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
For the fiscal year ended DECEMBER 31, 1996
-----------------
or
[ ] Transition Report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the transition period from to
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Commission Registrant State of Incorporation IRS Employer
File Number Address and Telephone Number Identification No.
- - ----------- ---------------------------- ------------------
1-12459 MIDAMERICAN ENERGY HOLDINGS COMPANY 42-1451822
(An Iowa Corporation)
666 GRAND AVE. PO BOX 657
DES MOINES, IOWA 50303
515-242-4300
1-11505 MIDAMERICAN ENERGY COMPANY 42-1425214
(An Iowa Corporation)
666 GRAND AVE. PO BOX 657
DES MOINES, IOWA 50303
515-242-4300
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Registrant Title of Each Class On which Registered
- - ---------- ------------------- -------------------
MidAmerican Energy
Holdings Company Common Stock, no par value New York Stock Exchange
MidAmerican Energy 7.98% MidAmerican Energy Company
Company Olbigated Preferred Securities New York Stock Exchange
of Subsidiary Trust
Securities registered pursuant to Section 12(g) of the Act:
MidAmerican Energy Preferred Stock, $3.30 Series, no par value
Company 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
- - -------------------------------------------------------------------------------
Registrant Title of each Class
<PAGE>
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X* No
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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 registrants' 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 MidAmerican
Energy Holdings Company (Holdings) was $1,668,169,740 as of February 21, 1997,
when 100,751,713 shares of common stock, without par value, were outstanding.
The aggregate market value of voting stock held by non-affiliates of MidAmerican
Energy Company was $0 as of February 21, 1997, when 100,751,713 shares of common
stock, without par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
A portion of Holding's Proxy Statement relating to its 1997 Annual Meeting of
Shareholders is incorporated by reference in Part III hereof.
* MidAmerican Energy Holdings Company (Holdings) became the parent holding
company for MidAmerican Energy Company (MidAmerican) pursuant to a statutory
share exchange. The effective date of the share exchange was December 1, 1996,
and prior to such effective date, Holdings had no assets or operations. Prior to
such effective date, MidAmerican 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 HOLDINGS COMPANY
AND
MIDAMERICAN ENERGY COMPANY
1996 Annual Report on Form 10-K
This combined Form 10-K is separately filed by MidAmerican Energy Holdings
Company (Holdings or the Company) and MidAmerican Energy Company (MidAmerican or
the Utility). Information herein relating to each individual registrant is filed
by such registrant on its own behalf. Accordingly, except for its subsidiary,
MidAmerican makes no representation as to information relating to any other
subsidiary of Holdings.
TABLE OF CONTENTS
Part I
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Page
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Item 1 Business
General Development of Business........................... 7
Financial Information About Industry Segments............. 7
Narrative Description of Business......................... 8
Business of MidAmerican................................. 8
Rate Matters.......................................... 9
Electric Operations .................................. 11
Natural Gas Operations................................ 13
Construction Program.................................. 14
General Utility Regulation............................ 15
Nuclear Regulation.................................... 16
Environmental Regulations............................. 17
Business of MidAmerican Capital Company................. 18
Business of Midwest Capital Group....................... 19
Item 2 Properties.................................................. 19
Item 3 Legal Proceedings........................................... 21
Item 4 Submission of Matters to a Vote of Security Holders......... 21
Other Information
Executive Officers of the Registrant........................ 22
Business Transaction Policy Statement....................... 22
Part II
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Item 5 Market for the Registrant's Common Equity and
Related Stockholder Matters................................. 23
Item 6 Selected Financial Data..................................... 23
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 23
Item 8 Financial Statements and Supplementary Data................. 23
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................... 23
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Part III
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Item 10 Directors and Executive Officers of the Registrant......... 24
Item 11 Executive Compensation..................................... 25
Item 12 Security Ownership of Certain Beneficial Owners
and Management........................................... 26
Item 13 Certain Relationships and Related Transactions............. 27
Part IV
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Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K...................................... 28
Signatures.......................................................... 101
Exhibits Index...................................................... 104
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DEFINITIONS
The following terms are used in this document with the following meanings:
TERM MEANING
AFUDC Allowance for funds used during construction
ANR ANR Pipeline Company
Bcf Billion cubic feet
Btu British Thermal Unit, the quantity of heat required to
raise the temperature of one pound of water one degree
Fahrenheit
CAA Clean Air Act Amendments of 1990
Coalition Illinois Coalition for Responsible Electricity
ComEd Commonwealth Edison Company
Company MidAmerican Energy Holdings Company
Cooper Cooper Nuclear Station
DOE United States Department of Energy
EMFs Electric and magnetic fields
Energy Services InterCoast Energy Marketing and Services Company
EAC Energy Adjustment Clause
EPAct Energy Policy Act
EPA United States Environmental Protection Agency
Exchange Act Securities Exchange Act of 1934, as amended
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Holdings MidAmerican Energy Holdings Company
ICC Illinois Commerce Commission
InterCoast InterCoast Energy Company
InterCoast Capital InterCoast Capital Company
Iowa-Illinois Iowa-Illinois Gas and Electric Company
IPM InterCoast Power Marketing Company
IPO Initial public offering
IUB Iowa Utilities Board
KCS KCS Energy Inc.
KW Kilowatt, a thousand watts
KWH Kilowatt-hour, one thousand watts used for one hour
LDC Local distribution company
LES Lincoln Electric System
MAAP Mid-Continent Area Power Pool
Mcf One thousand cubic feet
McLeod McLeod, Inc.
MD&A Management's Discussion and Analysis of Financial
Condition and Results of Operations
MidAmerican MidAmerican Energy Company, a wholly-owned subsidiary
of Holdings
MidAmerican Capital MidAmerican Capital Company, a wholly-owned subsidiary
of Holdings
Midwest Capital Midwest Capital Group, Inc., a wholly-owned subsidiary
of Holdings
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Midwest Midwest Power Systems Inc.
Midwest Resources Midwest Resources Inc.
MGP Manufactured gas plant
MMcf One million cubic feet
MW Megawatts, a million watts
NGPL Natural Gas Pipeline Company of America
NNG Northern Natural Gas
NPDES National Pollutant Discharge Elimination System
NPPD Nebraska Public Power District
NRC Nuclear Regulatory Commission
NWPA Nuclear Waste Policy Act of 1982
OASIS Open Access Same Time Information System
OCA Iowa Office of Consumer Advocate
OPEB Other postretirement employee benefits
Order 636 or Orders FERC Order 636 and related orders
PCBs Polychlorinated biphenyls
PGA Purchase gas adjustment clause
PRPs Potentially responsible parties
Rail Services InterCoast Rail Services and Investments
SDPUC South Dakota Public Utilities Commission
SFAS Statement of Financial Accounting Standards
Utility MidAmerican Energy Company
Quad Cities Station Quad Cites Nuclear Power Station
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PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
Holdings is an exempt public utility holding company and an Iowa
corporation. Effective December 1, 1996, it became the parent company of
MidAmerican, MidAmerican Capital and Midwest Capital pursuant to a share
exchange between MidAmerican and the Company. Prior to the effective date of the
exchange, MidAmerican Captial and Midwest Capital were direct subsidiaries of
MidAmerican. MidAmerican is a public utility and accounts for the predominant
part of the Company's assets and earnings. MidAmerican Capital and Midwest
Capital are the first-tier, nonregulated subsidiaries of the Company.
MidAmerican was formed on July 1, 1995, through the merger of Iowa-
Illinois, Midwest Resources and Midwest. The merger was accounted for as a
pooling-of-interests. MidAmerican Capital (then InterCoast Energy Company) was a
wholly owned nonregulated subsidiary of Iowa-Illinois. Midwest Resources was an
exempt public utility holding company with two wholly owned subsidiaries:
Midwest and Midwest Capital.
MidAmerican is primarily engaged in the business of generating,
transmitting, distributing and selling electric energy and in distributing,
selling and transporting natural gas. Midwest Capital functions as a regional
business development company in the utility service territory.
MidAmerican Capital engages primarily in nonregulated energy and
complementary services-related businesses. During 1996, the Company changed the
name of its nonregulated subsidiary, InterCoast Energy Company, to MidAmerican
Capital Company. As part of the restructuring of that subsidiary, the Company
formed a new subsidiary under MidAmerican Capital, named InterCoast Energy
Company (InterCoast). The new InterCoast had as its subsidiaries the Company's
wholesale nonregulated energy companies, including oil and gas exploration and
development operations. MidAmerican Capital retained as direct subsidiaries the
rail service businesses, the marketable securities and passive investment
activities, and a nonregulated retail natural gas subsidiary.
During the third quarter of 1996, the Company discontinued its oil and gas
exploration and development operations as well as a subsidiary that developed
and operates a computerized information system that facilitates real-time
exchange of power in the electric industry. The Company sold its oil and gas
exploration and development subsidiary and expects to sell the computer
information system subsidiary in 1997.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information on the Company's and MidAmerican's segments of
business is included under the respective Notes titled "Segment Information" in
Notes to Consolidated Financial Statements included in Part IV, Item 14 of this
Form 10-K.
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(C) NARRATIVE DESCRIPTION OF BUSINESS
BUSINESS OF MIDAMERICAN
MidAmerican 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.
MidAmerican 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.
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 MidAmerican's utility service territory is
approximately 1.7 million. As of December 31, 1996, MidAmerican had 642,000
retail electric customers and 610,000 natural gas customers.
MidAmerican 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 its total 1996 electric
operating revenues or 4.0% (food and kindred products industry) of its total
1996 gas operating margin. Among the primary industries served by MidAmerican
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, 1996, gross operating revenues from utility
operations represented 87% of the Company's total gross operating revenues. For
1995 and 1994, 94% and 93%, respectively, of gross operating revenues were from
utility operations.
For the year ended December 31, 1996, the Company derived approximately 59%
of its gross operating revenues from its electric business and 28% from its gas
business. For 1995 and 1994, the corresponding percentages were 66% electric and
28% gas, and 63% electric and 30% 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
electric sales are shown below:
Total Electric Sales
By Customer Class
1996 1995 1994
----- ----- -----
Residential 21.1% 23.2% 24.7%
Small General Service 16.2 19.1 22.3
Large General Service 27.6 26.1 28.0
Other 4.5 4.7 5.2
Sales for Resale 30.6 26.9 19.8
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
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Retail Electric Sales
By State
1996 1995 1994
----- ----- -----
Iowa 88.7% 88.4% 88.6%
Illinois 10.6 11.0 10.9
South Dakota 0.7 0.6 0.5
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
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
1996 1995 1994
----- ----- -----
Residential 61.1% 57.3% 55.3%
Small General Service 33.3 32.9 33.0
Large General Service 4.6 6.2 8.4
Sales for Resale and Other 1.0 3.6 3.3
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
Retail Gas Sales
By State
1996 1995 1994
----- ----- -----
Iowa 78.0% 77.1% 76.6%
Illinois 11.0 11.6 11.9
South Dakota 10.3 10.6 10.8
Other 0.7 0.7 0.7
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
There are seasonal variations in MidAmerican's electric and gas businesses
which are principally related to the use of energy for air conditioning and
heating. In 1996, 38% of MidAmerican's electric revenues were reported in the
months of June, July, August and September, reflecting the use of electricity
for cooling, and 53% of MidAmerican's gas revenues were reported in the months
of January, February, March and December, reflecting the use of gas for heating.
At December 31, 1996, MidAmerican had 3,370 full-time employees.
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
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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 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 MidAmerican 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 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 MidAmerican's current rate proceedings is
included in Notes to Consolidated Financial Statements in Part IV, Item 14, of
this Form 10-K.
In April 1992, the FERC issued Order No. 636, directing a restructuring by
interstate pipeline companies of their natural gas sales and transportation
services. Under the FERC Order, transitional gas supply realignment costs
related to this restructuring may be billed by interstate pipelines to their
customers. At December 31, 1996, MidAmerican had a regulatory asset of $25
million, with an offsetting non-current Other Liability, recorded for transition
costs. In addition, MidAmerican estimates it may incur other future billings of
approximately $8 million related to such restructuring. MidAmerican is currently
recovering such costs through rates.
MidAmerican has established an external trust for the investment of funds
collected for nuclear decommissioning associated with Quad Cities Station of
which MidAmerican is a 25% owner. The owner and operator of Cooper, from which
MidAmerican purchases 50% of the output pursuant to a long-term agreement,
maintains a decommissioning fund into which MidAmerican makes contributions as a
component of its power purchase payments. Electric tariffs in effect for 1996
include provisions for annual decommissioning costs at Quad Cities Station and
Cooper of approximately $18.5 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.
MidAmerican's Iowa electric tariffs contain a Uniform Electric Energy
Adjustment Clause under which MidAmerican'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 MidAmerican are reflected in
its Iowa gas rates through the Iowa Uniform Purchased Gas Adjustment Clause. A
discussion of a proposed Iowa rate settlement that would impact the electric
adjustment clause is included in the "Rate Matters" Note in Notes to
Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K.
Under Illinois electric tariffs, MidAmerican's Fuel Cost Adjustment Clause
reflects changes in the cost of all fuels used for electric generation,
including certain 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
MidAmerican are reflected in its Illinois gas rates through the Illinois Uniform
Purchased Gas Adjustment Clause.
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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 1996 was 3,537 MW, which was 16 MW less than MidAmerican's record
hourly peak of 3,553 MW set in 1995.
MidAmerican is interconnected with certain Iowa and neighboring utilities
and is involved in an electric power pooling agreement known as 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.
The EPAct was enacted in 1992 to promote competition in the wholesale
electric market. In April 1996, the FERC issued final rules (Orders 888 and 889)
to direct the implementation of EPAct. In general, Orders 888 and 889 require
public utilities and other transmission providers and users to provide other
companies the same transmission access, service and pricing that they provide
themselves. In compliance with Order 888, which was effective July 9, 1996,
MidAmerican has filed a pro forma open access transmission tariff and is
currently operating under it. In accordance with Order 889, which was effective
January 3, 1997, MidAmerican has separated its electric wholesale marketing and
transmission operation functions. Order 889 establishes standards of conduct for
this functional separation and further requires transmission providers such as
MidAmerican to either create or participate in an Open Access Same Time
Information System (OASIS). MidAmerican has elected to participate in the MAPP
OASIS. These developments assure that all transmission customers of MidAmerican,
including MidAmerican's own wholesale marketing function, can obtain
transmission information at the same time and can request service on the same
basis.
The IUB initiated a formal inquiry proceeding (Notice of Inquiry, Docket
No. NOI-95-1) in 1995, titled "Emerging Competition in the Electric Utility
Industry," primarily as an information gathering device. Since early in 1995,
meetings were held with a variety of interested parties, and the IUB established
an advisory panel of which MidAmerican was a member. The IUB staff authored a
report on the findings and potential options for restructuring in December 1996.
The IUB accepted the report of its staff, as well as other information submitted
in the case and closed the docket. The IUB has not determined its future course
of action. No legislation has yet been introduced in Iowa to allow generation or
retail service competition. 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)
in Part IV, Item 14 of this Form 10-K.
MidAmerican's accredited 1996 summer net generating capacity was 4,301
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.
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Fuel Supply for Electric Operations
MidAmerican's sources of fuel for electric generation were as follows for
the periods shown:
Year Ended December 31,
1996 1995 1994
----- ----- -----
Fuel Source:
Coal 75.6% 77.6% 83.4%
Nuclear 23.9 21.6 15.7
Gas 0.4 0.7 0.7
Oil 0.1 0.1 0.2
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
The average costs of fuels received (including transportation and handling
costs) were as follows for the periods shown:
Year Ended December 31,
1996 1995 1994
------ ------ ------
(Cents per million BTUs consumed)
Fuel Source:
Nuclear 44.85 44.19 47.08
Coal 92.45 95.14 95.90
Gas 318.80 226.92 297.08
Oil 412.13 422.80 422.13
Total Weighted Average 88.74 90.21 90.96
The average cost of coal received (including transportation) per ton for
the years 1996, 1995 and 1994 has been $15.18, $15.61 and $15.67, respectively.
MidAmerican has contracts with rail shippers providing for the delivery of
coal to its generating stations. In addition, MidAmerican has used spot market
purchases of coal to effectively manage inventory levels and take advantage of
near-term coal market opportunities. MidAmerican is continuing to satisfy its
coal requirements with a combination of contract and spot purchases. MidAmerican
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 MidAmerican's needs.
MidAmerican is a 25% joint owner of Quad Cities Station. MidAmerican 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 1997 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.
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MidAmerican purchases one-half of the power and energy of Cooper through a
long-term power purchase contract with 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 MidAmerican
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 NWPA, the 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 are being financed by fees charged
to owners and generators of the waste. ComEd has informed MidAmerican that there
is on-site storage capability at the Quad Cities Station sufficient to permit
such interim storage at least through 2008. NPPD has informed MidAmerican 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 has complete responsibility for natural gas procurement,
transportation and storage, a responsibility which had previously resided with
the interstate pipeline suppliers. These Orders directly impact the operations,
revenues and costs of LDCs, including MidAmerican, and create new opportunities.
MidAmerican has firm rights to pipeline capacity to transport gas from the
production area to its service territory. With the restructuring of the
industry, if MidAmerican does not need the capacity (due to fluctuations in
anticipated system demand), it can resell such capacity to other companies. To
provide incentives for the achievement of optimum use of available
transportation capacity, past IUB rulings have allowed MidAmerican to retain 30%
of Iowa margins earned on the resold capacity and return 70% to customers
through the purchased gas adjustment.
Information on the impact of FERC Order 636 is included in the "Operating
Activities and Other Matters" section of MD&A in Part IV, Item 14 of this Form
10-K.
Fuel Supply and Capacity
MidAmerican 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 NNG, NGPL and ANR systems. To insure system reliability, a
geographically diverse supply portfolio with varying terms and conditions is
utilized for the gas supplies.
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MidAmerican 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 typically replaced during the summer months. In addition, MidAmerican also
utilizes three liquefied natural gas plants and two propane-air peak shaving
plants to meet peak day demands.
On February 2, 1996, MidAmerican had its highest peak-day delivery of
1,143,026 MMBtus. This peak-day delivery included approximately 88.4% from
traditional sales service customers and 11.6% from customer owned gas
transported through MidAmerican's system. MidAmerican's 1996/97 winter heating
season peak-day delivery of 1,093,503 MMBtus was reached on January 10, 1997.
This peak-day delivery included approximately 81.5% from traditional sales
service customers and 18.5% from customer owned gas transported through
MidAmerican's system. The supply sources utilized by MidAmerican to meet its
peak-day deliveries to its sales service customers were:
Thousands Percent
of of
MMBtus Total
------- -------
Underground Storage 320.2 35.9
Firm Supply 476.1 53.4
LNG Facilities 80.8 9.1
LP Facilities 14.0 1.6
------ -----
Total 891.1 100.0
===== =====
MidAmerican does not anticipate difficulties in meeting its future demands
through the use of its supply portfolio and pipeline interconnections for the
foreseeable future.
CONSTRUCTION PROGRAM
The table below shows actual utility capital expenditures for 1996 and
budgeted utility expenditures for 1997 and for the period 1998 - 2001.
1996 1997 1998-2001
Actual Budgeted Budgeted
-------- -------- ---------
(Thousands of Dollars)
Electric Property
Production $ 27,770 $ 37,316 $108,385
Transmission 23,435 32,670 89,257
Distribution 34,416 34,402 162,939
Gas 33,257 31,916 131,000
Administration and Other 15,955 44,032 60,686
-------- -------- --------
Subtotal 134,833 180,336 552,267
Quad Cities Fuel 12,249 10,473 50,079
Cooper Additions 7,116 8,844 37,584
-------- -------- --------
Total $154,198 $199,653 $639,930
======== ======== ========
The amounts shown above include allowance for funds used during
construction. Of the $145.7 million of budgeted electric production expenditures
for the 1997-2001 period, $38.1 million are for expenditures at the
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Quad Cities Station. Also included in the amounts above, are capital
expenditures required to maintain compliance with the CAA. See "Environmental
Regulations" under this Item for additional information. In addition to the
amounts shown above, the Company also expects to contribute a total of
approximately $50 million to external trusts for Quad Cities nuclear
decommissioning during the 1997-2001 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.
MidAmerican 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. MidAmerican 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.
While MidAmerican's electricity prices are presently based on traditional
cost of service ratemaking, a number of initiatives are in progress that could
change that framework. In Illinois legislation has been introduced that would
restructure the industry and allow Illinois customers to choose their electric
supplier. Although the Company cannot predict the final outcome of such
legislation, passage of some form of restructuring bill is possible during 1997.
At the federal level, a number of bills have been introduced addressing
restructuring of the industry beyond the provisions of FERC Orders 888 and 889.
Such legislation would lay the framework for the transition to a competitive
retail market environment on a nationwide basis. The Company can not predict the
final outcome of such legislation.
No industry restructuring legislation was introduced in the 1997 session of
the Iowa legislature.
Additional information on the status of industry restructuring initiatives
is included under the "Operating Activities and Other Matters" section of MD&A
in Part IV, Item 14 of this Form 10-K.
In May 1996, the Iowa legislature approved a bill enhancing energy
efficiency program flexibility, eliminating mandatory spending levels for energy
efficiency programs, and allowing more timely recovery of energy efficiency
expenditures as determined by the IUB. The new legislation became effective July
1, 1996. Previously, electric and gas utilities in Iowa were required to spend
approximately 2.0% and 1.5%, respectively, of their annual Iowa jurisdictional
revenues on energy efficiency activities. MidAmerican expects final rules on the
implementation of the new legislation in the first half of 1997, following which
MidAmerican will seek approval to accelerate recovery of deferred and current
energy efficiency costs. Additional information on MidAmerican's energy
efficiency activities is included under the "Operating Activities and Other
Matters" section of MD&A in Part IV, Item 14 of this Form 10-K.
-15-
<PAGE>
NUCLEAR REGULATION
MidAmerican 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 MidAmerican
to secure and keep in effect all necessary NRC licenses and authorizations.
Under the terms of a long-term power purchase agreement, MidAmerican has
contracted to purchase one-half of the power and energy from Cooper located near
Brownville, Nebraska, through September 22, 2004. Cooper is owned and operated
by 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 MidAmerican's share of fuel costs
(including disposal costs) based upon energy delivered. Refer to "Management's
Discussion and Analysis" and Notes 1(h), 4(c), 4(d) and 4(e) in Notes to
Consolidated Financial Statements in Part IV, Item 14 of this Form 10-K.
MidAmerican 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 MidAmerican that
emergency preparedness plans for the Quad Cities Station and Cooper,
respectively, have been approved by the NRC. ComEd and NPPD have also advised
MidAmerican that state and local plans relating to the Quad Cities Station and
Cooper, respectively, have been approved by the Federal Emergency Management
Agency.
The NRC has required ComEd to submit information to allow the NRC to
determine what actions, if any, should be taken to assure that ComEd can safely
operate its six nuclear generating stations while sustaining performance
improvement at each site. While the NRC acknowledged improvements at Quad Cities
Station, it also noted performance declines at certain other ComEd nuclear
facilities. ComEd has indicated that it intends to provide the NRC with the
information requested.
In June 1988, the NRC adopted final regulations with respect to the
decommissioning of nuclear power plants. In 1996, the NRC enacted revisions to
provide clarification of these regulations. Among other things, the regulations
and amendments address the planning and funding for the eventual decommissioning
of nuclear power plants. In response to these regulations, MidAmerican 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 MidAmerican that a decommissioning plan for Cooper
has been submitted and approved by the NRC. Monthly payments to NPPD by
MidAmerican include monies to fund decommissioning as determined by NPPD.
-16-
<PAGE>
ENVIRONMENTAL REGULATIONS
MidAmerican 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, 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 MidAmerican's
existing facilities, (iv) increasing the risk of delay on construction projects,
(v) increasing MidAmerican's cost of waste disposal and (vi) possibly reducing
the reliability of service provided by MidAmerican and the amount of energy
available from MidAmerican's facilities. Any of such items could have a
substantial impact on amounts required to be expended by MidAmerican in the
future.
Air Quality
The CAA were signed into law in November 1990. MidAmerican has five jointly
owned and six wholly owned coal-fired generating stations, which represent
approximately 65% of MidAmerican's electric generating capability. 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 certain substances. By the year 2000, some MidAmerican coal-fired
generating units will be required to install emissions monitoring system
replacements or upgrades. Under current regulations, MidAmerican does not
anticipate its construction costs for the installation of emissions monitoring
system upgrades to exceed $4 million for 1997 through 2000.
The EPA has initiated rulemaking proceedings to change the National Ambient
Air Quality Standards for particulate matter and ozone. These new standards, if
implemented as proposed, could require MidAmerican to install additional control
equipment at its coal-fired units to reduce certain emissions. MidAmerican
cannot predict whether the proposed regulations will be adopted. If the proposed
regulations were adopted in their current form, MidAmerican's costs of
compliance could be substantial.
Water Quality
Under the Federal Water Pollution Control Act Amendments of 1972, as
amended, MidAmerican is required to obtain 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. MidAmerican has obtained all necessary NPDES permits for its
generating stations and, when such permits are expected to expire, MidAmerican
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 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.
-17-
<PAGE>
MidAmerican is evaluating 27 properties which were, at one time, sites of
MGP facilities in which it may be a potentially responsible party. MidAmerican'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. MidAmerican'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" in Notes to Consolidated
Financial Statements in Part IV, Item 14 of this Form 10-K.
Pursuant to the Toxic Substances Control Act, a federal law administered by
the EPA, MidAmerican developed a comprehensive program for the use, handling,
control and disposal of all PCB contained in electrical equipment. The future
use of equipment containing PCBs will be minimized. Capacitors, transformers and
other miscellaneous equipment are being purchased with a non-PCB dielectric
fluid. MidAmerican'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 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. Recent
studies have proven inconclusive as to the health effects of EMFs. MidAmerican
cannot predict the effect on construction costs of electric utility facilities
or operating costs if EMF regulations were to be adopted. Although MidAmerican
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
MidAmerican and on the electric utility industry in general could be
significant.
BUSINESS OF MIDAMERICAN CAPITAL COMPANY
MidAmerican Capital is a wholly owned nonregulated subsidiary of the
Company. The nonregulated activities emphasize energy and complementary
service-related businesses, credit quality and liquidity.
MidAmerican Capital participates in energy and complementary services
industries through three nonregulated business groups: Energy Services, Rail
Services and InterCoast Capital .
Energy Services provides electric, natural gas and energy management
services to both retail and wholesale markets. Energy Services' assets at
December 31, 1996 and 1995 were $5 million and $6 million, respectively.
AmGas Inc., a part of the Energy Services group, was organized in
anticipation of new opportunities under Order 636. AmGas Inc. markets natural
gas and energy management services to commercial and industrial clients in the
Midwest.
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., part of the Energy Services group,
was established in 1995 to provide wholesale natural gas marketing services.
-18-
<PAGE>
Rail Services provides railcar leasing, management and maintenance services
through UNITRAIN, Inc. and Cornhusker Railcar Services, Inc. These services are
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, an equity investment in a
company constructing a digital radio network, an equity investment in a
residential and commercial security company and equity interests in special
purpose funds that invest in venture capital and leveraged buy-out
opportunities.
InterCoast Capital manages MidAmerican Capital's financial investments.
Such investments consist primarily of investment grade marketable securities and
aircraft leases. InterCoast Capital's total investments at December 31, 1996 and
1995 were $310 million and $362 million, respectively.
InterCoast Capital's marketable securities portfolio, totaling $220 million
and $270 million at December 31, 1996 and 1995, 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 also holds equity participations in equipment leases for
passenger and freight transport aircraft. Such investments totaled $90 million
and $91 million at December 31, 1996 and 1995, respectively.
BUSINESS OF 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 principal
interest is a 2,000-acre planned residential and business community near Sioux
City, Iowa. The major construction phase of the planned community is complete,
and the marketing phase to sell developed residential and commercial lots is in
progress.
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 consists 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.
-19-
<PAGE>
The net accredited generating capacity, along with the participation
purchases and sales, net, and firm purchases and sales, net, are shown for
summer 1996 accreditation.
<TABLE>
<CAPTION>
Company's Share
of Accredited
Percent Generating
Plant Ownership Fuel Capability (MW)
- - --------------------------------- --------- ---- ---------------
<S> <C> <C> <C>
Steam Electric Generating Plants:
Council Bluffs Energy Center
Unit No. 1 100.0 Coal 46
Unit No. 2 100.0 Coal 88
Unit No. 3 79.1 Coal 534
George Neal Station
Unit No. 1 100.0 Coal 135
Unit No. 2 100.0 Coal 300
Unit No. 3 72.0 Coal 371
Unit No. 4 40.6 Coal 253
Louisa Unit 88.0 Coal 616
Ottumwa Unit 52.0 Coal 372
Riverside Station
Unit No. 3 100.0 Coal 5
Unit No. 5 100.0 Coal 130
-----
2,850
Combustion Turbines:
Coralville - 1 unit 100.0 Gas/Oil 64
Electrifarm - 3 units 100.0 Gas/Oil 185
Moline - 4 units 100.0 Gas/Oil 64
Parr - 2 units 100.0 Gas/Oil 31
Pleasant Hill Energy Center-3 units 100.0 Oil 148
River Hills Energy Center-8 units 100.0 Gas/Oil 116
Sycamore Energy Center-2 units 100.0 Gas/Oil 149
-----
757
Nuclear:
Cooper (1) (1) Nuclear 387
Quad-Cities Station (2)
Unit No. 1 25.0 Nuclear 192
Unit No. 2 25.0 Nuclear 193
-----
772
Hydro:
Moline - 4 units 100.0 Water 3
-----
Net Accredited Generating Capacity 4,382
Participation Purchases and Sales, Net (81)
-----
Total Net Accredited Generating Capability 4,301
Firm Purchases and Sales, Net (120)
-----
Adjusted Net Accredited Generating Capability 4,181
=====
</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.
(2) See the "Nuclear Regulation" section in Item 1 for information regarding
NRC communications with the operator of Quad-Cities Station.
-20-
<PAGE>
The electric system of MidAmerican at December 31, 1996, included 871 miles
of 345-kV transmission lines, 1,294 miles of 161-kV lines, 1,812 miles of 69-kV
lines and 261 miles of 34.5-kV lines.
The gas distribution facilities of MidAmerican at December 31, 1996,
included 18,732 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, or approximately 82% of gross utility plant, 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" in Notes to Consolidated
Financial Statements in Part IV, Item 14 of this Form 10-K. Cooper Litigation
On May 26, 1995, a predecessor of MidAmerican filed a lawsuit naming 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-80356. The legal proceeding is
based upon a long-term power purchase agreement between MidAmerican and NPPD,
pursuant to which MidAmerican purchases one-half the output of NPPD's 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 consistent with good
business and utility practices 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. MidAmerican's position is that NPPD's failure to meet its
obligations with respect to the operation of Cooper deprived MidAmerican of the
benefits it was entitled to under the power sales contract, causing MidAmerican
to lose profits and incur increased costs of operation, which damages
MidAmerican seeks to collect from NPPD. The matter is scheduled to go to trial
on June 9, 1997. Similar litigation has been filed against NPPD by 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.
-21-
<PAGE>
OTHER INFORMATION
EXECUTIVE OFFICERS OF HOLDINGS
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 61 Chairman of the Board
Stanley J. Bright 56 President and Chief Executive Officer
Ronald W. Stepien 50 Executive Vice President
Philip G. Lindner 53 Senior Vice President and Chief Financial Officer
John A. Rasmussen, Jr. 51 Senior Vice President and General Counsel
</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
December 1, 1996, and has been employed by Holdings and/or its subsidiaries or
predecessor companies for five or more years as an executive officer .
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 restructuring 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.
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.
-22-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION AND DIVIDENDS
Holdings' 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>
1996
4th Quarter $0.30 $ - $ - $16 1/4 $14 3/4 $ - $ - $ - $ -
3rd Quarter 0.30 - - 17 3/4 15 3/8 - - - -
2nd Quarter 0.30 - - 17 7/8 16 1/4 - - - -
1st Quarter 0.30 - - 18 7/8 16 1/4 - - - -
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
</TABLE>
HOLDERS
On February 21, 1997, there were approximately 65,000 shareholders of
record of Holdings' common stock.
MidAmerican's outstanding common stock is held entirely by its parent
company, Holdings, and is not publicly traded. On December 1, 1996, MidAmerican
distributed the capital stock of MidAmerican Capital and Midwest Capital to
Holdings. All other common dividends are included in the amounts displayed for
Holdings.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to Part IV of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to Part IV of this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Part IV of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
-23-
<PAGE>
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
Holdings
The information required by Item 10 relating to directors who are nominees
for election as directors at Holdings 1997 Annual Meeting of Shareholders is set
forth in Holdings' 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 pages 2 through 6 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.
MidAmerican
Information concerning the directors and executive officers of MidAmerican
is as follows:
(A) IDENTIFICATION
<TABLE>
<CAPTION>
Served in Served as
Present Present Director
Name Age Position Position Since Since
---- --- -------- -------------- ---------
<S> <C> <C> <C> <C>
Russell E. Christiansen 61 Director 1996 1983
Stanley J. Bright 56 Chairman, President and
Chief Executive Officer 1996 1987
Lynn K. Vorbrich 58 Executive Vice President 1996 -
Ronald W. Stepien 50 Executive Vice President 1996 1996
Dave J. Levy 42 Senior Vice President 1996 1996
Philip G. Lindner 53 Senior Vice President
and Chief Financial Officer 1996 1996
John A. Rasmussen, Jr. 51 Senior Vice President
and General Counsel 1996 1996
Stephen E. Shelton 49 Senior Vice President 1995 1996
Beverly A. Wharton 43 Senior Vice President 1996 1996
</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.
(B) BUSINESS EXPERIENCE
RUSSELL E. CHRISTIANSEN
Chairman of Holdings since December 1, 1996, Chairman of MidAmerican from
1995 to December 1, 1996 and Chairman of the Office of the Chief Executive
Officer from 1995 to July 1, 1996. Chairman and Chief Executive Officer of
Midwest Resources from 1992 to 1995 and President form 1990 to 1995. Director of
McLeod, Inc.
-24-
<PAGE>
STANLEY J. BRIGHT
President and Chief Executive Officer of Holdings since December 1, 1996.
Chairman of MidAmerican since December 1, 1996, Chief Executive Officer since
July 1, 1996, President since 1995 and President of the Office of the Chief
Executive Officer from 1995 to July 1, 1996. Chairman, President and Chief
Executive Officer of Iowa-Illinois from 1991 to 1995. Director of Norwest Bank
Iowa, N.A. and Utilx Corporation.
LYNN K. VORBRICH
Executive Vice President of MidAmerican since November 1, 1996 and
President, Electric Division from 1995 to November 1, 1996. Executive Vice
President, Midwest from 1991 to 1995. Director of Norwest Bank Quad Cities.
RONALD W. STEPIEN
Executive Vice President of Holdings since December 1, 1996. Executive Vice
President of MidAmerican since November 1, 1996 and Group Vice President from
1995 to November 1, 1996. Vice President of Iowa-Illinois from 1990 to 1995.
DAVE J. LEVY
Senior Vice President of MidAmerican since November 1, 1996 and Vice
President from 1995 to November 1, 1996. Vice President of Iowa-Illinois from
1993 to 1995 and manager prior to 1993.
PHILIP G. LINDNER
Senior Vice President and Chief Financial Officer of Holdings since
December 1, 1996. Senior Vice President and Chief financial Officer of
MidAmerican since November 1, 1996, Group Vice President and Chief Financial
Officer from August 1, 1996 to November 1, 1996 and Group Vice President from
1995 to August 1, 1996. Group Vice President of Midwest from 1992 to 1995.
JOHN A. RASMUSSEN, JR.
Senior Vice President and General Counsel of Holdings since December 1,
1996. Senior Vice President and General Counsel of MidAmerican since November 1,
1996 and Group Vice President and General Counsel from July 1, 1995 to November
1, 1996. Vice President and General Counsel of Midwest from 1991 to 1995.
STEVEN E. SHELTON
Senior Vice President of MidAmerican since 1995. Vice President of
Iowa-Illinois from 1985 to 1995.
BEVERLY A. WHARTON
Senior Vice President of MidAmerican since November 1, 1996 and President,
Gas Division from 1995 to November 1, 1996. Group Vice President of Midwest from
1992 to 1995. Director of Security National Bank.
ITEM 11. EXECUTIVE COMPENSATION
Holdings and MidAmerican
The information required by Item 11 is incorporated herein by reference
to the material appearing under the caption "EXECUTIVE COMPENSATION" on pages 9
through 20 of Holdings' Proxy Statement filed with the SEC.
-25-
<PAGE>
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 Holdings.
Holdings owns 100 percent of the outstanding Common Stock of MidAmerican.
(B) SECURITY OWNERSHIP OF MANAGEMENT
Holdings
Security ownership of management as outlined on pages 7 and 8 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.
MidAmerican
The following table shows the beneficial ownership, reported to MidAmerican
as of February 21, 1997, of Holdings Common Stock of each director, the two
individuals serving in the office of the chief executive officer of MidAmerican
Energy Company until July 1, 1996, and the four other most highly compensated
executive officers and, as a group, directors, and executive officers. No member
of the group owned any of the preferred stock of MidAmerican. To MidAmerican's
knowledge, no single entity owns of record or beneficially more than five
percent of any class of the outstanding voting securities of Holdings.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class
------------------------ ------------------------ ---------
<S> <C> <C>
Stanley J. Bright................. 71,061 (2) *
Russell E. Christiansen........... 84,950 (3) *
Ronald W. Stepien................. 17,839 (4) *
Lynn K. Vorbrich.................. 32,671 (5) *
Stephen E. Shelton................ 15,451 (6) *
Beverly A. Wharton................ 31,782 (7) *
Philip G. Lindner................. 17,969 (8) *
Dave J. Levy...................... 6,062 (9) *
John A. Rasmussen, Jr............. 22,795 (10) *
Directors and executive officers
as a group (9) persons.......... 300,580 (11) *
</TABLE>
___________________
* Less than one percent of the shares of MidAmerican Common Stock outstanding.
(1) Beneficial ownership of each of the shares of MidAmerican Common Stock
listed in the foregoing table is comprised of sole voting power and sole
investment power, unless otherwise noted.
(2) Includes 37,500 shares which Mr. Bright has the right to acquire within 60
days upon the exercise of stock options, 6,423 shares held in a Section
401(k) defined contribution plan as of December 31, 1996 and 1,697 shares
beneficially owned by Mr. Bright and his spouse.
-26-
<PAGE>
(3) Includes 37,500 shares which Mr. Christiansen has the right to acquire
within 60 days upon the exercise of stock options, 12,052 shares held in a
Section 401(k) defined contribution plan as of December 31, 1996 and 8,040
shares beneficially owned by Mr. Christiansen and his spouse.
(4) Includes 10,000 shares which Mr. Stepien has the right to acquire within 60
days upon the exercise of stock options, 1,162 shares held in a Section
401(k) defined contribution plan as of December 31, 1996.
(5) Includes 15,000 shares which Mr. Vorbrich has the right to acquire within
60 days upon the exercise of stock options, 2,674 shares held in a Section
401(k) defined contribution plan as of December 31, 1996 and 784 shares
beneficially owned by Mr. Vorbrich and his spouse.
(6) Includes 7,400 shares held in a Section 401(k) defined contribution plan as
of December 31, 1996.
(7) Includes 15,000 shares which Mrs. Wharton has the right to acquire within
60 days upon the exercise of stock options, 1,326 shares held in a Section
401(k) defined contribution plan as of December 31, 1996, 4,678 shares
beneficially owned by Mrs. Wharton and her spouse and 450 shares
beneficially owned in a custodial account for a minor child.
(8) Includes 10,000 shares which Mr. Lindner has the right to acquire within 60
days upon the exercise of stock options, 161 shares held in a Section
401(k) defined contribution plan as of December 31, 1996, and 1,138 shares
beneficially owned by Mr. Lindner and his spouse.
(9) Includes 44 shares held in a Section 401(k) defined contribution plan as of
December 31, 1996 and 493 shares beneficially owned by Mr. Levy and his
spouse.
(10) Includes 10,000 shares which Mr. Rasmussen has the right to acquire within
60 days upon the exercise of stock options, 3,050 shares held in a Section
401(k) defined contribution plan as of December 31, 1996 and 2,700 shares
beneficially owned by Mr. Rasmussen and his spouse.
(11) Includes 135,000 shares which the executive officers have the right to
acquire within 60 days upon the exercise of stock options, shares held in
defined contribution plans as of December 31, 1996 and shares beneficially
owned jointly with and individually by family members of directors and
executive officers.
(C) CHANGES IN CONTROL
There are no arrangements known to the registrants, the operation of which
may at a subsequent date result in a change in control of Holdings or
MidAmerican.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-27-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS (INCLUDED HEREIN)
Page No.
--------
Selected Consolidated Financial Data......................... 30
Management's Discussion and Analysis of Financial Condition
And Results of Operations.................................. 31
Index to Financial Statements:
------------------------------
MidAmerican Energy Holdings Company
Consolidated Statements of Income
For the Year Ended December 31, 1996, 1995 and 1994........ 46
Consolidated Statements of Cash Flows
For the Year Ended December 31, 1996, 1995 and 1994........ 47
Consolidated Balance Sheets
As of December 31, 1996 and 1995 .......................... 48
Consolidated Statements of Capitalization
As of December 31, 1996 and 1995 .......................... 49
Consolidated Statements of Retained Earnings
For the Year Ended December 31, 1996, 1995 and 1994........ 50
Notes to Consolidated Financial Statements................... 51
Management's Responsibility for Financial Statements......... 73
Reports of Independent Public Accountants.................... 74
MidAmerican Energy Company
Consolidated Statements of Income
For the Year Ended December 31, 1996, 1995 and 1994........ 75
Consolidated Statements of Cash Flows
For the Year Ended December 31, 1996, 1995 and 1994........ 76
Consolidated Balance Sheets
As of December 31, 1996 and 1995 .......................... 77
Consolidated Statements of Capitalization
As of December 31, 1996 and 1995 .......................... 78
Consolidated Statements of Retained Earnings
For the Year Ended December 31, 1996, 1995 and 1994........ 79
Notes to Consolidated Financial Statements................... 80
Management's Responsibility for Financial Statements......... 92
Reports of Independent Public Accountants.................... 93
Index to Supplemental Information
---------------------------------
Five-Year Financial Statistics............................... 94
Five-Year Consolidated Statements of Income.................. 95
Five-Year Consolidated Balance Sheets........................ 96
Five-Year Utility Statistics................................. 97
-28-
<PAGE>
(A)2. FINANCIAL STATEMENT SCHEDULES (INCLUDED HEREIN)
The following schedules should be read in conjunction with the
aforementioned financial statements.
Page No.
--------
MidAmerican Energy Holdings Company Consolidated
Valuation and Qualifying Accounts (Schedule II) ........... 99
MidAmerican Energy Company Consolidated Valuation
and Qualifying Accounts (Schedule II) ..................... 100
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 104.
(B) REPORTS ON FORM 8-K
On October 18, 1996, MidAmerican filed a report on Form 8-K, dated October
17, 1996. The report included information regarding the announcement that
MidAmerican had entered into a letter of intent to sell certain of its
nonregulated oil and gas subsidiaries to KCS Energy Inc. of Edison, New Jersey.
The press release issued in conjunction with the announcement was filed as an
Exhibit to the report.
On December 2, 1996, Holdings filed a report on Form 8-K, dated December 2,
1996. The report included information regarding the formation of Holdings. The
press release issued with respect to the holding company formation was filed as
an Exhibit to the report.
On December 20, 1996, Holdings filed a report on From 8-K, dated December
18, 1996, regarding the adoption of a Shareholder Rights Agreement. Pursuant to
such Agreement, the Company will make a dividend distribution of one preferred
stock purchase right for each outstanding share of Common Stock of the Company
as of the close of business on December 30, 1996. The Shareholder Rights
Agreement dated as of December 18, 1996, between the Company and Continental
Stock Transfer and Trust Company, as Rights Agent and the news release issued
announcing the adoption of the Shareholder Rights Agreement were filed as
Exhibits to the report.
-29-
<PAGE>
SELECTED FINANCIAL DATA
- - -----------------------
MidAmerican Energy Holdings Company
- - -----------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues........................................... $1,872,612 $1,649,341 $1,631,225 $1,627,956 $1,462,580
Operating income (a)............................... 343,638 292,354 264,492 267,938 211,159
Income from continuing operations (b).............. 143,761 119,705 123,098 134,325 75,045
Average common shares outstanding.................. 100,752 100,401 98,531 97,762 95,430
Earnings per average common share
from continuing operations..................... $ 1.43 $ 1.19 $ 1.25 $ 1.38 $ 0.79
Cash dividends declared per share.................. $ 1.20 $ 1.18 $ 1.17 $ 1.17 $ 1.28
BALANCE SHEET DATA:
Total assets....................................... $4,559,283 $4,470,097 $4,388,894 $4,352,073 $4,103,420
Long-term debt (c)................................. 1,474,701 1,468,617 1,471,127 1,407,374 1,401,736
Power purchase obligation (d)...................... 111,222 125,729 137,809 151,485 146,150
Short-term borrowings.............................. 161,990 184,800 124,500 173,035 120,244
Preferred stock:
Not subject to mandatory redemption............ 31,769 89,945 89,955 109,871 74,242
Subject to mandatory redemption (e)............ 150,000 50,000 50,000 50,000 48,625
Common stock equity................................ 1,239,946 1,225,715 1,204,112 1,180,510 1,159,676
Book value per common share........................ $ 12.31 $ 12.17 $ 12.08 $ 12.07 $ 11.86
</TABLE>
MidAmerican Energy Company
- - --------------------------
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................................... $1,635,761 $1,554,235 $1,513,675 $1,541,959 $1,420,714
Operating income (a).............................. 249,207 219,238 198,491 203,780 176,472
Net income from continuing operations (b)......... 165,132 132,489 121,145 133,888 86,713
Earnings on common from continuing operations..... 154,731 124,430 110,594 125,521 77,978
BALANCE SHEET DATA:
Total assets...................................... $3,774,653 $3,976,201 $3,879,847 $3,832,569 $3,583,705
Long-term debt (c)................................ 1,136,515 1,110,525 1,109,617 1,051,144 1,075,245
Power purchase obligation (d)..................... 111,222 125,729 137,809 151,485 146,150
Short-term borrowings............................. 161,700 184,800 124,500 160,800 110,600
Preferred stock:
Not subject to mandatory redemption........... 31,769 89,945 89,955 109,871 74,242
Subject to mandatory redemption (e)........... 150,000 50,000 50,000 50,000 48,625
Common stock equity (f)........................... 986,825 1,225,715 1,204,112 1,180,510 1,159,676
</TABLE>
(a) MidAmerican Energy Holdings Company (Holdings) operating income includes
$33.4 million of costs related to a restructuring and work force reduction
plan implemented and completed in 1995, and MidAmerican Energy Company
(MidAmerican) operating income includes $31.9 million of such costs.
(b) Holdings recorded after-tax losses of approximately $9.4 million and $10.2
million for the write-down of certain nonregulated assets during 1996, and
1995, respectively. In 1993, MidAmerican recorded an $11.5 million
after-tax gain on an exchange of natural gas service territories.
(c) Includes long-term debt due within one year.
(d) Includes power purchase obligation due within one year.
(e) 1996 includes MidAmerican-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely MidAmerican junior
subordinated debentures.
(f) 1996 Reflects the distribution of capital stock of MidAmerican Capital
Company and Midwest Capital Group, Inc. to Holdings.
-30-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
------------
COMPANY STRUCTURE
MidAmerican Energy Holdings Company (Holdings or the Company), is an exempt
public utility holding company headquartered in Des Moines, Iowa. Effective
December 1, 1996, Holdings became the parent company of MidAmerican Energy
Company (MidAmerican), MidAmerican Capital Company (MidAmerican Capital) and
Midwest Capital Group, Inc. (Midwest Capital). Prior to December 1, 1996,
MidAmerican Capital and Midwest Capital were subsidiaries of MidAmerican.
MidAmerican was formed on July 1, 1995, as a result of the merger (the
merger) of Iowa-Illinois Gas and Electric Company, Midwest Resources Inc.
(Resources) and Midwest Power Systems Inc., the utility subsidiary of Resources.
MidAmerican is a public utility with electric and natural gas operations
and is the principal subsidiary of Holdings. MidAmerican Capital (formerly
InterCoast Energy Company), discussed below, and Midwest Capital are Holdings'
nonregulated subsidiaries. Midwest Capital functions as a regional business
development company in MidAmerican's utility service territory.
During the second quarter of 1996, the Company restructured one of its
nonregulated subsidiaries, the former InterCoast Energy Company, and changed the
subsidiary's name to MidAmerican Capital Company. In addition, the Company
formed a new subsidiary under MidAmerican Capital, named InterCoast Energy
Company (InterCoast). The new InterCoast had as its subsidiaries the Company's
wholesale nonregulated energy companies, including InterCoast Oil and Gas
Company, formerly named Medallion Production Company. MidAmerican Capital
retained as direct subsidiaries the rail service businesses, the marketable
securities and passive investment activities, and a nonregulated retail natural
gas subsidiary.
DESCRIPTION OF FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS
The merger is accounted for as a pooling-of-interests, and the consolidated
financial statements are presented as if the merger occurred as of the beginning
of the earliest period presented. In addition, the consolidated financial
statements of MidAmerican present amounts related to MidAmerican Capital and
Midwest Capital as discontinued operations for all periods presented to reflect
their transfer to Holdings in December 1996. Portions of the following
discussion provide information related to material changes in the financial
condition and results of operations of Holdings and MidAmerican for 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
predecessor companies actually merged at the beginning of the earliest period.
The information presented in this management's discussion and analysis
addresses the financial statements of Holdings and MidAmerican as presented in
this joint filing. Information related to MidAmerican also relates to Holdings.
Information related to MidAmerican Capital and Midwest Capital pertains only to
the discussion of the financial condition and results of operations of Holdings.
To the extent necessary, certain discussions have been segregated to allow the
reader to identify information applicable only to Holdings.
-31-
<PAGE>
DISCONTINUED OPERATIONS
Holdings:
- - --------
The Company is redeploying certain of its nonregulated investments as part
of its strategy of becoming a leading regional provider of energy and
complementary services. As discussed below, the Company discontinued some of its
nonregulated operations during the second half of 1996. The related income or
loss from operations and the anticipated losses on disposal are reflected as
discontinued operations in each of the periods presented in the Consolidated
Statements of Income. Also included in discontinued operations in the
Consolidated Statements of Income are amounts related to the Company's
construction subsidiaries which were discontinued in 1994. Net assets of the
discontinued operations are separately presented in the Consolidated Balance
Sheets as Investment in Discontinued Operations.
In the fourth quarter of 1996, the Company and KCS Energy, Inc. (KCS) of
Edison, New Jersey, signed a definitive agreement to sell a portion of the
Company's nonregulated operations to KCS for $210 million in cash and 435,000
warrants to purchase KCS common stock. The sale, which included the Company's
oil and gas exploration and development operations, was completed in January
1997. The Company recorded an after-tax loss of $7.1 million for the transaction
in 1996.
The Company also intends to divest a subsidiary that developed and
continues to operate a computerized information system facilitating real-time
exchange of power in the electric industry. The Company expects the disposition
to occur during the first half of 1997 and, accordingly, recorded a $4.0 million
anticipated after-tax loss on disposal of those operations in September 1996.
MidAmerican:
- - -----------
MidAmerican received $15.3 million in cash in 1996 as final settlement for
the sale of a former coal mining subsidiary which was reflected as discontinued
operations in 1982 by one of MidAmerican's predecessors. The final settlement
included reacquisition by the buyer of preferred equity issued to MidAmerican
and the settlement of reclamation reserves. MidAmerican recorded an after-tax
loss on disposal of $3.3 million for the transaction in September 1996. This
transaction is included in discontinued operations in the consolidated financial
statements of MidAmerican as well as Holdings. Discontinued operations of
MidAmerican for 1996 also includes the net loss of MidAmerican Capital and
Midwest Capital for the 1996 period prior to the December 1, 1996, transfer to
Holdings.
FORWARD-LOOKING STATEMENTS
From time to time, the Company or one of its subsidiaries individually may
make forward-looking statements within the meaning of the federal securities
laws that involve judgments, assumptions and other uncertainties beyond the
control of the Company or any of its subsidiaries individually. These
forward-looking statements may include, among others, statements concerning
revenue and cost trends, cost recovery, cost reduction strategies and
anticipated outcomes, pricing strategies, changes in the utility industry,
planned capital expenditures, financing needs and availability, statements of
the Company's expectations, beliefs, future plans and strategies, anticipated
events or trends and similar comments concerning matters that are not historical
facts. Investors and other users of the forward-looking statements are cautioned
that such statements are not a guarantee of future performance of the Company
and that such forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in, or
implied by, such statements. Some, but not all, of the risks and uncertainties
include weather effects on sales and revenues, competitive factors, general
economic conditions in the Company's service territory and federal and state
regulatory actions.
-32-
<PAGE>
RESULTS OF OPERATIONS
---------------------
EARNINGS
The following tables provide a summary of the earnings contributions of the
Company's and MidAmerican's operations for each of the periods presented:
<TABLE>
<CAPTION>
Holdings:
- - --------
1996 1995 1994
---------- --------- ----------
<S> <C> <C> <C>
Earnings (in millions)
Continuing operations
Electric utility .............. $ 122.7 $ 111.9 $ 96.1
Gas utility ................... 32.0 12.6 14.5
---------- --------- ----------
Utility .................. 154.7 124.5 110.6
Nonregulated operations ....... (11.0) (4.8) 12.5
Discontinued operations ......... (12.7) 3.1 (2.9)
---------- --------- ----------
Consolidated earnings ........ $ 131.0 $ 122.8 $ 120.2
========== ========= ==========
Earnings Per Common Share
Continuing operations
Electric utility .............. $ 1.22 $ 1.11 $ 0.97
Gas utility ................... 0.32 0.13 0.15
---------- --------- ----------
Utility .................. 1.54 1.24 1.12
Nonregulated operations ....... (0.11) (0.05) 0.13
Discontinued operations ......... (0.13) 0.03 (0.03)
---------- --------- ----------
Consolidated earnings ......... $ 1.30 $ 1.22 $ 1.22
========== ========= ==========
MidAmerican:
- - -----------
1996 1995 1994
---------- --------- ----------
(in millions)
Earnings on Common Stock
Continuing operations
Electric utility .............. $ 122.7 $ 111.9 $ 96.1
Gas utility ................... 32.0 12.6 14.5
---------- --------- ----------
Total .................... 154.7 124.5 110.6
Discontinued operations ......... (10.1) (1.7) 9.6
---------- --------- ----------
Consolidated earnings ........ $ 144.6 $ 122.8 $ 120.2
========== ========= ==========
</TABLE>
The Company's earnings per share for 1996 increased 8 cents compared to
1995. The effect of merger-related costs on 1995 earnings and realization in
1996 of cost savings resulting from the merger had a favorable effect on the
Company's and MidAmerican's 1996 earnings compared to 1995. In addition, an
after-tax gain from the sale of certain MidAmerican storage gas supplies in 1996
and income from MidAmerican's incentive gas procurement program contributed 3
cents per share to 1996 earnings. A reduction in utility property taxes also
contributed to the improvement in earnings. The cost of a merger proposal,
discussed below, reduced utility earnings by approximately 5 cents per share in
1996. A cooler than normal summer and a favorable heating season compared to
normal resulted in an estimated decrease of 4 cents per share in 1996. For the
Company's nonregulated businesses, earnings from continuing operations decreased
6 cents per share in 1996 compared to 1995 due primarily to 1995 gains on the
sales of a telecommunications subsidiary and a partnership interest in a gas
marketing organization. As discussed below, 1996 and 1995 earnings of
nonregulated subsidiaries include write-downs of certain assets. Losses on
disposal of discontinued operations reduced 1996 earnings per share by
approximately 15 cents.
-33-
<PAGE>
On August 5, 1996, the Company announced a proposal to merge with IES
Industries Inc. (IES), a holding company headquartered in Cedar Rapids, Iowa.
The IES board of directors rejected the Company's proposal in favor of a pending
merger with WPL Holdings and Interstate Power Co. (the Wisconsin Transaction).
The Company solicited proxies against the Wisconsin Transaction for use at the
IES annual meeting of shareholders which was held on September 5, 1996. At that
meeting, the holders of a majority of the IES common stock voted in favor of the
Wisconsin Transaction, and the Company discontinued its attempt to merge with
IES. In the effort, MidAmerican incurred tax deductible costs of $8.7 million in
1996 which are included in Other, Net in the Consolidated Statements of Income.
The Company's and MidAmerican's 1995 earnings were reduced by
merger-related costs. As part of the process of combining the operations of
MidAmerican's predecessors, the Company developed a restructuring plan which
included employee incentive early retirement, relocation and separation
programs. The Company recorded $33.4 million of restructuring costs during 1995,
of which $31.9 million is included in utility operations. These costs are
reflected in Other Operating Expenses in the Consolidated Statements of Income.
In addition, the Company incurred transaction costs to complete the merger.
The Company expensed $4.6 million and $4.5 million of merger transaction costs
in 1995 and 1994, respectively. Of the total, $0.2 million of the 1994 costs
relates to nonregulated subsidiaries of the Company. These costs are included in
Other, Net in the Consolidated Statements of Income.
In total, restructuring and transaction costs reduced the Company's
earnings for 1995 by 24 cents per share. Transaction costs reduced 1994 earnings
by 5 cents per share.
Write-downs of certain assets, primarily alternative energy projects, of
the Company's nonregulated subsidiaries reduced earnings by approximately $9.4
million, or 9 cents per share, and $10.2 million, or 10 cents per share, in 1996
and 1995, respectively. The write-downs reflect declines in the value of those
nonregulated investments. The pre-tax amounts of the write-downs, which are
included in Other, Net in the Consolidated Statements of Income, totaled $15.6
million and $18.0 million for 1996 and 1995, respectively.
The Company's 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 in 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. As discussed above, merger-related costs and
write-downs of certain nonregulated assets had a significant adverse affect on
1995 earnings.
-34-
<PAGE>
<TABLE>
<CAPTION>
UTILITY GROSS MARGIN
Electric Gross Margin:
---------------------
1996 1995 1994
---------- --------- ----------
(In millions)
<S> <C> <C> <C>
Operating revenues ................ $ 1,099 $ 1,095 $ 1,022
Cost of fuel, energy and capacity . 234 230 214
---------- --------- ----------
Electric gross margin ......... $ 865 $ 865 $ 808
========== ========= ==========
</TABLE>
Variations in gross margin are the result of changes in revenues due to
price and sales volume variances. 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. MidAmerican has
been allowed to recover Energy Costs from most of its electric utility customers
through energy adjustment clauses (EACs) in revenues. Variations in revenues
collected through the EACs, reflecting changes in Energy Costs per unit sold and
volumes sold, do not affect gross margin or net income. Refer to "Rate Matters"
under the Operating Activities and Other Matters section of Liquidity and
Capital Resources.
Electric gross margin for 1996 was unchanged compared to 1995. Electric
retail sales for 1996 increased nearly 2% compared to 1995 due to modest
customer growth and an improvement in sales not dependent upon weather. Cooler
weather conditions in the 1996 third quarter compared to the 1995 third quarter
caused a significant decrease in weather-related sales. Colder weather during
the 1996 heating seasons compared to the 1995 heating seasons helped to mitigate
the impact of the mild cooling season in 1996. Sales to the more
weather-sensitive customers have a higher margin per unit than sales to other
customers. As a result, the decrease in sales to those customers had a greater
impact on margin than increases in sales to other customers. For the year, the
impact of weather reduced electric gross margin by an estimated $15 million
compared to normal.
Increases in electric retail rates due to filings made by MidAmerican's
predecessors increased revenues and gross margin for 1996 compared to 1995.
Electric revenues in the first half of 1995 reflect a $13.6 million annual
increase for interim rates in connection with an Iowa electric rate filing.
Revenues for 1996 reflect the full-year effect of the final $20.3 million annual
rate increase in the proceeding, which was effective in August 1995.
Approximately $8 million of this increase relates to increased expenses for
other postretirement employee benefit (OPEB) costs. Additionally, in August
1995, MidAmerican began collection of $18.6 million over a four-year period
related to an energy efficiency cost recovery filing. At the same time,
MidAmerican began expensing a similar amount for the amortization of previously
deferred energy efficiency costs. The amortization is included in other
operating expenses. Refer to "Energy Efficiency" in the Liquidity and Capital
Resources section for a discussion of changes in energy efficiency legislation
and potential acceleration of cost recovery.
In November 1996, MidAmerican implemented rate reductions representing
approximately $21.8 million in annual revenues related to proceedings begun in
1996. In addition, electric revenues and gross margin were reduced by $3.7
million in 1996 for a rate refund reserve for revenues prior to November 1 in
connection with one of the proceedings. Refer to "Rate Matters" in Liquidity and
Capital Resources later in this discussion for further information.
Electric gross margin for 1995 improved compared to 1994 due to the
increases in electric retail rates and a 3% increase in electric retail sales.
The increase in retail sales was due primarily to warmer temperatures in the
1995 third quarter compared to the third quarter of 1994.
In addition to the electric rate increases discussed above, in October 1994
and January 1995, MidAmerican 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 together with a corresponding
amortization of deferred energy efficiency costs.
-35-
<PAGE>
Revenues from sales for resale increased $16 million for 1996 compared to
1995 and $21.2 million for 1995 compared to 1994. Variations in the amount of
available generation affected sales volumes, especially for 1995 compared to
1994. During 1994 and the first quarter of 1995, nuclear generating facilities
were out of service for an extended period. Coal delivery uncertainties also
limited MidAmerican's sales for resale in 1994. In addition, the MidAmerican
merger and the reorganization of utility functions increased MidAmerican's
ability to participate in these types of transactions. Effective November 1995,
the margin on most electric energy sales for resale is flowed through to retail
customers and has a minimal effect on gross margin and net income.
<TABLE>
<CAPTION>
Gas Gross Margin:
----------------
1996 1995 1994
---------- --------- ----------
(In millions)
<S> <C> <C> <C>
Operating revenues ................ $ 537 $ 460 $ 492
Cost of gas sold .................. 345 279 327
---------- --------- ----------
Gas gross margin .............. $ 192 $ 181 $ 165
========== ========= ==========
</TABLE>
Variations in gas gross margin are the result of changes in revenues due to
price and sales volume variances. MidAmerican has been allowed to recover in
revenues the cost of gas sold from most of its gas utility customers through
purchase gas adjustment clauses (PGAs). Variations in revenues collected through
the PGAs, reflecting changes in the cost of gas per unit and volumes sold, do
not affect gross margin or net income.
Gross margin from gas sales increased in 1996 and 1995 compared to their
respective prior years. The increases were due both to price and sales volumes
increases. Retail sales of natural gas increased 3.1% in 1996 compared to 1995
due in part to colder weather conditions in the first quarter of 1996 than
during the first quarter of 1995. For 1996, the impact of colder than normal
weather increased gross margin by an estimated $8 million. Retail sales of
natural gas increased slightly in 1995 compared to 1994 due mainly to colder
temperatures in the fourth quarter of 1995 than in the 1994 fourth quarter.
Continued growth in the number of natural gas customers contributed to increases
in sales volumes.
Another cause of the increases in gas revenues and gross margin was an
increase in gas retail service rates. Retail revenues in the first half of 1995
reflect interim rates from an $8.2 million increase in annual gas revenues in
connection with an Iowa gas rate filing by one of its predecessor companies.
MidAmerican began collecting the interim rates in October 1994. Gas revenues for
1996 reflect the full-year effect of the final rate increase of $10.6 million
annually which was effective in August 1995. Approximately $2.5 million of the
$10.6 million increase relates to increased expense for OPEB costs.
In January 1995, MidAmerican implemented a rate increase for an Iowa energy
efficiency cost recovery filing which allows an increase in gas revenues of $6.7
million over a four-year period together with a corresponding amortization of
deferred energy efficiency costs. The amortization is included in other
operating expenses. Refer to "Energy Efficiency" in the Liquidity and Capital
Resources section for a discussion of changes in energy efficiency legislation
and potential acceleration of cost recovery.
UTILITY OPERATING EXPENSES
For 1996, utility other operating expenses decreased $49.5 million compared
to 1995 due primarily to costs in 1995 of the restructuring plan discussed under
"Earnings" in the Results of Operations section and from cost savings in 1996
resulting from the merger. Utility restructuring costs in 1995 totaled $31.9
million. In addition, 1996 reflects a $4.4 million reduction in nuclear
operations costs. Partially offsetting these decreases was a $4.2 million
increase from the amortization of deferred energy efficiency costs. There were
also increases in consulting services expenses and some general administrative
costs for 1996 compared to 1995.
-36-
<PAGE>
In addition to costs of the restructuring plan, 1995 other operating
expenses increased compared to 1994 due to increased amortization of deferred
energy efficiency costs and OPEB costs and the effect of a reduction of 1994
energy efficiency expenses to comply with the IUB regulation of these costs.
Nuclear operations costs decreased $8.6 million in 1995 compared to 1994.
Maintenance expenses increased for 1996 compared to 1995 and decreased for
1995 compared to 1994. The timing of power plant maintenance accounted for much
of the variation between the periods. The increase in power plant maintenance
for 1996 was partially offset by a $6.2 million adjustment to align inventory
accounting of predecessor companies. Maintenance expense for the Quad Cities
Nuclear Station (Quad Cities Station) increased $1.8 million for 1996 and
decreased $5.5 million for 1995 compared to the respective prior years.
Property and other taxes decreased in 1996 compared to 1995 due to a
reduction in property and payroll taxes. Lower than expected assessed property
values and tax rates reduced property tax expense for 1996. A decrease in the
number of employees as a result of the merger caused the reduction in payroll
tax expense.
NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES
Holdings:
- - --------
Revenues of MidAmerican Capital and Midwest Capital increased a total of
$141.7 million for 1996 compared to 1995. The increase was due primarily to a
$136.1 million increase in revenues from natural gas marketing subsidiaries,
some of which did not exist in 1995. Sales volumes for the natural gas marketing
firms increased 51 million MMBtu's, or 153%, for 1996 compared to 1995. In
addition, the average price of natural gas increased in 1996.
Cost of sales includes expenses directly related to sales of natural gas.
Increases in gas sales volumes and cost per unit resulted in the increase in the
cost of sales for 1996 compared to 1995.
Average margins (total price less cost of gas) on sales of natural gas
decreased in 1996 compared to 1995 due in part to increased competition in the
nonregulated natural gas industry. As a result, total 1996 gross margin on
nonregulated natural gas sales decreased $2.5 million compared to 1995.
Revenues for 1995 decreased from 1994 primarily due to a 16% reduction in
sales volumes of a nonregulated retail natural gas marketing subsidiary. A
decrease in real estate revenues and reduced revenues due to the sale of a
telecommunications subsidiary in early 1995 also contributed to the decrease.
NON-OPERATING INCOME AND INTEREST EXPENSE
MidAmerican:
- - -----------
Other, Net -
Other, Net for 1996 was reduced by $8.7 million for costs incurred by
MidAmerican for its merger proposal to IES Industries Inc. During 1996,
MidAmerican recorded a pre-tax gain of $3.2 million on the sale of certain
storage gas supplies. In addition, MidAmerican recorded $2.7 million of income
as a result of successful performance under its incentive gas procurement
program and a net pre-tax gain of $1.1 million from the reacquisition of
long-term debt. As discussed in the "Earnings" section of Results of Operations,
merger transaction costs related to the Company's 1995 merger reduced Other, Net
in 1995 and 1994.
Interest Charges -
Utility interest on long-term debt decreased for 1996 compared to 1995 due
to the reacquisition of debt in 1996 and increased for 1995 compared to 1994 due
primarily to the issuance of $60 million of 7.875% Series
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<PAGE>
of mortgage bonds in November 1994. An increase in the average amount of
commercial paper outstanding during 1996 was the cause of the increase in other
interest expense compared to 1995.
Holdings:
- - --------
Realized Gains and Losses on Securities, Net -
Net realized gains on securities increased for 1996 due to an increase in
gains on the disposition of equity fund holdings and managed preferred stock
portfolios. Net realized gains on securities decreased for 1995 compared to 1994
primarily from the sale of a single holding in 1994 which generated a $5.9
million pre-tax gain.
Other, Net -
Other, Net reflects $2.8 million more income from equity investments in
1996 than in 1995. In addition, Midwest Capital recorded a $1.8 million pre-tax
gain on the sale of the Hub Tower, a Des Moines office building, in the third
quarter of 1996, Midwest Capital had written down the carrying value of the
property by $5.8 million and $3.0 million in 1992 and in December 1995,
respectively, to reflect anticipated market values. As discussed in the
"Earnings" section at the beginning of Results of Operations, write-downs of
nonregulated investments decreased Other, Net by $15.6 million and $18.0 million
for 1996 and 1995, respectively. The $18.0 million for 1995 includes the Hub
Tower write-down. In 1995, the Company also had pre-tax gains totaling $8.5
million on the sales of a partnership interest in a gas marketing organization
and a telecommunication subsidiary.
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, construction expenditures, dividends, debt retirement
and other capital requirements.
For 1996, Holdings had net cash provided from operating activities of $351
million compared to $337 million for 1995. MidAmerican had net cash provided
from operating activities of $327 million and $333 million for 1996 and 1995,
respectively.
INVESTING ACTIVITIES AND PLANS
MidAmerican:
- - -----------
MidAmerican's primary need for capital is utility construction
expenditures. Utility construction expenditures, including allowance for funds
used during construction (AFUDC), Quad Cities Station nuclear fuel purchases and
Cooper Nuclear Station (Cooper) capital improvements, were $154 million for
1996. All such expenditures were met with cash generated from utility
operations, net of dividends.
Utility construction expenditures for 1996 and 1995 included $11 million
and $2 million, respectively, for replacement of a certain type of plastic pipe
installed in prior years in a portion of MidAmerican's natural gas distribution
system. MidAmerican decided to replace all such pipe due to concerns about its
long-term performance. MidAmerican has filed an action seeking recovery of
replacement costs and damages from the manufacturer of the resin used in the
pipe.
Forecasted utility construction expenditures for 1997 are $200 million
including AFUDC. Capital expenditures needs are reviewed regularly by
MidAmerican's management and may change significantly as a result of such
reviews. For the years 1997 through 2001, MidAmerican forecasts $840 million for
utility construction expenditures. MidAmerican presently expects that all
utility construction expenditures for 1997 through 2001 will be met with cash
generated from utility operations, net of dividends. The actual level of cash
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<PAGE>
generated from utility operations is affected by, among other things, economic
conditions in the utility service territory, weather and federal and state
regulatory actions.
Operators of a nuclear facility are required to set aside funds to provide
for costs of future decommissioning of their nuclear facility. 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 by the
operator. Based on information presently available, MidAmerican expects to
contribute approximately $47 million during the period 1997 through 2001 to an
external trust established for the investment of funds for decommissioning the
Quad Cities Station. Currently, the funds are invested predominately in
investment grade municipal and U.S. Treasury bonds. Beginning in 1997,
MidAmerican plans to invest a portion of the funds in domestic corporate debt
and common equity securities. In addition, a portion of the payments made under
a power purchase contract with Nebraska Public Power District (NPPD) are 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, MidAmerican expects to pay approximately $59 million to NPPD for
Cooper decommissioning during the period 1997 through 2001. NPPD invests the
funds predominantly in U.S. Treasury Bonds. MidAmerican'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. MidAmerican 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.
Holdings:
- - --------
Capital expenditures of nonregulated subsidiaries were $56 million for
1996. Capital expenditures of nonregulated subsidiaries depend primarily upon
the availability of suitable investment opportunities which meet the Company's
objectives. The Company continues to evaluate nonstrategic, nonregulated
investments and may redeploy certain assets in 1997. External financing may also
be used to provide for nonregulated capital expenditures.
The Company, through one of its nonregulated subsidiaries, has an
investment in Class A and Class B Common Stock of McLeod, Inc. (McLeod), a
telecommunications company. The Class B stock is convertible to Class A stock on
a one-for-one basis at the Company's option. On June 14, 1996, McLeod made an
initial public offering (IPO) of its Class A Common Stock. As part of an
investor agreement, the Company is prohibited from selling or otherwise
disposing of any of the common stock of McLeod for a period of two years from
the date of the IPO, and accordingly, no market value adjustments have been
reflected in the Company's financial statements. In the fourth quarter of 1996,
the Company made an additional investment of $10 million in McLeod Class A
Common Stock. At December 31, 1996, the carrying amount and fair value of the
Company's investment were $46.3 million and $218.3 million, respectively.
During the third quarter of 1996, a nonregulated subsidiary of the Company
made a $10 million investment in convertible preferred stock of RACOM, which is
a provider of digital wireless communications in MidAmerican's utility service
territory and surrounding areas.
MidAmerican Capital invests in a variety of marketable securities which it
holds for indefinite periods of time. In 1996, MidAmerican Capital had net cash
inflows of $55 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.
-39-
<PAGE>
FINANCING ACTIVITIES, PLANS AND AVAILABILITY
Holdings:
- - --------
As of December 31, 1996, Holdings had a $20 million line of credit
available to provide for short-term financing needs.
In addition, Holdings has the necessary authority to issue up to 6,000,000
shares of common stock through its Shareholder Options Plan (a dividend
reinvestment and stock purchase plan). Since July 1, 1995, 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. Holdings currently plans to continue using open market
purchases to meet share obligations under these plans.
On January 29, 1997, Holding's board of directors declared a quarterly
dividend on common shares of $0.30 per share payable March 1, 1997. The dividend
represents an annual rate of $1.20 per share.
MidAmerican:
- - -----------
MidAmerican currently has authority from the Federal Energy Regulatory
Commission (FERC) to issue short-term debt in the form of commercial paper and
bank notes aggregating $400 million. As of December 31, 1996, MidAmerican had a
$250 million revolving credit facility agreement and a $10 million line of
credit to provide short-term financing for utility operations. MidAmerican's
commercial paper borrowings, which totaled $162 million at December 31, 1996,
are supported by the revolving credit facility and the line of credit.
MidAmerican also has a revolving credit facility which is dedicated to provide
liquidity for its obligations under outstanding pollution control revenue bonds
that are periodically remarketed.
During 1996, MidAmerican redeemed all shares of its $1.7375 Series of
preferred securities. In October, MidAmerican reacquired $28 million of its
6.95% Series first mortgage bonds due 2025 and $3.5 million of its 7.45% Series
first mortgage bonds due 2023. In December 1996, MidAmerican issued $100 million
of 6 1/2% Medium-Term Notes due 2001 and $103 million of 7.98% Series
subordinated debt debentures to a subsidiary statutory business trust which in
turn issued $100 million of 7.98% Series A redeemable preferred securities.
Proceeds from these financings were used to redeem all $40 million of
MidAmerican's 8.15% Series first mortgage bonds due 2001 and the remaining $45.8
million of $1.7375 Series preferred securities mentioned above. The balance of
the proceeds was used to reduce commercial paper outstanding. Refer to Note (17)
for more discussion on Series A preferred securities.
MidAmerican currently has regulatory authority to issue an additional $300
million of preferred securities and long-term debt, including its medium-term
note program. It is management's intent to refinance certain MidAmerican debt
securities with additional issuances of unsecured debt and preferred securities
of a subsidiary trust as market conditions allow.
As of December 31, 1996, MidAmerican had $449 million of long-term debt
maturities and sinking fund requirements for 1997 through 2001.
Credit Ratings -
MidAmerican's access to external capital and its cost of capital are
influenced by the credit ratings of its securities. MidAmerican's credit ratings
as of January 24, 1997, are shown in the table below. The ratings reflect only
the views of such rating agencies, and each rating should be evaluated
independently of any other rating. Generally, rating agencies base their ratings
on information furnished to them by the issuing company and on investigation,
studies and assumptions by the rating agencies. There is no assurance that any
particular rating will continue for any given period of time or that it will not
be changed or withdrawn entirely if in the
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<PAGE>
judgment of the rating agency circumstances so warrant. Such ratings are not a
recommendation to buy, sell or hold securities.
<TABLE>
<CAPTION>
Moody's
Investors Standard
Service & Poor's
--------- --------
<S> <C> <C>
Mortgage Bonds ............ A2 A+
Unsecured Medium-Term Notes A3 A
Preferred Stocks .......... a3 A
Commercial Paper .......... P-1 A-1
</TABLE>
The following is a summary of the meanings of the ratings shown above and
the relative rank of MidAmerican's rating within each agency's classification
system.
Moody's top four bond ratings (Aaa, Aa, A and Baa) are generally considered
"investment grade." Obligations which are rated "A" possess many favorable
investment attributes and are considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment sometime in
the future. A numerical modifier ranks the security within the category with a
"1" indicating the high end, a "2" indicating the mid-range and a "3" indicating
the low end of the category. Standard & Poor's top four bond ratings (AAA, AA, A
and BBB) are considered "investment grade". Debt rated "A" has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in economic conditions than debt in higher rated
categories. Standard & Poor's may use a plus (+) or minus (-) sign after ratings
to designate the relative position of a credit within the rating category.
Ratings of preferred stocks are an indication of a company's ability to pay
the preferred dividend and any sinking fund obligations on a timely basis.
Moody's top four preferred stock ratings (aaa, aa, a and baa) are generally
considered "investment grade". Moody's "a" rating is considered to be an upper
medium grade preferred stock. Earnings and asset protection are expected to be
maintained at adequate levels in the foreseeable future. Standard & Poor's top
four preferred stock ratings (AAA, AA, A and BBB) are considered "investment
grade". Standard & Poor's "A" rating indicates adequate earnings and asset
protection.
Moody's top three commercial paper ratings (P-1, P-2 and P-3) are generally
considered "investment grade". Issuers rated "P-1" have a superior ability for
repayment of senior short-term debt obligations and repayment ability is often
evidenced by a conservative structure, broad margins in earnings coverage of
fixed financial charges and well established access to a range of financial
markets and assured sources of alternate liquidity. Standard & Poor's commercial
paper ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity less than 365 days. The top three Standard &
Poor's commercial paper ratings (A-1, A-2 and A-3) are considered "investment
grade". Issues rated "A-1" indicate that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety are denoted with a plus (+) sign designation.
Preferred Dividends -
Preferred dividends include net gains or losses on the reacquisition of
MidAmerican preferred shares. For 1996 and 1994, preferred dividends include
losses on reacquisition totaling $1.6 million and $0.3 million, respectively.
Preferred dividends, excluding the losses on reacquisition, decreased from the
1994 amount due to the redemption of three series of preferred securities in
December 1994. A change in the preferred dividend payment date following the
merger compared to that of a predecessor company resulted in a one-time
reduction in 1995 of the preferred dividend amount.
-41-
<PAGE>
Holdings:
- - --------
Continuing operations of MidAmerican Capital currently have unsecured
revolving credit facilities in the amount of $114 million. In January 1997,
MidAmerican Capital paid off the $90 million outstanding under the revolving
credit facilities with proceeds from the sale transaction with KCS. Another $100
million revolving credit facility related to discontinued operations was
terminated in January 1997, and the $84 million outstanding was paid off. In
addition, MidAmerican Capital terminated two $32 million
floating-rate-to-fixed-interest-rate swaps related to amounts outstanding under
one of the revolving credit facilities.
Excluding the above January 1997 payments, MidAmerican Capital has $142
million of long-term debt maturities and sinking fund requirements for 1997
through 2001, of which $30 million is in 1997.
During the third quarter of 1996, Midwest Capital sold the Hub Tower, a
Des Moines office building, and retired approximately $25 million of long-term
debt which was supported by a guarantee from MidAmerican. Proceeds from the sale
provided most of the funds necessary to retire the debt. The deficiency was
funded by a $4.5 million capital contribution in extinguishment of the
guarantee. Midwest Capital currently has a $25 million line of credit with
MidAmerican.
OPERATING ACTIVITIES AND OTHER MATTERS
The Company continues to adjust to its strategies and operations for the
changes it expects in the electric utility industry. The merger that resulted in
MidAmerican and the reorganization of utility operations were some of the first
steps taken to better position the Company for competition. In June 1996,
MidAmerican filed an electric pricing proposal in Iowa and Illinois that it
believes benefits customers and is designed to allow MidAmerican to function
more effectively in a competitive environment. Refer to the following discussion
under the heading "Rate Matters" for the current status of those filings. As
mentioned under "Discontinued Operations" in the Results of Operations section,
the Company has been evaluating its nonregulated investments to determine the
best use of those assets to support the Company's objective of being a leading
regional provider of energy and complementary services. The Company continues to
seek opportunities to better position itself as the industry evolves.
Holdings:
- - --------
During 1996, the Company began to reevaluate its nonregulated investments.
Through the evaluation process, management will determine which investments fit
the Company's objectives and which should be divested. The method of divestiture
could include alternatives from finding an immediate buyer to holding the
investment until maturity. The Company holds approximately 70 different
investments within its MidAmerican Capital and Midwest Capital subsidiaries
which it is evaluating. In 1996, the evaluation of nonregulated investments
resulted in a $20.9 million reduction in earnings because of asset impairments
or a decision to pursue the sale of an investment at below its carrying value.
The process will continue for the next 18 to 24 months and could result in
additional losses if the Company decides to divest of investments for less than
carrying value.
MidAmerican:
- - -----------
Regulatory Evolution and Competition -
MidAmerican 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.
MidAmerican supports changes in the electric utility industry that will create a
more competitive environment for the entire electric industry, as long as
appropriate transitional steps are in place to accommodate moving from a
regulated cost-of-service industry to a competitive industry. Although these
anticipated changes may create opportunities, they will also create additional
challenges and risks for utilities.
-42-
<PAGE>
In December 1996, MidAmerican was selected from among 20 potential
suppliers to provide electric service for the Resale Power Group of Iowa (RPGI).
The RPGI includes 27 municipal utilities, a rural electric cooperative and an
investor-owned utility. Members of the RPGI serve nearly 27,000 retail customers
and purchase approximately 500,000 megawatt hours annually. Under the five-year
contract beginning January 1, 1999, MidAmerican will also offer electric system
maintenance services, energy efficiency services and economic development
assistance. Electricity to RPGI utilities presently is supplied by IES
Utilities. This opportunity provided MidAmerican valuable experience in the
evolving competitive electric market.
MidAmerican is a member of the Illinois Coalition for Responsible
Electricity Choice (the Coalition). The Coalition has produced draft legislation
(the Proposal) that would restructure Illinois' electric industry and allow
Illinois customers to choose their electric service provider. The Proposal is
designed to, among other things, balance tax and regulatory burdens; transition
the industry to a competitive electric marketplace in phases between the years
2000 and 2005; stabilize or reduce tariffed electric rates; provide for recovery
of prior mandated investments of the utilities; and increase flexibility for
utilities while providing for oversight of reliability and safety by the ICC.
MidAmerican expects the Proposal to be addressed by the Illinois legislature in
1997. The Illinois legislature previously passed laws allowing the filing of
alternative pricing plans by utilities and increased flexibility for agreements
with industrial customers.
In Iowa, the Iowa Utilities Board (IUB) initiated a formal inquiry
proceeding (Notice of Inquiry, Docket No. NOI-95-1) in 1995, titled "Emerging
Competition in the Electric Utility Industry," primarily as an information
gathering device. Since early in 1995, meetings have been held with a variety of
interested parties, and the IUB established an advisory panel of which
MidAmerican was a member. The IUB staff authored a report on the findings and
potential options for restructuring in December 1996. The IUB accepted the
report of its staff, as well as other information submitted in the case and
closed the docket. The IUB has not determined its future course of action. No
legislation has yet been introduced in Iowa to allow generation or retail
service competition.
The Energy Policy Act (EPAct) was enacted in 1992 to promote competition in
the wholesale electric market. In April 1996, the FERC issued final rules
(Orders 888 and 889) to direct the implementation of EPAct. In general, Orders
888 and 889, require public utilities and other transmission providers and users
to provide other companies the same transmission access, service and pricing
that they provide themselves. In compliance with Order 888, which was effective
July 9, 1996, MidAmerican has filed a pro forma open access transmission tariff
and is currently operating under it. In accordance with Order 889, which was
effective January 3, 1997, MidAmerican has separated its electric wholesale
marketing and transmission operation functions. Order 889 establishes standards
of conduct for this functional separation and further requires transmission
providers such as MidAmerican to either create or participate in an Open Access
Same Time Information System (OASIS). MidAmerican has elected to participate in
the Mid-Continent Area Power Pool OASIS. These developments assure that all
transmission customers of MidAmerican, including MidAmerican's own wholesale
marketing function, can obtain transmission information at the same time and can
request service on the same basis.
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 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. MidAmerican's electric and gas utility operations are
currently subject to the provisions of SFAS 71, but its applicability is
periodically reexamined. If a portion of MidAmerican's utility operations no
longer meets the criteria of SFAS 71, MidAmerican would be required to eliminate
from its balance sheet the assets and liabilities related to those operations
that resulted from actions of its regulators. Although the amount of such an
elimination would depend on the specific circumstances, a material adjustment to
earnings in the appropriate period could result from the discontinuance of SFAS
71. As of December 31, 1996, MidAmerican had $374 million of regulatory assets
in its Consolidated Balance Sheet. Refer to Note (1)(c) for more detail related
to regulatory assets.
-43-
<PAGE>
Energy Efficiency -
In May 1996, the Iowa legislature approved a bill enhancing energy
efficiency program flexibility, eliminating mandatory spending levels for energy
efficiency programs and allowing more timely recovery of energy efficiency
expenditures as determined by the IUB. The new legislation became effective July
1, 1996. Previously, electric and gas utilities in Iowa were required to spend
approximately 2% and 1.5%, respectively, of their annual Iowa jurisdictional
revenues on energy efficiency activities. MidAmerican expects final rules on the
implementation of the new legislation in the first half of 1997, following which
MidAmerican will seek approval to accelerate recovery of deferred and current
energy efficiency costs. MidAmerican received approval to collect and is
collecting a total of $14.3 million annually for previously deferred energy
efficiency costs. The Consolidated Balance Sheet as of December 31, 1996,
included approximately $24 million of such approved costs yet to be collected
from customers. In addition, MidAmerican had approximately $88 million of energy
efficiency costs deferred and included as regulatory assets in its December 31,
1996, Consolidated Balance Sheet for which recovery will be sought in future
energy efficiency filings.
Rate Matters -
On June 4, 1996, MidAmerican filed an electric pricing proposal in Iowa and
Illinois. The proposal would provide MidAmerican more flexibility to negotiate
with customers who have service options and to mitigate strandable costs. The
proposal would also reduce regulatory lag in implementing new tariff services
and prices. As part of the proposal, MidAmerican would reduce electric revenues,
on a graduated basis, to the level of approximately $25 million annually within
five years and eliminate automatic fuel adjustment clauses. The price
reductions, possible due to merger and restructuring related cost savings,
reduce price disparity within customer classes and would move MidAmerican closer
to prices that it believes can be sustained in a competitive market.
On October 15, 1996, the ICC ordered MidAmerican to reduce rates for its
Illinois customers by 10%, or $13.1 million annually, effective November 3,
1996, and commenced an investigation into the reasonableness of MidAmerican's
rates. MidAmerican negotiated termination of the proceeding to reduce its rates
and withdrew its electric pricing proposal. The negotiated termination of the
rate reduction proceeding left in place the initial $13.1 million annual
reduction and included a second price reduction of $2.4 million annually to be
effective on June 1, 1997.
On August 1, 1996, the Iowa Office of Consumer Advocate (OCA) requested the
IUB to order MidAmerican to reduce its Iowa electric rates by 10.7%, or
approximately $101 million annually, in electric revenues. On September 6, 1996,
the IUB docketed the OCA request and initiated an investigation into
MidAmerican's rates. The IUB also consolidated the investigation with
MidAmerican's alternative regulation and pricing proposal for purposes of the
hearings scheduled to begin in January 1997. Effective November 1, 1996,
MidAmerican reduced its electric rates in Iowa $8.7 million annually to the
levels in its pricing proposal filed on June 4, 1996.
In January 1997, a settlement agreement between MidAmerican, the OCA and
other parties to the proceeding was negotiated. The agreement, which includes a
number of characteristics of MidAmerican's pricing proposal, is subject to
approval by the IUB. The agreement includes a tracking mechanism to currently
recover the cost of Cooper capital improvements. After reflecting the effect of
the Cooper tracking mechanism, prices for residential customers would be reduced
approximately $20 million annually by June 1, 1998, including the November 1,
1996, reduction. Rates for commercial and industrial customers would be reduced
a total of $10 million annually by June 1, 1998, through pilot projects,
negotiated rates with individual customers and, if needed, a base rate reduction
effective June 1, 1998.
In addition, the agreement accepts MidAmerican's proposal to eliminate the
energy adjustment clause (EAC) which currently is the mechanism through which
fuel costs are collected from Iowa customers. The EAC flows the cost of fuel to
customers on a current basis, and thus, fuel costs have little impact on net
income. Prospectively, base rates for Iowa customers would include a factor for
recovery of a representative level of fuel costs. To the extent actual fuel
costs vary from that factor, pre-tax earnings would be impacted. The fuel cost
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<PAGE>
factor would be reviewed in February 1999 and adjusted prospectively if actual
fuel costs vary 15% above or below the agreed factor.
Under the agreement, if MidAmerican's return on common equity exceeds 12%,
then a sharing between customers and shareholders begins, and if it exceeds 14%,
then a portion of MidAmerican's share would be used for accelerated recovery of
certain regulatory assets. The agreement permits MidAmerican to file for
increased rates if the return falls below 9%. Other parties signing the
agreement are prohibited from filing for reduced rates prior to 2001 unless the
return, after reflecting credits to customers, exceeds 14%.
As of December 31, 1996, MidAmerican had a $2.6 million liability recorded
for the portion of its Iowa electric revenues between August 1, 1996, and
October 31, 1996, that were in excess of those included in the pricing proposal.
Environmental Matters -
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 27 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. MidAmerican has six wholly owned and five jointly owned coal-fired
generating stations, which represent approximately 65% of MidAmerican's electric
generating capability. Essentially all utility generating units are subject to
CAA provisions which address continuous emission monitoring, permit requirements
and fees, and emission of certain substances. By the year 2000, some Company
coal-fired generating units will be required to install emissions monitoring
system replacements or upgrades. Under current regulations, MidAmerican does not
anticipate its construction costs for the installation of emissions monitoring
system upgrades to exceed $8 million for 1997 through 2000.
ACCOUNTING ISSUES
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry regarding
the recognition, measurement and classification of nuclear decommissioning costs
in the financial statements. In response to these questions, the FASB has issued
an Exposure Draft, "Accounting for Certain Liabilities Related to Closure or
Removal of Long-Lived Assets," which addresses 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
1996, 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. Due to the continuing evolution of the exposure draft, the Company is
uncertain as to the impact on its results of operations and financial position.
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<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES
Electric utility .................................... $ 1,099,008 $ 1,094,647 $ 1,021,660
Gas utility ......................................... 536,753 459,588 492,015
Nonregulated ........................................ 236,851 95,106 117,550
----------- ----------- -----------
1,872,612 1,649,341 1,631,225
----------- ----------- -----------
OPERATING EXPENSES
Utility:
Cost of fuel, energy and capacity ............... 234,317 230,261 213,987
Cost of gas sold ................................ 345,014 279,025 326,782
Other operating expenses ........................ 350,174 399,648 354,190
Maintenance ..................................... 88,621 85,363 101,275
Depreciation and amortization ................... 164,592 158,950 154,229
Property and other taxes ........................ 92,630 96,350 94,990
----------- ----------- -----------
1,275,348 1,249,597 1,245,453
----------- ----------- -----------
Nonregulated:
Cost of sales ................................... 218,256 70,209 84,515
Other ........................................... 35,370 37,181 36,765
----------- ----------- -----------
253,626 107,390 121,280
----------- ----------- -----------
Total operating expenses ........................ 1,528,974 1,356,987 1,366,733
----------- ----------- -----------
OPERATING INCOME .................................... 343,638 292,354 264,492
----------- ----------- -----------
NON-OPERATING INCOME
Interest income ..................................... 4,012 4,485 4,334
Dividend income ..................................... 16,985 16,954 17,087
Realized gains and losses on securities, net ........ 1,895 688 7,635
Other, net .......................................... (4,020) (10,467) 4,316
----------- ----------- -----------
18,872 11,660 33,372
----------- ----------- -----------
FIXED CHARGES
Interest on long-term debt .......................... 102,909 105,550 101,267
Other interest expense .............................. 10,941 9,449 6,446
Allowance for borrowed funds ........................ (4,212) (5,552) (3,955)
Preferred dividends of subsidiaries ................. 10,689 8,059 10,551
----------- ----------- -----------
120,327 117,506 114,309
----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 242,183 186,508 183,555
INCOME TAXES ........................................ 98,422 66,803 60,457
----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS ................... 143,761 119,705 123,098
DISCONTINUED OPERATIONS
Income from operations (net of income taxes)......... 2,117 3,059 856
Loss on disposal (net of income taxes) .............. (14,832) -- (3,765)
----------- ----------- -----------
(12,715) 3,059 (2,909)
----------- ----------- -----------
NET INCOME .......................................... $ 131,046 $ 122,764 $ 120,189
=========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING ................... 100,752 100,401 98,531
EARNINGS PER COMMON SHARE
Continuing operations ............................... $ 1.43 $ 1.19 $ 1.25
Discontinued operations ............................. (0.13) 0.03 (0.03)
----------- ----------- -----------
Earnings per average common share ................... $ 1.30 $ 1.22 $ 1.22
=========== =========== ===========
DIVIDENDS DECLARED PER SHARE ........................ $ 1.20 $ 1.18 $ 1.17
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-46-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net Income .................................................. $ 131,046 $ 122,764 $ 120,189
Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization .................. 190,511 181,636 179,918
Net increase (decrease) in deferred income taxes and
investment tax credit, net .............................. 22,142 (961) 34,103
Amortization of other assets .............................. 20,541 19,630 9,731
Capitalized cost of real estate sold ...................... 3,568 1,744 3,723
Loss (income) from discontinued operations ................ 12,715 (3,059) 2,909
Gain on sale of securities, assets and other investments .. (10,132) (1,050) (6,409)
Other-than-temporary decline in value of investments ...... 15,566 17,971 1,791
Impact of changes in working capital, net of effects
from discontinued operations ............................ (53,752) (21,024) (6,917)
Other ..................................................... 19,218 19,369 10,831
--------- --------- ---------
Net cash provided ....................................... 351,423 337,020 349,869
--------- --------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................... (154,198) (190,771) (211,669)
Quad Cities Nuclear Power Station decommissioning trust fund (8,607) (8,636) (9,044)
Deferred energy efficiency expenditures ..................... (20,390) (35,841) (28,221)
Nonregulated capital expenditures ........................... (55,788) (12,881) (9,095)
Purchase of securities ...................................... (198,947) (164,521) (113,757)
Proceeds from sale of securities ............................ 243,290 94,493 142,307
Proceeds from sale of assets and other investments .......... 33,285 34,263 6,433
Investment in discontinued operations ....................... (36,020) (9,752) (23,695)
Other investing activities, net ............................. 8,308 6,946 (7,957)
--------- --------- ---------
Net cash used ............................................. (189,067) (286,700) (254,698)
--------- --------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid ....................................... (120,770) (118,828) (114,924)
Issuance of long-term debt, net of issuance cost ............ 99,500 12,750 180,410
Retirement of long-term debt, including reacquisition cost .. (136,616) (110,351) (102,472)
Reacquisition of preferred shares ........................... (58,176) (10) (19,916)
Issuance of preferred shares, net of issuance cost........... 96,850 -- --
Increase (decrease) in MidAmerican Capital Company
unsecured revolving credit facility ....................... 44,500 95,000 (9,500)
Issuance of common shares ................................... -- 15,083 27,760
Net increase (decrease) in notes payable .................... (22,810) 60,300 (48,535)
--------- --------- ---------
Net cash used ............................................. (97,522) (46,056) (87,177)
--------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................... 64,834 4,264 7,994
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .............. 32,915 28,651 20,657
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR .................... $ 97,749 $ 32,915 $ 28,651
========= ========= =========
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................... $ 107,179 $ 116,843 $ 105,004
========= ========= =========
Income taxes paid ........................................... $ 85,894 $ 69,319 $ 50,713
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-47-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF DECEMBER 31
1996 1995
---------- -----------
<S> <C> <C>
ASSETS
UTILITY PLANT
Electric .............................................................. $4,010,847 $3,881,699
Gas ................................................................... 723,491 695,741
---------- ----------
4,734,338 4,577,440
Less accumulated depreciation and amortization ........................ 2,153,058 2,027,055
---------- ----------
2,581,280 2,550,385
Construction work in progress ......................................... 49,305 104,164
---------- ----------
2,630,585 2,654,549
---------- ----------
POWER PURCHASE CONTRACT ............................................... 190,897 212,148
---------- ----------
INVESTMENT IN DISCONTINUED OPERATIONS ................................. 196,356 177,300
---------- ----------
CURRENT ASSETS
Cash and cash equivalents ............................................. 97,749 32,915
Receivables, less reserves of $2,093 and $2,296, respectively.......... 312,930 228,128
Inventories ........................................................... 90,864 85,235
Other ................................................................. 11,696 18,428
---------- ----------
513,239 364,706
---------- ----------
INVESTMENTS ........................................................... 628,791 646,456
---------- ----------
OTHER ASSETS .......................................................... 399,415 414,938
---------- ----------
TOTAL ASSETS .......................................................... $4,559,283 $4,470,097
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity ........................................... $1,239,946 $1,225,715
MidAmerican preferred securities, not subject to mandatory redemption . 31,769 89,945
Preferred securities, subject to mandatory redemption:
MidAmerican preferred securities ................................... 50,000 50,000
MidAmerican-obligated preferred securities of subsidiary trust .....
holding solely MidAmerican junior subordinated debentures ........ 100,000 --
Long-term debt (excluding current portion) ............................ 1,395,103 1,403,322
---------- ----------
2,816,818 2,768,982
---------- ----------
CURRENT LIABILITIES
Notes Payable ......................................................... 161,990 184,800
Current portion of long-term debt...................................... 79,598 65,295
Current portion of power purchase contract ............................ 13,718 13,029
Accounts payable ...................................................... 169,806 122,055
Taxes accrued ......................................................... 82,254 81,898
Interest accrued ...................................................... 28,513 30,635
Other ................................................................. 30,229 46,267
---------- ----------
566,108 543,979
---------- ----------
OTHER LIABILITIES
Power purchase contract ............................................... 97,504 112,700
Deferred income taxes ................................................. 752,336 724,587
Investment tax credit ................................................. 88,842 95,041
Other ................................................................. 237,675 224,808
---------- ----------
1,176,357 1,157,136
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES .................................. $4,559,283 $4,470,097
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-48-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AS OF DECEMBER 31
1996 1995
-------------------- --------------------
(In thousands, except share amounts)
<S> <C> <C> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common shares, no par; 350,000,000 shares authorized;
100,751,713 and 100,751,713 shares outstanding, respectively.......... $ 801,431 $ 801,227
Retained earnings...................................................... 440,971 430,589
Valuation allowance, net of income taxes............................... (2,456) (6,101)
---------- ----------
1,239,946 44.0% 1,225,715 44.3%
---------- ------ ---------- ------
MIDAMERICAN PREFERRED SECURITIES (100,000,000 SHARES AUTHORIZED)
Cumulative shares outstanding not subject to mandatory redemption:
$3.30 Series, 49,523 shares........................................ 4,952 4,952
$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, zero and 2,400,000 shares, respectively............ -- 58,176
---------- ----------
31,769 1.1% 89,945 3.2%
---------- ------ ---------- ------
Cumulative 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
---------- ----------
50,000 1.8% 50,000 1.8%
---------- ------ ---------- ------
MIDAMERICAN-OBLIGATED PREFERRED SECURITIES
MidAmerican-obligated mandatorily redeemable cumulative preferred
securities of subsidiary trust holding solely MidAmerican junior
subordinated debentures:
7.98% Series, 4,000,000 and zero shares, respectively............. 100,000 3.6% -- 0.0%
---------- ------ ---------- ------
LONG-TERM DEBT
MidAmerican Mortgage bonds:
5.875% Series, due 1997............................................ -- 22,000
Adjustable Rate Series (8.8%), due 1997............................ -- 25,000
5.05% Series, due 1998............................................. 49,100 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
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............................................. 26,500 30,000
8.125% Series, due 2023............................................ 100,000 100,000
6.95% Series, due 2025............................................. 21,500 50,000
MidAmerican Pollution control revenue obligations:
5.15% to 5.75% Series, due periodically through 2003............... 8,424 10,984
5.95% Series, due 2023 (secured by general mortgage bonds)......... 29,030 29,030
</TABLE>
The accompanying notes are an integral part of these statements.
-49-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AS OF DECEMBER 31
1996 1995
-------------------- --------------------
(In thousands)
<S> <C> <C> <C> <C>
LONG-TERM DEBT (CONTINUED)
Variable Rate Series:
Due 2016 and 2017 (3.5% and 5.0%, respectively)................ $ 37,600 $ 37,600
Due 2023 (secured by general mortgage
bonds, 3.5% and 5.05%, respectively)...................... 28,295 28,295
Due 2023 (3.5% and 5.1%, respectively)......................... 6,850 6,850
Due 2024 (3.6% and 5.25%, respectively)........................ 34,900 34,900
Due 2025 (3.5% and 5.1%, respectively)......................... 12,750 12,750
MidAmerican Notes:
8.75% Series, due 2002............................................ 240 240
6.5% Series, due 2001............................................. 100,000 --
6.4% Series, due 2003 through 2007................................ 2,000 2,000
Obligation under capital lease.................................... 2,218 2,218
Unamortized debt premium and discount, net........................ (4,009) (4,126)
---------- ----------
Total utility.................................................. 1,085,398 1,107,741
---------- ----------
Nonregulated Subsidiaries Notes:
10.20% Series, due 1996 and 1997.................................. -- 30,000
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
8% Series, due annually through 2004.............................. 205 581
Borrowings under unsecured revolving credit facility (6.2% and
6.3% respectively)............................................. 64,000 64,000
Borrowings under unsecured revolving credit facility
(6.1% and 6.4%, respectively).................................. 26,000 66,000
Borrowings under unsecured revolving credit facility (6.1%)....... 84,500 --
---------- ----------
Total Nonregulated Subsidiaries................................ 309,705 295,581
---------- ----------
1,395,103 49.5% 1,403,322 50.7%
----------- ------ ---------- ------
TOTAL CAPITALIZATION.................................................. $2,816,818 100.0% $2,768,982 100.0%
========== ====== ========== ======
</TABLE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31
1996 1995 1994
-------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C>
BEGINNING OF YEAR.................................................... $430,589 $426,683 $421,358
-------- -------- --------
NET INCOME........................................................... 131,046 122,764 120,189
-------- -------- --------
DEDUCT (ADD):
Dividends declared on common shares of $1.20, $1.18 and
$1.17 per share, respectively...................................... 120,770 118,828 114,924
Other................................................................ (106) 30 (60)
-------- -------- --------
120,664 118,858 114,864
-------- -------- --------
END OF YEAR.......................................................... $440,971 $430,589 $426,683
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-50-
<PAGE>
MIDAMERICAN ENERGY HOLDINGS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) MERGER AND FORMATION OF THE COMPANY:
MidAmerican Energy Holdings Company (Company or Holdings) is a holding
company for MidAmerican Energy Company (MidAmerican), MidAmerican Capital
Company (MidAmerican Capital) and Midwest Capital Group, Inc. (Midwest Capital).
On April 24, 1996, MidAmerican shareholders approved a proposal to form Holdings
as a holding company for MidAmerican and its subsidiaries, MidAmerican Capital
and Midwest Capital. Effective December 1, 1996, each share of MidAmerican
common stock was exchanged for one share of Holdings common stock. As part of
the transaction, MidAmerican distributed the capital stock of MidAmerican
Capital and Midwest Capital to Holdings.
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.
(Midwest Resources) and its utility subsidiary, Midwest Power Systems Inc.
(Midwest Power). 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 Midwest Resources and Iowa-Illinois was converted into one share
and 1.47 shares, respectively, of MidAmerican common stock, no par value. The
merger was accounted for as a pooling-of-interest and the financial statements
included herein are presented as if the merger and the formation of the holding
company had occurred as of the earliest period shown.
(B) CONSOLIDATION POLICY AND PREPARATION OF FINANCIAL STATEMENTS:
The accompanying Consolidated Financial Statements include the Company and
its wholly owned subsidiaries, MidAmerican, MidAmerican Capital 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:
MidAmerican'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). MidAmerican'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.
Statement of Financial Accounting Standards (SFAS) No. 71 sets forth
accounting principles for 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. A
possible consequence of the changes in the utility industry is the discontinued
applicability of SFAS 71. MidAmerican's electric and gas utility operations are
currently subject to the provisions of SFAS 71, but its applicability is
periodically reexamined. If a portion of MidAmerican's utility operations no
longer meets the criteria of SFAS 71, MidAmerican would be required to eliminate
from its balance sheet
-51-
<PAGE>
the regulatory assets and liabilities related to those operations that resulted
from actions of its regulators. Although the amount of such an elimination would
depend on the specific circumstances, a material adjustment to earnings in the
appropriate period could result from the discontinuance of SFAS 71. The
following regulatory assets, primarily included in Other Assets in the
Consolidated Balance Sheets, represent probable future revenue to MidAmerican
because these costs are expected to be recovered in charges to utility customers
(in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred income taxes ............................ $140,649 $144,257
Energy efficiency costs .......................... 112,244 101,541
Debt refinancing costs ........................... 40,230 44,370
FERC Order 636 transition costs .................. 25,033 40,824
Environmental costs .............................. 22,577 23,076
Retirement benefit costs ......................... 11,025 15,354
Enrichment facilities decommissioning ............ 11,089 8,970
Unamortized costs of retired plant ............... 8,953 11,618
Other ............................................ 2,655 7,396
-------- --------
Total ....................................... $374,455 $397,406
======== ========
</TABLE>
(D) REVENUE RECOGNITION:
Revenues are recorded as services are rendered to customers. MidAmerican
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 $70.1 million and $61.0 million at December 31, 1996 and 1995, respectively,
and are included in Receivables on the Consolidated Balance Sheets.
The majority of MidAmerican's electric and gas sales are subject to
adjustment clauses. These clauses allow MidAmerican 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. See Note 8 for a
discussion of a proposed Iowa rate settlement that would impact the electric
adjustment clause.
(E) DEPRECIATION AND AMORTIZATION:
MidAmerican'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:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Electric.......... 3.8% 3.9% 3.8%
Gas............... 3.7% 3.7% 3.6%
</TABLE>
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.
-52-
<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>
1996 1995
-------- --------
<S> <C> <C>
Investments:
Marketable securities ....................... $219,890 $270,162
Equipment Leases ............................ 89,791 90,729
Nuclear decommissioning trust fund .......... 76,304 64,781
Energy projects ............................. 30,217 36,978
Special-purpose funds ....................... 44,932 47,046
Real estate ................................. 45,457 68,126
Corporate owned life insurance .............. 27,395 22,743
Coal transportation ......................... 18,623 12,703
Communications .............................. 56,333 16,332
Other ....................................... 19,849 16,856
-------- --------
Total ................................... $628,791 $646,456
======== ========
</TABLE>
Marketable securities generally consist of preferred stocks, common stocks
and mutual funds held by MidAmerican Capital. 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 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) 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.
-53-
<PAGE>
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>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Receivables ................. $(84,802) $(31,314) $ 19,343
Inventories ................. (5,629) 7,013 8,427
Other current assets ........ 6,732 (4,140) 6,907
Accounts payable ............ 47,751 15,903 (17,466)
Taxes accrued ............... 356 (9,755) (19,270)
Interest accrued ............ (2,122) (24) (362)
Other current liabilities ... (16,038) 1,293 (4,496)
-------- -------- --------
Total ..................... $(53,752) $(21,024) $ (6,917)
======== ======== ========
</TABLE>
(H) ACCOUNTING FOR LONG-TERM POWER PURCHASE CONTRACT:
Under a long-term power purchase contract with Nebraska Public Power
District (NPPD), expiring in 2004, MidAmerican purchases one-half of the output
of the 778-megawatt Cooper Nuclear Station (Cooper). The Consolidated Balance
Sheets include a liability for MidAmerican's fixed obligation to pay 50% of
NPPD's Nuclear Facility Revenue Bonds and other fixed liabilities. A like amount
representing MidAmerican's right to purchase power is shown as an asset.
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 MidAmerican 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.
(I) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121:
On January 1, 1996, the Company adopted SFAS No. 121 regarding accounting
for asset impairments. This statement 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 did
not have a material impact on the Company's results of operations or financial
position.
(2) LONG-TERM DEBT:
The Company's sinking fund requirements and maturities of long-term debt
for 1997 through 2001 are $80 million, $235 million, $190 million, $134
million and $125 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.
-54-
<PAGE>
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, 1996 and 1995. 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 Power electric utility property in
Iowa, or approximately 82% of gross utility plant, is pledged to secure mortgage
bonds.
MidAmerican Capital has $64 million and $50 million unsecured revolving
credit facility agreements which mature in 1998. Borrowings under these
agreements may be on a fixed rate, floating rate or competitive bid rate basis.
In addition, MidAmerican had a $100 million unsecured revolving credit facility
agreement which was retired in January of 1997. All subsidiary long-term
borrowings outstanding at December 31, 1996, are without recourse to Holdings.
(3) JOINTLY OWNED UTILITY PLANT:
Under joint plant ownership agreements with other utilities, MidAmerican
had undivided interests at December 31, 1996, in jointly owned generating plants
as shown in the table below.
The dollar amounts below represent MidAmerican'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
MidAmerican'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 $ 229 $ 126 $ 297 $ 160 $ 207 $ 530
Accumulated depreciation $ 79 $ 72 $ 154 $ 82 $ 96 $ 216
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 1997 are estimated to be $200
million, including $10 million for Quad Cities nuclear fuel and $9 million for
Cooper capital improvements. Nonregulated capital expenditures depend upon the
availability of investment opportunities and other factors. During 1997, such
expenditures are estimated to be approximately $39 million.
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<PAGE>
(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.
MidAmerican is evaluating 27 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 MidAmerican has any responsibility for remedial action. MidAmerican
is currently conducting field investigations at fifteen of the sites and has
completed investigations at three of the sites. In addition, MidAmerican is
currently removing contaminated soil at four of the sites, and has completed
removals at two of the sites. MidAmerican is continuing to evaluate several of
the sites to determine the future liability, if any, for conducting site
investigations or other site activity.
MidAmerican'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 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. MidAmerican's
present rates in Iowa provide for a fixed annual recovery of MGP costs.
MidAmerican 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 MidAmerican 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, which include
incremental direct costs of the remediation effort, costs for future monitoring
at sites and costs of compensation to employees for time expected to be spent
directly on the remediation effort, 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 MidAmerican'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 MidAmerican'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 1997 and is
not contingent upon the plant being in service. In addition, MidAmerican pays
one-half of NPPD's decommissioning funding related to Cooper.
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<PAGE>
The debt amortization and Department of Energy (DOE) enrichment plant
decontamination and decommissioning component of MidAmerican's payments to NPPD
were $14.5 million, $12.0 million and $10.8 million and the net interest
component was $3.6 million, $4.6 million and $5.4 million each for the years
1996, 1995 and 1994, respectively.
MidAmerican's payments for the debt principal portion of the power purchase
contract obligation and the DOE enrichment plant decontamination and
decommissioning payments are $13.7 million, $14.4 million, $15.0 million, $15.8
million and $16.6 million for 1997 through 2001, respectively, and $35.7 million
for 2002 through 2004.
(D) DECOMMISSIONING COSTS:
Based on site-specific decommissioning studies that include
decontamination, dismantling, site restoration and dry fuel storage cost,
MidAmerican's share of expected decommissioning costs for Cooper and Quad
Cities, in 1996 dollars, is $440 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 4.0%.
Although Cooper's operating license expires in 2014, the funding plan assumes
decommissioning will start in 2004, the currently anticipated plant shutdown
date.
As of December 31, 1996, MidAmerican's share of funds set aside by NPPD in
internal and external accounts for decommissioning was $62.9 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 6.3% 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 4.0% 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 MidAmerican's power
purchased costs. The Cooper decommissioning component of MidAmerican's payments
to NPPD were $9.9 million, $8.9 million and $8.9 million for the years 1996,
1995, and 1994, respectively, 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.
An external trust has been established for the investment of funds for
decommissioning the Quad Cities units. The total accrued balance as of December
31, 1996, was $76.3 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.
MidAmerican's provision for depreciation includes costs for Quad Cities
nuclear decommissioning of $8.6 million, $8.6 million and $9.1 million for 1996,
1995 and 1994, respectively. The provision charged to expense is equal to the
funding that is being collected in rates. The decommissioning funding component
of MidAmerican'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 MidAmerican'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 $3.5
million, $2.5 million and $2.2 million for 1996, 1995 and 1994, respectively.
(E) NUCLEAR INSURANCE:
MidAmerican 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
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<PAGE>
Commonwealth Edison (the joint owner and operator of Quad Cities), insurance
purchased directly by MidAmerican, 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, MidAmerican's maximum potential share of such an assessment
is $79.3 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, MidAmerican 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 MidAmerican and NPPD are covered for their
respective 50% obligation in the event of a loss totalling $2.75 billion.
MidAmerican 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 MidAmerican, 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 MidAmerican from industry mutual insurance companies for its obligations
associated with Cooper and Quad Cities combined total $13.8 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. MidAmerican'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) COAL AND NATURAL GAS CONTRACT COMMITMENTS:
MidAmerican has entered into supply and related transportation contracts
for its fossil-fueled generating stations. The contracts, with expiration dates
ranging from 1997 to 2003, require minimum payments of $68 million, $36 million,
$26 million, $19 million and $20 million for the years 1997 through 2001,
respectively, and $12 million for the total of the two 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 $91 million, $78 million, $43 million, $22 million and $19 million
for the years 1997 through 2001, respectively, and $82 million for the total of
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, 1996, was $25 million.
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<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>
1996 1995 1994
------------------- -------------------- --------------------
Amount Shares Amount Shares Amount Shares
-------- ------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year ... $801,227 100,752 $786,420 99,687 $759,120 97,782
Changes due to:
Issuance of common shares .. -- -- 15,083 1,065 27,760 1,911
Accrued stock options ...... 623 -- -- -- -- --
Capital stock expense ...... (419) -- (276) -- (377) --
Other ...................... -- -- -- -- (83) (6)
-------- ------- -------- ------- -------- ------
Balance, end of year ......... $801,431 100,752 $801,227 100,752 $786,420 99,687
======== ======= ======== ======= ======== ======
</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. MidAmerican 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>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefit earned during the period . $ 12,323 $ 9,817 $ 13,241
Interest cost on projected benefit obligation . 31,109 27,934 26,822
Decrease in pension costs from actual
return on assets ............................ (58,460) (63,593) (7,835)
Net amortization and deferral ................. 26,223 32,126 (21,030)
One-time charge ............................... -- 15,683 --
Regulatory deferral of incurred cost .......... 568 (10,470) (2,871)
-------- -------- --------
Net periodic pension cost ..................... $ 11,763 $ 11,497 $ 8,327
======== ======== ========
</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.
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 plans in which accumulated benefits exceed assets consist
entirely of nonqualified defined benefit plans. Although the plans have no
assets, the Company purchases corporate owned life insurance to provide funding
for the future cash requirements. The cash value of such insurance was $17.3
million and $14.5 million at December 31, 1996 and 1995, respectively. The
following table presents the funding status of the plans
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<PAGE>
and amounts recognized in the Consolidated Balance Sheets as of December 31
(dollars in thousands):
<TABLE>
<CAPTION>
Plans in Which:
--------------------------------------------------------
Assets Exceed Accumulated Accumulated Benefits Exceed
Benefits Assets
------------------------- ---------------------------
1996 1995 1996 1995
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation ................... $(298,237) $(293,985) $(36,574) $(32,429)
Nonvested benefit obligation ................ (3,454) (7,516) (1,925) (816)
--------- --------- -------- --------
Accumulated benefit obligation .............. (301,691) (301,501) (38,499) (33,245)
Provision for future pay increases .......... (79,790) (94,633) (8,733) (5,455)
--------- --------- -------- --------
Projected benefit obligation ................ (381,481) (396,134) (47,232) (38,700)
Plan assets at fair value ..................... 427,828 385,598 -- --
--------- -------- -------- --------
Projected benefit obligation (greater) less
than plan assets ......................... 46,347 (10,536) (47,232) (38,700)
Unrecognized prior service cost ............... 18,636 (15,866) 21,544 2,884
Unrecognized net loss (gain) .................. (63,173) 29,541 -- 9,431
Unrecognized net transition asset ............. (18,929) (21,521) -- --
Other ......................................... -- -- (12,811) (6,860)
--------- --------- -------- --------
Pension liability recognized in the
Consolidated Balance Sheets ................. $ (17,119) $ (18,382) $(38,499) $(33,245)
========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---- --------
<S> <C> <C>
Assumptions used were:
Discount rate............................... 7.5% 7.0%
Rate of increase in compensation levels..... 5.0% 5.0%
Weighted average expected long-term rate
of return on assets....................... 9.0% 8.9%
</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.
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<PAGE>
Net periodic postretirement benefit cost includes the following components
for the year ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
<S> <C> <C> <C>
Service cost-benefit earned during the period .................... $ 2,118 $ 1,583 $ 2,147
Interest cost .................................................... 8,341 7,185 7,221
Increase (decrease) in benefit cost from actual return on assets . (1,598) (2,090) 894
Amortization of unrecognized transition obligation ............... 5,291 5,291 5,442
Other ............................................................ (297) (262) (1,991)
One-time charge for early retirement ............................. -- 4,353 --
Regulatory recognition of incurred cost .......................... 5,112 5,140 (6,218)
-------- -------- -------
Net periodic postretirement benefit cost ......................... $ 18,967 $ 21,200 $ 7,495
======== ======== =======
</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>
1996 1995
--------- ---------
<S> <C> <C>
Accumulated present value of benefit obligations:
Retiree benefit obligation ............................... $ (78,935) $ (67,488)
Active employees fully eligible for benefits ............. (2,798) (5,904)
Other active employees ................................... (34,772) (33,949)
--------- ---------
Accumulated benefit obligation ........................... (116,505) (107,341)
Plan assets at fair value .................................. 36,783 26,916
--------- ---------
Accumulated benefit obligation greater than plan assets .... (79,722) (80,425)
Unrecognized net gain ...................................... (8,810) (13,880)
Unrecognized transition obligation ......................... 84,662 89,952
--------- ---------
Postretirement benefit liability recognized in the
Consolidated Balance Sheets .............................. $ (3,870) $ (4,353)
--------- =========
Assumptions used were:
Discount rate ............................................ 7.5% 7.0%
Weighted average expected long-term rate of return
on assets (after taxes)................................. 6.7% 6.4%
</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 11.0% in 1997, and that the rate of increase thereafter will decline
by 1.0% annually to an ultimate rate of 5.5% by the year 2002. For covered
individuals age 65 and older, it is assumed that health care costs will increase
by 8.0% in 1997, and that the rate of increase thereafter will decline by 1.0%
annually to an ultimate rate of 5.5% by the year 2000.
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<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 $1.3 million and the accumulated postretirement
benefit obligation would increase by $11.9 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 $4.4 million, $3.7 million
and $3.6 million for 1996, 1995 and 1994, 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>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Balance at year-end .............................. $161,990 $184,800 $124,500
Weighted average interest rate
on year-end balance............................... 5.4% 5.7% 6.1 %
Average daily amount outstanding
during the year................................... $151,318 $114,036 $105,728
Weighted average interest rate on average daily
amount outstanding during the year................ 5.5% 6.0% 4.4 %
</TABLE>
MidAmerican has authority from FERC to issue short-term debt in the form of
commercial paper and bank notes aggregating $400 million. As of December 31,
1996, MidAmerican had a $250 million revolving credit facility agreement and a
$10 million line of credit and Holdings had a $20 million line of credit.
MidAmerican's commercial paper borrowings are supported by the revolving credit
facility and the line of credit.
(8) RATE MATTERS:
On June 4, 1996, MidAmerican filed an electric pricing proposal in Iowa and
Illinois. The proposal would provide MidAmerican more flexibility to negotiate
with customers who have service options and mitigate strandable costs. The
proposal would also reduce regulatory lag in implementing new tariff services
and prices. As part of the proposal, MidAmerican would reduce electric revenues,
on a graduated basis, to the level of approximately $25 million annually within
five years and eliminate automatic fuel adjustment clauses. The price
reductions, possible due to merger and restructuring related cost savings,
reduce price disparity within customer classes and would move MidAmerican closer
to prices that it believes can be sustained in a competitive market.
On October 15, 1996, the ICC ordered MidAmerican to reduce rates for its
Illinois customers by 10%, or $13.1 million annually, effective November 3,
1996, and commenced an investigation into the reasonableness of MidAmerican's
rates. MidAmerican negotiated termination of the proceeding to reduce rates and
withdraw its electric pricing proposal. The negotiated termination of the rate
proceeding left in place the initial $13.1 million annual reduction and included
a second price reduction of $2.4 million to be effective on June 1, 1997.
On August 1, 1996, the Iowa Office of Consumer Advocate (OCA) requested the
IUB to order MidAmerican to reduce its Iowa electric rates by 10.7%, or
approximately $101 million annually, in electric revenues. On September 6,
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<PAGE>
1996, the IUB docketed the OCA request and initiated an investigation into
MidAmerican's rates. The IUB also consolidated the investigation with
MidAmerican's alternative regulation and pricing proposal for purposes of the
hearings scheduled to begin in January 1997. Effective November 1, 1996,
MidAmerican reduced its electric rates in Iowa $8.7 million annually to the
levels in its pricing proposal filed on June 4, 1996.
In January 1997, a settlement agreement between MidAmerican, the OCA and
other parties to the proceeding was negotiated. The agreement, which includes a
number of characteristics of MidAmerican's pricing proposal, is subject to
approval by the IUB. The agreement includes a tracking mechanism to currently
recover the cost of Cooper capital improvements. After reflecting the effect of
the Cooper tracking mechanism, prices for residential customers would be reduced
$20 million annually by June 1, 1998, including the November 1, 1996, reduction.
Rates for commercial and industrial customers would be reduced a total of $10
million annually by June 1, 1998, through pilot projects, negotiated rates with
individual customers and, if needed, a base rate reduction effective June 1,
1998.
In addition, the agreement accepts MidAmerican's proposal to eliminate the
energy adjustment clause (EAC) which currently is the mechanism through which
fuel costs are collected from Iowa customers. The EAC flows the cost of fuel to
customers on a current basis, and thus, fuel costs have little impact on net
income. Prospectively, base rates for Iowa customers would include a factor for
recovery of a representative level of fuel costs. To the extent actual fuel
costs vary from that factor, pre-tax earnings would be impacted. The fuel cost
factor would be reviewed in February 1999 and adjusted prospectively if actual
fuel costs vary 15% above or below the agreed factor.
Under the agreement, if MidAmerican's return on common equity exceeds 12%,
then a sharing between customers and shareholders begins, and if it exceeds 14%,
then a portion of MidAmerican's share would be used for accelerated recovery of
certain regulatory assets. The agreement permits MidAmerican to file for
increased rates if the return falls below 9%. Other parties signing the
agreement are prohibited from filing for reduced rates prior to 2001 unless the
return, after reflecting credits to customers, exceeds 14%.
As of December 31, 1996, MidAmerican had a $2.6 million liability recorded
for the portion of its Iowa electric revenues between August 1, 1996, and
October 31, 1996, that were in excess of those included in the pricing proposal.
(9) DISCONTINUED OPERATIONS:
In the third quarter of 1996, the Company announced the discontinuation of
certain nonstrategic businesses in support of its strategy of becoming a leading
regional energy and complementary services provider. In November of 1996, the
Company signed a definitive agreement with KCS Energy, Inc. (KCS) to sell an oil
and gas exploration and development subsidiary and completed the sale on January
3, 1997. The Company recorded an after-tax loss of $7.1 million for the
disposition in 1996. The Company has also announced its plan to divest a
subsidiary that developed and continues to operate a computerized information
system facilitating the real-time exchange of power in the electric industry.
The Company expects the disposition to occur during the first half of 1997 and
has recorded a $4.0 million estimated after-tax loss on disposal in the third
quarter of 1996. 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 the construction subsidiaries have
been sold but some remaining activity has been recorded in the periods reported.
In addition, in the third quarter of 1996 the Company received a final
settlement from the sale of a coal mining subsidiary which was reflected as a
discontinued operation by a predecessor company in 1982. The final settlement,
which resulted in an after-tax loss of $3.3 million, included the reacquisition
of preferred equity by the buyer and the settlement of reclamation reserves.
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<PAGE>
Proceeds received from the disposition of the oil and gas subsidiary
included $210 million in cash and 435,000 warrants to purchase KCS common stock.
The warrants were valued at $6 million. Proceeds received from the disposition
of the construction subsidiaries and the coal mining subsidiary settlement were
$4 million and $15 million, respectively. Net assets of the discontinued
operations are separately presented on the Consolidated Balance Sheets as
Investment in Discontinued Operations. Revenues from discontinued activities, as
well as the results of operations and the estimated loss on the disposal of
discontinued operations for the years ended December 31 are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES ................... $233,952 $81,637 $129,643
======== ======= ========
INCOME FROM OPERATIONS
Income before income taxes ......... $ 1,638 $ 4,704 $ 1,841
Income tax benefit (expense) ....... 479 (1,645) (985)
-------- ------- --------
Income from Operations ............. $ 2,117 $ 3,059 $ 856
======== ======= ========
LOSS ON DISPOSAL
Income (loss) before income taxes .. $ 9,047 $ -- $(11,576)
Income tax benefit (expense) ....... (23,879) -- 7,811
-------- ------- --------
Loss on Disposal ................... $(14,832) $ -- $ (3,765)
======== ======= ========
</TABLE>
(10) CONCENTRATION OF CREDIT RISK:
The Company's electric utility operations serve 555,000 customers in Iowa,
84,000 customers in western Illinois and 3,000 customers in southeastern South
Dakota. The Company's gas utility operations serve 480,000 customers in Iowa,
65,000 customers in western Illinois, 61,000 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, 1996, billed receivables from the Company's utility customers
totalled $146 million.
MidAmerican Capital has investments in preferred stocks of companies in the
utility industry. As of December 31, 1996, the total cost of these investments
was $132 million.
MidAmerican Capital has entered into leveraged lease agreements with
companies in the airline industry. As of December 31, 1996, the receivables
under these agreements totalled $37 million.
(11) PREFERRED SHARES:
During 1996, MidAmerican redeemed all shares of the $1.7375 Series of
preferred stock. The redemptions were made at a premium, which resulted in a
charge to net income of $1.6 million.
During 1994, MidAmerican redeemed all of its outstanding $4.36 Series,
$4.22 Series and $7.50 Series preferred shares. The redemptions were made at a
premium, which resulted in a charge to net income of $0.3 million.
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 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.
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<PAGE>
The total outstanding cumulative preferred stock of MidAmerican that is not
subject to mandatory redemption requirements may be redeemed at the option of
the Company at prices which, in the aggregate, total $31.8 million. The
aggregate total the holders of all preferred stock outstanding at December 31,
1996, are entitled to upon involuntary bankruptcy is $181.8 million plus accrued
dividends. Annual dividend requirements for all preferred stock outstanding at
December 31, 1996, total $12.3 million.
(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>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
UTILITY
Electric:
Operating revenues ........................ $ 1,099,008 $ 1,094,647 $ 1,021,660
Cost of fuel, energy and capacity ......... 234,317 230,261 213,987
Depreciation and amortization expense ..... 140,939 136,324 132,886
Other operating expenses .................. 424,594 459,344 438,811
----------- ----------- -----------
Operating income .......................... $ 299,158 $ 268,718 $ 235,976
=========== =========== ===========
Gas:
Operating revenues ........................ $ 536,753 $ 459,588 $ 492,015
Cost of gas sold .......................... 345,014 279,025 326,782
Depreciation and amortization expense ..... 23,653 22,626 21,343
Other operating expenses .................. 106,831 122,017 111,644
----------- ----------- -----------
Operating income .......................... $ 61,255 $ 35,920 $ 32,246
=========== =========== ===========
Operating income ............................ $ 360,413 $ 304,638 $ 268,222
Other income (expense) ...................... 3,998 (4,074) (3,712)
Fixed charges ............................... 96,753 92,036 87,157
----------- ----------- -----------
Income from continuing operations
before income taxes .................... 267,658 208,528 177,353
Income taxes ................................ 112,927 84,098 66,759
----------- ----------- -----------
Income from continuing operations ........... $ 154,731 $ 124,430 $ 110,594
=========== =========== ===========
Capital Expenditures-
Electric .................................. $ 116,243 $ 133,490 $ 164,870
Gas ....................................... 37,955 57,281 46,799
</TABLE>
-65-
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NONREGULATED
Revenues .................................. $ 236,851 $ 95,106 $ 117,550
Cost of sales ............................. 218,256 70,351 84,515
Depreciation
and amortization ....................... 4,854 6,010 6,935
Other operating expenses .................. 30,516 31,029 29,830
----------- ----------- -----------
Operating income (loss) ................... (16,775) (12,284) (3,730)
Other income .............................. 14,874 15,734 37,084
Fixed charges ............................. 23,574 25,470 27,152
----------- ----------- -----------
Income (loss) from continuing operations
before income taxes .................... (25,475) (22,020) 6,202
Income taxes .............................. (14,505) (17,295) (6,302)
----------- ----------- -----------
Income (loss) from continuing operations .. $ (10,970) $ (4,725) $ 12,504
=========== =========== ===========
Capital expenditures ...................... $ 55,788 $ 12,881 $ 9,095
ASSET INFORMATION
Identifiable assets:
Electric (a) ............................ $ 2,954,324 $ 2,947,832 $ 2,915,749
Gas (a) ................................. 692,993 699,539 683,704
Used in overall utility
operations ........................... 114,545 30,084 46,143
Nonregulated ............................ 601,065 615,342 557,052
Investment in discontinued operations ... 196,356 177,300 186,246
----------- ----------- -----------
Total assets .......................... $ 4,559,283 $ 4,470,097 $ 4,388,894
=========== =========== ===========
</TABLE>
(a) Utility plant less accumulated provision for depreciation, receivables,
inventories, 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.
-66-
<PAGE>
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.
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>
1996 1995
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial Instruments Owned by the Company:
Equity investments carried at cost ............ $ 95,339 $ 273,311 $ 58,972 $ 61,316
Financial Instruments Issued by the Company:
MidAmerican preferred securities; subject
to mandatory redemption .................... $ 50,000 $ 52,920 $ 50,000 $ 52,800
MidAmerican-obligated preferred securities;
subject to mandatory redemption ............ $ 100,000 $ 100,490 $ -- $ --
Long-term debt, including current portion ..... $1,474,701 $1,522,500 $1,468,617 $1,528,504
</TABLE>
Included in Equity Investments Carried at Cost is the Company's investment
in Class A and Class B Common Stock of McLeod, Inc. (McLeod). The Class B Common
Stock is convertible into Class A Common Stock. On June 14, 1996, McLeod made an
initial public offering (the IPO) of its Class A Common Stock. As part of an
investor agreement, the Company is prohibited from selling or otherwise
disposing of any of the common stock of McLeod for a period of two years from
the date of the IPO. The Company's investment in McLeod is considered restricted
stock and, as such, is recorded at cost. At December 31, 1996, the carrying
amount and fair value of this investment were $46.3 million and $218.3 million,
respectively.
-67-
<PAGE>
The amortized cost, gross unrealized gain and losses and estimated fair
value of investments in debt and equity securities at December 31 are as follows
(in thousands): 1996
<TABLE>
<CAPTION>
1996
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Available-for-sale:
Equity securities ........... $208,226 $ 4,883 $ (8,325) $204,784
Municipal bonds ............. 41,800 3,041 (356) 44,485
U.S. Government securities .. 26,814 137 (157) 26,794
Cash equivalents ............ 11,152 -- -- 11,152
-------- -------- -------- --------
$287,992 $ 8,061 $ (8,838) $287,215
======== ======== ======== ========
Held-to-maturity:
Equity securities ........... $ 6,435 $ -- $ (196) $ 6,239
Debt securities ............. 15,445 252 -- 15,697
-------- -------- -------- --------
$ 21,880 $ 252 $ (196) $ 21,936
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Available-for-sale:
Equity securities ........... $254,066 $ 7,132 $ (9,278) $251,920
Municipal Bonds ............. 38,098 3,228 (210) 41,116
U. S. Government securities . 18,402 355 -- 18,757
Cash equivalents ............ 13,000 -- -- 13,000
-------- -------- -------- --------
$323,566 $ 10,715 $ (9,488) $324,793
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>
At December 31, 1996, the debt securities held by the Company had the
following maturities (in thousands):
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Within 1 year ................. $ 1,361 $ 1,313 $ 72 $ 76
1 through 5 years ............. 23,847 23,765 10,262 10,420
5 through 10 years ............ 28,564 30,100 2,812 2,828
Over 10 years ................. 14,842 16,101 2,299 2,373
</TABLE>
During 1996, the Company sold a portion of its held-to-maturity securities
due to a significant deterioration in the issuer's credit worthiness. Such
securities had a carrying value of $4.8 million and proceeds from the sale were
$4.3 million.
During 1995, the Company reevaluated the classification of its classified
as held-to-maturity and available-for-sale securities in accordance with the
Financial Accounting Standards Board's Guide to Implementation of Statement 115
on
-68-
<PAGE>
Accounting for Certain Investments in Debt and Equity Securities. 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>
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Proceeds from sales ........ $ 250,772 $ 106,910 $ 135,769
Gross realized gains ....... 9,920 3,923 10,338
Gross realized losses ...... (7,950) (3,082) (5,234)
</TABLE>
(14) INCOME TAX EXPENSE:
Income tax expense from continuing operations includes the following for
the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Current
Federal ................... $ 80,165 $ 54,430 $ 20,874
State ..................... 22,100 13,330 5,500
--------- -------- --------
102,265 67,760 26,374
Deferred
Federal ................... 2,627 5,750 35,242
State ..................... (264) 1,470 5,796
--------- -------- --------
2,363 7,220 41,038
Investment tax credit, net ... (6,206) (8,177) (6,955)
--------- -------- --------
Total ..................... $ 98,422 $ 66,803 $ 60,457
========= ======== ========
</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>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets
Related to:
Investment tax credits .................. $ 61,349 $ 63,374
Unrealized losses ....................... 12,034 7,548
Pensions ................................ 17,648 17,938
AMT credit carry forward ................ 10,188 18,738
Nuclear reserves and decommissioning .... 8,233 8,367
Other ................................... 5,839 7,186
-------- --------
Total ................................ $115,291 $123,151
======== ========
</TABLE>
-69-
<PAGE>
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax liabilities
Related to:
Depreciable property .................... $575,495 $546,827
Income taxes recoverable
through future rates ................. 201,998 207,631
Energy efficiency ....................... 44,734 28,616
Reacquired debt ......................... 14,265 17,595
FERC Order 636 .......................... 9,023 16,073
Other ................................... 22,112 30,996
-------- --------
Total ................................. $867,627 $847,738
======== ========
</TABLE>
The following table is a reconciliation between the effective income tax
rate, before preferred stock dividends of subsidiary, indicated by the
Consolidated Statements of Income and the statutory federal income tax rate for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Effective federal and state
income tax rate ........................... 39% 34% 31%
Amortization of investment tax credit ....... 2 4 4
Resolution of prior year tax issue .......... -- -- 2
State income tax, net of federal income
tax benefit ............................... (6) (5) (4)
Dividends received deduction ................ 2 2 2
Other ....................................... (2) -- --
--- --- ---
Statutory federal income tax rate ........... 35% 35% 35%
=== === ===
</TABLE>
(15) INVENTORIES:
Inventories include the following amounts as of December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Materials and supplies, at average cost ... $32,222 $27,442
Coal stocks, at average cost .............. 32,293 32,163
Gas in storage, at LIFO cost .............. 23,915 21,883
Fuel oil, at average cost ................. 1,264 1,523
Other ..................................... 1,170 2,224
------- -------
Total ................................... $90,864 $85,235
======= =======
</TABLE>
At December 31, 1996 prices, the current cost of gas in storage was $61.3
million.
-70-
<PAGE>
(16) OTHER INFORMATION:
The Company 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>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Other-than-temporary declines in value
of investments and other assets ........... $(15,566) $(17,971) $(1,791)
IES merger costs ............................ (8,689) -- --
Special purpose fund income ................. 3,301 1,863 1,845
Energy efficiency carrying charges .......... 3,255 3,092 1,681
Gain on sale of cushion gas ................. 3,182 -- --
Incentive gas purchase plan award ........... 2,677 -- --
Agency gas sales, net ....................... 1,840 228 (2)
Gain on reacquisition of long-term debt ..... 1,105 -- --
Gain on sale of assets, net ................. 974 8,570 4,468
MidAmerican merger costs .................... -- (4,624) (4,510)
Allowance for equity funds used
during construction ....................... -- 481 452
Income (loss) from equity method investments. 2,510 (312) 2,712
Other ....................................... 1,391 (1,794) (539)
-------- -------- -------
Total ..................................... $ (4,020) $(10,467) $ 4,316
======== ======== =======
</TABLE>
(17) MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
MIDAMERICAN ENERGY FINANCING I:
In December 1996, MidAmerican Energy Financing I (the Trust), a
wholly-owned statutory business trust of MidAmerican, issued 4,000,000 shares of
7.98% Series MidAmerican-obligated mandatorily redeemable preferred securities
(the Preferred Securities). The sole assets of the Trust are $103.1 million of
MidAmerican 7.98% Series A Debentures due 2045 (the Debentures). There is a full
and unconditional guarantee by MidAmerican of the Trust's obligations under the
Preferred Securities. MidAmerican has the right to defer payments of interest on
the Debentures by extending the interest payment period for up to 20 consecutive
quarters. If interest payments on the Debentures are deferred, distributions on
the Preferred Securities will also be deferred. During any deferral,
distributions will continue to accrue with interest thereon and MidAmerican may
not declare or pay any dividend or other distribution on, or redeem or purchase,
any of its capital stock.
The Debentures may be redeemed by MidAmerican on or after December 18,
2001, or at an earlier time if there is more than an insubstantial risk that
interest paid on the Debentures will not be deductible for federal income tax
purposes. If the Debentures, or a portion thereof, are redeemed, the Trust must
redeem a like amount of the Preferred Securities. If a termination of the Trust
occurs, the Trust will distribute to the holders of the Preferred Securities a
like amount of the Debentures unless such a distribution is determined not to be
practicable. If such determination is made, the holders of the Preferred
Securities will be entitled to receive, out of the assets of the trust after
satisfaction of its liabilities, a liquidation amount of $25 for each Preferred
Security held plus accrued and unpaid distributions.
-71-
<PAGE>
(18) UNAUDITED QUARTERLY OPERATING RESULTS:
<TABLE>
<CAPTION>
1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues .......................... $507,596 $391,466 $434,678 $538,872
Operating income ............................ 100,141 65,004 97,919 80,574
Income from continuing operations ........... 48,405 25,099 40,548 29,709
Income (loss) from discontinued operations .. 2,642 3,896 (17,992) (1,261)
Earnings on common stock .................... 51,047 28,995 22,556 28,448
Earnings per average common share:
Income from continuing operations ........... $ 0.48 $ 0.25 $ 0.40 $ 0.29
Income (loss) from discontinued operations .. 0.03 0.04 (0.18) (0.01)
-------- -------- -------- --------
Earnings per average common share ........... $ 0.51 $ 0.29 $ 0.22 $ 0.28
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues .......................... $447,985 $356,990 $420,002 $424,364
Operating income ............................ 77,069 53,925 98,225 63,135
Income from continuing operations ........... 34,947 23,634 35,458 25,666
Income from discontinued operations ......... 349 1,274 322 1,114
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 $ 0.35 $ 0.26
Income from discontinued operations ......... -- 0.01 0.01 0.01
-------- -------- -------- --------
Earnings per average common share ........... $ 0.35 $ 0.25 $ 0.36 $ 0.27
======== ======== ======== ========
</TABLE>
The quarterly data reflect seasonal variations common in the utility
industry.
-72-
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the preparation of the accompanying financial
statements which 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.
Stanley J. Bright
President and Chief Executive Officer
Philip G. Lindner
Senior Vice President and
Chief Financial Officer
-73-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To MidAmerican Energy Holdings Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of MidAmerican Energy Holdings Company
(an Iowa corporation) and subsidiaries, as of December 31, 1996 and 1995, and
the related consolidated statements of income, retained earnings and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements and the supplemental schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and supplemental schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MidAmerican Energy Holdings
Company and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in Item
14(a)2., are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These supplemental schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 24, 1997
-74-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
YEARS ENDED DECEMBER 31
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING REVENUES
Electric utility.............................................. $1,099,008 $1,094,647 $1,021,660
Gas utility................................................... 536,753 459,588 492,015
---------- ---------- ----------
1,635,761 1,554,235 1,513,675
---------- ---------- ----------
OPERATING EXPENSES
Cost of fuel, energy and capacity............................. 234,317 230,261 213,987
Cost of gas sold.............................................. 345,014 279,025 326,782
Other operating expenses...................................... 350,174 399,648 354,190
Maintenance................................................... 88,621 85,363 101,275
Depreciation and amortization................................. 164,592 158,950 154,229
Property and other taxes...................................... 92,630 96,350 94,990
Income taxes.................................................. 111,206 85,400 69,731
---------- ---------- ----------
1,386,554 1,334,997 1,315,184
---------- ---------- ----------
OPERATING INCOME.............................................. 249,207 219,238 198,491
---------- ---------- ----------
NON-OPERATING INCOME
Interest and dividend income.................................. 1,598 1,354 1,672
Non-operating income taxes.................................... (1,721) 1,302 2,972
Other, net.................................................... 2,400 (5,428) (5,384)
---------- ---------- ----------
2,277 (2,772) (740)
---------- ---------- ----------
FIXED CHARGES
Interest on long-term debt.................................... 79,434 80,133 73,922
Other interest expense........................................ 10,842 9,396 6,639
Preferred dividends of subsidiary trust....................... 288 -- --
Allowance for borrowed funds.................................. (4,212) (5,552) (3,955)
---------- ---------- ----------
86,352 83,977 76,606
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS............................. 165,132 132,489 121,145
INCOME (LOSS) FROM DISCONTINUED OPERATIONS.................... (10,161) (1,666) 9,595
---------- ---------- ----------
NET INCOME.................................................... 154,971 130,823 130,740
PREFERRED DIVIDENDS........................................... 10,401 8,059 10,551
---------- ---------- ----------
EARNINGS ON COMMON STOCK...................................... $ 144,570 $ 122,764 $ 120,189
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-75-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net Income..................................................... $ 154,971 $ 130,823 $ 130,740
Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization.................... 185,657 175,969 173,164
Net increase (decrease) in deferred income taxes and
investment tax credit, net................................ (3,111) 6,835 34,090
Amortization of other assets................................ 20,541 19,630 6,595
Loss (income) from discontinued operations.................. 10,161 1,666 (9,595)
(Gain) Loss on sale of assets and long term investments..... (6,104) -- --
Other-than-temporary decline in value of investments........ -- -- 2,872
Impact of changes in working capital........................ (58,371) (5,595) (9,220)
Other....................................................... 23,689 3,856 5,489
--------- --------- ---------
Net cash provided......................................... 327,433 333,184 334,135
--------- --------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures.............................. (154,198) (192,625) (211,669)
Quad Cities Nuclear Power Station decommissioning trust fund... (8,607) (8,636) (9,144)
Deferred energy efficiency expenditures........................ (20,390) (35,841) (28,174)
Nonregulated capital expenditures.............................. (2,970) -- (1,578)
Proceeds from sale of assets and other investments............. 11,620 -- --
Investment in discontinued operations.......................... 10,100 (47,968) 11,126
Other investing activities, net................................ 734 203 (1,284)
--------- --------- ---------
Net cash used............................................... (163,711) (284,867) (240,723)
--------- --------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid................................................. (131,171) (126,887) (125,475)
Issuance of long-term debt, net of issuance cost............... 99,500 14,604 152,792
Retirement of long-term debt, including reacquisition cost..... (72,111) (14,277) (95,639)
Reacquisition of preferred shares.............................. (58,176) (10) (19,916)
Issuance of preferred securities, net of issuance cost......... 96,850 -- --
Issuance of common shares...................................... -- 15,083 27,760
Net increase (decrease) in notes payable....................... (23,100) 60,300 (36,300)
--------- --------- ---------
Net cash used............................................... (88,208) (51,187) (96,778)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... 75,514 (2,870) (3,366)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................. 8,701 11,571 14,937
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $ 84,215 $ 8,701 $ 11,571
========= ========= ==========
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized...................... $ 80,881 $ 89,055 $ 72,835
========= ======== =========
Income taxes paid.............................................. $ 103,627 $ 90,102 $ 85,316
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
-76-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF DECEMBER 31
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
UTILITY PLANT
Electric.......................................................... $4,013,851 $3,884,702
Gas............................................................... 723,491 695,741
---------- ----------
4,737,342 4,580,443
Less accumulated depreciation and amortization.................... 2,154,505 2,027,994
---------- ----------
2,582,837 2,552,449
Construction work in progress..................................... 49,305 104,164
---------- ----------
2,632,142 2,656,613
---------- ----------
POWER PURCHASE CONTRACT........................................... 190,897 212,148
---------- ----------
INVESTMENT IN DISCONTINUED OPERATIONS............................. -- 288,147
---------- ----------
CURRENT ASSETS
Cash and cash equivalents......................................... 84,215 8,701
Receivables, less reserves of $1,845 and $2,214, respectively..... 253,944 198,930
Inventories....................................................... 90,864 83,553
Other............................................................. 7,776 16,894
---------- ----------
436,799 308,078
---------- ----------
INVESTMENTS....................................................... 118,344 99,326
---------- ----------
OTHER ASSETS...................................................... 396,471 411,889
---------- ----------
TOTAL ASSETS...................................................... $3,774,653 $3,976,201
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity....................................... $ 986,825 $1,225,715
MidAmerican preferred securities, not subject to mandatory
redemption.................................................... 31,769 89,945
Preferred securities, subject to mandatory redemption:
MidAmerican preferred securities............................... 50,000 50,000
MidAmerican-obligated preferred securities of subsidiary trust
holding solely MidAmerican junior subordinated debentures.. 100,000 --
Long-term debt (excluding current portion)........................ 1,086,955 1,109,298
---------- ----------
2,255,549 2,474,958
---------- ----------
CURRENT LIABILITIES
Notes Payable..................................................... 161,700 184,800
Current portion of long-term debt................................. 49,560 1,227
Current portion of power purchase contract........................ 13,718 13,029
Accounts payable.................................................. 122,974 116,431
Taxes accrued..................................................... 82,338 78,993
Interest accrued.................................................. 24,245 23,642
Other............................................................. 24,452 40,107
---------- ----------
478,987 458,229
---------- ----------
OTHER LIABILITIES
Power purchase contract........................................... 97,504 112,700
Deferred income taxes............................................. 616,567 617,168
Investment tax credit............................................. 88,842 95,041
Other............................................................. 237,204 218,105
---------- ----------
1,040,117 1,043,014
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $3,774,653 $3,976,201
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-77-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AS OF DECEMBER 31
1996 1995
------------------ -------------------
(In thousands, except share amounts)
<S> <C> <C> <C> <C>
COMMON SHAREHOLDERS'EQUITY
Common shares, no par; 350,000,000 shares authorized;
100,751,713 and 100,751,713 shares outstanding, respectively....... $ 563,579 $ 801,227
Retained earnings...................................................... 423,246 430,589
Valuation allowance, net of income taxes............................... -- (6,101)
----------- ----------
986,825 43.8% 1,225,715 49.5%
----------- ------ ---------- ------
PREFERRED SECURITIES (100,000,000 SHARES AUTHORIZED)
Cumulative shares outstanding not subject to mandatory redemption:
$3.30 Series, 49,523 shares........................................ 4,952 4,952
$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, zero and 2,400,000 shares, respectively............ -- 58,176
----------- -----------
31,769 1.4% 89,945 3.7%
----------- ------- ----------- ------
Cumulative 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
----------- ----------
50,000 2.2% 50,000 2.0%
----------- ------- ----------- ------
MIDAMERICAN-OBLIGATED PREFERRED SECURITIES
MidAmerican-obligated mandatorily redeemable cumulative
preferred securities of subsidiary trust holding solely
MidAmerican junior subordinated debentures:
7.98% series, 4,000,000 and zero shares, respectively............ 100,000 4.4% -- 0.0%
----------- ------- ----------- ------
LONG-TERM DEBT
Mortgage bonds:
5.875% Series, due 1997........................................... -- 22,000
Adjustable Rate Series (8.8%), due 1997........................... -- 25,000
5.05% Series, due 1998............................................ 49,100 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
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............................................ 26,500 30,000
8.125% Series, due 2023........................................... 100,000 100,000
6.95% Series, due 2025............................................ 21,500 50,000
Pollution control revenue obligations:
5.15% to 5.75% Series, due periodically through 2003.............. 8,424 10,984
5.95% Series, due 2023 (secured by general mortgage bonds)........ 29,030 29,030
</TABLE>
The accompanying notes are an integral part of these statements.
-78-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
AS OF DECEMBER 31
1996 1995
------------------ ------------------
(In thousands)
<S> <C> <C> <C> <C>
LONG-TERM DEBT (CONTINUED)
Variable Rate Series:
Due 2016 and 2017 (3.5% and 5.0%, respectively)............. $ 37,600 $ 37,600
Due 2023 (secured by general mortgage bonds,
3.5% and 5.05%, respectively)............................ 28,295 28,295
Due 2023 (3.5% and 5.1%, respectively)...................... 6,850 6,850
Due 2024 (3.6% and 5.25%, respectively)..................... 34,900 34,900
Due 2025 (3.5% and 5.1%, respectively)...................... 12,750 12,750
Notes:
8.75% Series, due 2002......................................... 240 240
6.5% Series, due 2001.......................................... 100,000 --
6.4% Series, due 2003 through 2007............................. 2,000 2,000
Obligation under capital lease................................. 3,775 3,775
Unamortized debt premium and discount, net..................... (4,009) (4,126)
---------- ----------
Total ............................................................ 1,086,955 48.2% 1,109,298 44.8%
---------- ------ ---------- ------
TOTAL CAPITALIZATION ............................................. $2,255,549 100.0% $2,474,958 100.0%
========== ====== ========== ======
</TABLE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31
1996 1995 1994
--------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C>
BEGINNING OF YEAR................................................. $ 430,589 $ 426,683 $ 421,358
--------- --------- ---------
NET INCOME........................................................ 154,971 130,823 130,740
--------- --------- ---------
DEDUCT (ADD):
(Gain) loss on reacquisition of preferred shares.................. 1,572 (5) 312
Dividends declared on preferred shares............................ 8,829 8,064 10,141
Dividends declared on common shares of $1.20, $1.18 and
$1.17 per share, respectively................................... 120,770 118,828 114,924
Dividend of Investment in Subsidiaries............................ 31,143 -- --
Other............................................................. -- 30 38
--------- --------- ---------
162,314 126,917 125,415
--------- --------- ---------
END OF YEAR....................................................... $ 423,246 $ 430,589 $ 426,683
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-79-
<PAGE>
MIDAMERICAN ENERGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) MERGER AND FORMATION OF HOLDING COMPANY:
MidAmerican Energy Company (MidAmerican or Company) 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 Power). 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 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.
On April 24, 1996, MidAmerican shareholders approved a proposal to form a
holding company, MidAmerican Energy Holdings Company (Holdings) for MidAmerican
and its subsidiaries, MidAmerican Capital Company (MidAmerican Capital) and
Midwest Capital Group, Inc. (Midwest Capital). Effective December 1, 1996, each
share of MidAmerican common stock was exchanged for one share of Holdings common
stock. As part of the transaction, MidAmerican distributed the capital stock of
MidAmerican Capital and Midwest Capital to Holdings. See Note (9) for additional
information regarding the formation of the holding company.
(B) CONSOLIDATION POLICY AND PREPARATION OF FINANCIAL STATEMENTS:
The accompanying Consolidated Financial Statements include the Company and
its wholly owned subsidiaries. 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:
Refer to Note 1(c) of Holdings' Notes to Consolidated Financial Statements
for information regarding the effects of regulation on the MidAmerican's
accounting policy.
(D) REVENUE RECOGNITION:
Refer to Note 1(d) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's revenue recognition accounting policy.
(E) DEPRECIATION AND AMORTIZATION:
Refer to Note 1(e) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's depreciation and amortization accounting
policy.
-80-
<PAGE>
(F) INVESTMENTS:
Investments include the following amounts as of December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Investments:
Nuclear decommissioning trust fund.. $ 76,304 $ 64,781
Corporate owned life insurance...... 27,395 22,743
Other............................... 14,645 11,802
-------- ---------
Total........................... $118,344 $ 99,326
======== ========
</TABLE>
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) 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>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Receivables.................. $(55,014) $(19,044) $ 19,111
Inventories.................. (7,311) 5,777 9,957
Other current assets ........ 9,118 (4,358) 5,536
Accounts payable............. 6,543 21,475 (19,452)
Taxes accrued................ 3,345 (8,586) (20,547)
Interest accrued............. 603 (289) 217
Other current liabilities.... (15,655) (570) (4,042)
-------- -------- --------
Total..................... $(58,371) $ (5,595) $ (9,220)
======== ======== ========
</TABLE>
MidAmerican distributed the capital stock of MidAmerican Capital and
Midwest Capital to Holdings. See Note (9) for additional information.
(H) ACCOUNTING FOR LONG-TERM POWER PURCHASE CONTRACT:
Refer to Note 1(h) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's accounting for the Cooper Nuclear
Station (Cooper) long-term power purchase contract.
(I) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121:
Refer to Note 1(I) of Holdings' Notes to Consolidated Financial Statements
for information regarding the adoption of Statement of Financial Accounting
Standards No. 121.
-81-
<PAGE>
(2) LONG-TERM DEBT:
The Company's sinking fund requirements and maturities of long-term debt
for 1997 through 2001 are $50 million, $126 million, $61 million, $111 million
and $101 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, 1996 and 1995. 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 Power electric utility property in
Iowa, or approximately 82% of gross utility property, is pledged to secure
mortgage bonds.
(3) JOINTLY OWNED UTILITY PLANT:
Refer to Note 3 of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's jointly owned utility plant.
(4) COMMITMENTS AND CONTINGENCIES:
(A) CAPITAL EXPENDITURES:
Utility construction expenditures for 1997 are estimated to be $200
million, including $10 million for Quad Cities nuclear fuel and $9 million for
Cooper capital improvements.
(B) ENVIRONMENTAL MATTERS:
Refer to Note 4(b) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's Environmental Matters.
(C) LONG-TERM POWER PURCHASE CONTRACT:
Refer to Note 4(c) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's commitment under the Cooper long-term
power purchase contract.
(D) DECOMMISSIONING COSTS:
Refer to Note 4(d) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's commitment for decommissioning of
nuclear facilities.
-82-
<PAGE>
(E) NUCLEAR INSURANCE:
Refer to Note 4(e) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's nuclear insurance coverage and the
potential assessments under such coverage.
(F) COAL AND NATURAL GAS CONTRACT COMMITMENTS:
Refer to Note 4(f) of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's commitment under various coal and
natural gas supply and transportation contracts.
(5) COMMON SHAREHOLDERS' EQUITY:
Common shares outstanding changed during the years ended December 31 as
shown in the table below (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------- -------------------
Amount Shares Amount Shares Amount Shares
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year....... $801,227 100,752 $786,420 99,687 $759,120 97,782
Changes due to:
Issuance of common shares........ -- -- 15,083 1,065 27,760 1,911
Accrued stock options............ 623 -- -- -- -- --
Capital stock expense .......... (391) -- (276) -- (377) --
Distribution of investment in
subsidiaries to Holdings..... (237,880) -- -- -- -- --
Other............................ -- -- -- -- (83) (6)
-------- ------- -------- ------- -------- ------
Balance, end of year............. $563,579 100,752 $801,227 100,752 $786,420 99,687
======== ======= ======== ======= ======== ======
</TABLE>
(6) RETIREMENT PLANS:
MidAmerican Energy has noncontributory defined benefit pension plans
covering employees of MidAmerican and its affiliates, MidAmerican Capital and
Midwest Capital. No detailed segregation of the data is available by subsidiary.
Employees of MidAmerican represent approximately 95% of the payroll covered
under these plans. Refer to Note 6 of Holdings' Notes to Consolidated Financial
Statements for detailed information regarding net periodic pension cost and a
schedule reconciling the funded status of the plan with the amount recorded on
the consolidated financial statements of Holdings. MidAmerican's net periodic
pension costs under the plans for its continuing operations the was $7.0
million, $11.4 million and $7.7 million for 1996, 1995 and 1994, respectively.
MidAmerican provides certain health care and life insurance benefits for
retired employees of MidAmerican and its affiliates, MidAmerican Capital and
Midwest Capital. No detailed segregation of the data is available by subsidiary.
Employees of MidAmerican represent approximately 99% of the participants covered
under these plans. Refer to Note 6 of Holdings' Notes to Consolidated Financial
Statements for detailed information regarding net periodic postretirement
benefit cost and a schedule reconciling the funded status of the plan with the
amount recorded on the consolidated financial statements of Holdings.
MidAmerican Energy's net periodic postretirement benefit costs under the plans
for its continuing operations the was $18.7 million, $21.1 million and $7.2
million for 1996, 1995 and 1994, respectively.
-83-
<PAGE>
(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>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance at year-end ................................... $161,700 $184,800 $124,500
Weighted average interest rate
on year-end balance.................................... 5.4% 5.7% 6.1%
Average daily amount outstanding
during the year........................................ $151,162 $114,036 $105,728
Weighted average interest rate
on average daily amount outstanding during the year.. 5.5% 6.0% 4.4 %
</TABLE>
MidAmerican has authority from FERC to issue short-term debt in the form of
commercial paper and bank notes aggregating $400 million. As of December 31,
1996, MidAmerican had a $250 million revolving credit facility agreement and a
$10 million line of credit. MidAmerican's commercial paper borrowings are
supported by the revolving credit facility and the line of credit.
(8) RATE MATTERS:
Refer to Note 8 of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's rate matters.
(9) DISCONTINUED OPERATIONS:
On April 24, 1996, MidAmerican shareholders approved a proposal to form
Holdings as a holding company for MidAmerican and its subsidiaries. Effective
December 1, 1996, each share of MidAmerican common stock was exchanged for one
share of Holdings common stock. As part of the transaction, MidAmerican
distributed the capital stock of MidAmerican Capital and Midwest Capital to
Holdings. The subsidiaries that were distributed to Holdings have been reflected
as discontinued operations.
In the third quarter of 1996 MidAmerican received a final settlement from
the sale of a coal mining subsidiary which was reflected as a discontinued
operation by a predecessor company in 1982. The final settlement, which resulted
in an after-tax loss of $3.3 million, includes the reacquisition of preferred
equity by the buyer and the settlement of reclamation reserves. Proceeds
received from the settlement were $15 million.
-84-
<PAGE>
Net assets of the discontinued operations are separately presented on the
Consolidated Balance Sheets as Investment in Discontinued Operations. Revenues
from discontinued activities, as well as the results of discontinued operations
for the years ended December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES.......................... $215,631 $176,743 $247,193
======== ======== ========
INCOME (LOSS) FROM OPERATIONS
Income (loss) before income taxes........ $ 12,588 $(17,317) $ (3,534)
Income tax benefit (expense)............. (19,457) 15,651 13,129
-------- -------- --------
Income (loss) from Operations............ $ (6,869) $ (1,666) $ 9,595
======== ======== ========
LOSS ON DISPOSAL
Loss before income taxes................. $ (5,579) $ -- $ --
Income tax benefit ...................... 2,287 -- --
-------- -------- --------
Loss on Disposal......................... $ (3,292) $ -- $ --
========= ======== ========
</TABLE>
(10) CONCENTRATION OF CREDIT RISK:
MidAmerican's electric utility operations serve 550,000 customers in Iowa,
84,000 customers in western Illinois and 3,000 customers in southeastern South
Dakota. MidAmerican's gas utility operations serve 480,000 customers in Iowa,
65,000 customers in western Illinois, 61,000 customers in southeastern South
Dakota and 4,000 customers in northeastern Nebraska. The largest communities
served by MidAmerican 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. MidAmerican's utility operations grant unsecured credit to
customers, substantially all of whom are local businesses and residents. As of
December 31, 1996, billed receivables from the MidAmerican's utility customers
totalled $146 million.
(11) PREFERRED SHARES:
Refer to Note 11 of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican's preferred shares.
-85-
<PAGE>
(12) SEGMENT INFORMATION:
Information related to segments of the MidAmerican's business is as follows
for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
UTILITY
Electric-
Operating revenues .................... $ 1,099,008 $ 1,094,647 $ 1,021,660
Cost of fuel, energy and capacity ..... 234,317 230,261 213,987
Depreciation and amortization expense . 140,939 136,324 132,886
Other operating expenses .............. 424,594 459,344 438,811
Income taxes .......................... 92,365 76,955 63,428
----------- ----------- -----------
Operating income ...................... $ 206,793 $ 191,763 $ 172,548
=========== =========== ===========
Gas-
Operating revenues .................... $ 536,753 $ 459,588 $ 492,015
Cost of gas sold ...................... 345,014 279,025 326,782
Depreciation and amortization expense . 23,653 22,626 21,343
Other operating expenses .............. 106,831 122,017 111,644
Income taxes .......................... 18,841 8,445 6,303
----------- ----------- -----------
Operating income ...................... $ 42,414 $ 27,475 $ 25,943
=========== =========== ===========
Operating income .......................... $ 249,207 $ 219,238 $ 198,491
Other income (expense) .................... 3,998 (4,074) (3,712)
Income taxes - other (benefit) ............ 1,721 (1,302) (2,972)
Fixed charges ............................. 86,352 83,977 76,606
----------- ----------- -----------
Income from continuing operations ......... $ 165,132 $ 132,489 $ 121,145
=========== =========== ===========
Capital Expenditures-
Electric .............................. $ 116,243 $ 135,344 $ 164,870
Gas ................................... 37,955 57,281 46,799
ASSET INFORMATION
Identifiable assets-
Electric (a) .......................... $ 2,955,881 $ 2,950,285 $ 2,917,444
Gas (a) ............................... 692,993 699,702 684,004
Used in overall utility operations .... 125,779 38,067 45,950
Investment in discontinued operations ..... -- 288,147 232,449
----------- ----------- -----------
Total assets .............................. $ 3,774,653 $ 3,976,201 $ 3,879,847
=========== =========== ===========
</TABLE>
(a) Utility plant less accumulated provision for depreciation, receivables,
inventories, nuclear decommissioning trust fund and regulatory assets.
-86-
<PAGE>
(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 MidAmerican'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 MidAmerican'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.
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.
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
available to MidAmerican 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>
1996 1995
----------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Financial Instruments Issued by MidAmerican:
MidAmerican preferred securities; subject
to mandatory redemption.................... $ 50,000 $ 52,920 $ 50,000 $ 52,800
MidAmerican-obligated preferred securities;
subject to mandatory redemption............ $ 100,000 $ 100,000 $ -- $ --
Long-term debt, including current portion..... $1,136,515 $1,177,792 $1,110,525 $1,158,900
</TABLE>
The amortized cost, gross unrealized gain and losses and estimated fair
value of investments held in the Quad Cities nuclear decommissioning trust fund
at December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1996
---------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Available-for-sale:
Municipal bonds...................... $ 41,800 $ 3,041 $ (356) $ 44,485
U.S. Government Securities........... 26,814 137 (157) 26,794
Cash equivalents..................... 5,025 -- -- 5,025
-------- ------- ------- --------
$ 73,639 $ 3,178 $ (513) $ 76,304
======== ======= ======= ========
</TABLE>
-87-
<PAGE>
<TABLE>
<CAPTION>
1995
----------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Available-for-sale:
Municipal Bonds...................... $ 38,098 $ 3,228 $ (210) $ 41,116
U.S. Government Securities........... 4,908 -- -- 4,908
Cash equivalents..................... 18,402 355 -- 18,757
-------- ------- ------- --------
$ 61,408 $ 3,583 $ (210) $ 64,781
======== ======= ======= ========
</TABLE>
At December 31, 1996, the debt securities held in the Quad Cities nuclear
decommissioning trust fund had the following maturities (in thousands):
<TABLE>
<CAPTION>
Available for Sale
--------------------
Amortized Fair
Cost Value
--------- -------
<S> <C> <C>
Within 1 year............... $ 1,361 $ 1,313
1 through 5 years........... 23,847 23,765
5 through 10 years.......... 28,564 30,100
Over 10 years............... 14,842 16,101
</TABLE>
The proceeds and the gross realized gains and losses on the disposition of
investments held in the Quad Cities nuclear decommissioning trust fund for the
years ended December 31, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
Proceeds from sales......... $4,106 $21,266 $2,214
Gross realized gains........ 92 165 2
Gross realized losses....... (17) (448) (85)
</TABLE>
(14) INCOME TAX EXPENSE:
Income tax expense from continuing operations includes the following for
the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Income taxes
Current
Federal................ $ 92,240 $60,312 $25,701
State.................. 23,798 16,950 5,870
------- ------- -------
116,038 77,262 31,571
Deferred
Federal................ 2,504 11,571 33,378
State.................. 583 1,094 7,668
-------- ------- -------
3,087 12,665 41,046
Investment tax credit, net.. (6,198) (5,829) (5,858)
-------- ------- -------
Total income tax expense.... $112,927 $84,098 $66,759
======== ======= =======
</TABLE>
-88-
<PAGE>
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>
1996 1995
--------- --------
<S> <C> <C>
Deferred tax assets
Related to:
Investment tax credits........................ $ 61,349 $ 63,374
Pensions...................................... 17,648 17,938
Nuclear reserves and decommissioning.......... 8,233 8,367
Other......................................... 5,839 7,322
-------- --------
Total...................................... $ 93,069 $ 97,001
======== ========
1996 1995
-------- --------
Deferred tax liabilities
Related to:
Depreciable property.......................... $422,770 $421,363
Income taxes recoverable through future rates. 201,998 207,631
Energy efficiency............................. 44,733 28,616
Reacquired debt............................... 14,265 17,595
FERC Order 636................................ 9,023 16,073
Other......................................... 16,847 22,891
-------- --------
Total...................................... $709,636 $714,169
======== ========
</TABLE>
The following table is a reconciliation between the effective income tax
rate, before preferred stock dividends of subsidiary, indicated by the
Consolidated Statements of Income and the statutory federal income tax rate for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Effective federal and state income tax rate..... 41% 39% 36%
Amortization of investment tax credit........... 2 3 3
Resolution of prior year tax issue.............. -- -- 2
State income tax, net of federal income
tax benefit................................... (6) (5) (4)
Other........................................... (2) (2) (2)
---- ---- ----
Statutory federal income tax rate............... 35% 35% 35%
==== ==== ====
</TABLE>
-89-
<PAGE>
(15) INVENTORIES:
Inventories include the following amounts as of December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Materials and supplies, at average cost.. $32,222 $26,586
Coal stocks, at average cost............. 32,293 32,163
Gas in storage, at LIFO cost............. 23,915 21,883
Fuel oil, at average cost................ 1,264 1,523
Other.................................... 1,170 1,398
------- -------
Total.................................... $90,864 $83,553
======= =======
</TABLE>
At December 31, 1996 prices, the current cost of gas in storage was $61.3
million.
(16) OTHER INFORMATION:
The Company completed a merger-related restructuring plan during 1995.
Other operating expenses in the Consolidated Statements of Income for 1995
includes $31.9 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>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
IES merger costs......................... $(8,689) $ $ -
Energy efficiency carrying charges....... 3,225 3,092 1,681
Gain on sale of cushion gas.............. 3,182 -- --
Incentive gas procurement plan award..... 2,677 -- --
Agency gas sales, net.................... 1,840 228 (2)
Donations................................ (1,271) (1,612) (1,336)
Gain on reacquisition of long-term debt.. 1,105 -- --
MidAmerican merger costs................. -- (4,624) (4,279)
Allowance for equity funds used
during construction.................... -- 481 452
Other.................................... 331 (2,993) (1,900)
------- ------- -------
Total.............................. $ 2,400 $(5,428) $(5,384)
======= ======= =======
</TABLE>
(17) MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF MIDAMERICAN ENERGY FINANCING I:
Refer to Note 17 of Holdings' Notes to Consolidated Financial Statements
for information regarding MidAmerican-Obligated Mandatorily Redeemable Preferred
Securities Of MidAmerican Energy Financing I.
-90-
<PAGE>
(18) AFFILIATED COMPANY TRANSACTIONS:
The companies identified as affiliates are wholly owned subsidiaries of
Holdings. The basis for these charges is provided for in service agreements
between MidAmerican and its affiliates. In the opinion of management, the
expenses between entities are fair and reasonable.
MidAmerican incurred charges for employee wages and benefits, insurance,
building rent, computer costs, administrative services, travel expense and
general and administrative expenses; including treasury, legal, shareholder
relations and accounting functions, on behalf of MidAmerican Capital and Midwest
Capital. Such charges were $9.3 million, $4.6 million and $3.4 million for 1996,
1995 and 1994, respectively.
MidAmerican leases office facilities and other properties from affiliates.
Total lease payments were approximately $0.3 million, $0.6 million and $0.6
million for 1996, 1995 and 1994, respectively.
MidAmerican leases unit trains from an affiliate for the transportation of
coal to MidAmerican's generating stations. Unit train costs, including
maintenance, were approximately $3.0 million, $3.0 million and $2.9 million for
1996, 1995 and 1994, respectively.
MidAmerican purchased natural gas from an affiliate. MidAmerican's costs of
gas related to these transactions was $0.2 million, $0.3 million and $1.9
million for 1996, 1995 and 1994, respectively.
(19) UNAUDITED QUARTERLY OPERATING RESULTS:
<TABLE>
<CAPTION>
1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Operating revenues ................................ $458,260 $352,198 $ 384,071 $ 441,232
Operating income .................................. 69,361 47,058 70,100 62,688
Income from continuing operations ................. 47,419 26,846 43,658 47,209
Income (loss) from discontinued operations ........ 6,105 4,333 (19,015) (1,584)
Earnings on common stock .......................... 51,047 28,995 22,556 41,972
1995 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- ---------
(In thousands)
Operating revenues ................................ $418,583 $338,607 $ 403,235 $ 393,810
Operating income .................................. 56,563 44,517 70,572 47,586
Income from continuing operations ................. 36,532 21,880 46,078 27,999
Income from discontinued operations ............... 1,045 5,310 (8,621) 600
Earnings on common stock .......................... 35,296 24,908 35,780 26,780
</TABLE>
The quarterly data reflect seasonal variations common in the utility industry.
-91-
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the preparation of the accompanying financial
statements which 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 MidAmerican are reflected fairly in the
statements. The statements have been audited by MidAmerican's independent public
accountants, Arthur Andersen LLP.
MidAmerican 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 MidAmerican's assets are properly accounted for and
safeguarded. MidAmerican'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 MidAmerican Energy Holdings Company Board of Directors, through its
Audit Committee comprised entirely of outside directors, meets regularly with
management, the internal auditors and Arthur Andersen LLP to discuss accounting,
auditing, internal control and financial reporting matters. MidAmerican'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.
Stanley J. Bright
President and Chief Executive Officer
Philip G. Lindner
Senior Vice President and
Chief Financial Officer
-92-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 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, 1996 and 1995, and the related
consolidated statements of income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements and the supplemental schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and supplemental schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MidAmerican Energy Company
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in Item
14(a)2., are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These supplemental schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 24, 1997
-93-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
UNAUDITED FIVE-YEAR FINANCIAL STATISTICS
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings per average common share --
Continuing operations:
Utility operations ................................... $ 1.54 $ 1.24 $ 1.12 $ 1.29 $ 0.82
Nonregulated activities .............................. (0.11) (0.05) 0.13 0.09 (0.03)
Discontinued operations ................................ (0.13) 0.03 (0.03) 0.01 0.05
--------- --------- --------- --------- ---------
Earnings per average common share ...................... $ 1.30 $ 1.22 $ 1.22 $ 1.39 $ 0.84
========= ========= ========= ========= =========
Average shares of common stock
outstanding (in thousands) ........................... 100,752 100,401 98,531 97,762 95,430
Return on average common equity (%) .................... 10.6 10.1 10.1 11.6 7.1
Cash dividends declared per common share ............... $ 1.20 $ 1.18 $ 1.17 $ 1.17 $ 1.28
Common dividend payout ratio (%) ....................... 92 97 96 84 152
Ratio of earnings to fixed charges --
Holdings ............................................. 3.3 2.8 2.8 2.8 1.9
MidAmerican........................................... 4.1 3.4 3.3 3.4 2.3
Ratio of earnings to fixed charges and Cooper
Nuclear Station debt service --
Holdings.............................................. 3.1 2.7 2.7 2.8 1.8
MidAmerican .......................................... 4.0 3.3 3.2 3.3 2.2
Quarterly earnings per average common share
outstanding --
1st quarter .......................................... $ 0.51 $ 0.35 $ 0.45 $ 0.44 $ 0.28
2nd quarter .......................................... 0.29 0.25 0.22 0.22 0.13
3rd quarter .......................................... 0.22 0.36 0.36 0.52 0.26
4th quarter .......................................... 0.28 0.27 0.19 0.20 0.17
Total assets (in millions) ............................. $ 4,559 $ 4,470 $ 4,389 $ 4,352 $ 4,103
Capitalization (in millions) --
Common shareholders' equity .......................... $ 1,240 $ 1,226 $ 1,204 $ 1,181 $ 1,160
Preferred shares, not subject to mandatory redemption 32 90 90 110 74
Preferred shares, subject to mandatory redemption .... 150 50 50 50 49
Long-term debt (excluding current portion) ........... 1,395 1,403 1,398 1,341 1,369
Capitalization ratios % --
Common shareholders' equity .......................... 44.0 44.3 43.9 44.0 43.8
Preferred shares, not subject to mandatory redemption 1.1 3.2 3.3 4.1 2.8
Preferred shares, subject to mandatory redemption .... 5.4 1.8 1.8 1.9 1.8
Long-term debt (excluding current portion) ........... 49.5 50.7 51.0 50.0 51.6
Book value per common share at year-end ................ $ 12.31 $ 12.17 $ 12.08 $ 12.07 $ 11.86
Utility construction expenditures (in thousands) ....... $ 154,198 $ 190,771 $ 211,669 $ 215,081 $ 188,344
Net cash from utility operations less
dividends as a % of construction ..................... 127 108 99 86 85
Number of fulltime employees --
Utility .............................................. 3,370 3,331 4,077 4,196 4,305
Nonregulated ......................................... 236 271 274 347 200
</TABLE>
-94-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
UNAUDITED FIVE-YEAR CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric utility ............................ $ 1,099,008 $ 1,094,647 $ 1,021,660 $ 1,002,970 $ 936,027
Gas utility ................................. 536,753 459,588 492,015 538,989 484,687
Nonregulated ................................ 236,851 95,106 117,550 85,997 41,866
----------- ----------- ----------- ----------- -----------
1,872,612 1,649,341 1,631,225 1,627,956 1,462,580
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
Utility:
Cost of fuel, energy and capacity ........... 234,317 230,261 213,987 217,385 211,924
Cost of gas sold ............................ 345,014 279,025 326,782 366,049 326,097
Other operating expenses .................... 350,174 399,648 354,190 340,720 329,911
Maintenance ................................. 88,621 85,363 101,275 101,601 93,769
Depreciation and amortization ............... 164,592 158,950 154,229 150,822 144,646
Property and other taxes .................... 92,630 96,350 94,990 93,238 97,479
----------- ----------- ----------- ----------- -----------
1,275,348 1,249,597 1,245,453 1,269,815 1,203,826
----------- ----------- ----------- ----------- -----------
Nonregulated:
Cost of sales ............................... 218,256 70,209 84,515 57,907 14,411
Other ....................................... 35,370 37,181 36,765 32,296 33,184
----------- ----------- ----------- ----------- -----------
253,626 107,390 121,280 90,203 47,595
----------- ----------- ----------- ----------- -----------
Total operating expenses .................... 1,528,974 1,356,987 1,366,733 1,360,018 1,251,421
----------- ----------- ----------- ----------- -----------
OPERATING INCOME ............................ 343,638 292,354 264,492 267,938 211,159
----------- ----------- ----------- ----------- -----------
NON-OPERATING INCOME
Interest income ............................. 4,012 4,485 4,334 5,805 4,457
Dividend income ............................. 16,985 16,954 17,087 17,601 17,353
Realized gains and losses on securities, net 1,895 688 7,635 7,915 4,233
Other, net .................................. (4,020) (10,467) 4,316 20,842 (10,387)
----------- ----------- ----------- ----------- -----------
18,872 11,660 33,372 52,163 15,656
----------- ----------- ----------- ----------- -----------
FIXED CHARGES
Interest on long-term debt .................. 102,909 105,550 101,267 107,044 114,732
Other interest expense ...................... 10,941 9,449 6,446 5,066 5,899
Allowance for borrowed funds ................ (4,212) (5,552) (3,955) (2,186) (2,162)
Preferred dividends of subsidiaries ......... 10,689 8,059 10,551 8,367 8,735
----------- ----------- ----------- ----------- -----------
120,327 117,506 114,309 118,291 127,204
----------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME 242,183 186,508 183,555 201,810 99,611
INCOME TAXES ................................ 98,422 66,803 60,457 67,485 24,566
----------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS ........... 143,761 119,705 123,098 134,325 75,045
INCOME (LOSS) FROM DISCONTINUED OPERATIONS .. (12,715) 3,059 (2,909) 1,159 5,099
----------- ----------- ----------- ----------- -----------
NET INCOME .................................. $ 131,046 $ 122,764 $ 120,189 $ 135,484 $ 80,144
=========== =========== =========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING ........... 100,752 100,401 98,531 97,762 95,430
EARNINGS PER COMMON SHARE
Continuing operations ....................... $ 1.43 $ 1.19 $ 1.25 $ 1.38 $ 0.79
Discontinued operations ..................... (0.13) 0.03 (0.03) 0.01 0.05
----------- ----------- ----------- ----------- -----------
Earnings per average common share ........... $ 1.30 $ 1.22 $ 1.22 $ 1.39 $ 0.84
=========== =========== =========== =========== ===========
DIVIDENDS DECLARED PER SHARE ................ $ 1.20 $ 1.18 $ 1.17 $ 1.17 $ 1.28
=========== =========== =========== =========== ===========
</TABLE>
-95-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
UNAUDITED FIVE-YEAR CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF DECEMBER 31
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
ASSETS
UTILITY PLANT
<S> <C> <C> <C> <C> <C>
Electric ................................................... $ 4,010,847 $ 3,881,699 $ 3,765,004 $ 3,642,415 $ 3,534,703
Gas ........................................................ 723,491 695,741 663,792 639,276 628,856
----------- ----------- ----------- ----------- -----------
4,734,338 4,577,440 4,428,796 4,281,691 4,163,559
Less accumulated depreciation and amortization ............. 2,153,058 2,027,055 1,885,870 1,801,668 1,680,033
----------- ----------- ----------- ----------- -----------
2,581,280 2,550,385 2,542,926 2,480,023 2,483,526
Construction work in progress .............................. 49,305 104,164 101,252 111,726 67,664
----------- ----------- ----------- ----------- -----------
2,630,585 2,654,549 2,644,178 2,591,749 2,551,190
----------- ----------- ----------- ----------- -----------
POWER PURCHASE CONTRACT .................................... 190,897 212,148 221,998 248,643 243,146
----------- ----------- ----------- ----------- -----------
INVESTMENT IN DISCONTINUED OPERATIONS ...................... 196,356 177,300 186,246 168,907 118,163
----------- ----------- ----------- ----------- -----------
CURRENT ASSETS
Cash and cash equivalents .................................. 97,749 32,915 28,651 20,657 23,723
Receivables less reserves................................... 312,930 228,128 196,814 216,157 218,258
Inventories ................................................ 90,864 85,235 92,248 100,675 98,608
Other ...................................................... 11,696 18,428 14,288 21,195 24,811
----------- ----------- ----------- ----------- ------------
513,239 364,706 332,001 358,684 365,400
----------- ----------- ----------- ----------- -----------
INVESTMENTS ................................................ 628,791 646,456 595,510 614,153 635,315
----------- ----------- ----------- ----------- -----------
OTHER ASSETS ............................................... 399,415 414,938 408,961 369,937 190,206
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS ............................................... $ 4,559,283 $ 4,470,097 $ 4,388,894 $ 4,352,073 $ 4,103,420
=========== =========== =========== =========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity ................................ $ 1,239,946 $ 1,225,715 $ 1,204,112 $ 1,180,510 $ 1,159,676
Preferred shares, not subject to mandatory redemption ...... 31,769 89,945 89,955 109,871 74,242
Preferred shares, subject to mandatory redemption .......... 150,000 50,000 50,000 50,000 48,625
Long-term debt (excluding current portion) ................. 1,395,103 1,403,322 1,398,255 1,341,003 1,368,784
----------- ----------- ----------- ----------- -----------
2,816,818 2,768,982 2,742,322 2,681,384 2,651,327
----------- ----------- ----------- ----------- -----------
CURRENT LIABILITIES
Notes payable .............................................. 161,990 184,800 124,500 173,035 120,244
Current portion of long-term debt........................... 79,598 65,295 72,872 66,371 32,952
Current portion of power purchase contract ................. 13,718 13,029 12,080 10,830 8,065
Accounts payable ........................................... 169,806 122,055 106,152 123,618 112,198
Taxes accrued .............................................. 82,254 81,898 91,653 110,923 101,585
Interest accrued ........................................... 28,513 30,635 30,659 31,021 31,395
Other ...................................................... 30,229 46,267 44,974 49,470 53,050
----------- ----------- ----------- ----------- -----------
566,108 543,979 482,890 565,268 459,489
----------- ----------- ----------- ----------- -----------
OTHER LIABILITIES
Power purchase contract .................................... 97,504 112,700 125,729 140,655 138,085
Deferred income taxes ...................................... 752,336 724,587 712,307 659,753 589,626
Investment tax credit ...................................... 88,842 95,041 100,871 106,729 113,846
Other ...................................................... 237,675 224,808 224,775 198,284 151,047
----------- ----------- ----------- ----------- -----------
1,176,357 1,157,136 1,163,682 1,105,421 992,604
----------- ----------- ----------- ----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES ....................... $ 4,559,283 $ 4,470,097 $ 4,388,894 $ 4,352,073 $ 4,103,420
=========== =========== =========== =========== ===========
</TABLE>
-96-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
UNAUDITED UTILITY FIVE-YEAR ELECTRIC STATISTICS
FOR THE YEARS ENDED DECEMBER 31 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES (in thousands)
Residential ................................. $ 415,954 $ 434,105 $ 400,346 $ 386,047 $ 343,842
Small general service ....................... 237,466 252,427 253,703 242,205 236,292
Large general service ....................... 241,172 219,075 204,481 193,616 199,256
Other sales ................................. 60,476 60,160 57,731 56,198 30,878
Sales for resale ............................ 121,452 105,472 84,260 104,461 106,982
----------- ----------- ----------- ----------- -----------
Total from electric sales ................... 1,076,520 1,071,239 1,000,521 982,527 917,250
Other electric revenue ...................... 22,488 23,408 21,139 20,443 18,777
----------- ----------- ----------- ----------- -----------
Total ....................................... $ 1,099,008 $ 1,094,647 $ 1,021,660 $ 1,002,970 $ 936,027
=========== =========== =========== =========== ===========
KWH SALES (in thousands)
Residential ................................. 4,652,031 4,767,608 4,500,265 4,475,883 4,098,567
Small general service ....................... 3,565,459 3,920,792 4,062,993 3,937,360 3,885,898
Large general service ....................... 6,067,325 5,351,933 5,091,685 4,851,493 4,993,213
Other ....................................... 988,022 957,463 938,620 930,117 470,444
Sales for resale ............................ 6,727,326 5,509,161 3,605,092 5,566,208 6,386,957
----------- ----------- ----------- ----------- -----------
Total ....................................... 22,000,163 20,506,957 18,198,655 19,761,061 19,835,079
=========== =========== =========== =========== ===========
REVENUES AS A % OF TOTAL
Residential ................................. 38.6 40.5 40.0 39.3 37.5
Small general service ....................... 22.1 23.6 25.4 24.7 25.7
Large general service ....................... 22.4 20.5 20.4 19.7 21.7
Other ....................................... 5.6 5.6 5.8 5.7 3.4
Sales for resale ............................ 11.3 9.8 8.4 10.6 11.7
----------- ----------- ----------- ----------- -----------
Total ....................................... 100.0 100.0 100.0 100.0 100.0
=========== =========== =========== =========== ===========
SALES AS A % OF TOTAL
Residential ................................. 21.1 23.2 24.7 22.7 20.6
Small general service ....................... 16.2 19.1 22.3 19.9 19.6
Large general service ....................... 27.6 26.1 28.0 24.5 25.2
Other ....................................... 4.5 4.7 5.2 4.7 2.4
Sales for resale ............................ 30.6 26.9 19.8 28.2 32.2
----------- ----------- ----------- ----------- -----------
Total ....................................... 100.0 100.0 100.0 100.0 100.0
=========== =========== =========== =========== ===========
RETAIL ELECTRIC SALES BY JURISDICTION (%)
Iowa ........................................ 88.7 88.4 88.6 88.7 87.8
Illinois .................................... 10.6 11.0 10.9 10.9 11.8
South Dakota ................................ 0.7 0.6 0.5 0.4 0.4
----------- ----------- ----------- ----------- -----------
Total ....................................... 100.0 100.0 100.0 100.0 100.0
=========== =========== =========== =========== ===========
CUSTOMERS (end of year)
Residential ................................. 557,637 551,384 548,106 541,220 536,767
Small general service ....................... 73,022 72,616 69,905 68,829 71,843
Large general service ....................... 982 945 743 744 833
Other ....................................... 9,937 9,744 9,518 9,572 5,156
Sales for resale ............................ 55 55 59 63 61
----------- ----------- ----------- ----------- -----------
Total ....................................... 641,633 634,744 628,331 620,428 614,660
=========== =========== =========== =========== ===========
ANNUAL AVERAGE PER RESIDENTIAL CUSTOMER
Revenue per Kwh (cents) ..................... 8.94 9.11 8.90 8.62 8.39
KWh sales ................................... 8,392 8,670 8,265 8,310 7,681
COOLING DEGREE DAYS
Actual ...................................... 788 1,112 912 813 603
Percent warmer (colder) than normal ......... (17.5) 14.1 (6.5) (16.4) (38.5)
ELECTRIC PEAK DEMAND (net MW) ............... 3,537 3,553 3,226 3,284 2,902
SUMMER NET ACCREDITED CAPABILITY (MW) ....... 4,301 4,311 4,145 4,072 4,116
</TABLE>
-97-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
UNAUDITED UTILITY FIVE-YEAR GAS STATISTICS
FOR THE YEARS ENDED DECEMBER 31 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES (in thousands)
Residential ............................................... $338,605 $279,819 $287,171 $319,359 $282,688
Small general service ..................................... 153,616 128,501 142,894 150,913 133,384
Large general service ..................................... 17,670 23,280 36,729 37,761 43,919
Sales for resale and other ................................ 2,050 5,303 5,514 10,376 2,648
-------- -------- -------- -------- --------
Total revenue from gas sales ............................ 511,941 436,903 472,308 518,409 462,639
Gas transported ........................................... 20,155 16,677 12,842 13,457 17,473
Other gas revenues ........................................ 4,657 6,008 6,865 7,123 4,575
-------- -------- -------- -------- --------
Total ..................................................... $536,753 $459,588 $492,015 $538,989 $484,687
======== ======== ======== ======== ========
THROUGHPUT (MMBtu in thousands)
Sales
Residential ............................................. 61,732 57,153 54,732 60,612 56,072
Small general service ................................... 33,642 32,786 32,677 34,504 31,894
Large general service ................................... 4,634 6,222 8,253 9,681 12,357
Sales for resale and other .............................. 977 3,582 3,231 4,305 837
-------- -------- -------- -------- --------
Total sales ........................................... 100,985 99,743 98,893 109,102 101,160
Gas transported ........................................... 54,618 50,695 43,293 39,570 34,686
-------- -------- -------- -------- --------
Total ................................................... 155,603 150,438 142,186 148,672 135,846
======== ======== ======== ======== ========
REVENUES AS A % OF TOTAL
Residential ............................................... 63.6 61.7 59.2 60.0 58.9
Small general service ..................................... 28.9 28.3 29.4 28.4 27.8
Large general service ..................................... 3.3 5.1 7.6 7.1 9.1
Sales for resale and other ................................ 0.4 1.2 1.1 2.0 0.6
Gas Transported ........................................... 3.8 3.7 2.7 2.5 3.6
-------- -------- -------- -------- --------
Total ................................................... 100.0 100.0 100.0 100.0 100.0
======== ======== ======== ======== ========
SALES AS A % OF TOTAL (excluding gas transported)
Residential ............................................... 61.1 57.3 55.3 55.6 55.5
Small general service ..................................... 33.3 32.9 33.0 31.6 31.5
Large general service ..................................... 4.6 6.2 8.4 8.9 12.2
Sales for resale and other ................................ 1.0 3.6 3.3 3.9 0.8
-------- -------- -------- -------- --------
Total ................................................... 100.0 100.0 100.0 100.0 100.0
======== ======== ======== ======== ========
RETAIL GAS SALES BY JURISDICTION (%)
Iowa ...................................................... 78.0 77.1 76.6 74.5 73.4
Illinois .................................................. 11.0 11.6 11.9 11.4 11.6
South Dakota .............................................. 10.3 10.6 10.8 5.4 2.2
Other ..................................................... 0.7 0.7 0.7 8.7 12.8
-------- -------- -------- -------- --------
Total ................................................... 100.0 100.0 100.0 100.0 100.0
======== ======== ======== ======== ========
CUSTOMERS (end of year)
Residential ............................................... 550,786 541,732 535,301 526,863 552,660
Small general service ..................................... 58,059 57,207 55,855 54,972 54,918
Large general service ..................................... 821 830 876 868 1,020
Gas transported and other ................................. 504 1,128 171 128 123
-------- -------- -------- -------- --------
Total ................................................... 610,170 600,897 592,203 582,831 608,721
======== ======== ======== ======== ========
ANNUAL AVERAGES PER RESIDENTIAL CUSTOMER
Revenue per MMBtu ......................................... $5.49 $4.90 $5.25 $5.27 $5.04
MMBtu sales ............................................... 113 106 103 111 103
HEATING DEGREE DAYS
Actual .................................................... 7,445 6,841 6,565 7,097 6,302
Percent colder (warmer) than normal ....................... 10.1 0.9 (3.5) 3.2 (8.7)
COST PER MMBTU ............................................ $3.42 $2.80 $3.30 $3.36 $3.22
</TABLE>
-98-
<PAGE>
SCHEDULE II
MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Additions Balance at
Beginning Charged End
Description of Year to Income Deductions of Year
- - ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Reserves Deducted From Assets
To Which They Apply:
Reserve for uncollectible accounts:
Year ended 1996..................... $2,296 $6,145 $(6,348) $2,093
====== ====== ======= ======
Year ended 1995..................... $2,099 $4,934 $(4,737) $2,296
====== ====== ======= ======
Year ended 1994..................... $3,697 $3,920 $(5,518) $2,099
====== ====== ======= ======
Reserves Not Deducted From Assets:
Property insurance
Year ended 1996.................... $2,098 $ (70) $ - $2,028
====== ====== ======= ======
Year ended 1995.................... $2,224 $ 17 $ (143) $2,098
====== ====== ======= ======
Year ended 1994.................... $2,561 $ 200 $ (537) $2,224
====== ====== ======= ======
Injuries and damages
Year ended 1996.................... $1,079 $2,753 $(1,593) $2,239
====== ====== ======= ======
Year ended 1995.................... $2,350 $2,645 $(3,916) $1,079
====== ====== ======= ======
Year ended 1994.................... $1,801 $3,452 $(2,903) $2,350
====== ====== ======= ======
</TABLE>
-99-
<PAGE>
SCHEDULE II
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Additions Balance at
Beginning Charged End
Description of Year to Income Deductions of Year
- - ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Reserves Deducted From Assets
To Which They Apply:
Reserve for uncollectible accounts:
Year ended 1996.................... $2,214 $5,854 $(6,223) $1,845
====== ====== ======= ======
Year ended 1995.................... $2,008 $4,680 $(4,474) $2,214
====== ====== ======= ======
Year ended 1994.................... $2,040 $3,466 $(3,498) $2,008
====== ====== ======= ======
Reserves Not Deducted From Assets:
Property insurance
Year ended 1996.................... $2,098 $ (70) $ - $2,028
====== ====== ======= ======
Year ended 1995.................... $2,224 $ 17 $ (143) $2,098
====== ====== ======= ======
Year ended 1994.................... $2,561 $ 200 $ (537) $2,224
====== ====== ======= ======
Injuries and damages
Year ended 1996.................... $1,079 $2,753 $(1,593) $2,239
====== ====== ======= ======
Year ended 1995.................... $2,350 $2,645 $(3,916) $1,079
====== ====== ======= ======
Year ended 1994.................... $1,801 $3,452 $(2,903) $2,350
====== ====== ======= ======
</TABLE>
-100-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrants have duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MIDAMERICAN ENERGY HOLDINGS COMPANY
MIDAMERICAN ENERGY COMPANY
-----------------------------------
Registrants
Date: By /s/ S. J. Bright
-----------------------------------
(S. J. Bright) President, Chief
Executive Officer
and Director
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 registrants and
in the capacities and on the date indicated:
Signature Title
--------- -----
MidAmerican Energy Holdings Company
/s/ R. E. Christiansen Chairman of the Board of Directors
------------------------
(R. E. Christiansen)
/s/ P.G. Lindner Senior Vice President and Chief
-------------------------
(P.G. Lindner) Financial Officer
/s/ J. W. Aalfs Director
-------------------------
(J. W. Aalfs)
/s/ Robert A. Burnett Director
-------------------------
(R. A. Burnett)
/s/ Ross D. Christensen Director
-------------------------
(R. D. Christensen)
-101-
<PAGE>
/s/ John W. Colloton Director
-------------------------
(J. W. Colloton)
/s/ Frank S. Cottrell Director
-------------------------
(F. S. Cottrell)
/s/ Jack W. Eugster Director
-------------------------
(J. W. Eugster)
/s/ Mel Foster, Jr. Director
-------------------------
(M. Foster, Jr.)
/s/ Nolden Gentry Director
-------------------------
(N. Gentry)
/s/ J. M. Hoak, Jr. Director
-------------------------
(J. M. Hoak, Jr.)
/s/ R. L. Lawson Director
-------------------------
(R. L. Lawson)
/s/ R. L. Peterson Director
-------------------------
(R. L. Peterson)
/s/ N. L. Seifert Director
------------------------
(N. L. Seifert)
/s/ W. Scott Tinsman Director
-------------------------
(W. S. Tinsman)
/s/ L. L. Woodruff Director
-------------------------
(L. L. Woodruff)
-102-
<PAGE>
MidAmerican Energy Company
/s/ S. J. Bright Chairman of the Board of Directors
--------------------------
(S. J. Bright)
Director
--------------------------
(R. E. Christiansen)
/s/ P.G. Lindner Director, Senior Vice President
--------------------------
(P.G. Lindner) and Chief Financial Officer
Director
--------------------------
(D. J. Levy)
/s/ J. A. Rasmussen, Jr. Director
--------------------------
(J. A. Rasmussen, Jr.)
/s/ S. E. Shelton Director
--------------------------
(S. E. Shelton)
/s/ R. W. Stepien Director
--------------------------
(R. W. Stepien)
/s/ B. A. Wharton Director
-------------------------
(B. A. Wharton)
-103-
<PAGE>
EXHIBIT INDEX
Exhibits Filed Herewith
- - -----------------------
Holdings
3.1 Restated Articles of Incorporation of MidAmerican Energy Holdings
Company, as amended December 19, 1996.
3.2 Bylaws of MidAmerican Energy Holdings Company, as amended July 24,
1996.
MidAmerican Energy
3.3 Restated Articles of Incorporation of MidAmerican Energy Company, as
amended January 22, 1997.
Holdings and MidAmerican
10.1 MidAmerican Energy Company Severance Plan For Specified Officers dated
November 1, 1996.
Holdings
10.2 Form of Indemnity Agreement between MidAmerican Energy Holdings
Company and its directors and officers.
10.3 Employment Agreement between Stanley J. Bright and MidAmerican Energy
Holdings Company dated January 24, 1996.
10.4 Employment Agreement between Russell E. Christiansen and MidAmerican
Energy Holdings Company dated January 24, 1996, as amended January 29,
1997.
12.1 Computation of ratios of earnings to fixed charges and computation of
ratios of earnings to fixed charges plus preferred dividend
requirements.
MidAmerican
12.2 Computation of ratios of earnings to fixed charges and computation of
ratios of earnings to fixed charges plus preferred dividend
requirements.
Holdings
21.1 Subsidiaries of the Registrant.
MidAmerican
21.2 Subsidiaries of the Registrant.
-104-
<PAGE>
Holdings
23.1 Consent of Arthur Andersen LLP.
MidAmerican
23.3 Consent of Arthur Andersen LLP.
27 Financial Data Schedules (for electronic filings only).
Holdings
99.1 MidAmerican Energy Company Employee Stock Purchase Plan Annual Report
of Form 11-K.
Exhibits Incorporated by Reference
- - ----------------------------------
MidAmerican Energy
3.4 Restated Bylaws of MidAmerican Energy Company, as amended July 24,
1996. (Filed as Exhibit 3.1 to MidAmerican's Quarterly Report on Form
10-Q for the period ended June 30, 1996, Commission File No. 1-11505.)
Holdings
4.1 Shareholder Rights Agreement dated as of December 18, 1996 between
Holding's and Continental Stock Transfer and Trust Company. (Filed as
Exhibit 4 to Holdings' Current Report on Form 8-K dated December 18,
1996, Commission File No. 1-12459.)
Holdings and MidAmerican Energy
4.2 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.)
4.3 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.)
4.4 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.)
4.5 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.)
-105-
<PAGE>
4.6 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.)
4.7 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.)
4.8 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.)
4.9 Sixth Supplemental Indenture dated as of July 1, 1967. (Filed by
Iowa-Illinois as Exhibit 2.08 to Commission File No. 2-28806.)
4.10 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.)
4.11 Resignation and Appointment of successor Individual Trustee. (Filed by
Iowa-Illinois as Exhibit 4.B.30 to Commission File No. 33-39211.)
4.13 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.)
4.14 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.)
4.15 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.)
4.16 Sixth Supplemental Indenture dated as of July 1, 1995, between Midwest
Power Systems Inc. and Harris Trust and Savings Bank, Trustee. (Filed
as Exhibit 4.15 to MidAmerican's Annual Report on Form 10- K dated
December 31, 1995, Commission File No. 1-11505.)
4.17 Thirty-First Supplemental Indenture dated as of July 1, 1995, between
Iowa-Illinois Gas and Electric Company and Harris Trust and Savings
Bank, Trustee. (Filed as Exhibit 4.16 to MidAmerican's Annual Report
on Form 10-K dated December 31, 1995, Commission File No. 1-11505.)
10.2 MidAmerican Energy Company Deferred Compensation Plan for Directors.
(Filed as Exhibit 10.1 to MidAmerican's Annual Report on Form 10-K
dated December 31, 1995, Commission File No. 1-11505.)
10.3 MidAmerican Energy Company Deferred Compensation Plan for Executives.
(Filed as Exhibit 10.2 to MidAmerican's Annual Report on Form 10-K
dated December 31, 1995, Commission File No. 1-11505.)
-106-
<PAGE>
10.4 MidAmerican Energy Company Supplemental Retirement Plan for Designated
Officers. (Filed as Exhibit 10.3 to MidAmerican's Annual Report on
Form 10-K dated December 31, 1995, Commission File No. 1-11505.)
10.5 MidAmerican Energy Company Key Employee Short-Term Incentive Plan.
(Filed as Exhibit 10.4 to MidAmerican's Annual Report on Form 10-K
dated December 31, 1995, Commission File No. 1- 11505.)
10.6 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).
10.7 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).
10.8 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.)
10.9 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).
10.10 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.)
10.11 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.)
10.12 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.)
10.13 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.)
10.14 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.)
10.15 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.)
-107-
<PAGE>
10.16 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.)
10.17 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.)
10.18 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.)
10.19 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.)
10.20 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.)
10.21 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.)
10.22 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.)
10.23 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.)
10.24 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.)
10.25 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.)
10.27 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 Midwest
Resource's Annual Report on Form 10-K for the year ended December 31,
1992, Commission File No. 1-10654.)
-108-
<PAGE>
10.30 Midwest Power Systems 1993 Key Executive Incentive Compensation Plan.
(Filed as Exhibit 10.30 in Midwest Resources' 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.)
10.37 Form of Indemnity Agreement between MidAmerican Energy Company and
its directors and officers. (Filed as Exhibit 10.37 to MidAmerican's
Annual Report on Form 10-K dated December 31, 1995, Commission File
No. 1-11505.)
10.38 MidAmerican Energy Company 1995 Long-Term Incentive Plan. (Filed as
Exhibit 10(a) to Holdings' Registration Statement on Form S-4, File
No. 333-01645.)
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.
-109-
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY HOLDINGS COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 490.1007 of the Iowa Business
Corporation Act, the undersigned corporation hereby adopts the following
Restated Articles of Incorporation ("Articles of Incorporation"):
ARTICLE I
The name of the corporation is "MidAmerican Energy Holdings Company"
(hereinafter sometimes called the "Corporation") and its registered office shall
be located at 666 Grand Avenue, Des Moines, Iowa 50303 with the right to
establish and maintain branch offices at such other points within and without
the State of Iowa as the Board of Directors of the Corporation may, from time to
time, determine. The name of the Corporation's registered agent at such
registered office is Paul J. Leighton, Corporate Secretary.
ARTICLE II
The nature of the business or purposes to be conducted or promoted is to
engage in any or all lawful act or activity for which a corporation may be
incorporated under the Iowa Business Corporation Act.
ARTICLE III
A. The aggregate number of shares which the Corporation shall have
authority to issue is 350,000,000 shares of Common Stock, no par value ("Common
Stock"), and 100,000,000 shares of Preferred Stock, no par value ("Preferred
Stock").
B. The shares of authorized Common Stock shall be identical in all respects
and shall have equal rights and privileges. For all purposes, each registered
holder of Common Stock shall, at each meeting of shareholders, be entitled to
one vote for each share of Common Stock held, either in person or by proxy duly
authorized in writing. Except to the extent required by law or as permitted by
these Articles of
1
<PAGE>
Incorporation, as amended from time to time, the registered holders of the
shares of Common Stock shall have unlimited and exclusive voting rights.
C. The Board of Directors, at any time or from time to time, may, and is
hereby authorized to, issue and dispose of any of the authorized and unissued
shares of Common Stock and any treasury shares for such kind and amount of
consideration and to such persons, firms or corporations, as may be determined
by the Board of Directors, subject to any provisions of law then applicable. The
holders of Common Stock shall have no preemptive rights to acquire or subscribe
to any shares, or securities convertible into shares, of Common Stock.
D. The Board of Directors, at any time or from time to time may, and is
hereby authorized to, divide the authorized and unissued shares of Preferred
Stock into one or more classes or series and in connection with the creation of
any class or series to determine, in whole or in part, to the full extent now or
hereafter permitted by law, by adopting one or more articles of amendment to the
Articles of Incorporation providing for the creation thereof, the designation,
preferences, limitations and relative rights of such class or series, which may
provide for special, conditional or limited voting rights, or no rights to vote
at all, and to issue and dispose of any of such shares and any treasury shares
for such kind and amount of consideration and to such persons, firms or
corporations, as may be determined by the Board of Directors, subject to any
provisions of law then applicable.
E. The Board of Directors, at any time or from time to time may, and is
hereby authorized to, create and issue, whether or not in connection with the
issuance and sale of any shares of Common Stock, Preferred Stock or other
securities of the Corporation, warrants, rights and/or options entitling the
holders thereof to purchase from the Corporation any shares of Common Stock,
Preferred Stock or other securities of the Corporation. Such warrants, rights or
options shall be evidenced by such instrument or instruments as shall be
approved by the Board of Directors of the Corporation. The terms upon which, the
time or times (which may be limited or unlimited in duration) at or within
which, and the price or prices (which shall be not less than the minimum amount
prescribed by law, if any) at which any such shares or other securities may be
purchased from the Corporation upon the exercise of any such warrant, right or
option shall be fixed and stated in the resolution or resolutions of the Board
of Directors providing for the creation and issuance of such warrants, rights or
options. The Board of Directors is hereby authorized to create and issue any
such warrants, rights or options from time to time for such consideration, if
any, and to such persons, firms or corporations, as the Board of Directors may
determine.
F. The Corporation may authorize the issuance of some or all of the shares
of any or all of the classes of its capital stock without certificates.
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<PAGE>
G. The Corporation shall not be required to issue certificates representing
any fraction or fractions of a share of stock of any class but may issue in lieu
thereof one or more non-dividend bearing and non-voting scrip certificates in
such form or forms as shall be approved by the Board of Directors, each scrip
certificate representing a fractional interest in one share of stock of any
class. Such scrip certificates upon presentation together with similar scrip
certificates representing in the aggregate an interest in one or more full
shares of stock of any class shall entitle the holders thereof to receive one or
more full shares of stock of such class. Such scrip certificates may contain
such terms and conditions as shall be fixed by the Board of Directors and may
become void and of no effect after a period to be determined by the Board of
Directors and to be specified in such scrip certificates.
H. The Corporation shall be entitled to treat the person in whose name any
share of Common Stock or Preferred Stock is registered as the owner thereof for
all purposes and shall not be bound to recognize any equitable or other claim
to, or interest in, such share on the part of any person, whether or not the
Corporation shall have notice thereof except as may be expressly provided
otherwise by the laws of the State of Iowa.
ARTICLE IV
The term of corporate existence of the Corporation shall be perpetual.
ARTICLE V
A. All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of, the Board of Directors. The number of directors of the Corporation
shall be fixed by the Bylaws but shall be no less than ten (10) and no greater
than twenty-two (22), and such number may be increased or decreased from time to
time in accordance with the Bylaws, but no decrease shall have the effect of
shortening the term of any incumbent director. Directors shall be elected by the
shareholders at each annual meeting of the Corporation as specified herein and
in the Bylaws. Directors need not be shareholders.
B. Each director shall serve until his or her successor is elected and
qualified or until his or her prior death, retirement, resignation or removal.
Should a vacancy occur or be created, whether arising through death, resignation
or removal of a director or through an increase in the number of directors, such
vacancy shall be filled solely by a majority vote of the remaining directors
though less than a quorum of the Board of Directors. A director so elected to
fill a vacancy shall serve for the remainder of the then present term of office
of the Board of Directors.
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<PAGE>
C. Any director or the entire Board of Directors may be removed for cause
as set forth in this paragraph C. Removal of a director for cause must be
approved by the affirmative vote of the holders of shares of capital stock of
the Corporation having at least 75% of the votes of all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, only at a meeting called for the
purpose of removing the director and after notice stating that the purpose, or
one of the purposes, of the meeting is removal of the director. Any action for
removal of a director must be taken within one year of such cause.
D. The Board of Directors, by a vote of a majority of the entire Board of
Directors, may appoint from the directors an executive committee and such other
committees as they may deem judicious; and to such extent as shall be provided
in the resolution of the Board of Directors or in the Bylaws, may delegate to
such committees all or any of the powers of the Board of Directors which may be
lawfully delegated, and such committees shall have and thereupon may exercise
all or any of the powers so delegated to them. The Board of Directors or the
Bylaws may provide the number of members necessary to constitute a quorum of any
committee and the number of affirmative votes necessary for action by any
committee.
E. The Board of Directors shall elect such officers of the Corporation as
specified in the Bylaws. All vacancies in the offices of the Corporation shall
be filled by the Board of Directors. The Board of Directors shall also have
authority to appoint such other managing officers as they may from time to time
determine.
ARTICLE VI
Special meetings of shareholders of the Corporation may be called at any
time by the Chairman of the Board of Directors or by the President on at least
ten days' notice to each shareholder entitled to vote at the special meeting, by
mail at such shareholder's last known post office address, specifying the time,
place and purpose or purposes of the special meeting.
ARTICLE VII
The private property of the shareholders of the Corporation shall be
exempt from all corporate debts.
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<PAGE>
ARTICLE VIII
A. In addition to any affirmative vote required by law or under any other
provision of these Articles of Incorporation:
(i) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into any Other Entity (as
hereinafter defined); or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related
transactions) to or with any Other Entity of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of $25,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Other
Entity in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value of
$25,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation; or
(v) any reclassification of securities (including any reverse stock
split), recapitalization, reorganization, merger or consolidation
of the Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise involving
any Other Entity) which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly
owned by any Other Entity; or
(vi) any direct or indirect purchase or other acquisition by the
Corporation of any equity security (as defined in Rule 3a11-1 of
the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on June 30, 1995) of any class from an
Interested Securityholder (as hereinafter defined) who has
beneficially owned such securities for less than two years prior
to the date of such purchase or any agreement in respect thereof,
shall require the affirmative vote of the holders of shares of capital stock of
the Corporation having at least 75% (excluding, in the case of (i) through (v)
above, shares
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<PAGE>
beneficially owned by a 25% Shareholder (as hereinafter defined), and, in the
case of (vi) above, shares beneficially owned by such Interested Securityholder)
of the votes of all outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, considered for the
purpose of this Article VIII as one class ("Voting Shares"). Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that some lesser percentage vote may be specified, by law or in any agreement
with any national securities exchange or otherwise.
B. The provisions of paragraph A of this Article VIII shall not be
applicable to any particular Business Combination (as hereinafter defined), and
such Business Combination shall require only such affirmative vote as is
required by law and any other provision of these Articles of Incorporation, if
all of the conditions specified in either of the following subparagraphs 1 and 2
shall have been satisfied.
1. A majority of the Continuing Directors (as hereinafter defined)
shall have approved the Business Combination (but only if a majority of the
Board of Directors are Continuing Directors); or
2. All of the following conditions shall have been met:
a. The ratio of:
(i) the aggregate amount of the cash and the Fair Market
Value as of the date of consummation of the Business Combination
of other consideration to be received per share by holders of a
particular class or series of Voting Shares in such Business
Combination
to
(ii) the Fair Market Value per share of such class or series
of Voting Shares on the date of the first public announcement of
such Business Combination or the date on which any 25%
Shareholder became a 25% Shareholder, whichever is higher
is at least as great as the ratio (which ratio shall equal the number
one in the event that such 25% Shareholder has never beneficially
owned any shares of such class or series of Voting Shares) of
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<PAGE>
(x) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) which
such 25% Shareholder has theretofore paid for any share of such
class or series of Voting Shares acquired by it
to
(y) the Fair Market Value per share of such class or series
of Voting Shares on the date of the initial acquisition by such
25% Shareholder of any share of such class or series of Voting
Shares;
b. The aggregate amount of the cash and Fair Market Value as of
the date of consummation of the Business Combination of other
consideration to be received per share by holders of each class or
series of Preferred Stock in such Business Combination is not less
than the highest preferential amount per share to which holders of
shares of such class or series of Preferred Stock would, respectively,
be entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, regardless of whether
the Business Combination to be consummated constitutes such an event;
c. The consideration to be received by holders of a particular
class or series of Voting Shares in such Business Combination shall be
in cash or in the same form and of the same kind as the consideration
paid by the 25% Shareholder in acquiring the shares of such class or
series of Voting Shares already owned by it;
d. After such 25% Shareholder has acquired ownership of not less
than 25% of the then outstanding Voting Shares (a "25% Interest") and
prior to the consummation of such Business Combination:
(i) the 25% Shareholder shall have taken steps to ensure
that the Corporation's Board of Directors includes at all times
representation by Continuing Director(s) proportionate to the
ratio that the Voting Shares which from time to time are owned by
persons who are not 25% Shareholders ("Public Holders") bear to
all Voting Shares outstanding at such respective times (with a
Continuing Director to occupy any resulting fractional board
position);
(ii) there shall have been no reduction in the rate of
distributions ("Dividends") payable on the Common Stock except
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<PAGE>
as may have been approved by a majority vote of the Continuing
Directors;
(iii) such 25% Shareholder shall not have acquired any newly
issued shares of stock, directly or indirectly, from the
Corporation (except upon conversion of convertible securities
acquired by it prior to obtaining a 25% Interest or as a result
of a pro rata stock Dividend or stock split); and
(iv) such 25% Shareholder shall not have acquired any
additional Voting Shares or securities convertible into or
exchangeable for Voting Shares except as a part of the
transaction which resulted in such 25% Shareholder acquiring its
25% Interest;
e. Prior to or upon the consummation of such Business
Combination, such 25% Shareholder shall not have (i) received the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or
other financial assistance or tax credits provided by the
Corporation, or (ii) made any major change in the Corporation's
business or equity capital structure without the unanimous
approval of the entire Board of Directors; and
f. A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 and the General Rules and
Regulations promulgated thereunder shall have been mailed to all
holders of Voting Shares for the purpose of soliciting
shareholders' approval of such Business Combination. Such proxy
statement shall contain at the front thereof in a prominent
place, any recommendations as to the advisability (or
inadvisability) of the Business Combination which the Continuing
Directors, or any of them, may have furnished in writing and, if
deemed advisable by a majority of the Continuing Directors, an
opinion of a reputable investment banking firm as to the fairness
(or lack of fairness) of the terms of such Business Combination,
from a financial point of view, to the holders of Voting Shares
other than any 25% Shareholder (such investment banking firm to
be selected by a majority of the Continuing Directors, to be
furnished with all information it reasonably requests and to be
paid a reasonable fee for its services upon receipt by the
Corporation of such opinion).
C. For the purposes of this Article VIII:
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<PAGE>
1. The term "Business Combination" shall mean any transaction
which is referred to in any one or more of clauses (i) through (v) of
paragraph A of this Article VIII;
2. The term "Other Entity" shall include (a) any 25% Shareholder
and (b) any other person (whether or not itself a 25% Shareholder)
which after any Business Combination, would be an Affiliate (as
hereinafter defined) of any 25% Shareholder;
3. The term "person" shall mean any individual, firm, trust,
partnership, association, corporation or other entity;
4. The term "25% Shareholder" shall mean, in respect to any
Business Combination, any person (other than the Corporation or any
Subsidiary) who or which, as of the record date for the determination
of shareholders entitled to notice of and to vote on such Business
Combination, or immediately prior to the consummation of any such
transactions,
(a) is the beneficial owner, directly or indirectly, of not
less than 25% of the Voting Shares, or
(b) is an Affiliate of the Corporation and at any time
within five years prior thereto was the beneficial owner,
directly or indirectly, of not less than 25% of the then
outstanding Voting Shares, or
(c) is an assignee of or has otherwise succeeded to any
shares of capital stock of the Corporation which were at any time
within five years prior thereto beneficially owned by any 25%
Shareholder, and such assignment or succession shall have
occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the
Securities Act of 1933;
5. A person shall be the beneficial owner of any Voting Shares
(a) which such person or any of its Affiliates and
Associates (as hereinafter defined) beneficially own, directly or
indirectly, or
(b) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
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<PAGE>
(c) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation;
6. The outstanding Voting Shares shall include shares deemed
owned through application of subparagraph 5 of this paragraph C above
but shall not include any other Voting Shares which may be issuable
pursuant to any agreement or upon exercise of conversion rights,
warrants or options, or otherwise;
7. The term "Continuing Director" shall mean (a) a person who was
a member of the Board of Directors elected by the Public Holders prior
to the date as of which any 25% Shareholder acquired in excess of 10%
of the then outstanding Voting Shares or (b) a person designated
(before his or her initial election as a director) as a Continuing
Director by a majority of the then Continuing Directors;
8. The term "other consideration to be received" shall include,
without limitation, Voting Shares retained by Public Holders in the
event of a Business Combination in which the Corporation is the
surviving corporation;
9. The terms "Affiliate" and "Associate" shall have the
respective meanings given those terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on June 30, 1995;
10. The term "Subsidiary" shall mean any corporation or other
entity of which a majority of the outstanding voting securities or
other equity interests having the power, under ordinary circumstances,
to elect a majority of the directors or otherwise to direct the
management and policies, of such corporation or other entity, is
owned, directly or indirectly, by the Corporation;
11. The term "Interested Securityholder" shall mean, with respect
to any transaction which is referred to in Clause (vi) of paragraph A
of this Article VIII, any person (other than the Corporation or any
Subsidiary) who or which, as of the record date for the determination
of shareholders entitled to notice of and to vote on such transaction,
or immediately prior to the consummation of any such transaction,
(a) is the beneficial owner, directly or indirectly, of not
less than five percent of the Voting Shares, or
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<PAGE>
(b) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner, directly
or indirectly, of not less than five percent of the then
outstanding Voting Shares, or
(c) is an assignee of or has otherwise succeeded to any
shares of the class of securities to be acquired which were at
any time within two years prior thereto beneficially owned by an
Interested Securityholder, and such assignment or succession
shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933; and
12. The term "Fair Market Value" shall mean (i) in the case
of capital stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a
share of such capital stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such capital stock is not
quoted on the Composite Tape, on the New York Stock Exchange, or,
if such capital stock is not listed on such exchange, on the
principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such capital stock is
listed, or, if such capital stock is not listed on any such
exchange, the highest closing bid quotation with respect to a
share of such capital stock during the 30-day period preceding
the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in
use, or if no such quotations are available the fair market value
on the date in question of a share of such capital stock as
determined by a majority of the Continuing Directors in good
faith; and (ii) in the case of property other than cash or
capital stock, the fair market value of such property on the date
in question as determined in good faith by a majority of the
Continuing Directors; provided that any such determination by the
Continuing Directors shall only be effective if made at a meeting
at which a majority of Continuing Directors is present.
D. A majority of the Continuing Directors shall have the power
and duty to determine for purposes of this Article VIII, on the basis
of information known to them, (i) the number of Voting Shares
beneficially owned by any person, (ii) whether a person is an
Affiliate or Associate of another, (iii) whether a person has an
agreement, arrangement or understanding with another as to the matters
referred to in subparagraph 4 of paragraph C, (iv) whether the assets
subject to any Business Combination have an aggregate Fair Market
Value of $25,000,000 or more, and (v) such other matters with respect
to which a determination is required under this Article VIII.
E. Nothing contained in this Article VIII shall be construed to
relieve any 25% Shareholder from any fiduciary obligation imposed by
law.
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ARTICLE IX
Any amendment, alteration, change or repeal of Article VA, VB and VC,
Article VIII or this Article IX of these Articles of Incorporation shall require
the affirmative vote of the holders of shares of capital stock of the
Corporation having at least 75% of the votes of all outstanding Voting Shares
(as defined in Article VIII), excluding from such affirmative vote shares
beneficially owned by any 25% Shareholder or by any Interested Securityholder in
the case of an amendment of the provisions of paragraph A of Article VIII that
exclude from an affirmative vote required pursuant to such paragraph A shares
beneficially owned by 25% Shareholders or shares beneficially owned by
Interested Securityholders, as the case may be.
ARTICLE X
The Board of Directors may make Bylaws and from time to time may alter,
amend or repeal any Bylaws; but any Bylaws made by the Board of Directors may be
altered or repealed by the shareholders entitled to vote generally at any annual
meeting or at any special meeting provided notice of such proposed alteration or
repeal be included in the notice of meeting.
ARTICLE XI
A. A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability:
(i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders; or
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or
(iii) for any transaction from which the director derives an
improper personal benefit; or
(iv) under Section 490.833, or a successor provision, of the Iowa
Business Corporation Act.
B. If, after the date these Articles of Incorporation are filed with the
Secretary of State of the State of Iowa, the Iowa Business Corporation Act is
amended to authorize corporate action further eliminating or limiting the
personal liability of
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directors, then the liability of a director of the Corporation shall be deemed
eliminated or limited to the fullest extent permitted by the Iowa Business
Corporation Act, as so amended. Any repeal or modification of Section A or
Section B of this Article XI, by the shareholders of the Corporation shall be
prospective only and shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE XII
A. Each person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative, investigative, or arbitration and whether formal or informal
("proceeding"), by reasons of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity while serving as a director, officer or employee or in any
other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Iowa Business Corporation Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than the Iowa Business Corporation Act permitted the Corporation to
provide prior to such amendment), against all reasonable expenses, liability and
loss (including, without limitation, attorneys' fees, all costs, judgments,
fines, Employee Retirement Income Security Act excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith. Such right shall be a contract right and
shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that the payment of such expenses incurred by a director, officer or
employee in his or her capacity as a director, officer or employee (and not in
any other capacity in which service was or is rendered by such person while a
director, officer or employee including, without limitation, service to an
employee benefit plan) in advance of the final disposition of such proceeding,
shall be made only upon delivery to the Corporation of (i) a written
undertaking, by or on behalf of such director, officer or employee, to repay all
amounts so advanced if it should be determined ultimately that such director,
officer or employee is not entitled to be indemnified under this Article XII or
otherwise, or (ii) a written affirmation by or on behalf of such director,
officer or employee that, in such person's good faith belief, such person has
met the standards of conduct set forth in the Iowa Business Corporation Act.
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B. If a claim under Section A is not paid in full by the Corporation within
thirty (30) days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to also be paid the expenses of prosecuting such
claim. It shall be a defense to any such action that the claimant has not met
the standards of conduct which make it permissible under the Iowa Business
Corporation Act for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation. The
failure of the Corporation (including its Board of Directors, independent legal
counsel or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Iowa Business Corporation Act, shall not be a defense to the
action or create a presumption that the claimant had not met the applicable
standard of conduct.
C. Indemnification provided hereunder shall, in the case of the death of
the person entitled to indemnification, inure to the benefit of such person's
heirs, executors or other lawful representatives. The invalidity or
unenforceability of any provision of this Article XII shall not affect the
validity or enforceability of any other provision of this Article XII.
D. Any action taken or omitted to be taken by (i) any director, officer or
employee in good faith and in compliance with or pursuant to any order,
determination, approval or permission made or given by a commission, board,
official or other agency of the United States or of any state or other
governmental authority with respect to the property or affairs of the
Corporation or any such business corporation, not-for-profit corporation, joint
venture, trade association or other entity over which such commission, board,
official or agency has jurisdiction or authority or purports to have
jurisdiction or authority or (ii) by any director of the Corporation pursuant to
Section D of Article VIII shall be presumed to be in compliance with the
standard of conduct set forth in Section 490.851 (or any successor provision) of
the Iowa Business Corporation Act whether or not, in the case of clause (i), it
may thereafter be determined that such order, determination, approval or
permission was unauthorized, erroneous, unlawful or otherwise improper.
E. Unless finally determined, the termination of any litigation, whether by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the action taken or omitted to
be taken by the person seeking indemnification did not comply with the standard
of conduct set forth in Section 490.851 (or any successor provision) of the Iowa
Business Corporation Act.
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F. The rights conferred on any person by this Article XII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, Bylaws,
agreement, vote of shareholders or disinterested directors or otherwise.
G. The Corporation may maintain insurance, at its expense, to protect
itself and any such director, officer or employee of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Iowa Business Corporation Act.
RESTATED
01/31/96
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The duly adopted Restated Articles of Incorporation supersede the original
Articles of Incorporation and all amendments thereto.
The Restated Articles of Incorporation amend the Articles of Incorporation
requiring shareholder approval. The Restated Articles of Incorporation were
approved by the shareholders. The designation, number of outstanding shares,
number of votes entitled to be cast by each voting group entitled to vote
separately on the Restated Articles of Incorporation, and the number of votes of
each voting group indisputably represented are as follows:
Votes Entitled
Designation Shares To Be Cast On
Of Group Outstanding Restated Articles Votes Represented
- - ----------- ----------- ----------------- -----------------
Common Stock 1,000 1,000 1,000
The total number of undisputed votes cast for and against the Restated
Articles of Incorporation by each voting group entitled to vote separately on
the Restated Articles of Incorporation are as follows:
Voting Group Votes For Votes Against
- - ------------ --------- -------------
Common Stock 1,000 0
The number of votes cast for the Restated Articles of Incorporation by each
voting group was sufficient for approval by that voting group.
These Restated Articles of Incorporation are to be effective when filed by
the Secretary of State.
MIDAMERICAN ENERGY COMPANY
/s/ PAUL J. LEIGHTON
-------------------------------------
Paul J. Leighton, Corporate Secretary
RESTATED
01/31/96
16
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ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY HOLDINGS COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Sections 490.1001 and 490.1003, and in
accordance with Section 490.1006, of the Iowa Business Corporation Act, the
undersigned corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Holdings Company
2. Paragraph C of Article V of the Restated Articles of Incorporation is
hereby amended by deleting the first sentence thereof in its entirety
and substituting the following sentence therefor:
Any director or the entire Board of Directors may be removed only
for cause as set forth in this paragraph C.
3. The date of adoption of the amendment was November 8, 1996.
4A. The amendment was approved by the shareholders. The designation,
number of outstanding shares, number of votes entitled to be cast by
each voting group entitled to vote separately on the amendment, and
the number of votes of each voting group indisputably represented is
as follows:
Votes Entitled
Designation Shares To Be Cast Votes
of Group Outstanding On Amendment Represented
------------ ----------- ------------- -----------
Common Stock 1,000 1,000 1,000
4B. The total number of undisputed votes cast for and against the
amendment by each voting group entitled to vote separately on the
amendment are as follows:
Voting Group Votes For Votes Against
------------ --------- -------------
Common Stock 1,000 0
<PAGE>
The number of votes cast for the amendment by each voting group was
sufficient for approval by that voting group.
5. These Articles of Amendment are to be effective when filed by the
Secretary of State.
MIDAMERICAN ENERGY HOLDINGS COMPANY
/s/ P. J. LEIGHTON
-----------------------------------
P. J. Leighton, Corporate Secretary
MEC\HOLDING\AMEND1.ART
11/08/96
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY HOLDINGS COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Sections 490.601, and in accordance with
Section 490.602(4), of the Iowa Business Corporation Act, the undersigned
corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Holdings Company
2. On December 18, 1996, the Board of Directors of MidAmerican Energy
Holdings Company adopted the following resolution designating the
preferences and rights of the Series A Junior Participating Preferred
Stock:
RESOLVED, that, pursuant to the authority conferred upon the
Board of Directors of the Corporation (the "Board") by the provisions
of the Restated Articles of Incorporation, as amended, of the
Corporation, there is hereby created a series of Preferred Stock,
without par value, of the Corporation, which series shall have the
following designation and number of shares, and fixes the relative
rights, preferences, and limitations as follows thereof:
Section 1. Designation of Series; Number of Shares. The series of
Preferred Stock established hereby shall be designated the "Series A
Junior Participating Preferred Stock" (the "Series A Preferred Stock")
and the authorized number of shares constituting the Series A
Preferred Stock shall be 3,500,000. Such number of authorized shares
may be increased or decreased, from time to time, by resolution of the
Board; provided, however, that no such decrease shall reduce the
number of authorized shares of the Series A Preferred Stock to a
number less than the number of shares of the Series A Preferred Stock
then outstanding, plus the number of shares of the Series A Preferred
Stock then reserved for issuance upon the exercise of any outstanding
options, warrants or rights or the exercise of any conversion or
exchange privilege contained in any outstanding security issued by the
Corporation.
Section 2. Dividends and Distributions. (A) Subject to the rights
of the holders of shares of any other series of the Preferred Stock
(or shares of any other class of capital stock of the Corporation)
ranking prior and superior
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to the Series A Preferred Stock with respect to dividends, the holders
of shares of the Series A Preferred Stock, in preference to the
holders of shares of Common Stock and of any other class of capital
stock of the Corporation ranking junior to the Series A Preferred
Stock with respect to dividends, shall be entitled to receive, when,
as and if declared by the Board out of funds legally available
therefor, quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being
a "Dividend Payment Date"), commencing on the first Dividend Payment
Date after the initial issuance of a share or fractional share of the
Series A Preferred Stock, in an amount per share (rounded to the
nearest whole cent) equal to the greater of (a) $.01 and (b) 100 times
the aggregate per share amount of all cash dividends, plus 100 times
the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions (other than a dividend payable in
shares of Common Stock or a distribution in connection with the
subdivision of the outstanding shares of Common Stock, by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Dividend Payment Date or, with respect to the
first Dividend Payment Date, since the initial issuance of a share or
fractional share of the Series A Preferred Stock. The multiple of 100
(the "Dividend Multiple") set forth in the preceding sentence shall be
adjusted from time to time as hereinafter provided in this paragraph
(A). In the event that the Corporation shall at any time after the
effective date of this Articles of Amendment (i) declare or pay any
dividend on the Common Stock payable in shares of Common Stock or (ii)
effect a subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then, in each such case, the
Dividend Multiple thereafter applicable to the determination of the
amount of dividends per share which the holders of shares of the
Series A Preferred Stock shall be entitled to receive shall be the
Dividend Multiple in effect immediately prior to such event multiplied
by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Board shall declare, out of funds legally available
therefor, a dividend or distribution on the Series A Preferred Stock,
as provided in paragraph (A) of this Section 2, immediately after it
has declared a dividend or distribution on the Common Stock (other
than a dividend payable in shares of Common Stock); provided, however,
that, in the event that no dividend or distribution shall have been
declared on the Common Stock during the period between any Dividend
Payment Date and the next subsequent Dividend Payment Date, a dividend
of $.01 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Dividend Payment Date.
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(C) Dividends shall begin to accrue and be cumulative on the
outstanding shares of the Series A Preferred Stock from the Dividend
Payment Date next preceding the date of issuance of such shares,
unless such date of issuance shall be prior to the record date for the
first Dividend Payment Date, in which case dividends on such shares
shall begin to accrue and be cumulative from the date of issuance of
such shares, or unless such date of issuance shall be after the close
of business on the record date with respect to any Dividend Payment
Date and on or prior to such Dividend Payment Date, in which case
dividends on such shares shall begin to accrue and be cumulative from
such Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on shares of the Series A Preferred
Stock in an amount less than the total amount of dividends then
accrued shall be allocated pro rata among such shares. The Board may
fix a record date for the determination of the holders of shares of
the Series A Preferred Stock entitled to receive payment of any
dividend or distribution declared thereon, which record date shall be
not more than the number of days prior to the date fixed for such
payment permitted by applicable law.
Section 3. Voting Rights. In addition to any other voting rights
required by applicable law, the holders of shares of the Series A
Preferred Stock shall have the following voting rights:
(A) Each share of the Series A Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. The multiple of 100 (the "Voting
Multiple") set forth in the preceding sentence shall be adjusted from
time to time as hereinafter provided in this paragraph (A). In the
event that the Corporation shall at any time after the effective date
of this Articles of Amendment (i) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or (ii) effect a
subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then, in each such case, the Voting Multiple
thereafter applicable to the determination of the number of votes per
share to which the holders of shares of the Series A Preferred Stock
shall be entitled shall be the Voting Multiple in effect immediately
prior to such event multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately
after such event and the denominator of which shall be the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided in this Articles of Amendment,
in any other Articles of Amendment establishing another series of the
Preferred
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Stock (or any series of any other class of capital stock of the
Corporation) or by applicable law, the holders of the Series A
Preferred Stock, the holders of the Common Stock and the holders of any
other class of capital stock of the Corporation having general voting
rights shall vote together as a single class on all matters submitted
to a vote of the shareholders of the Corporation.
(C) Except as otherwise provided in this Articles of Amendment or
by applicable law, the holders of the Series A Preferred Stock shall
have no special voting rights and their consent shall not be required
(except to the extent provided in paragraph (B) of this Section 3) for
the taking of any corporate action.
Section 4. Certain Restrictions.
(A) Whenever dividends or other distributions payable on the
Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on outstanding shares of the
Series A Preferred Stock shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of any class of capital stock of the
Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) to the
Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of any class of capital stock of the
Corporation ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) with
the Series A Preferred Stock, except dividends paid ratably on
the Series A Preferred Stock and all such parity stock on which
dividends are accrued and unpaid in proportion to the total
amounts to which the holders of all such shares are then
entitled;
(iii) redeem, purchase or otherwise acquire for
consideration any shares of any class of capital stock of the
Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) to the
Series A Preferred Stock, except that the Corporation may at any
time redeem, purchase or otherwise acquire any shares of such
junior stock in exchange for other shares of any class of capital
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stock of the Corporation ranking junior (both as to dividends and
upon dissolution, liquidation or winding up of the Corporation)
to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of the Series A Preferred Stock or any shares of any class
of capital stock of the Corporation ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up of
the Corporation) with the Series A Preferred Stock, or redeem any
shares of such parity stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the
Board) to the holders of all such shares upon such terms and
conditions as the Board, after taking into consideration the
respective annual dividend rates and the other relative powers,
preferences and rights of the respective series and classes of
such shares, shall determine in good faith will result in fair
and equitable treatment among the respective holders of shares of
all such series and classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of any class of capital stock of the Corporation
unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of the Series A
Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after such purchase or acquisition. All such
cancelled shares shall thereupon become authorized and unissued
shares of Preferred Stock and may be reissued as part of any new
series of the Preferred Stock, subject to the conditions and
restrictions on issuance set forth in the Restated Articles of
Incorporation of the Corporation, as amended from time to time,
in any other Articles of Amendment establishing another series of
the Preferred Stock (or any series of any other class of capital
stock of the Corporation) or in any applicable law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation (whether voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made (a)
to the holders of shares of any class of capital stock of the
Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) to the
Series A Preferred Stock unless, prior thereto, the holder of
each outstanding share of the Series A Preferred Stock shall have
received an amount equal to the accrued
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and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, plus an amount equal to an
aggregate amount, subject to adjustment as hereinafter provided
in this Section 6, equal to the greater of (i) $1.00 and (ii) 100
times the aggregate per share amount to be distributed to the
holders of the Common Stock or (b) to the holders of shares of
any class of capital stock of the Corporation ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up of the Corporation) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock
and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event that the
Corporation shall at any time after the effective date of this
Articles of Amendment (a) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or (b) effect a
subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then, in each such
case, the aggregate amount per share which the holders of shares
of the Series A Preferred Stock shall thereafter be entitled to
receive pursuant to clause (a)(ii) of the preceding sentence
shall be the aggregate amount per share in effect pursuant to
such clause immediately prior to such event multiplied by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which shall be the number of shares of Common
Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In the event that the
Corporation shall be a party to any consolidation, merger,
combination or other transaction in which the outstanding shares
of Common Stock are converted or changed into or exchanged for
other capital stock, securities, cash or other property, or any
combination thereof, then, in each such case, each share of the
Series A Preferred Stock shall at the same time be similarly
converted or changed into or exchanged for an aggregate amount,
subject to adjustment as hereinafter provided in this Section 7,
equal to 100 times the aggregate amount of capital stock,
securities, cash and/or other property (payable in kind), as the
case may be, into which or for which each share of Common Stock
is being converted or changed or exchanged. In the event that the
Corporation shall at any time after the effective date of this
Articles of Amendment (a) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or (ii) effect a
subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then, in each such
case, the aggregate amount per share which the holders of shares
of the Series A Preferred Stock shall thereafter be entitled
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to receive pursuant to the preceding sentence shall be the
aggregate amount per share in effect pursuant to such sentence
immediately prior to such event multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of the Series A
Preferred Stock shall not be redeemable at any time.
Section 9. Rank. Unless otherwise provided in the Articles
of Amendment establishing another series of the Preferred Stock
after the effective date of this Articles of Amendment, the
Series A Preferred Stock shall rank, as to the payment of
dividends and the making of any other distribution of assets of
the Corporation, senior to the Common Stock, but junior to all
other series of the Preferred Stock.
Section 10. Amendments. The Restated Articles of
Incorporation of the Corporation shall not be amended in any
manner which would materially alter or change the powers,
preferences and rights of the Series A Preferred Stock so as to
adversely affect any thereof without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
Series A Preferred Stock, voting separately as a single class.
Section 11. Fractional Shares. Fractional shares of the
Series A Preferred Stock may be issued, but, unless the Board
shall otherwise determine, only in multiples of one one-hundredth
of a share. The holder of any fractional share of the Series A
Preferred Stock shall be entitled to receive dividends,
participate in distributions, exercise voting rights and have the
benefit of all other powers, preferences and rights relating to
the Series A Preferred Stock in the same proportion as such
fractional share bears to a whole share.
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These Articles of Amendment to the Restated Articles of Incorporation were
adopted by the Board of Directors without action by the shareholders. These
Articles of Amendment to the Restated Articles of Incorporation are to be
effective when filed by the Secretary of State.
MIDAMERICAN ENERGY HOLDINGS COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Corporate Secretary
MEC\HOLDING\AMEND2.ART
12.19.96
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EXHIBIT 3.2
BYLAWS
OF
MIDAMERICAN ENERGY HOLDINGS COMPANY
(an Iowa Corporation)
ARTICLE I.
Offices.
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation shall
be in the City of Des Moines, Polk County, Iowa. The Corporation may also have
an office or offices at such other place or places either within or without the
State of Iowa as the Board of Directors from time to time may determine or the
business of the Corporation may require.
Section 2. REGISTERED OFFICE. The registered office of the Corporation
required by the Iowa Business Corporation Act to be maintained in the State of
Iowa may be, but need not be, the same as the principal office of the
Corporation in the State of Iowa, and the address of the registered office may
be changed from time to time by the Board of Directors.
ARTICLE II.
Shareholders' Meetings.
Section 1. PLACE. All meetings of the shareholders shall be held in such
place as may be ordered by the Board of Directors.
Section 2. ANNUAL MEETINGS. The annual meeting of shareholders shall be
held on the Wednesday next preceding the last Thursday of April in each year, at
ten o'clock in the morning, when they shall elect the Board of Directors and
transact such other business as may properly be brought before the meeting. The
Board of Directors may, in its discretion, change the date or time, or both, of
the annual meeting of shareholders.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes may be called by the President, or by a Vice President
(under such conditions as are prescribed in these bylaws), or by the Chairman of
the Board of Directors (if there be one), or by the Vice Chairman of the Board
of Directors (if there be one), or by the Board of Directors.
<PAGE>
Section 4. NOTICE. Notice, in accordance with the Iowa Business Corporation
Act, stating the place, day and hour of the annual meeting and of any special
meeting, and in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given so that it is effective not less than ten
(10) nor more than sixty (60) days before the date of the meeting, by or at the
direction of the President, or the Secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at such meeting.
Section 5. RIGHT TO VOTE. Except as provided in Sections 8 and 9 of this
Article II, only shareholders owning shares of stock of a class entitled to vote
as required by the Iowa Business Corporation Act or as provided in the Articles
of Incorporation of record on the books of the Corporation on the day fixed by
the Board of Directors for the closing of the stock transfer books of the
Corporation prior to any meeting of the shareholders, or, if the stock transfer
books be not closed, of record on the books of the Corporation at the close of
business on the day fixed by the Board of Directors as the record date for the
determination of the shareholders entitled to vote at such meeting, shall be
entitled to notice of and shall have the right to vote (either in person or by
proxy) at such meeting.
Section 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATe. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy (70) days. If the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy (70) days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. Except as provided
in the Articles of Amendment to the Articles of Incorporation establishing one
or more classes or series of Preferred Stock, if the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date immediately preceding the
date on which notice of the meeting is mailed, or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 6, such determination
shall apply to any adjournment thereof, except that the Board of Directors must
fix a new record date if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting.
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Section 7. VOTING LISTS. The officer having charge of the stock transfer
books for shares of stock of the Corporation shall make a complete list of the
shareholders entitled to vote at a meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the registered address of and the
number of shares held by each, which list shall be kept on file at the office of
the Corporation and shall be subject to inspection by any shareholder at any
time during usual business hours beginning two business days after notice of
such meeting is given for which such list was prepared. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders. Failure to comply with the requirement of this Section
7 shall not affect the validity of any action taken at any such meeting.
Section 8. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name
of another corporation, domestic or foreign, may be voted by such officer or
proxy as the bylaws of such corporation may prescribe, or, in the absence of
such provision, as the board of directors of such corporation may determine.
Shares held by a person who is an administrator, executor, guardian or
conservator may be voted by such person, either in person or by proxy, without
the transfer of such shares into the name of such person. Shares standing in the
name of a trustee may be voted by such trustee, either in person or by proxy,
but no trustee shall be entitled to vote shares held by such trustee without a
transfer of such shares into the name of such trustee.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into the name of such receiver if
authority so to do is contained in an appropriate order of the court by which
such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
On and after the date on which written notice of redemption of redeemable
shares has been given to the holders thereof and a sum sufficient to redeem such
shares has been deposited with a bank or trust company with irrevocable
instruction and authority to pay the redemption price to the holders thereof
upon surrender of certificates therefor, such shares shall not be entitled to
vote on any matter and shall not be deemed to be outstanding shares.
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Shares of the Corporation are not entitled to be voted if they are owned,
directly or indirectly, by a second corporation, and the Corporation owns,
directly or indirectly, a majority of the shares entitled to vote for the
election of directors of such second corporation, nor shall any such shares be
counted in determining the total number of outstanding shares at any given time.
At all meetings of shareholders, a shareholder may vote either in person or
by proxy appointment form executed in writing by the shareholder or by the duly
authorized attorney-in-fact of such shareholder. Such proxy appointment and any
revocation thereof shall be filed with the Secretary of the Corporation. No
proxy appointment shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.
Section 9. PROXIES. When a valid proxy appointment form is filed with the
Secretary of the Corporation, the proxy named therein (or the duly appointed
substitute of such proxy, if the proxy appointment permits the appointment of a
substitute) shall be entitled to enter and be present at the shareholders'
meeting designated in the proxy appointment, and to exercise the power granted
to such proxy under such proxy appointment, notwithstanding that the shareholder
who gave the proxy appointment is personally present at the meeting, unless and
until such proxy appointment is revoked by a written instrument of revocation,
stating the time and date of revocation of the proxy appointment, duly signed by
the shareholder who executed the proxy appointment, and filed with the Secretary
of the Corporation at or prior to the meeting. Subject to any express limitation
or restriction in any such proxy appointment contained, a vote, consent or
action taken by a proxy prior to revocation thereof, as hereinbefore provided,
shall be valid and binding on the shareholder who gave the proxy appointment.
Each proxy appointment, and also each instrument of revocation thereof, shall be
retained by the Secretary of the Corporation as required by regulatory
authorities.
Section 10. Quorum. The holders of a majority of the votes of the shares
entitled to vote thereat, represented in person or by proxy, shall constitute a
quorum for the transaction of business at all meetings of the shareholders
except as otherwise provided by the Iowa Business Corporation Act, the Articles
of Incorporation or these bylaws. The holders of a majority of the votes of the
shares present in person or by proxy at any meeting and entitled to vote thereat
shall have power successively to adjourn the meeting to a specified date whether
or not a quorum be present. The time and place to which any such adjournment is
taken shall be publicly announced at the meeting, and no further notice thereof
shall be necessary. At any such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 11. Manner of Voting. Upon demand of any shareholder entitled to
vote thereon, the vote on any question before the meeting shall be by ballot. If
a quorum is present, the affirmative vote of the holders of a majority of the
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votes of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by the Iowa Business Corporation
Act or the Articles of Incorporation.
Section 12. OFFICERS OF THE MEETING-POWERS. The Chairman of the Board of
Directors (if there be one), or in the absence of the Chairman of the Board, the
Vice Chairman of the Board (if there be one), or the President of the
Corporation shall call meetings of the shareholders to order and shall act as
chairman thereof. The Board of Directors may appoint any shareholder to act as
chairman of any meeting in the absence of the Chairman of the Board of Directors
and the President, and in the case of the failure of the Board to appoint a
chairman, the shareholders present at the meeting shall elect a chairman who
shall be either a shareholder or a proxy of a shareholder.
The Secretary of the Corporation shall act as secretary at all meetings of
shareholders. In the absence of the Secretary at any meeting of shareholders,
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 13. POWER OF CHAIRMAN. The chairman of any shareholders' meeting
shall have power to determine the eligibility of votes, and may reject votes,
whether cast in person or by proxy, as irregular, unauthorized, or not cast in
accordance with the Articles of Incorporation or these bylaws. The decisions of
such chairman as to such matters shall be final unless challenged from the
floor, immediately after being announced and overruled by the vote of the
holders of a majority of the votes of the shares represented at the meeting.
Such chairman may appoint tellers to count ballots, whenever voting is by
ballot. Such chairman shall have power to order any unauthorized persons to
leave the meeting and to enforce such orders, and shall have and exercise all
power and authority, and perform all duties customarily possessed and performed
by the presiding officer of such a meeting.
ARTICLE III.
Board of Directors.
Section 1. POWERS. The business and affairs of the Corporation shall be
managed by the Board of Directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The number of directors
may be increased or decreased from time to time by resolution of the Board of
Directors within the range established in the Articles of Incorporation provided
no decrease shall have the effect of shortening the term of any incumbent
director. A director may but need not be a shareholder or a resident of the
State of Iowa. Each director shall be elected to serve until the next
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annual meeting of the shareholders and until the successor of such director
shall be elected or appointed as provided in Section 4 of this Article III, and
shall have qualified.
Section 3. NOMINATIONS. Nominations for the election of directors may be
made by the Board of Directors or a committee appointed by the Board of
Directors or by any shareholder entitled to vote in the election of directors
generally. However, any shareholder entitled to vote in the election of
directors generally may nominate one or more persons for election as directors
at a meeting only if written notice of such shareholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation not
later than (a) with respect to an election to be held at an annual meeting of
shareholders, 90 days in advance of such meeting, and (b) with respect to an
election to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each such notice shall
set forth: (i) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (ii) a representation
that the shareholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (iv) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (v) the consent of each nominee to serve as a director of the Corporation if
so elected. The Chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
Section 4. VACANCIES. In accordance with Article VI of the Articles of
Incorporation, if a vacancy in the Board of Directors shall occur, a majority of
the remaining directors, though less than a quorum, may appoint a director to
fill such vacancy, who shall hold office for the unexpired term of the
directorship in respect of which such vacancy occurred or for the full term of
any new directorship caused by any increase in the number of members.
Section 5. PLACE OF MEETINGS. The Board of Directors may hold its meetings,
regular or special, within or without the State of Iowa at such place or places
as it may from time to time determine, or as may be specified in the notice of
the meeting.
Section 6. Time and Place of Meeting. Regular meetings of the Board of
Directors shall be held, without notice other than this bylaw, quarterly on the
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Wednesday next preceding the last Thursday of each January, April, July and
October at the principal office of the Corporation in Des Moines at ten o'clock
in the morning. The Chairman of the Board of Directors (if there be one), the
Vice Chairman of the Board of Directors (if there be one), or the President may
direct a different date, time or place for the holding of a regular meeting and
the Secretary shall advise the directors of any such change at least three days
in advance of the meeting date in the manner provided in Section 8 of this
Article III.
The Chairman of the Board of Directors (if there be one) or the President
shall have power to cancel not more than two successive regular meetings of the
Board of Directors by causing not less than one day's notice of such
cancellation to be given to the directors.
Section 7. Special Meetings. Special meetings of the Board of Directors for
any purpose or purposes may be called by the Chairman of the Board of Directors
(if there be one), the Vice Chairman of the Board of Directors (if there be
one), by the President or a majority of the members of the Board, and shall be
held at such place as may be fixed by the person or persons calling such meeting
and as shall be specified in the notice of such meeting. The Secretary or an
assistant secretary shall give not less than two days' notice of the date, time
and place of each such meeting to each director in the manner provided in
Section 8 of this Article III. Neither the business to be transacted at, nor the
purpose of, any special meeting of the Board of Directors need be specified in
the notice given, or waiver of notice obtained, of such meeting as provided in
Section 8 or 9, as the case may be, of Article III.
Section 8. Manner of Giving Notice of Meetings. Notice of any special
meeting of the Board of Directors may be given to any director by telephone,
facsimile or by telegram addressed to such director at such address as last
appears in the records of the Secretary of the Corporation or by mail by
depositing the same in the post office or letter box in a postpaid, sealed
envelope addressed to such director at such address.
It shall be the duty of every director to furnish the Secretary of the
Corporation with the post office address of such director and to notify the
Secretary of any change therein.
Section 9. WAIVER OF NOTICE. Whenever any notice is required to be given to
directors under the provisions of the Iowa Business Corporation Act or of the
Articles of Incorporation or these bylaws, a waiver thereof in writing signed by
the director entitled to such notice, whether before, at or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a director at
a meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
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Section 10. QUORUM. At all meetings of the Board of Directors, a majority
of the number of directors fixed by these bylaws shall constitute a quorum for
the transaction of business. The act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors, except as may be otherwise specifically provided by the Iowa Business
Corporation Act or by the Articles of Incorporation or by these bylaws. If a
quorum shall not be present at any meeting of directors, the director or
directors present may adjourn the meeting to a specified time, without notice
other than announcement at the meeting.
Section 11. Conduct of Meetings. The Chairman of the Board of Directors (if
there be one) or, in the absence of the Chairman of the Board, the Vice Chairman
of the Board (if there be one), or the President of the Corporation shall act as
the presiding officer at Board of Director meetings, and the Secretary or an
assistant secretary of the Corporation shall act as the secretary of the
meeting. In the absence of the Chairman of the Board of Directors (if there be
one), the Vice Chairman of the Board of Directors (if there be one), and the
President, the Board of Directors may appoint a director to act as the presiding
officer. The presiding officer at Board of Director meetings shall be entitled
to vote as a director on all questions.
Minutes of all meetings of the Board of Directors shall be permanently kept
by the Secretary, and all minutes shall be signed by the secretary of the
meeting.
The Board of Directors shall have power to formulate rules and regulations
governing the conduct of Board of Director meetings and the procedure thereat.
Section 12. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may, by
resolution adopted by a majority of the number of directors fixed in accordance
with Article III, Section 2 of these bylaws, designate from among its members an
executive committee, and one or more other committees each of which, to the
extent provided in such resolution and permitted by the Iowa Business
Corporation Act, shall have and may exercise all the authority of the Board of
Directors. Unless otherwise provided by resolution of the Board of Directors, a
quorum of each such committee shall consist of a majority of its members, and if
a quorum is present when a vote is taken, the affirmative vote of a majority of
the members present shall be the act of such committee.
Section 13. COMPENSATION OF DIRECTORS. The Board of Directors shall have
the authority to fix the compensation of directors. Any director may serve the
Corporation in any other capacity and receive compensation therefor.
Section 14. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.
(a) Right to Indemnification. Each person who was or is a party or is
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threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative or
arbitration and whether formal or informal ("proceeding"), by reason of the fact
that he or she, or a person of whom he or she is the legal representative, is or
was a director, officer or employee of the Corporation or is or was serving at
the request of the Corporation as a director, officer or employee of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity while serving as a
director, officer or employee or in any other capacity while serving as a
director, officer or employee, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Iowa Business Corporation
Act, as the same exists or may hereafter be amended, (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than the Iowa Business Corporation Act
permitted the Corporation to provide prior to such amendment), against all
reasonable expenses, liability and loss(including, without limitation,
attorneys' fees, all costs, judgments, fines, Employee Retirement Income
Security Act excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith. Such right shall be a contract right and shall include the right to
be paid by the Corporation expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, the payment of such
expenses incurred by a director, officer or employee in his or her capacity as a
director, officer or employee (and not in any other capacity in which service
was or is rendered by such person while a director, officer or employee
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Corporation of (i) a written undertaking, by or on behalf of such director,
officer or employee to repay all amounts so advanced if it should be determined
ultimately that such director, officer or employee is not entitled to be
indemnified under this Section or otherwise, or (ii) a written affirmation by or
on behalf of such director, officer or employee that, in such person's good
faith belief, such person has met the standards of conduct set forth in the Iowa
Business Corporation Act.
(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a) is not
paid in full by the Corporation within thirty (30) days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be
paid also the expenses of prosecuting such claim. It shall be a defense to any
such action that the claimant has not met the standards of conduct which make it
permissible under the Iowa Business Corporation Act for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. The failure of the Corporation (including
its Board of Directors, independent legal counsel, or its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he
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or she has met the applicable standard of conduct set forth in the Iowa Business
Corporation Act, shall not be a defense to the action or create a presumption
that claimant had not met the applicable standard of conduct.
(c) BENEFIT. Indemnification provided hereunder shall, in the case of the
death of the person entitled to indemnification, inure to the benefit of such
person's heirs, executors or other lawful representatives. The invalidity or
unenforceability of any provision of this Section 14 shall not affect the
validity or enforceability of any other provision of this Section 14.
(d) CERTAIN ACTIONS; PRESUMPTION OF STANDARD OF CONDUCT. Any action taken
or omitted to be taken by (i) any director, officer or employee in good faith
and in compliance with or pursuant to any order, determination, approval or
permission made or given by a commission, board, official or other agency of the
United States or of any state or other governmental authority with respect to
the property or affairs of the Corporation or any such business corporation,
not-for-profit corporation, joint venture, trade association or other entity
over which such commission, board, official or agency has jurisdiction or
authority or purports to have jurisdiction or authority or (ii) by any director
of the Corporation pursuant to Section D of Article VIII of the Restated
Articles of Incorporation, as amended, shall be presumed to be in compliance
with the standard of conduct set forth in Section 490.851 (or any successor
provision) of the Iowa Business Corporation Act whether or not, in the case of
clause (i), it may thereafter be determined that such order, determination,
approval or permission was unauthorized, erroneous, unlawful or otherwise
improper.
(e) LITIGATION; PRESUMPTION OF STANDARD OF CONDUCT. Unless finally
determined, the termination of any litigation, whether by judgment, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that the action taken or omitted to be taken by the person
seeking indemnification did not comply with the standard of conduct set forth in
Section 490.851 (or successor provision) of the Iowa Business Corporation Act.
(f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
Section 14 shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the Restated Articles of
Incorporation, as amended, bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
(g) INSURANCE. The Corporation may maintain insurance, at its expense, to
protect itself and any such director, officer or employee of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Iowa Business Corporation Act.
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Section 15. ACTION BY DIRECTORS WITHOUT A MEETING. Any action required to
be taken at a meeting of the Board of Directors or a committee of directors and
any other action which may be taken at a meeting of the Board of Directors or a
committee of directors may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the directors or
all of the members of the committee of directors, as the case may be, entitled
to vote with respect to the subject matter thereof.
ARTICLE IV.
Officers.
At the first regular meeting of the Board of Directors following each
annual meeting of the shareholders, the Board shall elect a President, one or
more Vice Presidents as prescribed by these bylaws, a Secretary and a Treasurer;
and the Board may at any meeting elect or appoint a Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, additional vice presidents
and other officers or assistants to officers.
The Chairman of the Board of Directors (if there be one) and the Vice
Chairman of the Board of Directors (if there be one) shall be selected from
among the members of the Board. The officers of the Corporation may be, but are
not required to be, directors. An officer may, but need not be, a shareholder of
the Corporation.
Subject to the power of the Board of Directors to remove any officer from
office at any time when in its judgment the best interests of the Corporation
will be served thereby, each officer shall serve until the successor of such
officer is elected or appointed, unless the tenure of such officer is otherwise
fixed by the Board of Directors by resolution, contract or agreement for a
different period of time.
The Board of Directors shall have power to fix the compensation of each
officer, to prescribe the duties of such officer, to decrease or increase such
compensation, change the nature of such duties, or remove such officer from
office and elect or appoint the successor of such officer, in each case subject
to the terms of any agreement between such officer and the Corporation.
Section 1. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors (if there be one) shall preside at all meetings of the shareholders
and of the directors, at which the Chairman is present. The Chairman shall
perform all duties incident to the office of Chairman of the Board of Directors
and such other duties as, from time to time, may be assigned to the Chairman by
the Board of Directors, and, if so designated by an appropriate resolution of
the Board of Directors or an agreement between the Chairman and the Corporation,
shall be the chief executive officer of the Corporation, subject, however, to
the right of the Board of Directors to delegate
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any specific power to any other officer or officers of the Corporation; and the
Chairman shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 2. VICE CHAIRMAN OF THE BOARD OF DIRECTORS. The Board of Directors
may elect or appoint a Vice Chairman of the Board of Directors who shall, in the
absence or disability of the Chairman or in case of vacancy in the office,
assume all duties of the Chairman and such other duties as, from time to time,
may be assigned to the Vice Chairman by the Board of Directors.
Section 3. PRESIDENT. The President of the Corporation shall have general
and active management of and exercise general supervision of the business and
affairs of the Corporation and, if so designated by an appropriate resolution of
the Board of Directors, or an agreement between the President and the
Corporation, shall be the chief executive officer of the Corporation, subject,
however, to the right of the Board of Directors to delegate any specific power
to any other officer or officers of the Corporation; and the President shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The President shall have concurrent power with the Chairman of the Board
of Directors to sign bonds, mortgages, certificates for shares, and other
contracts and documents, except in cases where the signing and execution thereof
shall be expressly delegated by law, by the Board of Directors, or by these
bylaws to some other officer of the Corporation. In the absence of the Chairman
of the Board of Directors or in the event of the disability or refusal of the
Chairman to act, and in the absence of the Vice Chairman of the Board of
Directors or in the event of the disability or refusal of the Vice Chairman to
act, the President shall have such other powers as are vested in the Chairman of
the Board of Directors. In general, the President shall perform the duties
incident to the office of President and such other duties as may be prescribed
by the Board of Directors from time to time.
Section 4. EXECUTIVE VICE PRESIDENT. The Board of Directors may designate
an Executive Vice President who shall, in the absence or disability of the
President, or in case of a vacancy in that office, assume all duties of the
President.
Section 5. VICE PRESIDENTS. The Vice Presidents, including the Executive
Vice President and Vice Presidents designated by the Board of Directors as
Senior Vice Presidents or Group Vice Presidents, shall perform such of the
duties and exercise such of the powers of the President as shall be assigned to
them from time to time by the Board of Directors or the President, and shall
perform such other duties as the Board of Directors or the President shall from
time to time prescribe. Any Vice President may sign certificates for shares of
the Corporation and any deeds, mortgages, bonds, contracts or other instruments
which the Board of Directors has authorized to be executed, which authorizations
may be either specific or general. In case of the death, disability or absence
of the Chairman of the Board of Directors (if there be one) and the
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President and the Executive Vice President, the Senior Vice President or the
Group Vice President (or, if there be more than one, the Senior Vice President
or the Group Vice President designated by the Board of Directors) shall perform
the duties of the President, including interim duties, and when so acting shall
have all the powers of and be subject to all restrictions upon the President.
Section 6. SECRETARY. The Secretary shall attend all meetings of the
shareholders and of the Board of Directors and shall keep the minutes of such
meetings. The Secretary shall perform like duties for the standing committees of
the Board of Directors when required. Except as otherwise provided by these
bylaws or by the Iowa Business Corporation Act, the Secretary shall give, or
cause to be given, notice of all meetings of the shareholders and of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or the Chairman of the Board of Directors (if there be one)
or the President.
The Secretary shall have custody of the minute books, containing the
minutes of shareholders' and directors' meetings, of the stock books of the
Corporation, and of all corporate records. The Secretary shall have the duty to
see that the books, reports, statements, certificates and all other documents
and reports of the Corporation required by law are properly prepared, kept and
filed. The Secretary shall, in general, perform all duties incident to the
office of Secretary.
Section 7. ASSISTANT SECRETARIES. The assistant secretaries shall perform
such of the duties and exercise such of the powers of the Secretary as shall be
assigned to them from time to time by the Board of Directors or the Chairman of
the Board of Directors (if there be one) or the President or the Secretary, and
shall perform such other duties as the Board of Directors or the Chairman of the
Board of Directors (if there be one) or the President shall from time to time
prescribe.
Section 8. TREASURER. The Treasurer shall have the custody of all moneys,
stocks, bonds and other securities of the Corporation, and of all other papers
on which moneys are to be received and of all papers which relate to the receipt
or delivery of the stocks, bonds, notes and other securities of the Corporation
in the possession of the Treasurer. The Treasurer is authorized to receive and
receipt for stocks, bonds, notes and other securities belonging to the
Corporation or which are received for its account, and to place and keep the
same in safety deposit vaults rented for the purpose, or in safes or vaults
belonging to the Corporation. The Treasurer is authorized to collect and receive
all moneys due the Corporation and to receipt therefor, and to endorse all
checks, drafts, vouchers or other instruments for the payment of money payable
to the Corporation when necessary or proper and to deposit the same to the
credit of the Corporation in such depositaries as the Treasurer may designate
for the purpose, and the Treasurer may endorse all commercial documents for or
on behalf of the Corporation. The Treasurer is authorized to pay interest on
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obligations when due and dividends on stock when duly declared and payable. The
Treasurer shall, when necessary or proper, disburse the funds of the
Corporation, taking proper vouchers for such disbursements. The Treasurer shall
cause to be kept in the office of the Treasurer true and full accounts of all
receipts and disbursements, and shall render to the Board of Directors and the
Chairman of the Board of Directors (if there be one) or the President, whenever
they may require it, an account of all the transactions as Treasurer and of the
financial condition of the Corporation. The Treasurer shall also perform such
other duties as may be prescribed by the Board of Directors or the Chairman of
the Board of Directors (if there be one) or the President. The Treasurer shall,
in general, perform all duties usually incident to the office of Treasurer.
Section 9. ASSISTANT TREASURERS. The assistant treasurers shall perform
such of the duties and exercise such of the powers of the Treasurer as shall be
assigned to them from time to time by the Board of Directors or the Chairman of
the Board of Directors (if there be one) or the President or the Treasurer, and
shall perform such other duties as the Board of Directors or the Chairman of the
Board of Directors (if there be one) or the President shall from time to time
prescribe.
ARTICLE V.
Stock Certificates.
Section 1. REGISTRARS AND TRANSFER AGENTS. The Board of Directors shall
determine the form of and provide for the issue, registration and transfer of
the stock certificates representing stock of the Corporation, and may appoint
registrars and transfer agents, who may be natural persons or corporations. The
office of any transfer agent or registrar may be maintained within or without
the State of Iowa.
Section 2. SIGNATURES. Any stock certificates issued by the Corporation
shall bear the signatures of the Chairman of the Board of Directors (if there be
one), or the Vice Chairman of the Board of Directors (if there be one), or the
President or any Vice President and of the Secretary or any Assistant Secretary
and such officers are hereby authorized and empowered to sign such certificates
when the issuance thereof has been duly authorized by the Board of Directors;
provided, however, that if certificates representing shares of any class or
series of stock issued by the Corporation are countersigned by manual signature
by a transfer agent, other than the Corporation or its employee, or registered
by manual signature by a registrar, other than the Corporation or its employee,
any other signature on such certificate may be a facsimile, engraved, stamped or
printed. In case any person who is an officer who has signed or whose facsimile
signature has been placed upon such certificate representing stock of the
Corporation shall cease to be such officer of the Corporation before such
certificate is issued, such certificate may be issued by the Corporation with
the
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same effect as if such person was such officer at the date of its issue.
Section 3. TRANSFERS. Transfers of shares shall be made on the books of the
Corporation only by the registered owner thereof (or the legal representative of
such owner, upon satisfactory proof of authority therefor), or by the attorney
of such owner lawfully constituted in writing by documents filed with the
Secretary or transfer agent of the Corporation, and only upon surrender of the
certificate to be transferred, or delivery of an order of such owner if such
shares are not represented by a certificate, and payment of applicable taxes
with respect to such transfer, unless otherwise ordered by the Board of
Directors.
Section 4. LOST OR DESTROYED CERTIFICATES. New certificates may be issued
to replace lost, stolen or destroyed certificates, upon such terms and
conditions as the Board of Directors may prescribe.
Section 5. RIGHTS OF REGISTERED OWNERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered or shown on its books as
the owner of shares of its stock to receive dividends or any other distribution
thereon, or to vote such shares, and to treat such person as the owner of such
shares for all purposes and the Corporation shall not be bound to recognize any
equitable or other claim to or interest in its shares on the part of any person
other than the registered or record owner thereof, whether or not it shall have
notice thereof.
ARTICLE VI.
General Provisions.
Section 1. INSTRUMENTS AFFECTING REAL ESTATE. Deeds, mortgages and other
instruments affecting real estate owned by the Corporation, the execution of
which has been duly authorized by the Board of Directors, shall be signed on
behalf of the Corporation by the Chairman of the Board of Directors (if there be
one), the Vice Chairman of the Board of Directors (if there be one), or the
President or any Vice President and by the Secretary or any Assistant Secretary.
Leases, contracts to purchase and other instruments whereby the Corporation
acquires, in the ordinary course of business, an interest in real estate owned
by others may be executed on behalf of the Corporation by the Chairman of the
Board of Directors (if there be one), the Vice Chairman of the Board of
Directors (if there be one), the President or by any Vice President so
authorized.
Section 2. OTHER INSTRUMENTS. Bonds, notes and other secured or unsecured
obligations of the Corporation, when duly authorized by the Board of Directors,
may be executed on behalf of the Corporation by the Chairman of the Board of
Directors (if there be one) the Vice Chairman of the Board of Directors (if
there be one), or the President or any Vice President, or by any
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other officer or officers thereunto duly authorized by the Board of Directors
and the signature of any such officer may, if the Board of Directors shall so
determine, be a facsimile. Contracts and other instruments entered into executed
in the ordinary course of business may be signed on behalf of the Corporation by
the Chairman of the Board of Directors (if there be one), the Vice Chairman of
the Board of Directors (if there be one), or the President or by any officer or
employee of the Corporation thereunto authorized by the Chairman of the Board of
Directors (if there be one), the Vice Chairman of the Board of Directors (if
there be one), or the President, without obtaining specific authorization
therefor from the Board of Directors.
Section 3. DESTRUCTION OF RECORDS. The Chairman of the Board of Directors
(if there be one), the Vice Chairman of the Board of Directors (if there be
one), or the President or any Vice President appointed by the President to serve
in place of the President, the Secretary and the Treasurer shall constitute a
committee for the destruction of records and shall meet from time to time at the
call of the Secretary who shall be chairman of such committee. It shall have
power to order and cause the destruction of any corporate records, the
preservation of which has been found by it to be no longer necessary or
desirable.
Section 4. FISCAL YEAR. The fiscal year of the Corporation shall be the
calendar year.
Section 5. ANNUAL REPORT. As soon as practicable after the close of each
fiscal year, the Board of Directors shall cause an annual report of the business
and affairs of the Corporation to be made to the shareholders.
Section 6. NO CORPORATE SEAL. The Corporation shall have no corporate seal.
Section 7. STOCK IN OTHER CORPORATIONS. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board of Directors (if there be one),
the Vice Chairman of the Board of Directors (if there be one), or the President
or any Vice President of the Corporation (1) shall have full power and authority
to act and vote, in the name and on behalf of the Corporation, at any meeting of
shareholders of any corporation in which this Corporation may hold stock, and at
any such meeting shall possess and may exercise any and all of the rights and
powers incident to the ownership of such stock, and (2) shall have full power
and authority to execute, in the name and on behalf of the Corporation, proxies
appointing any suitable person or persons to act and to vote at any meeting of
shareholders of any corporation in which the Corporation may hold stock, and at
any such meeting the person or persons so designated shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock.
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ARTICLE VII.
Amendments.
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by vote of a majority of the number of directors fixed by these bylaws
at any regular or special meeting of the Board of Directors.
MEC-1.revbyl
06/22/95
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AMENDMENT TO THE BYLAWS OF
MIDAMERICAN ENERGY HOLDINGS COMPANY
DULY ADOPTED BY THE BOARD OF DIRECTORS ON July 24, 1996
RESOLVED, that, effective July 24, 1996, the Bylaws of MidAmerican
Energy Holdings Company are hereby amended by adding the following as a
second paragraph to Article II, Section 2:
Only such business shall be conducted at an annual meeting of shareholders
as shall have been properly brought before the meeting. For business to be
properly brought before the meeting, it must be: (i) authorized by the
Board of Directors and specified in the notice, or a supplemental notice,
of the meeting, (ii) otherwise brought before the meeting by or at the
direction of the Board of Directors or the Chairman of the meeting or (iii)
otherwise properly brought before the meeting by a shareholder. For
business to be properly brought before the meeting by a shareholder, the
shareholder must have given written notice thereof, either by personal
delivery or by United States mail, postage prepaid to the Secretary of the
Corporation (a) not later than 120 days in advance of such meeting or (b)
if less than 120 days' notice of the meeting or prior public disclosure of
the date of the meeting is given or made to shareholders, not later than
the close of business on the seventh day following the date on which notice
of such meeting is first given to shareholders. Each such notice shall set
forth as to each item of business the shareholder proposes to bring before
the meeting (1) a brief description of such item and the reasons for
conducting such business at the meeting, (2) the name and address, as they
appear on the Corporation's records, of the shareholder proposing such
business, (3) the class and number of shares of stock of the Corporation
which are beneficially owned by the shareholder (for purposes of the
regulations under Sections 13 and 14 of the Securities Exchange Act of
1934, as amended) and (4) any material interest of the shareholder in such
business. No business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this paragraph. The Chairman of
the meeting at which any business is proposed by a shareholder shall, if
the facts warrant, determine and declare to the meeting that such business
was not properly brought before the meeting in accordance with the
provisions of this paragraph and, in such event, the business not properly
before the meeting shall not be transacted.
MEC\HOLDING\BYLAW2.REV
EXHIBIT 3.3
RESTATED
ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 409.1007 of the Iowa Business
Corporation Act, the undersigned corporation hereby adopts the following
Restated Articles of Incorporation ("Articles of Incorporation"):
ARTICLE I
The name of the corporation is "MidAmerican Energy Company" (hereinafter
sometimes called the "Corporation") and its registered office shall be located
at 666 Grand Avenue, Des Moines, Iowa 50306 with the right to establish and
maintain branch offices at such other points within and without the State of
Iowa as the Board of Directors of the Corporation may, from time to time,
determine. The name of the Corporation's registered agent at such registered
office is Paul J. Leighton, Vice President and Corporate Secretary.
ARTICLE II
The nature of the business or purposes to be conducted or promoted is to
engage in any or all lawful act or activity for which a corporation may be
incorporated under the Iowa Business Corporation Act.
ARTICLE III
A. The aggregate number of shares which the Corporation shall have
authority to issue is 350,000,000 shares of Common Stock, no par value ("Common
Stock"), and 100,000,000 shares of Preferred Stock, no par value ("Preferred
Stock").
B. The shares of authorized Common Stock shall be identical in all respects
and shall have equal rights and privileges. For all purposes, each registered
holder of Common Stock shall, at each meeting of shareholders, be entitled to
one vote for each share of Common Stock held, either in person or by proxy duly
authorized in writing. Except to the extent required by law or as permitted by
these Articles of Incorporation, as amended from time to time, the registered
holders of the shares of Common Stock shall have unlimited and exclusive voting
rights.
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C. The Board of Directors, at any time or from time to time, may, and is
hereby authorized to, issue and dispose of any of the authorized and unissued
shares of Common Stock and any treasury shares for such kind and amount of
consideration and to such persons, firms or corporations, as may be determined
by the Board of Directors, subject to any provisions of law then applicable. The
holders of Common Stock shall have no preemptive rights to acquire or subscribe
to any shares, or securities convertible into shares, of Common Stock.
D. The Board of Directors, at any time or from time to time may, and is
hereby authorized to, divide the authorized and unissued shares of Preferred
Stock into one or more classes or series and in connection with the creation of
any class or series to determine, in whole or in part, to the full extent now or
hereafter permitted by law, by adopting one or more articles of amendment to the
Articles of Incorporation providing for the creation thereof, the designation,
preferences, limitations and relative rights of such class or series, which may
provide for special, conditional or limited voting rights, or no rights to vote
at all, and to issue and dispose of any of such shares and any treasury shares
for such kind and amount of consideration and to such persons, firms or
corporations, as may be determined by the Board of Directors, subject to any
provisions of law then applicable.
E. The Board of Directors, at any time or from time to time may, and is
hereby authorized to, create and issue, whether or not in connection with the
issuance and sale of any shares of Common Stock, Preferred Stock or other
securities of the Corporation, warrants, rights and/or options entitling the
holders thereof to purchase from the Corporation any shares of Common Stock,
Preferred Stock or other securities of the Corporation. Such warrants, rights or
options shall be evidenced by such instrument or instruments as shall be
approved by the Board of Directors of the Corporation. The terms upon which, the
time or times (which may be limited or unlimited in duration) at or within
which, and the price or prices (which shall be not less than the minimum amount
prescribed by law, if any) at which any such shares or other securities may be
purchased from the Corporation upon the exercise of any such warrant, right or
option shall be fixed and stated in the resolution or resolutions of the Board
of Directors providing for the creation and issuance of such warrants, rights or
options. The Board of Directors is hereby authorized to create and issue any
such warrants, rights or options from time to time for such consideration, if
any, and to such persons, firms or corporations, as the Board of Directors may
determine.
F. The Corporation may authorize the issuance of some or all of the shares
of any or all of the classes of its capital stock without certificates.
G. The Corporation shall not be required to issue certificates representing
any fraction or fractions of a share of stock of any class but may issue in lieu
thereof one or more non-dividend bearing and non-voting scrip certificates in
such form or forms as shall be approved by the Board of Directors, each scrip
certificate representing a fractional interest in one share of stock of any
class. Such scrip certificates upon presentation together with similar scrip
certificates representing in the aggregate an interest in one or more full
shares of stock of any class shall entitle the holders thereof to receive one or
more full shares of stock of such class. Such scrip certificates may contain
such
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terms and conditions as shall be fixed by the Board of Directors and may become
void and of no effect after a period to be determined by the Board of Directors
and to be specified in such scrip certificates.
H. The Corporation shall be entitled to treat the person in whose name any
share of Common Stock or Preferred Stock is registered as the owner thereof for
all purposes and shall not be bound to recognize any equitable or other claim
to, or interest in, such share on the part of any person, whether or not the
Corporation shall have notice thereof except as may be expressly provided
otherwise by the laws of the State of Iowa.
ARTICLE IV
The term of corporate existence of the Corporation shall be perpetual.
ARTICLE V
A. All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of, the Board of Directors. The number of directors of the Corporation
shall be fixed by the Bylaws but shall be no less than ten (10) and no greater
than twenty-two (22), and such number may be increased or decreased from time to
time in accordance with the Bylaws, but no decrease shall have the effect of
shortening the term of any incumbent director. Directors shall be elected by the
shareholders at each annual meeting of the Corporation as specified herein and
in the Bylaws. Directors need not be shareholders.
B. Each director shall serve until his or her successor is elected and
qualified or until his or her prior death, retirement, resignation or removal.
Should a vacancy occur or be created, whether arising through death, resignation
or removal of a director or through an increase in the number of directors, such
vacancy shall be filled solely by a majority vote of the remaining directors
though less than a quorum of the Board of Directors. A director so elected to
fill a vacancy shall serve for the remainder of the then present term of office
of the Board of Directors.
C. Any director or the entire Board of Directors may be removed for cause
as set forth in this paragraph C. Removal of a director for cause must be
approved by the affirmative vote of the holders of shares of capital stock of
the Corporation having at least 75% of the votes of all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, only at a meeting called for the
purpose of removing the director and after notice stating that the purpose, or
one of the purposes, of the meeting is removal of the director. Any action for
removal of a director must be taken within one year of such cause.
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D. The Board of Directors, by a vote of a majority of the entire Board of
Directors, may appoint from the directors an executive committee and such other
committees as they may deem judicious; and to such extent as shall be provided
in the resolution of the Board of Directors or in the Bylaws, may delegate to
such committees all or any of the powers of the Board of Directors which may be
lawfully delegated, and such committees shall have and thereupon may exercise
all or any of the powers so delegated to them. The Board of Directors or the
Bylaws may provide the number of members necessary to constitute a quorum of any
committee and the number of affirmative votes necessary for action by any
committee.
E. The Board of Directors shall elect such officers of the Corporation as
specified in the Bylaws. All vacancies in the offices of the Corporation shall
be filled by the Board of Directors. The Board of Directors shall also have
authority to appoint such other managing officers as they may from time to time
determine.
ARTICLE VI
Special meetings of shareholders of the Corporation may be called at any
time by the Chairman of the Board of Directors or by the President on at least
ten days' notice to each shareholder entitled to vote at the special meeting, by
mail at such shareholder's last known post office address, specifying the time,
place and purpose or purposes of the special meeting.
ARTICLE VII
The private property of the shareholders of the Corporation shall be exempt
from all corporate debts.
ARTICLE VIII
A. In addition to any affirmative vote required by law or under any other
provision of these Articles of Incorporation:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into any Other Entity (as
hereinafter defined); or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Other Entity of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market Value
(as hereinafter defined) of $25,000,000 or more; or
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(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related transactions) of
any securities of the Corporation or any Subsidiary to any Other
Entity in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value of
$25,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation; or
(v) any reclassification of securities (including any reverse
stock split), recapitalization, reorganization, merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving any Other Entity) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Other Entity; or
(vi) any direct or indirect purchase or other acquisition by the
Corporation of any equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on June 30, 1995) of any class from an Interested
Securityholder (as hereinafter defined) who has beneficially owned
such securities for less than two years prior to the date of such
purchase or any agreement in respect thereof,
shall require the affirmative vote of the holders of shares of capital stock of
the Corporation having at least 75% (excluding, in the case of (i) through (v)
above, shares beneficially owned by a 25% Shareholder (as hereinafter defined),
and, in the case of (vi) above, shares beneficially owned by such Interested
Securityholder) of the votes of all outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, considered
for the purpose of this Article VIII as one class ("Voting Shares"). Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that some lesser percentage vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of paragraph A of this Article VIII shall not be
applicable to any particular Business Combination (as hereinafter defined), and
such Business Combination shall require only such affirmative vote as is
required by law and any other provision of these Articles of Incorporation, if
all of the conditions specified in either of the following subparagraphs 1 and 2
shall have been satisfied.
1. A majority of the Continuing Directors (as hereinafter defined)
shall have approved the Business Combination (but only if a majority of the
Board of Directors are Continuing Directors); or
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2. All of the following conditions shall have been met:
a. The ratio of:
(i) the aggregate amount of the cash and the Fair Market
Value as of the date of consummation of the Business Combination
of other consideration to be received per share by holders of a
particular class or series of Voting Shares in such Business
Combination
to
(ii) the Fair Market Value per share of such class or series
of Voting Shares on the date of the first public announcement of
such Business Combination or the date on which any 25%
Shareholder became a 25% Shareholder, whichever is higher
is at least as great as the ratio (which ratio shall equal the number
one in the event that such 25% Shareholder has never beneficially
owned any shares of such class or series of Voting Shares) of
(x) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) which
such 25% Shareholder has theretofore paid for any share of such
class or series of Voting Shares acquired by it
to
(y) the Fair Market Value per share of such class or series
of Voting Shares on the date of the initial acquisition by such
25% Shareholder of any share of such class or series of Voting
Shares;
b. The aggregate amount of the cash and Fair Market Value as of
the date of consummation of the Business Combination of other
consideration to be received per share by holders of each class or
series of Preferred Stock in such Business Combination is not less
than the highest preferential amount per share to which holders of
shares of such class or series of Preferred Stock would, respectively,
be entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, regardless of whether
the Business Combination to be consummated constitutes such an event;
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c. The consideration to be received by holders of a particular
class or series of Voting Shares in such Business Combination shall be
in cash or in the same form and of the same kind as the consideration
paid by the 25% Shareholder in acquiring the shares of such class or
series of Voting Shares already owned by it;
d. After such 25% Shareholder has acquired ownership of not less
than 25% of the then outstanding Voting Shares (a "25% Interest") and
prior to the consummation of such Business Combination:
(i) the 25% Shareholder shall have taken steps to ensure
that the Corporation's Board of Directors includes at all times
representation by Continuing Director(s) proportionate to the
ratio that the Voting Shares which from time to time are owned by
persons who are not 25% Shareholders ("Public Holders") bear to
all Voting Shares outstanding at such respective times (with a
Continuing Director to occupy any resulting fractional board
position);
(ii) there shall have been no reduction in the rate of
distributions ("Dividends") payable on the Common Stock except as
may have been approved by a majority vote of the Continuing
Directors;
(iii) such 25% Shareholder shall not have acquired any newly
issued shares of stock, directly or indirectly, from the
Corporation (except upon conversion of convertible securities
acquired by it prior to obtaining a 25% Interest or as a result
of a pro rata stock Dividend or stock split); and
(iv) such 25% Shareholder shall not have acquired any
additional Voting Shares or securities convertible into or
exchangeable for Voting Shares except as a part of the
transaction which resulted in such 25% Shareholder acquiring its
25% Interest;
e. Prior to or upon the consummation of such Business Combination,
such 25% Shareholder shall not have (i) received the benefit, directly or
indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or tax credits
provided by the Corporation, or (ii) made any major change in the
Corporation's business or equity capital structure without the unanimous
approval of the entire Board of Directors; and
f. A proxy statement responsive to the requirements of the Securities
Exchange Act of 1934 and the General Rules and Regulations promulgated
thereunder shall have been mailed to all holders of Voting Shares for the
purpose of soliciting shareholders' approval of such Business Combination.
Such proxy statement shall contain at the front thereof in a prominent
place, any recommendations
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as to the advisability (or inadvisability) of the Business Combination
which the Continuing Directors, or any of them, may have furnished in
writing and, if deemed advisable by a majority of the Continuing
Directors, an opinion of a reputable investment banking firm as to the
fairness (or lack of fairness) of the terms of such Business
Combination, from a financial point of view, to the holders of Voting
Shares other than any 25% Shareholder (such investment banking firm to
be selected by a majority of the Continuing Directors, to be furnished
with all information it reasonably requests and to be paid a
reasonable fee for its services upon receipt by the Corporation of
such opinion).
C. For the purposes of this Article VIII:
1. The term "Business Combination" shall mean any transaction which is
referred to in any one or more of clauses (i) through (v) of paragraph A of
this Article VIII;
2. The term "Other Entity" shall include (a) any 25% Shareholder and
(b) any other person (whether or not itself a 25% Shareholder) which after
any Business Combination, would be an Affiliate (as hereinafter defined) of
any 25% Shareholder;
3. The term "person" shall mean any individual, firm, trust,
partnership, association, corporation or other entity;
4. The term "25% Shareholder" shall mean, in respect to any Business
Combination, any person (other than the Corporation or any Subsidiary) who
or which, as of the record date for the determination of shareholders
entitled to notice of and to vote on such Business Combination, or
immediately prior to the consummation of any such transactions,
(a) is the beneficial owner, directly or indirectly, of not less
than 25% of the Voting Shares, or
(b) is an Affiliate of the Corporation and at any time within
five years prior thereto was the beneficial owner, directly or
indirectly, of not less than 25% of the then outstanding Voting
Shares, or
(c) is an assignee of or has otherwise succeeded to any shares of
capital stock of the Corporation which were at any time within five
years prior thereto beneficially owned by any 25% Shareholder, and
such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933;
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5. A person shall be the beneficial owner of any Voting Shares
(a) which such person or any of its Affiliates and Associates (as
hereinafter defined) beneficially own, directly or indirectly, or
(b) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (ii) the right to vote pursuant to any agreement, arrangement or
understanding, or
(c) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation;
6. The outstanding Voting Shares shall include shares deemed owned
through application of subparagraph 5 of this paragraph C above but shall
not include any other Voting Shares which may be issuable pursuant to any
agreement or upon exercise of conversion rights, warrants or options, or
otherwise;
7. The term "Continuing Director" shall mean (a) a person who was a
member of the Board of Directors elected by the Public Holders prior to the
date as of which any 25% Shareholder acquired in excess of 10% of the then
outstanding Voting Shares or (b) a person designated (before his or her
initial election as a director) as a Continuing Director by a majority of
the then Continuing Directors;
8. The term "other consideration to be received" shall include,
without limitation, Voting Shares retained by Public Holders in the event
of a Business Combination in which the Corporation is the surviving
corporation;
9. The terms "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on June
30, 1995;
10. The term "Subsidiary" shall mean any corporation or other entity
of which a majority of the outstanding voting securities or other equity
interests having the power, under ordinary circumstances, to elect a
majority of the directors or otherwise to direct the management and
policies, of such corporation or other entity, is owned, directly or
indirectly, by the Corporation;
11. The term "Interested Securityholder" shall mean, with respect to
any transaction which is referred to in Clause (vi) of paragraph A of this
Article VIII, any person
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(other than the Corporation or any Subsidiary) who or which, as of the
record date for the determination of shareholders entitled to notice
of and to vote on such transaction, or immediately prior to the
consummation of any such transaction,
(a) is the beneficial owner, directly or indirectly, of not less
than five percent of the Voting Shares, or
(b) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than five percent of the then outstanding Voting Shares,
or
(c) is an assignee of or has otherwise succeeded to any shares of
the class of securities to be acquired which were at any time within
two years prior thereto beneficially owned by an Interested
Securityholder, and such assignment or succession shall have occurred
in the course of a transaction or series of transactions not involving
a public offering within the meaning of the Securities Act of 1933;
and
12. The term "Fair Market Value" shall mean (i) in the case of
capital stock, the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such capital
stock on the Composite Tape for New York Stock Exchange-Listed Stocks,
or, if such capital stock is not quoted on the Composite Tape, on the
New York Stock Exchange, or, if such capital stock is not listed on
such exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such
capital stock is listed, or, if such capital stock is not listed on
any such exchange, the highest closing bid quotation with respect to a
share of such capital stock during the 30- day period preceding the
date in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or if no
such quotations are available the fair market value on the date in
question of a share of such capital stock as determined by a majority
of the Continuing Directors in good faith; and (ii) in the case of
property other than cash or capital stock, the fair market value of
such property on the date in question as determined in good faith by a
majority of the Continuing Directors; provided that any such
determination by the Continuing Directors shall only be effective if
made at a meeting at which a majority of Continuing Directors is
present.
D. A majority of the Continuing Directors shall have the power and duty to
determine for purposes of this Article VIII, on the basis of information known
to them, (i) the number of Voting Shares beneficially owned by any person, (ii)
whether a person is an Affiliate or Associate of another, (iii) whether a person
has an agreement, arrangement or understanding with another as to the matters
referred to in subparagraph 4 of paragraph C, (iv) whether the assets subject to
any Business Combination have an aggregate Fair Market Value of $25,000,000 or
more, and (v) such other matters with respect to which a determination is
required under this Article VIII.
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E. Nothing contained in this Article VIII shall be construed to relieve any
25% Shareholder from any fiduciary obligation imposed by law.
ARTICLE IX
Any amendment, alteration, change or repeal of Article VA, VB and VC,
Article VIII or this Article IX of these Articles of Incorporation shall require
the affirmative vote of the holders of shares of capital stock of the
Corporation having at least 75% of the votes of all outstanding Voting Shares
(as defined in Article VIII), excluding from such affirmative vote shares
beneficially owned by any 25% Shareholder or by any Interested Securityholder in
the case of an amendment of the provisions of paragraph A of Article VIII that
exclude from an affirmative vote required pursuant to such paragraph A shares
beneficially owned by 25% Shareholders or shares beneficially owned by
Interested Securityholders, as the case may be.
ARTICLE X
The Board of Directors may make Bylaws and from time to time may alter,
amend or repeal any Bylaws; but any Bylaws made by the Board of Directors may be
altered or repealed by the shareholders entitled to vote generally at any annual
meeting or at any special meeting provided notice of such proposed alteration or
repeal be included in the notice of meeting.
ARTICLE XI
A. A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability:
(i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders; or
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or
(iii) for any transaction from which the director derives an improper
personal benefit; or
(iv) under Section 490.833, or a successor provision, of the Iowa
Business Corporation Act.
B. If, after the date these Articles of Incorporation are filed with the
Secretary of State of the State of Iowa, the Iowa Business Corporation Act is
amended to authorize corporate action
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further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be deemed eliminated or limited
to the fullest extent permitted by the Iowa Business Corporation Act, as so
amended. Any repeal or modification of Section A or Section B of this Article
XI, by the shareholders of the Corporation shall be prospective only and shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
ARTICLE XII
A. Each person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative, investigative, or arbitration and whether formal or informal
("proceeding"), by reasons of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity while serving as a director, officer or employee or in any
other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Iowa Business Corporation Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than the Iowa Business Corporation Act permitted the Corporation to
provide prior to such amendment), against all reasonable expenses, liability and
loss (including, without limitation, attorneys' fees, all costs, judgments,
fines, Employee Retirement Income Security Act excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith. Such right shall be a contract right and
shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that the payment of such expenses incurred by a director, officer or
employee in his or her capacity as a director, officer or employee (and not in
any other capacity in which service was or is rendered by such person while a
director, officer or employee including, without limitation, service to an
employee benefit plan) in advance of the final disposition of such proceeding,
shall be made only upon delivery to the Corporation of (i) a written
undertaking, by or on behalf of such director, officer or employee, to repay all
amounts so advanced if it should be determined ultimately that such director,
officer or employee is not entitled to be indemnified under this Article XII or
otherwise, or (ii) a written affirmation by or on behalf of such director,
officer or employee that, in such person's good faith belief, such person has
met the standards of conduct set forth in the Iowa Business Corporation Act.
B. If a claim under Section A is not paid in full by the Corporation within
thirty (30) days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to also be paid the expenses of prosecuting such
claim. It shall be a defense to any such action that the claimant has not met
the standards of conduct which
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make it permissible under the Iowa Business Corporation Act for the Corporation
to indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. The failure of the Corporation (including
its Board of Directors, independent legal counsel or its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the Iowa Business
Corporation Act, shall not be a defense to the action or create a presumption
that the claimant had not met the applicable standard of conduct.
C. Indemnification provided hereunder shall, in the case of the death of
the person entitled to indemnification, inure to the benefit of such person's
heirs, executors or other lawful representatives. The invalidity or
unenforceability of any provision of this Article XII shall not affect the
validity or enforceability of any other provision of this Article XII.
D. Any action taken or omitted to be taken by (i) any director, officer or
employee in good faith and in compliance with or pursuant to any order,
determination, approval or permission made or given by a commission, board,
official or other agency of the United States or of any state or other
governmental authority with respect to the property or affairs of the
Corporation or any such business corporation, not-for-profit corporation, joint
venture, trade association or other entity over which such commission, board,
official or agency has jurisdiction or authority or purports to have
jurisdiction or authority or (ii) by any director of the Corporation pursuant to
Section D of Article VIII shall be presumed to be in compliance with the
standard of conduct set forth in Section 490.851 (or any successor provision) of
the Iowa Business Corporation Act whether or not, in the case of clause (i), it
may thereafter be determined that such order, determination, approval or
permission was unauthorized, erroneous, unlawful or otherwise improper.
E. Unless finally determined, the termination of any litigation, whether by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the action taken or omitted to
be taken by the person seeking indemnification did not comply with the standard
of conduct set forth in Section 490.851 (or any successor provision) of the Iowa
Business Corporation Act.
F. The rights conferred on any person by this Article XII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, Bylaws,
agreement, vote of shareholders or disinterested directors or otherwise.
G. The Corporation may maintain insurance, at its expense, to protect
itself and any such director, officer or employee of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Iowa Business Corporation Act.
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The duly adopted Restated Articles of Incorporation supersede the original
Articles of Incorporation and all amendments thereto.
The Restated Articles of Incorporation amend the Articles of Incorporation
requiring shareholder approval. The Restated Articles of Incorporation were
approved by the shareholders. The designation, number of outstanding shares,
number of votes entitled to be cast by each voting group entitled to vote
separately on the Restated Articles of Incorporation, and the number of votes of
each voting group indisputably represented are as follows:
Votes Entitled
Designation Shares To Be Cast On Votes Represented
Of Group Outstanding Restated Articles at Meeting
- - ----------- ----------- ----------------- -----------------
Common Stock 1,000 1,000 1,000
The total number of undisputed votes cast for and against the Restated
Articles of Incorporation by each voting group entitled to vote separately on
the Restated Articles of Incorporation are as follows:
Voting Group Votes For Votes Against
- - ------------ --------- -------------
Common Stock 1,000 0
The number of votes cast for the Restated Articles of Incorporation by each
voting group was sufficient for approval by that voting group.
These Restated Articles of Incorporation are to be effective when filed by
the Secretary of State.
MIDAMERICAN ENERGY COMPANY
/s/ PAUL J. LEIGHTON
----------------------------------
Paul J. Leighton, Vice President and
Secretary
MER-141.rev
06/22/95
14
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ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 490.601, and in accordance with
Section 490.602(4), of the Iowa Business Corporation Act, the undersigned
corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Company
2. As of June 30, 1995, the Board of Directors of MidAmerican Energy
Company, an Iowa corporation ("Corporation"), duly adopted the following
Articles of Amendment to the Restated Articles of Incorporation ("Articles of
Incorporation") of the Corporation, determining certain terms of its class of
shares designated in Article III of its Articles of Incorporation as Preferred
Stock, no par value ("Preferred Stock"), and creating and determining the terms
of the ten series of Preferred Stock (collectively, the "Merger Series") to be
issued on the date on which the merger ("Merger") of Midwest Resources Inc., an
Iowa corporation ("Midwest Resources"), Midwest Power Systems Inc., an Iowa
corporation ("Midwest Power"), and Iowa-Illinois Gas and Electric Company, an
Illinois corporation ("Iowa-Illinois"), with and into the Corporation becomes
effective ("Effective Date of the Merger"), upon the conversion of (i) all
shares of each series of Midwest Power Preferred Stock, no par value ("Midwest
Power Preferred Stock"), into shares of a particular series of Preferred Stock,
and (ii) all shares of each series of Iowa-Illinois Preference Shares, without
par value ("Iowa-Illinois Preference Stock"), into shares of a particular series
of Preferred Stock, including the certain preferences, limitations and relative
rights of holders of shares of Preferred Stock, and the designation,
preferences, limitations and relative rights of each Merger Series.
3. The text of the Amendment determining the terms of the Preferred Stock
and the terms of each Merger Series, is as follows:
<PAGE>
A. Designations. Each Merger Series is given one of the following
distinguishing designations:
$1.7375 Series
$3.30 Series
$3.75 Series
$3.90 Series
$4.20 Series
$4.35 Series
$4.40 Series
$4.80 Series
$5.25 Series
$7.80 Series
B. Number of Shares. Each Merger Series shall consist of the following
number of shares of Preferred Stock:
Series Number of Shares
-------------- ----------------
$1.7375 Series 2,400,000
$3.30 Series 49,622
$3.75 Series 38,320
$3.90 Series 32,630
$4.20 Series 47,369
$4.35 Series 49,950
$4.40 Series 50,000
$4.80 Series 49,898
$5.25 Series 100,000
$7.80 Series 400,000
C. Distributions ("Dividends").
(1) The holders of the shares of each Merger Series in preference
to the holders of Common Stock and the holders of any other shares of
the Corporation which rank junior to the Preferred Stock, shall be
entitled to receive, but only when and as declared by the Board of
Directors, out of any assets legally available therefor, Dividends in
lawful money of the United States of America, in the amount per annum
set forth in the designation of such Merger Series in these Articles
of Amendment creating such Merger Series, and no more.
(2) Dividends on the Merger Series shares shall be payable
quarterly on the first day of each of the months of March, June,
September and December ("Dividend Payment Date") with respect to the
quarterly Dividend period ending on the date preceding each such
Dividend Payment Date, to shareholders of record as of a date to be
fixed by the Board of Directors, not exceeding thirty (30)
2
<PAGE>
days and not less than ten (10) days preceding such Dividend Payment
Dates; provided, however, that the first Dividend payable on the $5.25
Series and the $7.80 Series shall be paid as follows:
(a) if a regular Dividend Payment Date for the shares of
Iowa-Illinois Preference Stock which were converted into shares
of such Merger Series in the merger of Midwest Resources, Midwest
Power and Iowa-Illinois with and into the Corporation
("Iowa-Illinois Payment Date"), occurs after the Effective Date
of the Merger but before the first Dividend Payment Date after
the Effective Date of the Merger ("First Dividend Payment Date"),
then
(i) a Dividend shall be paid on the shares of such
Merger Series on the Iowa-Illinois Payment Date in the
regular quarterly amount, and
(ii) a Dividend shall be paid on the shares of such
Merger Series on the First Dividend Payment Date, but only
in the amount obtained by multiplying the regular quarterly
amount of such Dividend by a fraction (A) the numerator of
which is the number of days in the period commencing on the
Iowa-Illinois Payment Date and ending on and including the
day prior to the First Dividend Payment Date, and (B) the
denominator of which is the number of days in the period
commencing on the Dividend Payment Date preceding the
Effective Date of the Merger and ending on and including the
day prior to the First Dividend Payment Date; or
(b) if the First Dividend Payment Date occurs before an
Iowa-Illinois Payment Date, a Dividend shall be paid on the
shares of such Merger Series on the First Dividend Payment Date,
but only in the amount obtained by multiplying the regular
quarterly amount of such Dividend by a fraction (i) the numerator
of which is the number of days in the period commencing on the
Iowa-Illinois Payment Date preceding the Effective Date of the
Merger and ending on and including the day prior to the First
Dividend Payment Date, and (ii) the denominator of which is the
number of days in the period commencing on the Dividend Payment
Date preceding the Effective Date of the Merger and ending on and
including the day prior to the First Dividend Payment Date.
3
<PAGE>
(3) Except as provided in Section C (2), Dividends on each
Merger Series share shall be cumulative from the Dividend Payment
Date preceding the Effective Date of the Merger. Accumulations of
Dividends shall not bear interest.
(4) Except as provided in Section C (2), no Dividend shall
be paid upon, or declared and set apart for, any Merger Series
share for any quarterly period or portion thereof unless (i) at
the same time a like proportionate Dividend for the same
quarterly period or portion thereof shall be paid upon, or
declared and set aside, for all Merger Series shares and all
other shares of Preferred Stock on which Dividends are payable on
a Dividend Payment Date and (ii) no Dividends on any other shares
of Preferred Stock are accrued and unpaid.
(5) So long as any Merger Series shares are outstanding, the
Corporation shall not (i) pay or declare or set aside any
Dividend or other distribution on any shares of Common Stock or
on any other junior shares of the Corporation which rank below
the Preferred Stock with respect to any assets, Dividends or
other distributions or upon Liquidation or (ii) purchase, redeem
or otherwise acquire for value any shares of Common Stock or such
junior shares, in each case unless and until full Dividends have
been declared and paid upon or set apart for payment on all
shares of Preferred Stock, with respect to all Dividend periods
and the Dividend period which includes the date of such Dividend
or distribution on Common Stock or such junior shares; provided,
however, that the foregoing terms of this Section C (5) shall not
apply to the declaration and payment of Dividends or other
distributions on any shares of Common Stock or such junior shares
if payable solely in shares of Common Stock or such junior
shares, nor to the acquisition of shares of Common Stock or such
junior shares in exchange for, or through the application of the
proceeds of the sale of, any shares of Common Stock or such
junior shares.
D. Redemption.
(1) Subject to the limitations set forth in Section F, the
outstanding shares of each Merger Series may be redeemed by the
Corporation, at its option, by action of its Board of Directors,
as a whole at any time or in part from time to time, by paying in
cash on a redemption date specified by the Board of Directors,
the following redemption prices, in each case plus an amount
equal to accrued and unpaid Dividends thereon to such redemption
date:
4
<PAGE>
$1.7375 Series:
$26.3900 per share on December 1, 1994
through November 30, 1995
$26.0425 per share on December 1, 1995
through November 30, 1996
$25.6950 per share on December 1, 1996
through November 30, 1997
$25.3475 per share on December 1, 1997
through November 30, 1998
$25.000 per share on or after December 1,
1998
$3.30 Series:
$101.50 per share
$3.75 Series:
$102.75 per share
$3.90 Series:
$105.00 per share
$4.20 Series:
$103.439 per share
$4.35 Series:
$102.00 per share
$4.40 Series:
$101.50 per share
$4.80 Series:
$102.70 per share
$5.25 Series:
$101.97 per share on November 1, 1998
through October 31, 1999
$101.31 per share on November 1, 1999
through October 31, 2000
$100.66 per share on November 1, 2000
through October 31, 2001
$100.00 per share on or after November 1,
2001
$7.80 Series:
$107.80 per share on May 1, 1996 through
April 30, 2001
$103.90 per share on May 1, 2001 through
April 30, 2002
$101.95 per share on or after May 1, 2002
provided, however, that (i) prior to December 1, 1998, no
shares of the $1.7375 Series may be redeemed through a
refunding, directly or indirectly, by or in anticipation of
the incurring of any debt which has an interest cost, or the
issuance of stock ranking equally with or prior to the
$1.7375 Series as to Dividends or assets which has a
Dividend cost to the Corporation (computed in accordance
with generally accepted financial practice), of less that
7.15% per annum, (ii) prior
5
<PAGE>
to November 1, 1998, no shares of the $5.25 Series may be
redeemed at the option of the Corporation, and (iii) prior
to May 1, 1996, no shares of the $7.80 Series may be
redeemed at the option of the Corporation.
(2) Subject to the limitations set forth in Section F,
the Corporation shall on November 1, 2003 redeem all shares
of the $5.25 Series then outstanding at $100.00 per share,
plus accrued and unpaid Dividends thereon through October
31, 2003.
(3) "Accrued and unpaid Dividends" as used in this
Amendment with respect to any Merger Series share means the
amount, if any, by which the applicable amount of Dividend
per annum from the date after which Dividends on such share
become cumulative to the date in question, exceeds the
Dividends actually paid or declared and set aside for
payment thereon.
(4) Notice of any proposed redemption of any Merger
Series shares shall be given by the Corporation by mailing a
copy of such notice not more than sixty (60) nor less than
thirty (30) days prior to the date fixed for such redemption
to the holders of record of such shares to be redeemed, at
their respective addresses then appearing on the books of
the Corporation; but no failure to mail such notice or any
defect therein, or in the mailing thereof, shall affect the
validity of the proceedings for the redemption of any Merger
Series shares so to be redeemed.
(5) In case of redemption of only a part of the shares
of any Merger Series at the time outstanding, the shares of
such Merger Series to be redeemed shall be selected by lot
in such manner as the Board of Directors may determine.
(6) On the redemption date specified in the notice of
such redemption the Corporation shall, and at any time
within sixty (60) days prior to such redemption date may,
deposit in trust, for the account of the holders of the
Merger Series shares to be redeemed, funds necessary for
such redemption with a bank or trust company in good
standing, organized under the laws of the United State of
America or of the State of Iowa, doing business in the City
of Des Moines, Iowa, having combined capital, surplus and
undivided profits of at least $2,500,000 and designated in
such notice of redemption.
(7) Notice having been given and funds necessary for
such redemption having been deposited, all as provided in
this Section D, all Merger Series shares with respect to the
redemption of which such notice shall be given and deposit
made, shall thenceforth, whether or not the date fixed for
such redemption shall have yet occurred, or the certificates
for such shares shall have been
6
<PAGE>
surrendered for cancellation, be deemed no longer to be
outstanding for any purpose, and all rights with respect to
such shares shall thereupon cease and terminate except only
the right of the holders of the certificates for such shares
to receive, out of the funds so deposited in trust, upon or
after the redemption date (unless an earlier date is fixed
by the Board of Directors), the redemption funds, without
interest, to which they are entitled upon endorsement, if
required, and surrender of their certificates for such
shares.
(8) At the expiration of six (6) years after the
redemption date such trust shall terminate and any such
moneys then remaining on deposit with such bank or trust
company which are unclaimed by the holders of the
certificates for the Merger Series shares which have been so
redeemed, plus interest thereon, if any, shall be paid by
such bank or trust company to the Corporation, free of
trust, and thereafter the holders of the certificates for
such shares shall have no claim against such bank or trust
company but only claims as unsecured creditors against the
Corporation for the amount payable upon the redemption
thereof, without interest.
(9) Any interest on or other accretions to funds
deposited with such bank or trust company pursuant to this
Section D shall belong to the Corporation.
E. Sinking Fund. Subject to the limitations set forth in Section
F, while any shares of the $7.80 Series shall remain outstanding, the
Corporation shall on or before May 1, 2001, and on or before May 1 of
each year thereafter to and including May 1, 2005 (each such May 1
being hereinafter in this Section E called a "Sinking Fund Redemption
Date"), set aside, separate and apart from its other funds, an amount
equal to $6,660,000 (or such lesser amount as may be sufficient to
redeem all of the shares of the $7.80 Series then outstanding) as a
mandatory sinking fund payment for the exclusive benefit of shares of
the $7.80 Series, plus such further amount as shall equal the accrued
and unpaid Dividends on the shares of the $7.80 Series to be redeemed
out of such payment (as hereinafter in this Section E provided)
through the day preceding the applicable Sinking Fund Redemption Date.
The obligation of the Corporation to make such payments shall be
cumulative, so that if for any reason the full amount thereof shall
not be set aside for any year, the amount of the deficiency from time
to time shall be added to the amount due from the Corporation on
subsequent Sinking Fund Redemption Dates until the deficiency shall
have been fully satisfied. The Corporation shall be entitled to credit
against any such mandatory sinking fund payment shares of the $7.80
Series redeemed, purchased or otherwise acquired by the Corporation,
except through application of any sinking fund payment (whether
mandatory or optional), and not theretofore so credited, at the
sinking fund redemption price hereinafter specified in this Section E.
7
<PAGE>
In addition to the mandatory sinking fund payments required by the
immediately preceding paragraph, the Corporation may at its option, in
respect of any Sinking Fund Redemption Date, set aside, separate and
apart from its other funds, an amount not in excess of $6,660,000 as
an optional sinking fund payment for the exclusive benefit of shares
of the $7.80 Series, plus such further amount as shall equal the
accrued and unpaid Dividends on the shares of the $7.80 Series to be
redeemed out of such payment (as hereinafter in this Section E
provided) through the day preceding the applicable Sinking Fund
Redemption Date. The privilege of making such payments shall not be
cumulative, and no such payment shall relieve the Corporation to any
extent from its obligation to make any subsequent mandatory sinking
fund payment.
Any amounts set aside by the Corporation pursuant to this Section E
shall be applied on the date of such setting aside if a Sinking Fund
Redemption Date or otherwise on the first Sinking Fund Redemption Date
occurring thereafter to the redemption of shares of the $7.80 Series
at $100.00 per share, plus accrued and unpaid Dividends through the
day preceding the applicable Sinking Fund Redemption Date, in the
manner and upon the notice provided in Section D. If any Sinking Fund
Redemption Date shall be a Saturday, Sunday or other day on which
banking institutions in Chicago, Illinois or New York, New York are
authorized or obligated to remain closed, such term shall be construed
to refer to the next preceding business day.
Subject to the limitations stated in Section F, the Corporation shall
on May 1, 2006 redeem any shares of the $7.80 Series then outstanding
at $100.00 per share, plus accrued and unpaid Dividends through April
30, 2006.
F. Repurchase.
(1) The Corporation may from time to time purchase or
otherwise acquire Merger Series shares at a price not exceeding
the amount at the time payable in the event of redemption thereof
otherwise than through the operation of the applicable sinking
fund, if any.
(2) If and so long as the Corporation shall be in default in
the payment of any quarterly Dividend on any Merger Series
shares, or shall be in default in the payment of funds into or
the setting aside of funds for any sinking fund created for any
Merger Series shares, the Corporation shall not (other than by
the use of unapplied funds, if any, paid into or set aside for a
sinking fund or funds prior to such default):
(a) redeem any Merger Series shares, unless all Merger
Series shares are redeemed, or
8
<PAGE>
(b) purchase or otherwise acquire for a valuable
consideration any Merger Series shares, except pursuant to
offers of sale made by the holders of Merger Series shares
in response to an invitation for tenders given by mail by
the Corporation simultaneously to the holders of record of
all Merger Series shares then outstanding, at their
respective addresses then appearing on the books of the
Corporation.
G. Preference on Liquidation.
(1) Before any distribution of any assets of the Corporation
shall be made to the holders of any Common Stock or any other
junior shares of the Corporation which rank below the Preferred
Stock with respect to any assets, Dividends or other
distributions:
(a) in the event of any liquidation, dissolution or
winding up ("Liquidation") of the Corporation which is
voluntary:
(i) the holders of the shares of the $1.7375
Series, $3.30,Series, $3.75 Series, $4.35 Series, $4.40
Series, $4.80 Series, $5.25 Series and $7.80 Series
shall b entitled to receive an amount per share equal
to the amount which would then be payable upon such
share in the event of redemption thereof in accordance
with Section D(1), except that prior to November 1,
1998, the holders of the shares of the $5.25 Series
shall be entitled to receive $105.25 per share and
prior to May 1, 2001, the holders of the shares of the
$7.80 Series shall be entitled to receive $107.80 per
share, and no more; and
(ii) the holders of the shares of the $3.90 Series
and $4.20 Series shall be entitled to receive the
amount of one hundred dollars ($100) per share plus
accrued and unpaid Dividends to the date of payment of
such amount, and no more.
(b) in the event of any Liquidation of the Corporation
which is involuntary:
(i) the holders of the shares of the $3.30
Series, $3.75 Series, $3.90 Series, $4.20 Series, $4.35
Series, $4.40 Series, $4.80 Series, $5.25 Series and
$7.80 Series shall be entitled to receive the amount
of one hundred dollars ($100) per share plus accrued
and unpaid Dividends to the date of payment of such
amount, and no more; and
9
<PAGE>
(ii) the holders of the shares of the $1.7375
Series shall be entitled to receive the amount of
twenty-five dollars ($25.00) per share plus accrued and
unpaid Dividends to the date of payment of such amount,
and no more.
(2) If upon any Liquidation the assets distributable among
the holders of the shares of Preferred Stock shall be
insufficient to permit the payment of the full preferential
amounts to which they shall be entitled, then the entire assets
of the Corporation to be distributed shall be distributed among
the holders of the shares of Preferred Stock then outstanding
ratably in proportion to the amounts to which such holders are
respectively entitled.
(3) If upon any Liquidation the holders of the shares of
Preferred Stock shall receive the full preferential amounts to
which they shall be entitled, the remaining assets and funds of
the Corporation shall be distributed among the holders of the
shares of Common Stock and of any other junior shares of the
Corporation which rank below the Preferred Stock with respect to
any assets, or Dividends or other distributions, according to
their respective rights and preferences and according to their
respective shares.
(4) Neither a consolidation nor a merger of the Corporation,
nor a sale or transfer of substantially all its assets as an
entirety, nor a redemption or a purchase or other acquisition by
the Corporation of less than all of its shares of any class at
the time outstanding, shall be regarded as a Liquidation within
the meaning of this Section G.
H. Voting Rights.
(1) Except to the extent required by law or as permitted by
this Section H, the holders of Merger Series shares shall have no
voting rights.
(2) If at any time Dividends on any Preferred Stock shall be
accrued and unpaid in an amount equivalent to six or more full
quarterly Dividends, the holders of all shares of Preferred
Stock, voting together as a single class for such purpose, shall
be entitled until, but only until, all Dividends accrued and
unpaid on all shares of Preferred Stock shall have been paid (or
deposited in trust for payment on or before the next succeeding
Dividend Payment Date with respect to Merger Series shares, and
on or before the next succeeding date or dates upon which
Dividends are payable on other series of Preferred Stock), to
elect two (2) Directors of the Corporation.
10
<PAGE>
(3) While the holders of the shares of Preferred Stock
remain entitled to elect two (2) Directors of the Corporation,
the payment of Dividends on Preferred Stock, including accrued an
unpaid Dividends, shall not be unreasonably withheld if the
financial condition of the Corporation permits payment thereof.
(4) The right of the holders of the shares of Preferred
Stock under this Section H to elect two (2) Directors of the
Corporation may be exercised at any annual meeting of
shareholders or, within the limitations of this Section H, at a
special meeting of shareholders held for such purpose; whenever
such right shall have become vested, upon request signed by any
holder of record of shares of Preferred Stock and delivered to
the Corporation at its principal office not less than ninety (90)
days prior to the date for the annual meeting next following the
date of such vesting, the President of the Corporation shall call
a special meeting of shareholders, to be held within sixty (60)
days after the receipt of such request, for the purpose of
electing a new Board of Directors, of which two (2) shall,
subject to the provisions of this Section H, be elected by a vote
of the holders of the Preferred Stock to serve until the next
annual meeting or until their successors shall be elected and
shall qualify.
(5) No such special meeting shall be required to be held
within 120 days after such a prior special meeting, and the term
of office of each Director of the Corporation shall terminate at
the time of any such special meeting or adjournment thereof,
notwithstanding that the term for which such Director had been
elected shall not then have expired, and provided that the
successor of such Director is duly elected and qualified.
(6) In the event that at any special meeting at which the
holders of the shares of Preferred Stock shall be entitled to
elect two (2) Directors of the Corporation, a quorum of the
holders of the shares of Preferred Stock shall not be present in
person or by proxy, the holders of Common Stock, if a quorum
thereof be present in person or by proxy, shall temporarily elect
the Directors of the Corporation, which holders of the shares of
Preferred Stock were entitled but failed to elect, such Directors
to be designated as having been so elected and their respective
terms of office to expire at such times thereafter as their
successors shall be elected by holders of the shares of Preferred
Stock as provided in this Section H.
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<PAGE>
(7) Whenever the holders of the shares of Preferred Stock
shall be entitled to elect two (2) Directors, any holder of
record of a share of Preferred Stock shall have the right, during
regular business hours, in person or by a duly authorized
representative, to examine the Corporation stock records of the
Preferred Stock for the purpose of communicating with other
holders of Preferred Stock with respect to the exercise of such
right of election, and to make a list of such holders.
(8) Whenever, under the terms of this Section H, the holders
of the shares of Preferred Stock shall be divested of the right
to elect two (2) Directors, upon request signed by any holder of
record of Common Stock and delivered to the Corporation at its
principal office not less than ninety (90) days prior to the date
for the annual meeting next following the date of such divesting,
the President of the Corporation shall call a special meeting of
the holders of Common Stock to be held within sixty (60) days
after the receipt of such request for the purpose of electing a
new Board of Directors to serve until the next annual meeting or
until their respective successors shall be elected and shall
qualify.
(9) The term of office of each Director of the Corporation
shall terminate at the time of any such special meeting or
adjournment thereof at which a quorum of holders of Common Stock
shall be present in person or by proxy, notwithstanding that the
term for which such Director had been elected shall not then have
expired, and provided that the successor to such Director is duly
elected and qualified.
(10) If, during any interval between annual meetings of
shareholders for the election of Directors and while the holders
of the shares of Preferred Stock shall be entitled to elect two
(2) Directors, a Director in office who has been elected by the
holders of the shares of Preferred Stock, shall, by reason of
resignation, death or removal, cease to be a Director, (a) the
vacancy or vacancies shall be filled by vote of the remaining
Director then in office who was elected by the holders of the
shares of Preferred Stock or who succeeded to a Director so
elected, and (b) if any vacancy which occurred more than six
months prior to the date of the next ensuing annual meeting is
not so filled within forty (40) days after the occurrence
thereof, the President of the Corporation shall call a special
meeting of the holders of the shares of Preferred Stock and such
vacancy shall be filled at such special meeting.
(11) A Director elected by holders of the shares of
Preferred Stock may be removed from office only by vote of the
holders of a majority of the votes of the outstanding shares of
Preferred Stock.
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<PAGE>
(12) At any annual or special meeting of the shareholders
held for any purpose, including the purpose of electing Directors
when the holders of the shares of Preferred Stock shall be
entitled to elect two (2) Directors, the presence in person or by
proxy of holders of a majority of the votes of the outstanding
shares of Preferred Stock shall be required to constitute a
quorum of the holders of the shares of Preferred Stock.
(13) At any meeting of shareholders at which the holders of
the shares of Preferred Stock are required to vote by law or are
permitted to vote by any articles of amendment to the Articles of
Incorporation, each holder of Merger Series shares shall have one
vote for each such Merger Series share except the holders of
$1.7375 Series shares, which shall have 1/4 vote for each such
$1.7375 Series share, and each holder of shares of each other
series of Preferred Stock shall have the number or fraction of
votes set forth for each such share in the articles of amendment
to the Articles of Incorporation in which the terms of such
series are determined, in each case standing in the name of such
holder on the books of the Corporation on the record date fixed
for such purpose, or, if no record date is fixed, on the date on
which such vote is taken.
(14) The holders of shares of Preferred Stock shall not be
entitled to receive notice of any meeting at which they are not
entitled to vote.
I. No Preemptive Rights. No holder of Merger Series shares as
such shall have any preemptive or preferential right to purchase or
subscribe for any shares of stock or rights or options to purchase
stock or any other securities of the Corporation of any kind
whatsoever whether now or hereafter authorized.
13
<PAGE>
The Articles of Amendment to the Restated Articles of
Incorporation were adopted by the Board of Directors without action by
the shareholders. These Articles of Amendment to the Restated Articles
of Incorporation are to be effective when filed by the Secretary of
State.
MIDAMERICAN ENERGY COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Secretary
MER-142
06/22/95
14
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 490.601, and in accordance with
Section 490.602(4), of the Iowa Business Corporation Act, the undersigned
corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Company
2. As of December 13, 1995, the Board of Directors of MidAmerican Energy
Company, an Iowa corporation ("Corporation"), duly adopted the following
Articles of Amendment to the Restated Articles of Incorporation of the
Corporation, cancelling the following Preferred Stock:
Series Number of Shares Cancelled
------ --------------------------
$3.30 Series 7
3. The total number of authorized Preferred Stock for the following Series,
is remaining after the cancellation:
Series Number of Shares Remaining
------ --------------------------
$3.30 Series 49,615
The Articles of Amendment to the Restated Articles of Incorporation
were adopted by the Board of Directors without action by the shareholders.
These Articles of Amendment to the Restated Articles of Incorporation are
to be effective when filed by the Secretary of State.
MIDAMERICAN ENERGY COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Secretary
MER-145
12/21/1995
<PAGE>
ARTICLES OF CORRECTION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to section 124 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following articles of correction.
1. The name of the corporation is MidAmerican Energy Company.
2. The document to be corrected is the Articles of Amendment to the
Restated Articles of Incorporation of MidAmerican Energy Company.
3. The document to be corrected was filed by the secretary of state on
December 28, 1995.
4. The incorrect statements in the document to be corrected are as
follows:
Series Number of Shares Cancelled
------ --------------------------
$3.30 Series 7
Series Number of Shares Remaining
------ --------------------------
$3.30 Series 49,615
5. The reason that the document is incorrect is due to the fact that
the 7 should have been 99 and the 49,615 should have been 49,523.
6. The corrected statement is as follows:
Series Number of Shares Cancelled
------ --------------------------
$3.30 Series 99
Series Number of Shares Remaining
------ --------------------------
$3.30 Series 49,523
MIDAMERICAN ENERGY COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Corporate Secretary
MER-145a
01/18/1996
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 490.601, and in accordance with
Section 490.602(4), of the Iowa Business Corporation Act, the undersigned
corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Company
2. As of April 23, 1996, the Board of Directors of MidAmerican Energy
Company, an Iowa corporation ("Corporation"), duly adopted the following
Articles of Amendment to the Restated Articles of Incorporation of the
Corporation, cancelling the following Preferred Stock:
Series Number of Shares Cancelled
------ --------------------------
$1.7375 Series 350,000
3. The total number of authorized Preferred Stock for the following Series,
is remaining after the cancellation:
Series Number of Shares Remaining
------ --------------------------
$1.7375 Series 2,050,000
The Articles of Amendment to the Restated Articles of Incorporation were
adopted by the Board of Directors without action by the shareholders. These
Articles of Amendment to the Restated Articles of Incorporation are to be
effective when filed by the Secretary of State.
MIDAMERICAN ENERGY COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Secretary
MER-146.wpd
04/23/1996
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 490.601, and in accordance with
Section 490.602(4), of the Iowa Business Corporation Act, the undersigned
corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Company
2. As of July 24, 1996, the Board of Directors of MidAmerican Energy
Company, an Iowa corporation ("Corporation"), duly adopted the following
Articles of Amendment to the Restated Articles of Incorporation of the
Corporation, canceling the following Preferred Stock:
Series Number of Shares Canceled
------ -------------------------
$1.7375 Series 119,000
3. The total number of authorized Preferred Stock for the following Series,
is remaining after the cancellation:
Series Number of Shares Remaining
------ --------------------------
$1.7375 Series 1,931,000
The Articles of Amendment to the Restated Articles of Incorporation were
adopted by the Board of Directors without action by the shareholders. These
Articles of Amendment to the Restated Articles of Incorporation are to be
effective when filed by the Secretary of State.
MIDAMERICAN ENERGY COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Secretary
MER-147.wpd
07/18/1996
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 490.601, and in accordance with
Section 490.602(4), of the Iowa Business Corporation Act, the undersigned
corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Company
2. As of October 30, 1996, the Board of Directors of MidAmerican Energy
Company, an Iowa corporation ("Corporation"), duly adopted the following
Articles of Amendment to the Restated Articles of Incorporation of the
Corporation, canceling the following Preferred Stock:
Series Number of Shares Canceled
------ -------------------------
$1.7375 Series 43,000
3. The total number of authorized Preferred Stock for the following Series,
is remaining after the cancellation:
Series Number of Shares Remaining
------ --------------------------
$1.7375 Series 1,888,000
The Articles of Amendment to the Restated Articles of Incorporation were
adopted by the Board of Directors without action by the shareholders. These
Articles of Amendment to the Restated Articles of Incorporation are to be
effective when filed by the Secretary of State.
MIDAMERICAN ENERGY COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Corporate Secretary
MER-148.wpd
10/11/1996
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
MIDAMERICAN ENERGY COMPANY
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 490.601, and in accordance with
Section 490.602(4), of the Iowa Business Corporation Act, the undersigned
corporation hereby adopts the following Articles of Amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is:
MidAmerican Energy Company
2. On January 22, 1997, the Board of Directors of MidAmerican Energy
Company, an Iowa corporation ("Corporation"), duly adopted the following
Articles of Amendment to the Restated Articles of Incorporation of the
Corporation, canceling the following series of Preferred Stock of the
Corporation in its entirety:
Series Number of Shares Canceled
------ -------------------------
$1.7375 Series 1,888,0000
3. The total number of authorized Preferred Stock for the following Series,
is remaining after the cancellation:
Series Number of Shares Remaining
------ --------------------------
$1.7375 Series 0
The Articles of Amendment to the Restated Articles of Incorporation were
adopted by the Board of Directors without action by the shareholders. These
Articles of Amendment to the Restated Articles of Incorporation are to be
effective when filed by the Secretary of State.
MIDAMERICAN ENERGY COMPANY
/s/ P. J. LEIGHTON
----------------------------------
P. J. Leighton, Vice President and
Corporate Secretary
MER-149.wpd
01.30.97
EXHIBIT 10.1
12/18/96
MIDAMERICAN ENERGY COMPANY
SEVERANCE PLAN FOR SPECIFIED OFFICERS
DATED NOVEMBER 1, 1996
1. Purpose
The purpose of this Severance Plan adopted this first day of November,
1996 by MidAmerican Energy Company (the "Company") is to encourage the continued
attention and dedication of the Specified Officers to their assigned duties,
without distraction, in the face of the potentially disruptive forces present in
an industry undergoing fundamental marketplace changes.
2. Qualification for Severance Benefits
A Specified Officer shall be entitled to receive Severance Benefits if
such Specified Officer incurs a Qualifying Termination under Section 4(a).
Further, in the event of a section 4(b) Qualifying Termination, the Specified
Officer must resign within the twenty-four (24) month period referred to in that
section in order to be entitled to receive Severance Benefits. No Severance
Benefits shall become due or payable unless and until the conditions of this
section occur.
3. Specified Officers
The persons who are potentially eligible to receive benefits under this
Severance Plan are set forth on Appendix I, attached hereto and incorporated
herein. Those persons are herein referred as "Specified Officers." A Specified
Officer becomes enrolled in this Severance Plan only upon the execution of a
release and waiver ("Release and Wavier") in the form set forth in Appendix II,
attached hereto and incorporated herein.
4. Qualifying Termination
For the purpose of this Severance Plan, a "Qualifying Termination" shall
mean (a) the involuntary termination of employment of a Specified Officer for
any reason, except for a felony situation as provided in this Section; or (b) a
voluntary termination of employment within twenty-four (24) full calendar months
after a Change of Control, should a Specified Officer's (i) job reporting
location be changed by more than thirty (30) miles, (ii) total cash compensation
opportunity be reduced or (iii) duties and responsibilities be substantially
reduced.
"Change in Control" shall mean either (a) the closing date of the
restructuring of the Company as a result of mergers, consolidations, takeover or
reorganization unless at least sixty
1
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12/18/96
percent (60%) of the members of the Board of Directors of the corporation or
other entity resulting from such merger, consolidation, takeover or
reorganization were members of the Incumbent Board or (b) any occurrence or 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.
"Incumbent Board" shall mean the members of the Board of Directors of the
Company on November 1, 1996. For this purpose, an individual who becomes a
member of the Board subsequent to November 1, 1996 and who has been nominated
for election by the Company's shareholders by resolution adopted by a vote of at
least two-thirds (66-2/3%) 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.
Termination of employment due, in whole or in part, to the commission and
conviction of a felony by a Specified Officer shall not constitute a Qualifying
Termination under this Severance Plan. All Severance Benefits for a Specified
Officer charged with a felony shall be suspended until such time as the felony
charge is finally disposed. Conviction of a felony shall be sufficient to
disqualify the Specified Officer for Severance Benefits. A plea of no contest to
a felony charge shall not be sufficient to disqualify the Specified Officer for
Severance Benefits.
5. Severance Benefits
For the purpose of this Severance Plan, "Severance Benefits" shall mean:
a. an amount equal to two (2) times the Specified Officer's highest Total
Cash Compensation, said amount to be paid in a lump sum on the
effective date of his/her Qualifying Termination (except in the
circumstance of a felony situation as provided above); and
b. the Specified Officer's accrued vacation pay through the effective
date of his/her Qualifying Termination, said amount to be paid in a
lump sum on the effective date of such Qualifying Termination; and
c. continuation of health and term life for twenty-four (24) full
calendar months after the effective date of the Specified Officer's
Qualifying Termination at the same cost and at the same or
substantially similar coverage levels as are in effect under the
Company's group plans on such effective date; provided, however, in
the event the cost and/or coverage level shall change under the
Company's group plans at any time during the twenty-four (24) month
period the level likewise shall change for such Specified Officer in a
corresponding manner; and
2
<PAGE>
12/18/96
d. standard outplacement services from a nationally recognized firm of
the Specified Officer's selection for a period up to twenty-four (24)
full calendar months after the effective date of the Qualifying
Termination or until such Specified Officer obtains employment,
whichever is less. The cost of such services shall not exceed twenty
percent (20%) of the Specified Officer's Total Cash Compensation.
6. Term
This Severance Plan shall be effective as of November 1, 1996 and continue
thereafter through December 31, 2001. The Plan may be terminated or amended at
any time; provided, however, that such a termination or amendment shall not
affect the Severance Benefits to be provided under the Plan for any Specified
Officer listed on Appendix I without the express written consent of such
Specified Officer.
7. Total Cash Compensation
The term "Total Cash Compensation" shall mean the amount payable to a
Specified Officer by the Company or its predecessors as annual salary and Bonus,
without regard to deferrals. For the purpose of this Plan, "Bonus" shall mean
the larger of (i) the three-year average of bonuses actually paid to the
Specified Officer or (ii) the three-year average of accruals to the account of
the Specified Officer under any Key Employee Annual Incentive Plan. In the event
that less than three years of payments or accruals have occurred, then the
average of any payments or accruals, respectively, shall be used.
8. Taxes
A. The corporation paying the Severance Benefits shall be entitled to
withhold all federal, state, local, or other taxes legally imposed,
subject to subparagraphs B, C and D hereof.
B. In the event any of the Severance Benefits payable to a Specified
Officer are subject to the tax ("Excise Tax") imposed by Section 4999
of the Internal Revenue Code of 1986 (or any similar tax that may
hereafter be imposed) ("Code"), the corporation paying such Severance
Benefits shall pay to the Specified Officer in cash an additional
amount ("Gross-Up Payment") such that the net amount retained by the
Specified Officer after deduction of any Excise Tax payable on the
Severance Benefits and any federal, state, and local income tax and
Excise Tax payable upon the Gross-Up Payment shall be equal to the
Severance Benefits. Such Gross-Up Payment shall be made by the
corporation to the Specified Officer on the effective date of his/her
Qualifying Termination.
3
<PAGE>
12/18/96
C. For the purpose of determining whether any of the Severance Benefits
will be subject to the Excise Tax and the amount of such Excise Tax:
(a) any other payments of benefits received or to be received by a
Specified Officer in connection with his/her termination of
employment (whether pursuant to the terms of this Plan or any
other plan, arrangement, or agreement) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning
of Section 280(G)(b)(1) shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel, selected by such
Specified Officer, such other payments or benefits (in whole or
in part) do not constitute parachute payments, or that such
excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) in excess of the base amount within
the meaning of Section 280G(b)(3), or are otherwise not subject
to the Excise Tax; and
(b) the amount of Severance Benefits which shall be treated as
subject to the Excise Tax shall be equal to the lesser of: (i)
the total amount of Severance Benefits; or (ii) the amount of
excess parachute payments within the meaning of Section
280G(b)(1) of the Code (after applying clause (a) above); and
(c) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the independent auditors of the
corporation paying such Severance Benefits in accordance with the
principles of Sections 280G(d) of the Code and applicable
regulations.
For the purpose of determining the amount of the Gross-Up
Payment, the Specified Officer shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which such Gross-Up Payment is
to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the
Specified Officer's residence on the effective date of his/her
Qualifying Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state
and local taxes.
D. In the event the Internal Revenue Service adjusts the computations
under paragraph C hereof such that the Specified Officer does not
receive the maximum Severance Benefits (including Gross-Up Payment)
permitted by this Plan, the corporation paying such Severance Benefits
shall reimburse the Specified Officer
4
<PAGE>
12/18/96
for the full amount necessary to make him/her whole, plus interest
from the date such additional Severance Benefits became due to the
date of such payment at the prime rate as may be established by The
First National Bank of Chicago from time-to-time.
9. Employment Status
In no event shall any Specified Officer be obligated to seek other
employment or to take other action by way of mitigation of the amounts payable
to such Officer under the provisions of this Severance Plan, nor shall the
amount of any payment hereunder be reduced by any compensation earned by such
Specified Officer as a result of employment by another employer.
Nothing herein contained shall be deemed to create an employment agreement
with the Specified Officer providing for the employment of such Specified
Officer for any fixed period of time.
10. Other Benefits
Except to the extent provided in the Release and Waiver, neither the
provisions of this Severance Plan nor the right to receive Severance Benefits
shall reduce any amounts otherwise payable to any Specified Officer or in any
way diminish his/her rights under any benefit, bonus, incentive, stock option,
stock bonus or other stock purchase plan, or any employee agreement, or any
other plan, program policy or practice for which the Specified Officer may
qualify. Except to the extent provided in the Release and Waiver, vested
benefits and other amounts which the Specified Officer is otherwise entitled to
receive under any plan, program, policy or practice at or subsequent to the
effective date of such Specified Officer's Qualifying Termination shall be
payable in accordance with such plan, program, policy or practice.
11. Contractual Rights
This Plan establishes in each Specified Officer a right to the benefits to
which he or she is entitled hereunder. This Plan shall inure to the benefit of,
and be enforceable by, each Specified Officer's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If a Specified Officer dies while any Severance Benefits
would still be payable to him/her under this Severance Plan, all such unpaid
amounts shall be paid to such Specified Officer's designated beneficiaries or,
in the absence thereof, to such Specified Officer's estate.
5
<PAGE>
12/18/96
12. No Separate Fund Required
Nothing herein contained shall require or be deemed to require, or
prohibit or be deemed to prohibit, that the Company segregate or otherwise set
aside any funds or other assets, in trust or otherwise, to provide for the
payment of Severance Benefits.
13. Legal Remedies
A. To the extent permitted by law, the corporation obligated to pay any
Severance Benefits shall pay all legal fees, cost of litigation,
prejudgment interest, and other expenses incurred in good faith by
each Specified Officer as a result of such corporation's refusal to
provide the Severance Benefits to which the Specified Officer becomes
entitled under this Plan, or as a result of such corporation's
contesting the validity, enforceability, or interpretation of this
Plan, or as a result of any conflict pertaining to this Plan,
regardless of whether the Specified Officer prevails.
B. Each Specified Officer shall have the right and option to elect (in
lieu of litigation) to have any dispute or controversy arising under
or in connection with this Plan settled by arbitration conducted by an
arbitrator in accordance with the rules of the American Arbitration
Association then in effect. A Specified Officer's election to
arbitrate and the decision of the arbitrator in that proceeding shall
be binding on the parties to such arbitration.
Judgment may be entered on the award of the arbitrator in any court
having jurisdiction. All expenses of such arbitration, including the
fees and expenses of the counsel for the Specified Officer, shall be
borne by the corporation which is the party to the arbitration.
14. Severability
In the event any provision of this Severance Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not effect the
remaining parts of this Plan, and this Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
15. Successors and Assigns
This Severance Plan for all enrolled Specified Officers shall be binding
upon the Company, its successors and assigns in accordance with its terms.
6
<PAGE>
12/18/96
16. Captions
The captions of this Severance Plan are not a part of the provisions
hereof and shall have no force and effect.
17. Applicable Law
This Severance Plan shall be interpreted in accordance with the laws of
the State of Iowa.
7
<PAGE>
12/18/96
APPENDIX I
LIST OF SPECIFIED OFFICERS
B. E. Gale
S. E. Hollonbeck
D. J. Levy
P. G. Lindner
J. A. Rasmussen
S. E. Shelton
R. W. Stepien
B. A. Wharton
8
<PAGE>
12/18/96
APPENDIX II
FORM OF RELEASE AND WAIVER
In consideration of the undersigned Specified Officer's voluntary
execution and delivery of this Release and Waiver, the undersigned Specified
Officer relinquishes all right, interest and claim under the Severance Plan for
Specified Officers associated with the merger of Midwest Resources Inc., Midwest
Power Systems Inc. and Iowa-Illinois Gas and Electric Company with and into
MidAmerican Energy Company and the Severance Plan in the event of a Change In
Control of Iowa-Illinois Gas and Electric Company (the "Predecessor Plans"), and
hereby becomes a participant in the MidAmerican Energy Company Severance Plan
for Specified Officers, dated November 1, 1996 and is hereby granted (i) three
years of additional credit under the MidAmerican Energy Company Supplemental
Retirement Plan for Designated Officers and any other similar plan of a
predecessor to MidAmerican Energy Company under which a Specified Officer is
entitled to participate and (ii) a retention bonus, both (i) and (ii) are more
fully described on Exhibit A attached hereto and made a part hereof by this
reference.
By execution of this Release and Waiver, (x) the undersigned Specified
Officer specifically, voluntarily and irrevocably waives all right, interest,
and claim to benefits by, through, or under the Predecessor Plans and releases
Iowa-Illinois Gas and Electric Company, Midwest Resources, Inc., Midwest Power
Systems Inc., MidAmerican Energy Company, their respective directors, officers
and employees and such parties' respective successors and assigns with respect
to any right, interest or claim in and to benefits by, through or under the
Predecessor Plans and (y) MidAmerican Energy Company, its successors and
assigns, becomes obligated to the undersigned Specified Officer in accordance
with the terms of the MidAmerican Energy Company Severance Plan for Specified
Officers, dated November 1, 1996 and for three years of additional credit and
for a retention bonus as described in (i) and (ii) of the preceding paragraph
and Exhibit A.
Dated this ___________ day of _______________________, 1996
MidAmerican Energy Company
by _______________________________________
__________________________________________
Specified Officer
9
<PAGE>
12/18/96
EXHIBIT A
Supplemental Executive Retirement Plan Enhancement
Each Specified Officer is hereby granted three years of additional credit
under the Supplemental Retirement Plan For Designated Officers of MidAmerican
Energy Company and any other similar plan of a predecessor to MidAmerican Energy
Company under which a Specified Officer is entitled to participate, which credit
may be used, at the election of the Specified Officer, to reflect additional
covered service or increase assumed age at retirement.
Retention Bonus
MidAmerican Energy Company hereby grants each Specified Officer a
retention bonus, conditioned upon being in the employment of MidAmerican Energy
Company or one of its corporate affiliates on the dates specified below, and in
the amounts specified below:
ANNUAL BASE SALARY AS OF
DATE NOVEMBER 1, 1996
------ ------------------------
1-1-98 33 1/3%
1-1-99 33 1/3%
1-1-00 33 1/3%
The Retention Bonus will be provided to the Specified Officer as deferred
compensation. This deferred compensation will become a part of and will be
administered under the guidelines set forth in the MidAmerican Energy Company
Deferred Compensation Plan for Executives.
10
EXHIBIT 10.2
MIDAMERICAN ENERGY HOLDINGS COMPANY
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT, effective as of December 1, 1996, between
MidAmerican Energy Holdings 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 Bylaws, as
amended ("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
1
<PAGE>
obligated to indemnify Indemnitee for acts occurring after such event.
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
2
<PAGE>
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) 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
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<PAGE>
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 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
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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:
(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
5
<PAGE>
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
(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
6
<PAGE>
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.
(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
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<PAGE>
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 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
8
<PAGE>
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;
(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
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<PAGE>
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 Holdings 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 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
10
<PAGE>
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 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
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<PAGE>
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.
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
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(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 Holdings Company and the Indemnitee as of the date first
written above.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By
-------------------------------------
S. J. Bright
President and Chief Executive Officer
INDEMNITEE
-------------------------------------
(Signature)
-------------------------------------
MEC\Policy\Indem\Holding\Indem.form
12.01.96
13
EXHIBIT 10.3
MIDAMERICAN ENERGY HOLDINGS COMPANY
P.O. BOX 657
DES MOINES, IA 50303-0657
January 24, 1996
Mr. Stanley J. Bright
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
Dear Mr. Bright:
Pursuant to the Agreement and Plan of Exchange ("Exchange Agreement") dated
as of January 24, 1996, by and between MidAmerican Energy Company
("MidAmerican"), and MidAmerican Energy Holdings Company ("Holdings"),
MidAmerican will become a subsidiary of Holdings. In recognition of the value of
your past services to MidAmerican and its subsidiaries, and in anticipation of
your contribution to the future growth and success of Holdings and its
subsidiaries, Holdings wishes to provide itself and its subsidiaries the
continuing benefits of your service as a senior executive officer of Holdings
and its subsidiaries on the terms and conditions set forth below.
This letter sets forth our agreement with respect to your employment with
Holdings and its subsidiaries during the period commencing on the Effective Time
(as defined in the Exchange Agreement) and ending on July 1, 2000 (such period
herein referred to as the "Employment Period").
1.(a) Between the Effective Time and May 31, 1997, you shall serve as
President and Chief Executive Officer of Holdings performing those
responsibilities set forth on Exhibit A attached hereto. Commencing June 1, 1997
and ending on July 1, 2000, you shall serve as Chairman of the Board of
Directors of Holdings ("Chairman") and Chief Executive Officer of Holdings. Any
service required to be performed by you hereunder shall be of the type usually
performed by the officer holding such title at a major public company. Your
duties and services generally shall be performed by you on regular business days
during normal business hours, and you agree to be present in Des Moines, Iowa,
as required and for as much time as is necessary to perform your duties and
services for the business of Holdings and its subsidiaries. You shall be
entitled to vacation in accordance with the policy from time to time in effect
for senior executive officers of the Holdings and its subsidiaries with credit
for past service with MidAmerican Energy Company and its subsidiaries and
Iowa-Illinois Gas and Electric Company. During the Employment Period you shall
be reimbursed by Holdings in accordance with
<PAGE>
Holdings's policy from time to time in effect for any expenses commensurate with
your position which you may reasonably incur in the performance of your duties
and services hereunder and which are properly substantiated.
(b) In consideration of and as compensation for your services hereunder and
your agreement not to compete with Holdings as set forth herein, during the
Employment Period Holdings will pay to you, in equal installments with the same
frequency as for other executives of Holdings, but at least monthly, a base
salary not less than the base salary paid the Chairman, such base salary to be
subject to adjustment during the Employment Period in accordance with Holdings's
policy for executives. In addition to such salary, you shall be eligible to
receive, as additional compensation, appropriate management bonuses, long-term
incentive awards and such other compensation elements as are applicable, in
amounts not less than those paid or accrued for the Chairman of Holdings, in
relation to the achievement by Holdings and its subsidiaries of corporate goals
and objectives and Holdings will provide to you all other benefits accorded to
full-time senior executive employees of Holdings from time to time, provided
that such benefits shall be not less in the aggregate than those in effect at
MidAmerican Energy Company as of the Effective Time. Holdings's obligations to
make the salary payments and to provide the other benefits provided for by this
paragraph 1(b) shall be expressly contingent upon, and subject to, your
observance of, and substantial compliance with, all of the terms and provisions
thereof.
2. You agree that during the Employment Period, and any additional period
during which you are employed by or act as a consultant to Holdings or any
subsidiary or affiliate, except with the prior written consent of Holdings, you
will not in any way, directly or indirectly, own, manage, operate, control,
accept employment or a consulting position with or otherwise advise or assist or
be actively connected with, or have any financial interest in, directly or
indirectly, any enterprise which engages in, or otherwise carries on, any
business activity in competition with the business of Holdings and its
subsidiaries in any geographic area in which they engage in such business. You
further agree that during the Employment Period, and any additional period
during which you are employed by Holdings or any subsidiary or an affiliate and,
in any event, until the sixth anniversary of the Effective Time, subject to the
foregoing, you will not take any action which might divert from Holdings or any
of its subsidiaries or affiliates, successors or assigns any opportunity which
would be within the scope of its or their respective present or future
operations or business. It is understood that ownership of not more than one
percent (1%) of the equity securities of a public company shall in no way be
prohibited pursuant to the foregoing provisions.
3. Notwithstanding any of the foregoing provisions of this Agreement,
Holdings may terminate your duties and services hereunder during the term hereof
2
<PAGE>
and discharge you (i) in the event of a breach of this Agreement by you in any
material respect as determined by the affirmative vote of two-thirds of the
membership of Holdings's Board of Directors ("Board"), provided that the Board
shall have given you written notice of such breach, and you shall have failed to
remedy such breach within thirty (30) days of receipt of such notice, (ii) for
cause, upon the affirmative vote of two-thirds of the membership of the Board
(cause, for purposes of this Agreement, shall mean persistent incompetence,
willful misconduct, dishonesty or conviction of a felony), or (iii) upon the
affirmative vote of two-thirds of the membership of the Board, provided, in the
case of (iii), Holdings shall be obligated to make the salary payments to and
provide the other benefits provided for by paragraph 1(b) through the remainder
of the Employment Period notwithstanding such termination. Your duties and
services hereunder shall terminate in the event of your death or your physical
inability to perform the services required to be performed by you hereunder,
provided such inability shall have persisted for a continuous period of 270
days. Should your services be terminated by reason of your breach of this
Agreement, or for cause, Holdings shall pay to you your salary only through the
end of the calendar month in which such termination occurs, and if your services
are terminated by reason of your death or your physical inability to perform the
services required to be performed by you hereunder prior to the Retirement Date,
your salary hereunder shall terminate on the date benefits in respect of your
death or physical disability are made available to your estate or personal
representative under Holdings's benefit plans.
In the event of a breach of this Agreement by Holdings in any material
respect, such breach shall be deemed to constitute a constructive termination of
your employment in contravention of this Agreement, qualifying you for payment
pursuant to paragraph 3(iii) above and such other remedies as are available in
law or in equity; provided, however, that you shall have given the Board of
Holdings written notice of such breach, and the Board shall have failed to cause
Holdings to remedy such breach within thirty (30) days of receipt of such
notice.
4. It is understood and agreed that the services to be rendered under this
Agreement by you are special, unique and of an extraordinary character, and,
more particularly, that in the event of any breach or threatened breach by you
of the provisions of paragraph 2 hereof, Holdings shall have no adequate remedy
in law. Consequently, in the event of a breach or threatened breach by you of
the provisions of paragraph 2 hereof, in addition to Holdings's right to
terminate this Agreement pursuant to paragraph 3 hereof, Holdings shall be
entitled to an injunction restraining you from any such breach or threatened
breach.
5. Any paragraphs sentence, phrase or other provision of this Agreement
which is in conflict with any applicable statute, rule or other law shall be
deemed, if possible, to be modified or altered to conform thereto or, if not
possible, to be
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omitted herefrom. The invalidity of any portion hereof shall not affect the
force and effect of the remaining valid portions hereof.
6. This Agreement is governed by and is to be construed in accordance with
the substantive law (and not the choice of law rules) of the State of Iowa. This
Agreement (and the Exchange Agreement at Article V) constitutes the entire
understanding between you and Holdings with respect to the subject matter
contained herein and, except as otherwise set forth in this paragraph 6, as at
the Effective Time supersedes and cancels any and all prior written or oral
understandings and agreements with respect to such matters.
7. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered personally
or sent by registered or certified mail, postage prepaid, or sent by an
overnight delivery service, addressed as follows:
If to Holdings:
MidAmerican Energy Holdings Company
666 Grand Avenue
P.O. Box 657
Des Moines, Iowa 50303-0657
If to you:
Mr. Stanley J. Bright
666 Grand Avenue
P.O. Box 657
Des Moines, Iowa 50303-0657
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
8. This Agreement may be amended only by an instrument in writing signed by
the parties hereto, and any provision hereof may be waived only by an instrument
in writing signed by the party or parties against whom or which enforcement of
such waiver is sought. The failure of either party hereto at any time to require
the performance by the other party hereto of any provision hereof shall in no
way affect the full right to require such performance at any time thereafter,
nor shall the waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such provision or a
waiver of the provision itself or a waiver of any other provision of this
Agreement.
9. This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal
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<PAGE>
representatives. Neither this Agreement nor any right or obligation hereunder
may be assigned by Holdings or by you.
10. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
installment.
11. This Agreement shall have no force and effect unless and until the
Effective Time.
Sincerely,
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ RUSSELL E. CHRISTIANSEN
---------------------------
Russell E. Christiansen
Chairman
Accepted and agreed to as
of the date first written
above
/s/ STANLEY J. BRIGHT
---------------------------
Stanley J. Bright
5
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EXHIBIT A
RESPONSIBILITIES OF PRESIDENT AND CEO:
* Development of Strategic Options
* All Operating Functions
* Financial Management
* Budgeting, Financial Planning and Financial Analysis
* Treasury Functions
* Finance, including relationships with Institutional
Investors, Analysts and other shareholders; Investment
Banking Relationships and Dealing with Credit Rating
Agencies
* Dealings with External Auditors
* Accounting, Financial Reporting, and Taxation
* Legal Affairs
* Corporate Development
* Rates and Regulatory Matters
* Governmental Affairs
* Marketing and Economic Development
* Human Resources
* Other Administrative Functions (e.g., Purchasing and
Management Information Services)
EXHIBIT 10.4
MIDAMERICAN ENERGY HOLDINGS COMPANY
P.O. BOX 657
DES MOINES, IA 50303-0657
January 24, 1996
Mr. Russell E. Christiansen
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
Dear Mr. Christiansen:
Pursuant to the Agreement and Plan of Exchange ("Exchange Agreement") dated
as of January 24, 1996, by and between MidAmerican Energy Company
("MidAmerican"), and MidAmerican Energy Holdings Company ("Holdings"),
MidAmerican will become a subsidiary of Holdings. In recognition of the value of
your past services to MidAmerican and its subsidiaries, and in anticipation of
your contribution to the future growth and success of Holdings and its
subsidiaries, Holdings wishes to provide itself and its subsidiaries the
continuing benefits of your service as a senior executive officer of Holdings
and its subsidiaries on the terms and conditions set forth below.
This letter sets forth our agreement with respect to your employment with
Holdings and its subsidiaries during the period commencing on the Effective Time
(as defined in the Exchange Agreement) and ending on the date your employment
with Holdings and its subsidiaries terminates (as defined herein, "Employment
Period") and beyond the Employment Period, with respect to your acting as a
consultant and advisor to Holdings during the period commencing at the end of
the Employment Period and ending on the third anniversary of the retirement date
("Consulting Period") or until such earlier date as otherwise may be determined
hereunder.
1.(a) Between the Effective Time and May 31, 1997 (the "Employment
Period"), you shall serve as Chairman of the Board of the Directors of Holdings
("Chairman"), performing those responsibilities set forth on Exhibit A attached
hereto. Your retirement date shall be May 31, 1997 ("Retirement Date") and the
Consulting Period shall commence on June 1, 1997. During the Employment Period
your duties and services generally shall be performed by you on regular business
days during normal business hours, and you agree to be present as required and
for as much time as is necessary to perform your duties and services for the
business of Holdings and its subsidiaries. You shall be entitled to vacation
<PAGE>
in accordance with the policy from time to time in effect for senior executive
officers of Holdings and its subsidiaries with credit for past service with
MidAmerican and its subsidiaries and predecessors of each. During the Employment
Period you shall be reimbursed by Holdings in accordance with the Holdings's
policy from time to time in effect for any expenses commensurate with your
position which you may reasonably incur in the performance of your duties and
services hereunder and which are properly substantiated.
(b) In consideration of and as compensation for your services hereunder and
your agreement not to compete with Holdings as set forth herein, during the
Employment Period, Holdings will pay to you, in equal installments with the same
frequency as for other executives of Holdings, but at least monthly, a base
salary at the annual rate of not less than $400,000, such base salary to be
subject to adjustment during the Employment Period in accordance with Holdings's
policy for executives, and shall never be less than the base salary of the Chief
Executive Officer of Holdings. In addition to such salary, you shall be eligible
to receive, as additional compensation, appropriate management bonuses,
long-term incentive awards and such other compensation elements as are
applicable, in amounts not less than those paid or accrued for the Chief
Executive Officer of Holdings, in relation to the achievement by Holdings and
its subsidiaries of corporate goals and objectives and Holdings will provide to
you all other benefits accorded to full-time senior executive employees of
Holdings from time to time, provided that such benefits shall be not less in the
aggregate than those in effect at MidAmerican as of the Effective Time.
Holdings's obligations to make the salary payments and to provide the other
benefits provided for by this paragraph 1(b) shall be expressly contingent upon,
and subject to, your observance of, and substantial compliance with, all of the
terms and provisions hereof.
2.(a) During the Consulting Period, you shall serve as consultant and
advisor to Holdings. You agree, in your capacity as consultant and advisor, to
hold yourself ready to and to render such advice and counsel to Holdings and any
of its subsidiaries and affiliates as may be requested from time to time with
reasonable advance notice by the Board of Directors or Chief Executive Officer
of Holdings; provided, that you shall not be required to devote in excess of
sixty (60) days in any twelve-month period to your duties as a consultant
hereunder, and provided further that telephonic consultation shall not require
advance notice. It is understood and agreed that such requests for consultation
shall not unreasonably interfere with your employment with any other employer.
You shall report during the Consulting Period directly to the Chief Executive
Officer of Holdings, who shall represent Holdings in all matters relating to the
performance of this Agreement. During the Consulting Period, you shall be
reimbursed for any expenses which you may reasonably incur in the performance of
your duties hereunder and which are properly substantiated.
2
<PAGE>
(b) In consideration of and as compensation for your services as a
consultant and advisor to Holdings hereunder, and your agreement not to compete
with Holdings as set forth herein, during the Consulting Period Holdings will
pay to you in equal monthly installments a consulting fee at a rate of $50,000
per annum. Holdings shall not be obligated to make such payments in respect of
any period following the Employment Period if you continue to be actively
employed by Holdings or any subsidiary or affiliate after the Employment Period.
During the Consulting Period Holdings shall provide to you the benefits
described in paragraph 1 (other than the base salary, bonus, long-term incentive
and other cash compensation elements referred to therein), including office
space, equipment and furnishings and a full-time secretary, selected by you, at
the expense of Holdings in quarters agreed upon by you and Holdings. Holdings's
obligations to pay the consulting fee and benefits provided for by this
paragraph 2(b) shall be expressly contingent upon, and subject to, your
observance of, and substantial compliance with, all of the terms and provisions
hereof.
3. You agree that during the Employment Period and the Consulting Period,
and any additional period during which you are employed by or act as a
consultant to Holdings or any subsidiary or affiliate, except with the prior
written consent of Holdings, you will not in any way, directly or indirectly,
own, manage, operate, control, accept employment or a consulting position with,
or otherwise advise or assist or be actively connected with or have any
financial interest in, directly or indirectly, any enterprise which engages in,
or otherwise carries on, any business activity in competition with the business
of Holdings and its subsidiaries in any geographic area in which they engages in
such business. You further agree that during the Employment Period, the
Consulting Period, and any additional period during which you are employed by
Holdings or any subsidiary or an affiliate and, in any event, until the sixth
anniversary of the Effective Time, subject to the foregoing, you will not take
any action which might divert from Holdings or any of its subsidiaries or
affiliates, successors or assigns any opportunity which would be within the
scope of its or their respective present or future operations or business. It is
understood that ownership of not more than one percent (1%) of the equity
securities of a public company shall in no way be prohibited pursuant to the
foregoing provisions.
4. Notwithstanding any of the foregoing provisions of this Agreement,
Holdings may terminate your duties and services hereunder during the term hereof
and discharge you (i) in the event of a breach of this Agreement by you in any
material respect as determined by the affirmative vote of two-thirds of the
membership of Holdings's Board of Directors ("Board"), provided that the Board
shall have given you written notice of such breach, and you shall have failed to
remedy such breach within thirty (30) days of receipt of such notice, (ii) for
cause, upon the affirmative vote of two-thirds of the membership of the Board
(cause, for
3
<PAGE>
purposes of this Agreement, shall mean persistent incompetence, willful
misconduct, dishonesty or conviction of a felony), or (iii) upon the affirmative
vote of two-thirds of the membership of the Board, provided, in the case of
(iii), Holdings shall be obligated to make the salary payments to and provide
the other benefits provided for by paragraph 1(b) through the remainder of the
Employment Period and the salary payments and other benefits provided for by
paragraph 2(b) through the remainder of the Consulting Period notwithstanding
such termination. Your duties and services hereunder shall terminate in the
event of your death or your physical inability to perform the services required
to be performed by you hereunder, provided such inability shall have persisted
for a continuous period of 270 days. Should your services be terminated by
reason of your breach of this Agreement, or for cause, Holdings shall pay to you
your salary or consulting fee, as the case may be, only through the end of the
calendar month in which such termination occurs, and if your services are
terminated by reason of your death prior to the Retirement Date or your physical
inability to perform the services required to be performed by you hereunder,
your salary hereunder shall terminate on the date benefits in respect of your
death or physical disability are made available to your estate or personal
representative under Holdings's benefit plans.
In the event of a breach of the Agreement by Holdings in any material
respect, such breach shall be deemed to constitute a constructive termination of
your employment in contravention of this Agreement, qualifying you for payment
pursuant to paragraph 4(iii) above and such other remedies as are available in
law or in equity; provided, however, that you shall have given the Board of
Holdings written notice of such breach, and the Board shall have failed to cause
Holdings to remedy such breach within thirty (30) days of receipt of such
notice.
5. It is understood and agreed that the services to be rendered under this
Agreement by you are special, unique and of an extraordinary character, and,
more particularly, that in the event of any breach or threatened breach by you
of the provisions of paragraph 3 hereof, Holdings shall have no adequate remedy
in law. Consequently, in the event of a breach or threatened breach by you of
the provisions of paragraph 3 hereof, in addition to Holdings's right to
terminate this Agreement pursuant to paragraph 4 hereof, Holdings shall be
entitled to an injunction restraining you from any such breach or threatened
breach.
6. Any paragraph, sentence, phrase or other provision of this Agreement
which is in conflict with any applicable statute, rule or other law shall be
deemed, if possible, to be modified or altered to conform thereto or, if not
possible, to be omitted herefrom. The invalidity of any portion hereof shall not
affect the force and effect of the remaining valid portions hereof.
7. This Agreement is governed by and is to be construed in accordance with
the substantive law (and not the choice of law rules) of the State of Iowa. This
Agreement (and the Exchange Agreement at Article V) constitutes the entire
4
<PAGE>
understanding between you and Holdings with respect to the subject matter
contained herein and, except as otherwise set forth in this paragraph 7, at the
Effective Time of the Share Exchange supersedes and cancels any and all prior
written or oral understandings and agreements with respect to such matters,
including the employment agreement dated July 26, 1994. It is understood and
agreed that the share exchange as contemplated in the Exchange Agreement shall
not constitute a Change in Control for purposes of the Agreement between you and
MidAmerican, as successor to Midwest Energy Company, dated April 19, 1989 ("MWE
Agreement") only, and that notwithstanding the foregoing, the MWE Agreement
shall remain in full force and effect in accordance with the terms thereof with
respect to any event, transaction or circumstance other than the share exchange.
8. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered personally
or sent by registered or certified mail, postage prepaid, or sent by an
overnight delivery service, addressed as follows:
If to Holdings:
MidAmerican Energy Holdings Company
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
If to you:
Mr. Russell E. Christiansen
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
9. This Agreement may be amended only by an instrument in writing signed by
the parties hereto, and any provision hereof may be waived only by an instrument
in writing signed by the party or parties against whom or which enforcement of
such waiver is sought. The failure of either party hereto at any time to require
the performance by the other party hereto of any provision hereof shall in no
way affect the full right to require such performance at any time thereafter,
nor shall the waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such provision or a
waiver of the provision itself or a waiver of any other provision of this
Agreement.
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<PAGE>
10. This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives. Neither this Agreement nor any right or obligation
hereunder may be assigned by Holdings or by you.
11. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
12. This Agreement shall have no force and effect unless and until the
Effective Time.
Sincerely,
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ STANLEY J. BRIGHT
---------------------
Stanley J. Bright
President and
Chief Executive Officer
Accepted and agreed to as
of the date first written
above.
/s/ RUSSELL E. CHRISTIANSEN
---------------------------
Russell E. Christiansen
6
<PAGE>
EXHIBIT A
RESPONSIBILITIES OF CHAIRMAN
* Shareholder Meetings
* Meetings of the Board of Directors and Committees of the Board.
(The Chairman would preside and the President and CEO would have
a principal presentation role.)
* Agenda setting for board and board committee meetings to be
done by the Chairman with concurrence of the President and
CEO.
* Committees of the Board
* Executive (President and CEO to serve as chairman; Chairman
to serve as vice chairman.)
* Nominating
* Finance (Chairman and President and CEO to be members.)
* Audit
* Compensation
* Strategy (President and CEO to serve as chairman)
* Corporate Charter and Bylaw Revisions
* Major Economic Development Initiatives
* Major Governmental or Regulatory Initiatives and programs
undertaken by Holdings at the federal, state or local level.
* Major Industry Initiatives
<PAGE>
MIDAMERICAN ENERGY HOLDINGS COMPANY
P.O. BOX 657
DES MOINES, IA 50303-0657
January 29, 1997
Mr. Russell E. Christiansen
P.O. Box 657
Des Moines, IA 50303-0657
Dear Mr. Christiansen:
By letter dated as of January 24, 1996 ("Letter"), you and MidAmerican
Energy Holdings Company agreed to the terms and conditions of your continuing
employment as an employee of Holdings during the Employment Period and as a
consultant to Holdings during the Consulting Period. This letter sets forth our
agreement as to certain amendments to the Letter which will allow the deferral
by you of the annual fee ("Consulting Fee") to be paid to you by Holdings during
the Consulting Period. Terms contained herein and not otherwise defined shall
have the meaning ascribed to them in the Letter.
1. Paragraph 2 is amended by adding a new subparagraph (c) as follows:
2.(c). During the Consulting Period you shall be entitled to defer one
hundred percent (100%) of your Consulting Fee pursuant to a Deferred
Compensation Agreement and in accordance with the terms and conditions
of such Deferred Compensation Agreement. A form of the Deferred
Compensation Agreement is attached hereto and by this reference
incorporated herein.
2. All other terms and conditions of the Letter shall remain in full effect
and are not amended hereby.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ STANLEY J. BRIGHT
--------------------------------
Stanley J. Bright, President and Chief Executive Officer
Accepted and agreed to as of the date first written above.
/s/ RUSSELL E. CHRISTIANSEN
- - -----------------------------
Russell E. Christiansen
<PAGE>
MIDAMERICAN ENERGY HOLDINGS COMPANY
DEFERRED COMPENSATION AGREEMENT
WITH
RUSSELL E. CHRISTIANSEN
SECTION 1. PURPOSE. The purpose of this Agreement is to enable MidAmerican
Energy Holdings Company to retain in its employment the Executive by providing
such Executive the opportunity to defer his cash compensation.
SECTION 2. DEFINITIONS.
(a) "Cash Compensation" means one hundred percent (100%) of the Executive's
annual base salary attributable to his services for the Company between February
1, 1997 and December 31, 1997, and the cash portion of any incentive
compensation received by the Executive attributable to 1997 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 Holdings
Company.
(c) "Company" means MidAmerican Energy Holdings Company.
(d) "Compensation Committee" means the Compensation Committee established by
the Board of Directors of the Company.
(e) "Deferred Compensation" means 100% of the Cash Compensation as defined in
(a) above.
(f) "Executive" means Russell E. Christiansen.
(g) "Plan Year" shall mean each January 1 through December 31.
SECTION 3. ADMINISTRATION.
(a) Compensation Committee. The Compensation Committee shall have the
responsibility of making such determinations as may be necessary or advisable to
administer the Agreement. 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 Agreement.
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SECTION 4. BENEFICIARY DESIGNATION.
Executive shall designate one or more beneficiaries in writing to the Committee.
Such designation may be revoked or modified at any time by designating a new
beneficiary in writing to the Committee. Executive's beneficiary designation
shall be deemed automatically revoked in the event all designated beneficiaries
predecease the Executive or, if the sole beneficiary is the Executive's spouse,
in the event of dissolution of marriage. In such event, or in the event the
Executive does not designate a beneficiary, the benefits hereunder shall be paid
to the Executive's estate.
Section 5. Book Value Deferral Method.
(a) Deferred Compensation Units. The Book Value Deferral Method credits Deferred
Compensation units ("Units") to the Executive's account determined by dividing
the cash amount of Deferred Compensation by the Book Value of the Common Stock
at December 31, 1996. The Executive'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
the Executive, (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 the
Executive's account shall be determined by dividing the cash amount of Deferred
Compensation by the Book Value of the Common Stock at December 31, 1996.
(d) Credit for Dividends. The Company shall credit to the Executive'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 Executive 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 (using Book Value as of the previous December
31), 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
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<PAGE>
Common Stock, appropriate adjustment shall be made in the number of Units
credited to the account of the Executive in the Special Ledger.
SECTION 6. PAYMENT.
(a) Conditions on Right to Receive Payment. The Executive shall not be entitled
to payment of any Deferred Compensation until he is entitled to payment of
deferred compensation under the MidAmerican Energy Company Deferred Compensation
Plan-- Executives. Upon approval by the Committee, payment may be made to the
Executive earlier than the date specified above.
(b) Form and Timing of Payment. (i) Under the Book Value Deferral Method, the
value of Units at the time of payout shall be based on (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 or (y) the
Book Value of Common Stock as of the most recent December 31 prior to date of
payment. The Executive (or beneficiary in the event of death prior to any payout
to the Executive) 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".
(ii) At the election of the Compensation Committee, upon consultation with
the Executive, payments of deferred compensation shall be made on the date
selected by the Committee and shall be made in a lump sum or in approximately
equal annual installments, and if annual installments are elected, the
Compensation Committee shall determine, upon consultation with the Executive,
the period over which payments are to be made.
(iii) If annual installments are elected, 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 Executive at the beginning of such Plan Year (or the joint life
expectancy of the Executive and spouse if the Executive is married). Each annual
installment payment shall be made within fifteen (15) days following the first
day of each Plan Year.
(iv) 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
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<PAGE>
has been made with respect to the Units. In the alternative, instead of having
the account fluctuate in value, the Executive may elect to have the value of his
account fixed as of the December 31 prior to the first payment, based on the
selection of Payout Value under paragraph (b)(i) of this Section 6. If such an
election is made, the account shall be credited each December 31 with interest
at the then current Fixed Rate of Interest credited under the Fixed Rate of
Interest Deferral Option in the Company's "Deferred Compensation
Plan--Executives".
(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 (or as soon thereafter as reasonably possible if the value
is based on Book Value), 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 (based
on the Payout Value selected under paragraph (b)(i) of this Section 6).
(vi) Payment of a lump sum amount or any annual installment shall be made
in cash.
(vii) In the event of the death of an Executive occurring either before the
commencement of payment or before the full balance of the Executive's account
has been paid, the unpaid balance of Deferred Compensation shall be paid in a
lump sum to the Executive's designated beneficiary or estate. Payment shall be
made within thirty (30) days following the date of death. 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) of this Section 6 if no payments had yet begun
to the Executive.
SECTION 7. GENERAL PROVISIONS.
(a) 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 the Executive hereunder as long as the assets of such trust are
subject to the claims of general creditors of the Company with respect to the
value of the Executive's account.
(b) Withholding. The Committee shall have the right to require Executive 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 Agreement amounts sufficient to satisfy such withholding tax
requirements.
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(c) Costs of the Agreement. All costs of implementing and administering the
Agreement shall be borne by the Company.
(d) Non-Alienation of Benefits. No right or benefit under this Agreement 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 the Executive 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 Executive 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 Agreement 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.
(f) Amendment or Termination of Agreement. Any amendment or termination of this
Agreement shall only be accomplished and permitted by written agreement between
the Executive and Company.
(g) Separability. If any term or provision of this Agreement 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 Agreement, 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
Agreement shall be valid and enforced to the fullest extent permitted by law.
(h) Construction. The provisions of this Agreement 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
Agreement, or have any effect upon the meaning of the provisions hereof.
5
<PAGE>
(j) Authorized Officers. Whenever the Company under the terms of the Agreement
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.
Executed by the parties this 29th day of January, 1997.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: ____________________________
- - --------------------------------
Russell E. Christiansen
6
<PAGE>
MIDAMERICAN ENERGY HOLDINGS COMPANY
DEFERRED COMPENSATION AGREEMENT
WITH
RUSSELL E. CHRISTIANSEN
SECTION 1. PURPOSE. The purpose of this Agreement is to enable MidAmerican
Energy Holdings Company to retain the Executive as a consultant to the Company
by providing such Executive the opportunity to defer his cash compensation.
SECTION 2. DEFINITIONS.
(a) "Cash Compensation" means one hundred percent (100%) of the Executive's
annual consulting fees attributable to his services as a consultant for the
Company between June 1, 1997 and May 31, 2000.
(b) "Common Stock" means shares of common stock of MidAmerican Energy Holdings
Company.
(c) "Company" means MidAmerican Energy Holdings Company.
(d) "Compensation Committee" means the Compensation Committee established by
the Board of Directors of the Company.
(e) "Deferred Compensation" means 100% of the Cash Compensation as defined in
(a) above.
(f) "Executive" means Russell E. Christiansen.
(g) "Plan Year" shall mean each January 1 through December 31.
SECTION 3. ADMINISTRATION.
(a) Compensation Committee. The Compensation Committee shall have the
responsibility of making such determinations as may be necessary or advisable to
administer the Agreement. 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 Agreement.
<PAGE>
SECTION 4. BENEFICIARY DESIGNATION.
Executive shall designate one or more beneficiaries in writing to the Committee.
Such designation may be revoked or modified at any time by designating a new
beneficiary in writing to the Committee. Executive's beneficiary designation
shall be deemed automatically revoked in the event all designated beneficiaries
predecease the Executive or, if the sole beneficiary is the Executive's spouse,
in the event of dissolution of marriage. In such event, or in the event the
Executive does not designate a beneficiary, the benefits hereunder shall be paid
to the Executive's estate.
SECTION 5. BOOK VALUE DEFERRAL METHOD.
(a) Deferred Compensation Units. The Book Value Deferral Method credits Deferred
Compensation units ("Units") to the Executive's account determined by dividing
the cash amount of Deferred Compensation by the Book Value of the Common Stock
at December 31 of the previous calendar year. The Executive'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
the Executive, (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 the
Executive's account shall be determined by dividing the cash amount of Deferred
Compensation by the Book Value of the Common Stock at December 31 of the
previous calendar year.
(d) Credit for Dividends. The Company shall credit to the Executive'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 Executive 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 (using Book Value as of the previous December
31), and thereafter such additional Units shall be included in the base for
determining future credits.
2
<PAGE>
(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 the Executive in the Special Ledger.
SECTION 6. PAYMENT.
(a) Conditions on Right to Receive Payment. The Executive shall not be entitled
to payment of any Deferred Compensation until he is entitled to payment of
deferred compensation under the MidAmerican Energy Company Deferred Compensation
Plan-- Executives. Upon approval by the Committee, payment may be made to the
Executive earlier than the date specified above.
(b) Form and Timing of Payment. (i) Under the Book Value Deferral Method, the
value of Units at the time of payout shall be based on (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 or (y) the
Book Value of Common Stock as of the most recent December 31 prior to date of
payment. The Executive (or beneficiary in the event of death prior to any payout
to the Executive) 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".
(ii) At the election of the Compensation Committee, upon consultation with
the Executive, payments of deferred compensation shall be made on the date
selected by the Committee and shall be made in a lump sum or in approximately
equal annual installments, and if annual installments are elected, the
Compensation Committee shall determine, upon consultation with the Executive,
the period over which payments are to be made.
(iii) If annual installments are elected, 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 Executive at the beginning of such Plan Year (or the joint life
expectancy of the Executive and spouse if the Executive is married). Each annual
installment payment shall be made within fifteen (15) days following the first
day of each Plan Year.
(iv) 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
3
<PAGE>
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, the Executive may elect to
have the value of his account fixed as of the December 31 prior to the first
payment, based on the selection of Payout Value under paragraph (b)(i) of this
Section 6. If such an election is made, the account shall be credited each
December 31 with interest at the then current Fixed Rate of Interest credited
under the Fixed Rate of Interest Deferral Option in the Company's "Deferred
Compensation Plan--Executives".
(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 (or as soon thereafter as reasonably possible if the value
is based on Book Value), 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 (based
on the Payout Value selected under paragraph (b)(i) of this Section 6).
(vi) Payment of a lump sum amount or any annual installment shall be made
in cash.
(vii) In the event of the death of an Executive occurring either before the
commencement of payment or before the full balance of the Executive's account
has been paid, the unpaid balance of Deferred Compensation shall be paid in a
lump sum to the Executive's designated beneficiary or estate. Payment shall be
made within thirty (30) days following the date of death. 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) of this Section 6 if no payments had yet begun
to the Executive.
SECTION 7. GENERAL PROVISIONS.
(a) 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 the Executive hereunder as long as the assets of such trust are
subject to the claims of general creditors of the Company with respect to the
value of the Executive's account.
(b) Withholding. The Committee shall have the right to require Executive to
remit to the Company an amount sufficient to satisfy Federal, state and local
tax withholding
4
<PAGE>
requirements, or to deduct from any or all payments made pursuant to the
Agreement amounts sufficient to satisfy such withholding tax requirements.
(c) Costs of the Agreement. All costs of implementing and administering the
Agreement shall be borne by the Company.
(d) Non-Alienation of Benefits. No right or benefit under this Agreement 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 the Executive 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 Executive 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 Agreement 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.
(f) Amendment or Termination of Agreement. Any amendment or termination of this
Agreement shall only be accomplished and permitted by written agreement between
the Executive and Company.
(g) Separability. If any term or provision of this Agreement 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 Agreement, 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
Agreement shall be valid and enforced to the fullest extent permitted by law.
(h) Construction. The provisions of this Agreement 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
Agreement, or have any effect upon the meaning of the provisions hereof.
5
<PAGE>
(j) Authorized Officers. Whenever the Company under the terms of the Agreement
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.
Executed by the parties this 29th day of January, 1997.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: ____________________________
- - --------------------------------
Russell E. Christiansen
6
<TABLE>
<CAPTION>
EXHIBIT 12.1
MIDAMERICAN ENERGY HOLDINGS COMPANY
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 31,1996 DECEMBER 31,1995
-------------------------------- -------------------------------
Supplemental (a) Supplemental (a)
-------------------- ---------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations ........................... $143,761 -- $143,761 $119,705 $119,705
Preferred stock dividends of subsidiary ..................... 10,689 -- -- 8,059 -- 8,059
Pre-tax (gain) loss of less than 50% owned persons .......... 10,938 -- 10,938 16,482 -- 16,482
-------- ----- -------- -------- ----- --------
165,388 -- 154,699 144,246 -- 144,246
Add (Deduct):
Total income taxes .......................................... 98,422 -- 98,422 66,803 -- 66,803
Interest on long-term debt .................................. 102,909 3,615 106,524 105,550 4,595 110,145
Other interest charges ...................................... 10,941 -- 10,941 9,449 -- 9,449
Interest on leases .......................................... 375 -- 375 1,088 -- 1,088
-------- ----- -------- -------- ----- -------
212,647 3,615 216,262 182,890 4,595 187,485
-------- ----- -------- ------- ----- -------
Earnings available for fixed charges ...................... 378,035 3,615 370,961 327,136 4,595 331,731
-------- ----- -------- -------- ----- --------
Fixed Charges:
Interest on long-term debt .................................. 102,909 3,615 106,524 105,550 4,595 110,145
Other interest charges ...................................... 10,941 -- 10,941 9,449 -- 9,449
Interest on leases .......................................... 375 -- 375 1,088 -- 1,088
-------- ----- -------- -------- ----- --------
Total fixed charges ....................................... 114,225 3,615 117,840 116,087 4,595 120,682
-------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges .......................... 3.310 -- 3.148 2.818 -- 2.749
======== ===== ======== ======== ===== ========
Preferred stock dividend requirements ....................... $ 10,689 -- $ 10,689 $ 8,059 -- $ 8,059
Ratio of net income before income taxes to net income ....... 1.6372 -- 1.6846 1.5229 -- 1.5229
-------- ----- -------- -------- ----- --------
Preferred stock dividend requirements before income tax ..... 17,500 -- 18,007 12,273 -- 12,273
-------- ----- -------- -------- ----- --------
Fixed charges plus preferred stock dividend requirements .... 131,725 3,615 135,847 128,360 4,595 132,955
-------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) .............. 2.870 -- 2.731 2.549 -- 2.495
======== ===== ======== ======== ===== ========
</TABLE>
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-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12.1
MIDAMERICAN ENERGY HOLDINGS COMPANY
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 Twelve Months Ended
December 31, 1994 December 31, 1993 December 31, 1992
--------------------------- -------------------------- --------------------------
Supplemental (a) Supplemental (a) Supplemental (a)
------------------- ------------------- -------------------
As As As
Adjustment Adjusted Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations ........... $123,098 -- $123,098 $134,325 -- $134,325 $ 75,045 -- $ 75,045
Preferred stock dividends of subsidiary ..... 10,551 -- 10,551 8,367 -- 8,367 8,735 -- 8,735
Pre-tax (gain) loss of less than 50%
owned persons ............................. (270) -- (270) (597) -- (597) (1,297) -- (1,297)
-------- ----- -------- -------- ----- -------- -------- ----- --------
133,379 -- 133,379 142,095 -- $142,095 82,483 -- 82,483
Add (Deduct):
Total income taxes .......................... 60,457 -- 60,457 67,485 -- 67,485 24,566 -- 24,566
Interest on long-term debt .................. 101,267 5,428 106,695 107,044 5,678 112,722 114,732 7,391 122,123
Other interest charges ...................... 6,446 -- 6,446 5,066 -- 5,066 5,899 -- 5,899
Interest on leases .......................... 1,211 -- 1,211 1,876 -- 1,876 2,386 -- 2,386
--------- ----- -------- -------- ----- -------- -------- ----- --------
169,381 5,428 174,809 181,471 5,678 187,149 147,583 7,391 154,974
--------- ----- -------- -------- ----- -------- -------- ----- --------
Earnings available for fixed charges ...... 302,760 5,428 308,188 323,566 5,678 329,244 230,066 7,391 237,457
--------- ----- -------- -------- ----- -------- -------- ----- --------
Fixed Charges:
Interest on long-term debt .................. 101,267 5,428 106,695 107,044 5,678 112,722 114,732 7,391 122,123
Other interest charges ...................... 6,446 -- 6,446 5,066 -- 5,066 5,899 -- 5,899
Interest on leases .......................... 1,211 -- 1,211 1,876 -- 1,876 2,386 -- 2,386
-------- ----- -------- -------- ----- -------- -------- ----- --------
Total fixed charges ....................... 108,924 5,428 114,352 113,986 5,678 119,664 123,017 7,391 130,408
-------- ----- -------- -------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges .......... 2.780 -- 2.695 2.839 -- 2.751 1.870 -- 1.821
======== ===== ======== ======== ===== ======== ======== ===== ========
Preferred stock dividend requirements ....... $ 10,551 -- $ 10,551 $ 8,367 -- $ 8,367 $ 8,735 -- $ 8,735
Ratio of net income before
income taxes to net income................. 1.4524 -- 1.4524 1.4729 -- 1.4729 1.2932 -- 1.2932
-------- ----- -------- -------- ----- -------- -------- ----- --------
Preferred stock dividend requirements
before income tax ......................... 15,324 -- 15,324 12,324 -- 12,324 11,296 -- 11,296
-------- ----- -------- -------- ----- -------- -------- ----- --------
Fixed charges plus preferred stock
dividend requirements ..................... 124,248 5,428 129,676 126,310 5,678 131,988 134,313 7,391 141,704
-------- ----- -------- -------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges plus
preferred stock dividend requirements
(pre-income tax basis) .................... 2.437 -- 2.377 2.562 -- 2.494 1.713 -- 1.676
======== ===== ======== ======== ===== ======== ======== ===== =======
</TABLE>
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-
EXHIBIT 12.2
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
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 31,1996 DECEMBER 31,1995
-------------------------------- ------------------------------
Supplemental (a) Supplemental (a)
--------------------- --------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations ........................... $165,132 $165,132 $132,489 -- $132,489
Preferred stock dividends of subsidiary ..................... 288 -- 288 -- -- --
-------- ----- -------- -------- ----- --------
165,420 -- 165,420 132,489 132,489
Add (Deduct):
Total income taxes .......................................... 112,927 -- 112,927 84,098 -- 84,098
Interest on long-term debt .................................. 79,434 3,615 83,049 80,133 4,595 84,728
Other interest charges ...................................... 10,842 -- 10,842 9,396 -- 9,396
Interest on leases .......................................... 375 -- 375 1,088 -- 1,088
-------- ----- -------- -------- ----- --------
203,578 3,615 207,193 174,715 4,595 179,310
-------- ----- -------- -------- ----- --------
Earnings available for fixed charges ........................ 368,998 3,615 372,613 307,204 4,595 311,799
-------- ----- -------- -------- ----- --------
Fixed Charges:
Interest on long-term debt .................................. 79,434 3,615 83,049 80,133 4,595 84,728
Other interest charges ...................................... 10,842 -- 10,842 9,396 ----- 9,396
Interest on leases .......................................... 375 -- 375 1,088 -- 1,088
-------- ----- -------- -------- ----- --------
Total fixed charges ......................................... 90,651 3,615 94,266 90,617 4,595 95,212
-------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges .......................... 4.071 -- 3.953 3.390 -- 3.275
======== ===== ======== ======== ===== ========
Preferred stock dividend requirements ....................... $ 10,689 -- $ 10,689 $ 8,059 -- $ 8,059
Ratio of net income before income taxes to net income ....... 1.6827 -- 1.6827 1.6348 -- 1.6348
-------- ----- -------- -------- ----- --------
Preferred stock dividend requirements before income tax ..... 17,986 -- 17,986 13,175 -- 13,175
-------- ----- -------- -------- ----- --------
Fixed charges plus preferred stock dividend requirements .... 108,637 3,615 112,252 103,792 4,595 108,387
-------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) .............. 3.397 -- 3.319 2.960 -- 2.877
======== ===== ======== ======== ===== ========
</TABLE>
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-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12.2
MIDAMERICAN ENERGY COMPANY
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 Twelve Months Ended
December 31, 1994 December 31, 1993 December 31, 1992
--------------------------- -------------------------- --------------------------
Supplemental (a) Supplemental (a) Supplemental (a)
------------------- ------------------- -------------------
As As As
Adjustment Adjusted Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations ........... $121,145 -- $121,145 $133,888 -- $133,888 $ 86,713 -- $ 86,713
Preferred stock dividends of subsidiary ..... -- -- -- -- -- --
-------- ----- -------- -------- ----- -------- -------- ----- --------
121,145 -- 121,145 133,888 -- $133,888 86,713 -- 86,713
Add (Deduct):
Total income taxes .......................... 66,759 -- 66,759 75,917 -- 75,917 39,144 -- 39,144
Interest on long-term debt .................. 73,922 5,428 79,350 80,642 5,678 86,320 87,233 7,391 94,624
Other interest charges ...................... 6,639 -- 6,639 5,068 -- 5,068 4,373 -- 4,373
Interest on leases .......................... 1,211 -- 1,211 1,876 -- 1,876 2,386 -- 2,386
--------- ----- -------- -------- ----- -------- -------- ----- --------
148,531 5,428 153,959 163,503 5,678 169,181 133,136 7,391 140,527
--------- ----- -------- -------- ----- -------- -------- ----- --------
Earnings available for fixed charges ...... 269,676 5,428 275,104 297,391 5,678 303,069 219,849 7,391 227,240
--------- ----- -------- -------- ----- -------- -------- ----- --------
Fixed Charges:
Interest on long-term debt .................. 73,922 5,428 79,350 80,642 5,678 86,320 87,233 7,391 94,624
Other interest charges ...................... 6,639 -- 6,639 5,068 -- 5,068 4,373 -- 4,373
Interest on leases .......................... 1,211 -- 1,211 1,876 -- 1,876 2,386 -- 2,386
-------- ----- -------- -------- ----- -------- -------- ----- --------
Total fixed charges ....................... 81,772 5,428 87,200 87,586 5,678 93,264 93,992 7,391 101,383
-------- ----- -------- -------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges .......... 3.298 -- 3.155 3.395 -- 3.250 2.339 -- 2.241
======== ===== ======== ======== ===== ======== ======== ===== ========
Preferred stock dividend requirements ....... $ 10,551 -- $ 10,551 $ 8,367 -- $ 8,367 $ 8,735 -- $ 8,735
Ratio of net income before
income taxes to net income................. 1.5511 -- 1.5511 1.5670 -- 1.5670 1.4514 -- 1.4514
-------- ----- -------- -------- ----- -------- -------- ----- --------
Preferred stock dividend requirements
before income tax ......................... 16,366 -- 16,366 13,111 -- 13,111 12,678 -- 12,678
-------- ----- -------- -------- ----- -------- -------- ----- --------
Fixed charges plus preferred stock
dividend requirements ..................... 98,138 5,428 103,566 100,697 5,678 106,375 106,670 7,391 114,061
-------- ----- -------- -------- ----- -------- -------- ----- --------
Ratio of earnings to fixed charges plus
preferred stock dividend requirements
(pre-income tax basis) .................... 2.748 -- 2.656 2.953 -- 2.849 2.061 -- 1.992
======== ===== ======== ======== ===== ======== ======== ====== =======
</TABLE>
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-
EXHIBIT 21.1
SUBSIDIARIES OF MIDAMERICAN ENERGY HOLDINGS COMPANY
AS OF DECEMBER 31, 1996
Jurisdiction
Subsidiary of Incorporation
- - ---------- ----------------
MidAmerican Energy Company Iowa
MidAmerican Capital Company Delaware
Midwest Capital Group, Inc. Iowa
AmGas, Inc. Iowa
Continental Power Exchange, Inc. Delaware
InterCoast Capital Company Delaware
InterCoast Energy Company Delaware
InterCoast Oil and Gas Company (1) Delaware
InterCoast Power Company Delaware
IWG Co. 3 Delaware
IWG Co. 9 Delaware
MWR Investments, Inc. Iowa
As of the end of the year covered by this report, MidAmerican Energy Holdings
Company's remaining 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.
(1) Sold in January of 1997.
EXHIBIT 21.2
SUBSIDIARIES OF MIDAMERICAN ENERGY COMPANY
AS OF DECEMBER 31, 1996
Jurisdiction
Subsidiary of Incorporation
- - ---------- ----------------
CBEC Railway Inc. Iowa
MidAmerican Energy Financing I Delaware
As of the end of the year covered by this report, MidAmerican Energy Company's
remaining 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.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into MidAmerican Energy
Holdings Company's previously filed Registration Statements, File No.'s
33-60549, 33-60849, 33-60851, and 333-02803.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
March 28, 1997
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into MidAmerican Energy
Company's previously filed Registration Statements, File No.'s 2-85102 and
333-15387.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of MidAmerican Energy Company as of September 30,
1996, and the related consolidated statements of income and cash flows for the
nine months ended September 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000928576
<NAME> MidAmerican Energy Company
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,626,456
<OTHER-PROPERTY-AND-INVEST> 385,709
<TOTAL-CURRENT-ASSETS> 288,108
<TOTAL-DEFERRED-CHARGES> 397,582
<OTHER-ASSETS> 207,725
<TOTAL-ASSETS> 3,905,580
<COMMON> 801,442
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 442,593
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,238,615
50,000
77,534
<LONG-TERM-DEBT-NET> 1,062,350
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 160,063
<LONG-TERM-DEBT-CURRENT-PORT> 47,713
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,269,305
<TOT-CAPITALIZATION-AND-LIAB> 3,905,580
<GROSS-OPERATING-REVENUE> 1,194,529
<INCOME-TAX-EXPENSE> 86,967
<OTHER-OPERATING-EXPENSES> 921,043
<TOTAL-OPERATING-EXPENSES> 1,008,010
<OPERATING-INCOME-LOSS> 186,519
<OTHER-INCOME-NET> (12,632)<F1>
<INCOME-BEFORE-INTEREST-EXPEN> 173,887
<TOTAL-INTEREST-EXPENSE> 64,541
<NET-INCOME> 109,346
6,748
<EARNINGS-AVAILABLE-FOR-COMM> 102,598
<COMMON-STOCK-DIVIDENDS> 90,594
<TOTAL-INTEREST-ON-BONDS> 59,646
<CASH-FLOW-OPERATIONS> 249,873
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Tag 41 includes a $8,577,000 Loss from Discontinued Operations, net of
income taxes.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of MidAmerican Energy Company as of June 30,
1996, and the related consolidated statements of income and cash flows for the
six months ended June 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000928576
<NAME> MidAmerican Energy Company
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,633,316
<OTHER-PROPERTY-AND-INVEST> 398,124
<TOTAL-CURRENT-ASSETS> 238,956
<TOTAL-DEFERRED-CHARGES> 404,677
<OTHER-ASSETS> 209,178
<TOTAL-ASSETS> 3,884,251
<COMMON> 801,439
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 450,191
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,242,588
50,000
78,577
<LONG-TERM-DEBT-NET> 1,109,683
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 166,317
<LONG-TERM-DEBT-CURRENT-PORT> 392
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,236,694
<TOT-CAPITALIZATION-AND-LIAB> 3,884,251
<GROSS-OPERATING-REVENUE> 810,458
<INCOME-TAX-EXPENSE> 53,364
<OTHER-OPERATING-EXPENSES> 640,675
<TOTAL-OPERATING-EXPENSES> 694,039
<OPERATING-INCOME-LOSS> 116,419
<OTHER-INCOME-NET> 11,226<F1>
<INCOME-BEFORE-INTEREST-EXPEN> 127,645
<TOTAL-INTEREST-EXPENSE> 42,942
<NET-INCOME> 84,703
4,661
<EARNINGS-AVAILABLE-FOR-COMM> 80,042
<COMMON-STOCK-DIVIDENDS> 60,440
<TOTAL-INTEREST-ON-BONDS> 39,768
<CASH-FLOW-OPERATIONS> 181,258
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Tag 41 includes a $10,438,000 of Income from Discontinued Operations, net of
income taxes.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of MidAmerican Energy Company as of March 31, 1996,
and the related consolidated statements of income and cash flows for the three
months ended March 31, 1996, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000928576
<NAME> MidAmerican Energy Company
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,636,139
<OTHER-PROPERTY-AND-INVEST> 395,412
<TOTAL-CURRENT-ASSETS> 254,371
<TOTAL-DEFERRED-CHARGES> 404,908
<OTHER-ASSETS> 210,651
<TOTAL-ASSETS> 3,901,481
<COMMON> 797,675
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 451,414
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,244,250
50,000
81,461
<LONG-TERM-DEBT-NET> 1,109,563
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 99,800
<LONG-TERM-DEBT-CURRENT-PORT> 917
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,315,490
<TOT-CAPITALIZATION-AND-LIAB> 3,901,481
<GROSS-OPERATING-REVENUE> 458,260
<INCOME-TAX-EXPENSE> 32,330
<OTHER-OPERATING-EXPENSES> 356,569
<TOTAL-OPERATING-EXPENSES> 388,899
<OPERATING-INCOME-LOSS> 69,361
<OTHER-INCOME-NET> 5,876<F1>
<INCOME-BEFORE-INTEREST-EXPEN> 75,237
<TOTAL-INTEREST-EXPENSE> 21,713
<NET-INCOME> 53,524
2,477
<EARNINGS-AVAILABLE-FOR-COMM> 51,047
<COMMON-STOCK-DIVIDENDS> 30,221
<TOTAL-INTEREST-ON-BONDS> 19,826
<CASH-FLOW-OPERATIONS> 157,635
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Tag 41 includes a $6,105,000 income from Discontinued Operations, net of
income taxes.
</FN>
</TABLE>
EXHIBIT 99.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
-------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
----------- -----------
Commission file number 1-12459
------------------
MIDAMERICAN ENERGY COMPANY EMPLOYEE STOCK PURCHASE PLAN
- - -------------------------------------------------------------------------------
(Full title of the plan)
MIDAMERICAN ENERGY HOLDINGS COMPANY
- - -------------------------------------------------------------------------------
(Name of Issuer of the securities held pursuant to the plan)
666 Grand Ave. P.O. Box 657, Des Moines, Iowa 50303
- - --------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
<PAGE>
MIDAMERICAN ENERGY COMPANY
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
ASSETS
------
As of December 31
------------------------
1996 1995
---------- ----------
<S> <C> <C>
INVESTMENTS
MidAmerican Energy Holdings Company
common stock held by nominee -
558,323 and 486,319 shares, respectively
Cost at date of purchase $8,508,522 $7,189,938
Unrealized appreciation in market value 354,859 955,908
---------- ----------
Market value 8,863,381 8,145,846
CONTRIBUTIONS RECEIVABLE 2,857 2,854
---------- ----------
Total $8,866,238 $8,148,700
========== ==========
LIABILITIES AND OWNERSHIP INTEREST
----------------------------------
OWNERSHIP INTEREST $8,866,238 $8,148,700
========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
-2-
<PAGE>
MIDAMERICAN ENERGY COMPANY
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN OWNERSHIP INTEREST
<TABLE>
<CAPTION>
Year Ended Period From Inception
December 31, (July 3, 1995) to
1996 December 31, 1995
------------- --------------------
<S> <C> <C>
BALANCE, beginning of period $8,148,700 $ -
---------- ---------
TRANSFER OF OWNERSHIP INTEREST
FROM OTHER PLANS - 6,302,994
---------- ----------
CONTRIBUTIONS
Participants 2,129,815 1,192,809
Company 375,850 210,495
---------- ------------
2,505,665 1,403,304
---------- ----------
PLAN INCOME
Dividends on shares held by the Plan 612,650 275,721
Realized gain on distributed shares 137,597 41,459
Unrealized appreciation (depreciation)
in market value of investments (601,049) 955,908
---------- ----------
149,198 1,273,088
---------- ----------
DISTRIBUTIONS TO PLAN PARTICIPANTS
Shares distributed 1,324,675 554,965
Dividends paid 612,650 275,721
---------- ----------
1,937,325 830,686
---------- ----------
BALANCE, end of period $8,866,238 $8,148,700
========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
-3-
<PAGE>
MIDAMERICAN ENERGY COMPANY
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
(1) THE PLAN
The following brief description of the MidAmerican Energy Company Employee
Stock Purchase Plan (the Plan) is provided for general information purposes
only. Participants should refer to the Plan document for more complete
information.
(a) General and Plan Participants
On July 1, 1995, Iowa-Illinois Gas and Electric Company (Iowa-Illinois),
Midwest Resources Inc. (Resources) and its wholly owned subsidiary Midwest Power
Systems Inc. merged with and into MidAmerican Energy Company (MidAmerican). The
Plan became effective on July 3, 1995, at which time the ownership interest and
shares of the Resources and Iowa-Illinois employee stock purchase plans were
transferred to the Plan. The Resources and Iowa-Illinois plans ceased at that
time.
On April 24, 1996, MidAmerican shareholders approved a proposal to form
MidAmerican Energy Holdings Company (Holdings or the Company) as a holding
company for MidAmerican and its subsidiaries. Effective December 1, 1996, each
share of MidAmerican common stock was exchanged for one share of Holdings common
stock.
Under the Plan, eligible employees, as defined by the Plan, of the Company
and its subsidiaries who are enrolled in the Plan may purchase shares of the
common stock of the Company (Common Stock) at 85% of their fair market value.
Purchases are made on the last business day of each monthly investment period
with fair market value being the average of the high and low prices per share of
Common Stock on the New York Stock Exchange - Composite Transactions on such day
or, if there is no sale of Common Stock on that day, then on the next preceding
day on which there was a sale. The Company contributes the remaining 15% of the
fair market value.
The Plan will terminate when the maximum number of shares of Common Stock
to be sold under the Plan has been purchased or by action of the board of
directors of the Company. The maximum number of shares of Common Stock which is
currently authorized to be purchased pursuant to the Plan is 1,000,000 subject
to adjustment as the result of a stock dividend, split-up or combination. During
1996, the Company purchased shares of Common Stock in the open market to meet
share obligations under the Plan. Such share purchases do not proportionately
reduce the shares available for issuance.
At December 31, 1996 and 1995, there were 2,020 and 2,022 participants,
respectively in the Plan.
(b) Administration
The Plan is administered by the Company at the Company's expense.
(c) Contributions
Participants' contributions to the Plan are made through payroll deductions
which are credited to a purchase account established for each participant.
Participants may authorize contributions up to the lesser of
-4-
<PAGE>
15% of base pay, as defined in the Plan, or $21,250 annually.
(d) Ownership Interest
Shares of Common Stock purchased for all participants each monthly
investment period are issued on the last day of that period to a nominee for the
benefit of the participants. A separate account is maintained to reflect the
Common Stock balance of each participant. The Company is the nominee for the
Plan.
(e) Dividends
Cash dividends on shares of Common Stock earned on each participant's
account are paid to the participant by the Company or, at the participant's
election, reinvested in Common Stock. Such Common Stock is held in, and under
the terms of, the Company's Shareholder Options Plan.
(f) Vesting and Withdrawal of Shares
Participants have a vested right to all shares of Common Stock credited to
their accounts. Shares of Common Stock held in the Plan cannot be withdrawn from
the Plan until the shares have been held under the Plan for at least six months
except that, in the event of a participant's death or termination of employment
or eligibility, a participant's account will be totally distributed. Upon
withdrawal from the Plan, all whole shares in a participant's account will be
deposited in safekeeping under the Company's Shareholder Options Plan unless the
participant requests that a certificate be issued, and a cash payment will be
made for fractional shares.
(g) Legal and Income Tax Status
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974. The Company believes that the Plan qualifies under Section
423 of the Internal Revenue Code (the Code) as an employee stock purchase plan.
An employee's federal income tax status with respect to the Plan would be
determined by such section of the Code. The Plan is not subject to federal
income tax.
(2) ACCOUNTING POLICIES
(a) Basis of Accounting
The statements are presented on the accrual basis of accounting, and
accordingly, contributions of participants and the Company are reflected in the
year in which the participants earned the related wages. The Plan's obligation
to purchase Common Stock with the accrued contributions is reflected in
Ownership Interest. The cost of Common Stock distributed by the Plan is
determined on an average cost basis.
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
changes in ownership interest. Actual results could differ from those estimates.
(b) Valuation of Investments
Common Stock held under the Plan is reported at market value as determined
by the closing price at year-end on the New York Stock Exchange - Composite
Transaction listing. The market value as of December 31, 1996 and 1995 was
$15.875 and $16.75, respectively.
-5-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To MidAmerican Energy Holdings Company:
We have audited the accompanying statements of financial condition of the
MidAmerican Energy Company Employee Stock Purchase Plan as of December 31, 1996
and 1995, and the related statements of changes in ownership interest for the
twelve month period ended December 31, 1996 and from inception (July 3, 1995) to
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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the MidAmerican Energy
Company Employee Stock Purchase Plan as of December 31, 1996 and 1995, and the
changes in ownership interest for the twelve month period ended December 31,
1996, and from inception (July 3, 1995) to December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
March 21, 1996
-6-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, MidAmerican
Energy Holdings Company has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
MIDAMERICAN ENERGY COMPANY
EMPLOYEE STOCK PURCHASE PLAN
Date March 28, 1997 By /s/ P. G. Lindner
---------------- --------------------------
P. G. Lindner
Senior Vice President and
Chief Financial Officer
-7-
<PAGE>
EXHIBITS INDEX
The following exhibit is filed herewith:
23 Consent of Independent Public Accountants
-8-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 11-K, into MidAmerican Energy Holdings
Company's previously filed Registration Statement, File No. 33-60849.
Chicago, Illinois /s/ ARTHUR ANDERSEN LLP
March 28, 1997
