SCHEDULE 14A INFORMATION
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Securities Exchange Act of 1934
(Amendment No. __)
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[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
WPL HOLDINGS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid: $500,063
2) Form, Schedule or Registration Statement No.: Preliminary proxy
materials of WPL Holdings, Inc., IES Industries Inc. and
Interstate Power Company, Joint Registration Statement on
Form S-4 of WPL Holdings, Inc. and Interstate Power Company
(Registration No. 333-07931) and Joint Registration Statement on
Form S-4 of WPL Holdings, Inc. and Interstate Power Company
(Registration No. 333-10401).
3) Filing Party: WPL Holdings, Inc., IES Industries Inc. and
Interstate Power Company.
4) Date Filed: January 18, 1996, July 11, 1996 and August 19,
1996.
[The following is the slide presentation given, or to be given, by certain
executive officers of WPL Holdings, Inc., IES Industries Inc. and
Interstate Power Company to certain institutional investors.]
[Four state map of Minnesota, Interstate Energy Corporation
Wisconsin, Iowa and Illinois
with Interstate Energy Corporation
("IEC") service area highlighted]
[ ] WP&L
[ ] IES Utilities Inc.
[ ] Interstate Power Co.
TWO PROPOSALS
- Which choice maximizes your portfolio value?
- IES/IPC/WPH, together and MEC, alone
or
- MEC/IES, together and WPH & IPC, alone
INTERSTATE ENERGY CORPORATION
[Four state map of
Minnesota, Wisconsin, Iowa
and Illinois with IEC
service area highlighted]
- A growing and
diversified regional
customer base
- Assets - $4.5 Billion
- Over 850,000 electric
customers
- Over 360,000 gas
customers
- Service territory in
Iowa, Illinois,
[ ] WP&L Minnesota and
[ ] IES Utilities Inc. Wisconsin
[ ] Interstate Power Co.
IEC'S INVESTMENT IN COMMUNITIES IS
REFLECTED IN RETAIL SALES GROWTH
[Bar graph showing annual growth rate for 1991 through 1995 of IES (4.4%),
WP&L (3.5%), IPC (3.0%) and MidAm (1.1%).]
Represents Annual Growth Rate for 1991-1995
IEC - STRATEGY
- Focus on growth
- Organic
- Regional
- International
- Drive low-cost operations even lower
- Leverage non-regulated activity
- Leverage strong financial base
- Implement with aggressive management
EXECUTE
"GATEKEEPER STRATEGY"
IEC GROWTH
POTENTIAL
[Pie chart showing the following]
Energy Generation
- GENCO
- Railroads
- Oil & Gas
Other Core Energy
Businesses Marketing
- McLeod & Delivery
- RMT - Utilities
- Int'l
- IEA/HEG
IEC CORE BUSINESSES
IEC
Madison Wisconsin
Energy Energy Diversified
Production Marketing Businesses
& Delivery
Madison Cedar Rapids Cedar Rapids
Wisconsin Iowa Iowa
Administrative
Services
Dubuque, Iowa
STRONG COMPETITIVE
POSITION
- Access to regional markets
- Higher synergies ($749 million vs. $585 million) support lower rates
- Lower production costs
- Lower stranded investment risk
AVERAGE INDUSTRIAL CUSTOMER
CHARGE PER Kwh
[Bar graph showing average industrial customer charge per Kwh for WP&L
(3.63 cents per Kwh), IPC (3.72 cents per Kwh), IES (3.88 cents per Kwh)
and MidAm (4.04 cents per Kwh).]
Source: EEI Rankings, 1995
PRODUCTION COSTS - CENTS PER Kwh
1994(a)
Total
IES 3.10 cents
WPH 2.58 cents
MEC
IIGE 3.68 cents
MID RES 3.12 cents
(a) Goldman Sachs Electric Utilities, U.S. Research,
February 1996.
COMPARATIVE NUCLEAR
PERFORMANCE
- SALP SCORES
- MEC:
- Cooper 2.25
- Quad Cities 2.25
- IES:
- Duane Arnold 1.25
- WPH:
- Kewaunee 1.00
Source: Goldman Sachs U. S. Research, May 1996
COMPARATIVE NUCLEAR
PERFORMANCE
- Safety Record
- MEC:
- 13 significant violations in past 4 years
- Total fines over $1.3 million
- IES:
- 1 minor violation in past 4 years
- Fine of $12,500
- WPH:
- No violations in the past 10 years
STRANDED COST COMPARISON
Millions Percent of Equity
WPL Holdings, Inc. $ 0
Interstate Power Co. 48 6.0%
--------
$ 48
MidAmerican Energy $ 172 14.0%
Source: Moody's Special Comment, August 1995
FINANCIALLY STRONG
COMPANY
IEC PARTNERS HAVE HIGHER
CREDIT QUALITY
Moody's S & P
IES A2 A
WP&L Aa2 AA
IPC A1 A+
MidAm A2 A+
INVESTMENT RETURN
COMPARISON
[Bar graph showing total cumulative investment return from August 2, 1991
through August 2, 1996 for MEC (21%), WPH (60%), IES (63%) and IPW (50%).]
Total Cumulative Investment Return
8/2/91 - 8/2/96
VALUE CREATION
SINCE 1990, MEC HAS DONE TWO MAJOR
TRANSACTIONS WHICH HAVE CREATED
NO VALUE FOR SHAREOWNERS
Book Value Per Share
1991 1995 CGR
MEC $12.12 $12.17 0.4%
WPLH $16.77 $19.41 15.7%
Source: Annual Reports
DIVIDEND COMPARISON
[Line graph labeled "Dividend [Line graph labeled "Dividend
Cut" showing dividends Growth" showing dividends
declared per share (in declared per share (in
dollars) for MEC from 1991 dollars) for WPH, IES and IPC
through 1995 as follows: 1991 from 1991 through 1995 as
($1.38), 1992 ($1.28), 1993 follows: WPH -- 1991 ($1.80),
($1.17), 1994 ($1.17) and 1995 1992 ($1.86), 1993 ($1.90),
($1.18).] 1994 ($1.92) and 1995 ($1.94);
IES -- 1991 ($2.03) and 1992-
1995 ($2.10); and IPC -- 1991
($2.04) and 1992-1995
($2.08).]
HIGH DIVIDEND PAYOUT RATIOS
PRESENT CONCERNS
[Line graph showing historical MidAm dividend payout ratios from 1991
through 1995 as follows: 1991 (104.5%), 1992 (152.4%), 1993 (84.2%), 1994
(95.9%) and 1995 (96.7%).]
Historical MidAm Payout Ratios
DIVIDEND RISK
PROFORMA CASH FLOW
($/share)
- MidAmerican estimate $4.51
- Less: (a)
- Capital spending (MEC/IES) <3.26>
- Nuclear decommissioning (MEC/IES) <0.10>
- Deferred energy efficiency
(MEC/IES) <0.38>
-----
- Cash available for dividends $0.77
=====
(a) Based on 12 months ended 12/31/95
DIVIDEND/STOCK PRICE RISK
- IUB action on OCA request for $100 million reduction
- IUB action on $478 million of goodwill amortization
- Cash flows
- Earnings
- Rate/Nature of asset monetization
- New debt - $500 million
- Availability and cost
- No nuclear contingency in cash flow
SUPERIOR TRANSACTION
- Growth vs. divestiture
- Faster, more certain approvals
- Pooling vs. purchase accounting
- No financings required
MidAm DIVESTITURE
OPTIONS
[Pie chart showing the following]
Energy Generation
- GENCO
- Railroads [stricken out]
- Oil & Gas [stricken out]
Other Core Energy
Businesses Marketing
- McLeod & Delivery
- Utilities
- Int'l [stricken out]
- IEA [stricken out]
COMPARATIVE TRANSACTION
RISKS - REGULATORY
- IEC
- Department of Justice waiting period expired
- All federal and state applications filed
- MidAmerican
- Possible market power issues
- Bottom of queue
COMPARATIVE RISK -
POLITICAL
- IEC
- "Wisconsin" transaction, a MEC construct - not a political
concern
- Discussions held with government/legislative leadership/
community leaders on structure - warm reception
COMPARATIVE RISK -
POLITICAL
- MEC transaction
- Leadership concerns raised
- Market concentration
- Purchase premium
- Mayors from E. Iowa calling governor/IUB/legislators
- OCA concerns
COMPARATIVE TRANSACTION
RISKS - FINANCIAL
- IEC - Pooling transaction
- No debt
- No acquisition premium
- Minimally dilutive for one year, then accretive with no
synergies
- MidAmerican - Purchase transaction
- $500 million borrowing required
- Approximately 60% debt
- Goodwill risks of $478 million
- Projected multiple year dilution even with 50% synergies
WHO IS SAYING WHAT?
- Close to the ground
- Baird
- Edward D. Jones
- Dain Bosworth
- From afar
- Nat West
- ISS - in hopes of getting a better deal
- On mergers in general
- RDI
IMPACT ON INVESTORS
- WE BELIEVE, YOUR PORTFOLIO CHOICES ARE:
- Multi-year earnings dilution vs. earnings growth
- Dividend risk vs. dividend growth potential
- Timely closure risk vs. approvals in process
- Credit risk vs. credit quality
- Competitive risk vs. competitive advantage
- Potential short term gain vs. long term appreciation
- A business with a strategy and structure vs. ???
TWO PROPOSALS
- Which choice maximizes your portfolio value?
- IES/IPC/WPH, together and MEC, alone
- Higher synergies
- Lower Leverage
- Proven record of value creation
- Unique strategic direction
[The following document entitled "U.S. Electric Utility Mergers &
Acquisitions -- Media Release & Selected Excerpts," which was prepared by
Resource Data International Inc., was distributed by WPL Holdings, Inc.,
IES Industries Inc. and Interstate Power Company in connection with the
slide presentation detailed above.]
U.S. Electric Utility
Mergers & Acquisitions
[Picture]
MEDIA RELEASE &
SELECTED EXCERPTS
RESOURCE DATA [Logo]
INTERNATIONAL INC
MEDIA RELEASE
DATE AUG 8, 1996
RDI's Merger Outlook: 80 IOU's by 2000
Focus Turns From "Electric" Utilities Toward Comprehensive "Energy
Service" Companies
U.S. investor-owned utilities will merge at a rate of four to six
companies per year, leaving 80 major IOUs by the year 2000. This is just
one of several findings in a new study, "U.S. Electric Utility Mergers and
Acquisitions," recently published by Resource Data International, Inc.
(RDI), an independent energy information and consulting firm in Boulder,
Colorado.
"Competition is turning up the heat in the M&A arena," explains Kent
Knutson, RDI Senior Vice President. "Increasing shareholder value and
positioning for future competitive power markets are the driving forces
behind the recent surge in M&A activity."
Since early 1994, 10 deals involving 21 large investor-owned electric and
gas utilities have been announced. The estimated market value of these
deals is over $40.5 billion. According to Knutson, "These mergers
represent the most significant sign to date of the impacts of market
competition in the electric industry."
"Although the pace will slow a bit, mergers will continue to happen at an
impressive pace in the coming years," Knutson says. "Consolidation will
reduce the number of IOUs from 101 to 80 by the year 2000. Other
restructuring including divestiture and bankruptcy of high cost companies
could bring that number down to as few as 70." However, FERC rules
allowing pass through of stranded costs is expected to soften some of
these adverse effects of competition and save most weaker companies from
financial failure.
Most of the posturing for position is taking place at the IOU level. Of
the more than 2,800 publicly-owned and cooperative companies nationwide,
few have merged or been acquired in recent years.
"That's because most small electric companies are full-requirements
customers and are tied to long-term power contracts," said Knutson. "For
these utilities, the full benefits of competitive power markets will have
to wait until these commitments are either reopened for negotiation or
expire." In the meantime, the pooling of resources and the formation of
partnerships and alliances present alternative strategies to mergers that
will allow small companies to become more competitive.
The marriage of strong marketers with skilled generation and transmission
operators is a prime example of the type of business synergies emerging.
"The old rules are being broken," said Knutson. "Utilities are now
merging with more distant partners to provide a wider spectrum of energy
services. We also are seeing strategies such as offshore acquisitions and
growing attempts at hostile takeovers."
In the years to come, look for even more of the 'old-school' rules to be
broken. Today's game is more complex than ever before, and the players
are getting smarter and smarter every day. Over the next few years we'll
see definite winners and definite losers. The companies emerging on top
will be those who can become efficient energy service companies with a
wide range of customer services.
###
Key Findings: "U.S. Electric Utilities Mergers & Acquisitions"
Resource Data International, Inc., July 1, 1996
RDI projects that mergers will consolidate the electric industry to 80
investor-owned holding companies (IOUs) by the year 2000, down from 101
today and 93 if all pending mergers are approved. The restructuring or
divestiture of high cost, high rate companies could spur the industry to
as few as 70 companies over the projection period.
Since early 1994, ten large mergers have been announced involving 21
investor-owned electric and gas utilities. The estimated market value of
these pending mergers is an astounding $40.5 billion.
Companies are changing their focus, merging to become "energy" providers
rather than "electricity" providers. The current trend is to form
subsidiaries to handle power marketing and plant development and to
acquire gas pipeline and distribution companies. Virtually every recent
and pending merger has involved at least one partner with gas operations.
Pressure from shareholders is a key force triggering many mergers. Nearly
60% of those utilities involved in mergers over the past five years have
had poor financial performance.
Many large utilities are shifting their attention overseas to avoid
complex regulatory hurdles in the U.S. market and to improve earnings.
Since 1995, 10 U.S. utilities have spent more than $14 billion to acquire
foreign electric companies and assets.
Small electric companies must wait for long term contract commitments to
reopen or expire before they can enjoy the full benefits of competition.
Very little M&A activity has occurred among the 2,800 small electric
companies to date.
RDI's Merger Attractiveness Ranking
In the RDI study, each of the 3,200 electric utilities in the U.S. -
including privately-owned utilities, publicly-owned municipal utilities
and power generation and transmission and distribution cooperatives - was
ranked by its attractiveness as a merger partner.
Attractiveness factors include efficiency of operations, competitiveness
of electric rates charged, financial strength and age and experience of
management.
1320 PEARL STREET SUITE 300 BOULDER CO 80302 303-444-7788 FAX 303-444-1286
RDI's Merger Attractiveness Ranking Factors
STRATEGIC POSITION
ATTRACTIVE UNATTRACTIVE
- Low, and stable or decreasing - High, increasing customer rates
customer rates
- Increasing customer base - Low growth in customers and
sales
- Low industrial rates and low - High industrial rates and heavy
dependence on industrial revenue dependence on industrial
revenue
- Low distribution costs - High distribution costs
- Low generation costs - High generation costs
- Plants with low capital costs - Plants with high capital costs
- Low nuclear exposure - High nuclear exposure
- Large, well-interconnected - Poorly interconnected system
transmission system
- Company not so large as to have - Large company that would have
market power approval problems market power approval problems
- Potential for increasing plant
utilization
FINANCIAL PERFORMANCE
- Low proportion of long-term debt - High proportion of long-term
debt
- Growing dividends - Cut dividends or no dividends
- High rates of return - Low, negative or declining
rates of return
- Low potential stranded investment - High potential stranded
investment
- Low level of regulatory assets - Market value below industry
average
- Market value above industry - High level of regulatory assets
average
MANAGEMENT ANALYSIS
- CEO near retirement - Young CEO
- Previous and successful utility - No previous M&A activity or
M&A experience experience
- Ownership in gas operations, - No ownership in non-regulated
independent power producer, or subsidiaries
power marketer to offer business
diversity
- Complementary management
strengths
OPERATIONAL SAVINGS
- High productivity - Low productivity
- Expiring coal or transportation - Above market long-term fuel
contracts contracts
- Expiring purchase power contracts - Above market long-term
transportation contracts
- Potential for avoiding or - Above market long-term purchase
delaying new capacity or power contracts
purchases
- Gas purchase synergies - Coincident load
- Availability of significant load
diversity
- Potential for dispatch savings
- Potential for increasing plant
utilization
- Large volume coal transportation
customer