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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[Fee Required]
For the fiscal year ended ____December 31, 1995____
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[No Fee Required]
For the transition period from _______________________ to ______________________
Commission file number ____1-11505____
MIDAMERICAN ENERGY COMPANY
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(Exact name of registrant as specified in its charter)
IOWA 42-1425214
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
666 Grand Ave., P.O. Box 657, Des Moines, Iowa 50303
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 515-242-4300
Securities registered pursuant to Section 12(b) of the
Act:
Name of each exchange
Title of each class on which registered
- --------------------------------------------- -----------------------
COMMON STOCK, NO PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED STOCK, $1.7375 SERIES, NO PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
PREFERRED STOCK, $3.30 SERIES, NO PAR VALUE
PREFERRED STOCK, $3.75 SERIES, NO PAR VALUE
PREFERRED STOCK, $3.90 SERIES, NO PAR VALUE
PREFERRED STOCK, $4.20 SERIES, NO PAR VALUE
PREFERRED STOCK, $4.35 SERIES, NO PAR VALUE
PREFERRED STOCK, $4.40 SERIES, NO PAR VALUE
PREFERRED STOCK, $4.80 SERIES, NO PAR VALUE
PREFERRED STOCK, $5.25 SERIES, NO PAR VALUE
PREFERRED STOCK, $7.80 SERIES, NO PAR VALUE
- --------------------------------------------------------------------------------
Title of each class
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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 voting stock held by non-affiliates of the
registrant was $1,824,198,890 as of February 26, 1996, when 100,751,713 shares
of common stock, without par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Company's Annual Report to Shareholders for 1995 is
incorporated by reference in Parts I and II hereof. A portion of the Company's
Proxy Statement relating to its 1996 Annual Meeting of Shareholders is
incorporated by reference in Part III hereof.
*MidAmerican Energy Company ("MidAmerican") is the successor by merger of
Midwest Resources Inc. ("Midwest Resources"), Midwest Power Systems Inc.
("Midwest Power") and Iowa-Illinois Gas and Electric Company ("Iowa-Illinois")
with and into MidAmerican. The effective date of the merger was July 1, 1995,
and prior to such effective date, MidAmerican had no assets or operations.
Prior to such effective date, each of Iowa-Illinois, Midwest Resources and
Midwest Power was subject to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and accordingly
filed in a timely manner all reports required to be filed pursuant to Sections
13 or 15(d) of the Exchange Act during the preceding 12 months.
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MIDAMERICAN ENERGY COMPANY
1995 FORM 10--K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
PART I
Item 1 Business
General Development of Business.............................................................. 4
Financial Information About Industry Segments................................................ 4
Narrative Description of Business............................................................ 4
General.................................................................................... 4
Rate Matters............................................................................... 6
Electric Operations........................................................................ 7
Natural Gas Operations..................................................................... 9
Construction Program....................................................................... 10
General Utility Regulation................................................................. 10
Nuclear Regulation......................................................................... 11
Environmental Regulations.................................................................. 12
InterCoast Energy Company.................................................................. 13
Midwest Capital Group...................................................................... 14
Item 2 Properties..................................................................................... 15
Item 3 Legal Proceedings.............................................................................. 17
Item 4 Submission of Matters to a Vote of Security Holders............................................ 17
<CAPTION>
Other Information
<S> <C> <C>
Executive Officers of the Registrant........................................................... 18
Business Transaction Policy Statement.......................................................... 18
<CAPTION>
PART II
<S> <C> <C>
Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters...................... 19
Item 6 Selected Financial Data........................................................................ 19
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 20
Item 8 Financial Statements and Supplementary Data.................................................... 20
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................................................... 20
<CAPTION>
PART III
<S> <C> <C>
Item 10 Directors and Executive Officers of the Registrant............................................. 20
Item 11 Executive Compensation......................................................................... 20
Item 12.. Security Ownership of Certain Beneficial Owners and Management................................. 20
Item 13 Certain Relationships and Related Transactions................................................. 20
<CAPTION>
PART IV
<S> <C> <C>
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................... 21
Signatures................................................................................................ 26
Exhibits Index............................................................................................ 29
</TABLE>
3
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PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
MidAmerican Energy Company (MidAmerican or the Company), an Iowa
corporation, was formed on July 1, 1995, through the merger of Iowa-Illinois Gas
and Electric Company (Iowa-Illinois), Midwest Resources Inc. (Midwest Resources)
and Midwest Power Systems Inc. (Midwest). The merger was accounted for as a
pooling-of-interests. MidAmerican is primarily engaged in the business of
generating, transmitting, distributing and selling electric energy and
distributing, selling and transporting natural gas. The Company has two wholly
owned subsidiaries: InterCoast Energy Company (InterCoast) and Midwest Capital
Group, Inc. (Midwest Capital). InterCoast engages in nonregulated energy-related
businesses. Midwest Capital conducts economic development activities in the
Company's service territory. Prior to the merger, Iowa-Illinois was engaged in
business activities similar to those of MidAmerican. InterCoast was a wholly
owned subsidiary of Iowa-Illinois. Midwest Resources was an exempt public
utility holding company with two wholly owned subsidiaries: Midwest and Midwest
Capital. Midwest was engaged in utility activities similar to those of
MidAmerican and Midwest Capital was engaged in nonregulated business activities.
In January 1996, the Company's board of directors approved an Agreement and
Plan of Exchange related to the formation of MidAmerican Energy Holdings Company
(Holdings), a holding company. Holdings will have three wholly owned
subsidiaries, MidAmerican (utility operations), Midwest Capital and InterCoast.
Consummation of the holding company structure is subject to approval by holders
of a majority of the outstanding shares of the Company's common stock. In
addition, certain orders must be received from the Illinois Commerce Commission
(ICC), the Iowa Utilities Board (IUB), the Federal Energy Regulatory Commission
(FERC) and the Nuclear Regulatory Commission (NRC). Subject to the receipt of
such orders, each share of MidAmerican common stock will be exchanged for one
share of Holdings common stock. It is management's intent, if possible, to
complete the formation of the holding company and share exchange by the end of
1996.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information on the Company's segments of business is included
under the Note "Segment Information" on page 35 of the Company's Annual Report
to Shareholders for 1995, which page is incorporated herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company distributes electric energy in Council Bluffs, Des Moines, Fort
Dodge, Iowa City, Sioux City and Waterloo, Iowa, the Quad-Cities (Davenport and
Bettendorf, Iowa and Rock Island, Moline and East Moline, Illinois) and a number
of adjacent communities and areas.
The Company distributes natural gas in Cedar Rapids, Des Moines, Fort Dodge,
Iowa City, Sioux City and Waterloo, Iowa; the Quad-Cities; Sioux Falls, South
Dakota; and a number of adjacent communities and areas.
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MidAmerican's electric and gas operations are conducted under franchises,
certificates, permits and licenses obtained from state and local authorities.
The franchises, with various expiration dates, are typically for 25-year terms.
The population of the Company's utility service territory is approximately
1.7 million. As of December 31, 1995, the Company had 635,000 retail electric
customers and 601,000 natural gas customers.
The Company has a residential, agricultural, commercial and diversified
industrial customer group, in which no single industry or customer accounted for
more than 3.5% (food and kindred products industry) of the Company's total 1995
electric operating revenues or 3.6% (food and kindred products industry) of its
total 1995 gas operating margin. Among the primary industries served by the
Company are those which are concerned with the manufacturing, processing and
fabrication of primary metals, real estate, food products, farm and other non-
electrical machinery, and cement and gypsum products.
For the year ended December 31, 1995, the Company derived approximately 64%
of its gross operating revenues from its electric business and 27% from its gas
business. For 1994 and 1993, the corresponding percentages were 60% electric and
29% gas, and 60% electric and 32% gas, respectively.
Historical electric sales by customer class as a percent of total electric
sales and retail electric sales data by state as a percent of total retail sales
are shown below:
TOTAL ELECTRIC SALES
BY CUSTOMER CLASS
<TABLE>
<CAPTION>
1995 1994 1993
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<S> <C> <C> <C>
Residential.................................................. 23.2% 24.7% 22.7%
Small General Service........................................ 19.1 22.3 19.9
Large General Service........................................ 26.1 28.0 24.5
Other........................................................ 4.7 5.2 4.7
Sales for Resale............................................. 26.9 19.8 28.2
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Total.................................................... 100.0% 100.0% 100.0%
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</TABLE>
RETAIL ELECTRIC SALES
BY STATE
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Iowa......................................................... 89.5% 88.6% 88.7%
Illinois..................................................... 9.9 10.9 10.9
South Dakota................................................. 0.6 0.5 0.4
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Total.................................................... 100.0% 100.0% 100.0%
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</TABLE>
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Historical gas sales, excluding transportation throughput, by customer class
as a percent of total gas sales and by state as a percent of total retail gas
sales are shown below:
TOTAL GAS SALES
BY CUSTOMER CLASS
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Residential.................................................. 57.3% 55.3% 55.6%
Small General Service........................................ 32.9 33.0 31.6
Large General Service........................................ 6.2 8.4 8.9
Sales for Resale and Other................................... 3.6 3.3 3.9
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Total.................................................... 100.0% 100.0% 100.0%
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</TABLE>
RETAIL GAS SALES
BY STATE
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Iowa......................................................... 78.0% 76.6% 74.5%
Illinois..................................................... 10.7 11.9 11.4
South Dakota................................................. 10.6 10.8 5.4
Other........................................................ 0.7 0.7 8.7
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Total.................................................... 100.0% 100.0% 100.0%
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</TABLE>
There are seasonal variations in the Company's electric and gas businesses
which are principally related to the use of energy for air conditioning and
heating. In 1995, 40.3% of the Company's electric revenues were reported in the
months of June, July, August and September, reflecting the use of electricity
for cooling, and 50.3% of the Company's gas revenues were reported in the months
of January, February, March and December, reflecting the use of gas for heating.
At December 31, 1995, the Company had 3,602 full-time employees, of which
3,331 were employed in utility operations and 271 were employed by the Company's
nonregulated subsidiaries.
InterCoast and its subsidiaries manage the nonregulated businesses of the
Company. The nonregulated businesses include oil and gas production, financial
investments, leasing activities, energy services and railcar leasing and
management.
Midwest Capital and its subsidiaries manage the Company's economic
development investments. The economic development investments are primarily real
estate.
RATE MATTERS
Under Iowa law, temporary collection of higher rates can begin (subject to
refund) 90 days after filing with the IUB for that portion of such higher rates
approved by the IUB based on prior ratemaking principles and a rate of return on
common equity previously approved. If the IUB has not issued a final order
within ten months after the filing date, the temporary rates cease to be subject
to refund and any balance of the requested rate increase may then be collected
subject to refund. Exceptions to the ten month limitation are provided for
extensions due
6
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to a utility's lack of due diligence in the rate proceeding, judicial appeals
and situations involving new generating units being placed in service.
Under Illinois law, new rates may be put into effect by the Company 45 days
after filing with the ICC, or on such earlier date as the ICC may approve,
subject to the power of the ICC to suspend the proposed new rates for a period
not to exceed eleven months after filing, pending a hearing.
South Dakota law authorizes the South Dakota Public Utilities Commission
(SDPUC) to suspend new rates for up to six months during the pendency of rate
proceedings; however, the rates are permitted to be implemented after six months
subject to refund pending a final order in the proceeding.
Additional information on the Company's current rate proceedings is included
under the Note "Rate Matters" on page 34 of the Company's Annual Report to
Shareholders for 1995, which page is incorporated herein by reference.
In April 1992, the FERC issued Order No. 636, directing a restructuring by
interstate pipeline companies for their natural gas sales and transportation
services. The FERC Order contemplated that transitional gas supply realignment
costs related to this restructuring may be billed by interstate pipelines to
their customers. At December 31, 1995, a regulatory asset of $40.8 million, with
an offsetting non-current Other Liability, had been recorded. In addition, the
Company estimates it may incur other future billings of approximately $15.8
million related to such restructuring. The Company is currently recovering such
costs through rates.
The Company has established an external trust for the investment of funds
collected for nuclear decommissioning associated with Quad-Cities Nuclear
Station (Quad-Cities Station) of which the Company is a 25% owner. The owner and
operator of Cooper Nuclear Station (Cooper), from which the Company purchases
50% of the output pursuant to a long-term agreement, maintains a decommissioning
fund into which the Company makes contributions as a component of its power
purchase payments. Electric tariffs in effect for 1995 include provisions for
annual decommissioning costs at Quad-Cities Station and Cooper of approximately
$17.5 million. In Illinois, nuclear decommissioning costs are included in
customer billings through a mechanism that permits annual adjustments. In Iowa,
such costs are reflected in base rates.
The Company's Iowa electric tariffs contain a Uniform Electric Energy
Adjustment Clause under which the Company's billings reflect changes in the cost
of all fuels used for electric generation, including nuclear fuel disposition
costs, as well as the net effect of energy transactions (other than capacity)
with other utilities. Changes in the cost of gas to the Company are reflected in
its Iowa gas rates through the Iowa Uniform Purchased Gas Adjustment Clause.
Under Illinois electric tariffs, the Company's Fuel Cost Adjustment Clause
reflects changes in the cost of all fuels used for electric generation,
including allowable fuel transportation costs, nuclear fuel disposition costs
and the effects of energy transactions (other than capacity and margins on
interchange sales) with other utilities. Changes in the cost of gas to the
Company are reflected in its Illinois gas rates through the Illinois Uniform
Purchased Gas Adjustment Clause.
ELECTRIC OPERATIONS
The annual hourly peak demand occurs principally as a result of air
conditioning use during the cooling season. MidAmerican's highest hourly peak
demand in 1995 was 3,553 megawatts (MW), which was 269 MW more than the combined
hourly peak of the predecessor companies.
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MidAmerican is interconnected with certain Iowa and neighboring utilities
and is one of 29 utilities involved in an electric power pooling agreement known
as the Mid-Continent Area Power Pool (MAPP). The purpose of MAPP is to
coordinate the planning, construction and operation of generation and
transmission facilities, including the purchase and sale of power and energy
among members.
In October 1992, the National Energy Policy Act (NEPA) was signed into law.
NEPA allows all electric generators, whether subject to utility regulation or
not, to transport wholesale power across utilities' transmission facilities and
is intended to promote competition in the wholesale electric market. The FERC
has also developed, and is in the process of developing, policies to encourage
open-access to utilities' transmission facilities. These policies include
pricing, good faith requests and responses for transmission services and
recovery of stranded costs by public and transmitting utilities. In addition,
the IUB has initiated a formal inquiry proceeding entitled: "Emerging
Competition in the Electric Utility Industry." The Company is participating in
these various proceedings, as appropriate, in an attempt to assist in the
development of public policy in these areas. The Company has and will continue
to evaluate the impact on MidAmerican of policy decisions that result from these
proceedings. Additional information on anticipated changes in the utility
industry is included in the "Operating Activities" section of Management
Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
on pages 18 and 19 of the Company's Annual Report to Shareholders for 1995 which
pages are incorporated herein by reference.
The Company's accredited 1995 summer net generating capacity was 4,384
megawatts. The net generating capacity at any time may be less due to regulatory
restrictions, fuel restrictions and generating units being temporarily out of
service for inspection, maintenance, refueling or modifications.
FUEL SUPPLY FOR ELECTRIC OPERATIONS
The Company's sources of fuel for electric generation have been as follows
for the periods shown:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1995 1994 1993
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<S> <C> <C> <C>
Fuel Source:
Coal....................................................... 77.6% 83.4% 77.8%
Nuclear.................................................... 21.6 15.7 21.5
Gas........................................................ 0.7 0.7 0.7
Oil........................................................ 0.1 0.2 --
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Total.................................................... 100.0% 100.0% 100.0%
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</TABLE>
The average costs of fuels received (including transportation and handling
costs) in cents per million BTU's consumed have been as follows for the periods
shown:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
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<S> <C> <C> <C>
Fuel Source:
Nuclear................................................ 44.19 47.08 47.72
Coal................................................... 95.14 95.90 97.12
Gas.................................................... 226.92 297.08 303.21
Oil.................................................... 422.80 422.13 438.68
Total Weighted Average................................... 90.21 90.96 88.99
</TABLE>
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The average cost of coal received (including transportation) per ton for the
years 1995, 1994 and 1993 has been $15.61, $15.67 and $15.91, respectively.
MidAmerican has contracts with rail shippers providing for the delivery of
coal to its generating stations. In addition, the Company has used spot market
purchases of coal to effectively manage inventory levels and take advantage of
near-term coal market opportunities. The Company is continuing to satisfy its
coal requirements with a combination of contract and spot purchases. The Company
believes its sources of coal for its fossil-fueled generating stations are and
will continue to be satisfactory. Renewal of expiring contracts and negotiations
of new agreements will be pursued as required. Natural gas and oil are used for
peak demand electric generation and for standby purposes. These sources are
presently in adequate supply and available to meet the Company's needs.
The Company is a 25% joint owner of Quad-Cities Station. The Company has
been advised by Commonwealth Edison (ComEd), the joint owner and operator of
Quad-Cities Station, that the majority of its uranium concentrate and uranium
conversion requirements for Quad-Cities Station for 1996 can be met under
existing supplies or commitments. ComEd foresees no problem in obtaining the
remaining requirements now or obtaining future requirements. ComEd further
advises that all enrichment requirements have been contracted through 1999.
Commitments for fuel fabrication have been obtained at least through 2000. ComEd
does not anticipate that it will have any difficulty in contracting for uranium
concentrates for conversion, enrichment or fabrication of nuclear fuel needed to
operate Quad-Cities Station.
The Company purchases one-half of the power and energy of Cooper through a
long-term power purchase contract with Nebraska Public Power District (NPPD).
Approximately 30% of the fuel in the core at Cooper must be replaced every 18
months. The next refueling cycle is currently scheduled to begin in March of
1997. NPPD has informed the Company that it either has sufficient materials and
services available to meet foreseeable Cooper requirements or that such
materials and services are readily available from suppliers.
Under the Nuclear Waste Policy Act of 1982 (NWPA), the Department of Energy
(DOE) is responsible for the selection and development of repositories for, and
the permanent disposal of, spent nuclear fuel and high-level radioactive wastes.
ComEd and NPPD, as required by the NWPA, have signed a contract with the DOE
to provide for the disposal of spent nuclear fuel and high-level radioactive
waste beginning not later than January 1998. The DOE has stated, however, that
the delivery schedule for spent nuclear fuel may be delayed, and it is expected
that it will be significantly delayed. The costs incurred by the DOE for
disposal activities will be financed by fees charged to owners and generators of
the waste. ComEd has informed the Company that there is on-site storage
capability at the Quad-Cities Station sufficient to permit such interim storage
at least through 2007. NPPD has informed the Company that there is on-site
storage capability at the Cooper Station sufficient to permit such interim
storage at least through 2004, the remaining term of the long-term power
purchase contract. Meeting spent nuclear fuel storage requirements beyond such
time could require modifications to the spent fuel storage pools or new and
separate storage facilities, the costs of which have not been determined at this
time. Industry activities are underway to utilize dry casks for the interim
storage of high-level radioactive waste. This may provide an alternative for
interim on-site storage of such waste.
NATURAL GAS OPERATIONS
MidAmerican is engaged in the procurement, transportation, and distribution
of natural gas for utility and end-use customers in the Midwest. With the
implementation in 1993 of FERC Order 636 and related orders (Order 636 or
Orders), MidAmerican began operating in a more competitive environment.
MidAmerican now has complete responsibility for natural gas procurement,
transportation and storage, a responsibility which had
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previously resided with the interstate pipeline suppliers. These Orders directly
impact the operations, revenues and costs of local distribution companies
(LDCs), including MidAmerican, and create new opportunities.
The Company has firm rights to pipeline capacity to transport gas from the
production area to its service territory. With the restructuring of the
industry, if the Company does not need the capacity (due to fluctuations in
anticipated system demand), it can "sublease" such capacity to other companies.
To provide incentives for the achievement of optimum use of available
transportation capacity, an IUB ruling allows the Company to retain 30% of Iowa
revenues earned on the "subleased" capacity and returns 70% to customers through
the purchased gas adjustment.
Information on the impact of FERC Order 636 is included in the "Operating
Activities" section of MD&A on page 19 of the Company's Annual Report to
Shareholders for 1995, which page is incorporated herein by reference.
FUEL SUPPLY AND CAPACITY
The Company purchases the majority of its gas supplies from producers or
third party marketers and transports the gas on a firm or interruptible basis
through the Northern Natural Gas (NNG), Natural Gas Pipeline Company of America
(NGPL) and ANR Pipeline Company (ANR) systems. To insure system reliability, a
geographically diverse supply portfolio with varying terms and conditions is
utilized for the gas supplies.
The Company utilizes leased gas storage to meet peak day requirements and to
manage the daily changes in demand due to changes in weather. The storage gas is
replaced during the summer months. In addition, the company also utilizes three
liquefied natural gas plants and five propane-air peak shaving plants to meet
peak day demands.
On February 2, 1996, the Company had an estimated new peak-day delivery of
1,140 million cubic feet. This peak-day delivery included approximately 88% from
traditional sales service customers and 12% from customer owned gas transported
through the Company's system. The supply sources utilized by the Company to meet
its peak-day deliveries to its sales service customers were:
<TABLE>
<CAPTION>
MILLIONS
OF CUBIC PERCENT OF
FEET TOTAL
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<S> <C> <C>
Underground Storage................................................. 349.4 34.7
Firm Supply......................................................... 485.3 48.2
LNG Facilities...................................................... 116.5 11.6
LP Facilities....................................................... 56.2 5.5
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Total........................................................... 1,007.4 100.0
--------- -----
--------- -----
</TABLE>
The Company does not anticipate any difficulties in meeting its future
demands through the use of its supply portfolio and pipeline interconnections
for the foreseeable future.
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CONSTRUCTION PROGRAM
The table below shows actual utility capital expenditures for 1995 and
budgeted utility expenditures for 1996 and for the period 1997 - 2000.
<TABLE>
<CAPTION>
1996 1997-2000
1995 ACTUAL BUDGETED BUDGETED
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Electric Property
Production........................................... $ 32,919 $ 28,826 $ 152,544
Transmission......................................... 15,550 25,300 96,600
Distribution......................................... 53,670 35,200 142,800
Gas.................................................... 51,310 37,585 127,972
Administration and Other............................... 23,531 13,547 40,789
----------- ----------- -----------
Subtotal........................................... 176,980 140,458 560,705
Quad-Cities Fuel....................................... 2,293 17,300 38,300
Cooper Additions....................................... 11,498 8,574 52,656
----------- ----------- -----------
Total.............................................. $ 190,771 $ 166,332 $ 651,661
----------- ----------- -----------
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</TABLE>
The amounts shown above include allowance for funds used during
construction. Of the $181.4 million of budgeted electric production expenditures
for the 1996-2000 period, $37.6 million are for expenditures at the Quad-Cities
Station. Also included in the amounts above, are capital expenditures required
to maintain compliance with the Clean Air Act Amendments of 1990 (CAA). See
Environmental Regulations. In addition to the amounts shown above, the Company
also expects to contribute a total of approximately $45 million to an external
trust for Quad-Cities nuclear decommissioning during the 1996-2000 period.
GENERAL UTILITY REGULATION
MidAmerican is a public utility within the meaning of the Federal Power Act
and a natural gas company within the meaning of the Natural Gas Act. Therefore,
it is subject to regulation by FERC, in regard to numerous activities, including
the issuance of securities, accounting policies and practices, sales for resale
rates, the establishment and regulation of electric interconnections and
transmission services and replacement of certain gas utility property.
The Company is a public utility under the laws of Illinois and is regulated
by the ICC as to retail rates, services, accounts, issuance of securities,
affiliate transactions, construction, acquisition and sale of utility property,
acquisition and sale of securities and in other respects as provided by the laws
of Illinois. The Company is also a public utility under the laws of Iowa and is
regulated by the IUB as to retail rates, services, accounts, construction of
utility property and in other respects as provided by the laws of Iowa.
MidAmerican is also subject to regulation by the SDPUC as to electric and gas
retail rates and service.
Iowa law requires electric and gas utilities to spend 2.0% and 1.5%,
respectively, of their annual Iowa jurisdictional revenues on energy efficiency
activities, including demand-side management. Additional information on the
Company's energy efficiency activities is included under the Note "Rate Matters"
on page 34 of the Company's Annual Report to Shareholders for 1995 which page is
incorporated herein by reference.
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NUCLEAR REGULATION
The Company is subject to the jurisdiction of the NRC with respect to its
license and 25 percent ownership interest in the Quad Cities Station. ComEd is
the operator of the Quad-Cities Station and is under contract with the Company
to secure and keep in effect all necessary NRC licenses and authorizations.
Under the terms of a long-term power purchase agreement, the Company has
contracted to purchase one-half of the power and energy from Cooper located near
Brownville, NE, through September 22, 2004. Cooper is owned and operated by the
NPPD. Under the terms of the contract, NPPD is the sole NRC licensee of Cooper
and is required to comply with all NRC regulations. MidAmerican is responsible
for one-half of the fixed and operating costs of Cooper (excluding depreciation
but including debt service) and the Company's share of fuel costs (including
disposal costs) based upon energy delivered. Refer to "Management's Discussion
and Analysis" and Notes 1(i), 4(c), 4(d) and 4(e) on pages 15, 17, 27, 29 and 30
of the Company's Annual Report to Shareholders for 1995 which pages are
incorporated herein by reference. The Company is not subject to the jurisdiction
of the NRC with respect to Cooper and the long-term power purchase contract with
NPPD. NPPD, because it is the sole owner, licensee and operator of Cooper, is
thereby the only entity subject to the jurisdiction of the NRC. Under the terms
of the long-term power purchase contract, NPPD is required to assure that Cooper
is in compliance with all the NRC regulations.
The NRC regulations control the granting of permits and licenses for the
construction and operation of nuclear generating stations and subject such
stations to continuing review and regulation. The NRC review and regulatory
process covers, among other things, operations, maintenance, and environmental
and radiological aspects of such stations. The NRC may modify, suspend or revoke
licenses and impose civil penalties for failure to comply with the Atomic Energy
Act, the regulations under such Act or the terms of such licenses.
Federal regulations provide that any operating facility may be required to
cease operation if the NRC determines there are deficiencies in state, local or
utility emergency preparedness plans relating to such facility and the
deficiencies are not corrected. ComEd and NPPD have advised the Company that
emergency preparedness plans for the Quad-Cities Station and Cooper,
respectively, have been approved by the NRC. ComEd and NPPD have also advised
the Company that state and local plans relating to the Quad-Cities Station and
Cooper, respectively, have been approved by the Federal Emergency Management
Agency.
In June 1988, the NRC adopted final regulations with respect to the
decommissioning of nuclear power plants. Among other things, the regulations
address the planning and funding for the eventual decommissioning of nuclear
power plants. In response to these regulations, the Company submitted a report
to the NRC in July 1990 indicating that it will provide "reasonable assurance"
that funds will be available to pay the costs of decommissioning its share of
the Quad-Cities Station, by making monthly deposits to an external trust fund.
NPPD has advised the Company that a decommissioning plan for Cooper has been
submitted and approved by the NRC. Monthly payments to NPPD by the Company
include monies to fund decommissioning as determined by NPPD.
ENVIRONMENTAL REGULATIONS
The Company is subject to numerous legislative and regulatory environmental
protection requirements involving air and water pollution, waste management,
hazardous chemical use, noise abatement, land use aesthetics and atomic
radiation.
State and federal environmental laws and regulations currently have, and
future modifications may have,
12
<PAGE>
the effect of (i) increasing the lead time for the construction of new
facilities, (ii) significantly increasing the total cost of new facilities,
(iii) requiring modification of certain of the Company's existing facilities,
(iv) increasing the risk of delay on construction projects, (v) increasing the
Company's cost of waste disposal and (vi) possibly reducing the reliability of
service provided by the Company and the amount of energy available from the
Company's facilities. Any of such items could have a substantial impact on
amounts required to be expended by the Company in the future.
AIR QUALITY
Essentially all utility generating units are subject to the provisions of
the CAA which address continuous emission monitoring, permit requirements and
fees and emission of toxic substances. The Company has five jointly owned and
six wholly owned coal-fired generating stations, which represent approximately
65% of the Company's electric generating capability.
Two of the Company's coal-fired generating units were subject to the
requirements of the CAA beginning in 1995. These units were given a set number
of allowances by the United States Environmental Protection Agency (EPA). Each
allowance permits the units to emit one ton of sulfur dioxide. The Company has
completed most of the modifications necessary to one unit to burn low-sulfur
coal and to install nitrogen oxides controls and an emissions monitoring system.
Under proposed regulations, the second unit will require additional capital
expenditures to reduce emissions of nitrogen oxides.
The Company's other coal-fired generating units are not materially affected
by the provisions of the CAA. Due to the use of low-sulfur western coal, the
Company does not anticipate the need for additional capital expenditures to
lower sulfur dioxide emission rates to ensure that allowances allocated by the
federal government are not exceeded. While the Company estimates that sufficient
emission allowances have been allocated on system-wide basis for its units to
operate at the capacity factors needed to meet system energy requirements,
additional purchases of allowances may be necessary to meet desired sales for
resale levels. By the year 2000, some Company coal-fired generating units will
be required to install controls to reduce emissions of nitrogen oxides. Based on
currently proposed CAA regulations, the Company does not anticipate its
remaining construction costs for the installation of low nitrogen oxides burner
technology and emissions monitoring system upgrades to exceed $16 million of
which $3.4 million and none are expected to be expended in 1996 and 1997,
respectively.
WATER QUALITY
Under the Federal Water Pollution Control Act Amendments of 1972, as
amended, the Company is required to obtain National Pollutant Discharge
Elimination System (NPDES) permits to discharge effluents (including thermal
discharges) from its properties into various waterways. All NPDES permits are
subject to renewal after specified time periods not to exceed five years. The
Company has obtained all necessary NPDES permits for its generating stations
and, when such permits are expected to expire, the Company will file
applications for renewal.
HAZARDOUS MATERIALS AND WASTE MANAGEMENT
The EPA and state environmental agencies have determined that contaminated
wastes remaining at certain decommissioned manufactured gas plant (MGP)
facilities may pose a threat to the public health or the
13
<PAGE>
environment if such contaminants are in sufficient quantities and at such
concentrations as to warrant remedial action.
The Company is evaluating 26 properties which were, at one time, sites of
MGP facilities in which it may be a potentially responsible party. The Company's
present estimate of probable remediation costs of these sites is $21 million.
The ICC has approved the use of a tariff rider which permits recovery of the
actual costs of litigation, investigation and remediation relating to former MGP
sites. The Company's present rates in Iowa provide for a fixed annual recovery
of MGP costs.
Additional information relating to the Company's MGP facilities is included
under the Note "Commitments and Contingencies" on page 29 of the Company's
Annual Report to Shareholders for 1995 which page is incorporated herein by
reference.
Pursuant to the Toxic Substances Control Act, a federal law administered by
the EPA, the Company developed a comprehensive program for the use, handling,
control and disposal of all polychlorinated biphenyls (PCB's) contained in
electrical equipment. The future use of equipment containing PCB's will be
minimized. Capacitors, transformers and other miscellaneous equipment are being
purchased with a non-PCB dielectric fluid. The Company's exposure to PCB
liability has been reduced through the orderly replacement of a number of such
electrical devices with similar non-PCB electrical devices.
An unresolved issue is whether exposure to electric and magnetic fields
(EMFs) may result in adverse health effects. EMFs are produced by all devices
carrying or using electricity, including transmission and distribution lines and
home appliances. The Company cannot predict the effect on construction costs of
electric utility facilities if EMF regulations were to be adopted. Although the
Company is not the subject of any suit involving EMFs, litigation has been filed
in a number of jurisdictions against a variety of defendants alleging that EMFs
had an adverse effect on health. If such litigation were successful, the impact
on the Company and on the electric utility industry in general could be
significant.
INTERCOAST ENERGY COMPANY
InterCoast is a wholly owned nonregulated subsidiary of the Company. The
nonregulated activities emphasize energy-related diversification, credit quality
and liquidity.
InterCoast takes advantage of a core expertise in energy, participating in
the energy industry through four nonregulated business groups: Medallion
Production Company (Medallion), InterCoast Energy Marketing and Services Company
(Energy Services), Rail Car Services and Investments (Rail Services) and
InterCoast Capital Company (InterCoast Capital).
Medallion is an independent oil and gas company based in Tulsa, Oklahoma.
Medallion's oil and gas assets at December 31, 1995 and 1994 were $161 million
and $142 million, respectively. Medallion's reserves totaled 32.1 million
barrels of oil equivalent at December 31, 1995. Principal oil and gas production
facilities are in Texas, Louisiana, California, Oklahoma and Colorado.
Energy Services provides electric, natural gas and energy management
services to both retail and wholesale markets. Energy Services' assets at
December 31, 1995 and 1994 were $13 million and $11 million, respectively.
AmGas Inc., a part of the Energy Services group, was organized in
anticipation of new opportunities under
14
<PAGE>
Order 636. AmGas Inc. markets natural gas and energy management services to
commercial and industrial clients in the Midwest and areas of the
Northeastern United States.
Continental Power Exchange, Inc. (Continental), a part of the Energy
Services group, was established in March 1994. Continental operates a
computerized information system facilitating the real-time exchange of power in
the electric industry.
InterCoast Power Marketing Company (IPM), a part of the Energy Services
group, was established in September 1993 to offer wholesale power brokering and
marketing services to utilities and other power supply agencies. In July 1995,
IPM was granted "marketer" status by the FERC enabling it to directly buy and
sell power.
InterCoast Trade and Resources, Inc., was established during 1995. GED
Energy Services, Inc. was purchased in November of 1995. These companies, which
are part of the Energy Services group, provide wholesale natural gas marketing
services.
Rail Services provides railcar leasing, management and maintenance services
through UNITRAIN, Inc. and Cornhusker Railcar Services Inc. This service is
primarily provided to electric utility companies within Iowa and surrounding
states. In addition, Rail Services has indirect investments in a variety of
nonregulated energy production technologies including wind, solar,
hydroelectric, and natural gas and coal-fueled generation, equity investments in
two developing companies which provide products and services for the electric
and gas utility industries, an equity investment in a company that services and
markets fiber-optic and telecommunications systems and equity interests in
special purpose funds that invest in venture capital and leveraged buyout
opportunities.
InterCoast Capital manages InterCoast's financial investments. Such
investments consist primarily of investment grade marketable securities and
aircraft leases. InterCoast Capital's total investments at December 31, 1995 and
1994 were $362 million and $324 million, respectively.
InterCoast Capital's marketable securities portfolio, totaling $270 million
and $200 million at December 31, 1995 and 1994, respectively, focuses on energy
securities consisting primarily of preferred stocks issued by utility companies.
All such preferred stocks have been issued by companies having investment grade
senior debt ratings by Moody's or Standard & Poor's. In addition to the
preferred stocks, InterCoast Capital has investments in common stocks and
independently managed mutual funds.
InterCoast Capital holds InterCoast's equity participations in equipment
leases for passenger and freight transport aircraft. Such investments totaled
$91 million and $124 million at December 31, 1995 and 1994, respectively.
MIDWEST CAPITAL GROUP INC.
Midwest Capital is a wholly owned nonregulated subsidiary of the Company.
Midwest Capital's primary activity is the management of utility service area
investments to support economic development. Midwest Capital's two principal
interests are an office tower in downtown Des Moines, Iowa, and a 2,000-acre
planned residential and business community near Sioux City, Iowa. The office
tower is more than 97% leased to various businesses. The major construction
phase of the planned community is complete, and the marketing phase to sell
developed residential and commercial lots is in progress.
15
<PAGE>
ITEM 2. PROPERTIES
The Company's utility properties consist of physical assets necessary and
appropriate to rendering electric and gas service in its service territories.
Electric property consist primarily of generation, transmission and distribution
facilities. Gas property consists primarily of distribution plant, including
feeder lines to communities served from natural gas pipelines owned by others.
It is the opinion of management that the principal depreciable properties owned
by the Company's subsidiaries are in good operating condition and well
maintained.
The net accredited generating capacity, along with the participation
purchases and sales, net, and firm purchases and sales, net, are shown for
summer 1995 accreditation.
<TABLE>
<CAPTION>
COMPANY'S SHARE OF
ACCREDITED
PERCENT GENERATING
PLANT OWNERSHIP FUEL CAPABILITY (KW)
- ------------------------------------------------------------------- ----------- ---------- --------------------
<S> <C> <C> <C>
Steam Electric Generating Plants:
Council Bluffs Energy Center
Unit No. 1..................................................... 100.0 Coal 46,000
Unit No. 2..................................................... 100.0 Coal 88,000
Unit No. 3..................................................... 79.1 Coal 533,900
George Neal Station
Unit No. 1..................................................... 100.0 Coal 135,000
Unit No. 2..................................................... 100.0 Coal 300,000
Unit No. 3..................................................... 72.0 Coal 370,800
Unit No. 4..................................................... 40.6 Coal 253,200
Louisa Unit...................................................... 88.0 Coal 616,000
Ottumwa Unit..................................................... 52.0 Coal 372,100
Riverside Station
Unit No. 3..................................................... 100.0 Coal 5,000
Unit No. 5..................................................... 100.0 Coal 130,000
----------
2,850,000
----------
Combustion Turbines:
Coralville -- 1 unit............................................. 100.0 Gas/Oil 64,000
Electrifarm -- 3 units........................................... 100.0 Gas/Oil 185,600
Moline -- 1 unit................................................. 100.0 Gas/Oil 64,000
River Hills Energy Center -- 8 units............................. 100.0 Gas/Oil 116,000
Sycamore Energy Center -- 2 units................................ 100.0 Gas/Oil 149,000
Parr -- 2 units.................................................. 100.0 Gas/Oil 30,800
Pleasant Hill Energy Center -- 3 units........................... 100.0 Oil 148,000
----------
757,400
----------
Nuclear:
Quad-Cities Station
Unit No. 1..................................................... 25.0 Nuclear 192,300
Unit No. 2..................................................... 25.0 Nuclear 192,500
Cooper (1)....................................................... (1) Nuclear 389,000
----------
773,800
----------
Hydro:
Moline -- 1 unit................................................. 100.0 Water 3,200
----------
Net Accredited Generating Capacity................................. 4,384,400
Add: Participation Purchases and Sales, Net........................ (53,000)
Firm Purchases and Sales, Net................................. (115,000)
----------
Adjusted Net Accredited Generating Capability...................... 4,216,400
----------
----------
</TABLE>
- ------------------------
(1) Cooper is owned by NPPD and the amount shown is MidAmerican's entitlement
(50%) of Cooper's accredited capacity under a power purchase agreement
extending to the year 2004.
16
<PAGE>
The electric system of the Company at December 31, 1995, included 871 miles
of 345-kV transmission lines, 1,294 miles of 161-kV lines, 1,812 miles of 69-kV
lines and 342 miles of 34.5-kV lines. Distribution lines included 24,403 miles
of overhead conductor and 7,244 miles of underground conductor at December 31,
1995.
The gas distribution facilities of the Company at December 31, 1995,
included 18,284 miles of gas mains and services.
Substantially all the former Iowa-Illinois utility property and franchises,
and substantially all of the former Midwest electric utility property located in
Iowa, is pledged to secure mortgage bonds.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries have no material legal proceedings except
for the following:
ENVIRONMENTAL MATTERS
Information on the Company's environmental matters is included in Item 1 --
Business and under the Note "Environmental Matters" on page 29 of the Company's
Annual Report to Shareholders for 1995, which page is incorporated herein by
reference.
COOPER LITIGATION
On May 26, 1995, the Company filed a lawsuit naming Nebraska Public Power
District (NPPD) as defendant. The action is filed in the U.S. District Court for
the Southern District of Iowa and is identified as No. 4-95-CV-70356. The legal
proceeding is based upon a long-term power purchase agreement between the
Company and NPPD, pursuant to which the Company purchases one-half the output of
NPPD's Cooper Nuclear Station (Cooper) and pays one-half the cost of operating
Cooper. NPPD, in turn, is obligated to operate the plant in an efficient and
economical manner and in compliance with the terms of its operating license
issued to it by the Nuclear Regulatory Commission (NRC). In 1993 and 1994, as a
response to NPPD actions, the NRC issued numerous notices of violations to NPPD;
as a result of these violations and other safety issues identified by the NRC
and NPPD, Cooper experienced unplanned outages and outages were unduly extended.
NPPD's failure to meet its obligations with respect to the operation of Cooper
deprived the Company of the benefits it was entitled to under the power sales
contract, causing the Company to lose profits and incur increased costs of
operation, which damages the Company seeks to collect from NPPD. Similar
litigation has been filed against NPPD by the Lincoln Electric System (LES), a
municipal utility serving the City of Lincoln, Nebraska, and purchasing
one-eighth of the output of Cooper pursuant to a similar power purchase
contract. The LES legal proceeding is pending in Nebraska state court.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
17
<PAGE>
OTHER INFORMATION
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the executive officers of the Company are
listed below.
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD
- ---------------------------- --- --------------------------------------------------
<S> <C> <C>
Russell E. Christiansen 60 Chairman and Chairman of the Office of the CEO
Stanley J. Bright 55 President and President of the Office of the CEO
Lynn K. Vorbrich 57 President, Electric Division
Beverly A. Wharton 42 President, Gas Division
Richard C. Engle 61 Executive Vice President
Lance E. Cooper (a) 52 Group Vice President
Philip G. Lindner 52 Group Vice President
John A. Rasmussen, Jr. 50 Group Vice President and General Counsel
Ronald W. Stepien 49 Group Vice President
President (Midwest Capital)
Donald C. Hepperman 53 President and Chief Operating Officer
(InterCoast)
</TABLE>
Officers are elected annually by the Board of Directors. There are no family
relationships among these officers, nor any arrangements or understanding
between any officer and any other person pursuant to which the officer was
selected. Each of the officers has served in the above stated capacity since
July 1, 1995, and has been employed by the registrant and/or its subsidiaries or
predecessor companies for five or more years as an executive officer except
where noted.
(a) Served as Vice President of predecessor Iowa-Illinois from October 1991
to June 30, 1995. Prior to that time, Mr. Cooper was Vice President -- Control,
Atlantic City Electric Company.
BUSINESS TRANSACTION POLICY STATEMENT
In response to the competitive forces and regulatory changes being faced by
the Company, the Company has from time to time considered, and expects to
continue to consider, various strategies designed to enhance its competitive
position and to increase its ability to adapt to and anticipate changes in its
utility business. These strategies may include business combinations with other
companies, internal restructurings involving the complete or partial separation
of its wholesale and retail businesses, and additions to, or dispositions of,
portions of its franchised service territories. The Company may from time to
time be engaged in preliminary discussions, either internally or with third
parties, regarding one or more of these potential strategies. No assurances can
be given as to whether any potential transaction of the type described above may
actually occur, or as to the ultimate effect thereof on the financial condition
or competitive position of the Company.
The Company's management is mindful of the importance of informing investors
about Company operations. Management must also pay heed to the legally sensitive
nature of certain matters, and that is particularly true about any business
transaction involving an acquisition, disposition or combination of businesses
which the Company may be considering.
18
<PAGE>
Therefore, the Company's management has adopted a policy to announce
consideration of any such transaction only after it would enter into a
definitive agreement or an agreement in principle describing the material terms
of such a transaction.
Until that point, the Company would respond with "no comment" to any
inquiry concerning any such transaction, whether or not the Company is
considering, discussing or negotiating for any acquisitions, dispositions
or combinations of businesses. The Company's management believes this
policy is consistent both with investors' need for information and with
the Company's concern for appropriate disclosure regarding legally sensitive
matters.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION AND DIVIDENDS
The Company's common stock is listed on the New York Stock Exchange under
the symbol "MEC." The following table sets forth, for the periods indicated, the
dividends declared per share of common stock and the high and low market prices
of the common stock of MidAmerican, Midwest Resources and Iowa-Illinois, as
reported in THE WALL STREET JOURNAL for the New York Stock Exchange Composite
Tape.
<TABLE>
<CAPTION>
PRICE RANGE
------------------------------------------------------------
DIVIDENDS DECLARED MIDAMERICAN IOWA-ILLINOIS RESOURCES
------------------------ ---------------- -------------------- --------------------
MEC IWG MWR HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- ------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995
4th Quarter................. $ 0.30 $ -- $ -- $17 1/8 $15 $ -- $ -- $ -- $ --
3rd Quarter................. 0.30 -- -- 15 5/8 13 5/8 -- -- -- --
2nd Quarter................. -- 0.4325 0.29 -- -- 22 19 7/8 15 13 5/8
1st Quarter................. -- 0.4325 0.29 -- -- 22 1/8 19 14 5/8 13 3/8
1994
4th Quarter................. $ -- $0.4325 $ 0.29 -- -- $20 5/8 $18 7/8 $14 1/2 $12 7/8
3rd Quarter................. -- 0.4325 0.29 -- -- 22 1/2 19 1/4 15 3/8 13 1/2
2nd Quarter................. -- 0.4325 0.29 -- -- 24 1/2 19 7/8 16 3/4 13 7/8
1st Quarter................. -- 0.4325 0.29 -- -- 24 3/4 22 3/8 18 16
</TABLE>
HOLDERS
On February 26, 1996, there were approximately 70,000 shareholders of record
of MidAmerican's common stock.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is included in the following
captions and pages of the Company's Annual Report to Shareholders for 1995,
which captions are herein incorporated by reference:
<TABLE>
<CAPTION>
CAPTION PAGE
----------------------------------------------------------------------- -----
<S> <C> <C>
(1) Operating Revenues 42
(2) Income From Continuing Operations 42
(3) Earnings Per Average Share -- Continuing Operations 41
(4) Total Assets 43
(5) Capitalization 43
(6) Cash Dividends Declared Per Common Share 41
</TABLE>
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is included on pages 13 through 20 of
the Company's Annual Report to Shareholders for 1995, which pages are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included on pages 21 through 40 of
the Company's Annual Report to Shareholders for 1995, which pages are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The information required by Item 10 relating to directors who are nominees
for election as directors at the Company's 1996 Annual Meeting of Shareholders
is set forth in the Company's Proxy Statement filed with the SEC pursuant to
Regulation 14A under the Securities Exchange Act of 1934. Therefore, such
information is incorporated herein by reference to the material appearing under
the caption "ELECTION OF DIRECTORS" on pages11 through 16 of the Proxy
Statement. Information required by Item 10 relating to Executive Officers of the
Registrant is set forth under a separate caption in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
the material appearing under the caption "EXECUTIVE COMPENSATION" on pages 19
through 28 of the Company's Proxy Statement filed with the SEC.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the Company's knowledge, no single entity has beneficial ownership of 5
percent or more of the outstanding Common Stock of the Company.
(B) SECURITY OWNERSHIP OF MANAGEMENT
Security ownership of management as outlined on pages 17 and 18 of the
Company's Proxy Statement filed with the SEC under the caption "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" is incorporated herein by
reference.
(C) CHANGES IN CONTROL
There are no arrangements known to the registrant, the operation of which
may at a subsequent date result in a change in control of the registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS
The following financial statements (including the notes thereto) and the
related audit reports, incorporated herein by reference, are included in the
Company's Annual Report to Shareholders for 1995.
<TABLE>
<CAPTION>
PAGE NO. IN 1995
ANNUAL REPORT
TO SHAREHOLDERS
-----------------
<S> <C>
Consolidated Statements of Income
For the Year Ended December 31, 1995, 1994 and 1993.................................. 21
Consolidated Statements of Cash Flows
For the Year Ended December 31, 1995, 1994 and 1993.................................. 23
Consolidated Balance Sheets
As of December 31, 1995 and 1994..................................................... 22
Consolidated Statements of Retained Earnings
For the Year Ended December 31, 1995, 1994 and 1993.................................. 25
Notes to Consolidated Financial Statements............................................. 26-39
Report of Independent Public Accountant................................................ 40
</TABLE>
(A)2. FINANCIAL STATEMENT SCHEDULES (INCLUDED HEREIN)
The following schedule should be read in conjunction with the aforementioned
financial statements.
<TABLE>
<CAPTION>
PAGE NO. IN THIS
ANNUAL REPORT
ON FORM 10-K
-----------------
<S> <C>
Consolidated Valuation and Qualifying Accounts (Schedule II)
For the Year Ended December 31, 1995, 1994 and 1993.................................. 22
Reports of Independent Public Accountants.............................................. 23-25
</TABLE>
Other schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in the financial
statements or notes thereto.
(A)3. EXHIBITS
See Exhibit Index on page 29.
(B) REPORTS ON FORM 8-K
None.
21
<PAGE>
SCHEDULE II
MIDAMERICAN ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN B COLUMN C
----------- ----------- COLUMN E
COLUMN A BALANCE AT ADDITIONS COLUMN D -----------
- ---------------------------------------------------------------- BEGINNING CHARGED TO ----------- BALANCE AT
DESCRIPTION OF YEAR INCOME DEDUCTIONS END OF YEAR
- ---------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Reserves Deducted From Assets To Which They Apply:
Reserve for uncollectible accounts:
Year ended 1995............................................. $ 2,099 $ 4,934 $ (4,737) $ 2,296
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended 1994............................................. $ 3,697 $ 3,920 $ (5,518) $ 2,099
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended 1993............................................. $ 3,564 $ 3,406 $ (3,273) $ 3,697
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Reserves Not Deducted From Assets:
Property insurance
Year ended 1995............................................. $ 2,224 $ 17 $ (143) $ 2,098
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended 1994............................................. $ 2,561 $ 200 $ (537) $ 2,224
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended 1993............................................. $ 2,426 $ 135 $ -- $ 2,561
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Injuries and damages
Year ended 1995............................................. $ 2,350 $ 2,654 $ (3,916) $ 1,079
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended 1994............................................. $ 1,801 $ 3,452 $ (2,903) $ 2,350
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year ended 1993............................................. $ 1,323 $ 2,283 $ (1,805) $ 1,801
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of MidAmerican Energy Company and Subsidiaries:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in MidAmerican Energy Company's
annual report to shareholders for the year ended December 31, 1995, incorporated
by reference in this Form 10-K, and have issued our report thereon dated January
26, 1996. We did not audit the 1994 and 1993 financial statements of
Iowa-Illinois Gas and Electric Company, one of the companies merged in 1995 to
form MidAmerican Energy Company in a transaction accounted for as a
pooling-of-interests, as discussed in Note (1)(a). Such statements are included
in the consolidated financial statements of MidAmerican Energy Company and
subsidiaries and reflect total assets constituting 42 percent in 1994 and total
revenues constituting 36 percent in 1994 and 1993, of the related consolidated
totals. These statements were audited by other auditors whose report has been
furnished to us and our opinion, insofar as it relates to the amounts included
for Iowa-Illinois Gas and Electric Company, is based solely upon the report of
the other auditors.
Our audits were made for the purpose of forming an opinion on those
consolidated financial statements taken as a whole. The schedule listed on Page
22, Item 14 is the responsibility of MidAmerican Energy Company management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, based on our audits and the
report of other auditors, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
January 26, 1996
23
<PAGE>
DELOITTE & TOUCHE LLP Northwest Bank Building
101 West Second Street
Davenport, IA 52801-1813
319-322-4415
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
MidAmerican Energy Company:
We have audited the consolidated balance sheet and statement of
capitalization of Iowa-Illinois Gas and Electric Company and subsidiary
as of December 31, 1994, and the related consolidated statements of income,
retained earnings and cash flows for the years ended December 31, 1994 and
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies as of
December 31, 1994, and the results of their operations and their cash flows
for the years ended December 31, 1994 and 1993, in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
January 25, 1995
-24-
<PAGE>
DELOITTE & TOUCHE LLP Northwest Bank Building
101 West Second Street
Davenport, IA 52801-1813
319-322-4415
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
MidAmerican Energy Company
We have audited the consolidated balance sheet and statement of capitalization
of Iowa-Illinois Gas and Electric Company and subsidiary as of December 31,
1994, and the related consolidated statements of income, retained earnings and
cash flows for the years ended December 31, 1994 and 1993, and have issued our
report thereon dated January 25, 1995. Our audits also included the financial
statement schedule of Iowa-Illinois Gas and Electric Company and subsidiary
as of December 31, 1994 and 1993 and for each of the two years in the
period ended December 31, 1994, listed in Item 14. The financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects in the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
January 25, 1995
-25-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MIDAMERICAN ENERGY COMPANY
Date: March 8, 1996
By /s/ S.J. Bright
--------------------------------
(S. J. Bright)
President and President of the
Office
of the Chief Executive Officer
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 date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ -------------------------------------------------------- -----------------
<C> <S> <C>
/s/ R. E. Christiansen Chairman and Chairman of the Office of the Chief March 8, 1996
---------------------------- Executive Officer and Director
(R. E. Christiansen)
/s/ L. E. Cooper Group Vice President Finance and Accounting (Principal March 8, 1996
---------------------------- Accounting Officer)
(L. E. Cooper)
/s/ J. W. Aalfs Director March 8, 1996
----------------------------
(J. W. Aalfs)
/s/ B. T. Asher Director March 8, 1996
----------------------------
(B. T. Asher)
/s/ S. J. Bright Director March 8, 1996
----------------------------
(S. J. Bright)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ -------------------------------------------------------- -----------------
<C> <S> <C>
/s/ R. A. Burnett Director March 8, 1996
----------------------------
(R. A. Burnett)
/s/ R. D. Christensen Director March 8, 1996
----------------------------
(R. D. Christensen)
/s/ J. W. Colloton Director March 8, 1996
----------------------------
(J. W. Colloton)
/s/ F. S. Cottrell Director March 8, 1996
----------------------------
(F. S. Cottrell)
/s/ J. W. Eugster Director March 8, 1996
----------------------------
(J. W. Eugster)
/s/ W. C. Fletcher Director March 8, 1996
----------------------------
(W. C. Fletcher)
/s/ M. Foster, Jr. Director March 8, 1996
----------------------------
(M. Foster, Jr.)
/s/ N. Gentry Director March 8, 1996
----------------------------
(N. Gentry)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ -------------------------------------------------------- -----------------
<C> <S> <C>
/s/ J. M. Hoak, Jr. Director March 8, 1996
----------------------------
(J. M. Hoak, Jr.)
/s/ R. L. Lawson Director March 8, 1996
----------------------------
(R. L. Lawson)
/s/ R. L. Peterson Director March 8, 1996
----------------------------
(R. L. Peterson)
/s/ R. A. Schneider Director March 8, 1996
----------------------------
(R. A. Schneider)
/s/ N. L. Seifert Director March 8, 1996
----------------------------
(N. L. Seifert)
/s/ W. S. Tinsman Director March 8, 1996
----------------------------
(W. S. Tinsman)
/s/ L. L. Woodruff Director March 8, 1996
----------------------------
(L. L. Woodruff)
</TABLE>
28
<PAGE>
EXHIBIT INDEX
EXHIBITS FILED HEREWITH
2 Agreement and Plan of Exchange dated as of January 24, 1996.
4.15 Sixth Supplemental Indenture dated as of July 1, 1995, between Midwest
Power Systems Inc. and Harris Trust and Savings Bank, Trustee.
4.16 Thirty-First Supplemental Indenture dated as of July 1, 1995, between
Iowa-Illinois Gas and Electric Company and Harris Trust and Savings Bank,
Trustee.
10.1 MidAmerican Energy Company Deferred Compensation Plan for Directors.
10.2 MidAmerican Energy Company Deferred Compensation Plan for Executives.
10.3 MidAmerican Energy Company Supplemental Retirement Plan for Designated
Officers.
10.4 MidAmerican Energy Company Key Employee Short-Term Incentive Plan.
10.37 Form of Indemnity Agreement between MidAmerican and its directors and
officers.
12 Computation of ratios of earnings to fixed charges and computation of
ratios of earnings to fixed charges plus preferred dividend requirements.
13.1 "Management's Discussion and Analysis of Financial Condition and Results
of Operations," appearing on pages 13 - 20 of the Company's Annual Report
to Shareholders for 1995, incorporated by reference into Items 1 and 7 of
this Form 10-K.
13.2 "Financial Statements and Supplementary Data,"appearing on pages 21 - 39
of the Company's Annual Report to Shareholders for 1995, incorporated by
reference into Items 1(b), 1(c), 3, 8 and 14(a) (1) of this Form 10-K.
13.3 "Operating Revenues," Income From Continuing Operations," "Earnings Per
Average Share--Continuing Operations," "Total Assets," "Capitalization,"
and "Cash Dividends Declared Per Common Share" for the years 1991-1995,
appearing on page 41 - 43 of the Company's Annual Report to Shareholders
for 1995, incorporated by reference into Item 6 of this Form 10-K.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Anderson LLP
23.2 Consent of Deloitte & Touche LLP
EXHIBITS INCORPORATED BY REFERENCE
3.1 Restated Articles of Incorporation of the Company, as amended (filed as
Exhibit 3 to the Company's Registration Statement on Form 8-B, File No. 1-
11505).
-29-
<PAGE>
3.2 Restated Bylaws of the Company. (Filed as Exhibit 4 to the Company's
Registration Statement on Form 8-B, File No. 1-11505.)
4.1 General Mortgage Indenture and Deed of Trust dated as of January 1, 1993,
between Midwest Power Systems Inc. and Morgan Guaranty Trust Company of
New York, Trustee. (Filed as Exhibit 4(b)-1 to Midwest Resources' Annual
Report on Form 10-K for the year ended December 31, 1992, Commission File
No. 1-10654.)
4.2 First Supplemental Indenture dated as of January 1, 1993, between Midwest
Power Systems Inc. and Morgan Guaranty Trust Company of New York, Trustee.
(Filed as Exhibit 4(b)-2 to Midwest Resources' Annual Report on Form 10-K
for the year ended December 31, 1992, Commission File No. 1-10654.)
4.3 Second Supplemental Indenture dated as of January 15, 1993, between
Midwest Power Systems Inc. and Morgan Guaranty Trust Company of New York,
Trustee. (Filed as Exhibit 4(b)-3 to Midwest Resources' Annual Report on
Form 10-K for the year ended December 31, 1992, Commission File No. 1-
10654.)
4.4 Third Supplemental Indenture dated as of May 1, 1993, between Midwest
Power Systems Inc. and Morgan Guaranty Trust Company of New York, Trustee.
(Filed as Exhibit 4.4 to Midwest Resources' Annual Report on Form 10-K for
the year ended December 31, 1993, Commission File No. 1-10654.
4.5 Fourth Supplemental Indenture dated as of October 1, 1994, between Midwest
Power Systems Inc. and Harris Trust and Savings Bank, Trustee. (Filed as
Exhibit 4.5 to Midwest Resources' Annual Report on Form 10-K for the year
ended December 31, 1994, Commission File No. 1-10654.)
4.6 Fifth Supplemental Indenture dated as of November 1, 1994, between Midwest
Power Systems Inc. and Harris Trust and Savings Bank, Trustee. (Filed as
Exhibit 4.6 to Midwest Resources' Annual Report on Form 10-K for the year
ended December 31, 1994, Commission File No. 1-10654.)
4.7 Indenture of Mortgage and Deed of Trust, dated as of March 1, 1947.
(Filed by Iowa-Illinois as Exhibit 7B to Commission File No. 2-6922.)
4.8 Sixth Supplemental Indenture dated as of July 1, 1967. (Filed by Iowa-
Illinois as Exhibit 2.08 to Commission File No. 2-28806.)
4.9 Twentieth Supplemental Indenture dated as of May 1, 1982. (Filed as
Exhibit 4.B.23 to Iowa-Illinois' Quarterly Report on Form 10-Q for the
period ended June 30, 1982, Commission File No. 1-3573.)
4.10 Resignation and Appointment of successor Individual Trustee. (Filed by
Iowa-Illinois as Exhibit 4.B.30 to Commission File No. 33-39211.)
4.11 Twenty-Seventh Supplemental Indenture dated as of October 1, 1991. (Filed
as Exhibit 4.31.A to Iowa-Illinois' Current Report on Form 8-K dated
October 1, 1991, Commission File No. 1-3573.)
-30-
<PAGE>
4.12 Twenty-Eighth Supplemental Indenture dated as of May 15, 1992. (Filed as
Exhibit 4.31.B to Iowa-Illinois' Current Report on Form 8-K dated May 21,
1992, Commission File No. 1-3573.)
4.13 Twenty-Ninth Supplemental Indenture dated as of March 15, 1993. (Filed as
Exhibit 4.32.A to Iowa-Illinois' Current Report on Form 8-K dated March
24, 1993, Commission File No. 1-3573.)
4.14 Thirtieth Supplemental Indenture dated as of October 1, 1993. (Filed as
Exhibit 4.34.A to Iowa-Illinois' Current Report on Form 8-K dated October
7, 1993, Commission File No. 1-3573.)
10.5 Deferred Compensation Plan for Executives of Midwest Resources Inc. and
Subsidiaries. (Filed as Exhibit 10.1 to Midwest Resources' Annual Report
on Form 10-K for the year ended December 31, 1990, Commission File No. 1-
10654).
10.6 Deferred Compensation Plan for Board of Directors of Midwest Resources
Inc. and Subsidiaries. (Filed as Exhibit 10.2 to Midwest Resources' Annual
Report on Form 10-K for the year ended December 31, 1990, Commission File
No. 1-10654).
10.7 Midwest Resources Inc. Directors Retirement Plan. (Filed as Exhibit 10.3
to Midwest Resources' Annual Report on Form 10-K for the year ended
December 31, 1990, Commission File No. 1-10654.)
10.8 Non-Cash Bonus Award Plan for Executives of Midwest Resources Inc. (Filed
as Exhibit 10.4 to Midwest Resources' Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-10654).
10.9 Midwest Resources Inc. revised and amended Executive Deferred Compensation
Plan for IOR and Subsidiaries, dated January 29, 1992. (Filed as Exhibit
10.5 to Midwest Resources' Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 1-10654.)
10.10 Midwest Resources Inc. revised and amended Board of Directors Deferred
Compensation Plan for IOR and Subsidiaries, dated January 29, 1992.
(Filed as Exhibit 10.6 to Midwest Resources' Annual Report on Form 10-K
for the year ended December 31, 1991, Commission File No. 1-10654.)
10.11 Midwest Resources Inc. revised and amended Executive Incentive
Compensation Plan for IOR and Subsidiaries, dated January 29, 1992.
(Filed as Exhibit 10.7 to Midwest Resources' Annual Report on Form 10-K
for the year ended December 31, 1991, Commission File No. 1-10654.)
10.12 Midwest Resources Inc. and Participating Subsidiaries Long-Term Incentive
Compensation Plan. (Filed as Exhibit 10.8 to Midwest Resources' Annual
Report on Form 10-K for the year ended December 31, 1991, Commission File
No. 1-10654.)
10.13 Midwest Power Group 1992 Key Executive Incentive Compensation Plan.
(Filed as Exhibit 10.9 to Midwest Resources' Annual Report on Form 10-K
for the year ended December 31, 1991, Commission File No. 1-10654.)
-31-
<PAGE>
10.14 Midwest Resources Inc. Supplemental Retirement Plan (formerly the Midwest
Energy Company Supplemental Retirement Plan). (Filed as Exhibit 10.10 to
Midwest Resources' Annual Report on Form 10-K for the year ended December
31, 1993, Commission File No. 1-10654.)
10.15 Power Sales Contract between Iowa Power Inc. and Nebraska Public Power
District, dated September 22, 1967. (Filed as Exhibit 4-C-2 to Iowa Power
Inc.'s (IPR) Registration Statement, Registration No. 2-27681.)
10.16 Amendments Nos. 1 and 2 to Power Sales Contract between Iowa Power Inc.
and Nebraska Public Power District. (Filed as Exhibit 4-C-2a to IPR's
Registration Statement, Registration No. 2-35624.)
10.17 Amendment No. 3 dated August 31, 1970, to the Power Sales Contract between
Iowa Power Inc. and Nebraska Public Power District, dated September 22,
1967. (Filed as Exhibit 5-C-2-b to IPR's Registration Statement,
Registration No. 2-42191.)
10.18 Amendment No. 4 dated March 28, 1974, to the Power Sales Contract between
Iowa Power Inc. and Nebraska Public Power District, dated September 22,
1967. (Filed as Exhibit 5-C-2-c to IPR's Registration Statement,
Registration No. 2-51540.)
10.19 Revised and amended Executive Compensation Plan for Iowa Resources Inc.
and Subsidiaries, dated July 24, 1985. (Filed as Exhibit 10.21 to Iowa
Resources Inc.'s (IOR) Annual Report on Form 10-K for the year ended
December 31, 1985, Commission File No. 1-7830.)
10.20 Revised and amended Executive Deferred Compensation Plan for IOR and
Subsidiaries, dated July 24, 1985. (Filed as Exhibit 10.22 to IOR's
Annual Report on Form 10-K for the year ended December 31, 1985,
Commission File No. 1-7830.)
10.21 Revised and amended Deferred Compensation Plan for Board of Directors of
IOR and Subsidiaries, dated July 24, 1985. (Filed as Exhibit 10.22 to
IOR's Annual Report on Form 10-K for the year ended December 31, 1985,
Commission File No. 1-7830.)
10.22 Revised and amended Executive Compensation Plan for IOR and Subsidiaries,
dated December 18, 1987. (Filed as Exhibit 10.14 to IOR's Annual Report
on Form 10-K for the year ended December 31, 1987, Commission File No. 1-
7830.)
10.23 Revised and amended Executive Deferred Compensation Plan for IOR and
Subsidiaries, dated December 18, 1987. (Filed as Exhibit 10.15 to IOR's
Annual Report on Form 10-K for the year ended December 31, 1987,
Commission File No. 1-7830.)
10.24 Revised and amended Deferred Compensation Plan for Board of Directors of
IOR and Subsidiaries, dated December 18, 1987. (Filed as Exhibit 10.16 to
IOR's Annual Report on Form 10-K for the year ended December 31, 1987,
Commission File No. 1-7830.)
10.25 Employment Agreement between R. E. Christiansen and C&P Holdings Company
dated as of March 15, 1990. (Filed as Exhibit 10.24 to IOR's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission File
No. 1-7830.)
-32-
<PAGE>
10.26 Change in control agreement between Russell E. Christiansen and Midwest
Energy Company dated as of May 5, 1989. (Filed as Exhibit 10(e) in MWE's
Form 10-K for the year ended December 31, 1989, Commission File No. 1-
8708.)
10.29 Amendments to Midwest Resources Executive Deferred Compensation Plans,
dated October 30, 1992. (Filed as Exhibit 10(h) to MWR's Annual Report on
Form 10-K for the year ended December 31, 1992, Commission File No. 1-
10654.)
10.30 Midwest Power Systems 1993 Key Executive Incentive Compensation Plan.
(Filed as Exhibit 10.30 in MWR's Annual Report on Form 10-K for the year
ended December 31, 1993, Commission File No. 1-10654.)
10.31 Supplemental Retirement Plan for Principal Officers, as amended as of July
1, 1993. (Filed as Exhibit 10.K.2 to Iowa-Illinois' Annual Report on Form
10-K for the year ended December 31, 1993, Commission File No. 1-3573.)
10.32 Compensation Deferral Plan for Principal Officers, as amended as of July
1, 1993. (Filed as Exhibit 10.K.2 to Iowa-Illinois' Annual Report on Form
10-K for the year ended December 31, 1993, Commission File No. 1-3573.)
10.33 Board of Directors' Compensation Deferral Plan. (Filed as Exhibit 10.K.4
to Iowa-Illinois' Annual Report on Form 10-K for the year ended December
31, 1992, Commission File No. 1-3573.)
10.34 Revised and amended Supplemental Retirement Income Plan for Iowa Resources
Inc. and Subsidiaries dated October 24, 1984. (Filed as Exhibit 10.15 to
Midwest Resources' Annual Report on Form 10-K for the year ended December
31, 1994, Commission File No. 1-10654.)
10.35 Amendment No. 1 to the Midwest Resources Inc. Supplemental Retirement
Plan. (Filed as Exhibit 10.24 to Midwest Resources' Annual Report on Form
10-K for the year ended December 31, 1994, Commission File No. 1-10654.)
10.36 Deferred Compensation Plan of Midwest Energy Company and Subsidiary
Corporations. (Filed as Exhibit 10.25 to Midwest Resources' Annual Report
on Form 10-K for the year ended December 31, 1994, Commission File No. 1-
10654.)
Note: Pursuant to (b) (4) (iii)(A) of Item 601 of Regulation S-K, the Company
has not filed as an exhibit to this Form 10-K certain instruments with
respect to long-term debt not being registered if the total amount of
securities authorized thereunder does not exceed 10% of total assets of
the Company but hereby agrees to furnish to the Commission on request any
such instruments.
-33-
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE ("Agreement"), dated as of January 24,
1996, is between MidAmerican Energy Company, an Iowa corporation ("MidAmerican"
or "Company"), the company whose shares will be acquired pursuant to the Share
Exchange (described hereinafter), and MidAmerican Energy Holdings Company, an
Iowa corporation ("Holdings"), the acquiring company. MidAmerican and Holdings
are hereinafter sometimes referred to, collectively, as the "Companies".
WITNESSETH:
WHEREAS, the authorized capital stock of MidAmerican consists of (a)
350,000,000 shares of common stock without par value ("Company Common Stock"),
of which 100,751,713 shares are issued and outstanding, and (b) 100,000,000
shares of preferred stock, without par value ("Company Preferred Stock"), of
which 3,217,769 shares are issued and outstanding; and
WHEREAS, Holdings has 1,000 shares of common stock, no par value, ("Holdings
Common Stock") presently authorized, issued and outstanding, and at the
Effective Time (as hereinafter defined), the authorized capital stock of
Holdings will consist of (a) 350,000,000 shares of Holdings Common Stock and (b)
100,000,000 shares of preferred stock, no par value ("Holdings Preferred
Stock"); and
WHEREAS, the Boards of Directors of each of MidAmerican and Holdings deem it
desirable and in the best interests of the Companies and their shareholders that
each share of Company Common Stock be exchanged for a share of Holdings Common
Stock with the result that Holdings becomes the owner of all outstanding Company
Common Stock and each holder of Company Common Stock becomes the owner of an
equal number of shares of Holdings Common Stock, all pursuant to the terms and
conditions hereinafter set forth ("Share Exchange"); and
WHEREAS, the Iowa Business Corporation Act ("IBCA") permits share exchanges
which bind all of the shareholders upon the approval of a plan of share exchange
by the holders of a majority of all votes entitled to be voted thereon; and
WHEREAS, the Boards of Directors of MidAmerican and Holdings have
recommended that their respective shareholders approve the Share Exchange and
this Agreement, and this Agreement has been approved by the requisite vote of
Holdings' shareholder pursuant to Section 490.1103 of the IBCA;
NOW, THEREFORE, in consideration of the premises, and of the agreements,
covenants and conditions hereinafter contained, the parties hereto agree with
respect to the Share Exchange that, at the Effective Time, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time will
be exchanged for one share of Holdings Common Stock, and that the terms and
conditions of the Share Exchange and the method of carrying the same into effect
are as follows:
ARTICLE I
Subject to the satisfaction of the conditions and obligations of the parties
hereto, the Share Exchange will be effective upon the filing, with the Iowa
Secretary of State, in accordance with the IBCA, of articles of share exchange
("Articles of Exchange") with respect to the Share Exchange or at such later
time as may be stated in the Articles of Exchange (the time at which the Share
Exchange becomes effective being referred to herein as the "Effective Time").
1
<PAGE>
ARTICLE II
(1) The name of the corporation whose shares will be acquired is MidAmerican
Energy Company, and the name of the acquiring corporation is MidAmerican Energy
Holdings Company.
(2) The terms and conditions of the exchange, and the manner and basis of
exchanging the shares of Company Common Stock to be acquired for shares of
Holdings Common Stock, are as follows:
At the Effective Time:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be exchanged for one share of
Holdings Common Stock, which shall thereupon be fully paid and
non-assessable, except the shares for which dissenters' rights were
exercised;
(b) Holdings shall become the owner and holder of each issued and
outstanding share of Company Common stock so exchanged;
(c) Each share of Holdings Common Stock issued and outstanding
immediately prior to the Effective Time shall be canceled and shall
thereupon constitute an authorized and unissued share of Holdings Common
Stock;
(d) The former owners of Company Common Stock shall be entitled only to
receive shares of Holdings Common Stock as provided herein; and
(e) Holders of Company Common Stock who exercised their dissenters'
rights in accordance with the IBCA shall be entitled to receive payment of
"fair value" for their shares of Company Common Stock.
Shares of outstanding Company Preferred Stock shall not be exchanged or
otherwise affected by the Share Exchange.
ARTICLE III
The consummation of the Share Exchange is subject to the following
conditions precedent:
(1) The receipt of the requisite approval of the Share Exchange by the
holders of Company Common Stock;
(2) The filing of Restated Articles of Incorporation of Holdings
increasing the number of authorized shares of Holdings Common Stock and
Holdings Preferred Stock to 350,000,000 and 100,000,000 shares,
respectively, in the form attached hereto as Exhibit A;
(3) The satisfaction of the respective obligations of the parties hereto
set forth in this Agreement in accordance with the terms and conditions
herein contained;
(4) The execution and filing of Articles of Exchange with the Iowa
Secretary of State pursuant to the IBCA in the form attached hereto as
Exhibit B;
(5) The approval for listing upon official notice of issuance by the New
York Stock Exchange of Holdings Common Stock to be issued in accordance with
this Agreement;
(6) The receipt of either a ruling of the Internal Revenue Service
satisfactory to MidAmerican and its counsel, or an opinion of counsel
satisfactory to MidAmerican, with respect to the tax consequences of the
Share Exchange and other transactions incident thereto; and
(7) The receipt of such orders, authorizations, approvals or waivers
from all jurisdictional regulatory bodies, boards or agencies, which are
required in connection with the Share Exchange and related transactions.
2
<PAGE>
ARTICLE IV
Holdings will not engage in any business following the execution of this
Agreement until the consummation of the Share Exchange, other than such business
as is necessary to organize and maintain the corporate status and good standing
of Holdings in the State of Iowa and such other states in which it may be
authorized to conduct business.
ARTICLE V
This Agreement may be amended, modified or supplemented, or compliance with
any provision or condition hereof may be waived, at any time, by the mutual
consent of the Board of Directors of each of MidAmerican and Holdings; provided,
however, that no such amendment, modification, supplement or waiver shall be
made or effected, if such amendment, modification, supplement or waiver would,
in the judgment of the Board of Directors of MidAmerican, materially and
adversely affect the shareholders of MidAmerican.
This Agreement may be terminated and the Share Exchange and related
transactions abandoned at any time prior to the time the Articles of Exchange
are filed with the Iowa Secretary of State, if the Board of Directors of
MidAmerican determines, in its sole discretion, that consummation of the Share
Exchange would be inadvisable or not in the best interest of MidAmerican or its
shareholders.
ARTICLE VI
This Agreement has been submitted to the shareholder of Holdings for
approval, and the shareholder of Holdings has approved this Agreement, as
provided by the IBCA.
ARTICLE VII
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of Company Common Stock may, but
shall not be required to, surrender the same to Holdings for cancellation and
reissuance of a new certificate or certificates in such holder's name or for
cancellation and transfer, and each such holder or transferee will be entitled
to receive a certificate or certificates representing the same number of shares
of Holdings Common Stock as the shares of Company Common Stock previously
represented by the certificate or certificates surrendered. Until so surrendered
or presented for transfer, each outstanding certificate which, immediately prior
to the Effective Time, represented Company Common Stock shall be deemed and
treated for all corporate purposes to represent the ownership of the same number
of shares of Holdings Common Stock as though such surrender or transfer had
taken place. The holders of Company Common Stock at the Effective Time shall
have no right to have their shares of Company Common Stock transferred on the
stock transfer books of MidAmerican, and such stock transfer books shall be
deemed to be closed for this purpose at the Effective Time.
3
<PAGE>
IN WITNESS WHEREOF, each of MidAmerican and Holdings, pursuant to
authorization and approval given by their respective Boards of Directors, has
caused this Agreement to be executed by its President and attested by its
Secretary as of the date first above written.
MIDAMERICAN ENERGY COMPANY
By ___________________________________
PRESIDENT
ATTEST
______________________________________
SECRETARY
MIDAMERICAN ENERGY HOLDINGS COMPANY
By ___________________________________
PRESIDENT
ATTEST
______________________________________
SECRETARY
4
<PAGE>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SIXTH
SUPPLEMENTAL INDENTURE
-------------------------
MIDAMERICAN ENERGY COMPANY
TO
HARRIS TRUST AND SAVINGS BANK,
TRUSTEE
DATED AS OF JULY 1, 1995
-------------------------
ASSUMING THE OBLIGATIONS OF THE GENERAL MORTGAGE BONDS AND
THE OBSERVANCE OF THE TERMS OF THE INDENTURE AND
CONFIRMING THE LIEN OF THE INDENTURE
-------------------------
SUPPLEMENTAL TO GENERAL MORTGAGE INDENTURE
AND DEED OF TRUST
DATED AS OF JANUARY 1, 1993
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
THE SIXTH SUPPLEMENTAL INDENTURE, dated as of July 1, 1995, between
MidAmerican Energy Company, an Iowa corporation ("MidAmerican"), and Harris
Trust and Savings Bank, and Illinois corporation, as successor Trustee under the
General Mortgage Indenture and Deed of Trust ("Indenture"), dated as of January
1, 1993, heretofore executed and delivered by Midwest Power Systems Inc.
("Midwest Power") to Morgan Guaranty Trust Company of New York, predecessor
Trustee, to secure Mortgage bonds issued by Midwest Power pursuant to the
Indenture, unlimited in aggregate principal amount except as therein otherwise
provided.
WHEREAS, except for terms defined in this Supplemental Indenture, all
capitalized terms used in this Supplemental Indenture have the respective
meanings set forth in the Indenture; and
WHEREAS, Midwest Power has heretofore executed and delivered to the Trustee
the First, Second, and Third Supplemental Indentures dated as of January 1,
1993, January 15, 1993 and May 1, 1993, respectively, creating eleven series of
Bonds; and
WHEREAS, effective September 28, 1994, Morgan Guaranty Trust Company of New
York resigned as Trustee under the Indenture and Harris Trust and Savings Bank
was duly appointed as successor Trustee under the Indenture; and
WHEREAS, Midwest Power has heretofore executed and delivered to the Trustee
the Fourth Supplemental Indenture dated as of October 1, 1994 to confirm unto
the Trustee and record the description of certain property which is subject to
the Lien of the Indenture; and
WHEREAS, Midwest Power has heretofore executed and delivered to the Trustee
the Fifth Supplemental Indenture dated as of November 1, 1994 creating the
twelfth series of Bonds; and
WHEREAS, effective July 1, 1995 Midwest Power, Midwest Resources Inc., an
Iowa corporation and owner of the issued and outstanding common stock of Midwest
Power, and Iowa-Illinois Gas and Electric Company, an Illinois corporation, were
validly and legally merged (the "Merger") with and into MidAmerican; and
WHEREAS, the Indenture requires MidAmerican to enter into a Supplemental
Indenture for the purpose of assuming the due and punctual payment of the
principal and premium, if any, and interest on all outstanding Bonds according
to their tenor and the due and punctual performance by Midwest Power, confirming
the Lien of the Indenture and making the covenant and stipulation hereinafter
set forth; and
WHEREAS, all acts and things have been done and performed which are
necessary to make this Supplemental Indenture, when duly executed and delivered,
a valid, binding and legal instrument in accordance with its terms for the
purposes herein expressed; and the execution and delivery of this Supplemental
Indenture have been in all respects duly authorized.
<PAGE>
NOW THEREFORE, in consideration of the premises and in further
consideration of the sum of One Dollar in lawful money of the United States of
America paid to MidAmerican by the Trustee at or before the execution and
delivery of this Supplemental Indenture, the receipt of which is hereby
acknowledged, and of other good and valuable consideration, it is agreed by and
between MidAmerican and the Trustee as follows:
ARTICLE I
Assumption of Outstanding Bonds and Indenture Covenants
SECTION 1. MidAmerican does hereby acknowledge that Midwest Power has
been merged with and into MidAmerican and that such merger was on such terms
which fully preserve and in no respect impair the Lien or security of the
Indenture, or any of the rights or powers of the Trustee or the Bondholders
under the Indenture, or create any Prior Lien (other than Permissible
Encumbrances) on the Mortgaged Property.
SECTION 2. MidAmerican does hereby represent that MidAmerican does not
have outstanding, nor does it propose to issue in connection with such merger,
and obligations secured by a mortgage, pledge or other lien.
SECTION 3. In compliance with the requirements of Section 13.01 and
Section 15.01(i) of the Indenture, MidAmerican hereby expressly assumes the due
and punctual payment of the principal of and premium, if any, and interest on
all Bonds according to their tenor and the due and punctual performance and
observance of all the covenants and conditions of the Indenture to be kept or
performed by Midwest Power.
ARTICLE II
Grant
SECTION 1. In compliance with the requirements of Section 13.02(b)(i)
of the Indenture and in order to confirm the Lien of the Indenture and to
preserve and protect the rights of the Bondholders under the Indenture,
MidAmerican hereby confirms the prior Lien of the Indenture upon the Mortgaged
Property and subjects to the Lien of the Indenture as a first lien, or as a lien
subject only to liens affecting the property of Midwest Power prior to the
Merger, (A) all property which MidAmerican shall hereafter acquire or construct
which shall form an integral part of, or be essential to the use or operation
of, any property now or hereafter subject to the Lien of the Indenture and (B)
all renewals, replacements and additional property as may be purchases,
constructed or otherwise acquired by MidAmerican from and after the date of the
Merger to maintain the Mortgaged Property in good repair, working order and
condition as an operating system or systems and to comply with any covenant or
condition of the Indenture to be kept or observed by Midwest Power.
SECTION 2(a). In compliance with the requirements of Section 13.02(b)(ii)
of the Indenture, MidAmerican hereby covenants to keep the Mortgaged Property,
as far as practicable, identifiable.
2
<PAGE>
SECTION 2(b). Further in compliance with the requirements of Section
13.02(b)(ii) of the Indenture, MidAmerican hereby stipulates that the Trustee
shall not be taken impliedly to waive, by accepting or joining in this
Supplemental Indenture, and rights it would otherwise have.
ARTICLE III
The Trustee
SECTION 1. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or the due execution here of by MidAmerican, or for or in respect of
the recitals and statements contained herein, all of which recitals and
statements are made solely by MidAmerican.
SECTION 2. Except as herein otherwise provided, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustee by reason of this Supplemental Indenture other than as
set forth in the Indenture; and this Supplemental Indenture is executed and
accepted on behalf of the Trustee, subject to all terms and conditions set forth
in the Indenture, as fully to all intents as if the same were herein set forth
at length.
ARTICLE IV
Miscellaneous Provisions
SECTION 1. Except insofar as herein otherwise expressly provided, all
the provisions, definitions, terms and conditions of the Indenture, as it may
from time to time be amended, shall be deemed to be incorporated in and made a
part of, this Supplemental Indenture; and the Indenture as Indenture, as
amended, and this Supplemental Indenture shall be read, taken and construed as
one and the same instrument.
SECTION 2. Nothing in this Supplemental Indenture is intended, or shall
be construed, to give to any person or corporation, other than the parties
hereto and the Registered Holders of Bonds issued and to be issued under and
secured by the Indenture, any legal or equitable right, remedy or claim under or
in respect of this Supplemental Indenture, or under any covenant, condition or
provision herein contained, all the covenants, conditions and provisions of this
Supplemental Indenture being intended to be, and being, for the sole and
exclusive benefit of the parties hereto and of the Registered Holders of Bonds
issued and to issued under the Indenture and secured hereby.
SECTION 3. All covenants, stipulations and agreements in this
Supplemental Indenture contained by or on behalf of MidAmerican shall bind its
successors and assigns, whether so expressed or not.
SECTION 4. This Supplemental Indenture may be executed in any number of
counterparts, and each of such counterparts when so executed shall be deemed to
be an original; but all such counterparts shall together constitute but one and
the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, MIDAMERICAN ENERGY COMPANY has caused this Supplemental
Indenture to be executed by its President or one of its Vice Presidents and duly
attested by its Secretary or its Assistant Secretary (MidAmerican Energy Company
has no seal), and the Trustee has caused the same to be executed by one of its
Vice Presidents and its corporate seal to be hereunto affixed, duly attested by
one of its Assistant Secretaries, as of the day and year first written above.
MIDAMERICAN ENERGY COMPANY
By: /s/ L. E. Cooper
----------------------
L. E. Cooper
Group Vice President
Attest:
/s/ P. J. Leighton
- ---------------------
P. J. Leighton
Secretary
Signed, acknowledged and
delivered by MidAmerican
Energy Company in the
presence of:
/s/ J. A. Williams
- ----------------------
J. A. Williams
/s/ J. J. Chaplin
- -----------------------
J. J. Chaplin
4
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
Trustee
By: /s/J. Bartolini
------------------------
J. Bartolini
Vice President
[Corporate Seal]
Attest:
/s/C. Porter
- -----------------------
C. Porter
Assistant Sectary
Signed, sealed, acknowledged
and delivered by Harris Trust
and Savings Bank in the
presence of:
/s/R. Johnson
- -----------------------
R. Johnson
/s/Kimberley Lange
- -----------------------
Kimberley Lange
5
<PAGE>
State of Iowa )
ss.
County of Polk )
On this 30th day of June, 1995, before me appeared L. E. Cooper, to me
personally known, who, being by me duly sworn, did say that he is the Group Vice
President of MidAmerican Energy Company, a corporation described in and which
executed the foregoing instrument, and that said instrument was signed on behalf
of said corporation by authority of its board of directors, and said L. E.
Cooper acknowledged said instrument to be the free act and deed of said
corporation.
- ---------------------
EVONNE E. SCHAAF /s/Evonne E. Schaaf
MY COMMISSION EXPIRES ------------------------------
11-3-95 Evonne E. Schaaf,
------- Notary Public
- ---------------------
State of Illinois )
ss.
County of Cook )
On this 29th day of June, 1995, before me appeared J. Bartolini, to me
personally known, who, being by me duly sworn, did say that she is a Vice
President of Harris Trust and Savings Bank, an Illinois corporation described in
and which executed the foregoing instrument, and that the seal affixed to the
foregoing instrument is the seal of said corporation, and that said instrument
was signed and sealed on behalf of said corporation by authority of its board of
directors, and said J. Bartolini acknowledged said instrument to be free act and
deed of said corporation.
/s/M. Cody
------------------------------
M. Cody,
Notary Public
----------------------------------
"OFFICIAL SEAL"
Marianne Cody
Notary Public, State of Illinois
My Commission Expires 5/29/97
----------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
THIRTY-FIRST
SUPPLEMENTAL INDENTURE
-----------------
MIDAMERICAN ENERGY COMPANY
TO
HARRIS TRUST AND SAVINGS BANK
AND
C. POTTER
TRUSTEES
DATED AS OF JULY 1, 1995
-----------------
ASSUMING PAYMENT OF OUTSTANDING FIRST MORTGAGE BONDS
AND PERFORMANCE OF INDENTURE COVENANTS
AND CONFIRMING MORTGAGE LIEN
-----------------
SUPPLEMENTAL TO GENERAL MORTGAGE INDENTURE
AND DEED OF TRUST
DATED AS OF MARCH 1, 1947
OF
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
- --------------------------------------------------------------------------------
<PAGE>
THIS THIRTY FIRST SUPPLEMENTAL INDENTURE, dated as of July 1, 1995, between
MidAmerican Energy Company, 666 Grand Avenue, Des Moines 50306, a corporation
duly organized and existing under the laws of the State of Iowa (hereinafter
called "MidAmerican"), party of the first part, and Harris Trust and Savings
Bank, 111 West Monroe Street, Chicago, Illinois, 60690, a corporation having its
principal place of business in Chicago, Illinois (hereinafter called the
"Trustee"), and C. Potter of Chicago, Illinois (hereinafter called the
"Individual Trustee"), parties of the second part, under the Indenture of
Mortgage and Deed of Trust, dated as of March 1, 1947, the second part, under
the Indenture of Mortgage and Deed of Trust, dated as of March 1, 1947,
(hereinafter called the "Original Indenture") of Iowa-Illinois Gas and Electric
Company, a corporation duly organized and existing under the laws of the State
of Illinois ("Iowa-Illinois"), as amended and supplemented by Supplemental
Indentures dated, respectively, March 1, 1947, October 1, 1949, January 15,
1953, April 15, 1960, May 1, 1961, July 1, 1967, April 1, 1969, August 15, 1969,
September 1, 1970, June 15, 1975, March 15, 1976, January 15, 1977, October 1,
1977, September 1, 1978, July 15, 1979, January 15, 1980, June 15, 1980,
February 15, 1981, October 1, 1981, May 1, 1982, July 1, 1982, February 15,
1984, November 1, 1984, September 1, 1985, September 15, 1986, February 15,
1987, October 1, 1991, May 15, 1992, March 15, 1993 and October 1, 1993 (the
Original Indenture, as so amended and supplemented, being hereinafter called the
"Indenture" and such Supplemental Indentures being hereinafter called
collectively the "Prior Supplemental Indentures").
WHEREAS, Iowa-Illinois, Midwest Resources Inc., a corporation duly
organized and existing under the laws of the State of Iowa, and Midwest Power
Systems Inc., a corporation duly organized and existing under the laws of the
State of Iowa, are being merged (hereinafter called the "Merger") with and into
MidAmerican contemporaneously herewith.
WHEREAS, the Indenture requires that MidAmerican enter into a supplemental
indenture for the purpose of assuming the due and punctual payment of the
principal and interest on all outstanding Bonds secured by the Indenture and the
due and punctual performance and observance of all the covenants of the
Indenture to be kept and performed by Iowa-Illinois, confirming the Lien of the
Indenture on the Trust Estate (as defined in the Indenture) and making the
covenant and stipulation hereinafter set forth; and
WHEREAS, all acts and things necessary to make this Thirty-first
Supplemental Indenture, when duly executed and delivered, a valid, binding and
legal instrument in accordance with its terms for the purposes herein expressed
have been done and performed, and the execution and delivery of this Thirty-
first Supplemental Indenture have been in all respects duly authorized.
NOW, THEREFORE, in consideration of the premises and in further
consideration of the sum of One dollar in lawful money of the United States of
America paid to MidAmerican by the Trustee at or before the execution and
delivery of this Thirty-first Supplemental Indenture, the receipt whereof is
hereby acknowledged, and of other good and valuable considerations, it is agreed
by and between MidAmerican and the Trustees as follows:
<PAGE>
ARTICLE I
Assumption of Outstanding Bonds and Indenture Covenants
SECTION 1. MidAmerican does hereby acknowledge that the Merger is being
effected contemporaneously herewith and on such terms as shall fully preserve
and in no respect impair the lien or security of the Indenture or any of the
rights or powers of the Trustees or the bondholders under the Indenture.
SECTION 2. MidAmerican does hereby represent that MidAmerican does not
have outstanding, nor does it propose to issue in connection with such merger,
any obligations secured by a mortgage, pledge or other lien.
SECTION 3. In compliance with the requirements of Section 13.01 and
Section 15.01(d) or the Original Indenture, MidAmerican hereby expressly assumes
the due and punctual payment of the principal and interest on all bonds secured
by the Indenture at the time outstanding according to their tenor, and the due
and punctual performance and observance of all the covenants, terms and
conditions of the Indenture to be kept and performed by Iowa-Illinois.
ARTICLE II
Grant
SECTION 1. In compliance with the requirements of subparagraph (a) of
the second paragraph of Section 13.02 of the Original Indenture, MidAmerican
hereby confirms the prior lien of the Indenture upon the Trust Estate, and
hereby expressly subjects to the lien and operation of the Indenture as a first
lien, or as a lien subject only to liens affecting the property and franchises
of Iowa-Illinois prior to the Merger: (i) all property and franchises which
MidAmerican shall hereafter acquire or construct which shall form an integral
part of, or be essential to the use or operation of, any property now or
hereafter subject to the lien of the Indenture; and (ii) all renewals,
replacements and additional property as may be purchased, constructed or
otherwise acquired by MidAmerican from and after the date of the Merger to
maintain the Trust Estate in good repair, working order and condition as an
operating system or systems and to comply with any covenant or condition of the
Indenture to be kept or observed by MidAmerican hereafter.
ARTICLE III
Additional Covenant
In accordance with the requirement of subparagraph (b) of the second
paragraph of Section 13.02 of the Original Indenture, MidAmerican hereby
covenants to keep the Trust Estate, as far as practicable, readily identifiable.
2
<PAGE>
ARTICLE IV
Stipulation
In accordance with the requirement of subparagraph (b) of the second
paragraph of Section 13.02 of the Original Indenture, MidAmerican hereby
stipulates that the Trustees shall not be taken impliedly to waive, by accepting
or joining in this Thirty-first Supplemental Indenture, any rights they would
otherwise have.
ARTICLE V
The Trustees
SECTION 1. The Trustees shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Thirty-first
Supplemental Indenture or the due execution hereof by MidAmerican, or for or in
respect of the recitals and statements contained herein, all of which recitals
and statements are made solely by MidAmerican.
SECTION 2. Except as herein otherwise provided, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustees by reason of this Thirty-first Supplemental
Indenture other than as set forth in the Indenture; and this Thirty-first
Supplemental Indenture is executed and accepted on behalf of the Trustees
subject to all terms and conditions set forth in the Indenture as fully to
all intents as if the same were herein set forth at length.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Except insofar as herein otherwise expressly provided, all
the provisions, definitions, terms and conditions of the Indenture shall be
deemed to be incorporated in, and made a part of, this Thirty-first Supplemental
Indenture; and the Original Indenture, as supplemented by Prior Supplemental
Indentures, is in all respects ratified and confirmed; and the Original
Indenture, the Prior Supplemental Indentures and this Thirty-first Supplemental
Indenture shall be read, taken and construed as one and the same instrument.
SECTION 2. Nothing in this Thirty-first Supplemental Indenture is
intended, or shall be construed, to give to any person or corporation, other
than the parties hereto and the holders of bonds issued and to be issued under
and secured by the Indenture any legal or equitable right, remedy or claim under
or in respect of this Thirty-first Supplemental Indenture, or under any
covenant, condition or provision herein contained, all the covenants, conditions
and provisions of this Thirty-first Supplemental Indenture being intended to be,
and being, for the sole and exclusive benefit of the parties hereto and of the
holders of bonds issued and to be issued under the Indenture and secured hereby.
3
<PAGE>
SECTION 3. All covenants, stipulations and agreements in this Thirty-
first Supplemental Indenture contained by or on behalf of MidAmerican shall bind
and inure to the benefit of its successors and assigns, whether so expressed or
not.
SECTION 4. The headings of the several Articles of this Thirty-first
Supplemental Indenture are inserted for convenience of reference and shall not
be deemed to be a part hereof.
SECTION 5. This Thirty-first Supplemental Indenture may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
4
<PAGE>
IN WITNESS WHEREOF, MIDAMERICAN ENERGY COMPANY has caused this Thirty-first
Supplemental Indenture to be signed in its name and behalf by its President or
one of its Vice Presidents and duly attested by its Secretary or its Assistant
Secretary (MidAmerican Energy Company has no seal), and Harris Trust and Savings
Bank, as Trustee as aforesaid, has caused this Thirty-first Supplemental
Indenture to be signed in its name and behalf by one of its Vice Presidents and
its corporate seal to be affixed and duly attested by one of its Assistant
Secretaries, and C. Potter, as Individual Trustee as aforesaid, has hereunto
affixed her signature and seal, as of the day and year first above written.
MIDAMERICAN ENERGY COMPANY
BY: /S/ L.E. COOPER
---------------------------------
L.E. Cooper, Group Vice President
Attest:
/s/ P.J. Leighton
- ----------------------------
P.J. Leighton, Secretary
Signed, acknowledged and
delivered by MidAmerican
Energy Company in the
presence of:
/s/ J.A. Williams
- ----------------------------
J.A. Williams
/s/ J.J. Chaplin
- ----------------------------
J.J. Chaplin
5
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
AS TRUSTEE
By: /s/ J. Bartolini
--------------------
J. Bartolini, Vice President
[Seal]
Attest:
/s/ F.A. Pierson
- -------------------------------------
F.A. Pierson, Assistant Secretary
/s/ C. Potter
--------------------------------
C. Potter, as Individual Trustee
Signed, sealed, acknowledged
and delivered by Harris Trust
and Savings Bank and C. Potter
in the presence of:
/s/ R. Johnson
- -------------------
R. Johnson
/s/ K. Lang
- -------------------
K. Lang
6
<PAGE>
State of Iowa )
ss.
County of Polk )
I, Evonne E. Schaaf, a Notary Public in and for said County in the State
aforesaid, do hereby certify that on this 30th day of June, 1995, before me
personally appeared L.E. Cooper and P.J. Leighton, to me personally known and
known to me to be the same persons whose names are subscribed to the foregoing
instrument and who, being by me duly sworn, did say that they are respectively a
Group Vice President and the Secretary of MidAmerican Energy Company, an Iowa
corporation, one of the corporations described in and which executed the
foregoing instrument, and that said instrument was signed on behalf of said
corporation by authority of its Board of Directors, and said L.E. Cooper and
P.J. Leighton severally acknowledged that they, being thereunto duly authorized,
signed and delivered said instrument, and acknowledged the execution thereof to
be the free and voluntary act and deed of said corporation by it voluntarily
executed, and to be their own free and voluntary act, for the uses and purposes
therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid the day and year above written.
[Seal] /s/ Evonne E. Schaaf
--------------------------------
Evonne E. Schaaf, Notary Public
7
<PAGE>
State of Illinois )
SS.
County of Cook )
I, M. Cody, a Notary Public in and for said County in the State aforesaid,
do hereby certify that on this 29th day of June, 1995, before me personally
appeared J. Bartolini and F.A. Pierson, to me personally known and known to me
to be the same persons whose names are subscribed to the foregoing instrument
and who, being by me duly sworn, did say that they are respectively a Vice
President and Assistant Secretary of Harris Trust and Savings Bank, an Illinois
corporation, one of the corporations described in and which executed the
foregoing instrument, and that the seal affixed to the foregoing document is the
corporate seal of said corporation and that said instrument was signed and
sealed on behalf of said corporation by authority of its Board of Directors, and
said J. Bartolini and F.A. Pierson severally acknowledged that they, being
thereunto duly authorized, signed, sealed and delivered said instrument, and
acknowledged the execution thereof to be the free and voluntary act and deed of
said corporation by it voluntarily executed, and to be their own free and
voluntary act, for the uses and purposes therein set forth.
I do hereby further certify that on the aforesaid day before me
personally appeared C. Potter, to me personally known and known to me to be
the person named in and the same person whose name is subscribed to the
foregoing instrument, and acknowledged that she signed, sealed and delivered
the same as her free and voluntary act and deed for the uses and purposes
therein set forth
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid the day and year above written.
[Seal] /s/ M. Cody
-----------------------
M. Cody, Notary Public
8
<PAGE>
EXHIBIT 10.1
MIDAMERICAN ENERGY COMPANY
DEFERRED COMPENSATION PLAN
BOARD OF DIRECTORS
SECTION 1. PURPOSE. The purpose of this Plan is to enable MidAmerican
Energy Company to attract and retain qualified and experienced individuals to
serve on the Board of Directors of the Company by providing flexibility in the
compensation payments to Directors.
SECTION 2. DEFINITIONS.
(a) "Common Stock" means shares of common stock of MidAmerican Energy Company.
(b) "Company" means MidAmerican Energy Company.
(c) "Compensation Committee" means the Compensation Committee established by
the Board of Directors of the Company.
(d) "Deferred Compensation" means the amount of Total Cash Compensation not yet
earned by a Participant which such Participant elects to defer in any given Plan
Year in accordance with the provisions of the Plan.
(e) "Director" means any person serving as a member of the Board of Directors
of the Company.
(f) "Participant" means a Director who has elected to commit all or part of his
or her Total Cash Compensation for service as a Director as Deferred
Compensation under this Plan.
(g) "Plan Year" shall mean each January 1 through December 31 inclusive.
(h) "Total Cash Compensation" means the cash portion of the annual retainer,
the regular and special meeting fees and any fees for special services payable
to Directors.
SECTION 3. ADMINISTRATION.
(a) COMPENSATION COMMITTEE. The Compensation Committee shall have the
responsibility of interpreting and construing the Plan, establishing and
revising the rules and procedures governing the Plan and making such
determinations as may be necessary or advisable to administer the Plan. No
<PAGE>
member of the Compensation Committee shall be liable for any act done or
determination made in good faith.
(b) DELEGATION. The Compensation Committee may, in its discretion, delegate
its routine administrative duties to an officer or employee of the Company, or
to a committee composed of such officers or employees. The Corporate Secretary
of the Company shall maintain the records and accounts of the Plan.
SECTION 4. ELIGIBILITY.
(a) ELIGIBLE DIRECTORS. All Directors are eligible to participate in the Plan.
(b) AMOUNTS WHICH MAY BE DEFERRED. A Director may commit to the Plan all or
part of his or her Total Cash Compensation that would otherwise be paid to the
Director for a Plan Year by filing a written deferral election form with the
Corporate Secretary of the Company prior to the first day of the Plan Year.
(c) DEFERRALS BY A MEMBER-ELECT. A member-elect of the Board of Directors, for
his or her first partial or full Plan Year, may file such written deferral
election form on or before 30 days following the beginning of his or her term on
the Board of Directors.
(d) DEFERRAL ELECTION FORM. Participants shall designate on their written
deferral election form whether they elect to have their Total Cash Compensation
deferred in accordance with the Book Value Deferral Option as set forth in
Section 5 herein, the Fixed Rate of Interest Deferral Option as set forth in
Section 6 herein or a combination thereof.
(e) BENEFICIARY DESIGNATION. Participants shall designate one or more
beneficiaries on the written deferral election form. Such designation may be
revoked or modified at any time by designating a new beneficiary on the written
deferral election form. A Participant's beneficiary designation shall be deemed
automatically revoked in the event all designated beneficiaries predecease such
Participant or, if the sole beneficiary is such Participant's spouse, in the
event of dissolution of marriage. In such event, or in the event a Participant
does not designate a beneficiary, the benefits hereunder shall be paid to such
Participant's estate.
2
<PAGE>
SECTION 5. BOOK VALUE DEFERRAL OPTION.
(a) DEFERRED COMPENSATION UNITS. The Book Value Deferral Option credits
Deferred Compensation Units ("Units") to a Participant's account which are
determined by dividing the cash amount of Deferred Compensation by the Book
Value of the Common Stock at the end of the previous calendar year, adjusted in
accordance with paragraph (e) of this Section 5. Each Participant's account
shall be credited with amounts equal to dividends paid in cash from time to time
on the Common Stock. "Book Value" of Common Stock shall be the total Common
Stock equity on a consolidated basis divided by total shares outstanding, as
shown in the applicable annual report certified by the independent certified
public accountants retained as auditors of the Company.
(b) SPECIAL LEDGER. The Company shall keep an appropriate record,
hereinafter called the Special Ledger, of (i) the amount of Total Cash
Compensation deferred by a Participant for a particular Plan Year under the Book
Value Deferral Option, (ii) the number of Units credited under paragraph (c) of
this Section 5, and (iii) the amount of dividends and Units credited with
respect thereto under paragraph (d) of this Section 5.
(c) CREDIT OF UNITS TO ACCOUNT. The number of Units to be credited to a
Participant's account at any time shall be determined by dividing the cash
amount of Deferred Compensation by the Book Value of the Common Stock at the end
of the previous calendar year, adjusted in accordance with Section 5(e) of this
Plan, with fractional Units permitted.
(d) CREDIT FOR DIVIDENDS. The Company shall credit to each Participant's
account in the Special Ledger amounts equal to dividends paid in cash from time
to time on the account, so that the amount of each such credit will be the
equivalent of the dividends which the Participant would have received had the
Participant been the owner of the number of shares of Common Stock equal to the
number of Units in the Participant's account. Such amounts credited to each
Participant's account shall be converted into additional Units in the manner
provided in paragraph (c) of this Section 5, and thereafter such additional
Units shall be included in the base for determining future credits.
(e) ADJUSTMENT IN NUMBER OF UNITS. In the event of any stock dividend on
the Common Stock or any stock split, reverse stock split or combination of
shares of Common Stock, appropriate adjustment shall be made in the number of
Units credited to the account of each Participant in the Special Ledger.
(f) TERMINATION OF SERVICES DURING PLAN YEAR. In the event of termination of
services during a Plan Year for any reason, a reduction in the Units credited
3
<PAGE>
to the account of a Participant for such Plan Year shall be made, if necessary,
such that the sum of the dollar amount of Deferred Compensation of the
Participant for such Plan Year plus the amount of Total Cash Compensation paid
to the Participant for the period of actual directorship during such Plan Year
is equal to the amount of Total Cash Compensation that would have been paid to
the Participant for such partial Plan Year had no election been made to defer
any of the Total Cash Compensation for such Plan Year.
SECTION 6. FIXED RATE OF INTEREST DEFERRAL OPTION.
(a) INTEREST EARNED. Under the Fixed Rate of Interest Deferral Option, the
amount of Total Cash Compensation deferred for the current Plan Year and
Deferred Compensation credited to a Participant's account (including earnings
thereon credited to the Participant's account) from previous Plan Years and for
which this deferral option is selected will earn a fixed rate of interest
("Fixed Rate of Interest"). Interest shall be credited to a Participant's
account on each March 31, June 30, September 30 and December 31. The Fixed Rate
of Interest shall be established by the Compensation Committee prior to the
beginning of each Plan Year and each Director shall be notified of such Fixed
Rate of Interest prior to making a deferral election.
(b) SPECIAL LEDGER. The Company shall keep on the Special Ledger (i) the
amount of Total Cash Compensation deferred by a Participant for each Plan Year
under the Fixed Rate of Interest Deferral Option and (ii) the amount of interest
credited to the Participant's account as earnings on such Deferred Compensation
for each Plan Year.
(c) TERMINATION OF SERVICES DURING PLAN YEAR. In the event of termination of
services during a Plan Year for any reason, interest will continue to be
credited to the account of a Participant at the Fixed Rate of Interest for the
remainder of the Plan Year during which the termination of services occurs and
thereafter at the Fixed Rate of Interest established for each succeeding Play
Year until such time as payments commence in accordance with Section 7 hereof.
SECTION 7. PAYMENT.
(a) CONDITIONS ON RIGHT TO RECEIVE PAYMENT. A Participant shall not be entitled
to payment of any Deferred Compensation until the time elected by the
Participant as set forth on the written deferral election form filed with the
Corporate Secretary of the Company, or until his or her death or permanent
disability, whichever occurs first. The election shall state the date that
payments shall commence and the period over which payments shall be made.
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The Participant may elect to receive Deferred Compensation and accumulated
earnings thereon either in a lump sum payment or in annual installments. Once
an election is filed, it shall not be changed except by approval of the Board of
Directors of the Company.
(b) FORM AND TIMING OF PAYMENT. (i)(A) Under the Book Value Deferral
Option, the value of Units at the time of payout shall be based on the higher of
(w) the closing market price of Common Stock on the last trading date of the
preceding Plan Year on the New York Stock Exchange, (x) the average of the daily
closing market price for the Common Stock for the twelve month period ending on
the date of termination of services as a Director by a Participant, (y) the
closing market price of the Common Stock on the last trading date immediately
preceding the date of payment or (z) the Book Value of Common Stock as of the
most recent December 31 prior to date of payment. The Participant (or
beneficiary in the event of death prior to any payout to the Participant) shall
make a selection between the foregoing methods of valuation prior to the time
for payment of a lump sum or prior to the first payment in the case of annual
installments. Such selection cannot be changed with respect to any subsequent
payments in the case of annual installments. The per Unit value as selected by
the Participant shall be referred to as the "Payout Value."
(B) Under the Fixed Rate of Interest Deferral Option, the value of a
Participant's account shall be the aggregate amount of Deferred Compensation for
each Plan Year for which the Participant has elected to defer under the Fixed
Rate of Interest Deferral Option plus the aggregate amount of interest earned
thereon at the applicable Fixed Rate of Interest as established by the
Compensation Committee from year to year.
(ii) If annual installments are selected, each annual installment shall be
not less that an amount equal to the value of the account at the beginning of
the Plan Year in which distribution is to be made divided by the life expectancy
of the Participant at the beginning of such Plan Year (or the joint life
expectancy of the Participant and spouse if the Participant is married). Each
annual installment payment shall be made within fifteen (15) days following the
first day of each Plan Year.
(iii)(A) In the case of a Book Value Deferral Option, if an election is
made to receive annual installments, then Units remaining in the account at any
time shall continue to be credited with dividends (which shall purchase
additional Units), until full payment has been made with respect to all Units.
Units shall continue to fluctuate in value based on the Payout Value until full
payment has been made with respect to the Units. In the alternative, instead of
having the account fluctuate in value, a Participant may elect to have the
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<PAGE>
value of his or her account fixed as of the December 31 prior to the first
payment, based on the selection of Payout Value under paragraph (b)(i)(A) of
this Section 7. If such an election is made, the account shall be credited each
December 31 with interest at the then current Fixed Rate of Interest.
(B) In the case of a Fixed Rate of Interest Deferral Option, if an
election is made to receive annual installments, then the aggregate amount of
Deferred Compensation plus interest earned thereon remaining in the account at
any time shall continue to be credited each December 31 with interest at the
then current Fixed Rate of Interest, until full payment has been made.
(iv) If an election is made to receive a lump sum payment, payment shall be
made within fifteen (15) days following the first day of the Plan Year in which
payment is to be made, and the amount of the lump sum payment shall be equal to
the value of the account as of December 31 of the preceding Plan Year (in the
case of a Book Value Deferral Option, the value of the account shall be based on
the Payout Value selected under paragraph (b)(i)(A) of this Section 7).
(v) Payment of a lump sum amount or any annual installment shall be made
in cash.
(vi) In the event of the death of a Participant occurring either before the
commencement of payment or before the full balance of the Participant's account
has been paid, the unpaid balance of Deferred Compensation shall be paid in a
lump sum to the Participant's designated beneficiary or estate. Payment shall be
made within thirty (30) days following the date of death. In the case of a Book
Value Deferral Option, dividends to which owners of Common Stock would be
entitled through date of death shall be credited to the account. The value of
Units shall be based on the closing market price of Common Stock on the date of
death (or on the preceding business day if date of death is not business day)
or as otherwise selected by the beneficiary in accordance with paragraph
(b)(i)(A) of this Section 7.
SECTION 8. GENERAL PROVISIONS.
(a) UNFUNDED PLAN. (i) This Plan is intended to be an unfunded plan maintained
primarily to provide benefits to a "select group of management or highly
compensated employees" within the meaning of Sections 201, 301 and 401 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and as
amended from time to time or any successor thereto, and, therefore, is further
intended to be exempt from the provisions of Parts 2, 3 and 4 of Title I of
ERISA. Accordingly, the Compensation Committee may terminate
6
<PAGE>
the Plan for any or all Participants in order to achieve and maintain this
intended result, provided that previously accrued benefits hereunder shall not
be reduced or otherwise adversely affected without the written consent of the
affected Participants.
(ii) The obligations hereunder shall at all times be unsecured and payments
with respect to any benefits hereunder shall be paid out of the general
operating revenue of the Company. A trust may be established to provide for the
payment of benefits to Participants hereunder as long as the assets of such
trust are subject to the claims of general creditors of the Company with respect
to the deferrals (and earnings thereon, if applicable).
(b) WITHHOLDING. The Company shall have the right to require Participants to
remit to the Company an amount sufficient to satisfy Federal, state and local
tax withholding requirements, or to deduct from any or all payments made
pursuant to the Plan amounts sufficient to satisfy such withholding tax
requirements.
(c) COSTS OF THE PLAN. All costs of implementing and administering the Plan
shall be borne by the Company.
(d) NON-ALIENATION OF BENEFITS. No right or benefit under this Plan shall be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber,
or charge the same shall be void. No right or benefit hereunder shall in any
manner be liable for or subject to the debts, contracts, liabilities, or claims
of the person entitled to such benefit. If any Participant or designated
beneficiary hereunder should become bankrupt or attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge any right or benefit hereunder, then
such right or benefit shall, in the discretion of the Compensation Committee,
cease, and in such event, the Company may hold or apply the same or any part
thereof for the benefit of the Participant or the designated beneficiary, his or
her spouse, children, or other dependents, or any of them, in such manner and in
such proportion as the Compensation Committee may deem proper.
(e) SUCCESSORS. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the direct or indirect result of a merger or
reorganization involving the Company or the purchase or other acquisition, of
all or substantially all of the business or assets of the Company.
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<PAGE>
(f) AMENDMENT OR TERMINATION OF PLAN. (i) The Board of Directors reserves the
right at any time and from time to time to amend, suspend or terminate the Plan
without the consent of any Participant or other person claiming a right under
the Plan.
(ii) Any amendment or termination of this Plan shall not adversely affect
the rights of Participants or designated beneficiaries to payments of amounts
credited to Participants in the Special Ledger pursuant to the Book Value
Deferral Option or the Fixed Rate of Interest Deferral Option at the time of
such amendment or termination.
(g) SEPARABILITY. If any term or provision of this Plan as presently in effect
or as amended from time to time, or the application thereof to any payments or
circumstances, shall to any extent be invalid or unenforceable, the remainder of
the Plan, and the application of such term or provision to payments or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each term or provision of the Plan shall be valid
and enforced to the fullest extent permitted by law.
(h) CONSTRUCTION. The provisions of this Plan shall be construed, administered
and enforced according to the laws of the State of Iowa.
(i) TITLES. The titles of the Articles and Sections herein are included for
convenience of reference only and shall not be construed as part of this Plan,
or have any effect upon the meaning of the provisions hereof.
(j) IMPOSSIBILITY OF ACTION. In case it becomes impossible for the Company to
perform any act under this Plan, that act shall be preformed which in the
judgment of the Company will most nearly carry out the intent and purposes of
this Plan. All parties concerned shall be bound by any such acts performed
under such conditions.
(k) AUTHORIZED OFFICERS. Whenever the Company under the terms of the Plan is
permitted and required to perform any act or matter or thing, it shall be done
and performed by a duly authorized officer of the Company.
SECTION 9. EFFECTIVE DATE.
This Plan shall become effective as of July 1, 1995.
MEC-3a
09/18/95
8
<PAGE>
MIDAMERICAN ENERGY COMPANY
DEFERRED COMPENSATION PLAN
BOARD OF DIRECTORS
1995 DEFERRAL ELECTION FORM
A. DEFERRAL ELECTION. With respect to cash compensation for service as a
director of MidAmerican Energy Company for the Plan Year commencing July 1, 1995
and ending on December 31, 1995, I hereby elect to defer:
ALL_____or $_______(Multiples of $1,000)
B. DEFERRAL OPTION. I further elect the following deferral option(s):
Book Value Deferral Option: _____ ($ or %)
Fixed Rate of Interest Deferral Option: _____ ($ or %)
C. TIME OF PAYMENT. I further elect to defer such compensation until (check
one):
_____ The first day of the Plan Year following my termination as a member of
the Board of Directors of MidAmerican Energy Company.
_____ The first day of the Plan Year following my 65th birthday.
_____ Such time as I am not subject to a loss of social security benefits
under Section 203(f) of the Social Security Act as a result of
earnings in excess of the amount specified in Section 203(f) of the
Social Security Act.
_____ Other_________________________________________________________________
D. PAYMENT ELECTION. Deferred compensation shall be paid to me (check one):
_____ In a lump sum payment.
_____ In substantially equal annual installments over a period of _____
years.
E. BENEFICIARY DESIGNATION. I hereby designate __________________ to receive
all payments specified above payable after my death. I hereby reserve the power
to make future changes of beneficiary.
_____________________________ _______________________________
Date Signature
MEC-14
<PAGE>
EXHIBIT 10.2
MIDAMERICAN ENERGY COMPANY
DEFERRED COMPENSATION PLAN
EXECUTIVES
SECTION 1. PURPOSE. The purpose of this Plan is to enable MidAmerican
Energy Company to attract and retain in its employment qualified executives by
providing such executives the opportunity to defer a portion of their cash
compensation.
SECTION 2. DEFINITIONS.
(a) "Cash Compensation" means up to fifty percent (50%) of an Executive's
annual base salary and the cash portion of any incentive compensation received
by the Executive which is eligible for deferral under the terms of the
applicable incentive compensation plan of the Company.
(b) "Common Stock" means shares of common stock of MidAmerican Energy Company.
(c) "Company" means MidAmerican Energy Company.
(d) "Compensation Committee" means the Compensation Committee established by
the Board of Directors of the Company.
(e) "Deferred Compensation" means the amount of Cash Compensation not yet
earned by a Participant which such Participant elects to defer in any given Plan
Year in accordance with the provisions of the Plan.
(f) "Executive" means an officer or key employee of the Company eligible to
participate in the Plan.
(g) "Participant" means an Executive who has elected to commit part or all of
his or her Cash Compensation as Deferred Compensation under this Plan.
(h) "Plan Year" shall mean each January 1 through December 31 inclusive.
SECTION 3. ADMINISTRATION.
(a) COMPENSATION COMMITTEE. The Compensation Committee shall have the
responsibility of interpreting and construing the Plan, establishing and
revising the rules and procedures governing the Plan and making such
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<PAGE>
determinations as may be necessary or advisable to administer the Plan. No
member of the Compensation Committee shall be liable for any act done or
determination made in good faith.
(b) DELEGATION. The Compensation Committee may, in its discretion, delegate
its routine administrative duties to an officer or employee of the Company, or
to a committee composed of such officers or employees. The Corporate Secretary
of the Company shall maintain the records and accounts of the Plan.
SECTION 4. ELIGIBILITY.
(a) ELIGIBLE EXECUTIVES. Executives eligible to participate in the Plan
shall be designated by the Compensation Committee.
(b) AMOUNTS WHICH MAY BE DEFERRED. An Executive may commit to the Plan up
to fifty percent (50%) of his or her annual base salary that would otherwise be
paid to the Executive for a Plan Year by filing a written deferral election form
with the Corporate Secretary of the Company prior to the first day of the Plan
Year. The cash portion of any incentive compensation received by the Executive
which is eligible for deferral under the terms of the applicable incentive
compensation plan of the Company will automatically be eligible for deferral
under this Plan. An employee who is newly designated as an eligible Executive
under this Plan, for his or her first partial or full Plan Year, may file such
written election on or before thirty (30) days following designation as an
eligible Executive.
(c) DEFERRAL ELECTION FORM. Participants shall designate on their written
deferral election form whether they elect to have their Cash Compensation
deferred in accordance with the Book Value Deferral Option as set forth in
Section 5 herein, the Fixed Rate of Interest Deferral Option as set forth in
Section 6 herein or a combination thereof. Any incentive compensation deferred
under this Plan will be deferred on the same basis as the Participant elects to
defer Cash Compensation.
(d) BENEFICIARY DESIGNATION. Participants shall designate one or more
beneficiaries on the written deferral election form. Such designation may be
revoked or modified at any time by designating a new beneficiary on the written
deferral election form. A Participant's beneficiary designation shall be deemed
automatically revoked in the event all designated beneficiaries predecease such
Participant or, if the sole beneficiary is such Participant's spouse, in the
event of dissolution of marriage. In such event, or in the event a Participant
does not designate a beneficiary, the benefits hereunder shall be paid to such
Participant's estate.
2
<PAGE>
SECTION 5. BOOK VALUE DEFERRAL OPTION.
(a) DEFERRED COMPENSATION UNITS. The Book Value Deferral Option credits
Deferred Compensation Units ("Units") to a Participant's account which are
determined by dividing the cash amount of Deferred Compensation by the Book
Value of the Common Stock at the end of the previous calendar year, adjusted in
accordance with paragraph (e) of this Section 5. Each Participant's account
shall be credited with amounts equal to dividends paid in cash from time to time
on the Common Stock. "Book Value" of Common Stock shall be the total Common
Stock equity on a consolidated basis divided by total shares outstanding, as
shown in the applicable annual report certified by the independent certified
public accountants retained as auditors of the Company.
(b) SPECIAL LEDGER. The Company shall keep an appropriate record,
hereinafter called the Special Ledger, of (i) the amount of Cash Compensation
deferred by a Participant for a particular Plan Year under the Book Value
Deferral Option, (ii) the number of Units credited under paragraph (c) of this
Section 5, and (iii) the amount of dividends and Units credited with respect
thereto under paragraph (d) of this Section 5.
(c) CREDIT OF UNITS TO ACCOUNT. The number of Units to be credited to a
Participant's account at any time shall be determined by dividing the cash
amount of Deferred Compensation by the Book Value of the Common Stock at the end
of the previous calendar year, adjusted in accordance with Section 5(e) of this
Plan, with fractional Units permitted.
(d) CREDIT FOR DIVIDENDS. The Company shall credit to each Participant's
account in the Special Ledger amounts equal to dividends paid in cash from time
to time on the account, so that the amount of each such credit will be the
equivalent of the dividends which the Participant would have received had the
Participant been the owner of the number of shares of Common Stock equal to the
number of Units in the Participant's account. Such amounts credited to each
Participant's account shall be converted into additional Units in the manner
provided in paragraph (c) of this Section 5, and thereafter such additional
Units shall be included in the base for determining future credits.
(e) ADJUSTMENT IN NUMBER OF UNITS. In the event of any stock dividend on
the Common Stock or any stock split, reverse stock split or combination of
shares of Common Stock, appropriate adjustment shall be made in the number of
Units credited to the account of each Participant in the Special Ledger.
(f) TERMINATION OF SERVICES DURING PLAN YEAR. In the event of termination of
services during a Plan Year for any reason, a reduction in the Units credited
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<PAGE>
to the account of a Participant for such Plan Year shall be made, if necessary,
such that the sum of the dollar amount of Deferred Compensation of the
Participant for such Plan Year plus the amount of Cash Compensation paid to the
Participant for the period of actual service during such Plan Year is equal to
the amount of Cash Compensation that would have been paid to the Participant for
such partial Plan Year had no election been made to defer any of the Cash
Compensation for such Plan Year.
SECTION 6. FIXED RATE OF INTEREST DEFERRAL OPTION.
(a) INTEREST EARNED. Under the Fixed Rate of Interest Deferral Option, the
amount of Cash Compensation deferred for the current Plan Year and Deferred
Compensation credited to a Participant's account (including earnings thereon
credited to the Participant's account) from previous Plan Years and for which
this deferral option is selected will earn a fixed rate of interest ("Fixed Rate
of Interest"). Interest shall be credited to a Participant's account on each
March 31, June 30, September 30 and December 31. The Fixed Rate of Interest
shall be established by the Compensation Committee prior to the beginning of
each Plan Year and each Executive shall be notified of such Fixed Rate of
Interest prior to making a deferral election.
(b) SPECIAL LEDGER. The Company shall keep on the Special Ledger (i) the
amount of Cash Compensation deferred by a Participant for a particular Plan Year
under the Fixed Rate of Interest Deferral Option and (ii) the amount of interest
credited to the Participant's account as earnings on such Deferred Compensation
for each Plan Year.
(c) TERMINATION OF SERVICES DURING PLAN YEAR. In the event of termination of
services during a Plan Year for any reason, interest will continue to be
credited to the account of a Participant at the Fixed Rate of Interest for the
remainder of the Plan Year during which the termination of services occurs and
thereafter at the Fixed Rate of Interest established for each succeeding Play
Year until such time as payments commence in accordance with Section 7 hereof.
SECTION 7. PAYMENT.
(a) CONDITIONS ON RIGHT TO RECEIVE PAYMENT. A Participant shall not be entitled
to payment of any Deferred Compensation until he or she reaches retirement age
(including early retirement age if he or she takes early retirement) as defined
in the Company's defined benefit or cash balance pension plan, or upon death or
permanent disability, whichever occurs first. Upon approval by the Board of
Directors of the Company, payment may be made to
4
<PAGE>
a Participant earlier than retirement in the event employment terminates prior
to such time.
(b) FORM AND TIMING OF PAYMENT. (i)(A) Under the Book Value Deferral
Option, the value of Units at the time of payout shall be based on the higher of
(w) the closing market price of Common Stock on the last trading date of the
preceding Plan Year of the Common Stock on the New York Stock Exchange, (x) the
average of the daily closing market price for the Common Stock for the twelve
month period ending on the date of termination of services as an employee of the
Company, (y) the closing market price of the Common Stock on the last trading
date immediately preceding the date of payment or (z) the Book Value of Common
Stock as of the most recent December 31 prior to date of payment. The
Participant (or beneficiary in the event of death prior to any payout to the
Participant) shall make a selection between the foregoing methods of valuation
prior to the time for payment of a lump sum or prior to the first payment in the
case of annual installments. Such selection cannot be changed with respect to
any subsequent payments in the case of annual installments. The per Unit value
as selected by the Participant shall be referred to as the "Payout Value."
(B) Under the Fixed Rate of Interest Deferral Option, the value of a
Participant's account shall be the aggregate amount of Deferred Compensation for
each Plan Year for which the Participant has elected to defer under the Fixed
Rate of Interest Deferral Option plus the aggregate amount of interest earned
thereon at the applicable Fixed Rate of Interest as established by the
Compensation Committee from year to year.
(ii) At the election of the Compensation Committee, upon consultation with
the Participant, payments of deferred compensation shall be made in a lump sum
or in annual installments.
(iii) If annual installments are selected, each annual installment
shall be not less that an amount equal to the value of the account at the
beginning of the Plan Year in which distribution is to be made divided by the
life expectancy of the Participant at the beginning of such Plan Year (or the
joint life expectancy of the Participant and spouse if the Participant is
married). Each annual installment payment shall be made within fifteen (15)
days following the first day of each Plan Year.
(iv)(A) In the case of a Book Value Deferral Option, if an election is
made to receive annual installments, then Units remaining in the account at any
time shall continue to be credited with dividends (which shall purchase
additional Units), until full payment has been made with respect to all Units.
5
<PAGE>
Units shall continue to fluctuate in value based on the Payout Value until full
payment has been made with respect to the Units. In the alternative, instead of
having the account fluctuate in value, a Participant may elect to have the value
of his or her account fixed as of the December 31 prior to the first payment,
based on the selection of Payout Value under paragraph (b)(i)(A) of this Section
7. If such an election is made, the account shall be credited each December 31
with interest at the then current Fixed Rate of Interest.
(B) In the case of a Fixed Rate of Interest Deferral Option, if an
election is made to receive annual installments, then the aggregate amount of
Deferred Compensation plus interest earned thereon remaining in the account at
any time shall continue to be credited each December 31 with interest at the
then current Fixed Rate of Interest, until full payment has been made.
(v) If an election is made to receive a lump sum payment, payment shall be
made within fifteen (15) days following the first day of the Plan Year in which
payment is to be made, and the amount of the lump sum payment shall be equal to
the value of the account as of December 31 of the preceding Plan Year (in the
case of a Book Value Deferral Option, the value of the account shall be based on
the Payout Value selected under paragraph (b)(i)(A) of this Section 7).
(vi) Payment of a lump sum amount or any annual installment shall be made
in cash.
(vii) In the event of the death of a Participant occurring either
before the commencement of payment or before the full balance of the
Participant's account has been paid, the unpaid balance of Deferred Compensation
shall be paid in a lump sum to the Participant's designated beneficiary or
estate. Payment shall be made within thirty (30) days following the date of
death. In the case of a Book Value Deferral Option, dividends to which owners of
Common Stock would be entitled through date of death shall be credited to the
account. The value of Units shall be based on the closing market price of
Common Stock on the date of death (or on the preceding business day if date of
death is not business day) or as otherwise selected by the beneficiary in
accordance with paragraph (b)(i)(A) of this Section 7.
SECTION 8. GENERAL PROVISIONS.
(a) UNFUNDED PLAN. (i) This Plan is intended to be an unfunded plan maintained
primarily to provide benefits to a "select group of management or highly
compensated employees" within the meaning of Sections 201, 301 and 401 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and as
amended from time to time or any successor thereto, and,
6
<PAGE>
therefore, is further intended to be exempt from the provisions of Parts 2, 3
and 4 of Title I of ERISA. Accordingly, the Compensation Committee may
terminate the Plan for any or all Participants in order to achieve and maintain
this intended result, provided that previously accrued benefits hereunder shall
not be reduced or otherwise adversely affected without the written consent of
the affected Participants.
(ii) The obligations hereunder shall at all times be unsecured and payments
with respect to any benefits hereunder shall be paid out of the general
operating revenue of the Company. A trust may be established to provide for the
payment of benefits to Participants hereunder as long as the assets of such
trust are subject to the claims of general creditors of the Company with respect
to the deferrals (and earnings thereon, if applicable).
(b) WITHHOLDING. The Company shall have the right to require Participants to
remit to the Company an amount sufficient to satisfy Federal, state and local
tax withholding requirements, or to deduct from any or all payments made
pursuant to the Plan amounts sufficient to satisfy such withholding tax
requirements.
(c) COSTS OF THE PLAN. All costs of implementing and administering the Plan
shall be borne by the Company.
(d) NON-ALIENATION OF BENEFITS. No right or benefit under this Plan shall be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or
charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber,
or charge the same shall be void. No right or benefit hereunder shall in any
manner be liable for or subject to the debts, contracts, liabilities, or claims
of the person entitled to such benefit. If any Participant or designated
beneficiary hereunder should become bankrupt or attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge any right or benefit hereunder, then
such right or benefit shall, in the discretion of the Compensation Committee,
cease, and in such event, the Company may hold or apply the same or any part
thereof for the benefit of the Participant or the designated beneficiary, his or
her spouse, children, or other dependents, or any of them, in such manner and in
such proportion as the Compensation Committee may deem proper.
(e) SUCCESSORS. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the direct or indirect result of a merger or
reorganization involving the Company or the purchase or other acquisition, of
all or substantially all of the business or assets of the Company.
7
<PAGE>
(f) AMENDMENT OR TERMINATION OF PLAN. (i) The Board of Directors reserves the
right at any time and from time to time to amend, suspend or terminate the Plan
without the consent of any Participant or other person claiming a right under
the Plan.
(ii) Any amendment or termination of this Plan shall not adversely affect
the rights of Participants or designated beneficiaries to payments of amounts
credited to Participants in the Special Ledger pursuant to the Book Value
Deferral Option or the Fixed Rate of Interest Deferral Option at the time of
such amendment or termination.
(g) SEPARABILITY. If any term or provision of this Plan as presently in effect
or as amended from time to time, or the application thereof to any payments or
circumstances, shall to any extent be invalid or unenforceable, the remainder of
the Plan, and the application of such term or provision to payments or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each term or provision of the Plan shall be valid
and enforced to the fullest extent permitted by law.
(h) CONSTRUCTION. The provisions of this Plan shall be construed, administered
and enforced according to the laws of the State of Iowa.
(i) TITLES. The titles of the Articles and Sections herein are included for
convenience of reference only and shall not be construed as part of this Plan,
or have any effect upon the meaning of the provisions hereof.
(j) IMPOSSIBILITY OF ACTION. In case it becomes impossible for the Company to
perform any act under this Plan, that act shall be preformed which in the
judgment of the Company will most nearly carry out the intent and purposes of
this Plan. All parties concerned shall be bound by any such acts performed
under such conditions.
(k) AUTHORIZED OFFICERS. Whenever the Company under the terms of the Plan is
permitted and required to perform any act or matter or thing, it shall be done
and performed by a duly authorized officer of the Company.
SECTION 9. EFFECTIVE DATE.
This Plan shall become effective as of July 1, 1995.
8
MEC-4
09/13/95
<PAGE>
EXHIBIT 10.3
SUPPLEMENTAL RETIREMENT PLAN FOR
DESIGNATED OFFICERS
MIDAMERICAN ENERGY COMPANY
Board Approval: December 1995
<PAGE>
MIDAMERICAN UTILITY COMPANY
SUPPLEMENTAL RETIREMENT PLAN FOR DESIGNATED OFFICERS
CONTENTS
I. Establishment 1
II. Purpose 1
III. Construction
3.1. Definitions 1
3.2. Gender and Number 5
3.3. Severability 5
IV. Administration
4.1. The Committee 5
4.2. Authority of the Committee 5
4.3. Decisions Binding 6
V. Eligibility and Participation
5.1. Participation 6
5.2. No Employment Guarantee 6
VI. Benefits
6.1. Benefits Upon Normal Retirement 6
6.2. Benefits Upon Early Retirement 6
6.3. Benefits Upon Disability 7
6.4. Actuarial Equivalent Benefit 7
6.5. Benefits Upon Death 7
6.6. Forfeiture Upon Termination For Cause 8
6.7. General Payout Restriction 8
VII. Individual Accounts and the Rabbi Trust
7.1. Establishment of a Rabbi Trust 8
7.2. Causing the Trust to Become Irrevocable 9
7.3. Payment of Benefits from the Trust 9
<PAGE>
VIII. Beneficiary Designation
8.1. Designation of Beneficiary 9
8.2. Payment to a Participant's Estate 9
IX. Miscellaneous
9.1. Unfunded Plan 9
9.2. Withholding 9
9.3. Costs of the Plan 10
9.4. Nontransferability 10
9.5. Successors 10
9.6. Address of Participant or Beneficiary 10
9.7. Applicable Law 10
<PAGE>
MIDAMERICAN ENERGY COMPANY
SUPPLEMENTAL RETIREMENT PLAN FOR DESIGNATED OFFICERS
I. ESTABLISHMENT
MidAmerican Energy Company, an Iowa corporation (the "Company"),
hereby establishes the Company's Supplemental Retirement Plan for
Designated Officers (the "Plan"), effective as of January 1, 1996.
II. PURPOSE
The purpose of the Plan is to enable the Company and its subsidiaries
to attract, retain, and motivate persons of outstanding competence,
and to provide appropriate supplemental retirement and survivor
benefits to Designated Officers of the Company.
III. CONSTRUCTION
SECTION 3.1. DEFINITIONS. Whenever used herein, the following terms
shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means a Participant's discharge from the employment of
the Company because such Participant willfully engages in
conduct, or lack thereof, that is demonstrably and materially
injurious to the Company, its business reputation or financial
structure, but shall not include a Qualifying Termination.
Determination of "Cause" shall be made by the Committee in the
exercise of good faith and reasonable judgement and approved by
the Board.
(c) "Change in Control" means either:
(i) The closing date of the restructuring of the Company as a
result of merger, consolidation, takeover or reorganization
unless at least sixty percent (60%) of the members of the
board of directors of the corporation resulting from such
merger, consolidation, takeover or reorganization were
members of the Incumbent Board; or
(ii) The occurrence of any other event that is designated as
being a "Change in Control" by a majority vote of the
directors of the Incumbent Board who are not also employees
of the Company.
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(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means an Administrative Committee comprised of
Company employees selected by the President of the Company and
approved by the Board to administer the Plan pursuant to Article
IV herein.
(f) "Company" means MidAmerican Energy Company, and its subsidiaries.
(g) "Designated Officer" is an officer of the Company or its
subsidiaries who has been authorized by the Board to participate
in the Plan.
(h) "Disability" means a Termination of Services resulting from a
total disability of a Participant, as a result of a medically
determinable physical or mental impairment which renders such
Participant unable to engage in any substantial gainful
employment, and which can be expected to be of indefinite
duration. Such Disability shall be determined by the Committee
in the exercise of good faith and reasonable judgment in reliance
on competent medical advice from one or more qualified
individuals selected by the Committee.
(i) "Disability Benefit" means, for such Participant, the Normal
Retirement Supplemental Benefit or Early Retirement Supplemental
Benefit, computed as though the Participant is deemed to have
continued in employment during the period of disability and
incurred a Termination of Services on the date he or she elects
to begin receiving benefits hereunder.
(j) "Early Retirement Total Benefit" means a Normal Retirement Total
Benefit reduced at the rate of one percentage point for each
full and fraction of a year that, on the effective date of
commencement of benefits, such Participant's age is less than
sixty-five (65) years (i.e., 60% at age 60, 55% at age 55).
(k) "Early Retirement" means, for each Participant, the commencement
of benefits after Termination of Services of such Participant
other than because of death or Cause, but prior to such
Participant reaching Normal Retirement Age.
(l) "Early Retirement Date" means the first day of the month chosen
by the Participant for commencement of the Early Retirement
Supplement Benefit, which in no event shall be earlier than the
first day of the month following the Participant's attainment of
age fifty-five (55).
(m) "Early Retirement Supplemental Benefit" (see subsection (s)
below).
(n) "Effective Date" means January 1, 1996.
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(o) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor thereto.
(p) "Incumbent Board" means the members of the Board on August 1,
1995. For this purpose, an individual who becomes a member of
the Board subsequent to August 1, 1995 and who has been nominated
for election by the Company's shareholders by resolution adopted
by a vote of at least two-thirds of the directors then comprising
the Incumbent Board at a duly convened meeting thereof shall be
deemed to be a member of the Incumbent Board.
(q) "Normal Retirement Total Benefit" means the annual benefit
provided under the Plan upon a Termination of Services on or
following a Participant's Normal Retirement Date, in the amount
of sixty-five percent (65%) of such Participant's Total Cash
Compensation in effect immediately prior to such Termination of
Services, times a fraction, the numerator being the number of
years (including fractions of a year) of participation in this
Plan (or participation in a similar supplemental retirement plan
of a Predecessor Company) as of the date of Termination of
Services, and the denominator being the number of years of
participation if the Participant had remained employed to age 55
(the factor shall not exceed 1.0). The Board shall have the
authority to grant the crediting of service with a former
employer of a Participant in the calculation above (such
determination shall be made when the individual is first
designated by the Board to participate in this Plan).
(r) "Normal Retirement Supplemental Benefit" and "Early Retirement
Supplemental Benefit", respectively, mean the Normal Retirement
Total Benefit or Early Retirement Total Benefit, as applicable,
reduced by the sum of:
(i) the annual benefits provided to such Participant under the
Company's Tax Qualified Pension Plan (determined as if the
Participant elected the same benefit option as selected
under this Plan and beginning on the same date that payments
begin under this Plan, or the actuarial equivalent if
payments are not payable as early as under this Plan, as
determined by the Committee in the exercise of good faith
and judgment);
(ii) benefits under Iowa-Illinois Gas and Electric Company
Supplemental Retirement Plan, the Iowa Resources Inc. and
Subsidiaries Supplemental Retirement Income Plan, after
converting such benefits to an actuarially equivalent
amount, as determined by the Committee in the exercise of
good faith and reasonable judgment; and
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(iii) tax qualified defined benefit pension type retirement
plan benefits payable to such Participant by other
employers of such Participant if service with such
other employers is credited as service under the
Company's Tax Qualified Pension Plan, after converting
such benefits to an actuarially equivalent amount, as
determined by the Committee in the exercise of good
faith and reasonable judgment.
An Early Retirement Supplemental Benefit will not be available to
any Participant whose Termination of Services occurs prior to
being credited with five (5) Years of Service.
(s) "Normal Retirement Age" means, for each Participant, the
attainment of age sixty-five (65) years.
(t) "Normal Retirement Date" means the first day of the month next
following the date of reaching Normal Retirement Age.
(u) "Participant" means an officer of the Company or its subsidiaries
who has been approved by the Board, and any retired individual
who has a vested accrued benefit under the Plan as specified in
Article V.
(v) "Plan Year" means the calendar year beginning January 1 and
ending December 31.
(w) "Predecessor Company" means Midwest Resources Inc., Iowa-Illinois
Gas and Electric Company, Midwest Energy Company, Iowa Resources
Inc. and any member of the same controlled group of corporations
of any of these companies.
(x) "Rabbi Trust" means a grantor trust, within the meaning of
Sections 671-678 of the Code, established by the Company for the
benefit of the Participants, both active and retired, and the
Participants' designated beneficiaries, as specified in Article
VIII.
(y) "Spouse" means a husband or wife as licensed in marriage by the
state.
(z) "Survivor's Benefit" means the benefit payable to a Participant's
surviving Spouse, designated beneficiary or estate under the Plan
as specified in Section 6.6 in the event of such Participant's
death.
(aa) "Tax Qualified Pension Plan" shall mean the tax qualified defined
benefit plan, cash balance plan and money purchase pension plan,
if any, maintained by the
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Company, but shall not include any profit sharing plans, employee
stock ownership plans or qualified salary reduction or cash or
deferred plan.
(bb) "Termination of Services" means the severing of a Participant's
employment with the Company for any reason.
(cc) "Total Cash Compensation" means the highest amount payable to a
Participant by the Company (or a Predecessor Company) as annual
base salary during the five years immediately prior to
termination of services (including the year in which termination
occurs), plus the average of the Participant's last three years'
Awards under the Company's Key Employee Annual Incentive Plan or
its successor plan(s), or under a similar annual incentive bonus
program for executives of a Predecessor Company. Annual Base
Salary shall include amounts deferred under any Section 401(k)
plans, Section 125 cafeteria plans, nonqualified deferred
compensation plans or similar arrangements. If less than three
years' Awards have been made for the Participant, the average of
all Awards shall be used.
(dd) "Year of Service" or "Years of Service" means each full twelve
months of service with the Company or with a Predecessor Company.
SECTION 3.2. GENDER AND NUMBER. Except when otherwise indicated by the
context, any masculine term used herein also shall include the feminine;
the plural shall include the singular; and the singular shall include the
plural.
SECTION 3.3. SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan; and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
IV. ADMINISTRATION
SECTION 4.1. THE COMMITTEE. The Plan shall be administered within the
guidelines contained in this Article IV by an Administrative Committee
comprised of Company employees selected by the President of the Company and
approved by the Board. The Committee may delegate the responsibility of
performing ministerial acts to such administrative agents as it deems
advisable or desirable to carry out the purpose of the Plan.
SECTION 4.2. AUTHORITY OF THE COMMITTEE. Subject to ratification by the
Board, the Committee shall have the power to construe and interpret the
Plan and any agreement or instrument entered into hereunder; to prescribe,
amend, or waive rules and regulations for the Plan's administration; and to
make any other determination which may be necessary or advisable for the
Plan's administration. The Committee may correct any defect or supply any
omission or
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reconcile any inconsistency in the Plan in the manner and to the extent
reasonable to effect its purpose.
The Company may elect to insure the lives of Participants; in such case,
Participants must agree to undergo physical examinations and otherwise
cooperate in obtaining such insurance as a condition precedent to
participation in the Plan. Any such life insurance policies shall be owned
by and be considered a general asset of the Company. Subject to Section
7.2, no Participant or beneficiary shall have any rights to or interest in
or shall be entitled to any benefits under such policies.
SECTION 4.3. DECISIONS BINDING. All determinations and decisions made by
the Committee pursuant to the provisions of the Plan, as ratified by the
Board, and all related orders or resolutions of the Board shall be final,
conclusive, and binding on all persons, including the Company, its
shareholders, employees, the Participants and their estates and designated
beneficiaries.
The Board shall have the full power to amend or terminate the Plan at any
time prior to the occurrence of a Change in Control, as further described
in Article VII herein.
V. ELIGIBILITY AND PARTICIPATION
SECTION 5.1. PARTICIPATION. Upon approval by the Board, Designated Officers
shall automatically become Participants under the Plan. Retired
individuals who have a vested accrued benefit under the Plan will also be
considered to be Participants.
SECTION 5.2. NO EMPLOYMENT GUARANTEE. Neither this Plan nor any action
taken hereunder shall be construed as giving a Participant the right to be
retained as an employee of the Company for any period.
VI. BENEFITS
SECTION 6.1. BENEFITS UPON NORMAL RETIREMENT. Upon a Participant's Normal
Retirement, the Company shall pay to such Participant, as compensation for
services rendered prior to such date, his or her Normal Retirement
Supplemental Benefit in equal monthly installments commencing on the
Normal Retirement Date, or, if later, then first day of the month next
following Termination of Services, and continuing on the first day of each
month thereafter during the lifetime of such Participant.
SECTION 6.2. BENEFITS UPON EARLY RETIREMENT. Upon a Participant's Early
Retirement (as chosen by the Participant), and following Termination of
Services, the Company shall pay to the Participant, as compensation for
services rendered prior to such date, his or her Early Retirement
Supplemental Benefit in equal monthly installments commencing on the
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Participant's Early Retirement Date, and, in all cases, continuing on the
first day of each month thereafter during the lifetime of such Participant.
SECTION 6.3. BENEFITS UPON DISABILITY. Upon a Participant's election to
begin receiving benefits hereunder following Termination of Services for
Disability, the Company shall begin payment to the Participant (but no
earlier than his or her Early Retirement Date), as compensation for
services rendered prior to such date, his or her Disability Benefit in
equal monthly installments commencing on the first day of the month
selected by the Participant and continuing on the first day of each month
thereafter during the lifetime of such Participant.
SECTION 6.4. ACTUARIAL EQUIVALENT BENEFIT. If the Participant so elects
prior to commencement of benefits hereunder, he or she may choose a payment
option under any payment option authorized under the Company's Tax
Qualified Pension Plan which is the actuarial equivalent of the benefit
accrued under this Plan, using appropriate actuarial assumptions as
determined by the Committee in the exercise of good faith and reasonable
judgment; provided, however, no lump sum payment shall be permitted and no
installments for a fixed period only shall be permitted.
SECTION 6.5. BENEFITS UPON DEATH. Upon a Participant's death, the Company
shall pay to such Participant's designated beneficiary or estate, as
appropriate, the following Survivor's Benefit;
(a) DEATH PRIOR TO COMMENCEMENT OF BENEFITS. If a Participant dies
prior to commencement of the payment of any benefit hereunder,
the Company shall pay to such Participant's designated
beneficiary or estate a Survivor's Benefit equal to the Normal
Retirement Supplemental Benefit in one hundred eighty (180) equal
monthly installments commencing on the first day of the month
following such date of death and receipt of a death certificate
by the Company, and continuing on the first day of each month
thereafter until the one hundred eighty (180) payments have been
made.
(b) DEATH AFTER COMMENCEMENT OF BENEFITS. If a Participant dies after
commencement of the payment of any benefit hereunder, the Company
shall pay to the Participant's surviving Spouse a Survivor's
Benefit commencing on the first day of the month following such
date of death and receipt of a death certificate by the Company
and continuing on the first day of each month thereafter for the
remaining lifetime of the surviving Spouse. The Survivor's
Benefit means a benefit equal to two-thirds of the Normal
Retirement Supplemental Benefit, Early Retirement Supplemental
Benefit or Disability Benefit, as applicable, that the
Participant was receiving immediately prior to death, except that
the total Survivor's Benefit shall be limited to fifty percent
(50%) of the total benefit based upon an actuarial calculation at
the time benefits commence.
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(c) Payment by the Company of the benefit in Section 6.5 (a) or (b)
shall relieve the Company of the obligation to pay a Normal
Retirement Supplemental Benefit, an Early Retirement Supplemental
Benefit, a Disability Benefit, or any other benefit which the
Participant might have otherwise received under the Plan.
(d) In the event a Participant dies without a surviving Spouse, after
commencement of the payment of any benefits hereunder, the
Company shall pay to such Participant's designated beneficiary or
estate a Survivor's Benefit equal to the Normal Retirement
Supplemental Benefit, Early Retirement Supplemental Benefit or
Disability Benefit, as applicable, that the Participant was
receiving immediately prior to death such that a total of one
hundred eighty (180) equal monthly installments is paid to the
Participant and such Participant's designated beneficiary or
estate. The Survivor's Benefit portion shall commence on the
first day of the month following such date of death and receipt
of a death certificate by the Company, and continue on the first
day of each month thereafter until a total of one hundred eighty
(180) payments have been made.
SECTION 6.6. FORFEITURE UPON TERMINATION FOR CAUSE. Upon a Participant's
Termination of Services for Cause, such Participant shall immediately
forfeit all rights and benefits provided under the Plan, and the Company
shall have no further obligation to such Participant under the Plan.
SECTION 6.7. GENERAL PAYOUT RESTRICTIONS. No benefits shall be paid under
this Plan prior to the actual Termination of Services of a Participant.
VII. INDIVIDUAL ACCOUNTS AND THE RABBI TRUST
SECTION 7.1. ESTABLISHMENT OF A RABBI TRUST. After the Effective Date, the
Company shall be authorized, but shall not be required, to establish a
revocable Rabbi Trust for the benefit of the Participants, both active and
retired. Any such Rabbi Trust shall have an independent trustee, selected
by the Company, and, it shall contain restrictions on the Company's ability
to amend or terminate any of the terms thereof after the Rabbi Trust shall
become irrevocable as provided in Section 7.2.
All assets held in the Rabbi Trust (while revocable or irrevocable) shall
at all times be specifically subject to the claims of the Company's general
creditors in the event of bankruptcy or insolvency; such terms shall be
specifically defined within the provisions of the Rabbi Trust, along with a
required procedure for notifying the Trustee of any such bankruptcy or
insolvency.
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SECTION 7.2. CAUSING THE TRUST TO BECOME IRREVOCABLE. The instrument
establishing any such Rabbi Trust shall provide that the Rabbi Trust shall
be revocable until the occurrence of either of the following:
(i) A Change in Control; or
(ii) A majority vote by the Incumbent Board to make the Rabbi Trust
irrevocable.
SECTION 7.3. PAYMENT OF BENEFITS FROM THE TRUST. The Company shall be
primarily obligated to pay all benefits of Participants under the Plan,
whether the Rabbi Trust is revocable or irrevocable at the time. In the
event the Company fails to fulfill any such obligation hereunder in a
timely manner, the Trustee shall be empowered, under the terms of the Rabbi
Trust, to either cash in any related life insurance policies or to borrow
against the policies, to the extent necessary to pay past due benefits
directly from the Trust.
VIII. BENEFICIARY DESIGNATION
SECTION 8.1. DESIGNATION OF BENEFICIARY. Each Participant shall be entitled
to designate one or more beneficiaries by filing a signed, written notice
of such designation with the Committee, in a form as the Committee may
prescribe. A Participant may revoke or modify a beneficiary designation at
any time by filing a new beneficiary designation form with the Committee.
SECTION 8.2. PAYMENT TO A PARTICIPANT'S ESTATE. A Participant's beneficiary
designation shall be deemed automatically revoked in the event all
designated beneficiaries predecease such Participant or, if the sole
beneficiary is such Participant's Spouse, in the event of dissolution of
marriage. In such event, or in the event a Participant does not designate
a beneficiary, the benefits under Sections 6.5(a) and 6.5(d) shall be paid
to such Participant's estate.
IX. MISCELLANEOUS
SECTION 9.1. UNFUNDED PLAN. This Plan is intended to be an unfunded plan
maintained primarily to provide benefits to a "select group of management
or highly compensated employees" within the meaning of Sections 201, 301,
and 401 of ERISA and, therefore, is further intended to be exempt from the
provisions of Parts 2, 3, and 4 of Title I of ERISA. Accordingly, the
Committee may terminate the Plan for any or all Participants in order to
achieve and maintain this intended result, provided that previously accrued
benefits hereunder shall not be reduced or otherwise adversely affected
without the written consent of all affected Participants.
SECTION 9.2. WITHHOLDING. The Company shall have the right to require
Participants to remit to the Company an amount sufficient to satisfy
Federal, state, and local tax withholding requirements, or to deduct from
any or all payments made pursuant to the Plan amounts
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sufficient to satisfy such tax withholding requirements. In the event any
FICA, FUTA, Social Security, Medicare or any similar taxes become due on
benefits (or the value of such benefits) accrued under this Plan at any
time prior to the actual payment of benefits under this Plan, the Company
shall be authorized to withhold from the regular salary of such Participant
the amount of any such tax payable by the Participant. Withholding shall
take place during the same calendar year in which the taxes on such
benefits become due, or at such time as may be required by Internal Revenue
Service regulations.
SECTION 9.3. COSTS OF THE PLAN. All costs of implementing and administering
the Plan shall be borne by the Company.
SECTION 9.4. NONTRANSFERABILITY. Neither the Participants nor any
designated beneficiary shall have the right to sell, assign, transfer, or
otherwise convey the right to receive any payment hereunder; nor shall any
such payment be subject to attachment, garnishment, levy, pledge,
bankruptcy, or any other manner or kind of execution in connection with any
claim against the Participants or any designated beneficiary thereof.
SECTION 9.5. SUCCESSORS. All obligations of the Company under the Plan
shall be binding upon and inure to the benefit of any successor to the
Company, whether the existence of such successor is the direct or indirect
result of a merger, consolidation, or reorganization involving the Company
or the purchase or other acquisition of all or substantially all of the
business and/or assets of the Company.
SECTION 9.6. ADDRESS OF PARTICIPANT OR BENEFICIARY. Each Participant shall
keep the Company apprised of his or her current address and that of any
designated beneficiary during his or her participation in the Plan. Upon
the death of a Participant, any beneficiaries entitled to receive benefit
payment under the Plan shall keep the Company apprised of their current
address until the entire amount to be distributed has been paid.
SECTION 9.7. APPLICABLE LAW. To the extent not preempted by Federal law,
the Plan shall be governed by and construed in accordance with the laws of
the state of Iowa.
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EXHIBIT 10.4
MIDAMERICAN ENERGY COMPANY
KEY EMPLOYEE SHORT TERM INCENTIVE PLAN
Board Approval: October 1995
<PAGE>
MIDAMERICAN ENERGY COMPANY
KEY EMPLOYEE SHORT TERM INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of this Plan is to further the financial performance of the Company
by providing incentives and rewards to executives and key employees of the
Company, or of any Affiliate or Subsidiary, who are in a position to contribute
significantly to the achievement by the Company of such performance and to align
more closely the interests of such persons with the interests of the Company's
stockholders.
SECTION 2. DEFINITIONS
(a) "Plan" shall mean the MidAmerican Energy Company Key Employee
Incentive Plan.
(b) "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by the Company, and any entity in which the
Company has a significant equity interest, as determined by the Committee.
(c) "Award Period" shall mean the period of time during which Participant
Awards shall be measured. An Award Period shall be based on one or more
consecutive Fiscal Years, but no Award Period shall exceed five (5) years.
(d) "Base Salary" shall mean the base compensation paid to the Participant
during a Fiscal Year, including deferrals to a Company sponsored plan that
qualifies under either Code Section 401(k) or Code Section 125.
(e) "Board of Directors" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Company" shall mean MidAmerican Energy Company and its Subsidiaries
and Affiliates.
(h) "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company (the "Board") as designated by the Board to administer
the Plan.
(i) "Fiscal Year" shall mean the twelve months period used as the annual
accounting period by the Company and shall be designated according to the
calendar year in which such period ends.
(j) "Incumbent Board" means the members of the Board of Directors on
August 1, 1995. For this purpose, an individual who becomes a member of the
Board of Directors subsequent to
<PAGE>
August 1, 1995 and who has been nominated for election by the Company's
shareholders by resolution adopted by a vote of at least two-thirds of the
directors then comprising the Incumbent Board at a duly convened meeting thereof
shall be deemed to be a member of the Incumbent Board.
(k) "Participant" shall mean an individual selected by the Committee
pursuant to Section 4(a) from the following group of officers and employees of
the Company: the Chairman, the Chief Executive Officer, the President, any
Executive, Group or Senior Vice President, the Secretary, the General Counsel,
and any other Vice President, and in addition, the Chief Executive Officer is
authorized to recommend for inclusion in a Program such other salaried employees
of the Company, subject to selection by the Committee, who the Chief Executive
Officer deems to have a substantial opportunity to influence the financial
performance of the Company.
(l) "Participant Award" shall mean the cash or deferred compensation to be
earned by achieving each Program Target for the Award Period.
(m) "Program" shall mean the separate plan established by the Committee
under which a Participant may earn a predetermined Target Award for each Program
Target during an Award Period.
(n) "Program Target" shall mean performance goals established by the
Committee to be achieved by a Participant during an Award Period. Each
performance goal applicable to an Award Period shall identify one or more
business criteria that are to be monitored during the Award Period. Such
business criteria may include, but are not limited to, the following: earnings
per share, total earnings, return on equity, return on gross investment, return
on net assets, growth in assets, free cash flow, total shareholder return, net
income, expenses as a percentage of assets, shareholder value, customer
satisfaction, customer service criteria, and system performance. With respect
to each business criteria that is identified in a Program Target for a
particular Award Period, the Committee shall determine the target level of
performance that must be achieved in order for a performance goal to be treated
as attained. The Committee may base performance goals for an Award Period on
one or more of the business criteria set forth above.
(o) "Subsidiary" shall mean a corporation in which the Company owns at
least 50% of the outstanding voting stock, and which the Committee has
designated to participate in the Plan.
(p) "Target Award" shall mean the value expressed as a percentage of the
Participant Award, which has been determined for each Program Target that may be
earned by each Participant, and which can be expressed as a mid-point target and
at levels below and above the mid-point target.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee. A majority of the Committee
shall constitute a quorum. Any decision in writing signed by all members shall
be as fully effective as if made by a majority vote at a meeting duly called and
held. Such Committee shall have sole power to:
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(a) determine whether to establish a Program for any Participant,
designate the applicable Award Period, and the Program Target and Target Award
to be earned in such Program by each Participant, subject only to the
limitations otherwise prescribed in this Plan;
(b) determine the amount of maximum (subject to the limitation in Section
4(b) below) and minimum Participant Awards which may be earned by each
Participant;
(c) establish other threshold criteria that must be achieved during an
Award Period for any individual Participant, department, group, division, or
Subsidiary before any Award is made to a Participant or Participants;
(d) construe and interpret the Plan and make and amend such rules and
regulations for the administration of the Plan as the Committee may deem
desirable;
(e) determine the Base Salary to be used in calculating Target Awards and
the portions, if any, of an award which may be earned if employment commences or
terminates or a Participant's position changes during an Award Period; and
(f) determine in its sole discretion whether or not, and the degree to
which, Program Targets for any Participant have been achieved; in making such
determinations in connection with financial goals the Committee may include or
exclude in financial results as it deems appropriate, the whole or any part of
realized capital gains and losses and extraordinary (no matter how they are
characterized for accounting purposes) gains, losses, charges or credits.
Actions, determinations and decisions of the Committee respecting the Plan,
the granting of awards thereunder and the administration thereof shall be final,
conclusive and binding upon all parties concerned, including the Company, its
stockholders, and any employee of the Company.
SECTION 4. PROGRAM ESTABLISHMENT
(a) Participants in a Program shall be selected by the Committee from the
list of employees as set forth in Section 1(j) of this Plan and who, in the
opinion of the Committee, have a substantial opportunity to influence the
financial performance of the Company. In determining the Program Target for any
Participant, the Committee may take into account the Participant's level of
responsibility, performance, potential, cash compensation, salary, unexercised
stock options and such other considerations as it deems appropriate.
(b) Programs with respect to an Award Period shall be established by
resolution of the Committee selecting Participants and the related Program
Targets, Target Awards, and the maximum and minimum Participant Awards for each
Participant. The maximum Participant Awards for all Programs during each
separate Award Period for any Participant shall not exceed 100% of Base Salary
multiplied by the number of years in the Award Period.
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SECTION 5. DISTRIBUTION OF AWARDS
(a) No payments shall be made to Participants prior to the end of an Award
Period. Under no circumstances shall an award be payable under this Plan if
none of the Program Targets for a particular Award Period are attained.
(b) Distribution of Participant Awards (except any Award or part thereof
which is deferred) shall be made as soon as practical after the close of the
respective Award Period and after determination and verification of the results
of each Program Target by the Committee. A Participant may defer payment of all
or part of the Participant Award to which he or she would otherwise be entitled
at the end of the Award Period as provided in Section 6.
(c) The Committee in its sole and absolute discretion may reduce the
amount of an award otherwise payable to a Participant upon attainment of the
performance goal or goals established for an Award Period. A Participant's
performance must be satisfactory, regardless of Company performance, before he
or she may be granted an incentive award.
(d) If a Participant's employment terminates for any of the following
reasons prior to the end of the Award Period for a Program in which he or she
was participating, distribution of such Participant Award, if any becomes
payable, shall be limited to the following portion of the Award to which he or
she would otherwise be entitled if he or she were employed at the end of such
Award Period.
(i) Voluntary resignation -- None of the Participant Award.
(ii) Early Retirement or Normal Retirement under the terms of the
Company's pension plan--A distribution in proportion to the term of active
service (based on days) for the Participant during the Award Period based on
actual corporate results.
(iii) Disability as determined by the Committee -- A distribution
in proportion to the term of active service (based on days) for the Participant
during the Award Period based upon actual corporate results.
(iv) Death -- A distribution to the beneficiary designated in writing
by the Participant (or in the absence of such designation, to his or her legal
representatives) in proportion to the term of active service (based on days) of
the Participant during the Award Period based upon actual corporate results.
(v) Discharge or requested resignation -- A distribution in
proportion to the term of active service of the Participant during the Award
Period based upon actual corporate results; however, no part of a Participant
Award shall be distributable if the Participant was discharged for any act of
fraud, misappropriation, embezzlement or other act of dishonesty.
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SECTION 6. DEFERRED DISTRIBUTION OF AWARDS
(a) A Participant may defer payment of all or part of the cash portion of
the Award to which he or she would otherwise be entitled at the end of the Award
Period. A Participant's election to defer payment must be made on or before
December 15 immediately preceding the end of the Award Period to which the
election shall apply. The election shall be in the form of a written notice and
shall, if it so states, apply to more than one Award Period unless the
Participant is not eligible for one or more Award Periods to which the Notice
purports to apply, in which case the Notice shall apply to only those Award
Periods stated therein for which such Participant is actually eligible. The
Notice shall state a percentage of the Award to be deferred (the "Deferred
Amount").
(b) The Deferred Amount with respect to any Award Period shall be governed
by the terms of the MidAmerican Energy Company Deferred Compensation Plan for
Executives ("Deferred Plan").
(c) The Committee shall designate, at the time of establishment of the
Program, whether any portion of any Award that may be earned thereunder shall be
mandatorily deferred under the Deferred Plan.
SECTION 7. EXPENSES
The expenses of administering this Plan shall be borne by the Company and not
charged to any Participant.
SECTION 8. OTHER CONDITIONS
(a) No person shall have any claim or right to be granted a Participant
Award under this Plan. Neither a Participant nor his or her designated
beneficiary or legal representative shall have any right or interest in a
Participant Award until a distribution thereof shall have been made in
accordance with Sections 5, 6, or 8(e) hereof.
(b) It is a condition of the Plan, and all rights of each Participant
shall be subject thereto, that prior to distribution this Plan or the Deferred
Plan, no right or interest of any Participant to whom a Participant Award may be
made, shall be assignable or transferable, in whole or in part, either directly
or by operation of law or otherwise including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other
manner, but no devolution by death or mental incompetency; and no such right or
interest or any Participant shall be liable for, or subject to any obligation or
liability of such Participant.
(c) Neither this Plan nor any action taken hereunder shall be construed as
giving to any employee the right to be retained in the employ of the Company.
(d) The Company shall have the right to deduct from an Award any federal,
state or local taxes required by law to be withheld with respect to such Award.
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(e) Upon the occurrence of a Change in Control:
(i) any Award then outstanding held by a Participant shall be
immediately vested (without regard to any limitation imposed by
the Committee at the time the Award is granted which permits all
or any part of the Award to be received only after the lapse of
time), and will remain so until distributed in accordance with
the Plan; and
(ii) any performance standards related to any Award shall be deemed
achieved at the target level and restrictions otherwise
applicable shall lapse.
(f) A "Change in Control" shall be deemed to have occurred as of:
(i) The closing date of the restructuring of the Company as a result
of merger, consolidation, takeover or reorganization unless at
least sixty percent (60%) of the members of the board of
directors of the corporation resulting from such merger,
consolidation, takeover or reorganization were members of the
Incumbent Board; or
(ii) The occurrence of any other event that is designated as being a
"Change in Control" by a majority vote of the directors of the
Incumbent Board who are not also employees of the Company.
(g) All costs of Awards and compensation payable to Participants shall be
charged to the entity employing the Participant.
SECTION 9. AMENDMENT
The Committee shall have the right to amend, suspend or terminate this Plan at
any time; provided, however, that no such modification of this Plan shall:
(a) without the consent of the respective Participant, operate to annul an
established Program, or
(b) without the approval of the Board of Directors entitled to vote
thereon increase the maximum Participant Awards which may be awarded during an
Award Period under the Plan to any one Participant, or
(c) change the Program Target for a Program after it has been established,
or
(d) make any member of the Committee eligible to receive an award at any
time while he or she is serving on the Committee.
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SECTION 10. CODE SECTION 280G ELECTION.
Participants may elect to reduce or defer benefits otherwise payable in the
event total benefits payable by the Company would result in additional taxes to
the Company or Participant under Code Section 280G.
SECTION 11. EFFECTIVE DATE
This Plan shall be effective as of November 1, 1995, and shall continue in
effect, until terminated by the Committee.
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EXHIBIT 10.37
MIDAMERICAN ENERGY COMPANY
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT, effective as of July 1, 1995, between
MidAmerican Energy Company, an Iowa corporation ("Corporation"), and
_____________ ("Indemnitee").
WITNESSETH:
WHEREAS, Indemnitee either is, or will become, a member of the board
of directors of the Corporation ("Board of Directors") or an officer of the
Corporation, or both, and in such capacity or capacities (as hereinafter
defined), is performing or will perform valuable services for or on behalf of
the Corporation;
WHEREAS, Indemnitee is willing to perform or to continue to perform
such services and to perform additional services for or on behalf of the
Corporation on the condition that Indemnitee is indemnified as provided in this
Agreement;
WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein; and
WHEREAS, all capitalized terms used in this Agreement have the
respective meanings set forth in Section 15.
NOW THEREFORE, in consideration of the premises and the covenants in
this Agreement, and of Indemnitee agreeing to perform and performing services
for or on behalf of the Corporation as a member of its Board of Directors or one
of its officers, and intending to be legally bound hereby, the Corporation and
Indemnitee agree as follows:
1. SERVICES BY INDEMNITEE.
Indemnitee agrees to serve as a director or as an officer of the
Corporation, or both, so long as Indemnitee is duly appointed or elected and
qualified in accordance with the applicable provisions of the Restated Articles
of Incorporation, as amended ("Articles of Incorporation"), and Restated Bylaws
("Bylaws") of the Corporation, and until such time as Indemnitee resigns or
otherwise ceases to be such director or officer. Indemnitee may from time to
time also perform other services at the request or for the convenience of, or
otherwise benefiting, the Corporation. Indemnitee may at any time and for any
reason resign or be removed (subject to any obligation) as such director or
officer, and, in such event, the Company shall continue to be obligated to
indemnify Indemnitee for acts occurring while Indemnitee served as a director or
officer as set forth in this Agreement, however, the Company shall not be
obligated to indemnify Indemnitee for acts occurring after such event.
<PAGE>
2. INDEMNIFICATION.
Subject to the limitations set forth in this Section 2 and in Section
6, the Corporation hereby agrees to indemnify Indemnitee as follows:
The Corporation shall indemnify Indemnitee from and against any and
all Expenses and Liabilities with respect to any Proceeding associated with
Indemnitee being or having been a director or officer of the Corporation, to the
fullest extent permitted by applicable laws and the Articles of Incorporation in
effect on the date hereof or as such laws or Articles of Incorporation may from
time to time be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than applicable laws and the Articles of Incorporation
permitted the Corporation to provide before such amendment). The right to
indemnification conferred in this Agreement and the Articles of Incorporation
shall be presumed to have been relied upon by Indemnitee in agreeing to serve,
serving or continuing to serve the Corporation as a director or officer of the
Corporation, and shall be enforceable as a contract right. Without in any way
diminishing the scope of the indemnification provided by this Section 2, the
Corporation shall indemnify Indemnitee if and whenever Indemnitee is or was a
party or is threatened to be made a party to any Proceeding, including without
limitation to the fullest extent permitted by applicable laws any such
Proceeding brought by or in the right of the Corporation, because Indemnitee is
or was a director or officer of the Corporation, or because of anything done or
not done by Indemnitee in such capacity, against all Expenses and Liabilities
actually and reasonably incurred by or on behalf of Indemnitee in connection
with the investigation, defense, settlement or appeal of such Proceeding. In
addition to, and not as a limitation of, the foregoing, the rights of Indemnitee
to indemnification provided in this Agreement shall include those rights set
forth in Sections 3 and 8.
3. ADVANCEMENT OF EXPENSES: LETTER OF CREDIT.
(a) ADVANCEMENT OF EXPENSES. All reasonable Expenses incurred by or
on behalf of Indemnitee shall be advanced from time to time by the Corporation
to Indemnitee within 20 days after the receipt by the Corporation of a written
request for the advancement of such Expenses, whether prior to or after final
disposition of a Proceeding (except to the extent that there has been a Final
Adverse Determination that Indemnitee is not entitled to be indemnified for such
Expenses), including without limitation to the fullest extent permitted by
applicable laws any Proceeding brought by or in the right of the Corporation.
The written request for an advancement of any and all Expenses under this
Section 3(a) shall contain reasonable details of the Expenses incurred by or on
behalf of Indemnitee for which advancement is thereby requested, and by
execution of such request, Indemnitee shall be deemed to have made whatever (i)
written affirmation concerning the good faith of Indemnitee about the standard
of conduct of Indemnitee or any other matter, which may be required by
applicable law or the Articles of Incorporation, as from time to time amended,
to give Indemnitee the right to be indemnified under this Agreement or
otherwise, and (ii)
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<PAGE>
written undertaking may be required with respect to repayment to the
Corporation of such Expenses under applicable provisions of any law, or the
Articles of Incorporation, as from time to time amended; PROVIDED, HOWEVER; that
in no circumstances shall Indemnitee be deemed to have undertaken to repay to
the Corporation Expenses for which Indemnitee has the right to be indemnified
under this Agreement or otherwise.
(b) LETTER OF CREDIT. In order to secure the obligations of the
Corporation to indemnify and advance Expenses to Indemnitee pursuant to this
Agreement, the Corporation shall obtain at its expense at the time of any Change
in Control an irrevocable standby letter of credit naming Indemnitee as the sole
beneficiary ("Letter of Credit"). The Letter of Credit shall be in an
appropriate amount not less than $1,000,000, issued by a financial institution
having assets in excess of $100,000,000 and containing terms and conditions
reasonably acceptable to Indemnitee. The Letter of Credit shall provide that
Indemnitee may from time to time draw certain amounts thereunder, upon written
certification by Indemnitee to the issuer of the Letter of Credit that (i)
Indemnitee has made written request upon the Corporation for an amount not less
than the amount Indemnitee is drawing under the Letter of Credit and that the
Corporation has failed or refused to provide Indemnitee with such amount in full
within 20 days after receipt of such request, and (ii) Indemnitee believes that
Indemnitee is entitled under the terms of this Agreement to the amount which
Indemnitee is drawing under the Letter of Credit. The issuance of the Letter of
Credit shall not, in any way, diminish the obligation of the Corporation to
indemnify Indemnitee against Expenses and Liabilities to the full extent
required by this Agreement or otherwise.
(c) TERM OF LETTER OF CREDIT. Once the Corporation has obtained the
Letter of Credit, the Corporation shall at its expense maintain and renew the
Letter of Credit or a substitute letter of credit meeting the criteria of
Section 3(b) during the term of this Agreement so that the Letter of Credit
shall have an initial term of five years, be renewed for successive five-year
terms, and always have at least one year of its term remaining after the
termination of this Agreement.
4. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) Upon making a request for indemnification, Indemnitee shall be
presumed to be entitled to indemnification under this Agreement and the
Corporation shall have the burden of proof to overcome such presumption in
reaching any contrary determination. The termination of any Proceeding by
judgment, order, settlement, arbitration award or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent, shall not affect such presumption or, except
as may be provided in Section 6, of itself be determinative that the Indemnitee
failed to meet any requisite standard of conduct or establish a presumption with
regard to any other factual matter relevant to determining the right of
Indemnitee to indemnification under this Agreement or otherwise.
(b) If the person or persons so empowered to make a determination
pursuant to Section 5 shall have failed to make the requested determination
within 30 days after any judgment, order, settlement, dismissal, arbitration
award, conviction, acceptance of a plea of
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NOLO CONTENDERE or its equivalent, or other disposition or partial disposition
of any Proceeding or any other event which could enable the Corporation to
determine the right of Indemnitee to be indemnified under this Agreement or
otherwise, the requisite determination that Indemnitee has the right to
indemnification shall be deemed to have been made; PROVIDED, HOWEVER, that such
30 day period may be extended for a reasonable time, not to exceed an additional
30 days, if the person or persons so empowered to make a determination pursuant
to Section 5 in good faith requires such additional time to obtain or evaluate
documentation or information relating thereto; and PROVIDED FURTHER, that the
foregoing provisions of this Section 4(b) shall not apply if the determination
of entitlement to indemnification is to be made by the shareholders pursuant to
Section 5(b) of this Agreement and if (i) within 15 days after receipt by the
Corporation of the request for such determination the Board of Directors has
resolved to submit such determination to the shareholders for their
consideration at an annual meeting to be held within 75 days after such receipt
and such determination is made thereat, or (ii) a special meeting of
shareholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called and such determination is made thereat.
5. PROCEDURE FOR DETERMINATION OF RIGHT OF INDEMNITEE TO BE
INDEMNIFIED.
(a) Whenever Indemnitee believes that Indemnitee has a right to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Indemnitee for the determination of the right of Indemnitee to be indemnified
pursuant to this Agreement. In any event, Indemnitee shall submit such request
for indemnification within a reasonable time, not to exceed five years after any
judgment, order, settlement, dismissal, arbitration award, conviction,
acceptance of a plea of NOLO CONTENDERE or its equivalent, or final disposition
of such Proceeding, whichever is the later date for which Indemnitee requests
indemnification. The Secretary, General Counsel or other appropriate officer of
the Corporation shall, promptly upon receipt of such request for
indemnification, advise the Board of Directors in writing that Indemnitee has
made such request. Determination of the right of Indemnitee to indemnification
shall be made not later than 30 days after the receipt by the Corporation of
such written request for indemnification, PROVIDED that any request for
indemnification for Liabilities with respect to a particular Proceeding, other
than amounts paid in settlement, shall be made after a determination thereof in
such Proceeding. If it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within 10 days after such
determination.
(b) The Corporation shall be entitled to select the forum in which
the right of Indemnitee to indemnification will be heard; PROVIDED, HOWEVER,
that if such forum is selected after a Change in Control of the Corporation,
Independent Legal Counsel shall determine whether Indemnitee has the right to
indemnification. The forum shall be any one of the following:
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(i) The shareholders of the Corporation, other than shareholders
who are parties to the Proceeding with respect to which the Indemnitee
has claimed indemnification;
(ii) A majority of a quorum of the Board of Directors consisting
of Disinterested Directors;
(iii) Independent Legal Counsel, who shall make the
determination in a written opinion; or
(iv) A panel of three arbitrators, one selected by the
Corporation, another by Indemnitee and the third by the first two
arbitrators selected; or if for any reason three arbitrators are not
selected within 30 days after the appointment of the first arbitrator,
then selection of additional arbitrators shall be made by the American
Arbitration Association. If any arbitrator resigns or is unable to
serve in such capacity for any reason, the American Arbitration
Association shall select a replacement. The arbitration shall be
conducted pursuant to the commercial arbitration rules of the American
Arbitration Association in effect on the date of this Agreement.
6. SPECIFIC LIMITATIONS ON INDEMNIFICATION.
Notwithstanding anything in this Agreement to the contrary, the
Corporation shall not be obligated under this Agreement to make any payment to
Indemnitee for indemnification with respect to any Proceeding:
(a) To the extent that payment is actually made to Indemnitee under
any insurance policy, or is made to Indemnitee by the Corporation or an
affiliate otherwise than pursuant to this Agreement. Notwithstanding the
availability of such insurance, Indemnitee also may claim indemnification from
the Corporation pursuant to this Agreement by assigning to the Corporation any
claims under such insurance to the extent Indemnitee is paid by the Corporation;
(b) If a court in such Proceeding has entered a judgment or other
adjudication which is final and has become nonappealable and establishes that
the claim of Indemnitee for such indemnification arose from: (i) a breach by
Indemnitee of his or her duty of loyalty to the Corporation or its shareholders;
(ii) acts or omissions of Indemnitee not in good faith or which involve
intentional misconduct or knowing violations of the law; (iii) a transaction in
which Indemnitee derived an improper personal benefit; or (iv) liability of
Indemnitee to the Corporation pursuant to Section 490.833 of the Iowa Business
Corporation Act (or any successor provision);
(c) If there has been no Change in Control, for Liabilities in
connection with Proceedings settled without the consent of the Corporation,
which consent, however, shall not be unreasonably withheld; or
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<PAGE>
(d) For an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934, as amended, or similar provisions of any
state statutory or common law.
7. FEES AND EXPENSES OF INDEPENDENT LEGAL COUNSEL.
The Corporation agrees to pay the reasonable fees and expenses of
Independent Legal Counsel or a panel of three arbitrators if such Counsel or
panel of arbitrators is retained to make a determination of the right of
Indemnitee to indemnification pursuant to Section 5(b), and to fully indemnify
such Counsel or arbitrators against any and all expenses and losses incurred by
any of them arising out of or relating to this Agreement or their engagement
pursuant hereto.
8. REMEDIES OF INDEMNITEE.
(a) If (i) a determination is made pursuant to Section 5 that
Indemnitee is not entitled to indemnification, (ii) advances of Expenses are not
made to Indemnitee pursuant to this Agreement, (iii) payment has not been timely
made following a determination that Indemnitee has a right to indemnification
pursuant to this Agreement, or (iv) Indemnitee otherwise seeks enforcement of
this Agreement, Indemnitee shall be entitled to a final adjudication in an
appropriate court of the State of Iowa of the remedy sought. Alternatively,
unless the determination was made by a panel of arbitrators pursuant to Section
5(b)(iv), Indemnitee may elect to seek an award in arbitration to be conducted
by a single arbitrator pursuant to the commercial arbitration rules of the
American Arbitration Association in effect on the date of this Agreement, which
award is to be made within 90 days following the filing of the demand for
arbitration. The Corporation shall not oppose the right of Indemnitee to seek
any such adjudication or arbitration award. In any such proceeding or
arbitration Indemnitee shall be presumed to be entitled to indemnification under
this Agreement and the Corporation shall have the burden of proof to overcome
such presumption.
(b) If a determination that Indemnitee is not entitled to
indemnification, in whole or in part, has been made pursuant to Section 5, the
decision in the judicial proceeding or arbitration provided in Section 8(a)
shall be made DE NOVO and Indemnitee shall not be prejudiced by reason of a
determination that Indemnitee is not entitled to indemnification.
(c) If a determination that Indemnitee is entitled to indemnification
has been made pursuant to Section 5 or is deemed to have been made pursuant to
Section 4 or otherwise pursuant to this Agreement, the Corporation shall be
bound by such determination in the absence of a misrepresentation of a material
fact by Indemnitee.
(d) The Corporation shall be precluded from asserting that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable. The Corporation shall stipulate in any such court or before any
such arbitrator that the Corporation is bound by all the provisions of this
Agreement and is precluded from making any assertion to the contrary.
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(e) Expenses reasonably incurred by Indemnitee in connection with the
request of Indemnitee for indemnification under, seeking enforcement of, or to
recover damages for breach of, this Agreement shall be borne by the Corporation
when and as incurred by Indemnitee irrespective of any Final Adverse
Determination that Indemnitee is not entitled to indemnification.
9. INSURANCE.
(a) MAINTENANCE OF INSURANCE. The Corporation represents that it
presently maintains certain policies of directors' and officers' liability
insurance. Subject only to the provisions within this Section 9, the
Corporation agrees that during the Indemnification Period, the Corporation shall
use its best efforts to purchase and maintain in effect for the benefit of
Indemnitee one or more valid, binding and enforceable policies of directors' and
officers' liability insurance providing, in all respects, coverage both in scope
and amount which is no less favorable than that presently provided.
Notwithstanding the foregoing, the Corporation shall not be required to maintain
such policies of directors' and officers' liability insurance if such insurance
is not reasonably available or if it is in good faith determined by the then
Board of Directors either that:
(i) the premium cost of maintaining such insurance is
substantially disproportionate to the amount of coverage provided
thereunder; or
(ii) the protection provided by such insurance is so limited by
exclusions, deductions or otherwise that there is insufficient benefit
to warrant the cost of maintaining such insurance.
Anything in this Agreement to the contrary notwithstanding, to the
extent that and for so long as the Corporation shall choose to continue to
maintain any policies of directors' and officers' liability insurance during the
Indemnification Period, the Corporation shall maintain similar and equivalent
insurance for the benefit of Indemnitee during the Indemnification Period
(whether more or less favorable to Indemnitee than the existing policies of such
insurance maintained by the Corporation).
(b) ADDITIONAL INDEMNIFICATION IN LIEU OF INSURANCE. If the
Corporation discontinues any policy or policies of directors' and officers'
liability insurance referred to in Section 9(a) or limits in any way the
coverages provided thereunder either in scope or amount, or such policies or
coverages provided thereunder become unavailable in whole or in part for any
reason, the Corporation agrees to hold harmless and indemnify Indemnitee for the
remainder of the Indemnification Period to the full extent of the coverage which
would otherwise have been provided for the benefit of Indemnitee if such
insurance policies specified in Section 9(a) had been maintained.
10. MODIFICATION, WAIVER, TERMINATION AND CANCELLATION.
No supplement, modification, termination, cancellation or amendment of
this
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Agreement shall be binding unless executed in writing by both Indemnitee and the
Corporation. No waiver of any of the provisions of this Agreement shall be
deemed to be or shall constitute a waiver of any other provisions of this
Agreement (whether or not similar), nor shall any such waiver constitute a
continuing waiver.
11. SUBROGATION.
In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything which
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Corporation effectively to bring suit to
enforce such rights.
12. NOTICE BY INDEMNITEE AND DEFENSE OF CLAIM.
Indemnitee shall promptly notify the Corporation in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any matter, whether civil, criminal,
administrative or investigative, but the omission so to notify the Corporation
shall not relieve it from any liability which it may have to Indemnitee if such
omission does not materially prejudice the rights of the Corporation. If such
omission does materially prejudice the rights of the Corporation, the
Corporation shall be relieved from liability under this Agreement only to the
extent of such prejudice; nor will such omission relieve the Corporation from
any liability which it may have to Indemnitee otherwise than under this
Agreement. With respect to any Proceeding as to which Indemnitee notifies the
Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its
own expense; and
(b) The Corporation jointly with any other indemnifying party
similarly notified will be entitled to assume the defense of Indemnitee therein,
with counsel reasonably satisfactory to Indemnitee; PROVIDED, HOWEVER, that the
Corporation shall not be entitled to assume the defense of Indemnitee in any
Proceeding if there has been a Change in Control or if Indemnitee has reasonably
concluded that there may be a conflict of interest between the Corporation and
Indemnitee with respect to such Proceeding. After notice to Indemnitee from the
Corporation of its election to assume the defense of Indemnitee therein, the
Corporation will not be liable to Indemnitee under this Agreement for any
Expenses subsequently incurred by Indemnitee in connection with the defense
thereof, other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ his or her own counsel in such
Proceeding but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the expense
of Indemnitee unless:
(i) The employment of counsel by Indemnitee has been authorized
by the Corporation;
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(ii) Indemnitee has reasonably concluded that counsel employed
by the Corporation may not adequately represent Indemnitee; or
(iii) The Corporation has not in fact employed counsel to assume
the defense of Indemnitee in such Proceeding or has not in fact
assumed such defense or is not acting in connection therewith with
reasonable diligence; in each of which cases the fees and expenses of
such counsel shall be at the expense of the Corporation.
(c) The Corporation shall not settle any Proceeding in any manner
which would impose any liability, penalty or limitation on Indemnitee without
the written consent of Indemnitee; PROVIDED, HOWEVER, that Indemnitee will not
unreasonably withhold consent to any proposed settlement.
13. NOTICES.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (a) delivered
by hand and receipted for by the party to whom such notice or other
communication shall have been directed, or (b) mailed by registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.
(a) If to Indemnitee, to:
_________________
_________________
_________________
_________________
(b) If to the Corporation, to:
MidAmerican Energy Company
666 Grand Avenue
P. O. Box 657
Des Moines, Iowa 50303-0657
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
14. NONEXCLUSIVITY.
The rights of Indemnitee under this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Business Corporation Act of the State of Iowa, the Articles of Incorporation or
Bylaws of the Corporation, or any
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agreements, vote of shareholders, resolution of the Board of Directors or
otherwise, and to the extent that during the Indemnification Period the rights
of the then existing directors and officers are more favorable to such directors
or officers than the rights currently provided to Indemnitee thereunder or under
this Agreement, Indemnitee shall be entitled to the full benefits of such more
favorable rights.
15. CERTAIN DEFINITIONS.
(a) "CHANGE IN CONTROL" shall be deemed to have occurred if:
(1) Any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or a corporation owned directly or
indirectly by the shareholders of the Corporation in substantially the
same proportions as their ownership of stock of the Corporation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Corporation
representing 15% or more of the total voting power represented by the
then outstanding voting securities of the Corporation; or
(2) The Corporation is a party to a Business Combination
(as defined in Section C(1) of Article VIII of the Articles of
Incorporation, as in effect on the date hereof) except for any such
Business Combination which meets the conditions specified in paragraph
1 of Section B of such Article VIII.
(b) "DISINTERESTED DIRECTOR" means a director of the Corporation who
is not or was not a party to the Proceeding with respect to which
indemnification is being sought by Indemnitee.
(c) "EXPENSES" shall include all direct and indirect costs (including
without limitation attorneys' fees, retainers, court costs, transcripts, fees of
experts, witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, all other
disbursements or out-of-pocket expenses and reasonable compensation for time
spent by Indemnitee for which Indemnitee is otherwise not compensated by the
Corporation or any third party) actually and reasonably incurred in connection
with either the investigation, defense, settlement or appeal of a Proceeding or
establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise: PROVIDED, HOWEVER, that "Expenses" shall not
include any liabilities.
(d) "FINAL ADVERSE DETERMINATION" means a determination that
Indemnitee is not entitled to indemnification pursuant to Section 5 and either
(i) a final adjudication in an Iowa court or decision of an arbitrator pursuant
to Section 8(a) shall have denied the right of Indemnitee to indemnification
under this Agreement, and is no longer appealable, or (ii) Indemnitee shall have
failed to file a complaint in an Iowa court or seek an arbitration award
10
<PAGE>
pursuant to Section 8(a) for a period of 120 days after the determination made
pursuant to Section 5.
(e) "INDEMNIFICATION PERIOD" means the period of time for so long as
Indemnitee shall continue to serve as a director or officer of the Corporation,
or both, and thereafter so long as Indemnitee shall be subject to any possible
Proceeding.
(f) "INDEPENDENT LEGAL COUNSEL" means special legal counsel (i)
selected by the Board of Directors by vote of a majority of a quorum consisting
of Disinterested Directors or, if such quorum cannot be obtained, by vote of a
majority of the full Board of Directors, including directors who are not
Disinterested Directors, and (ii) approved by Indemnitee (which approval shall
not be unreasonably withheld) or, if there has been a Change in Control,
selected by Indemnitee and approved by the Board of Directors (which approval
shall not be unreasonably withheld), and that neither is presently nor in the
five years preceding such selection has been retained to represent (y) the
Corporation or any of its subsidiaries or affiliates, or Indemnitee or any
corporation or entity as to which Indemnitee is or was a director, officer or
employee, or any subsidiary or affiliate of such a corporation or entity, in any
material matter, or (z) any other party to the Proceeding giving rise to the
claim for indemnification with respect to which such counsel is being selected.
Notwithstanding the foregoing, the term "Independent Legal Counsel" shall not
include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine the right of Indemnitee to
indemnification under this Agreement.
(g) "LIABILITIES" means liabilities of any type whatsoever including,
but not limited to, any judgments, fines, ERISA excise taxes and penalties,
penalties and amounts paid in settlement (including all interest assessments and
other charges paid or payable in connection with or in respect of such
judgments, fines, penalties or amounts paid in settlement) of any Proceeding.
(h) "PROCEEDING" means any threatened, pending or completed action,
claim, suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative and whether formal or informal that is
associated with Indemnitee being or having been a director or officer of the
Corporation.
17. BINDING EFFECT; DURATION AND SCOPE OF AGREEMENT.
This Agreement shall be binding upon and inure to the benefit of and
be enforceable by Indemnitee and the Corporation and their respective successors
and assigns (including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business or assets
of the Corporation), spouses, heirs, executors, personal representatives and
administrators and other legal representatives. This Agreement shall continue
in effect during the Indemnification Period, regardless of whether Indemnitee
continues to serve as a director or officer of the Corporation.
11
<PAGE>
18. SEVERABILITY.
If any provision or provisions of this Agreement (or any portion
thereof) shall be held to be invalid, illegal or unenforceable for any reason
whatsoever:
(a) The validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby; and
(b) To the fullest extent legally possible, the provisions of this
Agreement shall be construed so as to give effect to the intent of any
provisions held invalid, illegal or unenforceable.
19. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Iowa.
20. ENTIRE AGREEMENT.
This Agreement represents the entire agreement between the Corporation
and Indemnitee, and there are no other agreements, contracts or understandings
between them, with respect to the subject matter of this Agreement, except as
specifically referred to herein or as provided in Section 14.
IN WITNESS WHEREOF, this Indemnity Agreement is executed by
MidAmerican Energy Company and the Indemnitee as of the date first written
above.
MIDAMERICAN ENERGY COMPANY
By
------------------------------------
R. E. Christiansen
Chairman of the Board and
Chairman of the Office of the CEO
INDEMNITEE
------------------------------------
(Signature)
------------------------------------
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
MIDAMERICAN ENERGY COMPANY (consolidated)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
(In Thousands)
(Unaudited)
Twelve Months Ended Twelve Months Ended
December 31, 1995 December 31,1994
---------------------------------------- ----------------------------------------
Supplemental (a) Supplemental (a)
---------------- ----------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations $130,406 $130,406 $136,385 $136,385
Pre-tax (gain) loss of less than
50% owned persons 16,482 16,482 (270) (270)
Add (Deduct):
Total income taxes 67,984 67,984 62,349 62,349
Interest on long-term debt 110,505 4,595 115,100 105,753 5,428 111,181
Other interest charges 9,449 9,449 6,446 6,446
Interest on leases 1,088 1,088 1,211 1,211
----------------------------------------- ---------------------------------------
189,026 4,595 193,621 175,759 5,428 181,187
----------------------------------------- ---------------------------------------
Earnings available for fixed charges 335,914 4,595 340,509 311,874 5,428 317,302
----------------------------------------- ---------------------------------------
Fixed Charges:
Interest on long-term debt 110,505 4,595 115,100 105,753 5,428 111,181
Other interest charges 9,449 - 9,449 6,446 - 6,446
Interest on leases 1,088 - 1,088 1,211 - 1,211
----------------------------------------- ---------------------------------------
Total fixed charges 121,042 4,595 125,637 113,410 5,428 118,838
----------------------------------------- ---------------------------------------
Ratio of earnings to fixed charges 2.775 - 2.710 2.750 - 2.670
----------------------------------------- ---------------------------------------
----------------------------------------- ---------------------------------------
Preferred stock dividend requirements $ 8,059 $ 8,059 $ 10,551 $ 10,551
Ratio of net income before income taxes
to net income 1.5213 - 1.5213 1.4572 - 1.4572
----------------------------------------- ---------------------------------------
Preferred stock dividend requirements
before income tax 12,260 - 12,260 15,374 - 15,374
----------------------------------------- ---------------------------------------
Fixed charges plus preferred stock
dividend requirements 133,302 4,595 137,897 128,784 5,428 134,212
----------------------------------------- ---------------------------------------
Ratio of earnings to fixed charges plus
preferred stock
dividend requirements (pre-income tax basis) 2.520 - 2.469 2.422 - 2.364
----------------------------------------- ---------------------------------------
----------------------------------------- ---------------------------------------
<CAPTION>
Twelve Months Ended
December 31, 1993
----------------------------------------
Supplemental (a)
----------------
As
Adjustment Adjusted
---------- --------
<S> <C> <C> <C>
Income from continuing operations $147,705 $147,705
Pre-tax (gain) loss of less than
50% owned persons (597) (597)
Add (Deduct):
Total income taxes 71,409 71,409
Interest on long-term debt 111,065 5,678 116,743
Other interest charges 5,066 5,066
Interest on leases 1,876 1,876
-----------------------------------------
189,416 5,678 195,094
-----------------------------------------
Earnings available for fixed charges 336,524 5,678 342,202
-----------------------------------------
Fixed Charges:
Interest on long-term debt 111,065 5,678 116,743
Other interest charges 5,066 - 5,066
Interest on leases 1,876 - 1,876
-----------------------------------------
Total fixed charges 118,007 5,678 123,685
-----------------------------------------
Ratio of earnings to fixed charges 2.852 - 2.767
-----------------------------------------
-----------------------------------------
Preferred stock dividend requirements $ 8,367 $ 8,367
Ratio of net income before income taxes
to net income 1.4835 - 1.4835
-----------------------------------------
Preferred stock dividend requirements
before income tax 12,412 - 12,412
-----------------------------------------
Fixed charges plus preferred stock
dividend requirements 130,419 5,678 136,097
-----------------------------------------
Ratio of earnings to fixed charges plus
preferred stock
dividend requirements (pre-income tax basis) 2.580 - 2.514
-----------------------------------------
-----------------------------------------
Note: (a) Amounts in the supplemental columns are to reflect the Company's
portion of the net interest component of payments to Nebraska Public Power
District under a long term purchase agreement for one-half of the plant
capacity from Cooper Nuclear Station.
1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
MIDAMERICAN ENERGY COMPANY (consolidated)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
(In Thousands)
(Unaudited)
Twelve Months Ended Twelve Months Ended
December 31, 1992 December 31,1991
---------------------------------------- ----------------------------------------
Supplemental (a) Supplemental (a)
---------------- ----------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations $ 88,085 $ 88,085 $127,969 $127,969
Pre-tax (gain) loss of less than
50% owned persons (1,297) (1,297) (240) (240)
Add (Deduct):
Total income taxes 26,812 26,812 59,604 59,604
Interest on long-term debt 114,732 7,391 122,123 106,538 5,689 112,227
Other interest charges 5,899 5,899 16,380 16,380
Interest on leases 2,386 2,386 3,795 3,795
----------------------------------------- ---------------------------------------
149,829 7,391 157,220 186,317 5,689 192,006
----------------------------------------- ---------------------------------------
Earnings available for fixed charges 236,617 7,391 244,008 314,046 5,689 319,735
----------------------------------------- ---------------------------------------
Fixed Charges:
Interest on long-term debt 114,732 7,391 122,123 106,538 5,689 112,227
Other interest charges 5,899 - 5,899 16,380 - 16,380
Interest on leases 2,386 - 2,386 3,795 - 3,795
----------------------------------------- ---------------------------------------
Total fixed charges 123,017 7,391 130,408 126,713 5,689 132,402
----------------------------------------- ---------------------------------------
Ratio of earnings to fixed charges 1.923 - 1.871 2.478 - 2.415
----------------------------------------- ---------------------------------------
----------------------------------------- ---------------------------------------
Preferred stock dividend requirements $ 8,735 $ 8,735 $ 9,708 $ 9,708
Ratio of net income before income taxes
to net income 1.3044 - 1.3044 1.4658 - 1.4658
----------------------------------------- ---------------------------------------
Preferred stock dividend requirements
before income tax 11,394 - 11,394 14,230 - 14,230
----------------------------------------- ---------------------------------------
Fixed charges plus preferred stock
dividend requirements 134,411 7,391 141,802 140,943 5,689 146,632
----------------------------------------- ---------------------------------------
Ratio of earnings to fixed charges plus
preferred stock
dividend requirements (pre-income tax basis) 1.760 - 1.721 2.228 - 2.181
----------------------------------------- ---------------------------------------
----------------------------------------- ---------------------------------------
Note: (a) Amounts in the supplemental columns are to reflect the Company's
portion of the net interest component of payments to Nebraska Public Power
District under a long term purchase agreement for one-half of the plant
capacity from Cooper Nuclear Station.
2
</TABLE>
<PAGE>
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CORPORATE OVERVIEW
MidAmerican Energy Company (the Company or MidAmerican) was formed on
July 1, 1995, as a result of the merger of Iowa-Illinois Gas and Electric
Company (Iowa-Illinois), Midwest Resources Inc. (Resources) and its utility
subsidiary, Midwest Power Systems Inc. (Midwest). Pursuant to the merger,
each outstanding share of preferred and preference stock of the predecessor
companies was converted into one share of a similarly designated series of
MidAmerican preferred stock, no par value. Each outstanding share of common
stock of Resources and Iowa-Illinois was converted into one share and 1.47
shares, respectively, of MidAmerican common stock, no par value.
The Company's utility operations (the Utility) consist of two principal
business units: an electric business unit headquartered in Davenport, Iowa, and
a natural gas business unit headquartered in Sioux City, Iowa. The Company's
corporate headquarters, which includes various staff functions, is in Des
Moines, Iowa. InterCoast Energy Company (InterCoast) and Midwest Capital Group,
Inc. (Midwest Capital) are the nonregulated subsidiaries of the Company and are
headquartered in Des Moines. InterCoast conducts various nonregulated
activities of the Company, while Midwest Capital functions as a regional
business development company in the utility service territory.
Management anticipates that the merger will permit the Company to derive
benefits from more efficient and economic use of the combined facilities and
resources of its predecessors. Savings from avoided costs and cost reductions
are estimated to total in excess of $500 million over the next 10 years.
Although the Company began realizing some benefits of the merger in 1995,
additional benefits and savings will be realized in 1996 and future years. As
discussed below, the Company has incurred significant costs related to
consummation of the merger, business restructuring and work force reduction.
The merger is being accounted for as a pooling-of-interests, and the
Consolidated Financial Statements included in this Annual Report are presented
as if the merger was consummated as of the beginning of the earliest period
presented. Portions of the following discussion provide information related to
material changes in the Company's financial condition and results of operations
between the periods presented, based on the combined historical information of
the predecessor companies. It is not necessarily indicative of what would have
occurred had the merger actually been consummated at the beginning of the
earliest period.
In January 1996, the Company's Board of Directors approved the formation
of a holding company structure. The holding company would have two wholly
owned subsidiaries consisting of MidAmerican (utility operations) and
InterCoast. Midwest Capital would remain a subsidiary of MidAmerican. The
Board of Directors and management believe a holding company structure will
provide a more flexible organization better designed to operate in a more
competitive environment. Consummation of the holding company structure is
subject to approval by holders of a majority of the outstanding shares of the
Company's common stock. In addition, certain orders must be received from
the Illinois Commerce Commission (ICC), the Iowa Utilities Board (IUB), the
Federal Energy Regulatory Commission (FERC), and the Nuclear Regulatory
Commission (NRC). Subject to such approvals, each share of MidAmerican common
stock will be exchanged for one share of the holding company's common stock.
It is management's intent, if possible, to complete the formation of the
holding company and share exchange by the end of 1996.
-1-
<PAGE>
RESULTS OF OPERATIONS
EARNINGS
The following tables provide a summary of the earnings contributions of the
Company's operations for the past three years:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Earnings (in millions)
Utility operations............... $124.5 $110.6 $125.5
Nonregulated operations.......... (2.1) 15.2 13.8
Income (loss) from
discontinued operations........ 0.4 (5.6) (3.8)
------ ------ -------
Consolidated earnings............ $122.8 $120.2 $135.5
------ ------ -------
------ ------ -------
Earnings Per Common Share
Utility operations............... $1.24 $1.12 $1.29
Nonregulated operations.......... (0.02) 0.16 0.14
Income (loss) from
discontinued operations........ - (0.06) (0.04)
------ ------ -------
Consolidated earnings............ $1.22 $1.22 $1.39
------ ------ -------
------ ------ -------
</TABLE>
Earnings per share for 1995 were unchanged compared to 1994. Increases in
the gross margins of utility electric and natural gas operations favorably
affected earnings for 1995. Gross margin is the amount of revenues remaining
after deducting electric fuel costs or the cost of gas sold, as appropriate.
Decreases in nuclear operations and maintenance costs also favorably affected
earnings. Merger-related costs and write-downs of certain nonregulated assets
had a significant adverse affect on 1995 earnings.
The increases in utility gross margins were due primarily to electric and
gas service rate increases filed prior to the merger. Recent rate activity is
discussed in greater detail later in this section. A portion of the rate
increases relate directly to increases in certain operating expenses. The gross
margin for electric operations, net of the increase in directly-related
operating expenses, contributed $0.26 per share more to earnings in 1995 than
in 1994. In addition to increases in electric rates, increased sales due to hot
weather in the third quarter of 1995, though offset somewhat by less extreme
temperatures in the heating season, resulted in a 3% increase in electric retail
sales for 1995 compared to 1994. The gross margin for gas operations, net of
the increase in directly-related operating expenses, contributed $0.07 per share
more to earnings in 1995 than in 1994. An increase in retail natural gas sales
also contributed to the improved gross margin due to colder temperatures in the
fourth quarter of 1995 compared to 1994.
As part of the process of merging the operations of MidAmerican's
predecessors, the Company developed a restructuring plan which includes employee
incentive early retirement, relocation and separation programs. The
restructuring plan, which was completed in 1995, resulted in the elimination of
over 700 positions. During 1995 the Company recorded $33.4 million of
restructuring costs which included the Company's estimate of the remaining
amount of such costs to be incurred. These costs are primarily reflected in
Other Operating Expenses in the Consolidated Statements of Income.
-2-
<PAGE>
In addition, the Company incurred nonrecurring costs to accomplish
consummation of the merger. These "transaction costs," which are included in
Other Non-Operating Income, in the Consolidated Statements of Income, totalled
$4.6 million in 1995 and $4.5 million in 1994.
In total, restructuring and transaction costs reduced 1995 earnings by
$0.24 per share, while transaction costs reduced 1994 earnings by $0.05 per
share.
Write-downs of certain assets of the Company's nonregulated subsidiaries
reduced 1995 earnings by approximately $10.2 million, or $0.10 per share. The
pre-tax amount of the write-downs, which is included in Other Non-Operating
Income, in the Consolidated Statements of Income, reflects other-than-temporary
declines of $18.0 million in the value of those nonregulated investments. The
investments are primarily alternative energy projects.
Earnings for 1994 decreased $15.3 million from the 1993 level due
primarily to merger transaction costs in 1994 and recognition of an $11.5
million aftertax gain on the exchange of gas service territory in 1993.
UTILITY OPERATING REVENUES
ELECTRIC:
A combination of factors contributed to the $73.0 million increase in
electric operating revenues for 1995.
Various increases in retail electric rates contributed to the increase in
electric revenues. In October 1994 and January 1995, the Company implemented
rate increases for Iowa energy efficiency cost recovery filings which allow a
total increase in electric revenues of $31.7 million over a four-year period.
In August 1995, the Company began collection of $18.6 million over a four-year
prospective period related to another energy efficiency cost recovery filing.
In connection with an Iowa electric rate filing, the Company began collecting in
January 1995 interim rates representing an increase of $13.6 million in annual
electric revenues. A final rate increase in the proceeding, representing an
increase of $20.3 million in annual electric revenues, was effective in August
1995. The new rates include a component for the recovery of other
postretirement employee benefit (OPEB) costs on an accrual basis instead of the
pay-as-you-go basis previously used. Approximately $8 million of the $20.3
million increase in annual revenues relates to additional expensing of OPEB
costs. Increases in revenues due to OPEB and energy efficiency costs have an
immaterial impact on net income due to corresponding increases in operating
expenses.
An 11% increase in retail sales of electricity for the 1995 third quarter
compared to the 1994 third quarter was the main cause of the increase in
electric retail sales for 1995. The increase in sales was primarily the result
of warmer temperatures which, measured in cooling degree days, were 56% warmer
in the 1995 third quarter than in the comparable 1994 quarter.
The Company has been allowed current recovery from most of its electric
utility customers for fuel and purchased power costs through energy adjustment
clauses (EACs). As the cost of energy to serve those customers fluctuates,
revenues fluctuate accordingly with no impact on gross margin or net income. In
1995, the average energy cost per unit decreased 4.5%. As a result, 1995
revenues collected through the EACs decreased compared to 1994.
Revenues from sales for resale accounted for $21.2 million of the increase
in electric revenues. Sales for resale volumes increased 53% for 1995 compared
to 1994. Greater availability of nuclear generating facilities in 1995
increased the amount of energy available for sales for resale. Coal delivery
uncertainties also limited the
-3-
<PAGE>
Company's sales for resale activity in 1994. Sales for resale have a lower
margin than other sales and, accordingly, increases in related revenues do
not increase net income as much as increases in retail revenues.
The Company is a 25% owner in Quad-Cities Nuclear Power Station (Quad-
Cities Station), which is jointly owned and operated by Commonwealth Edison.
The Company also purchases 50% of the energy of Cooper Nuclear Station (Cooper),
which is owned and operated by Nebraska Public Power District (NPPD), through a
power purchase agreement which terminates in 2004. NPPD took Cooper out of
service on May 25, 1994. Pending satisfaction of the concerns of the NRC,
Cooper remained out of service until February 1995 when it returned to service
following NRC approval to restart. In May 1995, the Company filed a lawsuit
seeking unspecified damages from NPPD related to the 1994-95 Cooper outage. In
June 1995, the NRC removed Cooper and the Quad-Cities Station from its list of
adversely trending plants.
Total electric operating revenues for 1994 increased $18.7 million compared
to 1993. Electric retail revenues increased $38.2 million in 1994 compared to
1993. The increase in retail revenues was partially offset by a decrease of
approximately $20 million in sales for resale revenues. As discussed above,
outages at Cooper in 1994 and coal delivery uncertainties limited the Company's
sales for resale activity. An increase in retail sales, due mostly to increased
sales to general service customers, was the primary cause of the increase in
retail revenues. An increase in the cost of energy per unit sold also increased
revenues through the EACs in 1994. Rate increases also contributed to the
increase in electric revenues for 1994 compared to 1993 as discussed below.
In July 1993, the Company implemented electric rates for some of its Iowa
customers designed to increase annual electric revenues by $6.8 million. Also
in July 1993, an annual electric rate increase in Illinois of $9.6 million
became effective.
GAS:
Gas operating revenues for 1995 decreased $32.4 million compared to 1994.
A reduction in revenues collected through the purchased gas adjustment clauses
(PGAs) was the primary cause of the decrease in revenues. This was due to a
significant decrease in the average cost of gas per unit sold. Variations in
revenues collected through the PGAs reflecting changes in the cost of gas and
volumes sold do not affect gross margin or net income.
An increase in sales and rates offset part of the impact of lower PGA
revenues. In January 1995, the Company implemented a gas service rate increase
resulting from findings in an Iowa energy efficiency cost recovery filing which
allows an increase in gas revenues of $6.7 million over a four-year period. In
October 1994, the Company began collecting interim rates for an Iowa gas rate
filing representing an increase of $8.2 million in annual gas revenues. A final
rate increase of $10.6 million in annual gas revenues was effective in August
1995. Approximately $2.5 million of the $10.6 million increase in annual
revenues relates to the recovery of OPEB costs on an accrual basis. Increases
in revenues due to OPEB and energy efficiency costs have an immaterial impact on
net income due to corresponding increases in operating expenses. Retail sales
of natural gas increased slightly due to a 4% increase in residential sales.
This was due mostly to colder weather in the fourth quarter of 1995.
Gas operating revenues for 1994 decreased $47.0 million compared to 1993
due to a decrease in retail natural gas sales. Temperatures, measured in
heating degree days, decreased considerably in 1994 compared to 1993, resulting
in the decrease in retail sales. In addition, an exchange of gas service
territories in the third quarter of 1993 resulted in a decrease in natural gas
customers. A reduction in revenues collected through the PGAs also contributed
to the decrease in retail revenues. The effect of rate increases partially
offset the decrease in revenues due to reduced sales volumes and PGA revenues.
-4-
<PAGE>
UTILITY OPERATING EXPENSES
Changes in the cost of electric fuel, energy and capacity (collectively,
Energy Costs) reflect fluctuations in generation levels and mix, fuel cost, and
energy and capacity purchases. Energy Costs for 1995 increased 8% compared to
1994 due primarily to a 13% increase in total electric sales. The increase in
Energy Costs as a result of greater sales of electricity was partially offset by
a 5% decrease in the average Energy Cost per unit. Energy Costs for 1994
decreased 2% compared to 1993 due primarily to the reduction in sales for
resale. The decrease due to reduced sales of electricity was partially offset
by a 7% increase in the average Energy Cost per unit. Part of the fluctuation
in the average Energy Cost per unit was due to the changes in the availability
of nuclear generation throughout the three-year period.
Cost of gas sold for 1995 decreased compared to 1994 due to a 15% decrease
in the average cost of gas per unit sold. Cost of gas sold decreased in 1994
compared to 1993 due primarily to a 9% decrease in sales which was due in part
to a gas property exchange.
Other operating expenses increased $45.5 million in 1995 compared to 1994
due primarily to costs related to the restructuring plan discussed in the
opening section of Results of Operations. Utility operating expenses include
$31.9 million of the $33.4 million total restructuring costs. As discussed
above, 1995 expenses also include increases from deferred energy efficiency and
OPEB costs. The increases for 1995 were partially offset by an $8.6 million
reduction in nuclear operations costs. Expenses for 1994 were reduced by $3.0
million due to capitalizing previously expensed energy efficiency costs to
comply with the IUB regulation of these costs.
Other operating expenses in 1994 increased $13.5 million compared to 1993.
Increased nuclear operations costs related to extended outages at Cooper and
Quad-Cities Station during 1994 contributed to the increase. The increase in
nuclear costs was partially offset by the adjustment to energy efficiency costs
mentioned above.
Maintenance expenses decreased $15.9 million in 1995 compared to 1994.
Quad-Cities Station maintenance expenses decreased $5.5 million due in part to
the 1994 outage. The timing of power plant maintenance and a reduction in
various distribution maintenance accounted for much of the remaining variation
between years.
Depreciation expense increased compared to each prior year due primarily to
additions to utility plant in service.
NONREGULATED OPERATING REVENUES
Revenues for the Company's nonregulated subsidiaries decreased $7.8 million
for 1995 compared to 1994. A decrease in real estate revenues and reduced
revenues due to the impact of the sale of a telecommunications subsidiary in
early 1995 accounted for most of the decrease. Revenues from the Company's oil
and gas production subsidiary were basically unchanged with increases in gas
production volumes and oil prices offsetting decreases due to lower prices for
natural gas. A 16% decrease in sales volumes for a nonregulated retail natural
gas marketing subsidiary resulted in a $13.9 million decrease in nonregulated
gas revenues for 1995. This decrease was offset by $14.2 million in revenues of
a wholesale natural gas marketing firm acquired in December 1995.
Revenues for 1994 increased $36.3 million compared to 1993 due primarily to
a $33.4 million increase in revenues from retail sales of natural gas. The
increase in retail natural gas sales and revenues for 1994 is attributable
primarily to the purchase of the assets of an existing nonregulated natural gas
business in January 1994. Higher production volumes reflecting additional
acquired reserves and successful drilling results also contributed to the
increase in revenues for 1995.
-5-
<PAGE>
NONREGULATED OPERATING EXPENSES
Cost of sales includes expenses directly related to sales of oil, natural
gas and real estate. The factors discussed above for revenues, including
natural gas sales volumes, lower gas prices and reduced real estate sales, also
affected the variances in cost of sales for the years 1993 through 1995. Cost
of sales for the newly acquired natural gas firm also contributed to the
increase in 1995 compared to 1994.
Other nonregulated expenses increased $3.0 million for 1995 compared to
1994. The 1995 amount includes $1.5 million of expenses for the Company's
restructuring plan. The $5.7 million increase in 1994 compared to 1993 was due
primarily to expenses of the natural gas marketing business acquired in January
1994.
REALIZED GAINS AND LOSSES ON SECURITIES, NET
Realized gains and losses on securities decreased $6.9 million for 1995
compared to 1994. The decrease resulted primarily from the sale of a single
holding in 1994 which generated a $5.9 million pre-tax gain. During 1993,
InterCoast realized significant gains on some of its investments in marketable
securities due to the impact of favorable market conditions.
NON-OPERATING INCOME - OTHER, NET
The adjustments to nonregulated investments discussed at the beginning of
Results of Operations were the primary cause of the decrease in Other, Net, for
1995 compared to 1994. In addition, merger transaction costs reduced Other, Net
in 1995 and 1994. A gain on the sale of an investment in a leveraged lease in
1994 also contributed to the comparative decrease for 1995 compared to 1994.
Gains totalling $8.5 million on the sales of a partnership interest in a gas
marketing organization and a telecommunication subsidiary in 1995 partially
offset the decreases. The decrease from 1993 to 1994 is due primarily to an
$18.5 million pre-tax gain on the exchange of natural gas service territories in
1993.
INTEREST CHARGES
Increased interest on long-term debt in 1995 compared to 1994 was due
primarily to the issuance of $60 million of 7.875% Series of mortgage bonds in
November 1994. The decrease in interest on long-term debt from 1993 to 1994
reflects refinancing of several series of long-term debt at lower interest rates
in 1993.
DISCONTINUED OPERATIONS
In 1994, the Company announced its intent to divest its construction
subsidiaries and recognized the anticipated loss on disposal. The sale of
certain assets of one of the subsidiaries was completed in December 1994, and
the sale of the other construction subsidiary was completed in March 1995.
Settlement of a construction receivable in the second quarter of 1995 resulted
in $0.4 million of income in 1995.
PREFERRED DIVIDENDS
The decrease in the preferred dividend requirement for 1995 compared to
1994 was due mostly to the redemption of three series of outstanding preferred
shares in December 1994.
-6-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has available a variety of sources of liquidity and capital
resources, both internal and external. These resources provide funds required
for current operations, debt retirement, dividends, construction expenditures
and other capital requirements.
For 1995, the Company had net cash provided from operating activities of
$382 million and net cash used of $320 million and $54 million for investing and
financing activities, respectively.
INVESTING ACTIVITIES
Utility construction expenditures, including allowance for funds used
during construction (AFUDC), Quad-Cities Station nuclear fuel purchases and
Cooper capital improvements, were $191 million for 1995. The decrease from the
1994 total of $212 million reflects the Company's efforts to limit construction
expenditures.
Forecasted utility construction expenditures for 1996 are $166 million
including AFUDC. The 1996 plan includes $35 million for Cooper capital
improvements and Quad-Cities Station nuclear fuel purchases and construction
expenditures. For the years 1996 through 2000, the Company forecasts $818
million for utility construction expenditures, $154 million of which is for
nuclear expenditures. The Company presently expects that all utility
construction expenditures for 1996 through 2000 will be met with cash generated
from utility operations, net of dividends.
In general, decommissioning of a nuclear facility means to safely remove
the facility from service and restore the property to a condition allowing
unrestricted use. During 1995, the Utility contributed approximately $9 million
to an external trust established for the investment of funds for decommissioning
the Quad-Cities Station. Based on information presently available, the Utility
expects to contribute $45 million to the trust during the period 1996 through
2000. The funds are invested predominately in investment grade municipal, and
U.S. Treasury, bonds. In addition, approximately $9 million of the 1995
payments made under the power purchase contract with NPPD were for
decommissioning funding related to Cooper. The Cooper costs are reflected in
Other Operating Expenses in the Consolidated Statements of Income. Based on
NPPD estimates, the Utility expects to pay approximately $54 million for Cooper
decommissioning during the period 1996 through 2000. NPPD invests the funds in
instruments similar to those of the Quad-Cities Station trust fund. The
Company's obligation for Cooper decommissioning may be affected by the actual
plant shutdown date and the status of the power purchase contract at that time.
The Company currently recovers Quad-Cities Station decommissioning costs charged
to Illinois customers through a rate rider on customer billings. Cooper and
Quad-Cities Station decommissioning costs charged to Iowa customers are included
in base rates, and increases in those amounts must be sought through the normal
ratemaking process. Refer to Note 4(d) of Notes to Consolidated Financial
Statements (Notes) for additional details regarding decommissioning.
Capital expenditures of nonregulated subsidiaries were $56 million for
1995. Capital expenditures of nonregulated subsidiaries depend upon the
availability of suitable investment opportunities and other factors. For 1996,
such expenditures are forecasted to be approximately $85 million, primarily
related to InterCoast.
InterCoast invests in a variety of marketable securities which it holds for
indefinite periods of time. For 1995, InterCoast had net cash outflows of $67
million from its marketable securities investment activities. In the
Consolidated Statements of Cash Flows, the lines Purchase of Securities and
Proceeds from Sale of Securities consist primarily of the gross amounts of these
activities, including realized gains and losses on investments in marketable
securities.
-7-
<PAGE>
FINANCING ACTIVITIES
The Utility currently has authority from the FERC to issue short-term debt
in the form of commercial paper and bank notes aggregating $400 million. As of
December 31, 1995, the Utility had bank lines of credit of $250 million to
provide short-term financing for utility operations. In January 1996, the
Utility entered into a $250 million revolving credit facility agreement to
replace those lines of credit. The Utility's commercial paper borrowings, which
totalled $185 million at December 31, 1995, are currently supported by the
revolving credit facility. The Utility also has lines of credit and revolving
credit facilities which are dedicated to provide liquidity for its obligations
under outstanding pollution control revenue bonds that are periodically
remarketed.
In January 1995, $12.75 million of floating rate pollution control
refunding revenue bonds due 2025 were issued. Proceeds from this financing were
used to redeem $12.75 million of collateralized pollution control revenue bonds,
5.8% Series, due 2007.
The Utility has $347 million of long-term debt maturities and sinking fund
requirements for 1996 through 2000, $1 million of which matures in 1996.
The Utility is currently considering several long-term financing options
for 1996. Proceeds from those issuances would be used to reduce commercial
paper outstanding and to refinance higher cost securities.
As of December 31, 1995, the Utility had the capability to issue
approximately $1.3 billion of mortgage bonds under the current Midwest
indenture. The Utility does not expect to issue additional debt under the Iowa-
Illinois indenture, but may if necessary.
During the first six months of 1995, Resources and Iowa-Illinois sold
original issue shares of common stock through certain of their employee stock
purchase and dividend reinvestment plans. On a MidAmerican share basis,
1,065,240 shares of common stock were issued. The Company has the necessary
authority to issue up to 6,000,000 shares of common stock through its
Shareholder Options Plan (the Company's dividend reinvestment and stock
purchase plan). Since the effective date of the merger, the Company has used
open market purchases of its common stock rather than original issue shares to
meet share obligations under its Employee Stock Purchase Plan and the
Shareholder Options Plan. The Company currently plans to continue using open
market purchases to meet share obligations under these plans.
Subsequent to the consummation of the merger, the Utility made a $55
million equity contribution to InterCoast. In addition, nonregulated businesses
not related to regional business development were transferred from Midwest
Capital to InterCoast. The equity contribution was then used to extinguish
Senior Notes and variable interest rate Notes Payable, thus eliminating several
financial relationships between the Company's utility and nonregulated
operations.
One support agreement remains between the Utility and Midwest Capital
related to a performance guarantee by Midwest Capital of a joint venture turnkey
engineering, procurement and construction contract for a cogeneration project.
The project received preliminary acceptance from the owner in 1995, which
pursuant to the construction contract, eliminates the potential for liquidated
damages being incurred related to the project. Midwest Capital also has $25
million of long-term debt outstanding at December 31, 1995, that matures in 1996
and is supported by a guarantee from the Utility. In addition, Midwest Capital
has a $25 million line of credit with the Utility.
During the third quarter of 1995, InterCoast entered into a $64 million
unsecured revolving credit facility agreement which matures in 1998. The
facility was used primarily to refinance maturing Senior Notes. InterCoast also
has a $110 million unsecured revolving credit facility agreement which matures
in 1999.
-8-
<PAGE>
Borrowings under these agreements may be at a fixed rate, floating rate or
competitive bid rate basis. All borrowings under these agreements are
without recourse to the Utility. At December 31, 1995, InterCoast had $130
million of debt outstanding under these two revolving credit facility
agreements.
In addition, InterCoast has entered into two floating rate to fixed
interest rate swaps each in the amount of $32 million. The interest rate swaps
have fixed rates of 5.97% and 6.00%, respectively, and are for three-year and
two-year terms, respectively, with an optional third year on the latter.
InterCoast's aggregate amounts of maturities and sinking fund requirements
for long-term debt outstanding at December 31, 1995, are $39 million for 1996
and $287 million for the years 1996 through 2000. Amounts due in 1996 are
expected to be refinanced with debt instruments.
On January 24, 1996, the Company's Board of Directors declared a quarterly
dividend on common shares of $0.30 per share payable March 1, 1996. The
dividend represents an annual rate of $1.20 per share.
OPERATING ACTIVITIES
The Utility is subject to regulation by several utility regulatory
agencies. The operating environment and the recoverability of costs from
utility customers are significantly influenced by the regulation of those
agencies. The Company anticipates that changes in the utility industry will
create a more competitive environment. Although these anticipated changes may
create opportunities, they will also create additional challenges and risks for
utilities. The Company is evaluating strategies that will assist it in a more
competitive environment.
A possible consequence of competition in the utility industry is the
discontinued applicability of Statement of Financial Accounting Standards (SFAS)
No. 71. SFAS 71 sets forth accounting principles for all, or a portion, of a
company's operations that are regulated and meet certain criteria. For
operations that meet the criteria, SFAS 71 allows, among other things, the
deferral of costs that would otherwise be expensed when incurred. The Company's
electric and gas utility operations are currently subject to the provisions of
SFAS 71. Should the utility industry become more competitive as presently
anticipated, the Company will reexamine the applicability of SFAS 71. If a
portion of the Company's utility operations no longer meets the criteria of SFAS
71, the Company could be required to eliminate from its balance sheet assets and
liabilities related to those operations that resulted from actions of its
regulators (i.e., regulatory assets and liabilities). A material adjustment to
earnings in the appropriate period could result from the discontinuance of SFAS
71. Refer to Note (1)(c) of Notes for a discussion of regulatory assets.
The Energy Policy Act (EPAct) was enacted in 1992. This law promotes
competition in the wholesale electric power market. The FERC has taken action
to establish rules and policies in compliance with provisions of the EPAct
through a Notice of Proposed Rulemaking issued March 29, 1995. The Company has
been active in providing filed, written comments with the FERC in an effort to
shape new transmission policies in ways that will best serve the interests of
its customers and shareholders. In conjunction with the Merger, the Company
submitted an open access transmission tariff in 1994 which was accepted for
filing by the FERC in June 1995.
Legislation enacted by the State of Illinois in 1995 allows public
utilities to file for regulatory approval of nontraditional rate design.
Alternative forms of rate design may include price caps, flexible rate
structures and other modifications of the cost-based method currently used to
determine rates for electric and gas services. The Company is evaluating its
options in light of the new legislation. If appropriate, the Company may file a
request in 1996 for alternate rate design in Illinois.
In 1992, the FERC issued Order No. 636, directing a restructuring by
interstate pipeline companies for their natural gas sales and transportation
services. The unbundling of pipeline services increased the Company's access
-9-
<PAGE>
to supply options and its supply responsibilities. Certain transition costs
incurred by interstate natural gas pipelines for their compliance with Order
636 will be paid to the pipeline companies over the next several years. The
Company's Consolidated Balance Sheet as of December 31, 1995, includes a $41
million noncurrent liability and regulatory asset recorded for transition
costs. The Company may incur other transition costs in conjunction with
future purchases of gas, but does not expect these billings to have a
material impact on the cost of gas. The Company is currently recovering
costs related to Order 636 from its customers.
Electric and gas utilities in Iowa are required to spend approximately 2%
and 1.5%, respectively, of their annual Iowa jurisdictional revenues on energy
efficiency activities. In October 1994 and in January 1995, the Company began
collecting over a four-year prospective period $19.7 million and $18.7 million,
respectively, related to prior energy efficiency cost recovery filings. A
recent district court ruling was issued which affirmed in all respects the IUB
decisions allowing such recovery. In another cost recovery filing, the IUB
issued an order approving the collection over a four-year prospective period of
$18.6 million. Collection related to this filing began August 8, 1995. As of
December 31, 1995, the Company had approximately $68 million of energy
efficiency costs deferred on its Consolidated Balance Sheet for which recovery
will be sought in future energy efficiency filings.
The United States Environmental Protection Agency (EPA) and state
environmental agencies have determined that contaminated wastes remaining at
certain decommissioned manufactured gas plant facilities may pose a threat to
the public health or the environment if such contaminants are in sufficient
quantities and at such concentrations as to warrant remedial action.
The Company is evaluating 26 properties which were, at one time, sites of
gas manufacturing plants in which it may be a potentially responsible party
(PRP). The purpose of these evaluations is to determine whether waste materials
are present, whether such materials constitute an environmental or health risk,
and whether the Company has any responsibility for remedial action. The
Company's present estimate of probable remediation costs for these sites is $21
million. This estimate has been recorded as a liability and a regulatory asset
for future recovery through the regulatory process. Refer to Note (4)(b) of
Notes for further discussion of the Company's environmental activities related
to manufactured gas plant sites and cost recovery.
Although the timing of potential incurred costs and recovery of such cost
in rates may affect the results of operations in individual periods, management
believes that the outcome of these issues will not have a material adverse
effect on the Company's financial position or results of operations.
The Clean Air Act Amendments of 1990 (CAA) were signed into law in November
1990. The Company has five jointly owned and five wholly owned coal-fired
generating stations, which represent approximately 65% of the Company's electric
generating capability.
Two of the Company's coal-fired generating units were subject to the
requirements of the CAA beginning in 1995. These units were given a set number
of allowances by the EPA. Each allowance permits the units to emit one ton of
sulfur dioxide. The Company has completed most of the modifications necessary
to one unit to burn low-sulfur coal and to install nitrogen oxides controls and
an emissions monitoring system. Under proposed regulations, the second unit
will require additional capital expenditures to reduce emissions of nitrogen
oxides.
The Company's other coal-fired generating units are not materially affected
by the provisions of the CAA. Due to the use of low-sulfur western coal, the
Company does not anticipate the need for additional capital expenditures to
lower sulfur dioxide emission rates to ensure that allowances allocated by the
federal government are not exceeded. While the Company estimates that
sufficient emission allowances have been allocated on a system-wide basis for
its units to operate at the capacity factors needed to meet system energy
-10-
<PAGE>
requirements, additional purchases of allowances may be necessary to meet
desired sales for resale levels. By the year 2000, some Company coal-fired
generating units will be required to install controls to reduce emissions of
nitrogen oxides. Essentially all utility generating units are subject to CAA
provisions which address continuous emission monitoring, permit requirements and
fees, and emission of toxic substances. Based on currently proposed CAA
regulations, the Company does not anticipate its remaining construction costs
for the installation of low nitrogen oxides burner technology and emissions
monitoring system upgrades to exceed $16 million.
ACCOUNTING ISSUES
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121 regarding accounting for asset impairments. This statement, which will
be adopted by the Company in the first quarter of 1996, requires the Company to
review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. SFAS 121 also requires rate-regulated companies to recognize an
impairment for regulatory assets that are not probable of future recovery.
Adoption of SFAS 121 is not expected to have a material impact on the Company's
results of operations or financial position at the time of adoption.
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry, including
those of the Company, regarding the recognition, measurement and classification
of nuclear decommissioning costs in the financial statements. In response to
these questions, the FASB has added a project to its agenda to review the
accounting for closure and removal costs, including decommissioning of nuclear
power plants. If current electric utility industry accounting practices for
such decommissioning are changed, the annual provision for decommissioning could
increase relative to 1995, and the total estimated cost for decommissioning
could be recorded as a liability with recognition of an increase in the cost of
related nuclear power plant. The Company has not determined what impact, if
any, it would have on the Company's operation and financial position.
In October 1995, the FASB issued SFAS No. 123 regarding stock-based
compensation plans. SFAS 123, which is effective for reporting periods
beginning January 1, 1996, allows for alternative methods of adoption. The
Company does not expect the accounting provisions or alternative disclosure
provisions of SFAS 123 to have a material impact on the Company's results of
operations.
-11-
<PAGE>
EXHIBIT 13.2
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1995 1994 1993
---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES
Electric utility $1,094,647 $1,021,660 $1,002,970
Gas utility 459,588 492,015 538,989
Nonregulated 169,409 177,235 140,976
---------- ---------- ----------
1,723,644 1,690,910 1,682,935
---------- ---------- ----------
OPERATING EXPENSES
Utility:
Cost of fuel, energy and capacity 230,261 213,987 217,385
Cost of gas sold 279,025 326,782 366,049
Other operating expenses 399,648 354,190 340,720
Maintenance 85,363 101,275 101,601
Depreciation and amortization 158,950 154,229 150,822
Property and other taxes 96,350 94,990 93,238
---------- ---------- ----------
1,249,597 1,245,453 1,269,815
---------- ---------- ----------
Nonregulated:
Cost of sales 128,685 130,621 96,656
Other 44,230 41,230 35,568
---------- ---------- ----------
172,915 171,851 132,224
---------- ---------- ----------
1,422,512 1,417,304 1,402,039
---------- ---------- ----------
OPERATING INCOME 301,132 273,606 280,896
---------- ---------- ----------
NON-OPERATING INCOME
Interest income 4,485 4,334 5,805
Dividend income 16,954 17,087 17,601
Realized gains and losses on securities, net 688 7,635 7,915
Other, net (10,467) 4,316 20,842
---------- ---------- ----------
11,660 33,372 52,163
---------- ---------- ----------
INTEREST CHARGES
Interest on long-term debt 110,505 105,753 111,065
Other interest expense 9,449 6,446 5,066
Allowance for borrowed funds (5,552) (3,955) (2,186)
---------- ---------- ----------
114,402 108,244 113,945
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 198,390 198,734 219,114
INCOME TAXES 67,984 62,349 71,409
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 130,406 136,385 147,705
INCOME (LOSS) FROM DISCONTINUED OPERATIONS 417 (5,645) (3,854)
---------- ---------- ----------
NET INCOME 130,823 130,740 143,851
PREFERRED DIVIDENDS 8,059 10,551 8,367
---------- ---------- ----------
EARNINGS ON COMMON STOCK $ 122,764 $ 120,189 $ 135,484
---------- ---------- ----------
---------- ---------- ----------
AVERAGE COMMON SHARES OUTSTANDING 100,401 98,531 97,762
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER COMMON SHARE
Continuing operations $ 1.22 $ 1.28 $ 1.43
Discontinued operations - (0.06) (0.04)
---------- ---------- ----------
Earnings per average common share $ 1.22 $ 1.22 $ 1.39
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
- 1 -
<PAGE>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31
------------------------------
1995 1994
---------- ----------
(In thousands)
<S> <C> <C>
ASSETS
UTILITY PLANT
Electric $3,881,699 $3,765,004
Gas 695,741 663,792
---------- ----------
4,577,440 4,428,796
Less accumulated depreciation and
amortization 2,027,055 1,885,870
---------- ----------
2,550,385 2,542,926
Construction work in progress 104,164 101,252
---------- ----------
2,654,549 2,644,178
---------- ----------
POWER PURCHASE CONTRACT 212,148 221,998
---------- ----------
INVESTMENT IN DISCONTINUED OPERATIONS - 15,249
---------- ----------
CURRENT ASSETS
Cash and cash equivalents 41,216 33,778
Receivables, less reserves of $2,296 and
$2,099, respectively 261,105 212,902
Inventories 85,235 92,248
Other 22,252 19,035
---------- ----------
409,808 357,963
---------- ----------
INVESTMENTS 826,496 752,428
---------- ----------
OTHER ASSETS 420,520 423,958
---------- ----------
TOTAL ASSETS $4,523,521 $4,415,774
---------- ----------
---------- ----------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see accompanying statement)
Common shareholders' equity $1,225,715 $1,204,112
Preferred shares, not subject to
mandatory redemption 89,945 89,955
Preferred shares, subject to
mandatory redemption 50,000 50,000
Long-term debt (excluding current portion) 1,403,322 1,398,255
---------- ----------
2,768,982 2,742,322
---------- ----------
CURRENT LIABILITIES
Notes payable 184,800 124,500
Current portion of long-term debt 65,295 72,872
Current portion of power purchase contract 13,029 12,080
Accounts payable 142,759 110,175
Taxes accrued 81,898 91,653
Interest accrued 30,635 30,659
Other 57,000 54,473
---------- ----------
575,416 496,412
---------- ----------
OTHER LIABILITES
Power purchase contract 112,700 125,729
Deferred income taxes 746,574 725,665
Investment tax credit 95,041 100,871
Other 224,808 224,775
---------- ----------
1,179,123 1,177,040
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $4,523,521 $4,415,774
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
- 2 -
<PAGE>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
1995 1994 1993
-------- -------- -------
(In thousands)
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 130,823 $ 130,740 $ 143,851
Adjustments to reconcile net income to net
cash provided:
Depreciation, depletion and amortization 202,542 198,049 193,199
Net increase in deferred income taxes and
investment tax credit, net 10,278 36,926 1,935
Amortization of other assets 20,047 9,731 5,447
Capitalized cost of real estate sold 1,744 3,723 5,737
Loss (income) from discontinued operations (417) 5,645 3,854
Gain on sale of assets and long-term investments (1,050) (6,409) (25,428)
Other-than-temporary decline in value of
investments and other assets 17,971 1,791 2,939
Impact of changes in working capital, net of
effects from discontinued operations (19,075) (9,270) 20,066
Other 18,809 10,624 (7,746)
-------- -------- -------
Net cash provided 381,672 381,550 343,854
-------- -------- -------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures (190,771) (211,669) (215,081)
Quad-Cities Nuclear Power Station
decommissioning trust fund (8,636) (9,044) (7,918)
Deferred energy efficiency expenditures (35,841) (28,221) (24,104)
Nonregulated capital expenditures (56,162) (52,609) (86,505)
Purchase of securities (164,521) (113,757) (197,490)
Proceeds from sale of securities 94,493 142,307 205,767
Proceeds from sale of assets and other
investments 34,263 6,433 55,582
Other investing activities, net 7,060 (7,957) 13,716
-------- -------- -------
Net cash used (320,115) (274,517) (256,033)
-------- -------- -------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (126,892) (125,065) (122,410)
Issuance of long-term debt, net of issuance cost 12,750 180,410 796,897
Retirement of long-term debt, including
reacquisition cost (110,351) (102,472) (895,900)
Issuance of preferred shares, net of
issuance cost - - 68,140
Reacquisition of preferred shares, including
reacquisition cost (9) (20,142) (32,629)
Increase (decrease) in InterCoast Energy Company
unsecured revolving credit facility 95,000 (9,500) 44,500
Issuance of common shares 15,083 27,760 -
Net increase (decrease) in notes payable 60,300 (48,535) 52,791
-------- -------- -------
Net cash used (54,119) (97,544) (88,611)
-------- -------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 7,438 9,489 (790)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 33,778 24,289 25,079
-------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,216 $ 33,778 $ 24,289
-------- -------- -------
-------- -------- -------
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized $ 116,843 $ 105,004 $ 111,133
-------- -------- -------
-------- -------- -------
Income taxes paid $ 88,863 $ 38,195 $ 54,346
-------- -------- -------
-------- -------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
AS OF DECEMBER 31
--------------------------------
1995 1994
------------ ------------
(In thousands,
except share amounts)
<S> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common shares, no par; 350,000,000 shares authorized;
100,751,713 and 99,686,636 shares outstanding, respectively $ 801,227 $ 786,420
Retained earnings 430,589 426,683
Valuation allowance, net of income taxes (6,101) (8,991)
------------ ------------
1,225,715 44.3% 1,204,112 43.9%
------------ ---- ------------ -----
PREFERRED SHARES (100,000,000 shares authorized)
Cumulative preferred shares outstanding; not subject to
mandatory redemption:
$3.30 Series, 49,523 and 49,622 shares, respectively 4,952 4,962
$3.75 Series, 38,320 shares 3,832 3,832
$3.90 Series, 32,630 shares 3,263 3,263
$4.20 Series, 47,369 shares 4,737 4,737
$4.35 Series, 49,950 shares 4,995 4,995
$4.40 Series, 50,000 shares 5,000 5,000
$4.80 Series, 49,898 shares 4,990 4,990
$1.7375 Series, 2,400,000 shares 58,176 58,176
Cumulative preferred shares outstanding; subject to
mandatory redemption:
$5.25 Series, 100,000 shares 10,000 10,000
$7.80 Series, 400,000 shares 40,000 40,000
------------ ------------
139,945 5.0% 139,955 5.1%
------------ ---- ------------ -----
LONG-TERM DEBT
Mortgage bonds:
5.875% Series, due 1997 22,000 22,000
Adjustable Rate Series, due 1997 (8.8% and 7.6%, respectively) 25,000 25,000
5.05% Series, due 1998 50,000 50,000
6.25% Series, due 1998 75,000 75,000
7 .875% Series, due 1999 60,000 60,000
6% Series, due 2000 35,000 35,000
6.75% Series, due 2000 75,000 75,000
8.15% Series, due 2001 40,000 40,000
7.125% Series, due 2003 100,000 100,000
7.70% Series, due 2004 60,000 60,000
7% Series, due 2005 100,000 100,000
7.375% Series, due 2008 75,000 75,000
8% Series, due 2022 50,000 50,000
7.45% Series, due 2023 30,000 30,000
8.125% Series, due 2023 100,000 100,000
6.95% Series, due 2025 50,000 50,000
Pollution control revenue obligations:
5.15% to 5.75% Series, due periodically through 2003 10,984 11,544
5.8% Series, due 2007 (secured by first mortgage bonds) - 12,750
5.95% Series, due 2023 (secured by general mortgage bonds) 29,030 29,030
Variable Rate Series-
Due 2016 and 2017 (5.0% and 5.7%, respectively) 37,600 37,600
Due 2023 (secured by general
mortgage bonds, 5.05% and 5.55%, respectively) 28,295 28,295
Due 2023 (5.1% and 5.6%, respectively) 6,850 6,850
Due 2024 (5.25% and 5.1%, respectively) 34,900 34,900
Due 2025 (5.1%) 12,750 -
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AS OF DECEMBER 31
--------------------------------
1995 1994
------------- -----------
(In thousands)
<S> <C> <C>
LONG-TERM DEBT (CONTINUED)
Notes:
9% to 15% Series, due annually through 1996 $ - $ 22
8.75% Series, due 2002 240 240
6.4% Series, due 2003 through 2007 2,000 2,000
Obligation under capital lease 2,218 2,356
Unamortized debt premium and discount, net (4,126) (4,706)
---------- ----------
Total utility 1,107,741 1,107,881
---------- ----------
Subsidiaries:
Notes -
9.30% Series, due 1995 and 1996 - 9,000
8.7% Series, due annually through 1996 - 25,508
Adjustable Rate Series, due semiannually through 1996 - 13,100
10.20% Series, due 1996 and 1997 30,000 60,000
9.87% Series, due annually through 1997 - 11,664
7.34% Series, due 1998 20,000 20,000
7.76% Series, due 1999 45,000 45,000
8.52% Series, due 2000 through 2002 70,000 70,000
9% Series, due annually through 2000 - 489
8% Series, due annually through 2004 581 613
Borrowings under unsecured revolving credit facility (6.3%) 64,000 -
Borrowings under unsecured revolving credit facility
(6.4% and 6.6%, respectively) 66,000 35,000
---------- ----------
Total Subsidiaries 295,581 290,374
---------- ----------
1,403,322 50.7% 1,398,255 51.0%
---------- ----- ---------- ------
TOTAL CAPITALIZATION $2,768,982 100.0% $2,742,322 100.0%
---------- ----- ---------- ------
---------- ----- ---------- ------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31
----------------------------------------
1995 1994 1993
-------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C>
BEGINNING OF YEAR $426,683 $421,358 $400,621
-------- -------- --------
NET INCOME 130,823 130,740 143,851
-------- -------- --------
DEDUCT (ADD):
(Gain) loss on reacquisition of preferred shares (5) 312 672
Dividends declared on preferred shares 8,064 10,141 8,350
Dividends declared on common shares of $1.18, $1.17 and
$1.17 per share, respectively 118,828 114,924 114,060
Other 30 38 32
-------- -------- --------
126,917 125,415 123,114
-------- -------- --------
END OF YEAR $430,589 $426,683 $421,358
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) MERGER:
On July 1, 1995, Iowa-Illinois Gas and Electric Company (Iowa-Illinois),
Midwest Resources Inc. (Resources) and Midwest Power Systems Inc. (Midwest)
merged to form MidAmerican Energy Company (MidAmerican or Company). The
merger was accounted for as a pooling-of-interests and the financial
statements included herein are presented as if the companies were merged as
of the earliest period shown. MidAmerican is a utility company with two
wholly owned nonregulated subsidiaries: InterCoast Energy Company
(InterCoast) and Midwest Capital Group, Inc. (Midwest Capital).
Each outstanding share of preferred and preference stock of the predecessor
companies was converted into one share of a similarly designated series of
MidAmerican preferred stock, no par value. Each outstanding share of common
stock of Resources and Iowa-Illinois was converted into one share and 1.47
shares, respectively, of MidAmerican common stock, no par value.
Resources' operating revenues and net income for the six months prior to
the merger were $534.2 million and $37.7 million, respectively.
Iowa-Illinois' operating revenues, as reclassified to include nonregulated
revenues in operating revenues consistent with MidAmerican's presentation,
and net income for the six months prior to the merger were $298.9 million and
$27.1 million, respectively.
(b) CONSOLIDATION POLICY AND PREPARATION OF FINANCIAL STATEMENTS:
The accompanying Consolidated Financial Statements include the Company and
its wholly owned nonregulated subsidiaries, InterCoast and Midwest Capital. All
significant intercompany transactions have been eliminated.
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 liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
may differ from those estimates.
(c) REGULATION:
The Company's utility operations are subject to the regulation of the Iowa
Utilities Board (IUB), the Illinois Commerce Commission (ICC), the South Dakota
Public Utilities Commission, and the Federal Energy Regulatory Commission
(FERC). The Company's accounting policies and the accompanying Consolidated
Financial Statements conform to generally accepted accounting principles
applicable to rate-regulated enterprises and reflect the effects of the
ratemaking process.
-6-
<PAGE>
The Company's utility operations are subject to the provisions of Statement
of Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects of
Certain Types of Regulation. The following regulatory assets, primarily
included in Other Assets in the Consolidated Balance Sheets, represent probable
future revenue to the Company because these costs are expected to be recovered
in charges to utility customers (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred income taxes. . . . . . . . . $144,257 $139,577
Energy efficiency costs. . . . . . . . 101,541 72,694
Debt refinancing costs . . . . . . . . 44,370 47,879
FERC Order 636 transition costs. . . . 40,824 56,608
Retirement benefit costs . . . . . . . 15,354 18,287
Environmental costs. . . . . . . . . . 23,076 23,535
Unamortized costs of retired plant . . 11,618 10,824
Enrichment facilities decommissioning. 8,970 9,807
Other . . . . . . . . . . . . . . . 7,396 10,479
-------- --------
Total . . . . . . . . . . . . . . $397,406 $389,690
-------- --------
-------- --------
</TABLE>
(d) REVENUE RECOGNITION:
Revenues are recorded as services are rendered to customers. The Company
records unbilled revenues, and related energy costs, representing the estimated
amount customers will be billed for services rendered between the meter-reading
dates in a particular month and the end of such month. Accrued unbilled
revenues are $61.0 million and $65.6 million at December 31, 1995 and 1994,
respectively, and are included in Receivables on the Consolidated Balance
Sheets.
The majority of the utility's electric and gas sales are subject to
adjustment clauses. These clauses allow the utility to adjust the amounts
charged for electric and gas service as the costs of gas, fuel for generation or
purchased power change. The costs recovered in revenues through use of the
adjustment clauses are charged to expense in the same period.
(e) DEPRECIATION AND AMORTIZATION:
The Company's provisions for depreciation and amortization for its utility
operations are based on straight-line composite rates. The average depreciation
and amortization rates for the years ended December 31 were as follows:
1995 1994 1993
Electric . . . . . . . . . . . . . . . . 3.9% 3.8% 3.8%
Gas . . . . . . . . . . . . . . . . 3.7% 3.6% 3.9%
Utility plant is stated at original cost which includes overhead costs,
administrative costs and an allowance for funds used during construction.
The cost of repairs and minor replacements is charged to maintenance
expense. Property additions and major property replacements are charged to
plant accounts. The cost of depreciable units of utility plant retired or
disposed of in the normal course of business is eliminated from the utility
plant accounts and such cost, plus net removal cost, is charged to accumulated
depreciation.
-7-
<PAGE>
An allowance for the estimated annual decommissioning costs of the
Quad-Cities Nuclear Power Station (Quad-Cities) equal to the level of funding is
included in depreciation expense. See Note 4(d) for additional information
regarding decommissioning costs.
(f) INVESTMENTS:
Investments, managed primarily through the Company's nonregulated
subsidiaries, include the following amounts as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Investments:
Marketable securities . . . . . . . $270,162 $199,514
Oil and gas properties. . . . . . . 160,831 142,378
Equipment Leases. . . . . . . . . . 90,729 123,603
Nuclear decommissioning trust fund. 64,781 49,432
Energy projects . . . . . . . . . . 44,741 51,150
Special-purpose funds . . . . . . . 47,046 34,767
Real estate . . . . . . . . . . . . 65,232 72,721
Corporate owned life insurance. . . 22,743 18,832
Non-public preferred stock. . . . . 14,372 24,451
Coal transportation equipment . . . 10,216 11,616
Communications. . . . . . . . . . . 16,332 4,793
Other . . . . . . . . . . . . . . . 19,311 19,171
-------- --------
Total investments. . . . . . . . . . . $826,496 $752,428
-------- --------
-------- --------
</TABLE>
Marketable securities generally consist of preferred stocks, common stocks
and mutual funds held by InterCoast.
On January 1, 1994, the Company adopted SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under this statement, investments in
marketable securities classified as available-for-sale are reported at fair
value with net unrealized gains and losses reported as a net of tax amount in
Other Common Shareholders' Equity until realized.
Investments in marketable securities that are classified as held-to-maturity
are reported at amortized cost. An other-than-temporary decline in the value of
a marketable security is recognized through a write-down of the investment to
earnings.
Investments held by the nuclear decommissioning trust fund for the Quad-
Cities units are classified as available-for-sale and are reported at fair value
with net unrealized gains and losses reported as adjustments to the accumulated
provision for nuclear decommissioning.
(g) OIL AND GAS:
The Company uses the full cost method of accounting for oil and gas
activities. Under the full cost method, all acquisition, exploration and
development costs are capitalized and amortized over the estimated production
from proved oil and gas reserves. Under the full cost method, net capitalized
costs may not exceed the present value of proved reserves as determined under
rules of the Securities and Exchange Commission.
-8-
<PAGE>
(h) CONSOLIDATED STATEMENTS OF CASH FLOWS:
The Company considers all cash and highly liquid debt instruments purchased
with a remaining maturity of three months or less to be cash and cash
equivalents for purposes of the Consolidated Statements of Cash Flows.
Net cash provided (used) from changes in working capital, net of effects from
discontinued operations and exchange of assets was as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Receivables . . . . . . . . . . $(48,203) $13,152 $ 149
Inventories. . . . . . . . . . . 7,013 8,427 (2,067)
Other current assets . . . . . . (3,217) 5,876 605
Accounts payable . . . . . . . . 32,584 (19,329) 13,741
Interest accrued . . . . . . . . (24) (362) (374)
Taxes accrued. . . . . . . . . . (9,755) (19,270) 9,338
Other current liabilities. . . . 2,527 2,236 (1,326)
-------- -------- -------
Total . . . . . . . . . . . . $(19,075) $ (9,270) $20,066
-------- -------- -------
-------- -------- -------
</TABLE>
During 1993, the Company exchanged its Minnesota gas properties, with a book
value of $52 million, for gas distribution properties in South Dakota, with an
appraised fair value of $32 million, and $38 million cash. A pre-tax gain on
the transaction of $18 million was recorded.
(i) ACCOUNTING FOR LONG-TERM POWER PURCHASE CONTRACT:
Under a long-term power purchase contract with Nebraska Public Power District
(NPPD), expiring in 2004, the Company purchases one-half of the output of the
778-megawatt Cooper Nuclear Station (Cooper). The Consolidated Balance Sheets
include a liability for the Company's fixed obligation to pay 50% of NPPD's
Nuclear Facility Revenue Bonds and other fixed liabilities. A like amount
representing the Company's right to purchase power is shown as an asset.
-9-
<PAGE>
Capital improvement costs for new property, including carrying costs, are
being deferred, amortized and recovered in rates over the term of the NPPD
contract. Capital improvement costs for property replacements, including
carrying costs, are being deferred, amortized and recovered in rates over a
five-year period.
The fuel cost portion of the power purchase contract is included in Cost of
Fuel, Energy and Capacity on the Consolidated Statements of Income. All other
costs the Company incurs in relation to its long-term power purchase contract
with NPPD are included in Other Operating Expenses on the Consolidated
Statements of Income.
See Notes 4(c), 4(d) and 4(e) for additional information regarding the power
purchase contract.
(j) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121:
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121 regarding accounting for asset impairments. This statement, which will
be adopted by the Company in the first quarter of 1996, requires the Company to
review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 also requires rate-regulated companies to recognize
an impairment for regulatory assets for which future recovery is not probable.
Adoption of SFAS No. 121 is not expected to have a material impact on the
Company's results of operations or financial position at the time of adoption.
(k) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123:
In October 1995, the FASB issued SFAS No. 123 regarding accounting for stock-
based compensation plans. This statement, which is effective for reporting
periods beginning January 1, 1996, allows for alternative methods of adoption.
The Company does not expect the accounting provisions or the alternative
disclosure provisions of SFAS No. 123 to have a material impact on the Company's
results of operations.
(2) LONG-TERM DEBT:
The Company's sinking fund requirements and maturities of long-term debt and
preferred stock for 1996 through 2000 are $65 million, $80 million, $209
million, $171 million and $134 million, respectively.
The interest rate on the Company's Adjustable Rate Series Mortgage Bonds is
reset every two years at 160 basis points over the average yield to maturity of
10-year Treasury securities. The rate was reset in 1995.
The Company's Variable Rate Pollution Control Revenue Obligations bear
interest at rates that are periodically established through remarketing of the
bonds in the short-term tax-exempt market. The Company, at its option, may
change the mode of interest calculation for these bonds by selecting from among
several alternative floating or fixed rate modes. The interest rates shown in
the Consolidated Statements of Capitalization are the weighted average interest
rates as of December 31, 1995 and 1994. The Company maintains dedicated
revolving credit facility agreements or renewable lines of credit to provide
liquidity for holders of these issues.
Substantially all the former Iowa-Illinois utility property and franchises,
and substantially all of the former Midwest electric utility property in Iowa,
is pledged to secure mortgage bonds.
InterCoast's unsecured Notes are issued in private placement transactions.
All Notes are issued without recourse to MidAmerican.
InterCoast has $64 million and $110 million unsecured revolving credit
facility agreements, which mature in 1998
-10-
<PAGE>
and 1999, respectively. Borrowings under these agreements may be on a fixed
rate, floating rate or competitive bid rate basis. InterCoast has entered
into two floating rate to fixed interest rate swaps, each in the amount of
$32 million. The interest rate swaps have fixed rates at 5.97% and 6.00%,
respectively, and are for three-year and two-year terms, respectively, with
an optional third year on the latter. All InterCoast borrowings are without
recourse to MidAmerican.
(3) JOINTLY OWNED UTILITY PLANT:
Under joint plant ownership agreements with other utilities, the Company had
undivided interests at December 31, 1995, in jointly owned generating plants as
shown in the table below.
The dollar amounts below represent the Company's share in each jointly owned
unit. Each participant has provided financing for its share of each unit.
Operating Expenses on the Consolidated Statements of Income include the
Company's share of the expenses of these units (dollars in millions).
<TABLE>
<CAPTION>
Nuclear Coal fired
------------ -------------------------------------------------
Council
Quad-Cities Neal Bluffs Neal Ottumwa Louisa
Units Unit Unit Unit Unit Unit
No. 1 & 2 No. 3 No. 3 No.4 No. 1 No. 1
---------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
In service date 1972 1975 1978 1979 1981 1983
Utility plant in service $200.4 $111.7 $286.5 $155.8 $202.2 $526.0
Accumulated depreciation $ 70.6 $ 64.8 $138.8 $ 78.9 $ 89.3 $204.3
Unit capacity-MW 1,539 515 675 624 716 700
Percent ownership 25.0% 72.0% 79.1% 40.6% 52.0% 88.0%
</TABLE>
(4) COMMITMENTS AND CONTINGENCIES:
(a) CAPITAL EXPENDITURES:
Utility construction expenditures for 1996 are estimated to be $166 million,
including $17 million for Quad-Cities nuclear fuel and $9 million for Cooper
capital improvements. Capital expenditures for nonregulated subsidiaries depend
upon the availability of investment opportunities and other factors. During
1996, such expenditures are estimated to be approximately $85 million.
(b) ENVIRONMENTAL MATTERS:
The United States Environmental Protection Agency (EPA) and the state
environmental agencies have determined that contaminated wastes remaining at
certain decommissioned manufactured gas plant (MGP) facilities may pose a threat
to the public health or the environment if such contaminants are in sufficient
quantities and at such concentrations as to warrant remedial action.
The Company is evaluating 26 properties which were, at one time, sites of gas
manufacturing plants in which it may be a potentially responsible party (PRP).
The purpose of these evaluations is to determine whether waste materials are
present, whether such materials constitute an environmental or health risk, and
whether the Company has any responsibility for remedial action. The Company is
currently conducting field investigations at five sites and has completed
investigations at three sites. In addition, the Company is currently removing
contaminated soil at three sites, and has completed removals at two sites. The
Company is continuing to evaluate several sites to determine the future
liability, if any, for conducting site investigations or other site activity.
-11-
<PAGE>
The Company's present estimate of probable remediation costs for the sites
discussed above is $21 million. This estimate has been recorded as a liability
and a regulatory asset for future recovery. The Illinois Commerce Commission
has approved the use of a tariff rider which permits recovery of the actual
costs of litigation, investigation and remediation relating to former MGP sites.
The Company's present rates in Iowa provide for a fixed annual recovery of MGP
costs. The Company intends to pursue recovery of the remediation costs from
other PRPs and its insurance carriers.
The estimate of probable remediation costs is established on a site specific
basis. The costs are accumulated in a three-step process. First, a
determination is made as to whether the Company has potential legal liability
for the site and whether information exists to indicate that contaminated wastes
remain at the site. If so, the costs of performing a preliminary investigation
are accrued. Once the investigation is completed and if it is determined
remedial action is required, the best estimate of remediation costs is accrued.
If necessary, the estimate is revised when a consent order is issued.
The estimated recorded liabilities for these properties are based upon
preliminary data. Thus, actual costs could vary significantly from the
estimates. The estimate could change materially based on facts and
circumstances derived from site investigations, changes in required remedial
action and changes in technology relating to remedial alternatives. In
addition, insurance recoveries for some or all of the costs may be possible, but
the liabilities recorded have not been reduced by any estimate of such
recoveries.
Although the timing of potential incurred costs and recovery of such costs in
rates may affect the results of operations in individual periods, management
believes that the outcome of these issues will not have a material adverse
effect on the Company's financial position or results of operations.
(c) LONG-TERM POWER PURCHASE CONTRACT:
Payments to NPPD cover one-half of the fixed and operating costs of Cooper
(excluding depreciation but including debt service) and the Company's share of
nuclear fuel cost (including nuclear fuel disposal) based on energy delivered.
The debt service portion is approximately $1.5 million per month for 1996 and is
not contingent upon the plant being in service. In addition, the Company pays
one-half of NPPD's decommissioning funding related to Cooper.
The debt amortization and Department of Energy (DOE) enrichment plant
decontamination and decommissioning component of the Company's payments to NPPD
were $12.0 million, $10.8 million and $9.9 million and the net interest
component was $4.6 million, $5.4 million and $5.7 million each for the years
1995, 1994 and 1993, respectively.
The Company's payments for the debt principal portion of the power purchase
contract obligation and the DOE enrichment plant decontamination and
decommissioning payments are $13.0 million, $13.6 million, $14.3 million, $15.0
million and $15.8 million for 1996 through 2000, respectively, and $54.0
million for 2001 through 2004.
(d) DECOMMISSIONING COSTS:
Based on site-specific decommissioning studies that include decontamination,
dismantling, site restoration and dry fuel storage cost, the Company's share of
expected decommissioning costs for Cooper and Quad-Cities, in 1995 dollars, is
$420 million. In Illinois, nuclear decommissioning costs are included in
customer billings through a mechanism that permits annual adjustments. Such
costs are reflected as base rates in Iowa tariffs.
For purposes of developing a decommissioning funding plan for Cooper, NPPD
assumes that decommissioning costs will escalate at an annual rate of 4%.
Although Cooper's operating license expires in 2014, the funding plan assumes
decommissioning will start in 2004, the currently anticipated plant shutdown
date.
-12-
<PAGE>
As of December 31, 1995, the Company's share of funds set aside by NPPD in
internal and external accounts for decommissioning was $49.4 million. In
addition, the funding plan also assumes various funds and reserves currently
held to satisfy NPPD Bond Resolution requirements will be available for plant
decommissioning costs after the bonds are retired in early 2004. The funding
schedule assumes a long-term return on funds in the trust of 6% annually.
Certain funds will be required to be invested on a short-term basis when
decommissioning begins and are assumed to earn at a rate of 4% annually. NPPD
is recognizing decommissioning costs over the expected service life of the
plant, and 50% of the costs are included as a component of the Company's power
purchased costs. During each of the years 1995, 1994 and 1993, $8.9 million of
the Company's power purchased costs were for Cooper decommissioning and are
included in Other Operating Expenses in the Consolidated Statements of Income.
Earnings from the internal and external trust funds, which are recognized by
NPPD as the owner of the plant, are tax exempt and serve to reduce future
funding requirements.
The Company has established an external trust for the investment of funds for
decommissioning the Quad-Cities units. The total accrued balance as of December
31, 1995, was $64.8 million and is included in Other Liabilities and a like
amount is reflected in Investments and represents the value of the assets held
in the trust.
The Company's provision for depreciation includes costs for Quad-Cities
nuclear decommissioning of $8.6 million, $9.1 million and $7.9 million for
1995, 1994 and 1993, respectively. The provision charged to expense is equal to
the funding that is being collected in rates. The decommissioning funding
component of the Company's Illinois tariffs assumes that decommissioning costs,
related to the Quad-Cities unit, will escalate at an annual rate of 5.3% and the
assumed annual return on funds in the trust is 6.5%. The Quad-Cities
decommissioning funding component of the Company's Iowa tariffs assumes that
decommissioning costs will escalate at an annual rate of 6.3% and the assumed
annual return on funds in the trust is 6.5%. Earnings on the assets in the
trust fund were $2.5 million, $2.2 million and $2.0 million for 1995, 1994 and
1993.
(e) NUCLEAR INSURANCE:
The Company maintains financial protection against catastrophic loss
associated with its interest in Quad-Cites and Cooper through a combination of
insurance purchased by NPPD (the owner and operator of Cooper) and Commonwealth
Edison (the joint owner and operator of Quad-Cities), insurance purchased
directly by the Company, and the mandatory industry-wide loss funding mechanism
afforded under the Price-Anderson Amendments Act of 1988. The coverage falls
into three categories: nuclear liability, property coverage and nuclear worker
liability.
NPPD and Commonwealth Edison each purchase nuclear liability insurance in the
maximum available amount of $200 million. In accordance with the Price-Anderson
Amendments Act of 1988, excess liability protection above that amount is
provided by a mandatory industry-wide program under which the owners of nuclear
generating facilities could be assessed for liability incurred due to a serious
nuclear incident at any commercial nuclear reactor in the United States.
Currently, the Company's maximum potential share of such an assessment is $79.2
million per incident, payable in installments not to exceed $10 million
annually.
The property coverage provides for property damage, stabilization and
decontamination of the facility, disposal of the decontaminated material and
premature decommissioning. For Quad-Cities, Commonwealth Edison purchases
primary and excess property insurance protection for the combined interest in
Quad-Cities totalling $2.1 billion. For Cooper, NPPD purchases primary property
insurance in the amount of $500 million. Additionally, commencing December 31,
1995, the Company and NPPD separately purchase coverage for their respective
obligation of $1.125 billion each in excess of the $500 million primary layer
purchased by NPPD. This structure provides that both the Company and NPPD are
covered for their respective 50% obligation in the event of a loss totalling
$2.75 billion. The Company also directly purchases extra expense/business
interruption coverage to cover the cost of replacement power and/or other
continuing costs in the event of a covered accidental outage at Cooper or Quad-
Cities. The coverages purchased directly by the
-13-
<PAGE>
Company, and the primary and excess property coverages purchased by
Commonwealth Edison, contain provisions for retrospective premium
assessments should two or more full policy-limit losses occur in one policy
year. Currently, the maximum retrospective amounts that could be assessed
against the Company for its obligations associated with Cooper and
Quad-Cities combined total $19.4 million.
The master nuclear worker liability coverage is an industry-wide policy with
an aggregate limit of $200 million for the nuclear industry as a whole, which is
in effect to cover tort claims of workers as a result of radiation exposure on
or after January 1, 1988. The Company's share, based on its interest in Cooper
and Quad-Cities, of a maximum potential share of a retrospective assessment
under this program is $3.0 million.
(f) FINANCIAL GUARANTEES:
The Company has letters of credit amounting to $20.4 million and financial
guarantees amounting to $11.3 million which are not reflected in the
consolidated financial statements. Letters of credit and financial guarantees
are conditional commitments issued by, or on behalf of, the Company to secure
performance for a third party. The guarantees are primarily issued to support
private borrowing arrangements and similar transactions.
Management believes that the likelihood of material cash payments by the
Company under these agreements is remote.
(g) COAL AND NATURAL GAS CONTRACT COMMITMENTS:
The Company has entered into coal supply and transportation contracts for its
fossil-fueled generating stations. The contracts, require minimum payments of
$65 million, $45 million, $28 million, $26 million and $16 million for the years
1996 through 2000, respectively, and $28 million for the years thereafter. The
Company expects to supplement these coal contracts with spot market purchases to
fulfill its future fossil fuel needs.
The Company has entered into various natural gas supply and transportation
contracts for its utility operations. The minimum commitments under these
contracts are $98 million, $87 million, $49 million, $26 million and $23 million
for the years 1996 through 2000, respectively, and $96 million for the years
thereafter. During 1993 FERC Order 636 became effective, requiring interstate
pipelines to restructure their services. The pipelines will recover the
transition costs related to Order 636 from the local distribution companies.
The Company has recorded a liability and regulatory asset for the transition
costs which are being recovered by the Company through the purchased gas
adjustment clause. The unrecovered balance recorded by the Company as of
December 31, 1995, was $41 million.
-14-
<PAGE>
(5) COMMON SHAREHOLDERS' EQUITY:
Common shares outstanding changed during the years ended December 31 as shown
in the table below (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
Amount Shares Amount Shares Amount Shares
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year . . . $786,420 99,687 $759,120 97,782 $759,610 97,778
Changes due to:
Issuance of common shares. . 15,083 1,065 27,760 1,911 - -
Capital stock expense . . . (276) - (377) - (442) -
Other. . . . . . . . . . . . - - (83) (6) (48) 4
-------- -------- -------- -------- -------- --------
Balance, end of year . . . . . . $801,227 100,752 $786,420 99,687 $759,120 97,782
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
(6) RETIREMENT PLANS:
The Company has noncontributory defined benefit pension plans covering
substantially all employees. Benefits under the plans are based on participants'
compensation, years of service and age at retirement.
Funding is based upon the actuarially determined costs of the plans and the
requirements of the Internal Revenue Code and the Employee Retirement Income
Security Act. The utility has been allowed to recover funding contributions in
rates.
Net periodic pension cost includes the following components for the years
ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefit earned during
the period. . . . . . . . . . . . . $ 9,817 $ 13,241 $ 11,140
Interest cost on projected benefit
obligation. . . . . . . . . . . . . 27,934 26,822 25,431
Decrease in pension costs from actual
return on assets. . . . . . . . . . (63,593) (7,835) (22,149)
Net amortization and deferral. . . . . . . . 32,126 (21,030) (6,075)
One-time charge. . . . . . . . . . . . . . . 15,683 - -
Regulatory deferral of incurred cost . . . . (10,470) (2,871) (2,018)
------- ------- -------
Net periodic pension cost. . . . . . . . . . $ 11,497 $ 8,327 $ 6,329
------- ------- -------
------- ------- -------
</TABLE>
During 1995, the Company incurred a one-time charge of $15.7 million
related to the early retirement portion of its restructuring plan. Of such
cost, $3.0 million was charged to expense and the remaining amount was
deferred for future recovery through the regulatory process.
-15-
<PAGE>
The plan assets are stated at fair market value and are primarily comprised
of insurance contracts, United States government debt and corporate equity
securities. The following table presents the plans' funding status and
amounts recognized in the Company's Consolidated Balance Sheets as of
December 31 (dollars in thousands):
<TABLE>
<CAPTION>
Plans in Which:
-----------------------------------------------------------
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
---------------------------- ----------------------------
1995 1994 1995 1994
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . $(293,985) $(224,488) $ (32,429) $(18,915)
Nonvested benefit obligation . . . . . . . . . . (7,516) (5,881) (816) (1,744)
----------- ------------ ------------ ------------
Accumulated benefit obligation . . . . . . . . . (301,501) (230,369) (33,245) (20,659)
Provision for future pay increases . . . . . . . (94,633) (66,414) (5,455) (2,357)
----------- ------------ ------------ ------------
Projected benefit obligation . . . . . . . . . . (396,134) (296,783) (38,700) (23,016)
Plan assets at fair value. . . . . . . . . . . . . 385,598 335,809 - -
----------- ------------ ------------ ------------
Projected benefit obligation (greater) less
than plan assets . . . . . . . . . . . . . . . . (10,536) 39,026 (38,700) (23,016)
Unrecognized prior service cost. . . . . . . . . . (15,866) 22,520 2,884 6,896
Unrecognized net loss (gain) . . . . . . . . . . . 29,541 (40,151) 9,431 2,603
Unrecognized net transition asset. . . . . . . . . (21,521) (24,112) - -
Other . . . . . . . . . . . . . . . . . . . . . . - - (6,860) (7,142)
----------- ------------ ------------ ------------
Pension liability recognized in the
Consolidated Balance Sheets . . . . . . . . . . $ (18,382) $ (2,717) $ (33,245) $(20,659)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Assumptions used were:
Discount rate . . . . . . . . . . . . . . . . . . 7.0% 8.5%
Rate of increase in compensation levels. . . . . . 5.0% 5.0%
Expected long-term rate of return on assets. . . . 8.75-9.0% 8.75-9.0%
</TABLE>
The Company currently provides certain health care and life insurance
benefits for retired employees. Under the plans, substantially all of the
Company's employees may become eligible for these benefits if they reach
retirement age while working for the Company. However, the Company retains
the right to change these benefits anytime at its discretion.
In January 1993, the Company adopted SFAS No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions. The Company began expensing
these costs on an accrual basis for its Illinois customers and certain of its
Iowa customers in 1993 and including provisions for such costs in rates for
these customers. For its remaining Iowa customers, the Company deferred the
portion of these costs above the "pay-as-you-go" amount already included in
rates until recovery on an accrual basis was established in 1995. The
Company is currently amortizing the deferral, expensing the SFAS No. 106
accrual and including provisions for these costs in rates.
-16-
<PAGE>
Net periodic postretirement benefit cost includes the following
components for the year ended December 31 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefit earned during the period. . . $ 1,583 $ 2,147 $ 2,252
Interest cost . . . . . . . . . . . . . . . . . 7,185 7,221 8,644
Increase (decrease) in benefit cost from
actual return on assets . . . . . . . . . . . . . (2,090) 894 (468)
Amortization of unrecognized transition
obligation . . . . . . . . . . . . . . . . . . . 5,291 5,442 5,449
Other . . . . . . . . . . . . . . . . . . . . (262) (1,991) 293
One-time charge for early retirement . . . . . . . 4,353 - -
Regulatory recognition of incurred cost. . . . . . 5,140 (6,218) (9,126)
------- ------- -------
Net periodic postretirement benefit cost . . . . . $21,200 $ 7,495 $ 7,044
------- ------- -------
------- ------- -------
</TABLE>
During 1995, the Company recorded a one-time expense of $4.4 million related
to the early retirement portion of its restructuring plan.
The Company has established external trust funds to meet its expected
postretirement benefit obligations. The trust funds are comprised primarily of
guaranteed rate investment accounts and money market investment accounts. A
reconciliation of the funded status of the plan to the amounts realized as of
December 31 is presented below (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Accumulated present value of benefit obligations:
Retiree benefit obligation . . . . . . . . . . . . $(67,488) $(55,233)
Active employees fully eligible for benefits . . . (5,904) (6,127)
Other active employees . . . . . . . . . . . . . . (33,949) (26,939)
-------- -------
Accumulated benefit obligation . . . . . . . . . . (107,341) (88,299)
Plan assets at fair value. . . . . . . . . . . . . 26,916 18,200
-------- -------
Accumulated benefit obligation greater than
plan assets . . . . . . . . . . . . . . . . . . . (80,425) (70,099)
Unrecognized net gain. . . . . . . . . . . . . . . (13,880) (25,894)
Unrecognized transition obligation . . . . . . . . 89,952 95,993
-------- -------
Postretirement benefit liability recognized in the
Consolidated Balance Sheets. . . . . . . . . . . $ (4,353) $ -
-------- -------
-------- -------
Assumptions used were:
Discount rate . . . . . . . . . . . . . . . . . 7.0% 8.5%
Expected long-term rate of return on assets
(after taxes):
Midwest Resources union plan . . . . . . . . . . 9.0% 9.0%
Midwest Resources salaried plan. . . . . . . . . 4.6% 4.6%
Iowa-Illinois plans. . . . . . . . . . . . . . . 3.0% 3.0%
</TABLE>
For purposes of calculating the postretirement benefit obligation, it is
assumed that health care costs for covered individuals prior to age 65 will
increase by 11% in 1996, and that the rate of increase thereafter will decline
by 1% annually to an ultimate rate of 5% by the year 2002. For covered
individuals age 65 and older, it is assumed that health care costs will increase
by 9% in 1996, and that the rate of increase thereafter will decline by 1%
annually to an ultimate rate of 5% by the year 2000.
-17-
<PAGE>
If the assumed health care trend rates used to measure the expected cost of
benefits covered by the plans were increased by 1%, the total service and
interest cost would increase by $0.9 million and the accumulated postretirement
benefit obligation would increase by $7.6 million.
The Company sponsors defined contribution pension plans (401(k) plans)
covering substantially all employees. The Company's contributions to the plans,
which are based on the participants level of contribution and cannot exceed four
percent of the participants salaries or wages, were $3.7 million, $3.6 million
and $3.6 million for 1995, 1994 and 1993, respectively.
(7) SHORT-TERM BORROWING:
Interim financing of working capital needs and the construction program may
be obtained from the sale of commercial paper or short-term borrowing from
banks. Information regarding short-term debt follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at year-end . . . . . . . . . . . $184,800 $124,500 $173,035
Weighted average interest rate
on year-end balance. . . . . . . . . . . . 5.7% 6.1% 3.4%
Average daily amount outstanding
during the year. . . . . . . . . . . . . . $114,036 $105,728 $117,445
Weighted average interest rate
on average daily amount
outstanding during the year. . . . . . . . 6.0% 4.4% 3.3%
</TABLE>
At December 31, 1995, the Company had bank lines of credit of $250
million to provide short-term financing for its utility operations. As of
December 31, 1995, the Company has regulatory authority to borrow up to $400
million of short-term debt for its utility operations. In January 1996, the
Company entered into a $250 million revolving credit facility agreement to
replace the lines of credit. The Company's commercial paper borrowings are
currently supported by the revolving credit facility.
(8) RATE MATTERS:
The table below shows the Company's recent material general rate activities
(dollars in thousands):
<TABLE>
<S> <C> <C>
Filing entity. . . . . . . . . . . . . . Midwest Midwest
State of filing. . . . . . . . . . . . . Iowa Iowa
Service . . . . . . . . . . . . . . . . Gas Electric
Interim revenue increase:
Amount . . . . . . . . . . . . . . . $ 8,200 $15,600
Percent. . . . . . . . . . . . . . . 3.2% 2.7%
Date collection began. . . . . . . . October 18, 1994 January 1, 1995
Final revenue increase:
Amount . . . . . . . . . . . . . . . $10,600 $20,300
Percent. . . . . . . . . . . . . . . 4.1% 3.4%
Date collection began. . . . . . . . August 1, 1995 August 11, 1995
</TABLE>
-18-
<PAGE>
The table below summarizes the results of the Company's recent
material energy efficiency cost recovery filing activities (dollars in
thousands):
<TABLE>
<S> <C> <C> <C>
Filing entity . . . . . . . . . . Midwest Midwest Iowa-Illinois
State of filing. . . . . . . . . . Iowa Iowa Iowa
Final revenue increase granted*. . $19,700 $18,700 $18,600
Deferred charges to be amortized*. $14,100 $13,400 $13,800
Date collection began. . . . . . . October 12, 1994 January 21, 1995 August 3, 1995
</TABLE>
* Recovery and amortization over a four-year period
(9) DISCONTINUED OPERATIONS:
The Company reflected as discontinued operations at September 30,
1994, all activities of a subsidiary that constructed generating facilities and
a subsidiary that constructed electric distribution and transmission systems.
Essentially all of the assets of these subsidiaries have been sold.
Midwest Capital, under the terms of certain sale agreements, has
indemnified the purchasers of the construction subsidiaries for specified
losses or claims relating to construction projects which occurred prior to
the date of their sale. In addition, Midwest Capital has guaranteed
performance on a joint venture turnkey engineering, procurement and
construction contract for a cogeneration project. The Company has provided a
support agreement to Midwest Capital related to this project. In October
1995, the project received preliminary acceptance from the owner. Management
believes that the likelihood of a material adverse impact to the Company
under any indemnity provision of the sale agreements or construction
contracts or material cash payments by the Company under the support
agreements is remote.
Net assets of the construction subsidiaries are separately presented
on the Consolidated Balance Sheets as Investment in Discontinued Operations.
Proceeds received from the disposition of the construction investments through
December 31, 1995, were $4.1 million. Revenues from discontinued activities,
as well as the results of operations and the estimated income (loss) on the
disposal of discontinued operations for the years ended December 31 are as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating Revenues . . . . . . . . . $ 7,334 $ 69,958 $ 94,350
-------- -------- ---------
-------- -------- ---------
Income (loss) from discontinued
operations before
income taxes . . . . . . . . $ 880 $ (2,788) $ (7,033)
Income tax benefit (expense) . . . . (463) 908 3,179
-------- -------- ---------
Total. . . . . . . . . . . . $ (417) $ (1,880) $ (3,854)
-------- -------- ---------
-------- -------- ---------
Loss on disposal before
income taxes . . . . . . . . $ - $(11,576) $ -
Income tax benefit . . . . . . . . . - 7,811 -
-------- ------- ---------
Total. . . . . . . . . . . . $ - $ (3,765) $ -
-------- -------- ---------
-------- -------- ---------
</TABLE>
-19-
<PAGE>
(10) CONCENTRATION OF CREDIT RISK:
The Company's electric utility operations serve 549,000 customers in
Iowa, 83,000 customers in western Illinois and 3,000 customers in southeastern
South Dakota. The Company's gas utility operations serve 471,000 customers in
Iowa, 65,000 customers in western Illinois, 60,000 customers in southeastern
South Dakota and 4,000 customers in northeastern Nebraska. The largest
communities served by the Company are the Iowa and Illinois Quad-Cities; Des
Moines, Sioux City, Cedar Rapids, Waterloo, Iowa City and Council Bluffs, Iowa;
and Sioux Falls, South Dakota. The Company's utility operations grant unsecured
credit to customers, substantially all of whom are local businesses and
residents. As of December 31, 1995, billed receivables from the Company's
utility customers totalled $126 million.
The Company has investments in preferred stocks of companies in the
utility industry. As of December 31, 1995, the total cost of these investments
was $163 million.
InterCoast has entered into leveraged lease agreements with companies
in the airline industry. As of December 31, 1995, the receivables under these
agreements totalled $38 million.
(11) PREFERRED SHARES:
On December 15, 1994, the Company redeemed all of its outstanding
$4.36 Series, $4.22 Series and $7.50 Series preferred shares. The redemption
was made at a premium, which resulted in a charge to net income on common shares
of $312,000.
The $5.25 Series Preferred Shares, which are not redeemable prior to
November 1, 1998 for any purpose, are subject to mandatory redemption on
November 1, 2003 at $100 per share. The $7.80 Series Preferred Shares, which
are not redeemable prior to May 1, 1996 for any purpose, have sinking fund
requirements under which 66,600 shares will be redeemed at $100 per share each
May 1, beginning in 2001 through May 1, 2006.
The total outstanding cumulative preferred stock that is not subject
to mandatory redemption requirements may be redeemed at the option of the
Company at prices which, in the aggregate, total $95.1 million. The aggregate
total the holders of all preferred stock outstanding at December 31, 1995, are
entitled to upon involuntary bankruptcy is $141.8 million plus accrued
dividends. Annual dividend requirements for preferred stock outstanding at
December 31, 1995, total $9.1 million.
-20-
<PAGE>
(12) SEGMENT INFORMATION:
Information related to segments of the Company's business is as
follows for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
UTILITY
Electric-
Operating revenues . . . . . . . . . . $ 1,094,647 $1,021,660 $1,002,970
Cost of fuel, energy and capacity. . . 230,261 213,987 217,385
Depreciation and amortization expense. 136,324 132,886 129,814
Other operating expenses . . . . . . . 459,344 438,811 424,589
----------- --------- ---------
Operating income . . . . . . . . . . . $ 268,718 $ 235,976 $ 231,182
----------- --------- ---------
----------- --------- ---------
Gas-
Operating revenues . . . . . . . . . $ 459,588 $ 492,015 $ 538,989
Cost of gas sold . . . . . . . . . . . 279,025 326,782 366,049
Depreciation and amortization expense. 22,626 21,343 21,008
Other operating expenses . . . . . . . 122,017 111,644 110,970
----------- --------- ---------
Operating income . . . . . . . . . . . $ 35,920 $ 32,246 $ 40,962
----------- --------- ---------
----------- --------- ---------
Operating income . . . . . . . . . . . . $ 304,638 $ 268,222 $ 272,144
Other income (expense) . . . . . . . . . (4,074) (3,712) 21,185
Interest charges . . . . . . . . . . . . 83,977 76,606 83,524
----------- --------- ---------
Income from continuing operations
before income taxes . . . . . . . . . . 216,587 187,904 209,805
Income taxes . . . . . . . . . . . . . . 84,098 66,759 75,917
----------- --------- ---------
Income from continuing operations. . . . $ 132,489 $ 121,145 $ 133,888
----------- --------- ---------
----------- --------- ---------
Capital Expenditures-
Electric . . . . . . . . . . . . . . . $ 133,490 $ 164,870 $ 178,903
Gas. . . . . . . . . . . . . . . . . . 57,281 46,799 36,178
NONREGULATED
Revenues . . . . . . . . . . . . . . . . $ 169,409 $ 177,235 $ 140,976
Cost of sales. . . . . . . . . . . . . . 128,685 130,621 96,656
Depreciation, depletion
and amortization . . . . . . . . . . . 26,573 24,884 18,771
Other operating expenses . . . . . . . . 17,657 16,346 16,797
----------- --------- ---------
Operating income (loss). . . . . . . . . (3,506) 5,384 8,752
Other income . . . . . . . . . . . . . . 15,734 37,084 30,978
Interest charges . . . . . . . . . . . . 30,425 31,638 30,421
Income (loss) from continuing operations
before income taxes. . . . . . . . . . (18,197) 10,830 9,309
Income taxes . . . . . . . . . . . . . . (16,114) (4,410) (4,508)
----------- --------- ---------
Income (loss) from continuing
operations . . . . . . . . . . . . . . $ (2,083) $ 15,240 $ 13,817
----------- --------- ---------
----------- --------- ---------
Capital expenditures . . . . . . . . . . $ 56,162 $ 52,609 $ 86,505
-21-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
ASSET INFORMATION
Identifiable assets-
Electric (a) . . . . . . . . . . . . . $2,947,832 $2,915,749 $2,891,487
Gas (a). . . . . . . . . . . . . . . . 709,742 693,203 662,634
Used in overall utility
operations . . . . . . . . . . . . . 46,644 71,399 67,622
Nonregulated . . . . . . . . . . . . . . 819,303 735,423 749,518
---------- ---------- ----------
Total assets . . . . . . . . . . . . . . $4,523,521 $4,415,774 $4,371,261
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(a) Utility plant less accumulated provision for depreciation, accounts
receivable, accrued unbilled revenues, inventories, deferred gas
expense, energy adjustment clause balance, nuclear decommissioning
trust fund and regulatory assets.
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments Tariffs for the Company's
utility services are established based on historical cost ratemaking.
Therefore, the impact of any realized gains or losses related to financial
instruments applicable to the Company's utility operations is dependent on
the treatment authorized under future ratemaking proceedings.
Cash and cash equivalents - The carrying amount approximates fair value
due to the short maturity of these instruments.
Quad-Cities nuclear decommissioning trust fund - Fair value is based on
quoted market prices of the investments held by the fund.
Marketable securities - Fair value is based on quoted market prices.
Debt securities - Fair value is based on the discounted value of the
future cash flows expected to be received from such investments.
Equity investments carried at cost - Fair value is based on an estimate
of the Company's share of partnership equity, offers from unrelated third
parties or the discounted value of the future cash flows expected to be
received from such investments.
Notes payable - Fair value is estimated to be the carrying amount due
to the short maturity of these issues.
Preferred shares - Fair value of preferred shares with mandatory
redemption provisions is estimated based on the quoted market prices for
similar issues.
-22-
<PAGE>
Long-term debt - Fair value of long-term debt is estimated based on
the quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. The following
table presents the carrying amount and estimated fair value of certain financial
instruments as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- --------- --------- --------
<S> <C> <C> <C> <C>
Financial Instruments Owned by the Company:
Equity investments carried at
costs . . . . . . . . . . . . . . . $ 58,972 $ 61,316 $ 22,352 $ 23,930
Financial Instruments Issued by the Company:
Preferred shares; subject to mandatory
redemption . . . . . . . . . . . . $ 50,000 $ 52,800 $ 50,000 $ 50,836
Long-term debt, including current
portion . . . . . . . . . . . . . . $1,468,617 $1,528,504 $1,471,127 $1,391,372
</TABLE>
The amortized cost, gross unrealized gain and losses and estimated fair
value of investments in debt and equity securities at December 31, 1995 and
1994, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Available-for-sale:
Equity securities $254,111 $ 7,132 $ (9,278) $251,965
Municipal Bonds 38,098 3,228 (210) 41,116
Cash equivalents 8,092 - - 8,092
Other debt securities 42,734 355 (6,507) 36,582
-------- -------- -------- --------
$343,035 $ 10,715 $(15,995) $337,755
-------- -------- -------- --------
-------- -------- -------- --------
Held-to-maturity:
Equity securities $ 11,389 $ - $ (786) $ 10,603
Debt securities 19,440 31 (921) 18,550
-------- -------- -------- --------
$ 30,829 $ 31 $ (1,707) $ 29,153
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
1994
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Available-for-sale:
Equity securities $171,201 $2,388 $(14,703) $158,886
Municipal bonds 43,034 749 (1,773) 42,010
Cash equivalents 5,836 - - 5,836
Other debt securities 4,102 - - 4,102
--------- -------- --------- ---------
$224,173 $3,137 $(16,476) $210,834
--------- -------- --------- ---------
--------- -------- --------- ---------
Held-to-maturity:
Equity securities $ 40,628 $ - $ (1,374) $ 39,254
Debt securities 14,804 39 (1,849) 12,994
--------- -------- --------- ---------
$ 55,432 $ 39 $ (3,223) $ 52,248
--------- -------- --------- ---------
--------- -------- --------- ---------
</TABLE>
At December 31, 1995, the debt securities held by the Company had the
following maturities (in thousands):
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- --------
<S> <C> <C>
Within 1 year $ 2,575 $ 2,454
1 through 5 years 38,345 36,934
5 through 10 years 35,788 32,239
Over 10 years 23,564 24,621
</TABLE>
During 1995, the Company re-evaluated the classification of its
securities classified as held-to-maturity and available-for-sale. As a result,
certain securities, with a total amortized cost of $33.1 million and a market
value of $33.8 million, were transferred from securities classified as held-to-
maturity to available-for-sale securities.
The proceeds and the gross realized gains and losses on the
disposition of investments held by the Company for the years ended December 31,
are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Proceeds from sales $107,692 $135,769
Gross realized gains 3,923 10,338
Gross realized losses (3,158) 5,234
</TABLE>
-24-
<PAGE>
(14) INCOME TAX EXPENSE:
Income tax expense from continuing operations includes the following
for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income taxes
Current
Federal . . . . . . . . . . $45,635 $20,036 $57,179
State . . . . . . . . . . . 12,071 5,387 12,295
-------- -------- --------
57,706 25,423 69,474
Deferred
Federal . . . . . . . . . . 15,905 37,316 7,610
State . . . . . . . . . . . 2,550 6,565 3,996
-------- -------- --------
18,455 43,881 11,606
Investment tax credit, net. . (8,177) (6,955) (9,671)
-------- -------- --------
Total income tax expense. . . $67,984 $62,349 $71,409
-------- -------- --------
-------- -------- --------
</TABLE>
Included in Deferred Income Taxes in the Consolidated Balance Sheets as of
December 31 are deferred tax assets and deferred tax liabilities as follows
(in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets
Related to:
Investment tax credits . . . $ 63,374 $ 67,279
Unrealized losses. . . . . . 7,548 4,008
Pensions . . . . . . . . . . 17,938 16,834
AMT credit carry forward . . 18,738 34,555
Nuclear reserves and
decommissioning . . . . . 8,367 8,340
Other. . . . . . . . . . . . 10,679 14,640
-------- --------
Total. . . . . . . . . . . . $126,644 $145,656
-------- --------
-------- --------
1995 1994
Deferred tax liabilities
Related to:
Depreciable property . . . . $533,750 $563,099
Income taxes recoverable
through future rates. . . 207,631 206,856
Intangible drilling costs. . 38,278 17,062
Energy efficiency. . . . . . 28,616 17,635
Reacquired debt. . . . . . . 17,595 18,575
FERC Order 636 . . . . . . . 16,073 17,939
Other. . . . . . . . . . . . 31,275 30,155
-------- --------
Total. . . . . . . . . . . . $873,218 $871,321
-------- --------
-------- --------
</TABLE>
The following table is a reconciliation between the effective income tax
rate, before preferred stock dividends, indicated by the Consolidated
Statements of Income and the statutory federal income tax rate for the years
ended December 31:
-25-
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Effective federal and state
income tax rate . . . . . . . . . . . . . . 34% 31% 33%
Amortization of investment tax credit . . . . 4 4 4
Resolution of prior year tax issue. . . . . . - 2 -
State income tax, net of federal income
tax benefit . . . . . . . . . . . . . . . . (5) (4) (5)
Dividends received deduction. . . . . . . . . 2 2 2
Other . . . . . . . . . . . . . . . . . . . . - - 1
---- ---- ----
Statutory federal income tax rate . . . . . . 35% 35% 35%
---- ---- ----
---- ---- ----
</TABLE>
(15) INVENTORIES:
Inventories include the following amounts as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Materials and supplies, at average cost. . . $ 27,442 $ 31,688
Coal stocks, at average cost . . . . . . . . 32,163 26,878
Fuel oil, at average cost. . . . . . . . . . 1,523 1,907
Gas in storage, at LIFO cost . . . . . . . . 21,883 30,347
Other. . . . . . . . . . . . . . . . . . . . 2,224 1,428
--------- ---------
Total. . . . . . . . . . . . . . . . . . . . $ 85,235 $ 92,248
--------- ---------
--------- ---------
</TABLE>
At December 31, 1995 prices, the current cost of gas in storage was
$31.4 million.
(16) OTHER INFORMATION:
The Company has completed a merger-related restructuring plan during
1995. Other operating expenses in the Consolidated Statements of Income for
1995 includes $33.4 million related to the restructuring plan.
Non-Operating - Other, Net, as shown on the Consolidated Statements of
Income includes the following for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Allowance for equity funds used
during construction . . . . . . . . . . . . . $ 481 $ 452 $ -
Gain on sale of assets, net. . . . . . . . . . 8,570 4,468 20,164
Income (loss) from equity method investments . (312) 2,712 2,073
Energy efficiency carrying charges . . . . . . 3,092 1,681 1,172
Merger costs . . . . . . . . . . . . . . . . . (4,624) (4,510) -
Other-than-temporary declines in value
of investments and other assets . . . . . . . (17,971) (1,791) (2,939)
Other. . . . . . . . . . . . . . . . . . . . . 297 1,304 372
--------- ---------- --------
Total. . . . . . . . . . . . . . . . . . . . . $(10,467) $ 4,316 $ 20,842
--------- ---------- --------
--------- ---------- --------
</TABLE>
-26-
<PAGE>
(17) HOLDING COMPANY PROPOSAL
The Company's Board of Directors has approved the formation of a
holding company for MidAmerican's organizational structure. The holding company
would have two wholly owned subsidiaries consisting of MidAmerican (utility
operations) and InterCoast. Consummation of the holding company structure is
subject to approval by holders of a majority of the outstanding shares of the
Company's common stock. In addition, certain orders must be received from the
ICC, IUB, FERC, and the Nuclear Regulatory Commission. Subject to such
approvals, each share of MidAmerican common stock will be exchanged for one
share of the holding company's stock. It is management's intent, if possible,
to complete the formation of the holding company and share exchange by the end
of 1996.
(18) UNAUDITED QUARTERLY OPERATING RESULTS:
<TABLE>
<CAPTION>
1995 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues . . . . . . . . . . $461,422 $371,712 $434,623 $455,887
Operating income . . . . . . . . . . . 78,841 56,312 99,887 66,092
Income from continuing operations. . . 37,577 26,674 37,457 28,698
Income (loss) from discontinued
operations . . . . . . . . . . . . . - 516 - (99)
Earnings on common stock . . . . . . . 35,296 24,908 35,780 26,780
Earnings per average common share:
Income from continuing operations. . $ 0.35 $ 0.24 $ 0.36 $ 0.27
Income (loss) from discontinued
operations . . . . . . . . . . . . - 0.01 - -
-------- -------- -------- --------
Earnings per average common share. . . $ 0.35 $ 0.25 $ 0.36 $ 0.27
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
1994 1st Quarter 2nd Quarter 3rd Quarter* 4th Quarter
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues . . . . . . . . . . $ 529,422 $ 368,126 $ 382,492 $ 410,870
Operating income . . . . . . . . . . . 86,855 55,949 85,570 45,232
Income from continuing operations. . . 47,468 24,748 42,125 22,044
Loss from discontinued operations. . . (759) (603) (4,236) (47)
Earnings on common stock . . . . . . . 44,136 21,571 35,315 19,167
Earnings per average common share:
Income from continuing operations . $ 0.46 $ 0.23 $ 0.40 $ 0.19
Loss from discontinued operations . (0.01) (0.01) (0.04) -
-------- -------- -------- --------
Earnings per average common share. . . $ 0.45 $ 0.22 $ 0.36 $ 0.19
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
* Includes the estimated loss on the disposal of the construction
subsidiaries.
The quarterly data reflect seasonal variations common in the utility industry.
-27-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of MidAmerican Energy Company and
Subsidiaries:
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of MidAmerican Energy Company (an Iowa
corporation) and subsidiaries, as of December 31, 1995 and 1994, and the related
consolidated statements of income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the 1994 and 1993 financial statements of Iowa-
Illinois Gas and Electric Company, one of the companies merged in 1995 to form
MidAmerican Energy Company in a transaction accounted for as a pooling-of-
interests, as discussed in Note (1)(a). Such statements are included in the
consolidated financial statements of MidAmerican Energy Company and subsidiaries
and reflect total assets constituting 42% in 1994 and total revenues
constituting 36% in 1994 and 1993, of the related consolidated totals. These
statements were audited by other auditors whose report has been furnished to us
and our opinion, insofar as it relates to the amounts included for Iowa-Illinois
Gas and Electric Company, is based solely upon the report of the other auditors.
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, based on our report and the report of the other
auditors, the financial statements referred to above present fairly, in all
material respects, the financial position of MidAmerican Energy Company and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Chicago, Illinois
January 26, 1996
-28-
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the preparation of all information contained in
this Annual Report, including the financial statements. The statements and
related financial information have been prepared in conformity with generally
accepted accounting principles. In the opinion of management, the financial
position, results of operation and cash flows of the Company are reflected
fairly in the statements. The statements have been audited by the Company's
independent public accountants, Arthur Andersen LLP.
The Company maintains a system of internal controls which is designed to
provide reasonable assurance, on a cost effective basis, that transactions are
executed in accordance with management's authorization, the financial statements
are reliable and the Company's assets are properly accounted for and
safeguarded. The Company's internal auditors continually evaluate and test the
system of internal controls and actions are taken when opportunities for
improvement are identified. Management believes that the system of internal
controls is effective.
The Audit Committee of the Board of Directors, the members of which are
directors who are not employees of the Company, meets regularly with management,
the internal auditors and Arthur Andersen LLP to discuss accounting, auditing,
internal control and financial reporting matters. The Company's independent
public accountants are appointed annually by the Board of Directors on
recommendation of the Audit Committee. The internal auditors and Arthur
Andersen LLP each have full access to the Audit Committee, without management
representatives present.
/s/ Stanley J. Bright
President,
Office of the Chief Executive Officer
/s/ Lance E. Cooper
Group Vice President
Finance and Accounting
-29-
<PAGE>
EXHIBIT 13.3
FIVE-YEAR FINANCIAL STATISTICS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings per average common share --
Continuing operations:
Utility operations $ 1.24 $ 1.12 $ 1.29 $ 0.82 $ 1.33
Nonregulated activities (.02) 0.16 0.14 0.01 (.01)
Discontinued operations - (0.06) (0.04) 0.01 -
------- ------- ------- ------- -------
Earnings per average common share $ 1.22 $ 1.22 $ 1.39 $ 0.84 $ 1.32
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Return on average common equity (%) 10.1 10.1 11.6 7.1 11.2
Cash dividends declared per common share $ 1.18 $ 1.17 $ 1.17 $ 1.28 $ 1.38
Common dividend payout ratio (%) 97 96 84 152 105
Ratio of earnings to fixed charges
Consolidated 2.8 2.8 2.9 1.9 2.5
Utility only 3.4 3.3 3.4 2.3 2.9
Ratio of earnings to fixed charges and
Cooper Nuclear Station debt service
Consolidated 2.7 2.7 2.8 1.9 2.4
Utility only 3.3 3.2 3.3 2.2 2.8
Capitalization ratios % --
Common shareholders' equity 44.3 43.9 44.0 43.8 42.9
Preferred shares, not subject to
mandatory redemption 3.2 3.3 4.1 2.8 2.8
Preferred shares, subject to
mandatory redemption 1.8 1.8 1.9 1.8 3.0
Long-term debt (excluding
current portion) 50.7 51.0 50.0 51.6 51.3
Book value per common share at year-end $ 12.17 $ 12.08 $ 12.07 $ 11.86 $ 12.12
Quarterly earnings per average common
share outstanding --
1st quarter $ 0.35 $ 0.45 $ 0.44 $ 0.28 $ 0.36
2nd quarter 0.25 0.22 0.22 0.13 0.27
3rd quarter 0.36 0.36 0.52 0.26 0.47
4th quarter 0.27 0.19 0.20 0.17 0.22
Number of fulltime employees --
Utility 3,331 4,077 4,196 4,305 4,370
Nonregulated 271 274 347 200 140
Utility construction expenditures $190,771 $211,669 $215,081 $188,344 $177,061
Net cash from utility operations less
dividends as a % of construction 134 121 103 71 100
</TABLE>
COMMON STOCK DIVIDENDS AND PRICES
<TABLE>
<CAPTION>
Price Range
----------------------------------------------------------
Dividends Declared MidAmerican Iowa-Illinois Resources
------------------------- ----------------- ------------------ -----------------
MEC IWG MWR High Low High Low High Low
------- ------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995
4th Quarter $ 0.30 $ - $ - $17 1/8 $15 $ - $ - $ - $ -
3rd Quarter 0.30 - - 15 5/8 13 5/8 - - - -
2nd Quarter - 0.4325 0.29 - - 22 19 7/8 15 13 5/8
1st Quarter - 0.4325 0.29 - - 22 1/8 19 14 5/8 13 3/8
1994
4th Quarter $ - $0.4325 $0.29 - - $20 5/8 $18 7/8 $14 1/2 $12 7/8
3rd Quarter - 0.4325 0.29 - - 22 1/2 19 1/4 15 3/8 13 1/2
2nd Quarter - 0.4325 0.29 - - 24 1/2 19 7/8 16 3/4 13 7/8
1st Quarter - 0.4325 0.29 - - 24 3/4 22 3/8 18 16
</TABLE>
-1-
<PAGE>
MIDAMERICAN ENERGY COMPANY
FIVE-YEAR CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric utility $1,094,647 $1,021,660 $1,002,970 $ 936,027 $ 968,799
Gas utility 459,588 492,015 538,989 484,687 473,251
Nonregulated 169,409 177,235 140,976 70,344 46,513
---------- --------- --------- --------- ---------
1,723,644 1,690,910 1,682,935 1,491,058 1,488,563
---------- --------- --------- --------- ---------
OPERATING EXPENSES
Utility:
Cost of fuel, energy and
Capacity 230,261 213,987 217,385 211,924 212,647
Cost of gas sold 279,025 326,782 366,049 326,097 323,113
Other operating expenses (2) 399,648 354,190 340,720 329,911 306,508
Maintenance 85,363 101,275 101,601 93,769 91,548
Depreciation and amortization 158,950 154,229 150,822 144,646 135,062
Property and other taxes 96,350 94,990 93,238 97,479 94,872
---------- --------- --------- --------- ---------
1,249,597 1,245,453 1,269,815 1,203,826 1,163,750
Nonregulated (2) 172,915 171,851 132,224 69,522 46,692
---------- --------- --------- --------- ---------
1,422,512 1,417,304 1,402,039 1,273,348 1,210,442
---------- --------- --------- --------- ---------
OPERATING INCOME 301,132 273,606 280,896 217,710 278,121
---------- --------- --------- --------- ---------
NON-OPERATING INCOME (3) 11,660 33,372 52,163 15,656 28,023
---------- --------- --------- --------- ---------
INTEREST CHARGES
Interest on long-term debt 110,505 105,753 111,065 114,732 106,538
Other interest expense 9,449 6,446 5,066 5,899 16,380
Allowance for borrowed funds (5,552) (3,955) (2,186) (2,162) (4,347)
---------- --------- --------- --------- ---------
114,402 108,244 113,945 118,469 118,571
---------- --------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 198,390 198,734 219,114 114,897 187,573
INCOME TAXES 67,984 62,349 71,409 26,812 59,604
---------- --------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS 130,406 136,385 147,705 88,085 127,969
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS
(net of income taxes) (4) 417 (5,645) (3,854) 794 203
---------- --------- --------- --------- ---------
NET INCOME 130,823 130,740 143,851 88,879 128,172
PREFERRED DIVIDENDS 8,059 10,551 8,367 8,735 9,708
---------- --------- --------- --------- ---------
EARNINGS ON COMMON STOCK $ 122,764 $ 120,189 $ 135,484 $ 80,144 $ 118,464
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
AVERAGE COMMON SHARES
OUTSTANDING 100,401 98,531 97,762 95,430 89,844
EARNINGS PER COMMON SHARE $ 1.22 $ 1.22 $ 1.39 $ 0.84 $ 1.32
</TABLE>
(1) The Company was formed on July 1, 1995, through a merger, as discussed
in Note (1)(a) of Notes to Consolidated Financial Statements (Notes).
All data on this statement reflect the pooled amounts of the
predecessor companies. Non-Operating income includes $4.5 million and
$4.6 million of merger-related costs in 1994 and 1995, respectively.
(2) Utility other operating expenses include $31.9 million of costs related
to a restructuring and work force reduction plan implemented and
completed in 1995. In addition, nonregulated other expenses for 1995
includes $1.5 million of related costs.
(3) During 1995, the Company recorded approximately $18 million of expense
for the write-down of certain nonregulated assets. In 1993, the Company
recorded an $18.5 million pre-tax gain on the exchange of natural gas
service territory. The exchange resulted in a decrease of
approximately 33,000 natural gas customers.
(4) In 1994 the Company announced its intent to divest its construction
subsidiaries. Refer to Note (9) of Notes.
-2-
<PAGE>
MIDAMERICAN ENERGY COMPANY
FIVE-YEAR CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ---------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
UTILITY PLANT
Electric $3,881,699 $3,765,004 $3,642,415 $3,534,703 $3,455,061
Gas 695,741 663,792 639,276 628,856 575,113
---------- ---------- ---------- ---------- ----------
4,577,440 4,428,796 4,281,691 4,163,559 4,030,174
Less accumulated depreciation and amortization 2,027,055 1,885,870 1,801,668 1,680,033 1,572,946
---------- ---------- ---------- ---------- ----------
2,550,385 2,542,926 2,480,023 2,483,526 2,457,228
Construction work in progress 104,164 101,252 111,726 67,664 51,176
---------- ---------- ---------- ---------- ----------
Total 2,654,549 2,644,178 2,591,749 2,551,190 2,508,404
---------- ---------- ---------- ---------- ----------
POWER PURCHASE CONTRACT 212,148 221,998 248,643 243,146 248,949
---------- ---------- ---------- ---------- ----------
INVESTMENT IN DISCONTINUED OPERATIONS - 15,249 22,206 23,686 23,854
---------- ---------- ---------- ---------- ----------
CURRENT ASSETS
Cash and cash equivalents 41,216 33,778 24,289 25,079 30,384
Receivables, less reserves 261,105 212,902 226,054 225,566 205,440
Inventories 85,235 92,248 100,675 98,608 91,753
Other 22,252 19,035 24,911 26,182 20,277
---------- ---------- ---------- ---------- ----------
409,808 357,963 375,929 375,435 347,854
---------- ---------- ---------- ---------- ----------
INVESTMENTS 826,496 752,428 760,308 727,929 673,789
---------- ---------- ---------- ---------- ----------
OTHER ASSETS 420,520 423,958 372,426 192,630 107,819
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS $4,523,521 $4,415,774 $4,371,261 $4,114,016 $3,910,669
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity $1,225,715 $1,204,112 $1,180,510 1,159,676 1,128,858
Preferred shares, not subject to mandatory redemption 89,945 89,955 109,871 74,242 74,291
Preferred shares, subject to mandatory redemption 50,000 50,000 50,000 48,625 79,200
Long-term debt 1,403,322 1,398,255 1,341,003 1,368,784 1,351,385
---------- ---------- ---------- ---------- ----------
2,768,982 2,742,322 2,681,384 2,651,327 2,633,734
---------- ---------- ---------- ---------- ----------
CURRENT LIABILITIES
Notes payable 184,800 124,500 173,035 120,244 67,629
Current portion of long-term debt 65,295 72,872 66,371 32,952 10,991
Current portion of power purchase contract 13,029 12,080 10,830 8,065 8,948
Accounts payable 142,759 110,175 129,504 115,763 117,573
Taxes accrued 81,898 91,653 110,923 101,585 101,879
Interest accrued 30,635 30,659 31,021 31,395 31,678
Other 57,000 54,473 52,237 53,563 39,378
---------- ---------- ---------- ---------- ----------
575,416 496,412 573,921 463,567 378,076
---------- ---------- ---------- ---------- ----------
OTHER LIABILITES
Power purchase contract 112,700 125,729 140,655 138,085 141,890
Deferred income taxes 746,574 725,665 670,288 596,144 525,056
Investment tax credit 95,041 100,871 106,729 113,846 119,989
Other 224,808 224,775 198,284 151,047 111,924
---------- ---------- ---------- ---------- ----------
1,179,123 1,177,040 1,115,956 999,122 898,859
---------- ---------- ---------- ---------- ----------
TOTAL CAPITALIZATION
AND LIABILITIES $4,523,521 $4,415,774 $4,371,261 $4,114,016 $3,910,669
---------- ----------- ---------- ---------- ----------
---------- ----------- ---------- ---------- ----------
</TABLE>
-3-
<PAGE>
Exhibit 21
SUBSIDIARIES OF MIDAMERICAN ENERGY COMPANY
AS OF DECEMBER 31, 1995
Jurisdiction
Subsidiary of Incorporation
- ---------- ----------------
InterCoast Energy Company Delaware
Midwest Capital Group, Inc. Iowa
InterCoast Capital Company Delaware
Medallion Production Company Delaware
As of the end of the year covered by this report, MidAmerican Energy Company's
other subsidiaries, considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary as defined in Rule 1-02(w) of
Regulation S-X.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included or incorporated by reference in this Form 10-K, into
MidAmerican Energy Company's previously filed Registration Statements, File
No.'s 2-85102, 33-60549, 33-60849, and 33-60851.
Chicago, Illinois /s/ ARTHUR ANDERSEN LLP
March 8, 1996
<PAGE>
DELOITTE & TOUCHE LLP Northwest Bank Building
101 West Second Street
Davenport, IA 52801-1813
319-322-4415
CONSENT OF INDEPENDENT AUDITORS
MidAmerican Energy Company:
We consent to the incorporation by reference in Registration Statement
File No.'s 2-85102, 33-60549, 33-60849 and 33-60851 of our reports dated
January 25, 1995, covering the consolidated balance sheet and statement of
capitalization of Iowa-Illinois Gas and Electric Company and subsidiary
as of December 31, 1994, and the related statements of income, retained
earnings and cash flows for the years ended December 31, 1994 and 1993,
and the schedule listed in Item 14(a)2 as of December 31, 1994 and 1993 and
for each of the two years in the period ended December 31, 1994, appearing in
MidAmerican Energy Company's Form 10-K for the year ended December 31, 1995.
It should be noted that we have not audited any financial statements of
Iowa-Illinois Gas and Electric Company and subsidiary subsequent to
December 31, 1994, or performed any audit procedures subsequent to the date of
our report.
/s/ DELOITTE & TOUCHE LLP
March 8, 1996
