UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
----------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -----------------------
Commission Registrant, State of Incorporation, 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
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuers' classes
of common stock as of the latest practicable date.
Registrant Class Shares Outstanding at April 30, 1998
- - ------------------ ---------------- ------------------------------------
MidAmerican Energy Common Stock 94,595,982
Holdings Company without par value
MidAmerican Energy Common Stock 70,980,203 (all of which were held by
Company without par value MidAmerican Energy Holdings Company)
<PAGE>
MIDAMERICAN ENERGY HOLDINGS COMPANY
AND
MIDAMERICAN ENERGY COMPANY
This combined Form 10-Q is separately filed by MidAmerican Energy Holdings
Company (Company or Holdings) and MidAmerican Energy Company (MidAmerican).
Information herein relating to each individual registrant is filed by such
registrant on its own behalf. Accordingly, except for its subsidiaries,
MidAmerican makes no representation as to information relating to any other
subsidiary of Holdings.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. Financial Statements
MidAmerican Energy Holdings Company
Consolidated Statements of Income............................... 3
Consolidated Statements of Comprehensive Income................. 4
Consolidated Balance Sheets..................................... 5
Consolidated Statements of Cash Flows........................... 6
Notes to Consolidated Financial Statements...................... 7
MidAmerican Energy Company
Consolidated Statements of Income...............................12
Consolidated Balance Sheets.....................................13
Consolidated Statements of Cash Flows...........................14
Notes to Consolidated Financial Statements......................15
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................16
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk......37
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings...............................................38
ITEM 6. Exhibits and Reports on Form 8-K................................39
Signatures...............................................................40
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<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except per share amounts)
Three Months Twelve Months
Ended March 31 Ended March 31
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric utility ........................... $ 256,354 $ 254,316 $ 1,128,338 $ 1,091,050
Gas utility ................................ 173,200 211,565 497,941 552,332
Nonregulated ............................... 41,974 114,278 187,371 301,793
----------- ----------- ----------- -----------
471,528 580,159 1,813,650 1,945,175
----------- ----------- ----------- -----------
OPERATING EXPENSES
Utility:
Cost of fuel, energy and capacity ........ 45,199 59,283 221,676 232,225
Cost of gas sold ......................... 105,321 141,833 309,504 364,111
Other operating expenses ................. 106,777 93,607 442,964 356,180
Maintenance .............................. 22,583 23,749 96,924 93,634
Depreciation and amortization ............ 44,191 42,008 172,723 165,656
Property and other taxes ................. 25,470 25,490 101,297 92,943
----------- ----------- ----------- -----------
349,541 385,970 1,345,088 1,304,749
----------- ----------- ----------- -----------
Nonregulated:
Cost of sales ............................ 39,036 108,970 170,248 284,479
Other .................................... 6,309 7,986 28,399 35,217
----------- ----------- ----------- -----------
45,345 116,956 198,647 319,696
----------- ----------- ----------- -----------
Total operating expenses.................. 394,886 502,926 1,543,735 1,624,445
----------- ----------- ----------- -----------
OPERATING INCOME ........................... 76,642 77,233 269,915 320,730
----------- ----------- ----------- -----------
NON-OPERATING INCOME
Interest income ............................ 2,452 1,553 6,217 4,060
Dividend income ............................ 2,714 3,548 12,958 16,027
Realized gains and losses on securities, net 1,065 518 8,345 (312)
Other, net ................................. 5,657 3,985 23,783 (1,707)
----------- ----------- ----------- -----------
11,888 9,604 51,303 18,068
----------- ----------- ----------- -----------
FIXED CHARGES
Interest on long-term debt ................. 20,284 23,463 86,719 100,267
Other interest expense ..................... 3,212 1,329 11,917 9,234
Preferred dividends of subsidiaries ........ 3,232 4,769 12,931 12,981
Allowance for borrowed funds ............... (754) (709) (2,642) (3,485)
----------- ----------- ----------- -----------
25,974 28,852 108,925 118,997
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES ...................... 62,556 57,985 212,293 219,801
INCOME TAXES ............................... 23,823 23,811 68,402 90,271
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS .......... 38,733 34,174 143,891 129,530
DISCONTINUED OPERATIONS
Income from operations (net of income taxes) -- 290 (408) (235)
Loss on disposal (net of income taxes) ..... -- (524) (3,586) (15,356)
----------- ----------- ----------- -----------
-- (234) (3,994) (15,591)
----------- ----------- ----------- -----------
NET INCOME ................................. $ 38,733 $ 33,940 $ 139,897 $ 113,939
=========== =========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING .......... 94,857 100,458 96,663 100,661
EARNINGS PER COMMON SHARE: BASIC AND DILUTED
Continuing operations ...................... $ 0.41 $ 0.34 $ 1.49 $ 1.29
Discontinued operations .................... -- -- (0.04) (0.16)
----------- ----------- ----------- -----------
Earnings per average common share .......... $ 0.41 $ 0.34 $ 1.45 $ 1.13
=========== =========== =========== ===========
DIVIDENDS DECLARED PER SHARE ............... $ 0.30 $ 0.30 $ 1.20 $ 1.20
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31 ENDED MARCH 31
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET INCOME ............................................ $ 38,733 $ 33,940 $ 139,897 $ 113,939
--------- --------- --------- ---------
OTHER COMPREHENSIVE INCOME
Unrealized gains (losses) on securities:
Unrealized holding gains during period .............. 82,856 4,126 302,657 6,961
Less reclassification adjustment for realized gains
(losses) reflected in net income during period .... 1,065 518 8,334 (312)
--------- --------- --------- ---------
81,791 3,608 294,323 7,273
Income tax expense .................................. 28,548 1,218 102,898 2,500
--------- --------- --------- ---------
Other comprehensive income, net ................... 53,243 2,390 191,425 4,773
--------- --------- --------- ---------
COMPREHENSIVE INCOME .................................. $ 91,976 $ 36,330 $ 331,322 $ 118,712
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF
-------------------------------------
MARCH 31 DECEMBER 31
------------------------ -----------
1998 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
UTILITY PLANT
Electric ................................................... $ 4,095,470 $ 4,033,782 $ 4,084,920
Gas ........................................................ 759,847 726,906 756,874
----------- ----------- -----------
4,855,317 4,760,688 4,841,794
Less accumulated depreciation and amortization ............. 2,312,812 2,188,624 2,275,099
----------- ----------- -----------
2,542,505 2,572,064 2,566,695
Construction work in progress .............................. 62,034 39,104 55,418
----------- ----------- -----------
2,604,539 2,611,168 2,622,113
----------- ----------- -----------
POWER PURCHASE CONTRACT .................................... 170,771 190,326 173,107
----------- ----------- -----------
INVESTMENT IN DISCONTINUED OPERATIONS ...................... -- 6,334 --
----------- ----------- -----------
CURRENT ASSETS
Cash and cash equivalents .................................. 34,637 93,010 10,468
Receivables ................................................ 158,502 233,407 207,471
Inventories ................................................ 40,890 59,704 86,091
Other ...................................................... 16,324 14,932 18,452
----------- ----------- -----------
250,353 401,053 322,482
----------- ----------- -----------
INVESTMENTS AND NONREGULATED PROPERTY, NET ................. 907,528 615,638 799,524
----------- ----------- -----------
OTHER ASSETS ............................................... 343,161 395,862 360,865
----------- ----------- -----------
TOTAL ASSETS ............................................... $ 4,276,352 $ 4,220,381 $ 4,278,091
=========== =========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity ................................ $ 1,349,011 $ 1,225,953 $ 1,301,286
MidAmerican preferred securities, not subject to
mandatory redemption ..................................... 31,761 31,766 31,763
Preferred securities, subject to mandatory redemption:
MidAmerican preferred securities ......................... 50,000 50,000 50,000
MidAmerican-obligated preferred securities of
subsidiary trust holding solely MidAmerican
junior subordinated debentures ......................... 100,000 100,000 100,000
Long-term debt (excluding current portion) ................. 1,037,598 1,118,723 1,034,211
----------- ----------- -----------
2,568,370 2,526,442 2,517,260
----------- ----------- -----------
CURRENT LIABILITIES
Notes payable .............................................. 141,063 40,209 138,054
Current portion of long-term debt .......................... 69,651 155,202 144,558
Current portion of power purchase contract ................. 14,361 13,718 14,361
Accounts payable ........................................... 140,198 147,352 145,855
Taxes accrued .............................................. 105,720 123,650 92,629
Interest accrued ........................................... 18,807 23,578 22,355
Other ...................................................... 33,515 52,445 38,766
----------- ----------- -----------
523,315 556,154 596,578
----------- ----------- -----------
OTHER LIABILITIES
Power purchase contract .................................... 83,143 97,504 83,143
Deferred income taxes ...................................... 785,610 716,062 761,795
Investment tax credit ...................................... 81,700 87,414 83,127
Other ...................................................... 234,214 236,805 236,188
----------- ----------- -----------
1,184,667 1,137,785 1,164,253
----------- ----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES ....................... $ 4,276,352 $ 4,220,381 $ 4,278,091
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
MIDAMERICAN ENERGY HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 38,733 $ 33,940
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization ............................. 48,437 48,409
Net decrease in deferred income taxes and
investment tax credit, net .............................. (5,373) (4,823)
Amortization of other assets .............................. 9,212 6,878
Loss from discontinued operations ......................... -- 234
Gain on sale of securities, assets and other investments .. (7,532) (1,465)
Other-than-temporary decline in value of investments ...... 39 160
Impact of changes in working capital, net of effects
from discontinued operations ............................ 94,933 144,109
Other ..................................................... 2,225 (4,045)
--------- ---------
Net cash provided ....................................... 180,674 223,397
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures ........................... (24,686) (26,603)
Quad Cities Nuclear Power Station decommissioning trust fund (2,813) (2,140)
Deferred energy efficiency expenditures ..................... -- (3,723)
Nonregulated capital expenditures ........................... (21,198) (2,625)
Purchase of securities ...................................... (53,230) (63,343)
Proceeds from sale of securities ............................ 52,045 78,652
Proceeds from sale of assets and other investments .......... 8,199 13,144
Investment in discontinued operations ....................... -- 152,713
Other investing activities, net ............................. (2,778) 1,600
--------- ---------
Net cash (used) provided .................................. (44,461) 147,675
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid ....................................... (28,376) (30,179)
Retirement of long-term debt, including reacquisition cost .. (75,031) (29,025)
Reacquisition of preferred shares ........................... (3) (3)
Reacquisition of common shares .............................. (14,843) (20,329)
Increase (decrease) in MidAmerican Capital Company
unsecured revolving credit facility ....................... 3,200 (174,500)
Net increase(decrease) in notes payable ..................... 3,009 (121,780)
--------- ---------
Net cash used ............................................. (112,044) (375,816)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ 24,169 (4,744)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............ 10,468 97,749
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................. $ 34,637 $ 93,005
========= =========
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ................... $ 25,134 $ 30,270
========= =========
Income taxes paid ........................................... $ 724 $ 63
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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MIDAMERICAN ENERGY HOLDINGS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A) GENERAL:
The consolidated financial statements included herein have been prepared by
Holdings, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company, all adjustments have been made to
present fairly the financial position, the results of operations and the changes
in cash flows for the periods presented. Although the Company believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest Annual Report on Form 10-K.
B) ENVIRONMENTAL MATTERS:
1) Manufactured Gas Plant Facilities:
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 26 properties which were, at one time, sites of
gas manufacturing plants in which it may be a potentially responsible party
(PRP). The purpose of these evaluations is to determine whether waste materials
are present, whether such materials constitute an environmental or health risk,
and whether MidAmerican has any responsibility for remedial action. MidAmerican
is currently conducting field investigations at seventeen of the sites and has
completed investigations at one of the sites. In addition, MidAmerican has
completed removals at three of the sites. MidAmerican is continuing to evaluate
several of the sites to determine its responsibility, if any, for conducting
site investigations or other site activity.
MidAmerican's present estimate of probable remediation costs for the sites
discussed above as of March 31, 1998 is $21 million. This estimate has been
recorded as a liability and a regulatory asset for future recovery. The Illinois
Commerce Commission (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
and the costs of removing known contaminated soil are accrued. As the
investigation is performed 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 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. The estimated
recorded liabilities for these properties are based upon
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<PAGE>
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.
2) Clean Air Act:
On July 18, 1997, the EPA adopted revisions to the National Ambient Air
Quality Standards for ozone and a new standard for fine particulate matter.
Based on data to be obtained from monitors located throughout the states, the
EPA will make a determination of whether the states have any areas that do not
meet the air quality standards (i.e., areas that are classified as
nonattainment). If a state has area(s) classified as nonattainment area(s), the
state is required to submit a State Implementation Plan specifying how it will
reach attainment of the standards through emission reductions or other means.
The impact of the new standards on MidAmerican will depend on the
attainment status of the areas surrounding MidAmerican's operations and
MidAmerican's relative contribution to the nonattainment status. If
MidAmerican's operations contribute to nonattainment and modifications to
MidAmerican's operations or facilities are necessary, the cost of making
emissions reductions to meet the air quality standards will be dependent upon
the level of emissions reductions required and the available technology.
MidAmerican will continue to evaluate the potential impact of the new
regulations.
Following recommendations provided by the Ozone Transport Assessment Group,
the EPA, in November 1997, issued a Notice of Proposed Rulemaking which
identified 22 states and the District of Columbia as making significant
contribution to nonattainment of NAAQS for ozone. Iowa is not subject to these
emissions reduction requirements as EPA's rule is currently drafted, and, as
such, MidAmerican does not anticipate that its facilities will be subject to
additional emissions reductions as a result of this initiative. The EPA
anticipates issuing its final rules in September 1998. MidAmerican will continue
to closely monitor this rulemaking proceeding.
C) RATE MATTERS:
As a result of a negotiated settlement in Illinois, MidAmerican reduced its
Illinois electric service rates by annual amounts of $13.1 million and $2.4
million, effective November 3, 1996, and June 1, 1997, respectively.
On June 27, 1997, the Iowa Utilities Board (IUB) approved a March 1997
settlement agreement between MidAmerican, the Iowa Office of Consumer Advocate
(OCA) and other parties in a consolidated rate proceeding involving
MidAmerican's electric pricing proposal and a filing by the OCA. The agreement
includes a number of components of MidAmerican's pricing proposal as follows:
* Prices for residential customers were reduced $8.5 million annually and
$10.0 million annually, effective November 1, 1996, and July 11, 1997,
respectively, and will be reduced an additional $5.0 million annually on June 1,
1998, for a total annual decrease of $23.5 million.
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* Rates for commercial and industrial customers will 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 currently
scheduled to be effective June 1, 1998.
* A tracking mechanism to currently recover the cost of capital
improvements required by the Cooper Nuclear Station Power Purchase Contract
which will offset approximately $6 million of the rate reductions in 1998.
* Elimination of the Iowa energy adjustment clause (EAC). Prior to July 11,
1997, MidAmerican collected fuel costs from Iowa customers on a current basis
through the EAC, and thus, fuel costs had little impact on net income. Since
then, base rates for Iowa customers 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 are impacted. The fuel cost factor will be
reviewed in February 1999 and adjusted prospectively if actual 1998 fuel costs
vary 15% above or below the factor included in base rates.
* If MidAmerican's annual Iowa electric jurisdictional return on common
equity exceeds 12%, then an equal sharing between customers and shareholders of
earnings above the 12% level begins; if it exceeds 14%, then two-thirds of
MidAmerican's share of those earnings will 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%.
* MidAmerican will develop a pilot program for a market access service
which allows customers with at least 4 MW of load to choose energy suppliers.
The pilot program, which is subject to approval by the IUB and the Federal
Energy Regulatory Commission (FERC), is limited to 60 MW of participation the
first year and can be expanded by 15 MW annually until the conclusion of the
program. Any loss of revenues associated with the pilot program will be
considered part of the $10 million annual reduction for commercial and
industrial customers as described above, but may not be recovered from other
customer classes. The program was filed with the IUB and the FERC in September
1997. The Company anticipates that the necessary approvals will be received by
the fourth quarter of 1998.
D) ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:
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. The majority of MidAmerican's electric and gas utility
operations currently meet the criteria of SFAS 71, but its applicability is
periodically reexamined. On December 16, 1997, MidAmerican's generation
operations serving Illinois were no longer subject to the provisions of SFAS 71
due to passage of restructuring legislation in Illinois. Thus, MidAmerican was
required to write off regulatory assets and liabilities from its balance sheet
related to its Illinois generation operations. The net amount of such write-offs
were immaterial. If other utility operations no longer meet the criteria of SFAS
71, MidAmerican would be required to write off the related regulatory assets and
liabilities from its balance sheet and thus, a material adjustment to earnings
in that period could result. As of March 31, 1998, MidAmerican had approximately
$325 million of regulatory assets in its Consolidated Balance Sheet because
these costs are expected to be recovered in future charges to utility customers.
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E) MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:
The MidAmerican Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely MidAmerican Junior Subordinated Debentures
included in the Consolidated Balance Sheets were issued by MidAmerican Energy
Financing I (the Trust), a wholly-owned statutory business trust of MidAmerican.
The sole assets of the Trust are $103.1 million of MidAmerican 7.98% Series A
Debentures due 2045.
F) COMMON SHAREHOLDERS' EQUITY:
In March 1997, Holdings announced its plan to repurchase up to $200 million
of the Company's common stock. The Company plans to purchase the shares from
time to time as market conditions warrant, with the intent of completing the
entire repurchase program by December 31, 1998. As of March 31, 1998, the
Company had repurchased approximately 5.7 million shares for $104.1 million
under the plan. In addition, a subsidiary has acquired 437,131 shares of
Holdings common stock which are also excluded from shares outstanding.
G) DETAIL OF OTHER COMPREHENSIVE INCOME - INCOME TAXES
For fiscal years beginning after December 15, 1997, full sets of
general-purpose financial statements are required to display comprehensive
income and its components in a financial statement that is displayed with the
same prominence as the other financial statements. Comprehensive income refers,
in general, to changes in the Company's equity, except those resulting from
transactions with shareholders. "Unrealized holding gains (losses)" reflects the
overall increase (decrease) in the market value of marketable securities held by
the Company as available-for-sale. The "reclassification adjustment" removes any
gains (losses) that have been realized from sales of those securities and
reflected in the Company's Net Income. The following table shows the income tax
expense or benefit related to each component (in thousands):
Three Months Twelve Months
Ended March 31 Ended March 31
-------------------- ---------------------
1998 1997 1998 1997
-------- -------- --------- --------
Unrealized holding gains
(losses) during period
Before income taxes $ 82,856 $ 4,126 $ 302,657 $ 6,961
Income tax expense (28,921) (1,399) (105,815) (2,391)
-------- ------- --------- --------
53,935 2,727 196,842 4,570
-------- ------- --------- --------
Less reclassification
adjustment for realized
gains (losses) reflected in
net income during period
Before income taxes 1,065 518 8,334 (312)
Income tax expense (373) (181) (2,917) 109
-------- ------- --------- --------
692 337 5,417 (203)
-------- ------- --------- --------
Other Comprehensive Income $ 53,243 $ 2,390 $ 191,425 $ 4,773
======== ======= ========= ========
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H) MCLEODUSA INCORPORATED INVESTMENT:
Included in investments on the Consolidated Balance Sheets is the Company's
investment in common stock of McLeodUSA Incorporated (McLeodUSA). McLeodUSA
common stock has been publicly traded since June 14, 1996. Investor agreements
related to McLeodUSA's initial public offering and subsequent merger with
Consolidated Communications Inc. prohibit the Company from selling or otherwise
disposing of any of the common stock of McLeodUSA prior to September 24, 1998,
without approval of McLeodUSA's board of directors. As a result of the
agreements, the Company's investment was considered restricted stock and, as
such, was recorded at cost in all periods prior to September 1997. Beginning in
September 1997, the investment is no longer considered restricted for accounting
purposes and is recorded at fair value. At March 31, 1998, the cost and fair
value of the McLeodUSA investment were $45.2 million and $340.5 million,
respectively. The unrealized gain is recorded, net of income taxes, as
accumulated comprehensive income in common shareholders' equity. At March 31,
1998, the unrealized gain and deferred income taxes for this investment were
$295.3 million and $103.4 million, respectively.
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<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31 ENDED MARCH 31
------------------------ --------------------------
1998 1997 1998 1997
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric utility .............................. $ 256,354 $ 254,316 $ 1,128,338 $ 1,091,050
Gas utility ................................... 173,200 211,565 497,941 552,332
----------- --------- ----------- -----------
429,554 465,881 1,626,279 1,643,382
----------- --------- ----------- -----------
OPERATING EXPENSES
Cost of fuel, energy and capacity ............. 45,757 59,283 222,234 232,225
Cost of gas sold .............................. 105,321 141,833 309,504 364,111
Other operating expenses ...................... 106,777 93,607 442,964 356,180
Maintenance ................................... 22,583 23,749 96,924 93,634
Depreciation and amortization ................. 44,191 42,008 172,723 165,656
Property and other taxes ...................... 25,470 25,490 101,297 92,943
Income taxes .................................. 28,953 23,504 80,011 102,380
----------- --------- ----------- -----------
379,052 409,474 1,425,657 1,407,129
----------- --------- ----------- -----------
OPERATING INCOME .............................. 50,502 56,407 200,622 236,253
----------- --------- ----------- -----------
NON-OPERATING INCOME
Interest and dividend income .................. 1,947 906 3,373 1,992
Non-operating income taxes .................... 4,926 (919) 4,090 (2,847)
Other, net .................................... (2,234) 1,331 8,802 4,679
----------- --------- ----------- -----------
4,639 1,318 16,265 3,824
----------- --------- ----------- -----------
FIXED CHARGES
Interest on long-term debt .................... 17,553 19,886 75,787 79,494
Other interest expense ........................ 3,168 1,329 11,866 8,848
Preferred dividends of subsidiary trust ....... 1,995 1,995 7,980 2,283
Allowance for borrowed funds .................. (754) (709) (2,642) (3,485)
----------- --------- ----------- -----------
21,962 22,501 92,991 87,140
----------- --------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS ............. 33,179 35,224 123,896 152,937
INCOME (LOSS) FROM DISCONTINUED OPERATIONS .... -- -- -- (16,266)
----------- --------- ----------- -----------
NET INCOME .................................... 33,179 35,224 123,896 136,671
PREFERRED DIVIDENDS ........................... 1,237 2,774 4,951 10,698
----------- --------- ----------- -----------
EARNINGS ON COMMON STOCK ...................... $ 31,942 $ 32,450 $ 118,945 $ 125,973
=========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-12-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF
------------------------------------
MARCH 31 DECEMBER 31
----------------------- -----------
1998 1997 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
UTILITY PLANT
Electric ............................................. $4,098,474 $4,036,785 $4,087,924
Gas .................................................. 759,847 726,906 756,874
---------- ---------- ----------
4,858,321 4,763,691 4,844,798
Less accumulated depreciation and amortization ....... 2,314,918 2,190,212 2,277,110
---------- ---------- ----------
2,543,403 2,573,479 2,567,688
Construction work in progress ........................ 62,034 39,104 55,418
---------- ---------- ----------
2,605,437 2,612,583 2,623,106
---------- ---------- ----------
POWER PURCHASE CONTRACT .............................. 170,771 190,326 173,107
---------- ---------- ----------
CURRENT ASSETS
Cash and cash equivalents ............................ 29,650 22,920 9,318
Receivables .......................................... 140,476 194,823 184,153
Inventories .......................................... 39,039 59,704 84,298
Other ................................................ 4,322 5,018 6,174
---------- ---------- ----------
213,487 282,465 283,943
---------- ---------- ----------
INVESTMENTS AND NONREGULATED PROPERTY, NET ........... 141,479 94,513 115,029
---------- ---------- ----------
OTHER ASSETS ......................................... 330,357 380,528 347,122
---------- ---------- ----------
TOTAL ASSETS ......................................... $3,461,531 $3,560,415 $3,542,307
========== ========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholder's equity .......................... $ 989,085 $ 987,880 $ 985,744
MidAmerican preferred securities, not subject to
mandatory redemption ............................... 31,761 31,766 31,763
Preferred securities, subject to mandatory redemption:
MidAmerican preferred securities ................... 50,000 50,000 50,000
MidAmerican-obligated preferred securities of
subsidiary trust holding solely MidAmerican
junior subordinated debentures .................. 100,000 100,000 100,000
Long-term debt (excluding current portion) ........... 919,815 982,623 920,203
---------- ---------- ----------
2,090,661 2,152,269 2,087,710
---------- ---------- ----------
CURRENT LIABILITIES
Notes payable ........................................ 115,102 40,025 122,500
Current portion of long-term debt .................... 49,837 125,068 124,460
Current portion of power purchase contract ........... 14,361 13,718 14,361
Accounts payable ..................................... 129,198 121,125 128,390
Taxes accrued ........................................ 101,818 86,570 91,449
Interest accrued ..................................... 14,181 17,611 20,616
Other ................................................ 20,298 23,318 22,598
---------- ---------- ----------
444,795 427,435 524,374
---------- ---------- ----------
OTHER LIABILITIES
Power purchase contract .............................. 83,143 97,504 83,143
Deferred income taxes ................................ 591,341 616,207 592,840
Investment tax credit ................................ 81,700 87,414 83,127
Other ................................................ 169,891 179,586 171,113
---------- ---------- ----------
926,075 980,711 930,223
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES ................. $3,461,531 $3,560,415 $3,542,307
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-13-
<PAGE>
<TABLE>
<CAPTION>
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31
---------------------------
1998 997
--------- ---------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ................................................. $ 33,179 $ 35,224
Adjustments to reconcile net income to net cash provided:
Depreciation and amortization ............................ 47,774 47,644
Net decrease in deferred income taxes and
investment tax credit, net ............................. (2,925) (1,789)
Amortization of other assets ............................. 9,165 6,620
Impact of changes in working capital ..................... 93,230 87,654
Other .................................................... (928) (17,468)
--------- ---------
Net cash provided ...................................... 179,495 157,885
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures .......................... (24,686) (26,603)
Quad Cities Nuclear Power Station decommissioning trust fund (2,813) (2,140)
Deferred energy efficiency expenditures .................... -- (3,723)
Nonregulated capital expenditures .......................... (19,966) (1,704)
Other investing activities, net ............................ 667 98
--------- ---------
Net cash used .......................................... (46,798) (34,072)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ............................................. (29,838) (34,274)
Retirement of long-term debt, including reacquisition cost . (75,126) (29,156)
Reacquisition of preferred shares .......................... (3) (3)
Net decrease in notes payable .............................. (7,398) (121,675)
--------- ---------
Net cash used .......................................... (112,365) (185,108)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....... 20,332 (61,295)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........... 9,318 84,215
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................. $ 29,650 $ 22,920
========= =========
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized .................. $ 27,303 $ 30,448
========= =========
Income taxes paid .......................................... $ 84 $ 13,218
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-14-
<PAGE>
MIDAMERICAN ENERGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A) GENERAL:
The consolidated financial statements included herein have been prepared by
MidAmerican, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of MidAmerican, all adjustments have been made to
present fairly the financial position, the results of operations and the changes
in cash flows for the periods presented. Although MidAmerican believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in
MidAmerican's latest Annual Report on Form 10-K.
B) ENVIRONMENTAL MATTERS:
Refer to Note B of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's environmental matters.
C) RATE MATTERS:
Refer to Note C of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's rate matters.
D) ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION:
Refer to Note D of Holdings' Notes to Consolidated Financial Statements for
information regarding MidAmerican's accounting for the effects of certain types
of regulation.
E) MIDAMERICAN-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES:
Refer to Note E of Holdings' Notes to Consolidated Financial Statements for
information regarding the MidAmerican-Obligated Mandatorily Redeemable Preferred
Securities.
F) STATEMENT OF COMPREHENSIVE INCOME:
MidAmerican did not have other comprehensive income for the periods
presented, and accordingly, a statement of comprehensive income has been
omitted. MidAmerican's total comprehensive income is equal to its earnings on
common stock for each period presented.
-15-
<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 is a public utility with electric and natural gas operations
and is the principal subsidiary of Holdings. MidAmerican Capital, Midwest
Capital and MidAmerican Realty Services Company (MidAmerican Realty) are
Holdings' nonregulated subsidiaries. MidAmerican Capital manages marketable
securities and passive investment activities, nonregulated wholesale and retail
natural gas businesses, security services and other energy-related, nonregulated
activities. Midwest Capital functions as a regional business development company
in MidAmerican's utility service territory. MidAmerican Realty was recently
established and will include the Company's real estate operations.
On April 6, 1998, the Company announced its intent to purchase AmerUs Home
Services Inc. (Home Services). Home Services includes real estate operations in
five states: Iowa Realty, the state's largest, and First Realty/Better Homes and
Gardens in Iowa; Edina Realty in Minnesota, North Dakota and Wisconsin; and
Carol Jones, Realtors, in Missouri. It has more than 800 employees and 3,400
sales agents and is the nation's third largest real estate brokerage
organization based on over 46,000 residential buyer/seller transactions in 1997.
In addition to residential brokerage, Home Services offers relocation, title and
abstract services. The Company expects the transaction to be completed in the
second quarter of 1998.
DESCRIPTION OF FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS
The consolidated financial statements of MidAmerican present amounts
related to MidAmerican Capital and Midwest Capital as discontinued operations
for all periods that include months prior to December 1, 1996, in order to
reflect their transfer to Holdings in December 1996.
Management's Discussion and Analysis (MD&A) 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.
-16-
<PAGE>
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, fuel prices, competitive factors,
general economic conditions in the Company's service territory, interest rates,
inflation and federal and state regulatory actions.
RESULTS OF OPERATIONS
---------------------
Holdings:
- - ---------
The following tables provide a summary of the earnings contributions of
the Company's operations for each of the periods presented:
Periods Ended March 31
-----------------------------------
Three Months Twelve Months
---------------- ---------------
1998 1997 1998 1997
------ ------ ------ ------
Net Income (in millions)
Continuing operations
Utility $ 31.9 $ 32.4 $118.9 $142.2
Nonregulated operations 6.8 1.7 25.0 (12.7)
Discontinued operations - (0.2) (4.0) (15.6)
------ ------ ------ ------
Consolidated earnings $ 38.7 $ 33.9 $139.9 $113.9
====== ====== ====== ======
Earnings Per Common Share -
Basic and Diluted
Continuing operations
Utility $ 0.34 $ 0.32 $ 1.23 $ 1.41
Nonregulated operations 0.07 0.02 0.26 (0.12)
Discontinued operations - - (0.04) (0.16)
------ ------ ------ ------
Consolidated earnings $ 0.41 $ 0.34 $ 1.45 $ 1.13
====== ====== ====== ======
-17-
<PAGE>
MidAmerican:
- - ------------
The following table provides a summary of the earnings contributions of
MidAmerican's operations for each of the periods presented:
Periods Ended March 31
--------------------------------
Three Months Twelve Months
-------------- ---------------
1998 1997 1998 1997
------ ------ ------ ------
(in millions)
Earnings on Common Stock
Continuing operations $ 31.9 $ 32.4 $118.9 $142.2
Discontinued operations* - - - (16.2)
------ ------ ------ ------
Consolidated earnings $ 31.9 $ 32.4 $118.9 $126.0
====== ====== ====== ======
* Twelve months ended March 31, 1997, includes the loss of MidAmerican
Capital and Midwest Capital prior to their transfer to Holdings on December 1,
1996.
EARNINGS DISCUSSION
Earnings per share for the first quarter of 1998 increased 7 cents compared
to the first quarter of 1997. For the twelve months ended period comparison,
earnings per share increased 32 cents in the 1998 period. Some of the
significant factors resulting in the variances are listed below, on a Holdings
per-share basis. The per-share amounts are comparative amounts; therefore, a
factor that had a negative impact on earnings in both periods, but which had
less of a negative impact in the 1998 period than in the 1997 period, would be
displayed as a positive factor for comparison purposes. The discussion that
follows addresses these factors as well as other items affecting the Company's
results of operations.
For purposes of this list, the amortization of deferred energy efficiency
costs, ongoing energy efficiency costs and costs recovered through a mechanism
(Cooper Tracker) to recover capital improvements costs at the Cooper Nuclear
Station, (all of which are included in Other Operating Expenses on the income
statement), have been netted against their recovery in revenues for portraying
the impact on earnings from variances in gross margin and operating expenses.
-18-
<PAGE>
Three Months Ended Twelve Months Ended
March 31, March 31,
1998 vs 1997 1998 vs 1997
------------------ -------------------
MidAmerican
Net reduction in electric and
gas gross margin due to -
Variation in the effect of
weather $(0.08) $(0.06)
Customer growth 0.02 0.08
Electric retail rate changes - (0.04)
Improvements due to other
factors 0.08 0.15
Nuclear O&M expenses 0.03 0.01
1996 inventory adjustment - (0.04)
Other O&M expenses (0.04) (0.36)
1996 merger proposal costs - 0.05
Nonregulated subsidiaries
Write-downs of certain assets - 0.07
Realized gain on sale of McLeodUSA
Incorporated common stock - 0.05
Gains on sales of certain assets 0.03 0.09
Income from a venture capital
investment 0.01 0.01
Reduction of interest on long-term
debt - 0.06
Discontinued operations - 0.12
The Company continued its strategic realignment of utility and nonregulated
operations which began in 1996. Earnings of nonregulated subsidiaries have been
significantly affected by the realignment. During 1997 and the first quarter of
1998, the Company divested a number of its interests in nonregulated assets
which did not align with the corporate vision of becoming the leading regional
provider of energy and complementary services. Earnings for the twelve months
ended March 31, 1998, include 6 cents per share from the sale of assets of
railcar leasing and repair businesses in the fourth quarter of 1997. First
quarter 1998 earnings reflect 3 cents per share for the sale of the Company's
interest in a financial management company and the liquidation of a partnership
that owned commercial office buildings. Losses from discontinued operations
reduced earnings in each twelve-month period shown above, though to a lesser
degree in the 1997 period. Cash proceeds from the sale of discontinued
operations in early 1997 allowed the Company to pay off long-term debt,
significantly reducing its interest expense compared to the twelve months ended
March 31, 1997.
In December 1997, the Company sold a portion of its investment in the
common stock of McLeodUSA Incorporated (McLeodUSA). Earnings for the twelve
months ended March 31, 1998, reflect the related gain of 5 cents per share.
Although utility earnings for the current twelve-month period were lower
than in the prior year, a reduction was anticipated because of the electric
pricing settlements achieved in 1996 and 1997 in Iowa and Illinois.
Additionally, utility operating expenses increased as the Company continued its
strategic realignment which included strengthening its marketing and customer
service capabilities and adding to its information technology resources.
-19-
<PAGE>
The Company's evaluation of its nonregulated investments has resulted in
write-downs of certain assets, primarily investments in alternative energy
projects, in the past two years. The write-downs, which reflect declines in the
value of those nonregulated investments, reduced earnings by approximately $2.0
million, or 2 cents per share, and $9.4 million, or 9 cents per share, in the
twelve months ended March 31, 1998 and 1997, respectively.
Discontinued Operations -
Holdings:
- - ---------
During 1996, the Company discontinued some of its nonregulated operations.
The income or loss from those operations and the losses on disposal are
reflected as discontinued operations in each of the periods presented in the
Consolidated Statements of Income. 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)
signed a definitive agreement to sell a portion of the Company's nonregulated
operations to KCS for $210 million in cash plus 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 twelve months ended
March 31, 1997, reflects a $7.6 million after-tax loss for the transaction. An
additional $0.4 million after-tax loss is included in the twelve months ended
March 31, 1998.
In October 1997, the Company also divested a subsidiary that developed and
operated a computerized information system which facilitated real-time exchange
of power in the electric industry. The Company recorded a $4.0 million
anticipated after-tax loss on disposal of those operations in September 1996 and
an additional $3.2 million after-tax loss on disposal in September 1997.
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 includes the net earnings/loss of MidAmerican Capital and Midwest
Capital for periods prior to their December 1, 1996, transfer to Holdings.
-20-
<PAGE>
UTILITY GROSS MARGIN
Electric Gross Margin:
----------------------
Periods Ended March 31
-----------------------------------
Three Months Twelve Months
------------- -----------------
1998 1997 1998 1997
---- ---- ------ ------
(In millions)
Operating revenues $256 $254 $1,128 $1,091
Cost of fuel, energy and capacity 45 59 222 232
---- ---- ------ ------
Electric gross margin $211 $195 $ 906 $ 859
==== ==== ====== ======
A variety of factors contributed to the increase in MidAmerican's electric
gross margin for the 1998 periods shown above compared to the 1997 periods.
Although mild temperatures had a negative impact on the 1998 quarter compared to
the 1997 quarter, the impact was more than offset by other factors. Temperatures
had a small positive impact on the twelve-month comparison. An increase in
electric retail sales volumes that are not dependent on weather, customer
growth, additional recovery of energy efficiency costs and the elimination of
Iowa's energy adjustment clause (EAC) all contributed to the improvement in
gross margin for the quarter and the twelve-month period. Electric service rate
reductions also reduced gross margin for the twelve months ended March 31, 1998,
relative to the 1997 period.
The increase in recovery of electric energy efficiency costs in Iowa
accounted for more than half of the increase in electric margin for the quarter
comparison. On September 29, 1997, MidAmerican began collection of its remaining
deferred energy efficiency costs and current, ongoing energy efficiency costs.
Including an allowed return on the deferred costs, the annual increase in
electric revenues is $36.1 million. The effect on earnings of this increase in
revenues and gross margin is partially offset by a corresponding increase in
other operating expenses of $31.1 million annually for currently incurred
electric energy efficiency costs and amortization of previously incurred costs.
Although temperatures were milder than normal in both of the three-month
periods above, comparatively, gross margin for the first quarter 1998 was
reduced $5 million more from the effect of temperatures than gross margin for
the first quarter 1997. When compared to normal, the impact of temperatures
resulted in an $8 million reduction in electric gross margin in the first
quarter of 1998 compared to a $3 million reduction in the margin for the first
quarter of 1997. A moderate but steady growth in the number of customers and an
increase in sales that are not dependent on weather offset a portion of the
decrease due to milder temperatures. In total, retail sales of electricity for
the first quarter of 1998 were unchanged from the level in the first quarter of
1997.
Revenues from sales of electricity to other utilities decreased $7.5
million for the 1998 quarter compared to the first quarter of 1997 due to a 24%
decrease in sales volumes.
Prior to July 11, 1997, MidAmerican was allowed to recover its energy costs
from most of its electric utility customers through EACs included in revenues.
Effective July 11, 1997, the EAC was eliminated for Iowa customers as part of a
new Iowa pricing plan. Previously, variations in revenues collected through the
EACs did not affect gross margin or net income due to corresponding changes in
energy costs. With the elimination of the Iowa EAC, fluctuations in energy costs
now have an impact on gross margin and net income.
-21-
<PAGE>
Energy costs per unit in the first quarter of 1998 were below the per-unit
amount recovered in rates under the new Iowa pricing plan and resulted in an
increase to gross margin compared to the first quarter of 1997.
For the twelve months ended March 31 comparison, temperatures reduced
revenues and gross margin less in the 1998 period than in the 1997 period. When
compared to normal, the impact of temperatures resulted in an $18 million
reduction in electric gross margin in the 1998 twelve-month period compared to a
$20 million reduction in the gross margin for the twelve months ended March 31,
1997. As with the quarter comparison, a moderate but steady growth in the number
of customers and an increase in sales that are not dependent on weather
contributed to the increase in revenues and margin. Electric retail sales
increased 2.3% for the 1998 twelve month period compared to the twelve months
ended March 31, 1997.
Increased recovery of electric energy efficiency costs and the Cooper
Tracker accounted for approximately one half of the increase. Energy costs per
unit in the twelve months ended March 31, 1998 were below the per-unit amount
recovered in rates under the new Iowa pricing plan and resulted in an increase
to gross margin.
In October 1996, the Illinois Commerce Commission (ICC) ordered MidAmerican
to reduce electric retail rates for its Illinois customers by 10%, or $13.1
million in annual revenues, effective November 3, 1996. A 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
effective on June 1, 1997. In Iowa, MidAmerican reduced its electric retail
rates by $8.7 million effective November 1, 1996. The reduction lowered rates to
levels proposed by MidAmerican in its pricing plan filed in June 1996. With
implementation of the approved settlement in July 1997, rates for Iowa
residential customers were reduced an additional $10.0 million annually. Net of
the effect of the Cooper Tracker, rate reductions reduced electric gross margin
by $12.2 million compared to the twelve months ended March 31, 1997. Refer to
"Rate Matters" in Liquidity and Capital Resources later in this discussion for
further information regarding the Iowa proceeding.
Gas Gross Margin:
-----------------
Periods Ended March 31
--------------------------------
Three Months Twelve Months
-------------- --------------
1998 1997 1998 1997
----- ----- ----- -----
(In millions)
Operating revenues $ 173 $ 212 $ 498 $ 552
Cost of gas sold 105 142 310 364
----- ------ ----- -----
Gas gross margin $ 68 $ 70 $ 188 $ 188
===== ====== ===== =====
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.
Temperatures in the first quarter of 1998 were 15% warmer than normal,
resulting in an $8 million decrease in gas gross margin for the period, while
temperatures in the first quarter of 1997 were close to normal, with little
effect on margin. Although moderate customer growth helped to offset some of the
effect of milder temperatures, total retail sales of natural gas decreased 12.6%
compared to the first quarter of 1997.
-22-
<PAGE>
Increased recovery of gas energy efficiency costs resulted in a $3 million
positive impact on the comparison of gross margin for the quarters. As discussed
in the electric margin discussion, on September 29, 1997, MidAmerican began
recovery of its energy efficiency costs which had not previously been approved
for recovery. Including an allowed return on deferred costs, the annual increase
in gas revenues is $12.8 million. The effect on earnings of this increase in
revenues and gross margin is partially offset by a corresponding increase in
other operating expenses of approximately $11.1 million annually for deferred
and ongoing gas energy efficiency costs.
The average cost of gas per unit decreased in the 1998 compared to the 1997
quarter and is reflected in revenues and cost of gas sold.
Mild temperatures resulted in an $11 million decrease in gas gross margin
for the twelve months ended March 31, 1998, compared to the twelve months ended
March 31, 1997. When compared to normal, the impact of temperatures resulted in
a $7 million reduction in gas gross margin in the 1998 twelve-month period
compared to a $4 million increase in gas gross margin for the twelve months
ended March 31, 1997.
The increase in recovery of gas energy efficiency costs recovered most of
the loss in margin resulting from milder temperatures. Moderate customer growth
also contributed to gross margin in the 1998 period.
UTILITY OPERATING EXPENSES
Utility other operating expenses increased $13.2 million for the first
quarter of 1998 compared to the first quarter of 1997 and $86.8 million for the
comparable twelve-month periods ended March 31, 1998 and 1997.
As mentioned in the gross margin discussions, on September 29, 1997,
MidAmerican began additional recovery of deferred energy efficiency costs and
current recovery of ongoing costs. As the deferred costs are recovered, they are
amortized to expense. Ongoing energy efficiency costs, which historically were
deferred until future periods, are now charged to expense. The increase in
energy efficiency costs accounted for $10.8 million of the increase in other
operating expenses for the 1998 quarter and $22.4 million of the increase for
the twelve-month comparison.
In addition to the energy efficiency expense increase, operating expenses
related to Cooper increased due to the ratemaking treatment for Cooper capital
improvements. As a result of 1996 and 1997 rate settlements, Cooper capital
improvements are now expensed when incurred, instead of being capitalized. As
mentioned previously in the Electric Gross Margin section, MidAmerican is
recovering on a current basis the Iowa portion of these costs from its Iowa
electric customers. Recovery in Illinois is included in base rates. This change
accounted for increases of $1.3 million and $5.5 million for the three-month and
twelve-month comparisons, respectively. An additional increase of $4.9 million
in other Cooper costs also contributed to the twelve-month increase.
Continued restructuring of the Company in preparation for a competitive
industry has required additional expenses. MidAmerican has increased its
emphasis on marketing-related efforts, as well as customer service operations,
resulting in increases in consulting costs, advertising, employee incentive
compensation and other related expenses. Increases in such expenses accounted
for more than $30 million of the increase in other operating expenses for the
twelve months ended March 31, 1998. In addition, the 1998 twelve-month period
reflects increases in certain employee benefits expenses, customer assistance
and energy
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efficiency administrative costs, manufactured gas plant site clean-up costs,
transmission wheeling expense due in part to changes required by FERC Order Nos.
888 and 889, and other general operations costs.
A decrease in maintenance costs at the Quad Cities Station was the reason
for the decrease in total maintenance expenses for the current quarter compared
to the first quarter of 1997. The decrease was due mostly to higher costs in the
1997 quarter for activities at the plant at that time.
Maintenance expenses for the twelve months ended March 31, 1998, were $3.3
million greater than in the comparable 1997 period. The main cause of the
increase was an adjustment in the fourth quarter of 1996 to align power plant
inventory accounting of predecessor companies. That adjustment reduced expenses
by $6.2 million for the twelve-month period ended March 31, 1997. In addition,
the Company incurred $2.0 million in maintenance expenses for restoration
following a snow storm in October 1997. Maintenance expenses at the Quad Cities
Station decreased $7.0 million in the twelve-month period ended March 31, 1998,
compared to the twelve months ended March 31, 1997. Refer to the discussion of
Quad Cities Nuclear Station in the Liquidity and Capital Resources section of
MD&A for information regarding the status of the plant.
Property taxes increased for the twelve months ended March 31, 1998,
relative to the comparable 1997 period due primarily to an increase in the
assessed value for Iowa property taxes.
NONREGULATED OPERATING REVENUES AND OPERATING EXPENSES
Holdings:
- - ---------
Revenues of MidAmerican Capital and Midwest Capital decreased a total of
$72.3 million and $114.4 million for the three-month and twelve-month periods
ended March 31, 1998, compared to their respective 1997 periods. Revenues from
the natural gas marketing subsidiaries decreased $69.0 million and $109.5
million, respectively, for the 1998 three-month and twelve-month periods.
Related sales volumes decreased 18 million MMBtu's (51%) and 41 million MMBtu's
(39%) compared to the sales volumes in the 1997 periods. The decrease in sales
volumes is due to the expiration of contracts which have not been replaced. A
decrease in the average price per unit, reflective of a decrease in the cost of
gas sold, also reduced revenues for the natural gas marketing subsidiaries.
Cost of sales includes expenses directly related to sales of natural gas.
The decrease in cost of sales for the first quarter of 1998 reflects a 29%
decrease in the average cost of gas per unit. Total gross margin (total price
less cost of gas) on nonregulated natural gas sales was unchanged for the
quarter and increased $2.5 million for the 1998 twelve-month period compared to
the 1997 twelve-month period.
NON-OPERATING INCOME AND INTEREST EXPENSE
MidAmerican:
- - ------------
Interest and Dividend Income -
Interest income increased in each 1998 comparative period due to an
increase in temporary cash investments.
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Other, Net -
Other, net for the first quarter of 1998 includes a deduction of $2.2
million for discounts on receivables sold. Refer to the Financing Activities
section of Liquidity and Capital Resources later in MD&A for a discussion of the
receivables sale in 1997. Other, Net for the first quarter of 1997 reflects
income of $2.0 million for recognition of deferred income from energy efficiency
programs and a reduction for a $0.9 million loss on reacquired long-term debt.
In addition to the items discussed above, Other, Net for the twelve months
ended March 31, 1998 and 1997, includes the items discussed in the following
paragraphs.
In September 1997, MidAmerican received a $15 million cash payment from
Nebraska Public Power District (NPPD) as settlement for a lawsuit filed by
MidAmerican against NPPD. Approximately $12 million was refunded to
MidAmerican's customers. The remaining amount was retained by MidAmerican for
recovery of litigation costs in the lawsuit. Other, Net for the 1998
twelve-month period reflects $2.2 million of pre-tax income for recovery of
litigation costs incurred in pre-1997 years.
MidAmerican was awarded $4.9 million of pre-tax income in the twelve months
ended March 31, 1998, for performance under its incentive gas procurement
program during the May 1996 to April 1997 period. In the comparable 1997
twelve-month period, MidAmerican recorded an award of $2.7 million of pre-tax
income as a result of successful performance under its incentive gas procurement
program during the 1995- 1996 heating season.
Other, Net for the 1997 twelve-month period includes approximately $8.7
million of expenses for costs incurred by MidAmerican for its merger proposal to
IES Industries Inc. in 1996.
In the fourth quarter of 1996, MidAmerican recorded an initial pre-tax gain
of $3.2 million on its sale of certain storage gas supplies which is reflected
in the twelve months ended March 31, 1997. MidAmerican recorded an additional
$0.8 million gain in the second quarter of 1997, which is reflected in the
twelve months ended March 31, 1998, after receiving favorable treatment on the
transaction from the Iowa Utilities Board (IUB).
The twelve months ended March 31, 1997, also includes $2.2 million of
income from reversal of a reserve after successful resolution of a dispute with
a vendor.
Recognition of deferred income from energy efficiency programs totaled $3.1
million in the 1998 twelve-month period compared to $4.6 million for 1997
period.
Fixed Charges -
Interest on long-term debt decreased due to long-term debt reduction and
refinancing activities in 1996 and 1997. Other interest expense increased for
the quarter comparison due to an increase in the average amount of commercial
paper outstanding. For the twelve months ended comparison, the increase in the
1998 period is due primarily to interest expense related to IRS settlements in
1997.
Preferred securities of subsidiary trust were issued in December 1996
resulting in the twelve months ended March 31, 1997, including only a partial
year of dividends. MidAmerican preferred shares were reacquired at the same
time, resulting in a decrease in preferred dividends deducted after net income.
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Holdings:
- - ---------
Dividend Income -
Dividend income decreased for the three months and twelve months ended
March 31, 1998, compared to the respective 1997 periods due to MidAmerican
Capital's reduced holdings of preferred stock portfolios, a portion of which
MidAmerican Capital liquidated in 1996.
Realized Gains and Losses on Securities, Net -
Net realized gains on securities for twelve months ended March 31, 1998,
includes an $8.0 million pre-tax gain on the sale of shares of McLeodUSA common
stock.
Other, Net -
Other, Net for the first quarter of 1998 includes $4.7 million from the
divestment of nonregulated assets, including the sale of the Company's interest
in a financial management company, the sale of a commercial office building and
liquidation of a partnership interest concurrent with the sale of its commercial
property. In addition, the Company recorded $2.1 million of income from an
equity investment in a venture capital fund.
In addition to the above items, the twelve months ended March 31 periods
were also affected by the factors discussed in the next paragraph.
During the twelve months ended March 31, 1998, the Company sold all of the
assets of its railcar repair services subsidiary and most of the assets of its
railcar leasing subsidiary and recorded pre-tax gains totaling $10.0 million.
Write-downs of nonregulated investments, as discussed in the Earnings Discussion
section at the beginning of Results of Operations, decreased Other, Net by $3.4
million and $15.6 million for the 1998 and 1997 twelve months ended March 31,
respectively. Excluding the investment mentioned above, income from equity
investments decreased for the 1998 twelve-month period due to the liquidation of
such investments during 1996 and early 1997.
Interest Charges -
MidAmerican Capital's interest on long-term debt decreased significantly
for the twelve-month comparison due to the reduction of its long-term debt in
early 1997.
INCOME TAXES
Holdings:
- - ---------
During the second quarter of 1997, the Company contributed part of an
appreciated common stock investment to its tax exempt foundation and realized
$2.9 million of tax benefit.
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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.
As of March 31, 1998, common equity represented 52.5% of the Company's
total capitalization compared to 51.7% and 48.5% as of December 31, 1997, and
March 31, 1997, respectively. Several factors other than earnings, dividends and
scheduled maturities of debt affected the change. Recording accumulated
comprehensive income for an investment in McLeodUSA to reflect its market value,
and repurchases and retirement of debt prior to its scheduled maturity were
major contributors to the move to a higher percentage of common equity since
March 31, 1997. The Company's common stock repurchase program has reduced common
equity during that period.
MidAmerican's common equity as of March 31, 1998, represented 47.3% of its
capitalization compared to 45.9% as of March 31, 1997. A reduction of long-term
debt was the primary cause of the change.
As reflected on the Consolidated Statements of Cash Flows, Holdings had net
cash provided from operating activities of $181 million for the first quarter of
1998 compared to $223 million for the same period in 1997. The decrease in cash
from operating activities for the 1998 quarter is due to changes in the working
capital of nonregulated subsidiaries. MidAmerican's net cash provided from
operating activities was $179 million for the first quarter of 1998 and $158
million for the first quarter of 1997.
INVESTING ACTIVITIES AND PLANS
MidAmerican:
- - ------------
Utility Construction Expenditures -
MidAmerican's primary need for capital is utility construction
expenditures. For the first three months of 1998, utility construction
expenditures totaled $25 million, including allowance for funds used during
construction (AFUDC) and Quad Cities Station nuclear fuel purchases. In
addition, MidAmerican's nonregulated railway subsidiary had $20 million of
construction expenditures in the same period. All such expenditures were met
with cash generated from utility operations, net of dividends.
Beginning with July 1997 expenditures, advances for Cooper capital
improvements are no longer included in utility construction expenditures but are
expensed when incurred in Other Operating Expenses. Previously, these expenses
were capitalized in accordance with then applicable rate regulation. As part of
the 1997 settlement of MidAmerican's electric pricing proposal, MidAmerican is
recovering on a current basis the Iowa portion of expenses for Cooper capital
improvements advances from its Iowa electric customers through a tracking
mechanism.
Forecasted utility construction expenditures for 1998 are $201 million
including AFUDC. Capital expenditure needs are reviewed regularly by
MidAmerican's management and may change significantly as a result of such
reviews. MidAmerican presently expects that all utility construction
expenditures for the next five years will be met with cash generated from
utility operations, net of dividends. The actual level of cash generated from
utility operations is affected by, among other things, economic conditions in
the utility service territory, weather and federal and state regulatory actions.
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Deferred Energy Efficiency Expenditures -
The Company stopped reflecting costs of its energy efficiency programs as
an investing activity on its Consolidated Statement of Cash Flows following the
IUB's approval in September 1997 of current recovery of ongoing energy
efficiency program costs. Under prior energy efficiency regulations, program
costs were deferred for several years prior to beginning their recovery over a
four-year period, and accordingly, the Company reflected them as an investing
activity.
Nuclear Decommissioning -
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 $51 million during the period 1998 through 2002 to an
external trust established for the investment of funds for decommissioning the
Quad Cities Station. Historically, the funds were invested in investment grade
municipal and U.S. Treasury bonds; however, in 1997 MidAmerican directed the
trust to begin investing a portion of the funds in domestic corporate debt and
common equity securities. Approximately 45% of the trust's funds are now
invested in domestic corporate debt and common equity securities.
In addition, MidAmerican makes payments to NPPD related to decommissioning
Cooper. These payments are reflected in Other Operating Expenses in the
Consolidated Statements of Income. NPPD estimates call for MidAmerican to pay
approximately $57 million to NPPD for Cooper decommissioning during the period
1998 through 2002. 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. In July 1997, NPPD filed a lawsuit in United States District Court for the
District of Nebraska naming MidAmerican as the defendant and seeking a
declaration of MidAmerican's rights and obligations in connection with Cooper
nuclear decommissioning funding.
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 recovery of increases in those amounts must be
sought through the normal ratemaking process.
Holdings:
- - ---------
Nonregulated Capital Expenditures -
Capital expenditures of MidAmerican Capital and Midwest Capital totaled $1
million for the first quarter of 1998. Capital expenditures of these
subsidiaries depend primarily upon the availability of suitable investment
opportunities which meet the Company's objectives. The Company continues to
evaluate nonregulated investments and may redeploy certain assets in the future.
External financing may also be used to provide for nonregulated capital
expenditures.
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<PAGE>
Investments -
MidAmerican Capital invests in a variety of marketable securities which it
holds for indefinite periods of time. 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.
Included in investments on the Consolidated Balance Sheets is the Company's
investment in common stock of McLeodUSA. McLeodUSA common stock has been
publicly traded since June 14, 1996. Investor agreements related to McLeodUSA's
initial public offering and subsequent merger with Consolidated Communications
Inc. prohibit the Company from selling or otherwise disposing of any of the
common stock of McLeodUSA prior to September 24, 1998, without the approval of
McLeodUSA's board of directors. As a result of the agreements, the Company's
investment was considered restricted stock and, as such, was recorded at cost in
all periods prior to September 1997. Beginning in September 1997, the investment
is no longer considered restricted for accounting purposes and is recorded at
fair value. As of March 31, 1998, the cost and fair value of the McLeodUSA
investment were $45.2 million and $340.5 million, respectively. The unrealized
gain is recorded, net of income taxes, as accumulated comprehensive income in
common shareholders' equity. As of March 31, 1998, the unrealized gain and
deferred income taxes for this investment were $295.3 million and $103.4
million, respectively.
MidAmerican Capital received approximately $302 million in cash during 1997
from sales of investments primarily as part of its efforts to align them with
the Company's strategy. A portion of the proceeds from these sales was used for
retirement of $174 million of MidAmerican Capital long-term debt in the first
quarter of 1997 and for dividends to Holdings for use in the repurchase of the
Company's common stock.
FINANCING ACTIVITIES, PLANS AND AVAILABILITY
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 March 31, 1998, 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 $95.3 million at March 31, 1998, 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.
In 1997, MidAmerican entered into a revolving agreement, which expires in
2002, to sell all of its right, title and interest in the majority of its billed
accounts receivable to MidAmerican Energy Funding Corporation (Funding Corp.), a
special purpose entity established to purchase accounts receivable from
MidAmerican. Funding Corp. in turn sold receivable interests to outside
investors. In consideration for the sale, MidAmerican received $70 million in
cash and the remaining balance in the form of a subordinated note from Funding
Corp. The agreement is structured as a true sale, as determined by SFAS 125,
under which the creditors of Funding Corp. will be entitled to be satisfied out
of the assets of Funding Corp. prior to any value being returned to MidAmerican
or its creditors. Therefore, the accounts receivable sold are not reflected on
Holdings' or MidAmerican's Consolidated Balance Sheets. As of March 31, 1998,
$135.6 million, net of reserves, was sold under the agreement.
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<PAGE>
As of March 31, 1998, MidAmerican had $326 million of long-term debt
maturities and sinking fund requirements for 1998 through 2002.
MidAmerican currently has regulatory authority to issue an additional $300
million of preferred securities and long-term debt, including issues under 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.
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 April 30, 1998, 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 judgment of the rating agency
circumstances so warrant. Such ratings are not a recommendation to buy, sell or
hold securities.
Moody's
Investors Standard
Service & Poor's
--------- --------
Mortgage Bonds A2 AA-
Unsecured Medium-Term Notes A3 A
Preferred Stocks a3 A
Commercial Paper P-1 A-1
Preferred Dividends -
Preferred dividends include net gains or losses on the reacquisition of
MidAmerican preferred shares. Net losses on reacquisitions totaled $1.4 million
and $2.8 million for the three-month and twelve-month periods ended March 31,
1997, respectively.
Holdings:
- - ---------
As of March 31, 1998, Holdings had lines of credit totaling $120 million
available to provide for short-term financing needs.
In addition, Holdings has the necessary authority to issue shares of its
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.
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<PAGE>
In March 1997, Holdings announced its plan to repurchase up to $200 million
of the Company's common stock. The Company plans to purchase the shares from
time to time as market conditions warrant, with the intent of completing the
entire repurchase program by December 31, 1998. As of March 31, 1998 the Company
had repurchased approximately 5.7 million shares for $104.1 million. The Company
believes repurchasing Holding's common stock is the best investment of Company
funds at this time. Repurchasing the common stock will reduce total common
dividend requirements and aid in improving the Company's dividend payout ratio.
In addition, a subsidiary of the Company holds approximately 437,000 shares of
Holdings common stock which are also excluded from shares outstanding.
On April 29, 1998, Holdings' board of directors declared a quarterly
dividend on common shares of $0.30 per share payable June 1, 1998. The dividend
represents an annual rate of $1.20 per share.
Nonregulated Subsidiaries -
As of March 31, 1998, MidAmerican Capital had unsecured revolving credit
facilities in the amount of $114 million with $3.2 million outstanding under
these facilities. MidAmerican Capital has $118 million of long-term debt
maturities and sinking fund requirements for 1998 through 2002 related to debt
outstanding at March 31, 1998.
Midwest Capital currently has a $25 million line of credit with
MidAmerican, of which $5 million was outstanding at March 31, 1998.
OPERATING ACTIVITIES AND OTHER MATTERS
Throughout the country, the utility industry continues to move towards a
competitive environment. Although the extent of deregulation varies between
states, increased competition is becoming a reality in virtually every region of
the country. Numerous states have passed restructuring legislation, some of
which initiated a phase-in of customer choice in 1998. Legislators and
regulators in many other states are addressing the issue.
As part of many restructuring legislation packages, electric utilities are
required to unbundle traditional services previously provided as a "packaged
product" under their rate tariffs. Unbundling allows customers to choose their
energy supplier and the level of energy delivery and retail services they
desire. Gas utilities are also experiencing separation of the merchant and
delivery functions for all classes of customers.
The generation segment of the electric industry will be significantly
impacted by competition. The introduction of competition in the wholesale market
has resulted in a proliferation of power marketers and a substantial increase in
market activity. As retail competition evolves, margins will be pressured by
competition from other utilities, power marketers, and self-generation.
MidAmerican has been active in promoting and monitoring legislative and
regulatory changes that affect the jurisdictions in which it operates. In order
to successfully compete in the new environment, the Company believes it must
become the leading regional provider of energy and complementary services. The
Company is evaluating all aspects of its business to determine what adjustments
are necessary to align them with this strategy. Aligning nonregulated businesses
with the Company's strategy has resulted, and may continue to result in the next
year, in negative impacts on Holdings' earnings in the form of write-downs for
the sale, revaluation or discontinuance of nonregulated operations and
investments. (Refer to the Results of
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Operations section of MD&A for comments on the earnings impact of such actions.)
The following discussion further addresses changes affecting the industry and
actions the Company is taking to implement its strategy.
Competition -
MidAmerican is subject to regulation by several utility regulatory agencies
which significantly influences the operating environment and the recoverability
of costs from utility customers. That regulatory environment has, in general,
given MidAmerican an exclusive right to serve customers within its service
territory and, in turn, the obligation to provide electric service to those
customers.
Although the anticipated changes in the electric utility industry may
create opportunities, they will also create additional challenges and risks for
utilities. Competition will put pressure on margins for traditional electric
services. In order to lessen the impact of reduced margins, MidAmerican will
continue to focus on controlling the cost of traditional services. As part of an
electric pricing settlement approved by the IUB in 1997, MidAmerican reduced its
prices for most of its Iowa electric retail customers. In the IUB order
approving the settlement, MidAmerican was also authorized to enter into
long-term contracts with industrial and commercial electric customers. Refer to
"Rate Matters" later in this discussion for further information. In addition,
MidAmerican is positioning itself to offer complementary products and services
as expected opportunities become available in a competitive utility retail
market. Additional products and services may provide avenues to replace margins
lost on traditional electric services.
As discussed in the Introduction section of MD&A, the Company is in the
process of purchasing a real estate brokerage organization. The Company
anticipates benefits to its utility operations from the additional contact with
customers and potential customers at times when the Company can meet a variety
of their needs.
In December 1997, an Iowa industrial customer located within MidAmerican's
IUB-approved exclusive electric service territory, filed a lawsuit against
Holdings and MidAmerican in the United States District Court for the Southern
District of Iowa alleging various violations of federal antitrust laws. The
lawsuit stems from a claim that because the customer is not free to choose its
retail energy supplier, MidAmerican is engaging in illegal monopolistic
behavior. In addition to damages, the customer is seeking the right to choose
its electric retail supplier. MidAmerican maintains that its provision of retail
electric service is in accordance with Iowa laws and regulations governing
electric service territories, and all other applicable legal requirements. A
ruling in favor of the plaintiff could have the effect of accelerating retail
competition in MidAmerican's Iowa service territory.
Legislative and Regulatory Evolution -
On December 16, 1997, the Governor of Illinois signed into law a bill to
restructure Illinois' electric utility industry and transition it to a
competitive market beginning October 1, 1999. MidAmerican is presently
participating in proceedings which detail the new competitive environment and
continues to evaluate the impact of the law on its operations.
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The law requires a 15% electric rate reduction for all Illinois residential
customers in 1998. To satisfy its obligation, the law specifically permitted
MidAmerican to receive credit for the $15.5 million, or approximately 13%, rate
reductions implemented in Illinois in 1996 and 1997. MidAmerican is also
exempted from the requirement to join an independent system operator (ISO) or to
form an in-state ISO.
In addition, the law provides for Illinois earnings above a certain level
of return on equity (ROE) to be shared equally between customers and MidAmerican
beginning in April 2000. The ROE level at which MidAmerican will be required to
share earnings is a multi-step calculation of average 30-year Treasury Bond
rates plus 5.50% for 1998 and 1999 and 6.50% for 2000 through 2004. If the
resulting average Treasury Bond rate approximated rates which existed in 1997,
the ROE level above which sharing must occur would be approximately 12%.
Beginning October 1, 1999, larger non-residential customers and 33% of the
remaining non-residential customers will be allowed to select their provider of
electric supply services. All other non-residential customers will have supplier
choice starting December 31, 2000. Residential customers all receive the
opportunity to select their electric supplier on May 1, 2002.
The law also addresses charges to customers for transition costs based on a
lost-revenue approach. These transition fees, designed to help utilities address
stranded costs, will end December 31, 2006, subject to possible extension.
MidAmerican's Iowa legislative priority for 1998 has been utility property
tax reform, a condition it considers precedent to utility industry
restructuring. A bill to replace the current utility property tax system, which
is supported by MidAmerican, was recently approved by the Iowa legislature and
signed into law by the Governor. The legislation becomes effective on
January 1, 1999.
Because energy costs are low in Iowa, industry restructuring has not been
an issue aggressively pursued in the state to date. During the 1998 Iowa
legislative session, a group of industrial customers introduced legislation to
allow retail service competition, but it did not develop further. With
resolution of the utility property tax issue, MidAmerican intends to pursue the
adoption of restructuring legislation in the 1999 Iowa legislative session.
In October 1997, the IUB adopted rules to encourage gas transportation
service for small volume customers starting in 1999. MidAmerican has until
November 15, 1998, to file its own plan to unbundle service for its small volume
customers. MidAmerican presently believes that these rules will not have a
material impact on its results of operations.
On May 4, 1998, MidAmerican filed a proposal with the IUB to allow at least
15,000 Iowa families and 2,000 small businesses to have the opportunity to
select among competing electricity providers. If approved, the two-year program
would allow participating retail customers in a selected test area to choose
among several electricity providers, including MidAmerican, and to have that
energy delivered by MidAmerican. MidAmerican would select a test market later
this year, and customers would begin choosing among electricity providers in
December 1998. Businesses in the test area would be eligible for the program if
their annual peak demand is less than four megawatts. New suppliers
participating in the program would have to be certified by the IUB and meet
specified requirements. Under the proposal, lost revenues during the program
would be recorded as a regulatory asset for future recovery.
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Accounting Effects of Industry Restructuring -
A possible consequence of competition in the utility industry is that
Statement of Financial Accounting Standards (SFAS) No. 71 may no longer apply.
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. A majority of MidAmerican's electric and gas utility operations
currently meet the criteria required by SFAS 71, but its applicability is
periodically reexamined. On December 16, 1997, MidAmerican's generation
operations serving Illinois were no longer subject to the provisions of SFAS 71
due to passage of restructuring legislation in Illinois. Thus, MidAmerican was
required to write off those amounts of regulatory assets and liabilities from
its balance sheet related to its Illinois generation operations. These
write-offs were not material. If other portions of its utility operations no
longer meet the criteria of SFAS 71, MidAmerican would be required to write off
the related regulatory assets and liabilities from its balance sheet and thus, a
material adjustment to earnings in that period could result. As of March 31,
1998, MidAmerican had $325 million of regulatory assets in its Consolidated
Balance Sheet.
Energy Efficiency -
MidAmerican's regulatory assets as of March 31, 1998, included $100.1
million of deferred energy efficiency costs. On September 29, 1997, MidAmerican
received approval from the IUB, effective immediately, to begin recovery of
deferred energy efficiency costs not previously approved for recovery. Based on
the current level of recovery, MidAmerican expects to recover approximately $35
million of the deferred energy efficiency costs in 1998. MidAmerican also
received approval to recover ongoing energy efficiency costs, which were
projected to be $18.5 million for the period May 1997 through April 1998. The
projected $18.5 million of ongoing costs, will be collected in the twelve-month
period ending in September 1998. Amortization of deferred energy efficiency
costs and current expenditures for energy efficiency costs will be reflected in
other operating expenses over the related periods of recovery.
Rate Matters -
As a result of a negotiated settlement in Illinois, MidAmerican reduced its
Illinois electric service rates by annual amounts of $13.1 million and $2.4
million, effective November 3, 1996, and June 1, 1997, respectively.
On June 27, 1997, the IUB approved a March 1997 settlement agreement
between MidAmerican, the OCA and other parties in a consolidated rate proceeding
involving MidAmerican's electric pricing proposal and a filing by the Iowa
Office of Consumer Advocate (OCA). The agreement includes a number of components
of MidAmerican's pricing proposal as follows:
* Prices for residential customers were reduced $8.5 million annually and
$10.0 million annually, effective November 1, 1996, and July 11, 1997,
respectively, and will be reduced an additional $5.0 million annually on June 1,
1998, for a total annual decrease of $23.5 million.
* Rates for commercial and industrial customers will 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 currently
scheduled to be effective June 1, 1998. MidAmerican has made significant
progress toward the $10 million reduction through long-term contracts with a
number of industrial and commercial customers.
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* A tracking mechanism to currently recover the cost of capital
improvements required by the Cooper Nuclear Station Power Purchase Contract
which will offset approximately $6 million of the rate reductions in 1998.
* Elimination of the Iowa energy adjustment clause (EAC). Prior to July 11,
1997, MidAmerican collected fuel costs from Iowa customers on a current basis
through the EAC, and thus, fuel costs had little impact on net income. Since
then, base rates for Iowa customers 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 are impacted. The fuel cost factor will be
reviewed in February 1999 and adjusted prospectively if actual 1998 fuel costs
vary 15% above or below the factor included in base rates.
* If MidAmerican's annual Iowa electric jurisdictional return on common
equity exceeds 12%, then an equal sharing between customers and shareholders of
earnings above the 12% level begins; if it exceeds 14%, then two-thirds of
MidAmerican's share of those earnings will 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%.
* MidAmerican will develop a pilot program for a market access service
which allows customers with at least 4 MW of load to choose energy suppliers.
The pilot program, which is subject to approval by the IUB and the Federal
Energy Regulatory Commission (FERC), is limited to 60 MW of participation the
first year and can be expanded by 15 MW annually until the conclusion of the
program. Any loss of revenues associated with the pilot program will be
considered part of the $10 million annual reduction for commercial and
industrial customers as described above, but may not be recovered from other
customer classes. The program was filed with the IUB and the FERC in September
1997. The Company anticipates that the necessary approvals will be received by
the fourth quarter of 1998.
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 26 properties which were, at one time, sites of
gas manufacturing plants in which it may be a potentially responsible party
(PRP). The purpose of these evaluations is to determine whether waste materials
are present, whether such materials constitute an environmental or health risk,
and whether the Company has any responsibility for remedial action. The
Company's present estimate of probable remediation costs for these sites is $21
million. This estimate has been recorded as a liability and a regulatory asset
for future recovery through the regulatory process. Refer to Note 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.
On July 18, 1997, the EPA adopted revisions to the National Ambient Air
Quality Standards for ozone and a new standard for fine particulate matter.
Based on data to be obtained from monitors located throughout
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the states, the EPA will make a determination of whether the states have any
areas that do not meet the air quality standards (i.e., areas that are
classified as nonattainment). If a state has area(s) classified as nonattainment
area(s), the state is required to submit a State Implementation Plan specifying
how it will reach attainment of the standards through emission reductions or
other means.
The impact of the new standards on MidAmerican will depend on the
attainment status of the areas surrounding MidAmerican's operations and
MidAmerican's relative contribution to the nonattainment status. If
MidAmerican's operations contribute to nonattainment and modifications to
MidAmerican's operations or facilities are necessary, the cost of making
emissions reductions to meet the air quality standards will be dependent upon
the level of emissions reductions required and the available technology.
MidAmerican will continue to evaluate the potential impact of the new
regulations.
Following recommendations provided by the Ozone Transport Assessment Group,
the EPA, in November 1997, issued a Notice of Proposed Rulemaking which
identified 22 states and the District of Columbia as making significant
contribution to nonattainment of NAAQS for ozone. Iowa is not subject to these
emissions reduction requirements as EPA's rule is currently drafted, and, as
such, MidAmerican does not anticipate that its facilities will be subject to
additional emissions reductions as a result of this initiative. The EPA
anticipates issuing its final rules in September 1998. MidAmerican will continue
to closely monitor this rulemaking proceeding.
Coal Inventories -
Coal inventory levels at MidAmerican's coal-fired generating stations have
declined since March 1997. Inventories of Powder River Basin coal, the
predominate type of coal burned at MidAmerican generating stations, declined
about 59% (in terms of tons of coal) in the twelve months ended March 31, 1998.
The decrease is due primarily to nationwide operational problems
experienced by a rail transportation provider of MidAmerican. Inadequate
delivery service to MidAmerican's Neal Energy Center (Neal Center) in the fourth
quarter of 1997 resulted in reduced coal inventory at that site. The Neal Center
represents approximately 37% of MidAmerican's coal-fired generating capacity.
Inventory levels at other MidAmerican coal-fired generating stations also
decreased in part due to higher-than-expected generation levels at those
stations caused in part by the effort to conserve coal at the Neal Center. An
extended outage at the Quad Cities Nuclear Station also affected the need for
additional generation at MidAmerican's coal-fired generating stations.
While deliveries to the Neal Center improved in the first quarter of 1998,
MidAmerican's total coal inventory remains below the desired level. MidAmerican
will be working throughout the year to build its coal inventory to the currently
desired level, which is approximately double the level as of March 31, 1998.
This effort to build MidAmerican's coal inventory may result in a reduction of
sales to other utilities, increased purchases of off-system energy and/or other
efforts to conserve coal.
Quad Cities Nuclear Station Outage -
In September 1997, Commonwealth Edison Company (ComEd), operator and 75%
owner of Quad Cities Station Units 1 and 2, shut down Unit 2 and entered early a
scheduled outage to address safety system concerns. In December 1997, Unit 1 was
also taken off-line for the same reason. In January 1998, ComEd received a
Confirmatory Action Letter (CAL) from the Nuclear Regulatory Commission (NRC).
The CAL
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details corrective actions required prior to restart of the units. Also in
January, ComEd was informed by the NRC that the performance of Quad Cities
Station is trending adversely. Preliminary results from the NRC Architectural
Engineering Inspection of design issues found no significant threats to
continued operation. ComEd addressed all issues facing Quad Cities Station, and
a recent meeting with the NRC substantially narrowed the list of open startup
issues. ComEd has informed MidAmerican that it expects successful inspection by
the NRC to close all CAL issues, allowing the startup of Unit 2 to commence
before the end of May and Unit 1 in June.
YEAR 2000
The Company has undertaken an extensive ongoing project to identify and
assess its critical business and operational systems potentially affected by the
year 2000 date change and to repair or replace those systems which are not year
2000 compliant. The Company, in addition to its internal resources, has engaged
independent contractors to assist with the conversion and replacement project.
The project timetable specifies completion of all conversion and replacement
work and testing sufficiently in advance of January 1, 2000 to identify any
residual concerns.
The Company's operations utilize systems and equipment provided by other
organizations. As a result, the Company's operations could be impacted by its
suppliers', vendors' or service providers' year 2000 efforts. The Company has
undertaken an initiative to assess the efforts of such constituent entities;
however, there is no assurance that the Company will not be affected by year
2000 problems of those organizations or their failure to repair or replace
systems or equipment which is incompatible with year 2000 dates.
The Company estimates the remaining cost to remediate year 2000 flaws in
its critical business systems to be approximately $3 million, although
additional unforeseen expenses for critical systems and embedded systems, as
discussed above, may be incurred. Although management believes the project will
be completed within the required time frame, unforeseen and other factors,
including failure of the contractors to perform, could cause delays in the
project, the results of which could be material to the Company.
PART I.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- - ------- ----------------------------------------------------------
As of March 31, 1998, the Company's and MidAmerican's financial positions
related to financial instruments and assets that are sensitive to changes in
interest rates or commodity price changes have not changed materially since
December 31, 1997. Refer to the Company's 1997 Annual Report on Form 10-K under
Item 7A for the applicable information as of December 31, 1997.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- - --------------------------
The Company and its subsidiaries have no material legal proceedings except
for the following:
Environmental Matters
- - ---------------------
For information relating to the Company's Environmental Matters, reference
is made to Part I, Note (B) of Holdings' Notes to Consolidated Financial
Statements.
Cooper Litigation
- - -----------------
On July 23, 1997, NPPD filed a Complaint, in the United States District
Court for the District of Nebraska, naming MidAmerican as the defendant and
seeking declaratory judgment as to three issues under the parties' long-term
power purchase agreement for Cooper capacity and energy. More specifically, NPPD
seeks a declaratory judgment in the following respects: (1) that MidAmerican is
obligated to pay 50% of all costs and expenses associated with decommissioning
Cooper, and that in the event NPPD continues to operate Cooper after expiration
of the power purchase agreement (September 2004), MidAmerican is not entitled to
reimbursement of any decommissioning funds it has paid to date or will pay in
the future; (2) that the current method of allocating transition costs as a part
of the decommissioning cost is proper under the power purchase agreement; and
(3) that the current method of investing decommissioning funds is proper under
the power purchase agreement. MidAmerican has filed a counterclaim for
declaratory relief and each party has made additional procedural filings.
Discovery is currently underway. MidAmerican is vigorously defending its
interests in this declaratory judgment action.
North Star Steel Company
- - ------------------------
On December 8, 1997, North Star Steel Company (NSS), a retail MidAmerican
electric customer, filed a Complaint in the United States District Court for the
Southern District of Iowa naming Holdings and MidAmerican as defendants. The
Complaint alleges that MidAmerican's refusal to allow NSS to obtain retail
electric service from an unspecified alternative energy company amounts to a
violation of federal antitrust laws. NSS is seeking to recover an unspecified
level of damages, and to require MidAmerican to provide retail wheeling service
so that NSS can obtain electricity from an unnamed supplier. MidAmerican is
vigorously defending its conduct.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits Filed Herewith
- - -----------------------
The exhibits filed herewith are attached to this combined Form 10-Q in
numerical order. They are listed below under the heading of the registrant or
registrants to whom they apply.
Holdings
Exhibit 12.1 - Computation of ratios of earnings to fixed charges and
computation of ratios of earnings to fixed charges plus preferred dividend
requirements.
MidAmerican
Exhibit 3.3 - Restated Articles of Incorporation of MidAmerican Energy
Company, as amended April 27, 1998.
Exhibit 12.2 - Computation of ratios of earnings to fixed charges and
computation of ratios of earnings to fixed charges plus preferred dividend
requirements.
Holdings and MidAmerican
Exhibit 27 - Financial Data Schedules (for electronic filing only).
(b) Reports on Form 8-K
On February 6, 1998, Holdings and MidAmerican filed a joint report on Form
8-K, dated February 6, 1998. The report included the following information:
Holdings computation of ratios of earnings to fixed charges and computation
of ratios of earnings to fixed charges plus preferred dividend requirements.
MidAmerican computation of ratios of earnings to fixed charges and
computation of ratios of earnings to fixed charges plus preferred dividend
requirements.
Financial information of Holdings and MidAmerican including selected
financial data for the years ended and as of December 31, 1997, 1996, 1995, 1994
and 1993; management's discussion and analysis of financial condition and
results of operations; consolidated statements of income, cash flows and
retained earnings for the years ended December 31, 1997, 1996 and 1995;
consolidated balance sheets and consolidated statements of capitalization as of
December 31, 1997 and 1996; notes to the consolidated financial statements;
report of the independent public accountant; report of management; and
supplemental financial and statistical data.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MIDAMERICAN ENERGY HOLDINGS COMPANY
MIDAMERICAN ENERGY COMPANY
-----------------------------------
(Registrants)
Date May 14, 1998
------------
/s/ A. L. Wells
--------------------------------------------------
Senior Vice President and Chief Financial Officer
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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.
<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
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;
6
<PAGE>
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
7
<PAGE>
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;
8
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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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<PAGE>
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 Security holders, 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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<PAGE>
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
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<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 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)
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<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.
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<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 be
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.
11
<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.
12
<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
<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. Article VA of the Restated Articles of Incorporation, as amended, is
hereby amended by deleting the second sentence thereof in its entirety and
substituting the following sentence therefor:
The number of directors of the Corporation shall be fixed by the
Bylaws but shall be no less than three (3) 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.
3. The date of adoption of the amendment was April 17, 1997.
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 100,751,713 100,751,713 100,751,713
<PAGE>
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 100,751,713 0
The number of votes cast for the amendment by each voting group was
sufficient for approval by that voting group.
These Articles of Amendment to the Restated Articles of Incorporation, as
amended, 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
AMD41797
<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 May 8, 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
------------ -------------------------
$3.30 Series 33
$4.35 Series 5
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 49,490
$4.35 Series 49,945
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-150.wpd
05.08.97
<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 August 7, 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, as
amended, canceling the following series of Preferred Stock of the Corporation in
its entirety:
Series Number of Shares Canceled
------------ -------------------------
$3.30 Series 5
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 49,485
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
AMD8797
<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 October 27, 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, as amended, canceling the following series of Preferred Stock of
the Corporation in its entirety:
Series Number of Shares Canceled
----------- -------------------------
$3.75 Series 10
3. The total number of authorized Preferred Stock for the following Series,
is remaining after the cancellation:
Series Number of Shares Remaining
------------ --------------------------
$3.75 Series 38,310
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
AMD1097
<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 November 7, 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, as amended, canceling the following series of Preferred Stock of
the Corporation in its entirety:
Series Number of Shares Canceled
------------ -------------------------
$3.30 Series 3
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 49,482
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
AMD1197
<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 December 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, as amended, canceling the following series of Preferred Stock of
the Corporation in its entirety:
Series Number of Shares Canceled
------ -------------------------
$3.30 Series 1
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 49,481
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
AMD1297
<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 April 27, 1998, 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, as
amended, canceling the following series of Preferred Stock of the Corporation in
its entirety:
Series Number of Shares Canceled
------ -------------------------
$3.30 Series 4
$3.75 Series 5
$4.20 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 49,467
$3.75 Series 38,305
$4.20 Series 47,362
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
AMD0498
EXHIBIT 12.1
<TABLE>
<CAPTION>
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
March 31, 1998 DECEMBER 31,1997
---------------------------- ----------------------------
Supplemental (a) Supplemental (a)
-------------------- --------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations ........................... $143,891 $ - $143,891 $139,332 $ - $139,332
Pre-tax (gain) loss of less than 50% owned persons .......... 2,369 - 2,369 2,234 - 2,234
-------- ------ -------- -------- ------ --------
146,260 - 146,260 141,566 - 141,566
-------- ------ -------- -------- ------ --------
Add (Deduct):
Total income taxes .......................................... 68,402 - 68,402 68,390 - 68,390
Interest on long-term debt .................................. 86,719 3,643 90,362 89,898 3,760 93,658
Other interest charges ...................................... 11,917 - 11,917 10,034 - 10,034
Preferred stock dividends of subsidiary...................... 4,951 - 4,951 6,488 - 6,488
Preferred stock dividends of subsidiary trust................ 7,980 - 7,980 7,980 - 7,980
Interest on leases .......................................... 250 - 250 268 - 268
-------- ------ -------- -------- ------ --------
180,219 3,643 183,862 183,058 3,760 186,818
-------- ------ -------- -------- ------ --------
Earnings available for fixed charges ...................... 326,479 3,643 330,122 324,624 3,760 328,384
-------- ------ -------- -------- ------ --------
Fixed Charges:
Interest on long-term debt .................................. 86,719 3,643 90,362 89,898 3,760 93,658
Other interest charges ...................................... 11,917 - 11,917 10,034 - 10,034
Preferred stock dividends of subsidiary trust................ 7,980 - 7,980 7,980 - 7,980
Interest on leases .......................................... 250 - 250 268 - 268
-------- ------ -------- -------- ------ --------
Total fixed charges ....................................... 106,866 3,643 110,509 108,180 3,760 111,940
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges .......................... 3.06 - 2.99 3.00 - 2.93
======== ====== ======== ======== ====== ========
Preferred stock dividends of subsidiary ..................... $ 4,951 $ - $ 4,951 $ 6,488 $ - $ 6,488
Ratio of net income before income taxes to net income ....... 1.4596 - 1.4596 1.4690 - 1.4690
-------- ------ -------- -------- ------ --------
Preferred stock dividend requirements before income tax ..... 7,226 - 7,226 9,531 - 9,531
-------- ------ -------- -------- ------ --------
Fixed charges plus preferred stock dividend requirements .... 114,092 3,643 117,735 117,711 3,760 121,471
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) .............. 2.86 - 2.80 2.76 - 2.70
======== ====== ======== ======== ====== ========
</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>
EXHIBIT 12.1
<TABLE>
<CAPTION>
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
Pre-tax (gain) loss of less than 50% owned persons .......... (698) - (698) 9,079 - 9,079
-------- ------ -------- -------- ------ --------
143,063 - 143,063 128,784 - 128,784
-------- ------ -------- -------- ------ --------
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
Preferred stock dividends of subsidiary...................... 10,401 - 10,401 8,059 - 8,059
Preferred stock dividends of subsidiary trust................ 288 - 288 - - -
Interest on leases .......................................... 375 - 375 1,088 - 1,088
-------- ------ -------- -------- ------ --------
223,336 3,615 226,951 190,949 4,595 195,544
-------- ------ -------- -------- ------ --------
Earnings available for fixed charges ...................... 366,399 3,615 370,014 319,733 4,595 324,328
-------- ------ --------- -------- ------ --------
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
Preferred stock dividends of subsidiary trust................ 288 - 288 - - -
Interest on leases .......................................... 375 - 375 1,088 - 1,088
-------- ------ --------- -------- ------ --------
Total fixed charges ....................................... 114,513 3,615 118,128 116,087 4,595 120,682
-------- ------ --------- -------- ------ --------
Ratio of earnings to fixed charges .......................... 3.20 - 3.13 2.75 - 2.69
======== ====== ========= ======== ====== ========
Preferred stock dividends of subsidiary ..................... $ 10,401 $ - $ 10,401 $ 8,059 $ - $ 8,059
Ratio of net income before income taxes to net income ....... 1.6384 - 1.6384 1.5229 - 1.5229
-------- ------ --------- -------- ------ --------
Preferred stock dividend requirements before income tax ..... 17,041 - 17,041 12,273 - 12,273
-------- ------ --------- -------- ------ --------
Fixed charges plus preferred stock dividend requirements .... 131,554 3,615 135,169 128,360 4,595 132,955
-------- ------ --------- -------- ------ --------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) .............. 2.79 - 2.74 2.49 - 2.44
======== ====== ========= ======== ====== ========
</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-
<PAGE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
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 31,1994 DECEMBER 31,1993
------------------------------- --------------------------------
Supplemental (a) Supplemental (a)
--------------------- --------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations .......................... $123,098 $ - $123,098 $134,325 $ - $134,325
Pre-tax (gain) loss of less than 50% owned persons ......... (270) - (270) (597) - (597)
-------- ------ -------- -------- ------ --------
122,828 - 122,828 133,728 - 133,728
-------- ------ --------- -------- ------ --------
Add (Deduct):
Total income taxes ......................................... 60,457 - 60,457 67,485 - 67,485
Interest on long-term debt ................................. 101,267 5,428 106,695 107,044 5,678 112,722
Other interest charges ..................................... 6,446 - 6,446 5,066 - 5,066
Preferred stock dividends of subsidiary..................... 10,551 - 10,551 8,367 - 8,367
Preferred stock dividends of subsidiary trust............... - - - - - -
Interest on leases ......................................... 1,211 - 1,211 1,876 - 1,876
-------- ------ -------- -------- ------ --------
179,932 5,428 185,360 189,838 5,678 195,516
-------- ------ -------- -------- ------ --------
Earnings available for fixed charges ..................... 302,760 5,428 308,188 323,566 5,678 329,244
-------- ------ -------- -------- ------ --------
Fixed Charges:
Interest on long-term debt ................................. 101,267 5,428 106,695 107,044 5,678 112,722
Other interest charges ..................................... 6,446 - 6,446 5,066 - 5,066
Preferred stock dividends of subsidiary trust............... - - - - - -
Interest on leases ......................................... 1,211 - 1,211 1,876 - 1,876
-------- ------ --------- -------- ------ --------
Total fixed charges ...................................... 108,924 5,428 114,352 113,986 5,678 119,664
-------- ------ --------- -------- ------ --------
Ratio of earnings to fixed charges ......................... 2.78 - 2.70 2.84 - 2.75
======== ====== ========= ======== ====== ========
Preferred stock dividends of subsidiary .................... $ 10,551 $ - $ 10,551 $ 8,367 $ - $ 8,367
Ratio of net income before income taxes to net income ...... 1.4524 - 1.4524 1.4729 - 1.4729
-------- ------ --------- -------- ------ --------
Preferred stock dividend requirements before income tax .... 15,324 - 15,324 12,324 - 12,324
-------- ------ --------- -------- ------ --------
Fixed charges plus preferred stock dividend requirements ... 124,248 5,428 129,676 126,310 5,678 131,988
-------- ------ --------- -------- ------ --------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) ............. 2.44 - 2.38 2.56 - 2.49
======== ====== ========= ======== ====== ========
</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.
-3-
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
MARCH 31,1998 DECEMBER 31,1997
-------------------------------- --------------------------------
Supplemental (a) Supplemental (a)
--------------------- ---------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations ......................... $123,896 $ - $123,896 $125,941 $ - $125,941
-------- ------ -------- -------- ------ --------
Add (Deduct):
Total income taxes ........................................ 75,921 - 75,921 76,317 - 76,317
Interest on long-term debt ................................ 75,787 3,643 79,430 78,120 3,760 81,880
Other interest charges .................................... 11,866 - 11,866 10,027 - 10,027
Preferred stock dividends of subsidiary trust.............. 7,980 - 7,980 7,980 - 7,980
Interest on leases ........................................ 250 - 250 268 - 268
-------- ------ -------- -------- ------ --------
171,804 3,643 175,447 172,712 3,760 176,472
-------- ------ -------- -------- ------ --------
Earnings available for fixed charges .................... 295,700 3,643 299,343 298,653 3,760 302,413
-------- ------ -------- -------- ------ --------
Fixed Charges:
Interest on long-term debt ................................ 75,787 3,643 79,430 78,120 3,760 81,880
Other interest charges .................................... 11,866 - 11,866 10,027 - 10,027
Preferred stock dividends of subsidiary trust.............. 7,980 - 7,980 7,980 - 7,980
Interest on leases ........................................ 250 - 250 268 - 268
-------- ------ -------- -------- ------ --------
Total fixed charges...................................... 95,883 3,643 99,526 96,395 3,760 100,155
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges ........................ 3.08 - 3.01 3.10 - 3.02
======== ====== ======== ======== ====== ========
Preferred stock dividends ................................. $ 4,951 $ - $ 4,951 $ 6,488 $ - $ 6,488
Ratio of net income before income taxes to net income ..... 1.6128 - 1.6128 1.6060 - 1.6060
-------- ------ -------- -------- ------ --------
Preferred stock dividend requirements before income tax ... 7,985 - 7,985 10,420 - 10,420
-------- ------ -------- -------- ------ --------
Fixed charges plus preferred stock dividend requirements .. 103,868 3,643 107,511 106,815 3,760 110,575
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) ............ 2.85 - 2.78 2.80 - 2.73
======== ====== ======== ======== ====== ========
</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>
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
-------- ------ -------- -------- ------ --------
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
Preferred stock dividends of subsidiary trust................ 288 - 288 - - -
Interest on leases .......................................... 375 - 375 1,088 - 1,088
-------- ------ -------- -------- ------ -------
203,866 3,615 207,481 174,715 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
Preferred stock dividends of subsidiary trust................ 288 - 288 - - -
Interest on leases .......................................... 375 - 375 1,088 - 1,088
-------- ------ -------- -------- ------ -------
Total fixed charges 90,939 3,615 94,554 90,617 4,595 95,212
-------- ------ ------- -------- ------ --------
Ratio of earnings to fixed charges .......................... 4.06 - 3.94 3.39 - 3.27
======== ====== ======== ======== ====== =======
Preferred stock dividends ................................... $ 10,401 $ - $ 10,401 $ 8,059 $ - $ 8,059
Ratio of net income before income taxes to net income ....... 1.6839 - 1.6839 1.6348 - 1.6348
-------- ------ -------- -------- ------ -------
Preferred stock dividend requirements before income tax ..... 17,514 - 17,514 13,175 - 13,175
-------- ------ -------- -------- ------ -------
Fixed charges plus preferred stock dividend requirements .... 108,453 3,615 112,068 103,792 4,595 108,387
-------- ------ -------- -------- ------ -------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) .............. 3.40 - 3.32 2.96 - 2.88
======== ====== ======== ======== ====== =======
</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-
<PAGE>
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 31,1994 DECEMBER 31,1993
------------------------------ --------------------------------
Supplemental (a) Supplemental (a)
-------------------- ---------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations .......................... $121,145 $ - $121,145 $133,888 $ - $133,888
-------- ------ -------- -------- ------ --------
Add (Deduct):
Total income taxes ......................................... 66,759 - 66,759 75,917 - 75,917
Interest on long-term debt ................................. 73,922 5,428 79,350 80,642 5,678 86,320
Other interest charges ..................................... 6,639 - 6,639 5,068 - 5,068
Preferred stock dividends of subsidiary trust............... - - - - - -
Interest on leases ......................................... 1,211 - 1,211 1,876 - 1,876
-------- ------ -------- -------- ------ -------
148,531 5,428 153,959 163,503 5,678 169,181
-------- ------ -------- -------- ------ -------
Earnings available for fixed charges ..................... 269,676 5,428 275,104 297,391 5,678 303,069
-------- ------ -------- -------- ------ -------
Fixed Charges:
Interest on long-term debt ................................. 73,922 5,428 79,350 80,642 5,678 86,320
Other interest charges ..................................... 6,639 - 6,639 5,068 - 5,068
Preferred stock dividends of subsidiary trust............... - - - - - -
Interest on leases ......................................... 1,211 - 1,211 1,876 - 1,876
-------- ------ -------- -------- ------ -------
Total fixed charges 81,772 5,428 87,200 87,586 5,678 93,264
-------- ------ -------- -------- ------ -------
Ratio of earnings to fixed charges ......................... 3.30 - 3.15 3.40 - 3.25
======== ====== ======== ======== ====== =======
Preferred stock dividends .................................. $ 10,551 $ - $ 10,551 $ 8,367 $ - $ 8,367
Ratio of net income before income taxes to net income ...... 1.5511 - 1.5511 1.5670 - 1.5670
-------- ------ -------- -------- ------ -------
Preferred stock dividend requirements before income tax .... 16,366 - 16,366 13,111 - 13,111
-------- ------ -------- -------- ------ -------
Fixed charges plus preferred stock dividend requirements ... 98,138 5,428 103,566 100,697 5,678 106,375
-------- ------ -------- -------- ------ -------
Ratio of earnings to fixed charges plus preferred stock
dividend requirements (pre-income tax basis) ............. 2.75 - 2.66 2.95 - 2.85
======== ====== ======== ======== ====== =======
</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
-3-
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of MidAmerican Energy Holdings Company as of March
31, 1998, and the related consolidated statements of income and cash flows for
the three months ended March 31, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001009526
<NAME> MIDAMERICAN ENERGY HOLDINGS COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,604,539
<OTHER-PROPERTY-AND-INVEST> 907,528
<TOTAL-CURRENT-ASSETS> 250,353
<TOTAL-DEFERRED-CHARGES> 343,161
<OTHER-ASSETS> 170,771
<TOTAL-ASSETS> 4,276,352
<COMMON> 746,367
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 409,788
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,349,011
150,000
31,761
<LONG-TERM-DEBT-NET> 1,037,598
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 141,063
<LONG-TERM-DEBT-CURRENT-PORT> 69,651
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,497,268
<TOT-CAPITALIZATION-AND-LIAB> 4,276,352
<GROSS-OPERATING-REVENUE> 471,528
<INCOME-TAX-EXPENSE> 23,823<F1>
<OTHER-OPERATING-EXPENSES> 394,886
<TOTAL-OPERATING-EXPENSES> 394,886
<OPERATING-INCOME-LOSS> 76,642
<OTHER-INCOME-NET> 11,888
<INCOME-BEFORE-INTEREST-EXPEN> 88,530
<TOTAL-INTEREST-EXPENSE> 25,974
<NET-INCOME> 38,733
0
<EARNINGS-AVAILABLE-FOR-COMM> 38,733
<COMMON-STOCK-DIVIDENDS> 28,507
<TOTAL-INTEREST-ON-BONDS> 17,553
<CASH-FLOW-OPERATIONS> 180,674
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<FN>
<F1> Tag 37, Income Tax Expense, includes operating and nonoperating income
taxes and is excluded from total operating expenses in Tag 39 and on the
Consolidated Statement of Income.
</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, 1998,
and the related consolidated statements of income and cash flows for the three
months ended March 31, 1998, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000928576
<NAME> MIDAMERICAN ENERGY COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,605,437
<OTHER-PROPERTY-AND-INVEST> 141,479
<TOTAL-CURRENT-ASSETS> 213,487
<TOTAL-DEFERRED-CHARGES> 330,357
<OTHER-ASSETS> 170,771
<TOTAL-ASSETS> 3,461,531
<COMMON> 560,562
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 428,523
<TOTAL-COMMON-STOCKHOLDERS-EQ> 989,085
150,000
31,761
<LONG-TERM-DEBT-NET> 919,815
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 115,102
<LONG-TERM-DEBT-CURRENT-PORT> 49,837
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,205,931
<TOT-CAPITALIZATION-AND-LIAB> 3,461,531
<GROSS-OPERATING-REVENUE> 429,554
<INCOME-TAX-EXPENSE> 28,953
<OTHER-OPERATING-EXPENSES> 350,099
<TOTAL-OPERATING-EXPENSES> 379,052
<OPERATING-INCOME-LOSS> 50,502
<OTHER-INCOME-NET> 4,639
<INCOME-BEFORE-INTEREST-EXPEN> 55,141
<TOTAL-INTEREST-EXPENSE> 21,962
<NET-INCOME> 33,179
1,237
<EARNINGS-AVAILABLE-FOR-COMM> 31,942
<COMMON-STOCK-DIVIDENDS> 28,600
<TOTAL-INTEREST-ON-BONDS> 17,553
<CASH-FLOW-OPERATIONS> 179,495
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of MidAmerican Energy Holdings Company as of March
31, 1997, and the related consolidated statements of income and cash flows for
the three months ended March 31, 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0001009526
<NAME> MIDAMERICAN ENERGY HOLDINGS COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,611,168
<OTHER-PROPERTY-AND-INVEST> 621,972
<TOTAL-CURRENT-ASSETS> 401,053
<TOTAL-DEFERRED-CHARGES> 395,862
<OTHER-ASSETS> 190,326
<TOTAL-ASSETS> 4,220,381
<COMMON> 792,257
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 433,762
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,225,953
150,000
31,766
<LONG-TERM-DEBT-NET> 1,118,723
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 40,209
<LONG-TERM-DEBT-CURRENT-PORT> 155,202
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,498,528
<TOT-CAPITALIZATION-AND-LIAB> 4,220,381
<GROSS-OPERATING-REVENUE> 580,159
<INCOME-TAX-EXPENSE> 23,811 <F1>
<OTHER-OPERATING-EXPENSES> 502,926
<TOTAL-OPERATING-EXPENSES> 502,926
<OPERATING-INCOME-LOSS> 77,233
<OTHER-INCOME-NET> 9,370<F2>
<INCOME-BEFORE-INTEREST-EXPEN> 86,603
<TOTAL-INTEREST-EXPENSE> 28,852
<NET-INCOME> 33,940
0
<EARNINGS-AVAILABLE-FOR-COMM> 33,940
<COMMON-STOCK-DIVIDENDS> 30,179
<TOTAL-INTEREST-ON-BONDS> 19,886
<CASH-FLOW-OPERATIONS> 223,397
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
<FN>
<F1> Tag 37, Income Tax Expense, includes operating and nonoperating income
taxes and is excluded from total operating expenses in Tag 39 and on the
Consolidated Statement of Income.
<F2> Tag 41 includes a ($234,000) income from Discontinued Operations, net of
income taxes.
</FN>
</TABLE>
