UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------------------
|
IOWA 42-1425214
- ------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
666 Grand Ave., P.O. Box 657, Des Moines, Iowa 50303
- ---------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 515-242-4300
------------
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
Common Stock, without par value 100,751,713
------------------------------- ------------------------------
(class) (outstanding at August 1, 1996)
|
MIDAMERICAN ENERGY COMPANY
INDEX
Page Number
-----------
Part I. Financial Information:
Consolidated Statements of Income for the Three,
Six and Twelve Months Ended June 30, 1996 and 1995 3
Consolidated Balance Sheets as of June 30, 1996
and 1995 and December 31, 1995 4
Consolidated Statements of Cash Flows for the Three,
and Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information 22
|
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except per share amounts)
Three Months Six Months Twelve Months
Ended June 30 Ended June 30 Ended June 30
---------------------- ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
-------- -------- ---------- -------- ---------- ---------
OPERATING REVENUES
Electric utility ..................... $266,580 $263,132 $ 528,854 $509,363 $1,114,138 $ 1,034,409
Gas utility .......................... 85,618 75,475 281,604 247,827 493,365 437,359
Nonregulated ......................... 95,744 33,105 194,321 75,944 287,786 154,728
-------- -------- ---------- -------- ---------- ---------
447,942 371,712 1,004,779 833,134 1,895,289 1,626,496
-------- -------- ---------- -------- ---------- ---------
OPERATING EXPENSES
Utility:
Cost of fuel, energy and capacity .. 55,123 58,019 116,498 112,069 234,690 219,803
Cost of gas sold ................... 48,689 42,360 171,425 150,931 299,519 269,329
Other operating expenses ........... 90,168 94,946 177,769 184,755 392,662 364,126
Maintenance ........................ 25,139 21,904 43,875 43,195 86,043 96,061
Depreciation and amortization ...... 41,062 39,291 82,006 78,210 162,746 155,701
Property and other taxes ........... 23,925 25,253 49,102 52,236 93,216 101,493
-------- -------- ---------- -------- ---------- ----------
284,106 281,773 640,675 621,396 1,268,876 1,206,513
-------- -------- ---------- -------- ---------- ----------
Nonregulated:
Cost of sales ...................... 82,528 22,963 167,379 55,673 240,391 116,263
Other .............................. 10,870 10,664 21,327 20,912 44,645 37,765
-------- -------- ---------- -------- ---------- ----------
93,398 33,627 188,706 76,585 285,036 154,028
-------- -------- ---------- -------- ---------- ----------
Total operating expenses............ 377,504 315,400 829,381 697,981 1,553,912 1,360,541
-------- -------- ---------- -------- ---------- ----------
OPERATING INCOME ..................... 70,438 56,312 175,398 135,153 341,377 265,955
-------- -------- ---------- -------- ---------- ----------
NON-OPERATING INCOME
Interest income ...................... 1,019 984 2,524 2,044 4,965 4,727
Dividend income ...................... 4,396 4,051 8,902 7,789 18,067 16,615
Realized gains and losses
on securities, net ................... 509 (71) 3,234 354 3,568 4,091
Other, net ........................... 3,056 8,797 4,728 10,438 (16,177) 8,784
-------- -------- ---------- -------- ---------- ---------
8,980 13,761 19,388 20,625 10,423 34,217
-------- -------- ---------- -------- ---------- ---------
INTEREST CHARGES
Interest on long-term debt ........... 26,820 27,836 53,599 55,624 108,480 109,522
Other interest expense ............... 2,687 4,270 5,723 5,630 9,542 9,654
Allowance for borrowed funds ......... (1,020) (1,360) (2,456) (2,587) (5,421) (4,893)
-------- -------- ---------- -------- ---------- ---------
28,487 30,746 56,866 58,667 112,601 114,283
-------- -------- ---------- -------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES ................ 50,931 39,327 137,920 97,111 239,199 185,889
INCOME TAXES ......................... 20,656 12,653 54,131 32,860 89,255 57,469
-------- -------- ---------- -------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS .... 30,275 26,674 83,789 64,251 149,944 128,420
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS .............. 904 516 914 516 815 (3,767)
-------- -------- ---------- -------- ---------- ---------
NET INCOME ........................... 31,179 27,190 84,703 64,767 150,759 124,653
PREFERRED DIVIDENDS .................. 2,184 2,282 4,661 4,563 8,157 9,967
-------- -------- ---------- -------- ---------- ---------
EARNINGS ON COMMON STOCK ............. $ 28,995 $ 24,908 $ 80,042 $ 60,204 $ 142,602 $ 114,686
======== ======== ========== ======== ========== ==========
AVERAGE COMMON SHARES OUTSTANDING .... 100,752 100,377 100,752 100,101 100,752 99,578
EARNINGS PER COMMON SHARE
Continuing operations ................ $ 0.28 $ 0.24 $ 0.78 $ 0.59 $ 1.41 $ 1.19
Discontinued operations .............. 0.01 0.01 0.01 0.01 0.01 (0.04)
-------- -------- ---------- -------- ---------- ---------
Earnings per average
common share ......................... $ 0.29 $ 0.25 $ 0.79 $ 0.60 $ 1.42 $ 1.15
======== ======== ========== ======== =========== ===========
Dividends Declared Per Share ......... $ 0.30 $ 0.29 $ 0.60 $ 0.58 $ 1.20 $ 1.17
======== ======== ========== ======== =========== ===========
|
The accompanying notes are an integral part of these statements.
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
As of
-------------------------------------
June 30 December 31
----------------------- -----------
1996 1995 1995
---------- ---------- ----------
(Unaudited)
ASSETS
UTILITY PLANT
Electric ............................. $3,973,331 $3,842,667 $3,881,699
Gas .................................. 693,564 680,463 695,741
---------- ---------- ----------
4,666,895 4,523,130 4,577,440
Less accumulated depreciation
and amortization ..................... 2,103,783 1,955,601 2,027,055
---------- ---------- ----------
2,563,112 2,567,529 2,550,385
Construction work in progress ........ 68,393 75,650 104,164
---------- ---------- ----------
2,631,505 2,643,179 2,654 549
---------- ---------- ----------
POWER PURCHASE CONTRACT .............. 209,178 222,163 212,148
---------- ----------- ----------
CURRENT ASSETS
Cash and cash equivalents ............ 24,763 35,705 41,216
Receivables .......................... 198,175 145,398 250,902
Inventories .......................... 78,190 95,181 85,235
Other ................................ 11,806 24,270 22,252
---------- --------- ---------
312,934 300,554 399,605
--------- --------- ---------
INVESTMENTS .......................... 869,172 803,211 829,422
--------- --------- ---------
OTHER ASSETS ......................... 409,911 396,373 417,594
--------- --------- ---------
TOTAL ASSETS ......................... $4,432,700 $4,365,480 $4,513,318
========== ========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity .......... $1,242,588 $1,223,826 $1,225,715
Preferred shares, not subject to
mandatory redemption ............... 78,577 89,955 89,945
Preferred shares, subject to
mandatory redemption ............... 50,000 50,000 50,000
Long-term debt
(excluding current portion) .......... 1,405,350 1,398,539 1,403,322
--------- --------- ---------
2,776,515 2,762,320 2,768,982
--------- --------- ---------
CURRENT LIABILITIES
Notes payable ........................ 164,490 102,300 184,800
Current portion of long-term debt..... 64,461 72,528 65,295
Current portion of power
purchased contract ................. 13,029 12,080 13,029
Accounts payable ..................... 77,218 78,213 142,759
Taxes accrued ........................ 76,462 98,274 81,898
Interest accrued ..................... 29,643 30,925 30,635
Other ................................ 55,689 43,559 46,797
--------- --------- ---------
480,992 437,879 565,213
--------- --------- ---------
OTHER LIABILITIES
Power purchase contract .............. 112,700 125,729 112,700
Deferred income taxes ................ 750,388 725,305 746,574
Investment tax credit ................ 92,141 98,272 95,041
Other ................................ 219,964 215,975 224,808
--------- --------- ---------
1,175,193 1,165,281 1,179,123
--------- --------- ---------
TOTAL CAPITALIZATION
AND LIABILITIES ...................... $4,432,700 $4,365,480 $4,513,318
========== ========== ==========
|
The accompanying notes are an integral part of these statements.
MIDAMERICAN ENERGY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................... $ 31,179 $ 27,190 $ 84,703 $ 64,767
Adjustments to reconcile net
income to net cash provided:
Depreciation, depletion and amortization ..... 50,773 49,692 102,157 99,705
Net increase (decrease) in deferred income
taxes and investment tax credit, net ....... 1,494 9,610 1,747 615
Amortization of other assets ................. 5,899 3,670 11,933 7,590
Capitalized cost of real estate sold ......... 2,231 170 2,498 635
Gain on sale of securities, assets
and other investments ...................... (503) (8,892) (3,573) (9,712)
Impact of changes in working
capital, net of effects from
discontinued operations .................... (62,075) (23,035) 7,141 23,347
Other ........................................ 2,843 (4,432) 7,870 5,220
--------- --------- --------- ---------
Net cash provided .......................... 31,841 53,973 214,476 192,167
--------- --------- --------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Utility construction expenditures .............. (37,075) (42,124) (65,593) (85,533)
Quad-Cities Nuclear Power Station
decommissioning trust fund ..................... (2,159) (2,159) (4,318) (4,360)
Deferred energy efficiency expenditures ........ (5,497) (5,473) (7,448) (10,862)
Nonregulated capital expenditures .............. (77,319) (23,214) (92,826) (35,783)
Purchase of securities ......................... (52,098) (40,981) (134,294) (55,344)
Proceeds from sale of securities ............... 82,409 15,984 164,090 27,884
Proceeds from sale of assets
and other investments .......................... 1,125 6,484 1,308 32,787
Other investing activities, net ................ 4,912 548 4,335 11,036
--------- --------- --------- ---------
Net cash used ................................ (85,702) (90,935) (134,746) (120,175)
--------- --------- --------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ................................. (32,403) (31,544) (65,101) (62,943)
Issuance of long-term debt, net of issuance cost -- 9,500 -- 49,054
Retirement of long-term debt,
including reacquisition cost ................... (408) (445) (1,047) (49,063)
Reacquisition of preferred shares,
including reacquisition cost ................... (2,975) -- (11,725) --
Increase in MidAmerican Capital Company
unsecured revolving credit facility .......... 24,000 -- 2,000 --
Issuance of common shares ...................... -- 7,454 -- 15,087
Net increase (decrease) in notes payable ....... 64,690 32,700 (20,310) (22,200)
--------- --------- --------- ---------
Net cash provided (used)...................... 52,904 17,665 (96,183) (70,065)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ......................... (957) (19,297) (16,453) 1,927
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,720 55,002 41,216 33,778
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..... $ 24,763 $ 35,705 $ 24,763 $ 35,705
========= ========= ========= =========
ADDITIONAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ...... $ 19,857 $ 22,741 $ 55,428 $ 55,911
========= ========= ========= =========
Income taxes paid .............................. $ 49,016 $ 32,805 $ 49,738 $ 36,760
========= ========= ========= =========
|
The accompanying notes are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A) General:
The consolidated financial statements included herein have been prepared by MidAmerican Energy Company (Company or MidAmerican), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, all adjustments have been made to present fairly the financial position, the results of operations and the changes in cash flows for the periods presented. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in the Company's latest Annual Report on Form 10-K.
On July 1, 1995, Iowa-Illinois Gas and Electric Company (Iowa-Illinois), Midwest Resources Inc. (Resources), and Midwest Power Systems Inc. (Midwest Power) merged with and into the Company. The merger was accounted for as a pooling-of-interests and the financial statements included herein are presented as if the companies were merged as of the earliest period shown. MidAmerican is a utility company with two wholly owned nonregulated subsidiaries: MidAmerican Capital Company (MidAmerican Capital) and Midwest Capital Group, Inc. (Midwest Capital).
B) Environmental Matters:
The United States Environmental Protection Agency (EPA) and state environmental agencies have determined that contaminated wastes remaining at certain decommissioned manufactured gas plant (MGP) facilities may pose a threat to the public health or the environment if such contaminants are in sufficient quantities and at such concentrations as to warrant remedial action.
The Company is evaluating 27 properties which were, at one time, sites of gas manufacturing plants in which it may be a potentially responsible party (PRP). The purpose of these evaluations is to determine whether waste materials are present, whether such materials constitute an environmental or health risk, and whether the Company has any responsibility for remedial action. The Company is currently conducting field investigations at fifteen of the sites and has completed investigations at three of the sites. In addition, the Company is currently removing contaminated soil at three of the sites, and has completed removals at two of the sites. The Company is continuing to evaluate several of the sites to determine the future liability, if any, for conducting site investigations or other site activity.
The Company's present estimate of probable remediation costs for the sites discussed above is $22 million. This estimate has been recorded as a liability and a regulatory asset for future recovery. The Illinois Commerce Commission has approved the use of a tariff rider which permits recovery of the actual costs of litigation, investigation and remediation relating to former MGP sites. The Company's present rates in Iowa provide for a fixed annual recovery of MGP costs. The Company intends to pursue recovery of the remediation costs from other PRPs and its insurance carriers.
The estimated recorded liabilities for these properties are based upon preliminary data. Thus, actual costs could vary significantly from the estimates. The estimate could change materially based on facts and circumstances derived from site investigations, changes in required remedial action and changes in technology relating to remedial alternatives. In addition, insurance recoveries for some or all of the costs may be possible, but the liabilities recorded have not been reduced by any estimate of such recoveries.
Although the timing of potential incurred costs and recovery of such costs in rates may affect the results of operations in individual periods, management believes that the outcome of these issues will not have a material adverse effect on the Company's financial position or results of operations.
C) Discontinued Operations:
The Company reflected as discontinued operations at September 30, 1994, all activities of a subsidiary that constructed generating facilities and a subsidiary that constructed electric distribution and transmission systems. Essentially all of the assets of these subsidiaries have been sold.
Midwest Capital, under the terms of certain sale agreements, has indemnified the purchasers of the construction subsidiaries for specified losses or claims relating to construction projects which occurred prior to the date of their sale. In addition, Midwest Capital has guaranteed performance on a joint venture turnkey engineering, procurement and construction contract for a cogeneration project. The Company has provided a support agreement to Midwest Capital related to this project. In October 1995, the project received preliminary acceptance from the owner. Management believes that the likelihood of a material adverse impact to the Company under any indemnity of the provisions of the sale agreements or the construction contracts, or a material cash payment by the Company under the support agreement is remote.
Proceeds received from the disposition of the construction investments through June 30, 1996, were $4.1 million. Revenues from discontinued activities, as well as the results of operations and the estimated income (loss) on the disposal of discontinued operations for the three, six and twelve months ended June 30 are as follows (in thousands):
Three Months Six Months Twelve Months
------------ ---------- -------------
Ended June 30 Ended June 30 Ended June 30
--------------- ----------------- ------------------
1996 1995 1996 1995 1996 1995
------- ----- ------- ------- ------- --------
Operating Revenues $ -- $ -- $ -- $ 6,269 $ 1,065 $ 47,996
======= ===== ======= ======= ======= ========
Income (Loss) from
Discontinued Operations
Income (Loss) from discontinued
operations before income taxes $ 1,530 $ 880 $ 1,530 $ 880 $ 1,530 $ 144
Income tax benefit (expense) (626) (364) (616) (364) (715) (146)
------- ----- ------- ------- ------- --------
Income (Loss) from
discontinued operations 904 516 914 516 815 (2)
------- ----- ------- ------- ------- --------
Loss on Disposal
Loss on disposal before income taxes $ -- $ -- $ -- $ -- $ -- $(11,576)
Income tax benefit -- -- -- -- -- 7,811
------- ----- ------- ------- ------- --------
Loss on disposal -- -- -- -- -- (3,765)
------- ----- ------- ------- ------- --------
Total $ 904 $ 516 $ 914 $ 516 $ 815 $ (3,767)
======= ===== ======= ======= ======= ========
|
D) Statement of Financial Accounting Standards No. 121:
On January 1, 1996, the Company adopted Statement of Financial Accounting Standard No. 121 (SFAS 121) regarding accounting for asset impairments. This statement requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS 121 also requires rate-regulated companies to recognize an impairment for regulatory assets for which future recovery is not probable. The adoption of SFAS 121 did not have a material impact on the Company's results of operations or financial position.
E) InterCoast Energy Company Restructuring:
During the second quarter, the Company restructured one of its nonregulated subsidiaries, the former InterCoast Energy Company, and changed its name to MidAmerican Capital. In addition, the Company formed a new subsidiary under MidAmerican Capital, named InterCoast Energy Company (InterCoast). The new InterCoast has as its subsidiaries the Company's wholesale nonregulated energy companies, including InterCoast Oil and Gas Company, formerly named Medallion Production Company. MidAmerican Capital retained the rail service businesses, the marketable securities and passive investment activities, and a nonregulated retail natural gas subsidiary.
Following the restructuring, InterCoast filed a registration statement with the Securities and Exchange Commission for an initial public offering (IPO) of common stock. On July 29, 1996, the Company canceled the IPO as a result of adverse general market conditions for initial public offerings. The Company has engaged Dillon Read & Co. Inc. to assist in evaluating strategic alternatives for InterCoast, including possible divestiture.
F) Holding Company:
The Company's Board of Directors, holders of a majority of the outstanding shares of the Company's common stock, the Iowa Utilities Board (IUB), the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission have approved, or issued orders that will permit, the formation of a holding company for MidAmerican's organizational structure. The holding company would initially have three wholly owned subsidiaries consisting of MidAmerican (utility operations), MidAmerican Capital and Midwest Capital. Approval must yet be received from the Illinois Commerce Commission. Subject to such approval, each share of MidAmerican common stock will be exchanged for one share of the holding company's common stock. It is management's intent, if possible, to complete the formation of the holding company and share exchange by the end of 1996.
G) Merger:
On August 5, 1996, the Company announced that it has proposed a merger with IES Industries Inc., (IES) in a cash and stock transaction valued at $39 per IES common share based on the closing price of MidAmerican common stock on August 2, 1996. IES is a holding company headquartered in Cedar Rapids, Iowa. As of December 31, 1995, IES had total assets of $2.0 billion and total operating revenues of $851 million. Its principal subsidiary, IES Utilities Inc., serves 334,000 electric customers and 175,000 gas customers in Iowa.
The aggregate value of the transaction would be approximately $1.17 billion. The combination would provide shareholders of IES with a 21% premium over the implied value of the consideration they would receive in a pending merger with WPL Holdings and Interstate Power Co. (the Wisconsin Transaction), along with a 42% dividend increase over the dividend proposed in the Wisconsin Transaction. The proposal calls for a cash and stock transaction in which the aggregate compensation will be no more than 40% cash and the remainder in MidAmerican common stock. IES common shareholders receiving cash would receive $39 per share of IES common stock and IES common shareholders receiving stock would receive, on a tax-free basis, 2.346 shares
of MidAmerican common stock per share of IES common stock. If an agreement between IES and MidAmerican with respect to a business combination is not reached, MidAmerican intends to solicit proxies against the Wisconsin Transaction for use at the IES annual meeting of shareholders, presently scheduled to be held on September 5, 1996.
H) McLeod, Inc. Investment:
At June 30, 1996, the Company had investments in Class A and Class B Common Stock of McLeod, Inc. (McLeod). The Class B Common Stock is Convertible into Class A Common Stock. On June 14, 1996, McLeod made an initial public offering of its Class A Common Stock. As part of an investor agreement, the Company is prohibited from selling or otherwise disposing of any of the common stock of McLeod for a period of two years from the date of the IPO. Under the provisions of Financial Accounting Standard No. 115, the Company's investment in McLeod is considered restricted stock and, as such, is recorded at cost. At June 30, 1996, the carrying amount and fair value of this investment were $36.3 million and $196.9 million, respectively.
I) Rate Matters:
On June 4, 1996, the Company filed a new electric pricing proposal in Iowa and Illinois. The proposal would reduce electric revenues by approximately $100 million over five years and eliminate automatic fuel adjustment clauses. The proposal would provide the Company more flexibility to negotiate with customers who have service options and to mitigate strandable costs. Both states have docketed the filings, and hearings in the cases are scheduled to begin in October 1996.
On August 1, 1996, the Iowa Office of Consumer Advocate (OCA) requested the IUB to order the Company to reduce annual electric rates by 10.7%, or approximately $101 million annually in Iowa electric revenues. The Company has asked the IUB to reject the case citing that, among other things, it fails to recognize the changes occurring in the electric utility industry. Should the IUB docket the case and, after hearings on the case, order a decrease in revenues, certain amounts collected subsequent to August 1, 1996, would be subject to refund. The Company cannot predict the IUB's response to the filing nor the outcome of such a case should it be accepted by the IUB.
J) Accounting for the Effects of Certain Types of Regulation:
Statement of Financial Accounting Standards (SFAS) No. 71 sets forth accounting principles for operations that are regulated and meet certain criteria. For operations that meet the criteria, SFAS 71 allows, among other things, the deferral of costs that would otherwise be expensed when incurred. A possible consequence of the changes in the utility industry is the discontinued applicability of SFAS 71. The Company's electric and gas utility operations are currently subject to the provisions of SFAS 71, but its applicability is periodically reexamined. If a portion of the Company's utility operations no longer meets the criteria of SFAS 71, the Company would be required to eliminate from its balance sheet the regulatory assets and liabilities related to those operations that resulted from actions of its regulators. Although the amount of such an elimination would depend on the specific circumstances, a material adjustment to earnings in the appropriate period could result from the discontinuance of SFAS 71. As of June 30, 1996, the Company had approximately $390 million of regulatory assets in its Consolidated Balance Sheet.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORPORATE OVERVIEW
MidAmerican Energy Company (the Company or MidAmerican), headquartered in Des Moines, Iowa, was formed on July 1, 1995, as a result of the merger of Iowa-Illinois Gas and Electric Company (Iowa-Illinois), Midwest Resources Inc. (Resources) and its utility subsidiary, Midwest Power Systems Inc. (Midwest).
The merger has been accounted for as a pooling-of-interests, and the Consolidated Financial Statements included in this Form 10-Q are presented as if the merger occurred as of the beginning of the earliest period presented. Portions of the following discussion provide information related to material changes in the Company's financial condition and results of operations between the periods presented based on the combined historical information of the predecessor companies. It is not necessarily indicative of what would have occurred had the predecessor companies actually merged at the beginning of the earliest period.
The Company's utility operations (the Utility) consist of two principal business units: an electric business unit headquartered in Davenport, Iowa, and a natural gas business unit headquartered in Sioux City, Iowa. MidAmerican Capital Company (formerly InterCoast Energy Company), discussed below, and Midwest Capital Group, Inc. (Midwest Capital) are the Company's nonregulated subsidiaries and are headquartered in Des Moines. Midwest Capital functions as a regional business development company in the utility service territory.
During the second quarter the Company restructured one of its nonregulated subsidiaries, the former InterCoast Energy Company, and changed its name to MidAmerican Capital Company (MidAmerican Capital). In addition, the Company formed a new subsidiary under MidAmerican Capital, named InterCoast Energy Company (InterCoast). The new InterCoast has as its subsidiaries the Company's wholesale nonregulated energy companies, including InterCoast Oil and Gas Company, formerly named Medallion Production Company. MidAmerican Capital retained the rail service businesses, the marketable securities and passive investment activities, and a nonregulated retail natural gas subsidiary.
Following the restructuring, InterCoast filed a registration statement with the Securities and Exchange Commission for an initial public offering (IPO) of common stock. On July 29, 1996, the Company canceled the IPO as a result of adverse general market conditions for initial public offerings. The Company has engaged Dillon Read & Co. Inc. to assist in evaluating strategic alternatives for InterCoast, including possible divestiture of InterCoast.
On April 24, 1996, the Company's common shareholders approved a proposal to form a holding company. The holding company would initially have three wholly owned subsidiaries consisting of MidAmerican (utility operations), MidAmerican Capital and Midwest Capital. The Board of Directors and management believe a holding company structure will provide a more flexible organization better designed to operate in a more competitive environment. As of the date of this filing, the Company has received orders from the Federal Energy Regulatory Commission (FERC), the Iowa Utilities Board (IUB) and the Nuclear Regulatory Commission (NRC) which permit the formation of a holding company. Approval must yet be received from the Illinois Commerce Commission (ICC). Subject to such approval, each share of MidAmerican common stock will be exchanged for one share of the holding company's common stock. It is management's intent, if possible, to complete the formation of the holding company and share exchange by the end of 1996.
On August 5, 1996, the Company announced that it has proposed a merger with IES Industries Inc., (IES) in a cash and stock transaction valued at $39 per IES common share based on the closing price of MidAmerican
common stock on August 2, 1996. IES is a holding company headquartered in Cedar Rapids, Iowa. As of December 31, 1995, IES had total assets of $2.0 billion and total operating revenues of $851 million. Its principal subsidiary, IES Utilities Inc., serves 334,000 electric customers and 175,000 gas customers in Iowa.
The aggregate value of the transaction would be approximately $1.17 billion. The combination would provide shareholders of IES with a 21% premium over the implied value of the consideration they would receive in a pending merger with WPL Holdings and Interstate Power Co. (the Wisconsin Transaction), along with a 42% dividend increase over the dividend proposed in the Wisconsin Transaction. The proposal calls for a cash and stock transaction in which the aggregate compensation will be no more than 40% cash and the remainder in MidAmerican common stock. IES common shareholders receiving cash would receive $39 per share of IES common stock and IES common shareholders receiving stock would receive, on a tax-free basis, 2.346 shares of MidAmerican common stock per share of IES common stock. If an agreement between IES and MidAmerican with respect to a business combination is not reached, MidAmerican intends to solicit proxies against the Wisconsin transaction for use at the IES annual meeting of shareholders, presently scheduled to be held on September 5, 1996.
FORWARD-LOOKING INFORMATION
From time to time, the Company may make "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements include, among others, statements concerning the Company's revenue and cost trends, cost recovery, cost reduction strategies and anticipated outcomes, pricing strategies, changes in the utility industry, planned capital expenditures, financing needs and availability, statements of the Company's expectations, beliefs, future plans and strategies, anticipated events or trends and similar comments concerning matters that are not historical facts. Forward-looking statements made by the Company are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. Some, but not all, of the risks and uncertainties include general economic conditions in the Company's service territory, competitive factors, federal and state regulatory actions and potential weather effects on sales and revenues.
RESULTS OF OPERATIONS
The following table provides a summary of the earnings contributions of the
Company's operations for each of the periods presented:
Periods Ended June 30
---------------------
Three Months Six Months Twelve Months
------------ ---------- -------------
1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------
Earnings (in millions)
Electric utility $ 25.3 $ 22.8 $ 47.5 $ 41.5 $117.9 $ 92.8
Gas utility (0.6) (3.2) 22.2 12.4 22.4 12.4
------ ------ ------ ------ ------ ------
Utility operations 24.7 19.6 69.7 53.9 140.3 105.2
Nonregulated operations 3.4 4.8 9.4 5.8 1.5 13.3
Income (loss) from
discontinued operations 0.9 0.5 0.9 0.5 0.8 (3.8)
------ ------ ------ ------ ------ ------
Consolidated earnings $ 29.0 $ 24.9 $ 80.0 $ 60.2 $142.6 $114.7
====== ====== ====== ====== ====== ======
Earnings Per Common Share
Electric utility $ 0.25 $ 0.22 $ 0.47 $ 0.42 $ 1.17 $ 0.93
Gas utility -- (0.03) 0.22 0.12 0.22 0.13
------ ------ ------ ------ ------ ------
Utility operations 0.25 0.19 0.69 0.54 1.39 1.06
Nonregulated operations 0.03 0.05 0.09 0.05 0.02 0.13
Income (loss) from
discontinued operations 0.01 0.01 0.01 0.01 0.01 (0.04)
------ ------ ------ ------ ------ ------
Consolidated earnings $ 0.29 $ 0.25 $ 0.79 $ 0.60 $ 1.42 $ 1.15
====== ====== ====== ====== ====== ======
|
Earnings per share for the second quarter of 1996 increased 4 cents compared to the second quarter of 1995. Gross margins of utility electric and natural gas operations contributed favorably to the increase in utility earnings per share. Gross margin is the amount of revenues remaining after deducting electric fuel costs or the cost of gas sold, as appropriate. Realization of cost savings resulting from the merger and the absence of merger-related costs also had a favorable effect on 1996 utility earnings compared to the second quarter of 1995. Total earnings of nonregulated subsidiaries decreased due to $5.0 million of aftertax gains in the second quarter of 1995 due to the sale of a partnership interest in a gas marketing organization and a telecommunications subsidiary. The decrease was partially offset by an improvement in earnings of a nonregulated oil and gas production subsidiary for the 1996 quarter compared to the 1995 quarter.
Earnings per share for the six months ended June 30, 1996, increased 19 cents compared to the six months ended June 30, 1995. Gross margins of utility electric and natural gas operations accounted for most of the increase in utility earnings per share. Realization of cost savings resulting from the merger and the absence of merger-related costs in 1996 also had a favorable effect on utility earnings. Earnings of nonregulated subsidiaries contributed 4 cents per share more in the 1996 six-month period than in the comparable 1995 period due primarily to improved oil and gas earnings.
For the twelve months ended June 30, 1996, earnings per share were 27 cents greater than the comparable 1995 period. Increases in utility gross margins, due primarily to increases in electric and gas retail sales volumes resulting from hot weather in the third quarter of 1995 and cold weather in the first quarter of 1996, were the main cause of the increase. Electric and gas service rate increases filed prior to the merger also contributed to the increase in gross margins. A portion of the rate increases relate directly to increases in certain operating expenses and thus did not materially increase earnings. A reduction in nuclear operations and maintenance expenses also favorably affected earnings.
During 1995, the Company's earnings were reduced by merger-related costs. As part of the process of merging the operations of MidAmerican's predecessors, the Company developed a restructuring plan which included employee incentive early retirement, relocation and separation programs. The Company recorded $33.4 million of restructuring costs during 1995. Of the total, $6.0 million was recorded in the second quarter, $24.6 million in the third quarter and $2.8 million in the fourth quarter. These costs are primarily reflected in Other Operating Expenses in the Consolidated Statements of Income.
In addition, the Company incurred transaction costs to complete the merger. In the third and fourth quarters of 1994, the Company expensed $4.5 million of merger transaction costs. During 1995, the Company expensed $4.6 million of merger transaction costs, $3.8 million of which were expensed in the third quarter. These costs are included in Other Non-Operating Income in the Consolidated Statements of Income.
In total, restructuring and transaction costs reduced earnings for the 1995 three-month and six-month periods by 4 cents per share. Earnings were reduced by 20 cents per share and 9 cents per share for such costs for the 1996 and 1995 twelve-month periods, respectively.
Write-downs of certain assets of the Company's nonregulated subsidiaries also reduced earnings for twelve months ended June 30, 1996, by approximately $10.2 million, or 10 cents per share. The pre-tax amount of the write-downs, which is included in Other Non-Operating Income in the Consolidated Statements of Income, reflects other-than-temporary declines of $18.0 million in the value of those nonregulated investments. The investments are primarily alternative energy projects. The 1995 twelve-month period also reflects the aftertax gains on the sales of a partnership interest in a gas marketing organization and a telecommunications subsidiary discussed previously.
Electric Gross Margin:
----------------------
Periods Ended June 30
---------------------------------------
Three Month Six Months Twelve Months
----------- ---------- -------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ------ ------
(In millions)
Operating revenues $267 $263 $529 $509 $1,114 $1,034
Cost of fuel, energy and capacity 55 58 116 112 235 220
---- ---- ---- ---- ------ ------
Electric gross margin $212 $205 $413 $397 $ 879 $ 814
==== ==== ==== ==== ====== ======
|
Variations in gross margin are the result of changes in revenues due to price and sales volume variances. Changes in the cost of electric fuel, energy and capacity (collectively, Energy Costs) reflect fluctuations in generation levels and mix, fuel cost, and energy and capacity purchases. The Company has been allowed to recover Energy Costs from most of its electric utility customers through energy adjustment clauses (EACs) in revenues. Variations in revenues collected through the EACs, reflecting changes in Energy Costs per unit sold and volumes sold, do not affect gross margin or net income.
The electric gross margin increased for each of the 1996 periods compared to the 1995 periods. The increases were due both to price and sales increases. Retail sales increased 3.1%, 4.0% and 5.2% for three, six and twelve months ended June 30, 1996, respectively, compared to the related 1995 periods. The increases in sales were due in part to weather conditions in the 1996 periods that were more conducive to increased sales to retail customers. Temperatures during the second quarter of 1996 were more extreme than in the second quarter of 1995, resulting in greater needs for heating and cooling. The six months ended June 30, 1996, was also affected by colder weather during the first quarter of 1996 than in the comparable period in 1995. A significantly warmer third quarter in 1995 than in the third quarter of 1994 additionally increased sales for the twelve months ended June 30, 1996. In addition, the Company continued to have steady customer growth.
An increase in electric retail rates also contributed to the increase in revenues and gross margin. Retail rates in the first and second quarters of 1995 reflect interim rates representing an increase of $13.6 million in annual electric revenues in connection with an Iowa electric rate filing, which the Company began collecting in January 1995. The first and second quarters of 1996 reflect the final rate increase in the proceeding, which was effective in August 1995, representing an increase of $20.3 million in annual electric revenues. Approximately $8 million of the $20.3 million increase in annual electric revenues relates to increased expensing of other postretirement employee benefit (OPEB) costs. Additionally, in August 1995, the Company began collection of $18.6 million over a four-year prospective period related to an energy efficiency cost recovery filing. Revenue increases for energy efficiency cost recovery have an immaterial impact on net income due to corresponding increases in other operating expenses, reflecting the amortization of previously deferred energy efficiency costs.
In addition to the electric rate increases discussed above, the comparison of the twelve-month gross margins was affected by two other energy efficiency cost recovery filings. In October 1994 and January 1995, the Company implemented rate increases for Iowa energy efficiency cost recovery filings which allow a total increase in electric revenues of $31.7 million over a four-year period. As stated above, a corresponding increase in other operating expenses results in an immaterial impact on net income for revenue increases from energy efficiency cost recovery.
Revenues from sales for resale decreased for the three months ended comparison and increased for the six and twelve months ended comparisons. Variations in the amount of available generation was the primary cause
of the differences. Sales for resale have a lower margin than other sales and, accordingly, increases in related revenues do not increase gross margin and net income as much as increases in retail revenues. Effective November 1995, the margin on most electric sales for resale is flowed through to retail customers and has a minimal effect on gross margin.
Gas Gross Margin:
-----------------
Periods Ended June 30,
----------------------
Three Months Six Months Twelve Months
------------ ---------- -------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(In millions)
Operating revenues $ 86 $ 75 $282 $248 $493 $437
Cost of gas sold 49 42 171 151 300 269
----- ----- ---- ----- ---- ----
Gas gross margin $ 37 $ 33 $111 $ 97 $193 $168
===== ===== ==== ===== ==== ====
|
Similar to electric gross margin, variations in gas gross margin are the result of changes in revenues due to price and sales volume variances. The Company has been allowed to recover the cost of gas sold from most of its gas utility customers through purchase gas adjustment clauses (PGAs) in revenues. Variations in revenues collected through the PGAs, reflecting changes in the cost of gas per unit and volumes sold, do not affect gross margin or net income.
Gas gross margin increased for each 1996 period presented compared to the 1995 periods. The increases were due both to price and sales increases. Retail sales increased 0.8%, 10.8% and 12.3% for three, six and twelve months ended June 30, 1996, respectively, compared to the related 1995 periods. As stated in the electric gross margin discussion, the increases in sales were due in part to weather conditions in the 1996 periods that were more conducive to increased sales to retail customers. Temperatures during part of the second quarter of 1996 were colder than in the second quarter of 1995, resulting in greater needs for heating. However, a decrease in sales to industrial customers offset most of the increase in sales due to the colder temperatures. The six months ended June 30, 1996, was significantly affected by colder weather during the first quarter of 1996 than in the comparable period in 1995. Colder temperatures in the fourth quarter of 1995 than in the fourth quarter of 1994 also increased sales for the twelve months ended June 30, 1996. In addition, the Company continued to have growth in the number of natural gas customers.
An increase in gas retail rates also was a cause of the increase in revenues and gross margin. Retail rates in the first and second quarters of 1995 reflect interim rates representing an increase of $8.2 million in annual gas revenues in connection with an Iowa gas rate filing, which the Company began collecting in October 1994. The first and second quarters of 1996 reflect the final rate increase in the proceeding, which was effective in August 1995, representing an increase of $10.6 million in annual gas revenues. Approximately $2.5 million of the $10.6 million increase in annual gas revenues relates to increased expensing of OPEB costs.
In addition to the gas rate increase discussed above, the comparison of the twelve-month gas gross margins was affected by an energy efficiency cost recovery filing. In January 1995, the Company implemented a gas service rate increase for an Iowa energy efficiency cost recovery filing which allows an increase in gas revenues of $6.7 million over a four-year period. Revenue increases for energy efficiency cost recovery have an immaterial impact on net income due to corresponding increases in other operating expenses.
Other operating expenses for the quarter ended June 30, 1996, decreased $4.8 million compared to the second quarter of 1995 due primarily to $6.0 million of restructuring costs included in the 1995 quarter as discussed in the Earnings section of Results of Operations. In addition, a decrease in nuclear operating expenses and savings from work force reductions following the merger contributed to the decrease. These decreases were partially offset by increased outside services and, as discussed above, amortization of deferred energy efficiency and OPEB costs.
Other operating expenses for the six months ended June 30, 1996, decreased $7.0 million compared to the comparable period in 1995. In addition to the items affecting the quarter comparison, the six months ended June 30,1996, reflects decreases in manufactured gas plant clean-up costs due primarily to timing.
For the twelve months ended June 30, 1996, other operating expenses increased $28.5 million compared to the 1995 period due primarily to costs related to the restructuring plan discussed in the Earnings section of Results of Operations. Of the total increase in utility operating expenses, $20.0 million is due to the restructuring costs. In addition, the 1996 twelve-month period reflects a $7.1 million increase from the amortization of deferred energy efficiency and OPEB costs. Increases in consulting services expenses and some general administrative costs also contributed to the increase. The increases for the 1996 period were partially offset by a $5.0 million reduction in nuclear operations costs.
Maintenance expenses increased $3.2 million for the three months ended June 30, 1996, compared to the 1995 period. The timing of power plant maintenance and an increase in certain general plant maintenance accounted for much of the variation between the periods. For the comparable twelve months ended periods, maintenance expenses decreased $10.0 million. A majority of the decrease was due to the timing of power plant maintenance. In addition, Quad-Cities Station maintenance expenses decreased $3.2 million for the twelve months ended June 30, 1996, due in part to a 1994 outage.
Depreciation expense increased compared to each prior period due primarily to additions to utility plant in service.
Revenues for the Company's nonregulated subsidiaries increased significantly for each 1996 period compared to the comparable 1995 period. The increases are due to revenues of oil and gas subsidiaries. Revenues of a wholesale natural gas marketing firm acquired in December 1995 are present only in the 1996 periods and accounted for approximately one-half of the increase for each period. Increases in sales volumes and prices for a nonregulated retail natural gas marketing subsidiary, as well as increased revenues from gas production due to greater production levels and higher prices, also resulted in increases in revenues for each 1996 period shown.
Cost of sales includes expenses directly related to sales of oil, natural gas and real estate. The factors discussed above for revenues, including natural gas sales volumes, gas prices and the newly acquired wholesale natural gas firm also affected the increase in cost of sales for each 1996 period compared to the 1995 periods.
Other nonregulated expenses increased $6.7 million for the 1996 twelve-month period compared to the twelve months ended June 30, 1995. The 1996 period includes $1.5 million of merger-related expenses for the Company's restructuring plan.
Realized gains and losses on securities increased for the six months ended June 30, 1996, due to an increase in gains on the disposition of equity fund holdings and managed preferred stock portfolios.
The second quarter of 1995 includes pre-tax gains totalling $8.5 million on the sales of a partnership interest in a gas marketing organization and a telecommunication subsidiary. In addition, the adjustments to nonregulated investments discussed at the beginning of Results of Operations decreased Other, Net, for the twelve months ended June 30, 1996, compared to the 1995 period. Merger transaction costs also reduced Other, Net in both twelve-month periods.
Decreased interest on long-term debt in the 1996 periods compared to the 1995 periods was due to a lower overall rate on debt of nonregulated subsidiaries. For the 1996 twelve-month period compared to the 1995 twelve-month period the decreases were partially offset by increased utility interest due to the issuance of $60 million of 7.875% Series of mortgage bonds in November 1994. Other interest expense decreased for the 1996 quarter compared to the 1995 quarter due to interest paid to the Internal Revenue Service in 1995.
In 1994, the Company announced its intent to divest its construction subsidiaries and recognized the anticipated loss on disposal. The sale of certain assets of one of the subsidiaries was completed in December 1994, and the sale of the other construction subsidiary was completed in March 1995. Settlement of certain operating items outstanding at the time of sale have resulted in income from discontinued operations in 1996 and 1995.
Preferred dividends for the 1996 periods include losses on the redemption of shares of the $1.7375 Series of preferred shares in March and June 1996. The reductions in preferred shares resulted in a decrease in dividends in the second quarter. During 1996, the Company has redeemed 469,000 shares of the $1.7375 series. Preferred dividends for the twelve months ended June 30, 1996, compared to the 1995 period were additionally reduced by the redemption of three other series of preferred shares in December 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company has available a variety of sources of liquidity and capital resources, both internal and external. These resources provide funds required for current operations, debt retirement, dividends, construction expenditures and other capital requirements.
For the first six months of 1996, the Company had net cash provided from operating activities of $214 million and net cash used of $135 million and $96 million for investing and financing activities, respectively.
Utility construction expenditures, including allowance for funds used during construction (AFUDC), Quad-Cities Station nuclear fuel purchases and Cooper capital improvements, were $66 million for the first six months of 1996.
Forecasted utility construction expenditures for 1996 are $166 million including AFUDC. Capital expenditures needs are reviewed regularly by the Company's management and may change significantly as a result of such reviews. For the years 1996 through 2000, the Company forecasts $818 million for utility construction expenditures. The Company presently expects that all utility construction expenditures for 1996 through 2000 will be met with cash generated from utility operations, net of dividends.
Operators of a nuclear facility are required to set aside funds to provide for costs of future decommissioning of their nuclear facility. In general, decommissioning of a nuclear facility means to safely remove the facility from service and restore the property to a condition allowing unrestricted use by the operator. Based on information presently available, the Utility expects to contribute $45 million during the period 1996 through 2000 to an external trust established for the investment of funds for decommissioning the Quad-Cities Station. The funds are invested predominately in investment grade municipal and U.S. Treasury bonds. In addition, a portion of the payments made under the power purchase contract with NPPD are for decommissioning funding related to Cooper. The Cooper costs are reflected in Other Operating Expenses in the Consolidated Statements of Income. Based on NPPD estimates, the Utility expects to pay approximately $57 million to NPPD for Cooper decommissioning during the period 1996 through 2000. NPPD invests the funds in instruments similar to those of the Quad-Cities Station trust fund. The Company's obligation for Cooper decommissioning may be affected by the actual plant shutdown date and the status of the power purchase contract at that time. The Company currently recovers Quad-Cities Station decommissioning costs charged to Illinois customers through a rate rider on customer billings. Cooper and Quad-Cities Station decommissioning costs charged to Iowa customers are included in base rates, and increases in those amounts must be sought through the normal ratemaking process.
Capital expenditures of nonregulated subsidiaries were $93 million for the first six months of 1996. In April 1996, InterCoast Oil and Gas Company (IOG), a subsidiary of InterCoast, acquired certain oil and gas interests. The acquisition, which was in excess of $50 million, increases IOG's 1995 year-end proved reserves to approximately 42 million barrels of oil equivalent, or an increase of approximately 30%. Capital expenditures of nonregulated subsidiaries depend upon the availability of suitable investment opportunities and other factors and may vary significantly from forecasted amounts. Excluding the oil and gas acquisition by IOG, capital expenditures are forecasted to be approximately $85 million for 1996, primarily related to InterCoast.
MidAmerican Capital invests in a variety of marketable securities which it holds for indefinite periods of time. For the first six months of 1996, MidAmerican Capital had net cash inflows of $38 million from its marketable securities investment activities. In the Consolidated Statements of Cash Flows, the lines Purchase of Securities and Proceeds from Sale of Securities consist primarily of the gross amounts of these activities, including realized gains and losses on investments in marketable securities.
The Company, through one of its nonregulated subsidiaries, has an investment in Class A and Class B common stock of McLeod, Inc. (McLeod), a telecommunications company. The Class B stock is convertible to Class A stock on a one-for-one basis. On June 14, 1996, McLeod made an initial public offering (IPO) of common stock. The Company's investment represents approximately 18% of the total outstanding common stock of the company on the date of the IPO. At June 30, 1996, the carrying amount and fair value of the Company's investment were $36.3 million and $196.9 million, respectively. As part of an investor agreement,
the Company is prohibited from selling or otherwise disposing of any of the common stock of McLeod for a period of two years from the date of the IPO, and accordingly, no market value adjustments have been reflected in the Company's financial statements.
The Utility currently has authority from the FERC to issue short-term debt in the form of commercial paper and bank notes aggregating $400 million. As of June 30, 1996, the Utility had a $250 million revolving credit facility agreement to provide short-term financing for utility operations. The Utility's commercial paper borrowings, which totalled $164 million at June 30, 1996, are supported by the revolving credit facility. The Utility also has a revolving credit facility which is dedicated to provide liquidity for its obligations under outstanding pollution control revenue bonds that are periodically remarketed.
The Utility has $347 million of long-term debt maturities and sinking fund requirements for 1996 through 2000, of which $1 million matures in 1996. Management is considering several long-term financing options for 1996. Proceeds from those financings would be used to reduce commercial paper outstanding and to refinance higher cost securities. As of December 31, 1995, the Utility had the capability to issue approximately $1.3 billion of mortgage bonds under one indenture.
The Company has the necessary authority to issue up to 6,000,000 shares of common stock through its Shareholder Options Plan (the Company's dividend reinvestment and stock purchase plan). Since the effective date of the merger, the Company has used open market purchases of its common stock rather than original issue shares to meet share obligations under its Employee Stock Purchase Plan and the Shareholder Options Plan. The Company currently plans to continue using open market purchases to meet share obligations under these plans.
Several financial relationships between the Company's utility and nonregulated operations were eliminated subsequent to the merger. One support agreement remains between the Utility and Midwest Capital related to a performance guarantee by Midwest Capital of a joint venture turnkey engineering, procurement and construction contract for a cogeneration project. The project received preliminary acceptance from the owner in 1995, which pursuant to the construction contract, eliminates the potential for liquidated damages being incurred related to the project. Midwest Capital also has $25 million of long-term debt outstanding at June 30, 1996, that matures in 1996 and is supported by a guarantee from the Utility. In addition, Midwest Capital has a $25 million line of credit with the Utility.
MidAmerican Capital has two floating-rate-to-fixed interest rate swaps each in the amount of $32 million. The interest rate swaps have fixed rates of 5.97% and 6.00%, respectively, and are for three-year and two-year terms, respectively, with an optional third year on the latter.
MidAmerican Capital's aggregate amounts of maturities and sinking fund requirements for long-term debt outstanding at June 30, 1996, are $39 million for 1996 and $289 million for the years 1996 through 2000.
On July 24, 1996, the Company's Board of Directors declared a quarterly dividend on common shares of $0.30 per share payable September 1, 1996. The dividend represents an annual rate of $1.20 per share.
The Utility is subject to regulation by several utility regulatory agencies. The operating environment and the recoverability of costs from utility customers are significantly influenced by the regulation of those agencies. The Company supports changes in the utility industry that will create a more competitive environment for the entire electric industry. Although these anticipated changes may create opportunities, they will also create additional
challenges and risks for utilities. The Company is evaluating strategies that will assist it in a more competitive environment.
A possible consequence of competition in the utility industry is the discontinued applicability of Statement of Financial Accounting Standards (SFAS) No. 71. SFAS 71 sets forth accounting principles for operations that are regulated and meet certain criteria. For operations that meet the criteria, SFAS 71 allows, among other things, the deferral of costs that would otherwise be expensed when incurred. The Company's electric and gas utility operations are currently subject to the provisions of SFAS 71, but its applicability is periodically reexamined. If a portion of the Company's utility operations no longer meets the criteria of SFAS 71, the Company would be required to eliminate from its balance sheet the regulatory assets and liabilities related to those operations that resulted from actions of its regulators. Although the amount of such an elimination would depend on the specific circumstances, a material adjustment to earnings in the appropriate period could result from the discontinuance of SFAS 71. As of June 30, 1996, the Company had approximately $390 million of regulatory assets in its Consolidated Balance Sheet.
In 1992, the FERC issued Order No. 636, directing a restructuring by interstate pipeline companies for their natural gas sales and transportation services. The unbundling of pipeline services increased the Company's access to supply options and its supply responsibilities. Certain transition costs incurred by interstate natural gas pipelines for their compliance with Order 636 will be paid to the pipeline companies over the next several years. The Company's Consolidated Balance Sheet as of June 30, 1996, includes a $34 million noncurrent liability and regulatory asset recorded for transition costs. The Company may incur other transition costs in conjunction with future purchases of gas, but does not expect these billings to have a material impact on the cost of gas. The Company is currently recovering costs related to Order 636 from its customers.
In May 1996, the Iowa legislature approved a bill eliminating mandatory spending levels for energy efficiency programs and allowing more timely recovery of energy efficiency expenditures as determined by the IUB. The new legislation became effective July 1, 1996. Previously, electric and gas utilities in Iowa were required to spend approximately 2% and 1.5%, respectively, of their annual Iowa jurisdictional revenues on energy efficiency activities. As discussed in Results of Operations, the Company is collecting a total of approximately $14.3 million annually for some of the previously deferred costs related to prior energy efficiency filings. As of June 30, 1996, the Company had approximately $75 million of energy efficiency costs deferred and included as regulatory assets in its Consolidated Balance Sheet for which recovery will be sought in future energy efficiency filings.
On June 4, 1996, the Company filed a new electric pricing proposal in Iowa and Illinois. The proposal would reduce electric revenues by approximately $100 million over five years and eliminate automatic fuel adjustment clauses. The price reductions, possible due to merger-related cost savings, reduce price disparity within customer classes and are expected to move the Company closer to prices that can be sustained in a competitive market. In addition, the proposal will provide the Company more flexibility to negotiate with customers who have service options and to mitigate strandable costs. Both states have docketed the filings, and hearings in the cases are scheduled to begin in October 1996.
On August 1, 1996, the Iowa Office of Consumer Advocate (OCA) requested the IUB to order the Company to reduce annual electric rates by 10.7%, or approximately $101 million annually in Iowa electric revenues. The Company has asked the IUB to reject the case citing that, among other things, it fails to recognize the changes occurring in the electric utility industry. The Company cannot predict the IUB's response to the filing nor the outcome of such a case should it be accepted by the IUB. However, the Company strongly disagrees with the requested reduction and believes the Company's electric pricing proposal achieves proper price levels, is designed to meet the needs of the changing utility industry and creates an environment beneficial to all parties involved.
The United States Environmental Protection Agency (EPA) and state environmental agencies have determined that contaminated wastes remaining at certain decommissioned manufactured gas plant facilities may pose a threat to the public health or the environment if such contaminants are in sufficient quantities and at such concentrations as to warrant remedial action.
The Company is evaluating 27 properties which were, at one time, sites of gas manufacturing plants in which it may be a potentially responsible party (PRP). The purpose of these evaluations is to determine whether waste materials are present, whether such materials constitute an environmental or health risk, and whether the Company has any responsibility for remedial action. The Company's present estimate of probable remediation costs for these sites is $22 million. This estimate has been recorded as a liability and a regulatory asset for future recovery through the regulatory process. Refer to Note (B) of Notes for further discussion of the Company's environmental activities related to manufactured gas plant sites and cost recovery.
Although the timing of potential incurred costs and recovery of such cost in rates may affect the results of operations in individual periods, management believes that the outcome of these issues will not have a material adverse effect on the Company's financial position or results of operations.
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS 121 regarding accounting for asset impairments. This statement, which was adopted by the Company in the first quarter of 1996, requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. SFAS 121 also requires rate-regulated companies to recognize an impairment for regulatory assets that are not probable of future recovery. Adoption of SFAS 121 did not have a material impact on the Company's results of operations or financial position.
The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry regarding the recognition, measurement and classification of nuclear decommissioning costs in the financial statements. In response to these questions, the FASB has issued an Exposure Draft (ED), "Accounting for Certain Liabilities Related to Closure or Removal of Long-Lived Assets," which addresses the accounting for closure and removal costs, including decommissioning of nuclear power plants. If current electric utility industry accounting practices for such decommissioning are changed, the annual provision for decommissioning could increase relative to 1995, and the total estimated cost for decommissioning could be recorded as a liability with recognition of an increase in the cost of related nuclear power plant. Due to the continuing evolution of the exposure draft, the Company is uncertain as to the impact on its results of operations and financial position.
PART II - OTHER INFORMATION
The Company and its subsidiaries have no material legal proceedings except for the following:
For information relating to the Company's Environmental Matters, reference is made to Part I, Note (B) of Notes to Consolidated Financial Statements.
On May 26, 1995, the Company filed a lawsuit naming Nebraska Public Power District (NPPD) as defendant. The action is filed in the U.S. District Court for the Southern District of Iowa and is identified as No. 4-95-CV-80356. The legal proceeding is based upon a long-term power purchase agreement between the Company and NPPD, pursuant to which the Company purchases one-half the output of NPPD's Cooper Nuclear Station (Cooper) and pays one-half the cost of operating Cooper. NPPD, in turn, is obligated to operate the plant in an efficient and economical manner consistent with good business and utility practices and in compliance with the terms of its operating license issued to it by the Nuclear Regulatory Commission (NRC). In 1993 and 1994, as a response to NPPD actions, the NRC issued numerous notices of violations to NPPD; as a result of these violations and other safety issues identified by the NRC and NPPD, Cooper experienced unplanned outages and outages were unduly extended. NPPD's failure to meet its obligations with respect to the operation of Cooper deprived the Company of the benefits it was entitled to under the power sales contract, causing the Company to lose profits and incur increased costs of operation, which damages the Company seeks to collect from NPPD. Similar litigation has been filed against NPPD by the Lincoln Electric System (LES), a municipal utility serving the City of Lincoln, Nebraska, and purchasing one-eighth of the output of Cooper pursuant to a similar power purchase contract. The LES legal proceeding is pending in Nebraska state court.
The Company held its 1996 Annual Meeting of Shareholders on April 24, 1996. At the annual meeting, shareholders elected the seventeen persons nominated and approved two additional matters presented to them for a vote. The results of the votes are as follows:
For Against
---------- ---------
Election of Directors:
Name -
John W. Aalfs 78,691,743 2,091,239
B. T. Asher 78,686,998 2,095,985
S. J. Bright 78,645,284 2,137,698
R. A. Burnett 78,636,642 2,146,341
R. D. Christensen 78,657,617 2,125,365
R. E. Christiansen 78,602,222 2,180,760
J. W. Colloton 78,601,725 2,181,257
F. S. Cottrell 78,671,173 2,111,810
J. W. Eugster 78,733,423 2,049,559
M. Foster, Jr. 78,526,299 2,256,683
N. Gentry 78,724,143 2,107,832
J. M. Hoak, Jr. 78,738,274 2,044,708
R. L. Lawson 78,256,096 2,526,886
R. L. Peterson 78,493,850 2,289,132
N. L. Seifert 78,627,662 2,155,320
W. S. Tinsman 78,753,168 2,029,814
L. L. Woodruff 78,655,097 2,127,885
For Against Abstain
---------- --------- ---------
Approval of the
Agreement and Plan
of Exchange (Holding
company proposal): 64,837,297 2,658,969 2,106,790
Approval of the 1995
Long-Term Incentive
Plan: 69,378,101 8,798,936 2,700,984
|
(a) Exhibits
Exhibit 3.1- Restated Bylaws of MidAmerican Energy Company, as amended July 24, 1996
Exhibit 12 - Computation of ratios of earnings to fixed charges and computation of ratios of earnings to fixed charges plus preferred dividend requirements.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On April 30, 1996, the Company filed a report on Form 8-K, dated April 25, 1996, regarding the announcement of the development of an innovative market-based pricing proposal. The press release issued in conjunction with the announcement was filed as an Exhibit to the report.
On May 29, 1996, the Company filed a report on Form 8-K, dated May 28, 1996. The report included information regarding the announcement of the restructuring of one of MidAmerican Energy Company's wholly owned nonregulated subsidiaries and a plan for an initial public offering of common stock in the newly restructured company. The press release issued in conjunction with the announcement was filed as an Exhibit to the report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date August 12, 1996 P. G. Lindner
------------------------------- --------------------------------
P. G. Lindner
Group Vice President
(Principal financial officer)
|
EXHIBIT 3.1
RESTATED BYLAWS
OF
MIDAMERICAN ENERGY COMPANY,
AS AMENDED
(an Iowa Corporation)
ARTICLE I.
Offices.
Section 1. Principal Office. The principal office of the Corporation shall be in the City of Des Moines, Polk County, Iowa. The Corporation may also have an office or offices at such other place or places either within or without the State of Iowa as the Board of Directors from time to time determines or the business of the Corporation may require.
Section 2. Registered Office. The registered office of the Corporation required by the Iowa Business Corporation Act to be maintained in the State of Iowa may be, but need not be, the same as the principal office of the Corporation in the state of Iowa, and the address of the registered office may be changed from time to time by the Board of Directors.
ARTICLE II.
Shareholders' Meetings.
Section 1. Place. All meetings of the shareholders shall be held in such place as may be ordered by the Board of Directors.
Section 2. Annual Meetings. The annual meeting of shareholders shall be held on the Wednesday next preceding the last Thursday of April in each year, at ten o'clock in the morning, when the shareholders shall elect the Board of Directors and transact such other business as may properly be brought before the meeting. The Board of Directors may, in its discretion, change the date or time, or both, of the annual meeting of shareholders.
Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes may be called by the President, or by a Vice President (under such conditions as are prescribed in these bylaws), or by the Chairman of the Board of Directors (if there be one), or by the Vice Chairman of the Board of Directors (if there be one), or by the Board of Directors.
Section 4. Notice. Notice, in accordance with the Iowa Business Corporation
Act, stating the place, day and hour of the annual meeting and of any special
meeting, and in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given so that it is effective not less than ten
(10) nor more than sixty (60) days before the date
of the meeting, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting.
Section 5. Right to Vote. Except as provided in Sections 8 and 9 of this Article II, only shareholders owning shares of stock of a class entitled to vote as required by the Iowa Business Corporation Act or as provided in the Restated Articles of Incorporation, as amended, of record on the books of the Corporation on the day fixed by the Board of Directors for the closing of the stock transfer books of the Corporation prior to any meeting of the shareholders, or, if the stock transfer books be not closed, of record on the books of the Corporation at the close of business on the day fixed by the Board of Directors as the record date for the determination of the shareholders entitled to vote at such meeting, shall be entitled to notice of and shall have the right to vote (either in person or by proxy) at such meeting.
Section 6. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy (70) days. If the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy (70) days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. Except as provided
in the Amendment to the Restated Articles of Incorporation establishing one or
more classes or series of Preferred Stock, if the stock transfer books are not
closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date immediately preceding the
date on which notice of the meeting is mailed, or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 6, such determination
shall apply to any adjournment thereof, except that the Board of Directors must
fix a new record date if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting.
Section 7. Shareholders' List. The officer having charge of the stock transfer books for shares of stock of the Corporation shall make a complete list of the shareholders entitled to vote at a meeting of shareholders or any adjournment thereof, arranged in alphabetical order and by voting group and within each voting group by class or series of shares, with the address of and the number of shares held by each, which list shall be kept on file at the principal office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours beginning two business days after notice of such meeting is given for which such list was prepared. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder at any time during the meeting or any adjournment thereof. The original stock transfer books shall
be prima facie evidence as to the identity of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. Failure to comply with the requirements of this Section 7 shall not affect the validity of any action taken at any such meeting.
Section 8. Voting of Shares by Certain Holders. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.
Shares held by a person who is an administrator, executor, guardian or conservator may be voted by such person, either in person or by proxy, without the transfer of such shares into the name of such person. Shares standing in the name of a trustee may be voted by such trustee, either in person or by proxy, but no trustee shall be entitled to vote shares held by such trustee without a transfer of such shares into the name of such trustee.
Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the name of such receiver if authority so to do is contained in an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.
On and after the date on which written notice of redemption of redeemable shares has been given to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares.
Shares of the Corporation are not entitled to be voted if they are owned, directly or indirectly, by a second corporation, and the Corporation owns, directly or indirectly, a majority of the shares entitled to vote for the election of directors of such second corporation, nor shall any such shares be counted in determining the total number of outstanding shares at any given time.
At all meetings of shareholders, a shareholder may vote either in person or by proxy appointment form executed in writing by the shareholder or by the duly authorized attorney-in-fact of such shareholder. Such proxy appointment and any revocation thereof shall be filed with the Secretary of the Corporation. No proxy appointment shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.
Section 9. Proxies. When a valid proxy appointment form is filed with the Secretary of the Corporation, the proxy named therein (or the duly appointed substitute of such proxy, if the proxy appointment permits the appointment of a substitute) shall be entitled to enter and be present at the shareholders' meeting designated in the proxy appointment, and to exercise the power granted to such proxy under such proxy appointment, notwithstanding that the
shareholder who gave the proxy appointment is personally present at the meeting, unless and until such proxy appointment is revoked by a written instrument of revocation, stating the time and date of revocation of the proxy appointment, duly signed by the shareholder who executed the proxy appointment, and filed with the Secretary of the Corporation at or prior to the meeting. Subject to any express limitation or restriction in any such proxy appointment contained, a vote, consent or action taken by a proxy prior to revocation thereof, as hereinbefore provided, shall be valid and binding on the shareholder who gave the proxy appointment. Each proxy appointment, and also each instrument of revocation thereof, shall be retained by the Secretary of the Corporation as required by regulatory authorities.
Section 10. Quorum. The holders of a majority of the votes of the shares entitled to vote thereat, represented in person or by proxy, shall constitute a quorum for the transaction of business at all meetings of the shareholders except as otherwise provided by the Iowa Business Corporation Act, the Restated Articles of Incorporation, as amended, or these bylaws. The holders of a majority of the votes of the shares present in person or by proxy at any meeting and entitled to vote thereat shall have power successively to adjourn the meeting to a specified date whether or not a quorum be present. The time and place to which any such adjournment is taken shall be publicly announced at the meeting, and no further notice thereof shall be necessary. At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally called.
Section 11. Manner of Voting. Upon demand of any shareholder entitled to vote thereon, the vote on any question before the meeting shall be by ballot. If a quorum is present, the affirmative vote of the holders of a majority of the votes of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Iowa Business Corporation
Act or the Restated Articles of Incorporation.
Section 12. Officers of the Meeting-Powers. The Chairman of the Board of Directors (if there be one), or in the absence of the Chairman of the Board, the Vice Chairman of the Board (if there be one), or the President of the Corporation shall call meetings of the shareholders to order and shall act as chairman thereof. The Board of Directors may appoint any shareholder to act as chairman of any meeting in the absence of the Chairman of the Board of Directors and the President, and in the case of the failure of the Board to appoint a chairman, the shareholders present at the meeting shall elect a chairman who shall be either a shareholder or a proxy of a shareholder.
The Secretary of the Corporation shall act as secretary at all meetings of shareholders. In the absence of the Secretary at any meeting of shareholders, the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 13. Power of Chairman. The chairman of any shareholders' meeting shall have power to determine the eligibility of votes, and may reject votes, whether cast in person or by proxy, as irregular, unauthorized, or not cast in accordance with the Restated Articles of Incorporation, as amended, or these bylaws. The decisions of such chairman as to such matters shall be final unless challenged from the floor, immediately after being announced and overruled by the vote of the holders of a majority of the votes of the shares represented at the
meeting. Such chairman may appoint inspectors of election to count ballots, whenever voting is by ballot. Such chairman shall have power to order any unauthorized persons to leave the meeting and to enforce such orders, and shall have and exercise all power and authority, and perform all duties customarily possessed and performed by the presiding officer of such a meeting.
ARTICLE III.
Board of Directors.
Section 1. Powers. The business and affairs of the Corporation shall be managed by the Board of Directors.
Section 2. Number and Qualification of Directors. The number of directors shall be fixed by resolution of the Board of Directors within the range established in the Restated Articles of Incorporation, as amended, and the number of directors may be increased or decreased from time to time by resolution of the Board of Directors within such range, provided no decrease shall have the effect of shortening the term of any incumbent director. A director may but need not be a shareholder or a resident of the State of Iowa. Each director shall be elected to serve until the next annual meeting of the shareholders and until the successor of such director shall be elected or appointed as provided in Section 4 of this Article III, and shall have qualified.
Section 3. Nominations. Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder entitled to vote in the election of directors generally. However, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such shareholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (a) with respect to an election to be held at an annual meeting of shareholders, 120 days in advance of such meeting, and (b) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (v) the consent of each nominee to serve as a director of the Corporation if so elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
Section 4. Vacancies. In accordance with Article VI of the Restated Articles of Incorporation, if a vacancy in the Board of Directors shall occur, a majority of the remaining directors, though less than a quorum, may appoint a director to fill such vacancy, who shall hold office for the unexpired term of the directorship in respect of which such vacancy occurred or for the full term of any new directorship caused by any increase in the number of members.
Section 5. Place of Meetings. The Board of Directors may hold its meetings, regular or special, within or without the State of Iowa at such place or places as it may from time to time determine, or as may be specified in the notice of the meeting.
Section 6. Time and Place of Meeting. Regular meetings of the Board of Directors shall be held, without notice other than this bylaw, quarterly on the Wednesday next preceding the last Thursday of each January, April, July and October at the principal office of the Corporation in Des Moines at ten o'clock in the morning. The Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), or the President may direct a different date, time or place for the holding of a regular meeting and the Secretary shall advise the directors of any such change at least three days in advance of the meeting date in the manner provided in Section 8 of this Article III.
The Chairman of the Board of Directors (if there be one) or the President shall have power to cancel not more than two successive regular meetings of the Board of Directors by causing not less than one day's notice of such cancellation to be given to the directors.
Section 7. Special Meetings. Special meetings of the Board of Directors for any purpose or purposes may be called by the Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), by the President or a majority of the members of the Board, and shall be held at such place as may be fixed by the person or persons calling such meeting and as shall be specified in the notice of such meeting. The Secretary or an assistant secretary shall give not less than two days' notice of the date, time and place of each such meeting to each director in the manner provided in Section 8 of this Article III. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice given, or waiver of notice obtained, of such meeting as provided in Section 8 or 9, as the case may be, of Article III.
Section 8. Manner of Giving Notice of Meetings. Notice of any special meeting of the Board of Directors may be given to any director by telephone, facsimile or by telegram addressed to such director at such address as last appears in the records of the Secretary of the Corporation or by mail by depositing the same in the post office or letter box in a postpaid, sealed envelope addressed to such director at such address or by placing with a courier or delivery service with instructions for express delivery to such director at such address.
It shall be the duty of every director to furnish the Secretary of the Corporation with the post office address of such director and to notify the Secretary of any change therein.
Section 9. Waiver of Notice. Whenever any notice is required to be given to directors under the provisions of the Iowa Business Corporation Act or of the Restated Articles of Incorporation, as amended, or these bylaws, a waiver thereof in writing signed by the director entitled to such notice, whether before, at or after the time stated therein, shall be deemed equivalent thereto. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.
Section 10. Quorum. At all meetings of the Board of Directors, a majority of the number of directors fixed by resolution of the Board of Directors in accordance with Article III, Section 2 of these bylaws shall constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by the Iowa Business Corporation Act or by the Restated Articles of Incorporation, as amended, or by these bylaws. If a quorum shall not be present at any meeting of directors, the director or directors present may adjourn the meeting to a specified time, without notice other than announcement at the meeting.
Section 11. Conduct of Meetings. The Chairman of the Board of Directors (if there be one) or, in the absence of the Chairman of the Board, the Vice Chairman of the Board of Directors (if there be one), or the President of the Corporation shall act as the presiding officer at Board of Director meetings, and the Secretary or an assistant secretary of the Corporation shall act as the secretary of the meeting. In the absence of the Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), and the President, the Board of Directors may appoint a director to act as the presiding officer. The presiding officer at Board of Director meetings shall be entitled to vote as a director on all questions.
Minutes of all meetings of the Board of Directors shall be permanently kept by the Secretary, and all minutes shall be signed by the secretary of the meeting.
The Board of Directors shall have power to formulate rules and regulations governing the conduct of Board of Director meetings and the procedure thereat.
Section 12. Executive and Other Committees. The Board of Directors may, by resolution adopted by a majority of the number of directors fixed in accordance with Article III, Section 2 of these bylaws, designate from among its members an executive committee, and one or more other committees each of which, to the extent provided in such resolution and permitted by the Iowa Business Corporation Act, shall have and may exercise all the authority of the Board of Directors. Unless otherwise provided by resolution of the Board of Directors, a quorum of each such committee shall consist of a majority of its members, and if a quorum is present when a vote is taken, the affirmative vote of a majority of the members present shall be the act of such committee.
Section 13. Compensation of Directors. The Board of Directors shall have the authority to fix the compensation of directors. Any director may serve the Corporation in any other capacity and receive compensation therefor.
Section 14. Indemnification of Directors, Officers and Employees.
(a) Right to Indemnification. Each person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative or arbitration and whether formal or informal ("proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity while serving as a director, officer or employee or in any other capacity while serving as a director, officer or employee, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Iowa Business Corporation Act, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the Iowa Business Corporation Act permitted the Corporation to provide prior to such amendment), against all reasonable expenses, liability and loss(including, without limitation, attorneys' fees, all costs, judgments, fines, Employee Retirement Income Security Act excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith. Such right shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, the payment of such expenses incurred by a director, officer or employee in his or her capacity as a director, officer or employee (and not in any other capacity in which service was or is rendered by such person while a director, officer or employee including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Corporation of (i) a written undertaking, by or on behalf of such director, officer or employee to repay all amounts so advanced if it should be determined ultimately that such director, officer or employee is not entitled to be indemnified under this Section or otherwise, or (ii) a written affirmation by or on behalf of such director, officer or employee that, in such person's good faith belief, such person has met the standards of conduct set forth in the Iowa Business Corporation Act.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expenses of prosecuting such claim. It shall be a defense to any such action that the claimant has not met the standards of conduct which make it permissible under the Iowa Business Corporation Act for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. The failure of the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the Iowa Business Corporation Act, shall not be a defense to the action or create a presumption that claimant had not met the applicable standard of conduct.
(c) Benefit. Indemnification provided hereunder shall, in the case of the death of the person entitled to indemnification, inure to the benefit of such person's heirs, executors or other lawful representatives. The invalidity or unenforceability of any provision of this Section 14 shall not affect the validity or enforceability of any other provision of this Section 14.
(d) Certain Actions; Presumption of Standard of Conduct. Any action taken or omitted to be taken by (i) any director, officer or employee in good faith and in compliance with or pursuant to any order, determination, approval or permission made or given by a commission, board, official or other agency of the United States or of any state or other governmental authority with respect to the property or affairs of the Corporation or any such business corporation, not-for-profit corporation, joint venture, trade association or other entity over which such commission, board, official or agency has jurisdiction or authority or purports to have jurisdiction or authority or (ii) by any director of the Corporation pursuant to Section D of Article VIII of the Restated Articles of Incorporation, as amended, shall be presumed to be in compliance with the standard of conduct set forth in Section 490.851 (or any successor provision) of the Iowa Business Corporation Act whether or not, in the case of clause (i), it may thereafter be determined that such order, determination, approval or permission was unauthorized, erroneous, unlawful or otherwise improper.
(e) Litigation; Presumption of Standard of Conduct. Unless finally
determined, the termination of any litigation, whether by judgment, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that the action taken or omitted to be taken by the person
seeking indemnification did not comply with the standard of conduct set forth in
Section 490.851 (or successor provision) of the Iowa Business Corporation Act.
(f) Non-Exclusivity of Rights. The rights conferred on any person by this
Section 14 shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the Restated Articles of
Incorporation, as amended, bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
(g) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer or employee of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Iowa Business Corporation Act.
Section 15. Action by Directors Without a Meeting. Any action required to be taken at a meeting of the Board of Directors or a committee of directors and any other action which may be taken at a meeting of the Board of Directors or a committee of directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or all of the members of the committee of directors, as the case may be, entitled to vote with respect to the subject matter thereof.
ARTICLE IV.
Officers.
At the first regular meeting of the Board of Directors following each annual meeting of the shareholders, the Board shall elect a President, one or more Vice Presidents as prescribed by these bylaws, a Secretary and a Treasurer; and the Board may at any meeting elect or appoint a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, additional vice presidents and other officers or assistants to officers.
The Chairman of the Board of Directors (if there be one) and the Vice Chairman of the Board of Directors (if there be one) shall be selected from among the members of the Board. The officers of the Corporation may be, but are not required to be, directors. An officer may, but need not be, a shareholder of the Corporation.
Subject to the power of the Board of Directors to remove any officer from office at any time when in its judgment the best interests of the Corporation will be served thereby, each officer shall serve until the successor of such officer is elected or appointed, unless the tenure of such officer is otherwise fixed by the Board of Directors by resolution, contract or agreement for a different period of time.
The Board of Directors shall have power to fix the compensation of each officer, to prescribe the duties of such officer, to decrease or increase such compensation, change the nature of such duties, or remove such officer from office and elect or appoint the successor of such officer, in each case subject to the terms of any agreement between such officer and the Corporation.
Section 1. Chairman of the Board of Directors. The Chairman of the Board of Directors (if there be one) shall preside at all meetings of the shareholders and of the directors, at which the Chairman is present. The Chairman shall perform all duties incident to the office of Chairman of the Board of Directors and such other duties as, from time to time, may be assigned to the Chairman by the Board of Directors, and, if so designated by an appropriate resolution of the Board of Directors or an agreement between the Chairman and the Corporation, shall be the chief executive officer of the Corporation, subject, however, to the right of the Board of Directors to delegate any specific power to any other officer or officers of the Corporation; and the Chairman shall see that all orders and resolutions of the Board of Directors are carried into effect.
Section 2. Vice Chairman of the Board of Directors. The Board of Directors may elect or appoint a Vice Chairman of the Board of Directors who shall, in the absence or disability of the Chairman or in case of vacancy in the office, assume all duties of the Chairman and such other duties as, from time to time, may be assigned to the Vice Chairman by the Board of Directors.
Section 3. President. The President of the Corporation shall have general and active management of and exercise general supervision of the business and affairs of the Corporation and, if so designated by an appropriate resolution of the Board of Directors, or an agreement between the President and the Corporation, shall be the chief executive officer of the
Corporation, subject, however, to the right of the Board of Directors to delegate any specific power to any other officer or officers of the Corporation; and the President shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall have concurrent power with the Chairman of the Board of Directors to sign bonds, mortgages, certificates for shares, and other contracts and documents, except in cases where the signing and execution thereof shall be expressly delegated by law, by the Board of Directors, or by these bylaws to some other officer of the Corporation. In the absence of the Chairman of the Board of Directors or in the event of the disability or refusal of the Chairman to act, and in the absence of the Vice Chairman of the Board of Directors or in the event of the disability or refusal of the Vice Chairman to act, the President shall have such other powers as are vested in the Chairman of the Board of Directors. In general, the President shall perform the duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.
Section 4. Executive Vice President. The Board of Directors may designate an Executive Vice President who shall, in the absence or disability of the President, or in case of a vacancy in that office, assume all duties of the President.
Section 5. Vice Presidents. The Vice Presidents, including the Executive Vice President and Vice Presidents designated by the Board of Directors as Senior Vice Presidents or Group Vice Presidents, shall perform such of the duties and exercise such of the powers of the President as shall be assigned to them from time to time by the Board of Directors or the President, and shall perform such other duties as the Board of Directors or the President shall from time to time prescribe. Any Vice President may sign certificates for shares of the Corporation and any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, which authorizations may be either specific or general. In case of the death, disability or absence of the Chairman of the Board of Directors (if there be one) and the President and the Executive Vice President, the Senior Vice President or the Group Vice President (or, if there be more than one, the Senior Vice President or the Group Vice President designated by the Board of Directors) shall perform the duties of the President, including interim duties, and when so acting shall have all the powers of and be subject to all restrictions upon the President.
Section 6. Secretary. The Secretary shall attend all meetings of the shareholders and of the Board of Directors and shall keep the minutes of such meetings. The Secretary shall perform like duties for the standing committees of the Board of Directors when required. Except as otherwise provided by these bylaws or by the Iowa Business Corporation Act, the Secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chairman of the Board of Directors (if there be one) or the President.
The Secretary shall have custody of the minute books, containing the minutes of shareholders' and directors' meetings, of the stock books of the Corporation, and of all corporate records. The Secretary shall have the duty to see that the books, reports, statements, certificates and all other documents and reports of the Corporation required by law are properly prepared, kept and filed. The Secretary shall, in general, perform all duties incident to the office of Secretary.
Section 7. Assistant Secretaries. The assistant secretaries shall perform such of the duties and exercise such of the powers of the Secretary as shall be assigned to them from time to time by the Board of Directors or the Chairman of the Board of Directors (if there be one) or the President or the Secretary, and shall perform such other duties as the Board of Directors or the Chairman of the Board of Directors (if there be one) or the President shall from time to time prescribe.
Section 8. Treasurer. The Treasurer shall have the custody of all moneys, stocks, bonds and other securities of the Corporation, and of all other papers on which moneys are to be received and of all papers which relate to the receipt or delivery of the stocks, bonds, notes and other securities of the Corporation in the possession of the Treasurer. The Treasurer is authorized to receive and receipt for stocks, bonds, notes and other securities belonging to the Corporation or which are received for its account, and to place and keep the same in safety deposit vaults rented for the purpose, or in safes or vaults belonging to the Corporation. The Treasurer is authorized to collect and receive all moneys due the Corporation and to receipt therefor, and to endorse all checks, drafts, vouchers or other instruments for the payment of money payable to the Corporation when necessary or proper and to deposit the same to the credit of the Corporation in such depositaries as the Treasurer may designate for the purpose, and the Treasurer may endorse all commercial documents for or on behalf of the Corporation. The Treasurer is authorized to pay interest on obligations when due and dividends on stock when duly declared and payable. The Treasurer shall, when necessary or proper, disburse the funds of the Corporation, taking proper vouchers for such disbursements. The Treasurer shall cause to be kept in the office of the Treasurer true and full accounts of all receipts and disbursements, and shall render to the Board of Directors and the Chairman of the Board of Directors (if there be one) or the President, whenever they may require it, an account of all the transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall also perform such other duties as may be prescribed by the Board of Directors or the Chairman of the Board of Directors (if there be one) or the President. The Treasurer shall, in general, perform all duties usually incident to the office of Treasurer.
Section 9. Assistant Treasurers. The assistant treasurers shall perform such of the duties and exercise such of the powers of the Treasurer as shall be assigned to them from time to time by the Board of Directors or the Chairman of the Board of Directors (if there be one) or the President or the Treasurer, and shall perform such other duties as the Board of Directors or the Chairman of the Board of Directors (if there be one) or the President shall from time to time prescribe.
ARTICLE V.
Stock Certificates.
Section 1. Registrars and Transfer Agents. The Board of Directors shall determine the form of and provide for the issue, registration and transfer of the stock certificates representing stock of the Corporation, and may appoint registrars and transfer agents, who may be natural persons or corporations. The office of any transfer agent or registrar may be maintained within or without the State of Iowa.
Section 2. Signatures. Any stock certificates issued by the Corporation shall bear the signatures of the Chairman of the Board of Directors (if there be one), or the Vice Chairman of the Board of Directors (if there be one), or the President or any Vice President and of the Secretary or any Assistant Secretary and such officers are hereby authorized and empowered to sign such certificates when the issuance thereof has been duly authorized by the Board of Directors; provided, however, that if certificates representing shares of any class or series of stock issued by the Corporation are countersigned by manual signature by a transfer agent, other than the Corporation or its employee, or registered by manual signature by a registrar, other than the Corporation or its employee, any other signature on such certificate may be a facsimile, engraved, stamped or printed. In case any person who is an officer who has signed or whose facsimile signature has been placed upon such certificate representing stock of the Corporation shall cease to be such officer of the Corporation before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person was such officer at the date of its issue.
Section 3. Transfers. Transfers of shares shall be made on the books of the Corporation only by the registered owner thereof (or the legal representative of such owner, upon satisfactory proof of authority therefor), or by the attorney of such owner lawfully constituted in writing by documents filed with the Secretary or transfer agent of the Corporation, and only upon surrender of the certificate to be transferred, or delivery of an order of such owner if such shares are not represented by a certificate, and payment of applicable taxes with respect to such transfer, unless otherwise ordered by the Board of Directors.
Section 4. Lost or Destroyed Certificates. New certificates may be issued to replace lost, stolen or destroyed certificates, upon such terms and conditions as the Board of Directors may prescribe.
Section 5. Rights of Registered Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered or shown on its books as the owner of shares of its stock to receive dividends or any other distribution thereon, or to vote such shares, and to treat such person as the owner of such shares for all purposes and the Corporation shall not be bound to recognize any equitable or other claim to or interest in its shares on the part of any person other than the registered or record owner thereof, whether or not it shall have notice thereof.
ARTICLE VI.
General Provisions.
Section 1. Instruments Affecting Real Estate. Deeds, mortgages and other instruments affecting real estate owned by the Corporation, the execution of which has been duly authorized by the Board of Directors, shall be signed on behalf of the Corporation by the Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), or the President or any Vice President and by the Secretary or any Assistant Secretary. Leases, contracts to purchase and other instruments whereby the Corporation acquires, in the ordinary course of business, an interest in real estate owned by
others may be executed on behalf of the Corporation by the Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), the President or by any Vice President so authorized.
Section 2. Other Instruments. Bonds, notes and other secured or unsecured obligations of the Corporation, when duly authorized by the Board of Directors, may be executed on behalf of the Corporation by the Chairman of the Board of Directors (if there be one) the Vice Chairman of the Board of Directors (if there be one), or the President or any Vice President, or by any other officer or officers thereunto duly authorized by the Board of Directors and the signature of any such officer may, if the Board of Directors shall so determine, be a facsimile. Contracts and other instruments entered into executed in the ordinary course of business may be signed on behalf of the Corporation by the Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), or the President or by any officer or employee of the Corporation thereunto authorized by the Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), or the President, without obtaining specific authorization therefor from the Board of Directors.
Section 3. Destruction of Records. The Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), or the President or any Vice President appointed by the President to serve in place of the President, the Secretary and the Treasurer shall constitute a committee for the destruction of records and shall meet from time to time at the call of the Secretary who shall be chairman of such committee. It shall have power to order and cause the destruction of any corporate records, the preservation of which has been found by it to be no longer necessary or desirable.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be the calendar year.
Section 5. Annual Report. As soon as practicable after the close of each fiscal year, the Board of Directors shall cause an annual report of the business and affairs of the Corporation to be made to the shareholders.
Section 6. No Corporate Seal. The Corporation shall have no corporate seal.
Section 7. Stock in Other Corporations. Unless otherwise ordered by the Board of Directors, the Chairman of the Board of Directors (if there be one), the Vice Chairman of the Board of Directors (if there be one), or the President or any Vice President of the Corporation (1) shall have full power and authority to act and vote, in the name and on behalf of the Corporation, at any meeting of shareholders of any corporation in which this Corporation may hold stock, and at any such meeting shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock, and (2) shall have full power and authority to execute, in the name and on behalf of the Corporation, proxies appointing any suitable person or persons to act and to vote at any meeting of shareholders of any corporation in which the Corporation may hold stock, and at any such meeting the person or persons so designated shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock.
ARTICLE VII.
Amendments.
These bylaws may be altered, amended or repealed and new bylaws may be adopted by vote of a majority of the number of directors fixed by these bylaws at any regular or special meeting of the Board of Directors.
AMENDMENT TO THE RESTATED BYLAWS OF
MIDAMERICAN ENERGY COMPANY
DULY ADOPTED BY THE BOARD OF DIRECTORS ON JULY 24, 1996
RESOLVED, that, effective July 24, 1996, the Restated Bylaws of MidAmerican Energy Company are hereby amended by adding the following as a second paragraph to Article II, Section 2:
Only such business shall be conducted at an annual meeting of shareholders as shall have been properly brought before the meeting. For business to be properly brought before the meeting, it must be: (i) authorized by the Board of Directors and specified in the notice, or a supplemental notice, of the meeting, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or the Chairman of the meeting or (iii) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before the meeting by a shareholder, the shareholder must have given written notice thereof, either by personal delivery or by United States mail, postage prepaid to the Secretary of the Corporation (a) not later than 120 days in advance of such meeting or (b) if less than 120 days' notice of the meeting or prior public disclosure of the date of the meeting is given or made to shareholders, not later than the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth as to each item of business the shareholder proposes to bring before the meeting (1) a brief description of such item and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on the Corporation's records, of the shareholder proposing such business, (3) the class and number of shares of stock of the Corporation which are beneficially owned by the shareholder (for purposes of the regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as amended) and (4) any material interest of the shareholder in such business. No business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph. The Chairman of the meeting at which any business is proposed by a shareholder shall, if the facts warrant, determine and declare to the meeting that such business was not properly brought before the meeting in accordance with the provisions of this paragraph and, in such event, the business not properly before the meeting shall not be transacted.
EXHIBIT 12
MIDAMERICAN ENERGY COMPANY (consolidated)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
(In Thousands)
(Unaudited)
Twelve Months Ended Twelve Months Ended
--------------------------------------- ------------------------------------
June 30, 1996 December 31, 1995
--------------------------------------- ------------------------------------
Supplemental (a) Supplemental (a)
----------------------- --------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
Income from continuing operations ........... $149,944 $ -- $149,944 $130,406 $ -- $130,406
-------- ------ -------- -------- ------- --------
Pre-tax (gain) loss of less than
50% owned persons ......................... 14,597 -- 14,597 16,482 -- 16,482
-------- ------ -------- -------- ------- --------
Add (Deduct):
Total income taxes .......................... 89,255 -- 89,255 67,984 -- 67,984
Interest on long-term debt .................. 108,480 3,938 112,418 110,505 4,595 115,100
Other interest charges ...................... 9,542 -- 9,542 9,449 -- 9,449
Interest on leases .......................... 406 -- 406 1,088 -- 1,088
-------- ------ -------- -------- ------ --------
207,683 3,938 211,621 189,026 4,595 193,621
-------- ------ -------- -------- ------ --------
Earnings available for fixed charges ........ 372,224 3,938 376,162 335,914 4,595 340,509
-------- ------ -------- -------- ------ --------
Fixed charges:
Interest on long-term debt .................. 108,480 3,938 112,418 110,505 4,595 115,100
Other interest charges ...................... 9,542 -- 9,542 9,449 -- 9,449
Interest on leases .......................... 406 -- 406 1,088 -- 1,088
Total fixed charges ....................... 118,428 3,938 122,366 121,042 4,595 125,637
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges .......... 3.143 -- 3.074 2.775 -- 2.710
========= ====== ======== ======== ====== ========
Preferred stock dividend requirements ....... $ 8,157 $ -- $ 8,157 $ 8,059 $ -- $ 8,059
Ratio of net income before income taxes to
net income ................................ 1.5953 -- 1.5953 1.5213 -- 1.5213
-------- ------ -------- -------- ------ --------
Preferred stock dividend requirements before
income tax ................................ 13,012 -- 13,012 12,260 -- 12,260
-------- ------ -------- -------- ------ --------
Fixed charges plus preferred stock dividend
requirements .............................. 131,440 3,938 135,378 133,302 4,595 137,897
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges plus
preferred stock dividend requirements
(pre-income tax basis) .................... 2.832 -- 2.779 2.520 -- 2.469
====== ====== ====== ====== ====== ======
|
Notes: (a) Amounts in the supplemental columns are to reflect the Company's portion of the net interest component of payments to Nebraska Public Power District under a long-term purchase agreement for one-half of the plant capacity from Cooper Nuclear Station.
EXHIBIT 12
MIDAMERICAN ENERGY COMPANY (consolidated)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
(In Thousands)
(Unaudited)
Twelve Months Ended Twelve Months Ended
--------------------------------------- ------------------------------------
December 31, 1994 December 31, 1993
--------------------------------------- ------------------------------------
Supplemental (a) Supplemental (a)
----------------------- --------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
Income from continuing operations ........... $136,385 $ -- $136,385 $147,705 $ -- $147,705
-------- ------ -------- -------- ------- --------
Pre-tax (gain) loss of less than 50% owned
person .................................... (270) -- (270) (597) -- (597)
-------- ------ -------- -------- ------- --------
Add (Deduct):
Total income taxes .......................... 62,349 -- 62,349 71,409 -- 71,409
Interest on long-term debt .................. 105,753 5,428 111,181 111,065 5,678 116,743
Other interest charges ...................... 6,446 -- 6,446 5,066 -- 5,066
Interest on leases .......................... 1,211 -- 1,211 1,876 -- 1,876
-------- ------ -------- -------- ------ --------
175,759 5,428 181,187 189,416 5,678 195,094
-------- ------ -------- -------- ------ --------
Earnings available for fixed charges ........ 311,874 5,428 317,302 336,524 5,678 342,202
-------- ------ -------- -------- ------ --------
Fixed charges:
Interest on long-term debt .................. 105,753 5,428 111,181 111,065 5,678 116,743
Other interest charges ...................... 6,446 -- 6,446 5,066 -- 5,066
Interest on leases .......................... 1,211 -- 1,211 1,876 -- 1,876
-------- ------ -------- -------- ------ --------
Total fixed charges ......................... 113,410 5,428 118,838 118,007 5,678 123,685
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges .......... 2.750 -- 2.670 2.852 -- 2,767
======== ====== ======== ======== ====== ========
Preferred stock dividend requirements ....... $ 10,551 $ -- $ 10,551 $ 8,367 $ -- $ 8,367
Ratio of net income before income taxes
to net income ............................. 1.4572 -- 1.4572 1.4835 -- 1.4835
-------- ------ -------- -------- ------ --------
Preferred stock dividend requirements
before income tax ......................... 15,374 -- 15,374 12,412 -- 12,412
-------- ------ -------- -------- ------ --------
Fixed charges plus preferred stock dividend
requirements .............................. 128,784 5,428 134,212 130,419 5,678 136,097
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges plus
preferred stock dividend requirements
(pre-income tax basis) .................... 2.422 -- 2.364 2.580 -- 2.514
======== ====== ====== ====== ====== ======
|
Notes: (a) Amounts in the supplemental columns are to reflect the Company's portion of the net interest component of payments to Nebraska Public Power District under a long-term purchase agreement for one-half of the plant capacity from Cooper Nuclear Station.
EXHIBIT 12
PAGE 3 OF 3
MIDAMERICAN ENERGY COMPANY (consolidated)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
(In Thousands)
(Unaudited)
Twelve Months Ended Twelve Months Ended
--------------------------------------- ------------------------------------
December 31, 1992 December 31, 1991
--------------------------------------- ------------------------------------
Supplemental (a) Supplemental (a)
----------------------- --------------------
As As
Adjustment Adjusted Adjustment Adjusted
---------- -------- ---------- --------
Income from continuing operations ........... $ 88,085 $ -- $ 88,085 $127,969 $ -- $127,969
-------- ------ -------- -------- ------- --------
Pre-tax (gain) loss of less than 50%
owned persons ............................. (1,297) -- (1,297) (240) -- (240)
-------- ------ -------- -------- ------- --------
Add (Deduct):
Total income taxes .......................... 26,812 -- 26,812 59,604 -- 59,604
Interest on long-term debt .................. 114,732 7,391 122,123 106,538 5,689 112,227
Other interest charges ...................... 5,899 -- 5,899 16,380 -- 16,380
Interest on leases .......................... 2,386 -- 2,386 3,795 -- 3,795
-------- ------ -------- -------- ------ --------
149,829 7,391 157,220 186,317 5,689 192,006
-------- ------ -------- -------- ------ --------
Earnings available for fixed charges ...... 236,617 7,391 244,008 314,046 5,689 319,735
-------- ------ -------- -------- ------ --------
Fixed charges:
Interest on long-term debt .................. 114,732 7,391 122,123 106,538 5,689 112,227
Other interest charges ...................... 5,899 -- 5,899 16,380 -- 16,380
Interest on leases .......................... 2,386 -- 2,386 3,795 -- 3,795
-------- ------ -------- -------- ------ --------
Total fixed charges ....................... 123,017 7,391 130,408 126,713 5,689 132,402
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges .......... 1.923 -- 1.871 2.478 -- 2.415
======== ====== ======== ======== ====== ========
Preferred stock dividend requirements ....... $ 8,735 $ -- $ 8,735 $ 9,708 $ -- $ 9,708
Ratio of net income before income taxes
to net income ............................. 1.3044 -- 1.3044 1.4658 -- 1.4658
-------- ------ -------- -------- ------ --------
Preferred stock dividend requirements
before income tax ......................... 11,394 -- 11,394 14,230 -- 14,230
-------- ------ -------- -------- ------ --------
Fixed charges plus preferred stock
dividend requirements ..................... 134,411 7,391 141,802 140,943 5,689 146,632
-------- ------ -------- -------- ------ --------
Ratio of earnings to fixed charges plus
preferred stock dividend requirements
(pre-income tax basis) .................... 1.760 -- 1.721 2.228 -- 2.181
======== ====== ======== ======== ====== ========
|
Notes: (a) Amounts in the supplemental columns are to reflect the Company's portion of the net interest component of payments to Nebraska Public Power District under a long-term purchase agreement for one-half of the plant capacity from Cooper Nuclear Station.
| ARTICLE UT |
| This schedule contains summary financial information extracted from the consolidated balance sheet of MidAmerican Energy Company as of June 30, 1996, and the related consolidated statements of income and cash flows for the six months ended June 30, 1996, and is qualified in its entirety by reference to such financial statements. |
| MULTIPLIER:1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 1996 |
| PERIOD START | JAN 01 1996 |
| PERIOD END | JUN 30 1996 |
| BOOK VALUE | PER BOOK |
| TOTAL NET UTILITY PLANT | 2,631,505 |
| OTHER PROPERTY AND INVEST | 869,172 |
| TOTAL CURRENT ASSETS | 312,934 |
| TOTAL DEFERRED CHARGES | 409,911 |
| OTHER ASSETS | 209,178 |
| TOTAL ASSETS | 4,432,700 |
| COMMON | 801,439 |
| CAPITAL SURPLUS PAID IN | 0 |
| RETAINED EARNINGS | 450,191 |
| TOTAL COMMON STOCKHOLDERS EQ | 1,242,588 |
| PREFERRED MANDATORY | 50,000 |
| PREFERRED | 78,577 |
| LONG TERM DEBT NET | 1,405,350 |
| SHORT TERM NOTES | 0 |
| LONG TERM NOTES PAYABLE | 0 |
| COMMERCIAL PAPER OBLIGATIONS | 164,200 |
| LONG TERM DEBT CURRENT PORT | 64,461 |
| PREFERRED STOCK CURRENT | 0 |
| CAPITAL LEASE OBLIGATIONS | 0 |
| LEASES CURRENT | 0 |
| OTHER ITEMS CAPITAL AND LIAB | 1,427,524 |
| TOT CAPITALIZATION AND LIAB | 4,432,700 |
| GROSS OPERATING REVENUE | 1,004,779 |
| INCOME TAX EXPENSE | 54,131 1 |
| OTHER OPERATING EXPENSES | 829,381 |
| TOTAL OPERATING EXPENSES | 829,381 |
| OPERATING INCOME LOSS | 175,398 |
| OTHER INCOME NET | 20,302 2 |
| INCOME BEFORE INTEREST EXPEN | 195,700 |
| TOTAL INTEREST EXPENSE | 56,866 |
| NET INCOME | 84,703 |
| PREFERRED STOCK DIVIDENDS | 4,661 |
| EARNINGS AVAILABLE FOR COMM | 80,042 |
| COMMON STOCK DIVIDENDS | 60,440 |
| TOTAL INTEREST ON BONDS | 39,768 |
| CASH FLOW OPERATIONS | 214,476 |
| EPS PRIMARY | 0.79 |
| EPS DILUTED | 0.79 |
| 1 | Tag 37 includes operating and nonoperating income taxes and is excluded from operating expenses in Tag 39 and on the Consolidated Statement of Income. |
| 2 | Tag 41 includes $914,000 of Income from Discontinued Operations, net of income taxes. |