FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Illinois 42-0673189
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
206 East Second Street, Davenport, Iowa 52801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(319) 326-7111
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 and 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 the
filing requirements for the past 90 days.
Yes X No ____
Common shares outstanding at June 30, 1994 29,501,416
Part I. Quarterly Financial Information
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Second Quarter Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
(In thousands, except per share amounts)
(Unaudited)
OPERATING REVENUES
Electric $89,108 $82,919 $173,716 $159,266
Gas 25,324 31,695 125,580 117,217
114,432 114,614 299,296 276,483
OPERATING EXPENSES AND TAXES
Operation-
Cost of gas sold 13,794 19,754 88,833 81,734
Cost of fuel, energy and capacity 15,668 16,296 35,843 30,958
Other operation 26,872 24,768 54,069 47,567
Maintenance 10,254 8,863 22,282 18,082
Provision for depreciation 15,417 14,550 30,800 29,019
Depreciation and equity funds
recovered under Louisa Phase-In Clause - 1,185 - 2,370
Income taxes 6,106 4,569 13,041 12,525
Property and other taxes 8,729 8,021 18,032 17,307
96,840 98,006 262,900 239,562
OPERATING INCOME 17,592 16,608 36,396 36,921
OTHER INCOME
InterCoast Energy Company -
Oil and gas revenues 15,787 13,981 31,562 25,602
Other income 7,949 6,739 17,574 15,352
Expenses, including interest and
provision for income taxes (20,680) (17,431) (42,373) (32,984)
Net income of InterCoast Energy Company 3,056 3,289 6,763 7,970
Allowance for equity funds
used during construction (145) - 31 -
Miscellaneous (480) (213) (147) (613)
2,431 3,076 6,647 7,357
INCOME BEFORE UTILITY INTEREST CHARGES 20,023 19,684 43,043 44,278
UTILITY INTEREST CHARGES
Interest on long-term debt 5,925 6,235 11,785 12,471
Other interest expense 252 400 537 795
Allowance for borrowed funds
used during construction (365) (296) (580) (584)
5,812 6,339 11,742 12,682
NET INCOME 14,211 13,345 31,301 31,596
PREFERRED AND PREFERENCE
DIVIDEND REQUIREMENTS 1,204 1,246 2,406 2,500
NET INCOME ON COMMON SHARES $13,007 $12,099 $28,895 $29,096
AVERAGE COMMON SHARES OUTSTANDING 29,394 29,333 29,372 29,331
NET INCOME PER AVERAGE
COMMON SHARE OUTSTANDING $0.44 $0.41 $0.98 $0.99
CASH DIVIDENDS DECLARED AND
PAID PER COMMON SHARE $0.4325 $0.4325 $0.865 $0.865
<FN>
The accompanying notes to consolidated financial statements are an intergral part of these statements.
-1-
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
6-30-94 12-31-93
(In thousands, except
share amounts)
(Unaudited)
PROPERTY AND OTHER ASSETS
UTILITY PLANT, at original cost
Electric $1,294,398 $1,279,700
Gas 269,885 271,342
1,564,283 1,551,042
Less--Accumulated provision for depreciation 626,311 605,708
937,972 945,334
Nuclear fuel, net of accumulated amortization 27,761 25,120
Construction work in progress 35,189 22,791
1,000,922 993,245
CURRENT ASSETS
Cash and cash equivalents 13,268 17,844
Accounts receivable, less reserves of $ 1,161 and $1,165 36,534 43,389
Accrued unbilled revenues 16,239 22,182
Inventories 30,978 35,597
Deferred gas expense 50 5,794
Other 15,327 18,246
112,396 143,052
INVESTMENTS
InterCoast Energy Company 528,250 501,829
Nuclear decommissioning trust fund 44,977 39,470
Corporate-owned life insurance 12,853 12,836
586,080 554,135
OTHER ASSETS
Regulatory assets 95,697 92,828
Other 10,624 10,303
106,321 103,131
1,805,719 1,793,563
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
COMMON SHAREHOLDERS' EQUITY
Common shares--authorized 80,000,000 shares--outstanding 29,501,416 and
29,352,173 shares stated at 283,091 280,009
Retained earnings 222,845 219,371
Other (1,837) 32
504,099 499,412
PREFERRED SHARES--authorized 400,000 shares, cumulative
--outstanding 198,288 shares not subject to mandatory redemption 19,829 19,829
PREFERENCE SHARES--authorized 2,386,250 shares, cumulative
--outstanding 500,000 shares subject to mandatory redemption 50,000 50,000
LONG-TERM DEBT
First Mortgage Bonds 323,685 323,625
Pollution Control Obligations 48,133 48,275
InterCoast Energy Company 261,500 242,500
633,318 614,400
TOTAL CAPITALIZATION 1,207,246 1,183,641
CURRENT LIABILITIES
Notes payable 31,500 31,000
Debt redeemable within one year 59,145 59,232
Accounts payable 31,955 44,847
Accrued taxes 24,227 24,913
Accrued interest 11,490 11,413
Accrued gas expense 10,296 11,745
Other 13,373 18,322
181,986 201,472
OTHER LIABILITIES
Capital lease obligations 9,791 10,036
Accumulated provision for nuclear decommissioning 44,977 39,470
Other 42,833 42,984
97,601 92,490
ACCUMULATED DEFERRED INCOME TAXES 278,611 274,605
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 40,275 41,355
$1,805,719 $1,793,563
<FN>
The accompanying notes to consolidated financial statements are an integral part of
these statements.
-2-
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1994 1993
(In thousands)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $31,301 $31,596
Adjustments to reconcile net income
to net cash from operating activities -
Depreciation 32,800 31,341
Depletion 8,688 6,156
Depreciation and equity funds recovered under
Louisa Phase-In Clause - 2,370
Nuclear fuel amortization 3,651 4,175
Deferred income taxes, net 4,786 6,493
Tax credits, net (1,080) (1,127)
Net gain on disposition of securities (2,264) (1,781)
Allowance for equity funds used during construction (31) -
Changes in current assets and liabilities
Accounts receivable 6,855 9,187
Accrued unbilled revenues 5,943 6,861
Inventories 4,619 4,854
Deferred and accrued gas expense 4,295 7,803
Accounts payable (12,992) (3,145)
Accrued taxes (686) (2,059)
Other current assets and liabilities (1,797) (9,981)
Energy-efficiency program cost deferrals, net (3,651) (3,284)
Other (3,329) (2,180)
Net cash from operating activities 77,108 87,279
CASH FLOWS FROM INVESTING ACTIVITIES
Utility plant expenditures (32,660) (27,746)
Nuclear fuel expenditures (6,292) (5,596)
Allowance for equity funds used during construction 31 -
Nuclear decommissioning trust fund (4,472) (4,052)
Oil and gas investments (17,233) (14,449)
Purchase of investments (32,080) (50,078)
Sale of investments 13,819 24,066
Other 2,706 1,262
Net cash from investing activities (76,181) (76,593)
CASH FLOWS FROM FINANCING ACTIVITIES
Common shares issued 3,094 -
Preference shares redeemed - (575)
Long-term debt issued - 75,865
Long-term debt retired (232) (78,143)
Long-term borrowings of InterCoast Energy Company -
Increase in unsecured revolving credit facility 19,000 13,300
Increase in short-term borrowings 500 3,500
Dividends paid (27,834) (27,879)
Issuance expense (31) (944)
Net cash from financing activities (5,503) (14,876)
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,576) (4,190)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,844 20,827
CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,268 $16,637
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the periods for -
Interest (net of amounts capitalized) $24,323 $25,679
Income taxes 10,509 9,312
<FN>
The accompanying notes to consolidated financial statements are an integral part of
these statements.
-3-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(a) The condensed consolidated financial statements
included herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission.
The statements reflect all adjustments which are, in the
Company's opinion, necessary for a fair statement of the results
for the periods presented. Certain information and footnote
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.
However, the Company believes that the disclosures are adequate
to make the information presented not misleading. Certain 1993
amounts have been reclassified to conform to the current year
presentation. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated
financial statements and the notes thereto incorporated by
reference in the latest annual report on Form 10-K.
(b) On May 3, 1993, the Company filed revised electric
rates with the Iowa Utilities Board (IUB) designed to increase
annual electric revenues by approximately $13.5 million (7.5%)
and to provide for any increase in the federal corporate income
tax rate ultimately enacted. A temporary annual rate increase of
$6.8 million (3.8%) was implemented July 26, 1993. Final rates
at the $6.8 million increase level became effective April 15,
1994.
(c) In April 1992, the Federal Energy Regulatory Commission
(FERC) issued Order No. 636, directing a restructuring by
interstate pipeline companies for their natural gas sales and
transportation services. The FERC Order contemplated that
transitional gas supply realignment costs related to this
restructuring may be billed by interstate pipelines to their
customers. The amount of transition costs which the FERC may
ultimately authorize the pipelines to bill the Company is
estimated to be $35 to $50 million. The Illinois Commerce
Commission has allowed the Company to include provisions for such
costs in its customer billings. Rehearing was granted to two
intervenors and additional information was received. The two
intervenors filed a petition for interlocutory review which was
denied. Provisions for such costs are also being included in
customer billings in Iowa.
(d) The allowance for funds used during construction
(AFUDC) includes the costs of equity and borrowed funds used to
finance construction which are capitalized in accordance with
rules prescribed by the Federal Energy Regulatory Commission
(FERC). The FERC's Uniform System of Accounts defines AFUDC as
the net cost of borrowed funds used for construction and a
reasonable rate to reflect the costs of other funds so used.
In the first six months of 1994 and 1993, AFUDC rates were 4.3%
and 3.5%, respectively, compounded semi-annually. Under FERC
rules, if average short-term debt outstanding exceeds
construction work in progress (CWIP), all CWIP is assumed to have
been financed with short-term debt. This was the condition in
1993. While currently capitalized AFUDC does not represent a
current source of cash, it does represent a basis for future
sources of cash through the inclusion in rates of depreciation
charges and allowance for returns on investment.
(e) On January 1, 1994, the Company adopted Statement of
Financial Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities (SFAS 115). Under this statement,
InterCoast Energy Company (InterCoast), the Company's wholly
owned non-regulated subsidiary, investments in debt and
marketable equity securities are reported at fair value with net
unrealized gains and losses reported as a net of tax amount in a
separate component of shareholders' equity until realized. The
adoption of SFAS 115 did not have a material effect on financial
position or results of operations.
(f) The Company is investigating five properties currently
owned by the Company which were, at one time, sites of gas
manufacturing plants. The purpose of these investigations 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. One site
is located in Illinois and four sites are located in Iowa. With
regard to the Illinois property, the Company has signed a working
agreement with the Illinois Environmental Protection Agency to
perform further investigation to determine whether waste
materials are present and, if so, whether such materials
constitute an environmental or health risk. At June 30, 1994, an
estimated liability of $3.3 million has been recorded for
litigation, investigation and remediation related to the Illinois
site. A regulatory asset has been recorded reflecting
anticipated cost recovery through rates in Illinois. With regard
to the Iowa sites, no agreement or consent order has been
negotiated to perform any site investigations or remediation.
The Company has recorded a $4 million estimated liability for the
Iowa sites. A regulatory asset has been recorded based on the
current regulatory treatment of comparable costs in Iowa. The
estimated recorded liabilities for these properties are based
upon preliminary data. Thus, actual costs could vary
significantly from the estimates. 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 incurred costs,
recoveries and the inclusion of provision for 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.
Clean Air Act legislation was signed into law in November
1990. The Company has four jointly and one wholly owned coal-
fired generating stations which represent approximately 65% of
the Company's electric generating capability. Each of these
facilities will be impacted to varying degrees by the
legislation.
Only one unit at the wholly owned generating station,
representing approximately 10% of the Company's electric
generating capability, will be impacted by the emission reduction
requirements effective in 1995. Beginning in 1995, this unit
will be required to hold allowances, issued by the federal
government, in order to emit sulfur dioxide. The compliance
strategy for this unit includes modifications to allow for
burning low sulfur coal, modifications for nitrogen oxide control
and installation of a new emission monitoring system. The
Company's remaining construction expenditures relative to this
work are estimated to be $5.4 million.
The four generating stations not affected until 2000 already
burn low sulfur coal, so additional capital costs will not be
incurred for sulfur dioxide emission reduction requirements.
Beginning in 2000, these stations will be required to hold
allowances, issued by the federal government, in order to emit
sulfur dioxide. Installation of low nitrogen oxide burners is
required at one of these facilities and existing emission
monitoring systems at all four facilities will require upgrading.
The Company's remaining construction cost for this work is
estimated to be $2.1 million.
It is anticipated that any costs incurred by the Company to
comply with the Clean Air Act legislation would be included in
the cost of service on which the Company's rates for utility
service are based.
(g) Expenses of InterCoast include interest expense as
follows:
June 30,
1994 1993
Three Months Ended. . . .$ 6,417,000 $ 6,009,000
Six Months Ended. . . . .$12,658,000 $11,934,000
(h) On July 27, 1994, the Company and Midwest Resources
Inc. announced a strategic "merger of equals" to form MidAmerican
Energy Company. Under the proposed merger, MidAmerican Energy
Company will be structured as a utility with the Company, Midwest
Resources Inc. and Midwest Power Systems Inc. being merged into
the new company.
MidAmerican will be the largest electric and
gas utility operating in Iowa with combined revenues of
approximately $1.8 billion, combined assets of approximately $4.4
billion and total capitalization of approximately $2.7 billion.
Midwest's common shareholders will receive one share of
MidAmerican for each Midwest share and the Company's shareholders
will receive 1.47 shares of MidAmerican for each Company share.
The boards of directors anticipate that MidAmerican will
initially have an indicated annual common stock dividend of $1.20
per share.
The merger is subject to approval by the shareholders of the
Company and Midwest Resources Inc. and the following regulatory
agencies: the FERC, and the state regulators in Iowa, Illinois
and South Dakota. Completion of the merger is expected in the
second half of 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Operating Revenues
Electric revenues increased in the second quarter and first
six months of 1994 compared to the corresponding periods in 1993
primarily due to higher rates, increased sales for resale and
increased retail unit sales. These increases were partially
offset by lower fuel and energy cost billings to retail
customers.
A temporary annual electric rate increase in Iowa of $6.8
million was implemented July 26, 1993. Final rates at the $6.8
million increase level became effective April 15, 1994.
On July 28, 1993, an annual electric rate increase in
Illinois of $9.6 million became effective following ICC approval.
On January 15, 1994, an additional electric increase of $230,000
related to the increase in the federal corporate income tax rate
became effective on rehearing. Also on rehearing, the ICC
approved a rate rider which permits the Company to recover costs
of investigation, remediation and litigation relating to former
manufactured gas plant sites. In addition, on January 1, 1994,
nuclear decommissioning costs included in Illinois customer
billings through a rate rider were increased by $1.2 million
annually. The previously mentioned rate increases were partially
offset by $1.7 million and $3.2 million decreases in revenues for
the second quarter and first six months of 1994, respectively,
reflecting the expiration of the Company's Louisa Phase-In Clause
on June 30, 1993. Increased revenues collected through rate
riders relating to former manufactured gas plant sites and
nuclear decommissioning and the decreased revenues from
expiration of the Louisa Phase-In Clause will not affect net
income due to a corresponding increase or decrease in costs.
Increased retail unit sales reflect warmer weather and
increases in industrial usage in the second quarter of 1994
compared to the second quarter of 1993.
As noted above, the increases in electric revenues were
partially offset by decreased fuel and energy cost billings to
retail customers. Variations in fuel and energy cost billings
reflect corresponding changes in fuel and purchased energy costs
and, thus, do not affect net income.
The changes in electric revenues are shown below:
Revenue Increase (Decrease) from Prior Period
Second Quarter 1994 Six Months June 1994
to Second Quarter 1993 to Six Months June 1993
(In thousands)
Change in Retail Fuel and Energy
Adjustment Clause Billings $ (2,200) $ (500)
Change in Retail Unit Sales 3,800 3,800
Change in Sales for Resale 800 4,700
Change Due to the Effect of
Higher Rates 3,700 6,400
$ 6,100 $ 14,400
Gas revenues decreased in the second quarter of 1994
compared to the second quarter of 1993. The principal factors
contributing to the decrease were lower purchased gas cost
billings and decreased sales volumes reflecting temperatures
which were 17% warmer than the second quarter of 1993 (when
measured by heating degree days). Variations in purchased gas
cost billings reflect corresponding changes in cost of gas sold
and, thus, do not affect net income. Partially offsetting these
decreases were higher rates.
Gas revenues increased in the first six months of 1994
compared to the first six months of 1993. The principal factors
contributing to the increase were higher purchased gas cost
billings, increased sales volumes reflecting temperatures which
were slightly colder than the first six months of 1993 and higher
rates. Variations in purchased gas cost billings reflect
corresponding changes in cost of gas sold and, thus, do not
affect net income.
On July 28, 1993, an annual gas rate increase in Illinois of
$2 million became effective following ICC approval. On January
15, 1994, an additional gas increase of $49,000 related to the
increase in the federal corporate income tax rate became
effective on rehearing. As noted previously, also on rehearing,
the ICC approved a rate rider which permits the Company to
recover costs of investigation, remediation and litigation
relating to former manufactured gas plant sites.
The changes in gas revenue are shown below:
Revenue Increase (Decrease) from Prior Period
Second Quarter 1994 Six Months June 1994
to Second Quarter 1993 to Six Months June 1993
(In thousands)
Change in Purchased Gas
Adjustment Clause Billings $(3,500) $ 6,000
Change in Unit Sales (3,000) 1,600
Change Due to the Effect of
Higher Rates 200 800
$(6,300) $ 8,400
Operation
Cost of gas sold decreased in the second quarter of 1994
compared to the second quarter of 1993 primarily due to lower gas
purchases reflecting warmer temperatures in the second quarter of
1994.
Cost of gas sold increased in the first six months of 1994
compared to the first six months of 1993 primarily due to
increased purchased gas costs from suppliers and higher gas
purchases reflecting slightly colder temperatures in the first
six months of 1994.
Changes in the cost of electric fuel, energy and capacity
reflect fluctuations in generation mix, fuel cost and energy and
capacity purchases. Decreased fuel, energy and capacity costs in
the second quarter of 1994 compared to the second quarter of 1993
are primarily due to decreased average unit fuel and energy costs
partially offset by increased total sales. Increased fuel, energy
and capacity costs in the first six months of 1994 compared to
the first six months of 1993 are primarily due to increased
average unit fuel and energy costs and increased total sales.
Other operation and maintenance increased in the second
quarter and first six months of 1994 compared to the
corresponding periods in 1993 primarily due to increased costs at
the Quad-Cities Nuclear Power Station.
Depreciation and Equity Funds
Recovered Under Louisa Phase-In Clause
The decrease in the amount recovered under the Louisa Phase-
In Clause in the second quarter and first six months of 1994
compared to the corresponding periods in 1993 reflects the
expiration of the Louisa Phase-In Clause on June 30, 1993.
Oil and Gas Revenues of InterCoast Energy Company
Oil and gas revenues of InterCoast increased in the second
quarter of 1994 compared to the second quarter of 1993 primarily
due to higher production volumes, partially offset by lower oil
and gas prices.
Oil and gas revenues of InterCoast increased in the first
six months of 1994 compared to the first six months of 1993
primarily due to higher production volumes and higher gas prices,
partially offset by lower oil prices.
Other Income of InterCoast Energy Company
Other income of InterCoast increased in the second quarter
of 1994 compared to the second quarter of 1993 primarily due to
increased gains on the disposition of direct holdings in common
stock.
Other income of InterCoast increased in the first six months
of 1994 compared to the first six months of 1993 primarily due to
greater income from special purpose funds.
Expenses of InterCoast Energy Company
Expenses of InterCoast increased in the second quarter and
first six months of 1994 compared to the corresponding periods in
1993 primarily due to greater oil and gas expenses.
Other Matters
On July 27, 1994, the Company and Midwest Resources Inc.
announced a strategic "merger of equals" to form MidAmerican
Energy Company. Under the proposed merger, MidAmerican Energy
Company will be structured as a utility with the Company, Midwest
Resources Inc. and Midwest Power Systems Inc. being merged into
the new company.
MidAmerican will be the largest electric and
gas utility operating in Iowa with combined revenues of
approximately $1.8 billion, combined assets of approximately $4.4
billion and total capitalization of approximately $2.7 billion.
Midwest's common shareholders will receive one share of
MidAmerican for each Midwest share and the Company's shareholders
will receive 1.47 shares of MidAmerican for each Company share.
The boards of directors anticipate that MidAmerican will
initially have an indicated annual common stock dividend of $1.20
per share.
The merger is subject to approval by the shareholders of the
Company and Midwest Resources Inc. and the following regulatory
agencies: the FERC, and the state regulators in Iowa, Illinois
and South Dakota. Completion of the merger is expected in the
second half of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current utility construction program forecast
calls for expenditures of $87.6 million in 1994. Approximately
65% of these expenditures are expected to be met from cash
generated from operations. The Company's utility capital
requirements for the years 1994-1998 include budgeted
construction expenditures of $319.6 million, expected
contributions to nuclear decommissioning trust funds of $45.7
million and maturities, sinking funds and redemptions related to
long-term debt of $98.2 million.
At June 30, 1994 and December 31, 1993, the Company had
$31.5 million and $31 million, respectively, of outstanding
short-term commercial paper notes.
In April 1992, the FERC issued Order No. 636, directing a
restructuring by interstate pipeline companies for their natural
gas sales and transportation services. The FERC Order
contemplated that transitional gas supply realignment costs
related to this restructuring may be billed by interstate
pipelines to their customers. The amount of transition costs
which the FERC may ultimately authorize the pipelines to bill the
Company is estimated to be $35 to $50 million. The ICC has
allowed the Company to include provisions for such costs in its
customer billings. Rehearing was granted to two intervenors and
additional information was received. The two intervenors filed a
petition for interlocutory review which was denied. Provisions
for such costs are also being included in customer billings in
Iowa.
The Company is investigating five properties currently owned
by the Company which were, at one time, sites of gas
manufacturing plants. The purpose of these investigations 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. One site
is located in Illinois and four sites are located in Iowa. With
regard to the Illinois property, the Company has signed a working
agreement with the Illinois Environmental Protection Agency to
perform further investigation to determine whether waste
materials are present and, if so, whether such materials
constitute an environmental or health risk. At June 30, 1994, an
estimated liability of $3.3 million has been recorded for
litigation, investigation and remediation related to the Illinois
site. A regulatory asset has been recorded reflecting
anticipated cost recovery through rates in Illinois. With regard
to the Iowa sites, no agreement or consent order has been
negotiated to perform any site investigations or remediation.
The Company has recorded a $4 million estimated liability for the
Iowa sites. A regulatory asset has been recorded based on the
current regulatory treatment of comparable costs in Iowa. The
estimated recorded liabilities for these properties are based
upon preliminary data. Thus, actual costs could vary
significantly from the estimates. 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 incurred costs,
recoveries and the inclusion of provision for 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.
Clean Air Act legislation was signed into law in November
1990. The Company has four jointly and one wholly owned coal-
fired generating stations which represent approximately 65% of
the Company's electric generating capability. Each of these
facilities will be impacted to varying degrees by the
legislation.
Only one unit at the wholly owned generating station,
representing approximately 10% of the Company's electric
generating capability, will be impacted by the emission reduction
requirements effective in 1995. Beginning in 1995, this unit
will be required to hold allowances, issued by the federal
government, in order to emit sulfur dioxide. The compliance
strategy for this unit includes modifications to allow for
burning low sulfur coal, modifications for nitrogen oxide control
and installation of a new emission monitoring system. The
Company's remaining construction expenditures relative to this
work are estimated to be $5.4 million.
The four generating stations not affected until 2000 already
burn low sulfur coal, so additional capital costs will not be
incurred for sulfur dioxide emission reduction requirements.
Beginning in 2000, these stations will be required to hold
allowances, issued by the federal government, in order to emit
sulfur dioxide. Installation of low nitrogen oxide burners is
required at one of these facilities and existing emission
monitoring systems at all four facilities will require upgrading.
The Company's remaining construction cost for this work is
estimated to be $2.1 million.
It is anticipated that any costs incurred by the Company to
comply with the Clean Air Act legislation would be included in
the cost of service on which the Company's rates for utility
service are based.
The forecasted 1994 capital expenditures for InterCoast are
approximately $82.6 million. Actual expenditures are dependent
on overall InterCoast performance and general market conditions.
InterCoast's aggregate amounts of maturities and cash
sinking fund requirements for long-term debt outstanding at June
30, 1994 are $59 million for 1994 and $275.5 million for the
years 1994-1998. Amounts due in 1994 are expected to be
refinanced with debt instruments and operating cash flow.
In January 1994, InterCoast renegotiated its unsecured
revolving credit facility agreement. The renegotiation increased
the amount of capital available from $65 million to $110 million.
The amended credit agreement matures February 14, 1996.
Borrowings under this agreement may be on a fixed rate, floating
rate or competitive bid rate basis. All such borrowings are
without recourse to the parent Company. Borrowings at June 30,
1994 were $63.5 million at a weighted average interest cost of
5.1%.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company held on
April 28, 1994, ten directors were elected by cumulative voting
to hold office until the next Annual Meeting and until their
successors shall have been duly elected and qualified. The name
of each nominee elected as a director and the number of votes
cast for or withheld from voting for such nominee, in accordance
with applicable cumulative voting procedures, is set forth below:
Nominee Votes For Votes Withheld*
Stanley J. Bright 24,752,146 378,099
John W. Colloton 24,608,124 378,099
Lance E. Cooper 24,757,931 378,099
Frank S. Cottrell 24,728,501 378,099
William C. Fletcher 24,590,239 378,099
Mel Foster, Jr. 24,633,346 378,099
Nancy L. Seifert 24,716,513 378,099
Stephen E. Shelton 24,749,855 378,099
W. Scott Tinsman 24,747,374 378,099
Leonard L. Woodruff 24,754,502 378,099
* The number shown is equal to the number of shares as to
which authority to vote was withheld as to all
nominees. Such number excludes shares as to which
authority to vote was withheld as to one or more (but
less than all) nominees. Under cumulative voting, the
votes of the shares withheld from one or more nominees
were distributed by the proxyholders among the other
nominees.
Certain proxies marked by hand to "abstain" from voting were
treated as withholding authority to vote for any nominee. There
were no broker non-votes for directors.
Also at the Annual Meeting, shareholders adopted an
amendment to the First Restated Articles of Incorporation,
limiting each director's monetary liability to the Company and
its shareholders arising from a breach of the director's
fiduciary duty, as permitted by recent changes to Illinois law.
The votes cast related to this amendment were as follows:
Number of Votes
For 22,948,331
Against 1,572,343
Abstain 576,525
Broker non-votes 2,144,837
Finally, at the Annual Meeting, shareholders adopted the
1994 Key Employee Sustained Performance Plan, a long-term
incentive plan for Senior Officers of the Company, under which
the Company may issue from time to time up to 100,000 of its
common shares to participants in the Plan. The votes cast
related to this plan were as follows:
Number of Votes
For 21,478,565
Against 2,989,653
Abstain 627,918
Broker non-votes 2,144,837
Item 5. Other Events
Rate Matters
See Note (b) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion of an Iowa
electric rate filing.
Federal Gas Transition Costs
See Note (c) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion of federal
gas transition costs related to Federal Energy Regulatory
Commission Order No. 636.
Environmental Matters
See Note (f) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion related to
manufactured gas plant sites and Clean Air Act legislation.
Merger Announced
See Note (h) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion related to
the announced merger of the Company, Midwest Resources Inc. and
Midwest Power Systems Inc. into a new utility, MidAmerican Energy
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.A - Article Eleven of the First Restated
Articles of Incorporation of Iowa-Illinois
Gas and Electric Company as amended
(b) Reports on Form 8-K
A report on Form 8-K dated July 29, 1994 was filed. The
report included under "Item 5 Other Events" and "Item 7 Financial
Statements and Exhibits" information related to the merger of the
Company, Midwest Resources Inc. and Midwest Power Systems Inc.
with and into MidAmerican Energy Company.
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.
Iowa-Illinois Gas and Electric Company
(Registrant)
Date: August 3, 1994 By L. E. Cooper
L. E. Cooper
Vice President-Finance
(Chief Financial Officer)
Date: August 3, 1994 By K. M. Giger
K. M. Giger
Secretary and Treasurer