<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
-- OR --
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------------------
TEXAS UTILITIES COMPANY
A Texas Corporation I.R.S. Employer Identification
Commission File Number 1-3591 No. 75-0705930
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201
(214) 812-4600
TEXAS UTILITIES ELECTRIC COMPANY
A Texas Corporation I.R.S. Employer Identification
Commission File Number 0-11442 No. 75-1837355
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201
(214) 812-4600
-------------------------
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
--------- --------
COMMON STOCK OUTSTANDING AT OCTOBER 31, 1996:
Texas Utilities Company: 224,602,557 shares, without par value.
Texas Utilities Electric Company: 156,800,000 shares, without par value.
THIS COMBINED FORM 10-Q IS FILED SEPARATELY BY TEXAS UTILITIES COMPANY AND
TEXAS UTILITIES ELECTRIC COMPANY. INFORMATION CONTAINED HEREIN RELATING TO AN
INDIVIDUAL REGISTRANT IS FILED BY THAT REGISTRANT ON ITS OWN BEHALF EXCEPT THAT
THE INFORMATION WITH RESPECT TO TEXAS UTILITIES ELECTRIC COMPANY, OTHER THAN
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS UTILITIES ELECTRIC
COMPANY, IS FILED BY EACH OF TEXAS UTILITIES ELECTRIC COMPANY AND TEXAS
UTILITIES COMPANY. NEITHER TEXAS UTILITIES ELECTRIC COMPANY NOR TEXAS
UTILITIES COMPANY MAKES ANY REPRESENTATIONS AS TO INFORMATION FILED BY THE
OTHER REGISTRANT.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
-----
<S> <C> <C>
Item 1. Financial Statements
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
Condensed Statements of Consolidated Income
Three, Nine and Twelve Months Ended September 30, 1996 and 1995 . . . . . 3
Condensed Statements of Consolidated Cash Flows
Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . 4
Condensed Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . 5
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
Condensed Statements of Consolidated Income
Three, Nine and Twelve Months Ended September 30, 1996 and 1995 . . . . . 7
Condensed Statements of Consolidated Cash Flows
Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . 8
Condensed Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 11
INDEPENDENT ACCOUNTANTS' REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES ....................................... $1,930,097 $1,775,669 $5,085,310 $4,373,932 $6,350,066 $5,594,620
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power .............................. 600,681 490,817 1,637,132 1,273,686 2,004,436 1,646,642
Operation and maintenance ............................. 301,304 275,451 900,438 809,730 1,200,352 1,118,963
Depreciation and amortization ......................... 155,664 139,778 463,417 417,937 609,299 556,081
Taxes other than income ............................... 128,838 126,924 390,728 396,231 531,105 540,253
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses ........................... 1,186,487 1,032,970 3,391,715 2,897,584 4,345,192 3,861,939
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME ......................................... 743,610 742,699 1,693,595 1,476,348 2,004,874 1,732,681
OTHER INCOME AND (DEDUCTIONS) - NET ...................... 5,570 5,207 4,778 14,283 15,078 20,785
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME ............................................. 749,180 747,906 1,698,373 1,490,631 2,019,952 1,753,466
---------- ---------- ---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest ............................................... 193,178 172,751 610,002 526,369 789,815 701,291
Allowance for borrowed funds used during construction .. (2,716) (4,596) (9,253) (14,409) (10,171) (17,852)
Impairment of assets ................................... -- 1,233,320 -- 1,233,320 -- 1,233,320
TU Electric obligated, mandatorily redeemable, preferred
securities of trusts distributions ................... 8,250 -- 24,749 -- 26,550 --
Preferred stock dividends of subsidiary ................ 13,120 21,133 40,845 65,914 59,845 89,600
---------- ---------- ---------- ---------- ---------- ----------
Total interest and other charges .................... 211,832 1,422,608 666,343 1,811,194 866,039 2,006,359
---------- ---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES ........................ 537,348 (674,702) 1,032,030 (320,563) 1,153,913 (252,893)
INCOME TAX EXPENSE (BENEFIT) ............................. 179,365 (232,986) 345,016 (102,690) 387,671 (70,595)
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME (LOSS) ........................... $ 357,983 $ (441,716) $ 687,014 $ (217,873) $ 766,242 $ (182,298)
========== ========== ========== ========== ========== ==========
Average shares of common stock outstanding (thousands) ... 224,603 225,841 225,346 225,841 225,469 225,841
Earnings (loss) and dividends per share of common stock:
Earnings (loss) (on average shares outstanding) ....... $ 1.59 $ (1.96) $ 3.05 $ (0.96) $ 3.40 $ (0.81)
Dividends declared .................................... $ 0.50 $ 0.77 $ 1.50 $ 2.31 $ 2.00 $ 3.08
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
---- ----
THOUSANDS OF DOLLARS
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income (loss) .................................................................. $ 687,014 $ (217,873)
Adjustments to reconcile consolidated net income (loss) to cash provided by operating activities:
Depreciation and amortization (including amounts charged to fuel) ............................. 579,123 534,265
Deferred federal income taxes-- net ........................................................... 155,333 (250,969)
Federal investment tax credits-- net .......................................................... (17,504) (17,015)
Allowance for equity funds used during construction ........................................... (1,292) 43
Impairment of assets .......................................................................... -- 1,233,320
Changes in operating assets and liabilities:
Receivables ................................................................................. (136,206) (110,407)
Inventories ................................................................................. 19,667 29,249
Accounts payable ............................................................................ 74,429 34,170
Interest and taxes accrued .................................................................. 53,861 63,961
Other working capital ....................................................................... (31,961) (38,532)
Over/(under)-recovered fuel revenue-- net of deferred taxes ................................. (41,077) 60,543
Other-- net ................................................................................. 52,532 (16,280)
---------- ----------
Cash provided by operating activities ..................................................... 1,393,919 1,304,475
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds .......................................................................... 244,225 333,905
Other long-term debt .......................................................................... 300,000 300,000
Retirement of long-term debt, preferred stock and common stock .................................. (884,194) (790,413)
Change in notes payable ......................................................................... (227,240) (122,089)
Common stock dividends paid ..................................................................... (338,761) (521,759)
Debt premium, discount, financing and reacquisition expenses .................................... (41,532) (67,890)
---------- ----------
Cash used in financing activities ......................................................... (947,502) (868,246)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures ....................................................................... (321,365) (307,254)
Allowance for equity funds used during construction (excluding amount for nuclear fuel) ......... 719 (43)
Change in construction receivables/payables-- net ............................................... 994 (317)
Non-utility property-- net ...................................................................... (6,431) (66,260)
Nuclear fuel (excluding allowance for equity funds used during construction) .................... (50,712) (19,886)
Other investments ............................................................................... (102,804) (35,899)
---------- ----------
Cash used in investing activities ......................................................... (479,599) (429,659)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ............................................................ 43,888 --
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............................................................ 10,706 6,570
CASH AND CASH EQUIVALENTS-- BEGINNING BALANCE ...................................................... 24,853 7,426
---------- ----------
CASH AND CASH EQUIVALENTS-- ENDING BALANCE ......................................................... $ 35,559 $ 13,996
========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
------------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
UTILITY PLANT
In service:
Production ........................................................ $16,730,737 $16,661,053
Transmission ...................................................... 1,601,668 1,592,610
Distribution ...................................................... 5,593,202 5,333,396
General ........................................................... 495,487 466,474
----------- -----------
Total ........................................................... 24,421,094 24,053,533
Less accumulated depreciation ..................................... 5,993,583 5,562,190
----------- -----------
Utility plant in service, less accumulated depreciation ......... 18,427,511 18,491,343
Construction work in progress ...................................... 231,075 271,033
Nuclear fuel (net of accumulated amortization: 1996 -- $352,238,000;
1995-- $295,390,000) ............................................. 261,173 266,735
Held for future use ................................................ 24,588 25,096
----------- -----------
Utility plant, less accumulated depreciation and amortization ... 18,944,347 19,054,207
Less reserve for regulatory disallowances .......................... 1,308,460 1,308,460
----------- -----------
Net utility plant ............................................... 17,635,887 17,745,747
----------- -----------
INVESTMENTS
Non-utility property ............................................... 428,851 422,421
Other investments .................................................. 711,070 617,583
----------- -----------
Total investments ............................................... 1,139,921 1,040,004
----------- -----------
CURRENT ASSETS
Cash in banks ...................................................... 35,559 24,853
Special deposits ................................................... 3,177 19,455
Accounts receivable:
Customers ......................................................... 416,109 275,275
Other ............................................................. 50,006 51,735
Allowance for uncollectible accounts .............................. (8,397) (5,965)
Inventories -- at average cost:
Materials and supplies ............................................ 199,579 200,145
Fuel stock ........................................................ 108,894 128,028
Prepayments ........................................................ 80,398 55,528
Deferred federal income taxes ...................................... 49,371 84,410
Other current assets ............................................... 18,186 14,924
----------- -----------
Total current assets ............................................ 952,882 848,388
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets ...................................... 1,870,465 1,901,310
Other deferred debits .............................................. 88,813 73,087
----------- -----------
Total deferred debits ........................................... 1,959,278 1,974,397
Less reserve for regulatory disallowances .......................... 72,685 72,685
----------- -----------
Net deferred debits ............................................. 1,886,593 1,901,712
----------- -----------
Total ................................................... $21,615,283 $21,535,851
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
CAPITALIZATION
Common stock, without par value -- net:
Authorized shares -- 500,000,000
Outstanding shares: 1996-- 224,602,557; 1995-- 225,841,037....................... $ 4,785,001 $ 4,806,912
Retained earnings .................................................................... 1,252,721 924,444
Cumulative currency translation adjustment ........................................... 40,619 397
----------- -----------
Total common stock equity ..................................................... 6,078,341 5,731,753
Preferred stock:
Not subject to mandatory redemption .............................................. 464,427 489,695
Subject to mandatory redemption .................................................. 250,844 263,196
TU Electric obligated, mandatorily redeemable, preferred securities of trusts ........ 381,259 381,476
Long-term debt, less amounts due currently ........................................... 8,657,685 9,174,575
----------- -----------
Total capitalization .......................................................... 15,832,556 16,040,695
----------- -----------
CURRENT LIABILITIES
Notes payable:
Commercial paper ................................................................. 225,000 321,990
Banks ............................................................................ 143,890 275,000
Long-term debt due currently ......................................................... 391,924 61,321
Accounts payable ..................................................................... 376,146 300,726
Dividends declared ................................................................... 124,550 125,929
Customers' deposits .................................................................. 81,440 76,963
Taxes accrued ........................................................................ 233,190 167,951
Interest accrued ..................................................................... 153,885 165,277
Over-recovered fuel revenue .......................................................... 52,663 115,858
Other current liabilities ............................................................ 78,467 101,566
----------- -----------
Total current liabilities .................................................... 1,861,155 1,712,581
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred federal income taxes ............................................ 2,786,847 2,669,808
Unamortized federal investment tax credits ........................................... 595,412 622,786
Other deferred credits and noncurrent liabilities .................................... 539,313 489,981
----------- -----------
Total deferred credits and other noncurrent liabilities ...................... 3,921,572 3,782,575
COMMITMENTS AND CONTINGENCIES
----------- -----------
Total ................................................................... $21,615,283 $21,535,851
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 7
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------- ----------------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES ....................................... $1,787,412 $1,761,378 $4,694,520 $4,336,395 $5,918,587 $5,545,186
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power ............................... 553,077 508,811 1,510,370 1,325,640 1,881,821 1,715,602
Operation and maintenance .............................. 263,929 260,098 793,286 768,800 1,073,520 1,062,088
Depreciation and amortization .......................... 140,991 137,388 419,788 410,816 558,583 546,836
Federal income taxes ................................... 185,294 200,133 383,125 335,157 430,283 370,211
Taxes other than income ................................ 121,851 120,781 369,605 377,803 503,847 516,073
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses ............................. 1,265,142 1,227,211 3,476,174 3,218,216 4,448,054 4,210,810
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME ......................................... 522,270 534,167 1,218,346 1,118,179 1,470,533 1,334,376
---------- ---------- ---------- ---------- ---------- ----------
OTHER INCOME (LOSS)
Allowance for equity funds used during construction .... 373 -- 1,272 (58) 7,988 1,534
Impairment of assets ................................... -- (486,350) -- (486,350) -- (486,350)
Other income and (deductions)-- net .................... 6,272 3,213 1,362 8,255 1,732 11,091
Federal income taxes ................................... (2,236) 169,047 15,183 167,455 17,090 166,527
---------- ---------- ---------- ---------- ---------- ----------
Total other income (loss) ............................ 4,409 (314,090) 17,817 (310,698) 26,810 (307,198)
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME ............................................. 526,679 220,077 1,236,163 807,481 1,497,343 1,027,178
---------- ---------- ---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on mortgage bonds ............................. 122,285 128,920 369,762 401,067 495,671 538,954
Interest on other long-term debt ....................... 6,205 12,880 22,858 34,302 32,627 42,309
Other interest ......................................... 13,215 14,700 67,948 42,367 84,082 55,677
TU Electric obligated, mandatorily redeemable,
preferred securities of trusts distributions ......... 8,250 -- 24,749 -- 26,550 --
Allowance for borrowed funds used during construction... (2,714) (4,595) (9,246) (14,404) (10,161) (17,845)
---------- ---------- ---------- ---------- ---------- ----------
Total interest and other charges ..................... 147,241 151,905 476,071 463,332 628,769 619,095
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME .................................. 379,438 68,172 760,092 344,149 868,574 408,083
PREFERRED STOCK DIVIDENDS ................................ 13,120 21,133 40,845 65,914 59,845 89,600
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME AVAILABLE FOR
COMMON STOCK ........................................... $ 366,318 $ 47,039 $ 719,247 $ 278,235 $ 808,729 $ 318,483
========== ========== ========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
7
<PAGE> 8
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
---- ----
THOUSANDS OF DOLLARS
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income .................................................................. $ 760,092 $ 344,149
Adjustments to reconcile consolidated net income to cash provided by operating activities:
Depreciation and amortization (including amounts charged to fuel) ...................... 513,157 511,400
Deferred federal income taxes-- net .................................................... 125,822 8,019
Federal investment tax credits-- net ................................................... (16,323) (15,834)
Allowance for equity funds used during construction .................................... (1,272) 58
Impairment of assets ................................................................... -- 486,350
Changes in operating assets and liabilities:
Receivables .......................................................................... (107,196) (106,004)
Inventories .......................................................................... 9,172 1,345
Accounts payable ..................................................................... 55,465 (6,323)
Interest and taxes accrued ........................................................... 119,803 50,287
Other working capital ................................................................ (35,257) (29,308)
Over/(under)-recovered fuel revenue-- net of deferred taxes .......................... (41,077) 60,543
Other-- net .......................................................................... 13,355 8,873
---------- ----------
Cash provided by operating activities .............................................. 1,395,741 1,313,555
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds ................................................................... 244,225 333,905
Other long-term debt ................................................................... -- 300,000
Retirement of long-term debt and preferred stock ......................................... (814,695) (771,852)
Change in notes receivable-- affiliates .................................................. (36,622) (24,851)
Change in notes payable-- commercial paper ............................................... (96,990) (122,089)
Preferred stock dividends paid ........................................................... 80,645 (68,228)
Common stock dividends paid .............................................................. (366,912) (540,960)
Debt premium, discount, financing and reacquisition expenses ............................. (38,623) (67,890)
---------- ----------
Cash used in financing activities .................................................. (1,028,972) (961,965)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures ................................................................ (266,411) (292,315)
Allowance for equity funds used during construction (excluding amount for nuclear fuel) .. 699 (58)
Change in construction receivables/payables-- net ........................................ (994) (427)
Non-utility property-- net ............................................................... -- 36
Nuclear fuel (excluding allowance for equity funds used during construction) ............. (50,712) (19,886)
Other investments ........................................................................ (39,306) (32,691)
---------- ----------
Cash used in investing activities .................................................. (356,724) (345,341)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS ..................................................... 10,045 6,249
CASH AND CASH EQUIVALENTS-- BEGINNING BALANCE ............................................... 22,633 6,699
---------- ----------
CASH AND CASH EQUIVALENTS-- ENDING BALANCE .................................................. $ 32,678 $ 12,948
========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
8
<PAGE> 9
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
------------- ------------
THOUSANDS OF DOLLARS
<S> <C> <C>
ELECTRIC PLANT
In service:
Production ......................................................... $15,775,829 $15,699,488
Transmission ....................................................... 1,595,375 1,586,547
Distribution ....................................................... 4,403,903 4,229,794
General ............................................................ 426,505 407,897
----------- -----------
Total ............................................................ 22,201,612 21,923,726
Less accumulated depreciation ...................................... 5,466,192 5,075,428
----------- -----------
Electric plant in service, less accumulated depreciation ......... 16,735,420 16,848,298
Construction work in progress ....................................... 193,479 236,913
Nuclear fuel (net of accumulated amortization: 1996 -- $352,238,000;
1995-- $295,390,000) .............................................. 261,173 266,735
Held for future use ................................................. 24,588 25,096
----------- -----------
Electric plant, less accumulated depreciation and amortization ... 17,214,660 17,377,042
Less reserve for regulatory disallowances ........................... 1,308,460 1,308,460
----------- -----------
Net electric plant ............................................... 15,906,200 16,068,582
----------- -----------
INVESTMENTS
Non-utility property ................................................ 332,234 332,234
Other investments ................................................... 143,194 103,888
----------- -----------
Total investments ................................................ 475,428 436,122
----------- -----------
CURRENT ASSETS
Cash in banks ....................................................... 32,678 22,633
Special deposits .................................................... 552 527
Notes receivable-- affiliates ....................................... 38,978 2,356
Accounts receivable:
Customers .......................................................... 331,846 212,165
Other .............................................................. 25,667 34,906
Allowance for uncollectible accounts ............................... (7,160) (3,914)
Inventories -- at average cost:
Materials and supplies ............................................. 179,901 179,001
Fuel stock ......................................................... 72,817 82,889
Prepayments ......................................................... 51,577 31,225
Deferred federal income taxes ....................................... 60,393 79,629
Other current assets ................................................ 2,832 1,455
----------- -----------
Total current assets ............................................. 790,081 642,872
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets ....................................... 1,851,367 1,879,369
Other deferred debits ............................................... 59,362 49,114
----------- -----------
Total deferred debits ............................................ 1,910,729 1,928,483
Less reserve for regulatory disallowances ........................... 72,685 72,685
----------- -----------
Net deferred debits .............................................. 1,838,044 1,855,798
----------- -----------
Total ....................................................... $19,009,753 $19,003,374
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
9
<PAGE> 10
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares -- 180,000,000
Outstanding shares-- 156,800,000 .......................................... $ 4,732,305 $ 4,732,305
Retained earnings ........................................................... 1,419,929 1,067,593
----------- -----------
Total common stock equity ............................................. 6,152,234 5,799,898
Preferred stock:
Not subject to mandatory redemption ....................................... 464,427 489,695
Subject to mandatory redemption ........................................... 250,844 263,196
TU Electric obligated, mandatorily redeemable, preferred securities of trusts 381,259 381,476
Long-term debt, less amounts due currently .................................. 6,355,266 7,212,070
----------- -----------
Total capitalization .................................................. 13,604,030 14,146,335
----------- -----------
CURRENT LIABILITIES
Notes payable-- commercial paper ............................................ 225,000 321,990
Long-term debt due currently ................................................ 374,061 43,458
Accounts payable:
Affiliates ................................................................ 109,936 101,722
Other ..................................................................... 155,659 109,402
Dividends declared .......................................................... 134,552 13,210
Customers' deposits ......................................................... 69,181 63,564
Taxes accrued ............................................................... 268,219 142,364
Interest accrued ............................................................ 135,763 141,815
Over-recovered fuel revenue ................................................. 52,663 115,858
Other current liabilities ................................................... 44,597 63,716
----------- -----------
Total current liabilities ............................................. 1,569,631 1,117,099
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred federal income taxes ................................... 2,963,210 2,869,049
Unamortized federal investment tax credits .................................. 583,271 609,466
Other deferred credits and noncurrent liabilities ........................... 289,611 261,425
----------- -----------
Total deferred credits and other noncurrent liabilities ............... 3,836,092 3,739,940
COMMITMENTS AND CONTINGENCIES
----------- -----------
Total ............................................................... $19,009,753 $19,003,374
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
10
<PAGE> 11
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
THE COMPANY AND TU ELECTRIC
Basis of Presentation -- The condensed consolidated financial statements of
Texas Utilities Company (Company) and its subsidiaries and Texas Utilities
Electric Company and its subsidiaries (TU Electric) have been prepared on the
same basis as those in the 1995 Annual Reports of the Company and TU Electric
on Form 10-K and, in the opinion of the Company or TU Electric, as the case may
be, all adjustments (constituting only normal recurring accruals) necessary to
a fair presentation of the results of operation and financial position have
been included therein. The statements are presented pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations.
These condensed consolidated financial statements, and notes thereto,
should be considered in conjunction with the consolidated financial statements,
and the notes thereto, of the Company and TU Electric included in the 1995
Annual Reports of the Company and TU Electric on Form 10-K, and the information
under Management's Discussion and Analysis of Financial Condition and Results
of Operation herein. The Company and TU Electric each believes that its
respective disclosures are adequate to make the information presented not
misleading. Certain financial statement items have been reclassified to
conform to the current period presentation.
Impairment of Assets -- In September 1995, the Company and TU Electric
recorded the impairment of several non-performing assets in accordance with
the early adoption of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which prescribes a methodology for assessing and measuring
impairments in the carrying value of certain assets.
Use of Estimates -- The preparation of the Company's and TU Electric's
condensed consolidated financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions about future events that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the balance
sheet dates and the reported amounts of revenue and expense during the periods
covered by the condensed consolidated financial statements. In the event
estimates and/or assumptions prove to be different from actual amounts,
adjustments are made to reflect more current information in subsequent periods.
No material adjustments were made to previous quarter estimates during the
current period.
THE COMPANY
Consolidation -- The condensed consolidated financial statements include
the Company and all of its subsidiaries (System Companies):
TU Electric Texas Utilities Services Inc.
Texas Utilities Australia Pty. Ltd. Texas Utilities Properties Inc.
Southwestern Electric Service Company Texas Utilities Communications Inc.
Texas Utilities Fuel Company Basic Resources Inc.
Texas Utilities Mining Company Chaco Energy Company
All significant intercompany items and transactions have been eliminated in
consolidation.
TU ELECTRIC
Consolidation -- The condensed consolidated financial statements of TU
Electric include all of its subsidiaries, all of which are business trusts.
All significant intercompany items and transactions have been eliminated in
consolidation.
11
<PAGE> 12
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SHORT-TERM FINANCING
THE COMPANY AND TU ELECTRIC
In April 1996, the Company and TU Electric entered into two new credit
agreements (Credit Agreements) with a group of commercial banks. The Credit
Agreements, for each of which the Company pays a fee, have three facilities.
Borrowings under these facilities will be used for working capital and other
corporate purposes, including commercial paper backup. Facility A provides for
short-term borrowings of up to $375,000,000 at a variable interest rate and
terminates April 25, 1997. Facility B provides for short-term borrowings of
up to $875,000,000 at a variable interest rate and terminates April 26, 2001.
The Company's borrowings under Facilities A and B are limited to an aggregate
of $750,000,000 outstanding at any one time. Facility C is a separate
five-year, unsecured long-term loan to the Company in the principal amount of
$300,000,000.
3. CAPITALIZATION
THE COMPANY
COMMON STOCK
In June 1996, the Company purchased and retired 1,238,480 shares of its
issued and outstanding common stock.
LONG-TERM DEBT
In April 1996, the Company borrowed $300,000,000 pursuant to Facility C of
the Credit Agreements discussed in Note 2. The proceeds were used to refinance
outstanding indebtedness of the Company. Facility C matures April 26, 2001.
The Company may choose to use either or both of two methods of calculating a
variable interest rate for portions of the long-term loan. At September 30,
1996, the interest rate for the entire amount of the long-term loan was 5.89%.
TU ELECTRIC
PREFERRED STOCK
At September 30, 1996 and December 31, 1995, TU Electric had 17,000,000
shares of preferred stock authorized by its articles of incorporation of which
7,204,379 and 7,609,103 shares were issued and outstanding, respectively.
During the nine months ended September 30, 1996, TU Electric redeemed or
purchased 279,724 shares of preferred stock with annual dividend rates ranging
from 6.50% to 7.98%. In addition, TU Electric redeemed 125,000 shares on May
1, 1996, and 125,000 shares on November 1, 1996, of its $9.64 Cumulative
Preferred Stock which fulfills its mandatory redemption requirements, with
respect to preferred stock, until May 1, 1997.
LONG-TERM DEBT
In September 1996, the Brazos River Authority issued $111,215,000 aggregate
principal amount of Pollution Control Revenue Bonds due June 1, 2030
collateralized by TU Electric's First Mortgage Bonds. In March 1996, the
Brazos River Authority, the Sabine River Authority of Texas and the Trinity
River Authority of Texas issued $133,010,000 aggregate principal amount of
Pollution Control Revenue Bonds due March 1, 2026 collateralized by TU
Electric's First Mortgage Bonds. All such bonds have variable interest rates
and are subject to mandatory tender and remarketing from time to time. Should
remarketing fail, in certain circumstances, the purchase of the bonds upon
tender is supported by standby bond purchase agreements. Scheduled payments of
interest and principal at maturity or on mandatory redemption, upon the
occurrence of certain events, are supported by municipal bond insurance
policies. Interest rates on all of the bonds are currently determined daily.
At September 30, 1996, such rates ranged from 3.80% to 4.10%.
12
<PAGE> 13
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TU Electric redeemed, reacquired or prepaid the following long-term debt
during the nine months ended September 30, 1996:
<TABLE>
<CAPTION>
PRINCIPAL
DESCRIPTION AMOUNT INTEREST RATE MATURITY
----------- ------------ ---------------- ---------
<S> <C> <C> <C>
First mortgage bonds . . . . . . . . . . . . . . . . . . . . . . $276,595,000 7-3/8% to 10.44% 2001-2025
Taxable pollution control revenue bonds . . . . . . . . . . . . . 25,060,000 5.16% to 6.65% 2021
Pollution control revenue bonds . . . . . . . . . . . . . . . . . 169,165,000 7-3/4% to 8-1/4% 2016
Term credit agreement . . . . . . . . . . . . . . . . . . . . . . 300,000,000 5.95% to 6.09% 1997
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $770,820,000
============
</TABLE>
In October 1996, TU Electric reacquired $20,000,000 of its 7-3/8% First
Mortgage and Collateral Trust Bonds due October 1, 2025.
4. RATE PROCEEDINGS
TU ELECTRIC
In October 1994, TU Electric filed an application for approval by the
Public Utility Commission of Texas (PUC) of certain aspects of its Integrated
Resource Plan (IRP) for the ten-year period 1995-2004. The IRP, developed as
an experimental pilot project in conjunction with regulatory and customer
groups, included the acquisition through a competitive bidding process of
third party-supplied demand-side management resources and renewable resources.
Hearings on this application were concluded in March 1995. In August 1995, the
PUC remanded the case for development of a solicitation plan and to more
closely conform the TU Electric 1995 IRP to new state legislation that required
the PUC to adopt a state-wide integrated resource planning rule by September 1,
1996. In January 1996, TU Electric filed an updated IRP with the PUC along
with a proposed plan for the solicitation of resources through a competitive
bidding process. The PUC issued its final order on TU Electric's IRP in October
1996, making it the first plan of its kind to be approved in Texas.
5. COMMITMENTS AND CONTINGENCIES
COOLING WATER CONTRACTS
TU ELECTRIC
TU Electric has entered into contracts with public agencies to purchase
cooling water for use in the generation of electric energy. In connection with
certain contracts, TU Electric has agreed, in effect, to guarantee the
principal, $32,810,000 at September 30, 1996, and interest on bonds issued to
finance the reservoirs from which the water is supplied. The bonds mature at
various dates through 2011 and have interest rates ranging from 5-1/2% to 7%.
TU Electric is required to make periodic payments equal to such principal and
interest, including amounts assumed by a third party and reimbursed to TU
Electric. In addition, TU Electric is obligated to pay certain variable costs
of operating and maintaining the reservoirs. TU Electric has assigned to a
municipality all contract rights and obligations of TU Electric in connection
with $79,865,000 remaining principal amount of bonds at September 30, 1996,
issued for similar purposes which had previously been guaranteed by TU
Electric. TU Electric is, however, contingently liable in the unlikely event
of default by the municipality.
NUCLEAR DECOMMISSIONING AND DISPOSAL OF SPENT FUEL
TU ELECTRIC
TU Electric has established a reserve, charged to depreciation expense and
included in accumulated depreciation, for the decommissioning of the Comanche
Peak nuclear generating station (Comanche Peak), whereby decommissioning costs
are being recovered from customers over the life of the plant and deposited in
external trust funds (included in other investments). At September 30, 1996,
such reserve totaled $90,489,000 which includes an accrual of $13,634,000 and
$18,179,000 for the nine and twelve months ended September 30, 1996,
respectively. As
13
<PAGE> 14
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
of September 30, 1996, the market value of deposits in the external trust for
decommissioning of Comanche Peak was $107,173,000. Realized earnings on funds
deposited in the external trust are recognized in the reserve. Based on a
site-specific study during 1992 using the prompt dismantlement method and
then-current dollars, decommissioning costs for Comanche Peak Unit 1, and Unit
2 and common facilities were estimated to be $255,000,000 and $344,000,000,
respectively. Decommissioning activities are projected to begin in 2030 and
2033 for Comanche Peak Unit 1, and Unit 2 and common facilities, respectively.
TU Electric is recovering such costs based upon the 1992 study through its
rates placed in effect under Docket 11735.
TU Electric has a contract with the United States Department of Energy for
the future disposal of spent nuclear fuel at a cost of one mill per
kilowatt-hour of Comanche Peak net generation. The disposal fee is included in
nuclear fuel expense.
GENERAL
THE COMPANY AND TU ELECTRIC
In addition to the above, the Company and TU Electric are involved in
various legal and administrative proceedings which, in the opinion of each,
should not have a material effect upon its financial position, results of
operation or cash flows.
14
<PAGE> 15
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Company:
We have reviewed the accompanying condensed consolidated balance sheet of Texas
Utilities Company and subsidiaries as of September 30, 1996, and the related
condensed statements of consolidated income for the three-month, nine-month and
twelve-month periods ended September 30, 1996 and 1995, and of consolidated
cash flows for the nine-month periods ended September 30, 1996 and 1995. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Texas Utilities Company and
subsidiaries as of December 31, 1995, and the related consolidated statements
of income, retained earnings and cash flows for the year then ended (not
presented herein); and in our report dated February 29, 1996, we expressed an
unqualified opinion on those consolidated financial statements, which opinion
included an explanatory paragraph concerning Texas Utilities Company and
subsidiaries' change in accounting for the impairment of long-lived assets and
long-lived assets to be disposed of. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1995, is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
November 5, 1996
15
<PAGE> 16
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Electric Company:
We have reviewed the accompanying condensed consolidated balance sheet of Texas
Utilities Electric Company and subsidiaries ( TU Electric ) as of September 30,
1996, and the related condensed statements of consolidated income for the
three-month, nine-month and twelve-month periods ended September 30, 1996 and
1995, and of consolidated cash flows for the nine-month periods ended September
30, 1996 and 1995. These financial statements are the responsibility of TU
Electric s management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of TU Electric and subsidiaries as of
December 31, 1995, and the related consolidated statements of income, retained
earnings and cash flows for the year then ended (not presented herein); and in
our report dated February 29, 1996, we expressed an unqualified opinion on
those consolidated financial statements, which opinion included an explanatory
paragraph concerning TU Electric and subsidiaries change in accounting for the
impairment of long-lived assets and long-lived assets to be disposed of. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
DELOITTE & TOUCHE LLP
November 5, 1996
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
This report and other presentations made by Texas Utilities Company
(Company) or Texas Utilities Electric Company and its subsidiaries (TU
Electric) contain forward looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended. Although the Company and
TU Electric each believes that in making any such statement its expectations
are based on reasonable assumptions, any such statement is qualified in its
entirety by reference to the following important factors that could cause the
actual results of the Company or TU Electric to differ materially from those
projected in such forward looking statement: (i) prevailing governmental
policies and regulatory actions, including those of the Federal Energy
Regulatory Commission, the Public Utility Commission of Texas, the Nuclear
Regulatory Commission, and, in the case of the Company, the Office of the
Regulator General of Victoria, Australia, with respect to allowed rates of
return, industry and rate structure, purchased power and investment
recovery, operations of nuclear generating facilities, acquisitions and
disposal of assets and facilities, operation and construction of plant
facilities, decommissioning costs, present or prospective wholesale and retail
competition, changes in tax laws and policies and changes in and compliance
with environmental and safety laws and policies, (ii) weather conditions and
other natural phenomena, (iii) unanticipated population growth or decline, and
changes in market demand and demographic pattern, (iv) competition for retail
and wholesale customers, (v) pricing and transportation of crude oil, natural
gas and other commodities, (vi) unanticipated changes in interest rates or in
rates of inflation, (vii) unanticipated changes in operating expenses and
capital expenditures, (viii) capital market conditions, (ix) competition for
new energy development opportunities, and (x) legal and administrative
proceedings and settlements.
Certain comparisons in this Quarterly Report on Form 10-Q have been
affected by the acquisition of Texas Utilities Australia Pty. Ltd. in December
1995.
LIQUIDITY AND CAPITAL RESOURCES
For information concerning liquidity and capital resources, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operation in the Company and TU Electric Annual Reports on Form 10-K for the
year 1995. Quarterly results presented herein are not necessarily indicative
of expectations for a full year's operations because of seasonal and other
factors, including variations in maintenance and other operating expense
patterns. No significant changes or events which might affect the financial
condition of the Company and its subsidiaries (System Companies) have occurred
subsequent to year-end other than as disclosed in the reports of the Company
and TU Electric included herein .
THE COMPANY AND TU ELECTRIC
In April 1996, the Company and TU Electric entered into two new credit
agreements (Credit Agreements) with a group of commercial banks. The Credit
Agreements, for each of which the Company pays a fee, have three facilities.
Borrowings under these facilities will be used for working capital and other
corporate purposes, including commercial paper backup. Facility A provides for
short-term borrowings of up to $375,000,000 at a variable interest rate and
terminates April 25, 1997. Facility B provides for short-term borrowings of
up to $875,000,000 at a variable interest rate and terminates April 26, 2001.
The Company's borrowings under Facilities A and B are limited to an aggregate
of $750,000,000 outstanding at any one time. Facility C is a separate
five-year, unsecured long-term loan to the Company in the principal amount of
$300,000,000.
In addition to the above, the Company and Texas Utilities Fuel Company have
separate arrangements for uncommitted lines of credit. For more information
regarding short-term and long-term financings of the Company and TU Electric,
see Notes 2 and 3 to Condensed Consolidated Financial Statements.
The System Companies expect to issue additional debt and equity securities
as needed, including (i) the possible future sale by TU Electric of up to
$350,000,000 principal amount of First Mortgage Bonds currently registered with
the Securities and Exchange Commission for offering pursuant to Rule 415 under
the Securities Act of 1933 and (ii) the possible future sale by TU Electric of
up to 250,000 shares of Cumulative Preferred Stock ($100 liquidation value)
similarly registered. In addition, TU Electric has the ability to issue from
time to time up to $98,850,000 of First Mortgage Bonds designated as
Medium-Term Notes, Series D.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
In order to remain competitive, the Company and TU Electric are
aggressively managing their operating costs and capital expenditures through
streamlined business processes and are developing and implementing strategies
to address an increasingly competitive environment. These strategies include
initiatives to improve their return on corporate assets and to maximize
shareholder value through new marketing programs, creative rate design, and new
business opportunities. Additional initiatives under consideration include the
potential disposition or alternative utilization of existing assets and the
restructuring of strategic business units.
While TU Electric and Southwestern Electric Service Company (SESCO) have
experienced competitive pressures in the wholesale market resulting in a small
loss of load for TU Electric since the beginning of 1993, wholesale sales
represented a relatively low percentage of TU Electric's consolidated operating
revenues for the three-, nine- and twelve-month periods ended September 30,
1996. TU Electric and SESCO are unable to predict the extent of future
competitive developments in either the wholesale or retail markets or what
impact, if any, such developments may have on their operations.
For other information regarding Rate Proceedings, see Note 4 to Condensed
Consolidated Financial Statements.
Under the current regulatory environment, TU Electric and SESCO are subject
to the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS 71). In the
event the companies no longer meet the criteria for application of SFAS 71 due
to significant changes in regulation or competition, the companies would
discontinue the application of SFAS 71. If a portion of either company's
operations continues to meet the criteria for application of SFAS 71, only that
portion would be subject to SFAS 71 treatment. Should significant changes in
regulation or competition occur, TU Electric and SESCO would be required to
assess the recoverability of other assets, including plant, and, if impaired,
to write down the assets to reflect their fair market value. Neither TU
Electric nor SESCO can predict whether or to what extent changes in the
business environment may occur requiring the partial or complete
discontinuation of SFAS 71 application.
THE COMPANY
External funds of a permanent or long-term nature are obtained through the
issuance of common stock, preferred stock, preferred securities and long-term
debt by the System Companies. The capitalization ratios of the Company and its
subsidiaries at September 30, 1996 consisted of approximately 55% long-term
debt, 2% TU Electric obligated, mandatorily redeemable, preferred securities of
trusts, 5% preferred stock and 38% common stock equity.
To date in 1996, the System Companies redeemed, reacquired or made
principal payments of $916,426,000 (including $846,927,000 for TU Electric) on
long-term debt, preferred stock and common stock, including the Company's June
1996 purchase and retirement of 1,238,480 shares of its issued and outstanding
common stock.
In April 1996, the Company borrowed $300,000,000 pursuant to Facility C of
the Credit Agreements previously discussed. The proceeds were used to
refinance outstanding indebtedness of the Company. Facility C matures April
26, 2001. The Company may choose to use either or both of two methods of
calculating a variable interest rate for portions of the long-term loan. The
current interest rate for the entire amount of the long-term loan is 5.83%.
In April 1996, the Company announced that it had entered into a merger
agreement with Dallas-based ENSERCH Corporation (ENSERCH). Under the terms of
the agreement, Lone Star Gas Company (Lone Star Gas) and Lone Star Pipeline
Company (Lone Star Pipeline), the local distribution and pipeline divisions of
ENSERCH, and other businesses, excluding Enserch Exploration Inc. (EEX), a
subsidiary of ENSERCH, will be acquired by a new holding company, to be named
Texas Utilities Company, which will own all of the common stock of ENSERCH and
the Company. Shares of the Company's common stock will be automatically
converted into shares of the new holding company common stock on a one-for-one
basis in a tax-free transaction. Lone Star Gas is one of the largest gas
distribution companies in the United States and the largest in Texas, serving
over 1.3 million customers and providing
18
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
service through over 23,500 miles of distribution mains. Lone Star Pipeline
has one of the largest pipelines in the United States and consists of 9,200
miles of gathering and transmission pipelines in Texas. Also included in the
acquisition are ENSERCH's subsidiaries engaged in natural gas processing,
natural gas marketing and independent power production. The new holding
company is expected to issue approximately $550 million of the new holding
company's common stock to ENSERCH shareholders, and approximately $1.15 billion
of ENSERCH's debt and preferred stock would remain outstanding. The transaction
is subject to certain conditions which include the approval of ENSERCH's, EEX's
and the Company's shareholders, approval by the SEC and receipt by ENSERCH of a
favorable ruling from the Internal Revenue Service (IRS). Special meetings of
the shareholders are scheduled to be held separately on November 15, 1996, for
the purpose of approving the transaction. In September 1996, proxy statements
were mailed to ENSERCH's, EEX's and the Company's shareholders for purposes of
voting on the proposed merger. The Texas Railroad Commission has been notified
of the proposed transaction and has indicated no objection to it. The
transaction is also subject to review by the Antitrust Division of the U.S.
Department of Justice. The required waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, expired in October 1996.
TU ELECTRIC
The capitalization ratios of TU Electric at September 30, 1996 consisted of
approximately 47% long-term debt, 3% TU Electric obligated, mandatorily
redeemable, preferred securities of trusts, 5% preferred stock and 45% common
stock equity.
Long-term debt financings to date in 1996 by TU Electric consisted of the
issuance of pollution control revenue bonds in the amount of $133,010,000 due
2026 and $111,215,000 due 2030. Current interest rates on such issuances range
from 2.90% to 3.10%. Proceeds from such financings were used for the early
redemption or reacquisition of debt and for general corporate purposes.
THE COMPANY AND TU ELECTRIC
The re-evaluation of growth expectations, the effects of inflation,
additional regulatory requirements and the availability of fuel, labor,
materials and capital may result in changes to the estimated construction costs
and dates of completion in the Company's and TU Electric's construction
programs. Commitments in connection with the construction program are
generally revocable subject to reimbursement to manufacturers for expenditures
incurred or other cancellation penalties.
The Company and TU Electric each plans to seek new investment opportunities
from time to time when it concludes that such investments are consistent with
its business strategies and will likely enhance the long-term returns to
shareholders. Other than the ENSERCH acquisition discussed above, the timing
and amounts of any specific new business investment opportunities are presently
undetermined.
RESULTS OF OPERATION
THE COMPANY AND TU ELECTRIC
For the three-, nine- and twelve-month periods ended September 30, 1996,
the Company's consolidated net income, excluding the after-tax effect of the
1995 asset impairment representing approximately $802 million ($316 million for
TU Electric), decreased approximately 1%, and increased approximately 18% and
24% as compared to the respective periods ended September 30, 1995. For the
Company and TU Electric, from which most of consolidated earnings is derived,
the major factor affecting earnings for the three-month period was milder
weather conditions as compared to the prior period. For the nine- and
twelve-month periods, the major factors affecting earnings were increased
customer growth and warmer weather.
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
TU ELECTRIC
For the three-, nine- and twelve-month periods, operating revenues
increased approximately 1%, 8% and 7%, respectively. The following table
details the factors contributing to these changes:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
------------------ ----------------- -------------------
FACTORS THOUSANDS OF DOLLARS
-------
<S> <C> <C> <C>
Base rate revenue (including unbilled) . . . . . . . $(12,398) $178,249 $212,165
Fuel revenue and power cost recovery factor revenue . 42,269 173,634 153,191
Other revenue . . . . . . . . . . . . . . . . . . . . (3,837) 6,242 8,045
-------- -------- --------
Total operating revenues . . . . . . . . . . . . . $ 26,034 $358,125 $373,401
======== ======== ========
</TABLE>
Total energy sales (including unbilled energy sales) increased
approximately 1%, 7% and 6% for the three-, nine- and twelve-month periods,
respectively. The decrease in base rate revenue for the three-month period
reflects milder weather conditions. Increased base rate revenue for the nine-
and twelve-month periods were primarily the result of an increase in customers
and warmer weather conditions as compared to the prior periods.
The increase in fuel revenue for all periods was primarily due to increases
in energy sales and increases in spot market gas prices.
Fuel and purchased power expense increased approximately 9%, 14% and 10%
for the three-month, nine-month and twelve- month periods primarily due to
increased energy sales and increased spot market gas prices as compared to the
prior periods.
Other income and (deductions) -- net increased for the three-month period
due primarily to gains on the disposition of certain properties, and decreased
for the nine- and twelve-month periods due primarily to an increase in
non-utility property expenses, offset in part, by gains on the disposition of
certain properties.
Interest on mortgage bonds decreased as compared to the prior periods due
to reduced interest requirements resulting from the Company's refinancing
efforts, partially offset by increased interest requirements for new issues
sold. The decrease in interest on other long-term debt for all periods was
affected by the prepayment of TU Electric's promissory note to Brazos
Electric Power Cooperative in October 1995. Other interest decreased for the
three-month period due to a decrease in average short-term borrowings. For the
nine- and twelve-month periods, other interest charges increased due to an
interest payment related to a settlement with the IRS, offset in part, by
decreased interest on average short-term borrowings. Preferred securities of
trusts distributions resulted from the issuance, in December 1995, of TU
Electric obligated, mandatorily redeemable, preferred securities of trusts.
For the three-, nine- and twelve-month periods, preferred stock dividends
decreased due primarily to the partial redemption of certain series.
20
<PAGE> 21
PART II. OTHER INFORMATION
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as a part of Part II are:
4(a) - Fifty-sixth Supplemental Indenture, dated as of September 1,
1996, to the Texas Utilities Electric Company Mortgage and
Deed of Trust, dated as of December 1, 1983, between Texas
Utilities Electric Company and Irving Trust Company (now The
Bank of New York), Trustee.
15 - Letters from Deloitte & Touche LLP as to unaudited interim
financial information
15(a) Texas Utilities Company
15(b) Texas Utilities Electric Company
27 - Financial Data Schedules
27(a) Texas Utilities Company
27(b) Texas Utilities Electric Company
(b) Reports on Form 8-K filed since June 30, 1996 are as follows:
None
21
<PAGE> 22
SIGNATURE
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 hereunto duly authorized.
TEXAS UTILITIES COMPANY
By /s/ Cathryn C. Hulen
-------------------------------
Cathryn C. Hulen
Controller and
Principal Accounting Officer
Date: November 5, 1996
- --------------------------------------------------------------------------------
SIGNATURE
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 hereunto duly authorized.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ Cathryn C. Hulen
-------------------------------
Cathryn C. Hulen
Controller and
Principal Accounting Officer
Date: November 5, 1996
22
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------
<S> <C>
4(a) - Fifty-sixth Supplemental Indenture, dated as of
September 1, 1996, to the Texas Utilities Electric
Company Mortgage and Deed of Trust, dated as of
December 1, 1983, between Texas Utilities Electric
Company and Irving Trust Company (now the Bank of
New York), Trustee
15 - Letters from Deloitte & Touche LLP as to unaudited
interim financial information
15(a) Texas Utilities Company
15(b) Texas Utilities Electric Company
27 - Financial Data Schedules
27(a) Texas Utilities Company
27(b) Texas Utilities Electric Company
</TABLE>
<PAGE> 1
EXHIBIT 4(a)
[CONFORMED COPY]
================================================================================
TEXAS UTILITIES ELECTRIC COMPANY
TO
THE BANK OF NEW YORK,
(FORMERLY IRVING TRUST COMPANY)
TRUSTEE UNDER THE TEXAS UTILITIES
ELECTRIC COMPANY MORTGAGE AND
DEED OF TRUST, DATED AS OF
DECEMBER 1, 1983
------------------
FIFTY-SIXTH SUPPLEMENTAL INDENTURE
PROVIDING AMONG OTHER THINGS FOR
FIRST MORTGAGE BONDS,
POLLUTION CONTROL SERIES AC
AND
FIRST MORTGAGE BONDS,
POLLUTION CONTROL SERIES AD
------------------
DATED AS OF SEPTEMBER 1, 1996
================================================================================
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
<PAGE> 2
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
FIFTY-SIXTH SUPPLEMENTAL INDENTURE
----------------------------
INDENTURE, dated as of September 1, 1996, between TEXAS UTILITIES
ELECTRIC COMPANY, a corporation of the State of Texas, whose address is Energy
Plaza, 1601 Bryan Street, Dallas, Texas 75201 (hereinafter sometimes called the
Company), and THE BANK OF NEW YORK (formerly Irving Trust Company), a
corporation of the State of New York, whose address is 101 Barclay Street, New
York, New York 10286 (hereinafter sometimes called the Trustee), Trustee under
the Mortgage and Deed of Trust, dated as of December 1, 1983 (hereinafter
called the Original Indenture, the Original Indenture and any and all
indentures and instruments supplemental thereto being hereinafter sometimes
collectively called the Mortgage), which Original Indenture was executed and
delivered by the Company to secure the payment of bonds issued or to be issued
under and in accordance with the provisions of the Mortgage, reference to which
Mortgage is made, this Indenture (hereinafter called the Fifty-sixth
Supplemental Indenture) being supplemental thereto;
WHEREAS, said Original Indenture was recorded or filed as required in
the State of Texas; and
WHEREAS, the Company executed and delivered to the Trustee the following
supplemental indentures:
<TABLE>
<CAPTION>
DESIGNATION DATED AS OF
----------- -----------
<S> <C>
First Supplemental Indenture . . . . . . . . . . . . . . . . . . . . April 1, 1984
Second Supplemental Indenture . . . . . . . . . . . . . . . . . . . . September 1, 1984
Third Supplemental Indenture . . . . . . . . . . . . . . . . . . . . April 1, 1985
Fourth Supplemental Indenture . . . . . . . . . . . . . . . . . . . . August 1, 1985
Fifth Supplemental Indenture . . . . . . . . . . . . . . . . . . . . September 1, 1985
Sixth Supplemental Indenture . . . . . . . . . . . . . . . . . . . . December 1, 1985
Seventh Supplemental Indenture . . . . . . . . . . . . . . . . . . . March 1, 1986
Eighth Supplemental Indenture . . . . . . . . . . . . . . . . . . . . May 1, 1986
Ninth Supplemental Indenture . . . . . . . . . . . . . . . . . . . . October 1, 1986
Tenth Supplemental Indenture . . . . . . . . . . . . . . . . . . . . December 1, 1986
Eleventh Supplemental Indenture . . . . . . . . . . . . . . . . . . . December 1, 1986
Twelfth Supplemental Indenture . . . . . . . . . . . . . . . . . . . February 1, 1987
Thirteenth Supplemental Indenture . . . . . . . . . . . . . . . . . . March 1, 1987
Fourteenth Supplemental Indenture . . . . . . . . . . . . . . . . . . April 1, 1987
Fifteenth Supplemental Indenture . . . . . . . . . . . . . . . . . . July 1, 1987
Sixteenth Supplemental Indenture . . . . . . . . . . . . . . . . . . September 1, 1987
Seventeenth Supplemental Indenture . . . . . . . . . . . . . . . . . October 1, 1987
Eighteenth Supplemental Indenture . . . . . . . . . . . . . . . . . . March 1, 1988
Nineteenth Supplemental Indenture . . . . . . . . . . . . . . . . . . May 1, 1988
</TABLE>
<PAGE> 3
2
<TABLE>
<CAPTION>
DESIGNATION DATED AS OF
----------- -----------
<S> <C>
Twentieth Supplemental Indenture . . . . . . . . . . . . . . . . . . September 1, 1988
Twenty-first Supplemental Indenture . . . . . . . . . . . . . . . . . November 1, 1988
Twenty-second Supplemental Indenture . . . . . . . . . . . . . . . . January 1, 1989
Twenty-third Supplemental Indenture . . . . . . . . . . . . . . . . . August 1, 1989
Twenty-fourth Supplemental Indenture . . . . . . . . . . . . . . . . November 1, 1989
Twenty-fifth Supplemental Indenture . . . . . . . . . . . . . . . . . December 1, 1989
Twenty-sixth Supplemental Indenture . . . . . . . . . . . . . . . . . February 1, 1990
Twenty-seventh Supplemental Indenture . . . . . . . . . . . . . . . . September 1, 1990
Twenty-eighth Supplemental Indenture . . . . . . . . . . . . . . . . October 1, 1990
Twenty-ninth Supplemental Indenture . . . . . . . . . . . . . . . . . October 1, 1990
Thirtieth Supplemental Indenture . . . . . . . . . . . . . . . . . . March 1, 1991
Thirty-first Supplemental Indenture . . . . . . . . . . . . . . . . . May 1, 1991
Thirty-second Supplemental Indenture . . . . . . . . . . . . . . . . July 1, 1991
Thirty-third Supplemental Indenture . . . . . . . . . . . . . . . . . February 1, 1992
Thirty-fourth Supplemental Indenture . . . . . . . . . . . . . . . . April 1, 1992
Thirty-fifth Supplemental Indenture . . . . . . . . . . . . . . . . . April 1, 1992
Thirty-sixth Supplemental Indenture . . . . . . . . . . . . . . . . . June 1, 1992
Thirty-seventh Supplemental Indenture . . . . . . . . . . . . . . . . June 1, 1992
Thirty-eighth Supplemental Indenture . . . . . . . . . . . . . . . . August 1, 1992
Thirty-ninth Supplemental Indenture . . . . . . . . . . . . . . . . . October 1, 1992
Fortieth Supplemental Indenture . . . . . . . . . . . . . . . . . . . November 1, 1992
Forty-first Supplemental Indenture . . . . . . . . . . . . . . . . . December 1, 1992
Forty-second Supplemental Indenture . . . . . . . . . . . . . . . . . March 1, 1993
Forty-third Supplemental Indenture . . . . . . . . . . . . . . . . . April 1, 1993
Forty-fourth Supplemental Indenture . . . . . . . . . . . . . . . . . April 1, 1993
Forty-fifth Supplemental Indenture . . . . . . . . . . . . . . . . . May 1, 1993
Forty-sixth Supplemental Indenture . . . . . . . . . . . . . . . . . July 1, 1993
Forty-seventh Supplemental Indenture . . . . . . . . . . . . . . . . October 1, 1993
Forty-eighth Supplemental Indenture . . . . . . . . . . . . . . . . . November 1, 1993
Forty-ninth Supplemental Indenture . . . . . . . . . . . . . . . . . May 1, 1994
Fiftieth Supplemental Indenture . . . . . . . . . . . . . . . . . . . May 1, 1994
Fifty-first Supplemental Indenture . . . . . . . . . . . . . . . . . August 1, 1994
Fifty-second Supplemental Indenture . . . . . . . . . . . . . . . . . April 1, 1995
Fifty-third Supplemental Indenture . . . . . . . . . . . . . . . . . June 1, 1995
Fifty-fourth Supplemental Indenture . . . . . . . . . . . . . . . . . October 1, 1995
Fifty-fifth Supplemental Indenture . . . . . . . . . . . . . . . . . March 1, 1996
</TABLE>
which supplemental indentures were or are to be recorded or filed as required
in the State of Texas; and
WHEREAS, by the Original Indenture, the Company covenanted that it
would execute and deliver such supplemental indenture or indentures and such
further instruments and do such further acts as may be necessary or proper to
carry out more effectually the purposes of the Mortgage and to make subject to
the Lien of the Mortgage any property thereafter acquired and intended to be
subject to the Lien thereof; and
WHEREAS, in addition to the property described in the Original
Indenture, the Company has acquired certain other property, rights and
interests in property; and
<PAGE> 4
3
WHEREAS, the Company has heretofore issued as of August 31, 1996, in
accordance with the provisions of the Original Indenture, as heretofore
supplemented, the following series of First Mortgage and Collateral Trust Bonds
and First Mortgage Bonds:
<TABLE>
<CAPTION>
Principal Principal
Amount Amount
Series Issued Outstanding
------ --------------- -----------
<S> <C> <C>
12% Series due March 1, 1985 . . . . . . . . . . . . . . $ 1,000,000 $ None
13 5/8% Series due April 1, 2014 . . . . . . . . . . . . 100,000,000 None
13 1/2% Series due September 1, 2014 . . . . . . . . . . 150,000,000 None
12 7/8% Series due April 1, 2015 . . . . . . . . . . . . 150,000,000 None
12% Series due August 1, 2015 . . . . . . . . . . . . . . 100,000,000 None
12% Series due September 1, 2015 . . . . . . . . . . . . 75,000,000 None
11 1/8% Series due December 1, 2015 . . . . . . . . . . . 150,000,000 None
9 3/8% Series due March 1, 2016 . . . . . . . . . . . . . 200,000,000 None
9 3/4% Series due May 1, 2016 . . . . . . . . . . . . . . 200,000,000 None
7 3/4% Pollution Control Series C . . . . . . . . . . . . 70,000,000 None
8 1/4% Pollution Control Series D . . . . . . . . . . . . 200,000,000 111,215,000
9 1/2% Series due December 1, 2016 . . . . . . . . . . . 300,000,000 None
9 1/4% Series due February 1, 2017 . . . . . . . . . . . 250,000,000 None
7 7/8% Pollution Control Series E . . . . . . . . . . . . 100,000,000 81,305,000
10 1/2% Series due April 1, 2017 . . . . . . . . . . . . 250,000,000 None
9 1/2% Series due July 1, 1997 . . . . . . . . . . . . . 150,000,000 None
10 1/2% Series due July 1, 2017 . . . . . . . . . . . . . 150,000,000 None
9% Pollution Control Series F . . . . . . . . . . . . . 55,000,000 51,525,000
9% Pollution Control Series G . . . . . . . . . . . . . 12,000,000 12,000,000
9 7/8% Pollution Control Series H . . . . . . . . . . . 112,000,000 28,765,000
9 1/4% Pollution Control Series I . . . . . . . . . . . 100,000,000 54,005,000
10 3/8% Series due May 1, 1998 . . . . . . . . . . . . . 150,000,000 None
11 3/8% Series due May 1, 2018 . . . . . . . . . . . . . 150,000,000 None
Secured Medium-Term Notes, Series A . . . . . . . . . . . 300,000,000 30,000,000
10.44% Series due November 1, 2008 . . . . . . . . . . . 150,000,000 100,000,000
8 1/4% Pollution Control Series J . . . . . . . . . . . 100,000,000 100,000,000
9 1/2% Series due August 1, 1999 . . . . . . . . . . . . 200,000,000 200,000,000
10% Series due August 1, 2019 . . . . . . . . . . . . . . 100,000,000 None
9 7/8% Series due November 1, 2019 . . . . . . . . . . . 150,000,000 None
Secured Medium-Term Notes, Series B . . . . . . . . . . . 150,000,000 120,000,000
8 1/8% Pollution Control Series K . . . . . . . . . . . 50,000,000 50,000,000
8 1/8% Pollution Control Series L . . . . . . . . . . . 40,000,000 40,000,000
10 5/8% Series due September 1, 2020 . . . . . . . . . . 250,000,000 None
Secured Medium-Term Notes, Series C . . . . . . . . . . . 150,000,000 36,000,000
8 1/4% Pollution Control Series due October 1, 2020 . . . 11,000,000 11,000,000
7 7/8% Pollution Control Series due March 1, 2021 . . . . 100,000,000 100,000,000
9 3/4% Series due May 1, 2021 . . . . . . . . . . . . . . 300,000,000 280,855,000
0% Pollution Control Series M due June 1, 2021 . . . . . 86,250,000 None
0% Pollution Control Series N due June 1, 2021 . . . . . 57,500,000 None
0% Pollution Control Series O due June 1, 2021 . . . . . 57,500,000 None
0% Pollution Control Series P due June 1, 2021 . . . . . 115,000,000 75,831,000
8 1/8% Series due February 1, 2002 . . . . . . . . . . . 150,000,000 150,000,000
8 7/8% Series due February 1, 2022 . . . . . . . . . . . 175,000,000 175,000,000
</TABLE>
<PAGE> 5
4
<TABLE>
<CAPTION>
Principal Principal
Amount Amount
Series Issued Outstanding
------ --------------- -----------
<S> <C> <C>
8 1/4% Series due April 1, 2004 . . . . . . . . . . . . . $100,000,000 $100,000,000
9% Series due April 1, 2022 . . . . . . . . . . . . . . . 100,000,000 100,000,000
6 3/4% Pollution Control Series due April 1, 2022 . . . . 50,000,000 50,000,000
7 1/8% Series due June 1, 1997 . . . . . . . . . . . . . 150,000,000 150,000,000
8% Series due June 1, 2002 . . . . . . . . . . . . . . . 147,000,000 147,000,000
6 5/8% Pollution Control Series due June 1, 2022 . . . . 33,000,000 33,000,000
6 3/8% Series due August 1, 1997 . . . . . . . . . . . . 175,000,000 175,000,000
7 3/8% Series due August 1, 2001 . . . . . . . . . . . . 150,000,000 150,000,000
8 1/2% Series due August 1, 2024 . . . . . . . . . . . . 175,000,000 163,000,000
6.70% Pollution Control Series due October 1, 2022 . . . 16,935,000 16,935,000
6.55% Pollution Control Series due October 1, 2022 . . . 40,000,000 40,000,000
7 3/8% Series due November 1, 1999 . . . . . . . . . . . 100,000,000 100,000,000
8 3/4% Series due November 1, 2023 . . . . . . . . . . . 200,000,000 195,550,000
6 1/2% Pollution Control Series due December 1, 2027 . . 46,660,000 46,660,000
6 3/4% Series due March 1, 2003 . . . . . . . . . . . . . 200,000,000 200,000,000
7 7/8% Series due March 1, 2023 . . . . . . . . . . . . . 300,000,000 300,000,000
6.05% Pollution Control Series due April 1, 2025 . . . . 90,000,000 90,000,000
6.10% Pollution Control Series due April 1, 2028 . . . . 50,000,000 50,000,000
5 7/8% Series due April 1, 1998 . . . . . . . . . . . . . 175,000,000 175,000,000
6 3/4% Series due April 1, 2003 . . . . . . . . . . . . . 100,000,000 100,000,000
7 7/8% Series due April 1, 2024 . . . . . . . . . . . . . 225,000,000 225,000,000
0% Pollution Control Series due June 1, 2023 . . . . . . 115,000,000 115,000,000
5 3/4% Series due July 1, 1998 . . . . . . . . . . . . . 150,000,000 150,000,000
6 3/4% Series due July 1, 2005 . . . . . . . . . . . . . 100,000,000 100,000,000
7 5/8% Series due July 1, 2025 . . . . . . . . . . . . . 250,000,000 250,000,000
5 1/2% Series due October 1, 1998 . . . . . . . . . . . . 125,000,000 125,000,000
6 1/4% Series due October 1, 2004 . . . . . . . . . . . . 125,000,000 125,000,000
7 3/8% Series due October 1, 2025 . . . . . . . . . . . . 300,000,000 253,000,000
5 1/2% Pollution Control Series due May 1, 2022 . . . . . 50,000,000 50,000,000
5.55% Pollution Control Series due May 1, 2022 . . . . . 75,000,000 75,000,000
5.85% Pollution Control Series due May 1, 2022 . . . . . 33,465,000 33,465,000
Floating Rate Series due May 1, 1999 . . . . . . . . . . 300,000,000 300,000,000
Pollution Control Series Q due May 1, 2029 . . . . . . . 45,045,500 45,045,500
Pollution Control Series R due May 1, 2029 . . . . . . . 45,045,500 45,045,500
0% Series due 1994 . . . . . . . . . . . . . . . . . . . 1,013,831,000 None
Pollution Control Series S due April 1, 2030 . . . . . . 58,270,500 58,270,500
Pollution Control Series T due April 1, 2030 . . . . . . 18,400,000 18,400,000
Pollution Control Series U . . . . . . . . . . . . . . . 136,108,250 136,108,250
Pollution Control Series V . . . . . . . . . . . . . . . 136,108,250 136,108,250
Pollution Control Series W . . . . . . . . . . . . . . . 13,857,500 13,857,500
Pollution Control Series X . . . . . . . . . . . . . . . 21,246,250 21,246,250
Secured Medium-Term Notes, Series D . . . . . . . . . . . 201,150,000 201,150,000
Pollution Control Series Y . . . . . . . . . . . . . . . 28,819,000 28,819,000
Pollution Control Series Z . . . . . . . . . . . . . . . 66,642,500 66,642,500
Pollution Control Series AA . . . . . . . . . . . . . . . 28,750,000 28,750,000
Pollution Control Series AB . . . . . . . . . . . . . . . 28,750,000 28,750,000
</TABLE>
<PAGE> 6
5
which bonds are also hereinafter sometimes called bonds of the First through
Eighty-ninth Series, respectively; and
WHEREAS, Section 2.01 of the Original Indenture provides that the form
of each series of bonds (other than the First Series) issued thereunder and of
the coupons to be attached to coupon bonds of such series shall be established
by Resolution of the Board of Directors of the Company, and that the form of
such series, as established by said Board of Directors, shall specify the
descriptive title of the bonds and various other terms thereof, and may also
have such omissions or modifications or contain such provisions not prohibited
by the provisions of the Mortgage as the Board of Directors may, in its
discretion, cause to be inserted therein expressing or referring to the terms
and conditions upon which such bonds are to be issued and/or secured under
the Mortgage; and
WHEREAS, Section 22.04 of the Original Indenture provides, among other
things, that any power, privilege or right expressly or impliedly reserved to
or in any way conferred upon the Company by any provision of the Mortgage,
whether such power, privilege or right is in any way restricted or is
unrestricted, may be in whole or in part waived or surrendered or subjected to
any restriction if at the time unrestricted, or to additional restriction if
already restricted, and the Company may enter into any further covenants,
limitations, restrictions or provisions for the benefit of any one or more
series of bonds issued thereunder, or the Company may cure any ambiguity
contained therein, or in any supplemental indenture, or may establish the terms
and provisions of any series of bonds other than the First Series, by an
instrument in writing executed and acknowledged by the Company in such manner
as would be necessary to entitle a conveyance of real estate to be recorded in
all of the states in which any property at the time subject to the Lien of the
Mortgage shall be situated; and
WHEREAS, the Company now desires to create two new series of bonds and
to add to its covenants and agreements contained in the Mortgage certain other
covenants and agreements to be observed by it and to alter and amend in certain
respects the covenants and provisions contained in the Mortgage; and
WHEREAS, the execution and delivery by the Company of this Fifty-sixth
Supplemental Indenture, and the terms of the bonds of the Ninetieth and
Ninety-first Series, hereinafter referred to, have been duly authorized by the
Board of Directors of the Company by appropriate resolutions of said Board of
Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That the Company, in
consideration of the premises and of Ten Dollars to it duly paid by the Trustee
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, and in order to secure the payment of both the
principal of and interest and premium, if any, on the bonds from time to time
issued under the Mortgage, according to their tenor and effect and the
performance of all the provisions of the Mortgage (including any instruments
supplemental thereto and any modification made as in the Mortgage provided) and
of said bonds, hath granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, hypothecated, affected, pledged, set over and confirmed
and
<PAGE> 7
6
granted a security interest in and by these presents doth grant, bargain, sell,
release, convey, assign, transfer, mortgage, hypothecate, affect, pledge, set
over and confirm and grant a security interest in (subject, however, to
Excepted Encumbrances as defined in Section 1.06 of the Original Indenture)
unto The Bank of New York, Trustee under the Mortgage, and to its successor or
successors in said trust, and to said Trustee and its successors and assigns
forever, all properties of the Company, real, personal and mixed, of the kind
or nature specifically mentioned in the Original Indenture, as heretofore
supplemented, or of any other kind or nature acquired by the Company on or
after the date of the execution and delivery of the Original Indenture (except
any herein or in the Original Indenture expressly excepted), now owned or,
subject to the provisions of Section 18.03 of the Original Indenture, hereafter
acquired by the Company (by purchase, consolidation, merger, donation,
construction, erection or in any other way) and wheresoever situated, including
(without in anywise limiting or impairing by the enumeration of the same, the
scope and intent of the foregoing or of any general description contained in
this Fifty-sixth Supplemental Indenture) all real estate, lands, easements,
servitudes, licenses, permits, franchises, privileges, rights of way and other
rights in or relating to real estate or the occupancy of the same; all power
sites, flowage rights, water rights, water locations, water appropriations,
ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways,
dams, dam sites, aqueducts, and all other rights or means for appropriating,
conveying, storing and supplying water; all rights of way and roads; all plants
for the generation of electricity by steam, water and/or other power; all power
houses, gas plants, street lighting systems, standards and other equipment
incidental thereto; all telephone, radio and television systems, air-
conditioning systems and equipment incidental thereto, water wheels, water
works, water systems, steam heat and hot water plants, substations, lines,
service and supply systems, bridges, culverts, tracks, ice or refrigeration
plants and equipment, offices, buildings and other structures and the equipment
thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and
other machines, prime movers, regulators, meters, transformers, generators
(including, but not limited to, engine driven generators and turbo-generator
units), motors, electrical, gas and mechanical appliances, conduits, cables,
water, steam heat, gas or other pipes, gas mains and pipes, service pipes,
fittings, valves and connections, pole and transmission lines, towers, overhead
conductors and devices, underground conduits, underground conductors and
devices, wires, cables, tools, implements, apparatus, storage battery
equipment, and all other fixtures and personalty; all municipal and other
franchises, consents or permits; all lines for the transmission and
distribution of electric current, gas, steam heat or water for any purpose
including towers, poles, wires, cables, pipes, conduits, ducts and all
apparatus for use in connection therewith and (except as herein or in the
Original Indenture expressly excepted) all the right, title and interest of the
Company in and to all other property of any kind or nature appertaining to
and/or used and/or occupied and/or enjoyed in connection with any property
hereinbefore or in the Original Indenture described.
TOGETHER WITH all and singular the tenements, hereditaments,
prescriptions, servitudes and appurtenances belonging or in anywise
appertaining to the aforesaid property or any part thereof, with the reversion
and reversions, remainder and remainders and (subject to the provisions of
Section 13.01 of the Original Indenture) the tolls, rents,
<PAGE> 8
7
revenues, issues, earnings, income, product and profits thereof, and all the
estate, right, title and interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of
Section 18.03 of the Original Indenture, all the property, rights and
franchises acquired by the Company (by purchase, consolidation, merger,
donation, construction, erection or in any other way) after the date hereof,
except any herein or in the Original Indenture expressly excepted, shall be and
are as fully granted and conveyed hereby and as fully embraced within the Lien
of the Original Indenture and the Lien hereof as if such property, rights and
franchises were now owned by the Company and were specifically described herein
and conveyed hereby.
PROVIDED that the following are not and are not intended to be now or
hereafter granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder,
nor is a security interest therein hereby or by the Original Indenture, as
heretofore supplemented, granted or intended to be granted, and the same are
hereby expressly excepted from the Lien and operation of the Original
Indenture, as heretofore supplemented, and from the Lien and operation of this
Fifty-sixth Supplemental Indenture, viz.: (1) cash, shares of stock, bonds,
notes and other obligations and other securities not hereinbefore or hereafter
specifically pledged, paid, deposited, delivered or held under the Mortgage or
covenanted so to be; (2) merchandise, equipment, apparatus, materials or
supplies held for the purpose of sale or other disposition in the usual course
of business or for the purpose of repairing or replacing (in whole or in part)
any rolling stock, buses, motor coaches, automobiles or other vehicles or
aircraft or boats, ships, or other vessels and any fuel, oil and similar
materials and supplies consumable in the operation of any of the properties of
the Company; rolling stock, buses, motor coaches, automobiles and other
vehicles and all aircraft; boats, ships and other vessels; all timber,
minerals, mineral rights and royalties; (3) bills, notes and other instruments
and accounts receivable, judgments, demands, general intangibles and choses in
action, and all contracts, leases and operating agreements not specifically
pledged hereunder or under the Mortgage or covenanted so to be; (4) the last
day of the term of any lease or leasehold which may hereafter become subject to
the Lien of the Mortgage; (5) electric energy, gas, water, steam, ice, and
other materials or products generated, manufactured, produced, or purchased by
the Company for sale, distribution or use in the ordinary course of its
business; (6) any natural gas wells or natural gas leases or natural gas
transportation lines or other works or property used primarily and principally
in the production of natural gas or its transportation, primarily for the
purpose of sale to natural gas customers or to a natural gas distribution or
pipeline company, up to the point of connection with any distribution system;
and (7) the Company's franchise to be a corporation; provided, however, that
the property and rights expressly excepted from the Lien and operation of the
Original Indenture and this Fifty-sixth Supplemental Indenture in the above
subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so
excepted in the event and as of the date that the Trustee or a receiver or
trustee shall enter upon and take possession of the Mortgaged and Pledged
<PAGE> 9
8
Property in the manner provided in Article XV of the Original Indenture by
reason of the occurrence of a Default.
TO HAVE AND TO HOLD all such properties, real, personal and mixed,
granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged,
hypothecated, affected, pledged, set over or confirmed or in which a security
interest has been granted by the Company as aforesaid, or intended so to be
(subject, however, to Excepted Encumbrances as defined in Section 1.06 of the
Original Indenture), unto The Bank of New York, Trustee, and its successors and
assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms,
trusts and conditions and subject to and with the same provisos and covenants
as are set forth in the Original Indenture, as heretofore supplemented, this
Fifty- sixth Supplemental Indenture being supplemental to the Original
Indenture.
AND IT IS HEREBY COVENANTED by the Company that all the terms,
conditions, provisos, covenants and provisions contained in the Original
Indenture, as heretofore supplemented, shall affect and apply to the property
hereinbefore described and conveyed and to the estate, rights, obligations and
duties of the Company and the Trustee and the beneficiaries of the trust with
respect to said property, and to the Trustee and its successors as Trustee of
said property, in the same manner and with the same effect as if said property
had been owned by the Company at the time of the execution of the Original
Indenture, and had been specifically and at length described in and conveyed to
said Trustee by the Original Indenture as a part of the property therein stated
to be conveyed.
The Company further covenants and agrees to and with the Trustee and
its successors in said trust under the Mortgage, as follows:
ARTICLE I
NINETIETH SERIES OF BONDS
SECTION 1. There shall be a series of bonds designated "Pollution
Control Series AC" (herein sometimes referred to as the "Ninetieth Series"),
each of which shall also bear the descriptive title "First Mortgage Bond", and
the form thereof, which shall be established by Resolution of the Board of
Directors of the Company, shall contain suitable provisions with respect to the
matters hereinafter in this Section specified. Bonds of the Ninetieth Series
shall mature on June 1, 2030, shall not bear interest and shall be issued as
fully registered bonds in denominations of One Hundred Twenty-five Dollars and,
at the option of the Company, in any multiple or multiples thereof (the
exercise of such option to be evidenced by the execution and delivery thereof);
the principal of each said bond to be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, or at the
office or agency of the Company in the City of Dallas, Texas, as the holder of
any said bond may elect, in such coin or currency of the United States of
America as at the time of payment is legal tender for public and private
<PAGE> 10
9
debts. Bonds of the Ninetieth Series shall be dated as in Section 2.03 of the
Original Indenture provided.
(I) The bonds of the Ninetieth Series shall be initially issued in
the aggregate principal amount of $70,397,250 to, and registered in the name
of, the trustee under the Trust Indenture, dated as of September 1, 1996
(hereinafter sometimes called the "1996B and 1996C Brazos Bond Indenture"), of
the Brazos River Authority (hereinafter sometimes called the "Brazos
Authority"), under which its Collateralized Pollution Control Revenue Refunding
Bonds (Texas Utilities Electric Company Project) Series 1996B (hereinafter
sometimes called the "Series 1996B Brazos Revenue Bonds") are to be issued, in
order to provide the benefit of a lien to secure the obligation of the Company
to make the Installment Payments and Purchase Price payments pursuant to, and
as such terms are defined in, the Installment Sale and Bond Amortization
Agreement, dated as of September 1, 1996 (hereinafter sometimes called the
"1996B Brazos Agreement"), between the Brazos Authority and the Company.
The Company shall receive a credit against its obligation to make any
payment of the principal of the bonds of the Ninetieth Series, whether at
maturity, upon redemption or otherwise, in an amount equal to 115% of the sum
of (a) the amount, if any, on deposit in the Debt Service Fund maintained under
the 1996B and 1996C Brazos Bond Indenture which reduces the corresponding
Installment Payment and (b) the amount, if any, paid by the Company pursuant to
Section 5.04 of the 1996B Brazos Agreement in respect of the corresponding
Installment Payment.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Ninetieth Series as the same
shall become due and payable shall have been fully satisfied and discharged
unless and until it shall have received a written notice from the trustee under
the 1996B Brazos Bond Indenture, signed by its President, a Vice President, an
Assistant Vice President or a Trust Officer, stating that the corresponding
Installment Payment or Purchase Price payment has become due and payable and
has not been fully paid and specifying the amount of funds required to make
such payment.
(II) In the event that any Series 1996B Brazos Revenue Bonds
outstanding under the 1996B and 1996C Brazos Bond Indenture shall become
immediately due and payable pursuant to Section 6.02 of the 1996B and 1996C
Brazos Bond Indenture, upon the occurrence of an Event of Default under Section
6.01(a) of the 1996B and 1996C Brazos Bond Indenture, all bonds of the
Ninetieth Series, then Outstanding, shall be redeemed by the Company, on the
date such Series 1996B Brazos Revenue Bonds shall have become immediately due
and payable, at the principal amount thereof.
The Trustee may conclusively presume that no redemption of bonds of
the Ninetieth Series is required pursuant to the first paragraph of this
subsection (II) unless and until it shall have received a written notice from
the trustee under the 1996B and 1996C Brazos Bond Indenture, signed by its
President, a Vice President, an Assistant Vice President or a Trust Officer,
stating that Series 1996B Brazos Revenue Bonds have become
<PAGE> 11
10
immediately due and payable pursuant to Section 6.02 of the 1996B and 1996C
Brazos Bond Indenture, upon the occurrence of an Event of Default under Section
6.01(a) of the 1996B and 1996C Brazos Bond Indenture and specifying the
principal amount thereof. Said notice shall also contain a waiver of notice of
such redemption by the trustee under the 1996B and 1996C Brazos Bond Indenture,
as the holder of all bonds of the Ninetieth Series then Outstanding.
(III) The Company hereby waives its right to have any notice of
redemption pursuant to subsection (II) of this Section 1 state that such notice
is subject to the receipt of the redemption moneys by the Trustee on or before
the date fixed for redemption. Notwithstanding the provisions of Section 12.02
of the Mortgage, any such notice under such subsection shall not be
conditional.
(IV) At the option of the registered owner, any bonds of the
Ninetieth Series, upon surrender thereof for cancellation at the office or
agency of the Company in the Borough of Manhattan, The City of New York, New
York, shall be exchangeable for a like aggregate principal amount of bonds of
the same series of other authorized denominations.
Bonds of the Ninetieth Series shall not be transferrable except to any
successor trustee under the 1996B and 1996C Brazos Bond Indenture, any such
transfer to be made at the office or agency of the Company in the Borough of
Manhattan, The City of New York, New York.
The Company hereby waives any right to make a charge for any exchange
or transfer of bonds of the Ninetieth Series.
ARTICLE II
NINETY-FIRST SERIES OF BONDS
SECTION 2. There shall be a series of bonds designated "Pollution
Control Series AD" (herein sometimes referred to as the "Ninety-first Series"),
each of which shall also bear the descriptive title "First Mortgage Bond", and
the form thereof, which shall be established by Resolution of the Board of
Directors of the Company, shall contain suitable provisions with respect to the
matters hereinafter in this Section specified. Bonds of the Ninety-first
Series shall mature on June 1, 2030, shall not bear interest and shall be
issued as fully registered bonds in denominations of Five Hundred Dollars and,
at the option of the Company, in any multiple or multiples thereof (the
exercise of such option to be evidenced by the execution and delivery thereof);
the principal of each said bond to be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, or at the
office or agency of the Company in the City of Dallas, Texas, as the holder of
any said bond may elect, in such coin or currency of the United States of
America as at the time of payment is legal tender for public and private debts.
<PAGE> 12
11
Bonds of the Ninety-first Series shall be dated as in Section 2.03 of the
Original Indenture provided.
(I) The bonds of the Ninety-first Series shall be initially issued in
the aggregate principal amount of $57,500,000 to, and registered in the name
of, the trustee under the 1996B and 1996C Brazos Bond Indenture, under which
the Brazos Authority's Collateralized Pollution Control Revenue Refunding Bonds
(Texas Utilities Electric Company Project) Series 1996C (hereinafter sometimes
called the "Series 1996C Brazos Revenue Bonds") are to be issued, in order to
provide the benefit of a lien to secure the obligation of the Company to make
the Installment Payments and Purchase Price payments pursuant to, and as such
terms are defined in, the Installment Sale and Bond Amortization Agreement,
dated as of September 1, 1996 (hereinafter sometimes called the "1996C Brazos
Agreement"), between the Brazos Authority and the Company.
The Company shall receive a credit against its obligation to make any
payment of the principal of the bonds of the Ninety-first Series, whether at
maturity, upon redemption or otherwise, in an amount equal to 115% of the sum
of (a) the amount, if any, on deposit in the Debt Service Fund maintained under
the 1996B and 1996C Brazos Bond Indenture which reduces the corresponding
Installment Payment and (b) the amount, if any, paid by the Company pursuant to
Section 5.04 of the 1996C Brazos Agreement in respect of the corresponding
Installment Payment.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Ninety-first Series as the
same shall become due and payable shall have been fully satisfied and
discharged unless and until it shall have received a written notice from the
trustee under the 1996B and 1996C Brazos Bond Indenture, signed by its
President, a Vice President, an Assistant Vice President or a Trust Officer,
stating that the corresponding Installment Payment or Purchase Price payment
has become due and payable and has not been fully paid and specifying the
amount of funds required to make such payment.
(II) In the event that any Series 1996C Brazos Revenue Bonds
outstanding under the 1996B and 1996C Brazos Bond Indenture shall become
immediately due and payable pursuant to Section 6.02 of the 1996B and 1996C
Brazos Bond Indenture, upon the occurrence of an Event of Default under Section
6.01(a) of the 1996B and 1996C Brazos Bond Indenture, all bonds of the
Ninety-first Series, then Outstanding, shall be redeemed by the Company, on the
date such Series 1996C Brazos Revenue Bonds shall have become immediately due
and payable, at the principal amount thereof.
The Trustee may conclusively presume that no redemption of bonds of
the Ninety-first Series is required pursuant to the first paragraph of this
subsection (II) unless and until it shall have received a written notice from
the trustee under the 1996B and 1996C Brazos Bond Indenture, signed by its
President, a Vice President, an Assistant Vice President or a Trust Officer,
stating that Series 1996C Brazos Revenue Bonds have become immediately due and
payable pursuant to Section 6.02 of the 1996B and 1996C Brazos Bond Indenture,
upon the occurrence of an Event of Default under Section 6.01(a) of the
<PAGE> 13
12
1996B and 1996C Brazos Bond Indenture and specifying the principal amount
thereof. Said notice shall also contain a waiver of notice of such redemption
by the trustee under the 1996B and 1996C Brazos Bond Indenture, as the holder
of all bonds of the Ninety-first Series then Outstanding.
(III) The Company hereby waives its right to have any notice of
redemption pursuant to subsection (II) of this Section 2 state that such notice
is subject to the receipt of the redemption moneys by the Trustee on or before
the date fixed for redemption. Notwithstanding the provisions of Section 12.02
of the Mortgage, any such notice under such subsection shall not be
conditional.
(IV) At the option of the registered owner, any bonds of the
Ninety-first Series, upon surrender thereof for cancellation at the office or
agency of the Company in the Borough of Manhattan, The City of New York, New
York, shall be exchangeable for a like aggregate principal amount of bonds of
the same series of other authorized denominations.
Bonds of the Ninety-first Series shall not be transferrable except to
any successor trustee under the 1996B and 1996C Brazos Bond Indenture, any such
transfer to be made at the office or agency of the Company in the Borough of
Manhattan, The City of New York, New York.
The Company hereby waives any right to make a charge for any exchange
or transfer of bonds of the Ninety-first Series.
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3. Subject to the amendments provided for in this Fifty-sixth
Supplemental Indenture, the terms defined in the Original Indenture, as
heretofore supplemented, shall for all purposes of this Fifty-sixth
Supplemental Indenture have the meanings specified in the Original Indenture,
as heretofore supplemented.
SECTION 4. The Trustee hereby accepts the trusts herein declared,
provided, created or supplemented and agrees to perform the same upon the terms
and conditions herein and in the Original Indenture, as heretofore
supplemented, set forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for or
in respect of the validity or sufficiency of this Fifty-sixth Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made by the Company solely. In general, each and every term and
condition contained in Article XIX of the Original
<PAGE> 14
13
Indenture shall apply to and form part of this Fifty-sixth Supplemental
Indenture with the same force and effect as if the same were herein set forth
in full with such omissions, variations and insertions, if any, as may be
appropriate to make the same conform to the provisions of this Fifty-sixth
Supplemental Indenture.
SECTION 5. Whenever in this Fifty-sixth Supplemental Indenture either
of the parties hereto is named or referred to, this shall, subject to the
provisions of Articles XVIII and XIX of the Original Indenture, be deemed to
include the successors and assigns of such party, and all the covenants and
agreements in this Fifty-sixth Supplemental Indenture contained, by or on
behalf of the Company, or by or on behalf of the Trustee, shall, subject as
aforesaid, bind and inure to the respective benefits of the respective
successors and assigns of such parties, whether so expressed or not.
SECTION 6. Nothing in this Fifty-sixth Supplemental Indenture
expressed or implied, is intended, or shall be construed to confer upon, or to
give to, any person, firm or corporation, other than the parties hereto and the
holders of the bonds and coupons Outstanding under the Mortgage, any right,
remedy or claim under or by reason of this Fifty- sixth Supplemental Indenture
or any covenant, condition, stipulation, promise or agreement hereof, and all
the covenants, conditions, stipulations, promises and agreements in this
Fifty-sixth Supplemental Indenture contained, by or on behalf of the Company,
shall be for the sole and exclusive benefit of the parties hereto, and of the
holders of the bonds and coupons Outstanding under the Mortgage.
SECTION 7. This Fifty-sixth Supplemental Indenture shall be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
<PAGE> 15
14
IN WITNESS WHEREOF, TEXAS UTILITIES ELECTRIC COMPANY has caused its
corporate name to be hereunto affixed, and this instrument to be signed and
sealed by its Chairman of the Board and Chief Executive, President or one of
its Vice Presidents, and its corporate seal to be attested by its Secretary or
one of its Assistant Secretaries for and in its behalf, and THE BANK OF NEW
YORK has caused its corporate name to be hereunto affixed, and this instrument
to be signed and sealed by one of its Vice Presidents or Assistant Vice
Presidents and its corporate seal to be attested by one of its Assistant Vice
Presidents, Assistant Secretaries or Assistant Treasurers, all as of the day
and year first above written.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ RON SEIDEL
--------------------------------
RON SEIDEL
Vice President
Attest:
/s/ GLEN H. HIBBS [CORPORATE SEAL]
- ---------------------------------------
GLEN H. HIBBS
Assistant Secretary
Executed, sealed and delivered by
TEXAS UTILITIES ELECTRIC COMPANY
in the presence of:
/s/ W. E. PATTERSON
- -------------------------------------
/s/ JUSTUS B. RHODES
- -------------------------------------
<PAGE> 16
15
THE BANK OF NEW YORK, Trustee
By /s/ W. N. GITLIN
---------------------------
W. N. GITLIN
Vice President
Attest:
/s/ STEPHEN J. GIURLANDO [CORPORATE SEAL]
- ----------------------------------
STEPHEN J. GIURLANDO
Assistant Vice President
Executed, sealed and delivered by
THE BANK OF NEW YORK
in the presence of:
/s/ JOCELYN LYNCH
- ----------------------------------
/s/ MICHELLE RUSSO
- ----------------------------------
<PAGE> 17
16
STATE OF TEXAS )
) SS.:
COUNTY OF DALLAS )
Before me, a Notary Public in and for said State, on this day
personally appeared RON SEIDEL, known to me to be the person whose name is
subscribed to the foregoing instrument and known to me to be a Vice President
of TEXAS UTILITIES ELECTRIC COMPANY, a Texas corporation, and acknowledged to
me that said person executed said instrument for the purposes and consideration
therein expressed, and as the act of said corporation.
Given under my hand and seal of office this 18th day of September,
1996.
[NOTARIAL SEAL] /s/ LENAE B. DAVIS
-----------------------------------
LENAE B. DAVIS
Notary Public, State of Texas
My Commission Expires June 23, 2000
<PAGE> 18
17
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
Before me, a Notary Public in and for said State, on this day
personally appeared W.N. GITLIN, known to me to be the person whose name is
subscribed to the foregoing instrument and known to me to be a Vice President
of THE BANK OF NEW YORK, a New York corporation, and acknowledged to me that
said person executed said instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this 16th day of September,
1996.
[NOTARIAL SEAL] /s/ WILLIAM J. CASSELS
--------------------------------------
WILLIAM J. CASSELS
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate filed in New York County
Commission Expires May 16, 1998
<PAGE> 19
18
SUMMARY OF RECORDING DATA
Fifty-sixth Supplemental Indenture
Filed September 26, 1996
Office of the Secretary of the State of Texas,
Utility Security Instrument File No. 83-281286
<PAGE> 1
EXHIBIT 15(a)
Texas Utilities Company:
We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited condensed consolidated
interim financial information of Texas Utilities Company and subsidiaries for
the periods ended September 30, 1996 and 1995, as indicated in our report dated
November 5, 1996; because we did not perform an audit, we expressed no opinion
on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, is
incorporated by reference in Registration Statement No. 33-55931 on Form S-3
and Registration Statements No. 33-59575, 33-59759 and 33-59961 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
November 5, 1996
<PAGE> 2
EXHIBIT 15(b)
Texas Utilities Electric Company:
We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited condensed consolidated
interim financial information of Texas Utilities Electric Company and
subsidiaries for the periods ended September 30, 1996 and 1995, as indicated in
our report dated November 5, 1996; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, is
incorporated by reference in Registration Statements No. 33-68100 and 33-69554
on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
November 5, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENTS OF CONSOLIDATED INCOME, CONDENSED STATEMENTS OF
CONSOLIDATED CASH FLOWS, AND CONDENSED CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000097561
<NAME> TEXAS UTILITIES CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 17,635,887
<OTHER-PROPERTY-AND-INVEST> 1,139,921
<TOTAL-CURRENT-ASSETS> 952,882
<TOTAL-DEFERRED-CHARGES> 1,886,593
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 21,615,283
<COMMON> 4,785,001
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,293,340
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,078,341
632,103
464,427
<LONG-TERM-DEBT-NET> 8,657,685
<SHORT-TERM-NOTES> 143,890
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 225,000
<LONG-TERM-DEBT-CURRENT-PORT> 391,924
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,021,913
<TOT-CAPITALIZATION-AND-LIAB> 21,615,283
<GROSS-OPERATING-REVENUE> 5,085,310
<INCOME-TAX-EXPENSE> 345,016
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 3,391,715
<OPERATING-INCOME-LOSS> 1,693,595
<OTHER-INCOME-NET> 4,778
<INCOME-BEFORE-INTEREST-EXPEN> 1,698,373
<TOTAL-INTEREST-EXPENSE> 666,343
<NET-INCOME> 1,032,030
0
<EARNINGS-AVAILABLE-FOR-COMM> 687,014
<COMMON-STOCK-DIVIDENDS> 338,761
<TOTAL-INTEREST-ON-BONDS> 369,870
<CASH-FLOW-OPERATIONS> 1,393,919
<EPS-PRIMARY> 3.05
<EPS-DILUTED> 3.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENTS OF INCOME, CONDENSED STATEMENTS OF CASH FLOWS, AND
CONDENSED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000710182
<NAME> TEXAS UTILITIES ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 15,906,200
<OTHER-PROPERTY-AND-INVEST> 475,428
<TOTAL-CURRENT-ASSETS> 790,081
<TOTAL-DEFERRED-CHARGES> 1,838,044
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 19,009,753
<COMMON> 4,732,305
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,419,929
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,152,234
632,103
464,427
<LONG-TERM-DEBT-NET> 6,355,266
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 225,000
<LONG-TERM-DEBT-CURRENT-PORT> 374,061
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,806,662
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<INCOME-TAX-EXPENSE> 383,125
<OTHER-OPERATING-EXPENSES> 3,093,049
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<OPERATING-INCOME-LOSS> 1,218,346
<OTHER-INCOME-NET> 17,817
<INCOME-BEFORE-INTEREST-EXPEN> 1,236,163
<TOTAL-INTEREST-EXPENSE> 451,322
<NET-INCOME> 784,841
65,594
<EARNINGS-AVAILABLE-FOR-COMM> 719,247
<COMMON-STOCK-DIVIDENDS> 366,912
<TOTAL-INTEREST-ON-BONDS> 369,762
<CASH-FLOW-OPERATIONS> 1,395,741
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
