UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Name of Registrant, State of
Incorporation, IRS Employer
Commission Address of Principal Executive Offices Identification
File Number and Telephone Number Number
WPL HOLDINGS, INC.
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
1-9894 39-1380265
WISCONSIN POWER AND LIGHT COMPANY
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
0-337 Telephone (608)252-3311 39-0714890
Indicate by check mark whether each of the registrants (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past (90) days.
Yes X No _____
Number of shares outstanding for each class of common stock as of July 31,
1997:
WPL Holdings, Inc. Common Stock, $.01 par value,
30,788,593 shares
Wisconsin Power and Light Company Common Stock, $5 par value,
13,326,601 shares (all of which
are owned beneficially and of
record by WPL Holdings, Inc.)
CONTENTS
Page
Part I. Financial Information
WPL Holdings, Inc.
Consolidated Statements of Income for the
Three and Six Months Ended
June 30, 1997 and 1996 5
Consolidated Balance Sheets as of June 30,
1997 and December 31, 1996 6
Consolidated Statements of Cash Flows for the
Six Months Ended
June 30, 1997 and 1996 8
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis of
Financial Condition and
Results of Operations 10
Wisconsin Power and Light Company
Consolidated Statements of Income for the
Three and Six Months Ended
June 30, 1997 and 1996 21
Consolidated Balance Sheets as of June 30,
1997 and December 31, 1996 22
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 24
Notes to Consolidated Financial Statements 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 26
Part II. Other Information 33
Signatures 35
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are defined
below:
Abbreviation or Acronym Term
DOJ U.S. Department of Justice
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
HDC Heartland Development Corporation
HES Heartland Energy Services, Inc.
ICC Illinois Commerce Commission
IEA Industrial Energy Applications, Inc.
IEC Interstate Energy Corporation
IES IES Industries Inc.
IES Diversified IES Diversified Inc.
IES Utilities IES Utilities Inc.
IPC Interstate Power Company
IUB Iowa Utilities Board
Kewaunee Kewaunee Nuclear Power Plant
MG&E Madison Gas and Electric Company
MPUC Minnesota Public Utilities
Commission
PSCW Public Service Commission of
Wisconsin
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting
Standards
WEPCO Wisconsin Electric Power Company
WP&L Wisconsin Power and Light Company
WPLH WPL Holdings, Inc.
WPSC Wisconsin Public Service Corporation
WPL HOLDINGS, INC.
FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(This page left blank intentionally)
WPL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands except for per share data)
Operating revenues:
Electric $151,306 $137,084 $309,733 $285,584
Gas 23,633 28,002 95,212 99,743
Fees, rents, non-
utility energy sales
and other 31,742 43,207 63,424 83,843
------- ------- ------- -------
206,681 208,293 468,369 469,170
------- ------- ------- -------
Operating expenses:
Electric production
fuels 28,329 27,339 58,403 55,944
Purchased power 33,679 17,070 67,070 32,993
Purchased gas 13,884 15,690 61,266 61,054
Other operation and
cost of non-utility
energy 59,853 75,297 124,740 151,432
Maintenance 14,882 10,940 25,162 19,491
Depreciation and
amortization 26,954 22,712 53,166 45,828
Taxes other than
income 9,200 8,884 18,025 18,055
------- ------- ------- -------
186,781 177,932 407,832 384,797
------- ------- ------- -------
Operating income 19,900 30,361 60,537 84,373
------- ------- ------- -------
Interest expense and
other:
Interest expense 8,910 10,059 18,589 18,980
Allowance for funds
used during
construction (680) (583) (1,521) (1,359)
Other (2,461) (6,894) (5,364) (10,994)
------- ------- ------- -------
5,769 2,582 11,704 6,627
------- ------- ------- -------
Income before income
taxes and preferred
dividendrequirement of
subsidiary 14,131 27,779 48,833 77,746
Income taxes 4,296 10,412 16,343 27,871
Preferred dividend
requirement of
subsidiary 828 828 1,656 1,656
------- ------- ------- -------
Net income $ 9,007 $ 16,539 $ 30,834 $ 48,219
======= ======= ======= =======
Earnings per share of
common stock $ 0.29 $ 0.54 $ 1.00 $ 1.57
======= ======== ======= ========
Weighted average number
of shares of common
stock outstanding 30,777 30,795 30,775 30,784
====== ======= ======= =======
Cash dividends paid per
share of common stock $ 0.50 $ 0.4925 $ 1.00 $ 0.985
====== ======= ======= ========
The accompanying notes are an integral part of the consolidated
financial statements.
WPL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
ASSETS (in thousands)
Utility plant:
Plant in service--
Electric $ 1,767,540 $ 1,729,311
Gas 231,352 227,809
Water 24,516 23,905
Common 185,045 152,093
---------- ----------
2,208,453 2,133,118
Less--accumulated provision for
depreciation 1,014,232 967,436
---------- ----------
1,194,221 1,165,682
Construction work in progress 34,572 55,519
Nuclear fuel, net 20,880 19,368
---------- ----------
1,249,673 1,240,569
---------- ----------
Other property and equipment:
Rental, net 113,352 112,913
Other, net 10,923 16,350
---------- ----------
124,275 129,263
---------- ----------
Investments:
Nuclear decommissioning trust
funds 102,074 90,671
Other investments 15,076 15,408
---------- ----------
117,150 106,079
---------- ----------
Current assets:
Cash and equivalents 42,982 11,070
Net accounts receivable and
unbilled revenue, less
allowance for doubtful
accounts of $1,760 and
$1,524, respectively 80,775 88,798
Coal, at average cost 18,623 15,841
Materials and supplies, at
average cost 19,943 19,915
Gas in storage, at average cost 5,069 9,992
Prepayments and other 27,010 26,786
---------- ----------
194,402 172,402
---------- ----------
Restricted cash 7,823 6,848
---------- ----------
Deferred charges:
Regulatory assets 161,880 160,877
Other 94,934 84,493
---------- ----------
256,814 245,370
---------- ----------
TOTAL ASSETS $ 1,950,137 $ 1,900,531
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
WPL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
CAPITALIZATION AND LIABILITIES (in thousands)
Capitalization:
Common stock, $.01 par value,
authorized 100,000,000 shares,
issued and outstanding--
30,788,593 and 30,773,795,
respectively $ 308 $ 308
Additional paid-in capital 304,053 303,856
Reinvested earnings 303,251 303,191
-------- --------
Total common equity 607,612 607,355
-------- --------
Subsidiary preferred stock without
mandatory redemption:
Cumulative, without par value,
authorized 3,750,000 shares,
maximum aggregate stated value
$150,000,000:
Cumulative, without par value,
$100 stated value--
449,765 shares outstanding 44,977 44,977
Cumulative, without par value, $25
stated value--
599,460 shares outstanding 14,986 14,986
-------- -------
Total preferred stock 59,963 59,963
-------- -------
Long-term debt, net 467,474 362,564
--------- ---------
1,135,049 1,029,882
--------- ---------
Current liabilities:
Current maturities of long-term debt 56,758 67,626
Variable rate demand bonds 56,975 56,975
Short-term debt 73,505 102,779
Accounts payable and accruals 91,365 106,486
Accrued payroll and vacation 12,340 14,500
Accrued taxes 2,484 4,669
Accrued interest 7,741 9,085
Other 42,175 45,218
--------- --------
343,343 407,338
--------- --------
Other credits:
Accumulated deferred income taxes 250,761 245,686
Accumulated deferred investment tax
credits 35,985 36,931
Accrued environmental remediation
costs 73,583 74,075
Deferred credits and other 111,416 106,619
--------- ---------
471,745 463,311
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $ 1,950,137 $ 1,900,531
======== =========
The accompanying notes are an integral part of the consolidated financial
statements.
WPL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1997 1996
(in thousands)
Cash flows generated from (used for)
operating activities:
Net income $ 30,834 $ 48,219
Adjustments to reconcile net
income to net cash generated from
operating activities:
Depreciation and amortization 53,166 45,828
Deferred income taxes 585 (311)
Investment tax credit
restored (946) (955)
Amortization of nuclear fuel 202 4,329
Allowance for equity funds used
during construction (1,135) (905)
Gain on sale of other
property and equipment -- (5,676)
Gain on sale of investment -- (3,249)
Changes in assets and
liabilities:
Restricted cash (975) (2,675)
Net accounts receivable and
unbilled revenue 8,023 13,716
Inventories 2,113 1,200
Prepayments and other (224) (6,439)
Accounts payable and accruals (18,625) (24,772)
Accrued taxes (2,185) 11,197
Other, net (795) (11,861)
-------- --------
Net cash from (used for)
operating activities 70,038 67,646
-------- --------
Cash flows generated from (used for)
financing activities:
Common stock cash dividends (30,774) (30,323)
Proceeds from issuance of
long-term debt 105,000 --
Net change in short-term debt (29,274) (51,991)
Reduction of long-term debt (10,691) (6,636)
Other, net -- 726
-------- -------
Net cash from (used for)
financing activities 34,261 (88,224)
-------- -------
Cash flows generated from (used for)
investing activities:
Proceeds from sale of other
property and equipment -- 36,264
Proceeds from sale of
investment -- 22,130
Additions to utility plant,
excluding AFUDC (57,269) (50,963)
Allowance for borrowed funds
used during construction (386) (454)
Dedicated decommissioning
trust funds (11,403) (11,390)
Net change in other property
and equipment 2,198 22,852
Additions to nuclear fuel (1,714) (2,710)
Other, net (3,813) 3,098
------- -------
Net cash from (used for)
investing activities (72,387) 18,827
------- -------
Net increase (decrease) in cash
and equivalents 31,912 (1,751)
Cash and equivalents at beginning
of period 11,070 11,386
------- -------
Cash and equivalents at end of
period $ 42,982 $ 9,635
======= =======
Supplemental disclosures of cash
flow information:
Cash paid during the period:
Interest on debt $ 19,352 $ 19,426
Preferred stock dividends
of subsidiary $ 1,656 $ 1,656
Income taxes $ 11,812 $ 18,757
The accompanying notes are an integral part of the consolidated
financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been
prepared by WPLH, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The consolidated financial
statements include WPLH and its wholly-owned consolidated
subsidiaries, including WP&L. These financial statements should be
read in conjunction with the financial statements and the notes
included in WPLH's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of
(a) the consolidated results of operations for the three and six
months ended June 30, 1997 and 1996, (b) the consolidated financial
position at June 30, 1997 and December 31, 1996, and (c) the
consolidated statement of cash flows for the six months ended June
30, 1997 and 1996, have been made. Because of the seasonal nature of
WP&L's operations, results for the three and six months ended June
30, 1997, as reported for WPLH, are not necessarily indicative of
results that may be expected for the year ending December 31, 1997.
2. On April 28, 1997, WP&L entered into an interest rate forward
contract to hedge interest rate risk related to the anticipated
issuance of $105 million of long-term debt securities. The
securities were issued on June 30, 1997 and the forward contract was
settled which resulted in a cash payment of $3.8 million by WP&L.
This payment will be recognized as an adjustment to interest expense
over the life of the new debt securities to approximate the interest
rate implicit in the forward contract.
3. On June 30, 1997, WP&L issued $105 million of 7% debentures due June
15, 2007. Approximately $50 million of the net proceeds was used to
reduce outstanding short-term debt. The balance of the proceeds will
be used to retire at maturity the $55 million of WP&L First Mortgage
Bonds, Series Z, 6.125%, due July 15, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PROPOSED MERGER
WPLH, IES and IPC have entered into an Agreement and Plan of Merger, as
amended, dated November 10, 1995, which provides for the combination of
all three companies. The new company will be named IEC.
IES is a holding company headquartered in Cedar Rapids, Iowa, and is the
parent company of IES Utilities and IES Diversified. IES Utilities
supplies electric and gas service to approximately 336,000 and 176,000
customers, respectively, in Iowa. IES Diversified and its principal
subsidiaries are primarily engaged in the energy-related, transportation
and real estate development businesses. IPC, a public utility
headquartered in Dubuque, Iowa, supplies electric and gas service to
approximately 165,000 and 49,000 customers, respectively, in northeast
Iowa, northwest Illinois and southern Minnesota.
The proposed merger, which will be accounted for as a pooling of
interests, was approved by the respective shareowners on September 5,
1996. The merger is conditioned on the receipt of approvals of several
federal and state regulatory agencies. The status of these approvals is
as follows:
On May 7, 1997, the ICC issued an order approving the proposed merger.
On March 24, 1997, the MPUC issued an order approving the merger without
hearings, subject to a number of technical conditions that the parties are
willing to meet. Included is a 4-year rate freeze for IPC's Minnesota
customers.
On May 7, 1997, WP&L filed testimony with the PSCW proposing a rate freeze
from the date of the merger approval through calendar year 2000. The PSCW
completed hearings related to the merger in June 1997. Hearings regarding
the merger were completed in July 1997 before the IUB. Approvals from the
PSCW and IUB are still pending.
The FERC issued an order on January 15, 1997. Some limited issues were
set for hearings that began on April 23, 1997 and ended on May 2, 1997.
On July 3, 1997, an administrative law judge issued a non-binding
recommendation that FERC approve the merger subject to the terms of a
stipulation agreement on competition issues entered into between the
companies and the FERC trial staff. Approval from the FERC is still
pending.
Given that the merger was not consummated before July 7, 1997, the merger
partners are required to submit new information to the DOJ pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act. The DOJ completed its
impact review of the merger on market power earlier and all requirements
of this review were satisfied. The merger partners do not believe the
resubmission will cause any material delays in finalizing the merger.
The companies expect to receive final decisions on all outstanding
regulatory approvals relating to the merger by the end of 1997.
Additional information regarding the merger is available in WPLH's 1996
Annual Report on Form 10-K
THREE MONTHS ENDED JUNE 30, 1997 VS. JUNE 30, 1996:
OVERVIEW
WPLH reported consolidated second quarter net income of $9.0 million, or
29 cents per share, compared with $16.5 million, or 54 cents per share,
for the same period in 1996. The decrease in earnings primarily reflects
the operation of WPLH's utility subsidiary, WP&L. Contributing to the
decrease in earnings were lower electric margin due to plant outages and
reduced gas margin due to warmer weather in the second quarter of 1997 as
compared with the same period in 1996. In addition, a $3.4 million after-
tax gain was recognized on the sale of a combustion turbine in the second
quarter of 1996.
HDC, parent company of WPLH's non-regulated operations, reported a net
loss of $0.3 million for the second quarter of 1997 compared with a net
loss of $2.2 million for the same period in 1996. Performance in the
second quarter of 1996 was impaired by contract losses associated with the
start-up of the energy marketing subsidiary.
Electric Operations
Revenues and Costs kWhs Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $ 45,206 $ 43,776 3% 652,831 633,695 3% 340,160 334,035 2%
Industrial 38,908 36,450 7% 1,049,251 1,003,872 5% 837 810 3%
Commercial 25,738 24,519 5% 437,705 421,098 4% 46,356 45,300 2%
Sales to other
Utilities 40,047 31,367 28% 1,405,889 1,290,219 9% 107 92 16%
Other 1,407 972 45% 13,264 15,591 (15%) 1,741 1,742 (0%)
-------- -------- --------- --------- -------- --------
Total $151,306 $137,084 10% 3,558,940 3,364,475 6% 389,201 381,979 2%
======== ======== ==== ========= ========= ==== ======== ======== ====
Electric
Production Fuels 28,329 27,339 4%
Purchased Power 33,679 17,070 97%
-------- --------
Margin $ 89,298 $ 92,675 (4%)
======== ======== ====
Electric revenues increased $14.2 million, or 10 percent, as compared with
the second quarter of 1996. Continued customer growth, economic strength
in the service area and increased sales to other utilities contributed to
the increase in revenues.
WP&L had an average retail rate reduction of 2.4 percent effective April
29, 1997. The Kewaunee surcharge, which also was effective April 29, 1997
through July 1, 1997, offset this rate decrease for the second quarter.
Refer to the "Rates and Regulatory Matters" section below for further
discussion of these rate modifications.
Despite higher electric revenues, electric margin decreased $3.4 million,
or 4 percent, as compared with the second quarter of 1996. The decline in
margin reflects the impact of the shutdown at Kewaunee throughout most of
the second quarter of 1997 for steam generator tube repairs, as well as
several temporary, routine outages at WP&L's coal-fired plants during
April and May of 1997. These outages caused a greater reliance on more
costly purchased power to meet customer requirements. Refer to the
"Capital Requirements" section below for further discussion of the
Kewaunee plant outage. The Kewaunee outage and increased sales to other
utilities resulted in a 97 percent increase in purchased power.
Gas Operations
Revenues and Costs Therms Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $ 11,774 $ 14,703 (20%) 20,553 23,245 (12%) 135,378 131,093 3%
Commercial and
Industrial 6,125 7,855 (22%) 13,958 15,493 (10%) 16,632 16,160 3%
Interruptible 454 611 (26%) 1,346 1,659 (19%) 285 258 10%
Transportation
and other 5,280 4,833 9% 38,254 34,339 11% 379 266 42%
------- ------- ------- ------- ------- -------
Total $ 23,633 $ 28,002 (16%) 74,111 74,736 (1%) 152,674 147,777 3%
======= ======= ==== ======= ======= ==== ======= ======= ====
Purchased Gas 13,884 15,690 (12%)
------- -------
Margin $ 9,749 $ 12,312 (21%)
======= ======= ====
Gas revenues decreased $4.4 million, or 16 percent, as compared with the
second quarter of 1996. Revenues declined due to the pass through to
customers of lower costs per therm of natural gas, the average retail rate
decrease of 2.2 percent effective April 29, 1997 and lower therm sales to
native customers due to warmer weather in the second quarter of 1997.
Although total therm sales remained relatively unchanged, a shift in the
sales mix from residential, commercial and interruptible customers to
lower margin transportation customers resulted in reduced margins.
Effective January 1, 1995, the PSCW approved the replacement of the
purchased gas adjustment clause with an adjustment mechanism based on a
prescribed commodity price index. Fluctuations in WP&L's commodity cost
of gas as compared with the price index are subject to a customer sharing
mechanism, with WP&L's gains or losses limited to $1.1 million annually.
WP&L realized unfavorable contributions to gas margin of $0.5 million and
$0.1 million for the second quarters of 1997 and 1996, respectively. The
review of the gas incentive program for 1996 by the PSCW resulted in a
$5.9 million refund to residential natural gas customers in April 1997. A
modified gas incentive mechanism has been approved and is effective with
the retail rate order discussed below under "Rates and Regulatory
Matters."
Fees, Rents, Non-Utility Energy Sales and Other Revenues
Fees, rents, non-utility energy sales and other revenues primarily
reflects sales and revenues of WPLH's non-regulated subsidiaries,
consolidated under HDC. The decrease in these revenues for the second
quarter of 1997 is primarily due to the formation of a joint venture,
effective January 1, 1997, between the gas marketing business of the
energy marketing subsidiary and IEA, the energy marketing subsidiary of
IES Industries. Earnings related to this joint venture are included with
"Interest Expense and Other." Second quarter revenues in 1996 included
$5.5 million related to gas marketing sales now associated with the joint
venture. In addition, the softening market for the environmental service
business and reduced activity in the electric trading area of the energy
marketing subsidiary also contributed to the decline in revenues.
Other Operation and Cost of Non-Utility Energy
The decrease in other operation and cost of non-utility energy is
primarily due to the recording of the earnings associated with the joint
venture under "Interest Expense and Other," as discussed above. Second
quarter operating expenses in 1996 included $7.1 million related to gas
marketing sales now associated with the joint venture. In addition, the
softening market for the environmental service business and the reduced
activity in the electric trading area of the energy marketing subsidiary
also contributed to the decline in other operations expense.
Maintenance Expense
Maintenance expense increased as a result of higher plant maintenance
expenses at Kewaunee and several of WP&L's coal-fired plants, as discussed
above under "Electric Operations."
Depreciation and Amortization
Depreciation expense increased due to higher depreciation rates at WP&L
approved by the PSCW, effective January 1, 1997, and property additions.
Additional contributions to the nuclear decommissioning trust fund also
contributed to the increase in depreciation expense.
Interest Expense and Other
The decrease in interest expense primarily reflects a favorable settlement
of outstanding tax issues related to permanent differences and nonutility
operations in the second quarter of 1997. Other income in the second
quarter of 1996 included a $5.2 million pre-tax gain from the sale of a
combustion turbine.
Income Taxes
The decrease in income taxes between quarters is consistent with lower
taxable income.
SIX MONTHS ENDED JUNE 30, 1997 VS. JUNE 30, 1996
OVERVIEW
WPLH reported consolidated net income for the six months ended June 30,
1997 of $30.8 million , or $1.00 per share, compared with $48.2 million,
or $1.57 per share, for the same period in 1996. The decrease in earnings
primarily reflects the operation of WPLH's utility subsidiary, WP&L.
Contributing to the decrease in earnings were lower electric margin due to
plant outages and reduced gas margin due to warmer weather for the six
months ended June 30, 1997 as compared with the same period in 1996. In
addition, a $3.4 million after-tax gain was recognized on the sale of a
combustion turbine in the second quarter of 1996.
HDC, parent company of WPLH's non-regulated operations, reported a net
loss of $1.4 million for the six months ended June 30, 1997 compared with
a net loss of $2.1 million for the same period in 1996. Performance in
1996 was impaired by contract losses associated with the start-up of the
energy marketing subsidiary. Partially offsetting these losses was an
after-tax gain of $2.1 million relating to the sale of investments in
assisted living properties in the first quarter of 1996.
Electric Operations
Revenues and Costs kWhs Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $100,011 $ 99,428 1% 1,463,644 1,467,364 (0%) 340,160 334,035 2%
Industrial 74,190 70,562 5% 2,044,569 1,935,459 6% 837 810 3%
Commercial 52,538 50,918 3% 904,564 869,064 4% 46,356 45,300 2%
Sales to other
Utilities 78,551 62,278 26% 2,792,847 2,482,561 12% 107 92 16%
Other 4,443 2,398 85% 33,457 30,271 11% 1,741 1,742 (0%)
------- ------- --------- --------- ------- -------
Total $309,733 $285,584 8% 7,239,081 6,784,719 7% 389,201 381,979 2%
======= ======= ==== ======== ========= ==== ======= ======= ====
Electric
Production Fuels 58,403 55,944 4%
Purchased Power 67,070 32,993 103%
------- -------
Margin $184,260 $196,647 (6%)
======= ======= ====
Electric revenues increased $24.1 million, or 8 percent, as compared with
the six months ended June 30, 1996. Continued customer growth, economic
strength in the service area and increased sales to other utilities offset
the impact of warmer weather in 1997.
WP&L had an average retail rate decrease of 2.4 percent effective April
29, 1997. The Kewaunee surcharge, which also was effective April 29, 1997
through July 1, 1997, offset this rate decrease for the second quarter.
Refer to the "Rates and Regulatory Matters" section below for further
discussion of these rate modifications.
Despite higher electric revenues, electric margin decreased $12.4 million,
or 6 percent, as compared with the six months ended June 30, 1996. The
decline in margin reflects the impact of the shutdown at Kewaunee
throughout most of the first half of 1997 for steam generator tube repairs
as well as several temporary, routine outages at WP&L's coal-fired plants
through the first five months of 1997. These outages caused a greater
reliance on more costly purchased power to meet customer requirements.
Refer to the "Capital Requirements" section below for further discussion
of the Kewaunee plant outage. The Kewaunee outage and increased sales to
other utilities resulted in a 103 percent increase in purchased power.
Gas Operations
Revenues and Costs Therms Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $ 53,406 $ 54,137 (1%) 81,082 89,112 (9%) 135,378 131,093 3%
Commercial and
Industrial 30,237 29,642 2% 56,086 60,355 (7%) 16,632 16,160 3%
Interruptible 1,337 1,675 (20%) 3,299 4,627 (29%) 285 258 10%
Transportation
and other 10,232 14,289 (28%) 100,036 99,758 0% 379 266 42%
------- ------- ------- ------- ------- -------
Total $ 95,212 $ 99,743 (5%) 240,503 253,852 (5%) 152,674 147,777 3%
======= ======= ==== ======= ======= ==== ======= ======= ====
Purchased Gas 61,266 61,054 0%
------- -------
Margin $ 33,946 $ 38,689 (12%)
======= ====== ====
Gas revenues decreased $4.5 million, or 5 percent, as compared with the
six months ended June 30, 1996. The average retail rate decrease of 2.2
percent effective April 29, 1997 and reduced therm sales due to warmer
weather in the first half of 1997 resulted in the revenue decrease. A
shift in the sales mix from residential, commercial and interruptible
customers to lower margin transportation customers resulted in reduced
margins.
Effective January 1, 1995, the PSCW approved the replacement of the
purchased gas adjustment clause with an adjustment mechanism based on a
prescribed commodity price index. Fluctuations in WP&L's commodity cost
of gas as compared with the price index are subject to a customer sharing
mechanism, with WP&L's gains or losses limited to $1.1 million. WP&L
realized favorable contributions to gas margin of $0.3 million and $0.9
million for the six months ended June 30, 1997 and 1996, respectively.
The review of the gas incentive program for 1996 by the PSCW resulted in a
$5.9 million refund to residential natural gas customers in April 1997. A
modified gas incentive mechanism has been approved and is effective with
the retail rate order discussed below under "Rates and Regulatory
Matters."
Fees, Rents, Non-Utility Energy Sales and Other Revenues
Fees, rents, non-utility energy sales and other revenues primarily
reflects sales and revenues of WPLH's non-regulated subsidiaries,
consolidated under HDC. The decrease in these revenues for the six months
ended June 30, 1997 is primarily due to the formation of a joint venture,
effective January 1, 1997, between the gas marketing business of the
energy marketing subsidiary and IEA, the energy marketing subsidiary of
IES Industries. Earnings related to this joint venture are included with
"Interest Expense and Other." Revenues for the six months ended June 30,
1996 included $13.0 million related to gas marketing sales now associated
with the joint venture. In addition, the softening market for the
environmental service business and reduced activity in the electric
trading area of the energy marketing subsidiary also contributed to the
decline in revenues for 1997.
Other Operation and Cost of Non-Utility Energy
The decrease in other operation and cost of non-utility energy is
primarily due to the recording of the earnings associated with the joint
venture under "Interest Expense and Other," as discussed above. Operating
expenses for the six months ended June 30, 1996 included $17.5 million
related to gas marketing sales now associated with the joint venture. In
addition, the softening market for the environmental service business and
the reduced activity in the electric trading area of the energy marketing
subsidiary also contributed to the decline in other operations expense for
1997.
Maintenance Expense
Maintenance expense increased as a result of higher plant maintenance
expenses at Kewaunee and several of WP&L's coal-fired plants, as discussed
above under "Electric Operations."
Depreciation and Amortization
Depreciation expense increased due to higher depreciation rates at WP&L
approved by the PSCW, effective January 1, 1997, and property additions.
Additional contributions to the nuclear decommissioning trust fund also
contributed to the increase in depreciation expense.
Interest Expense and Other
Other income in 1996 included a second quarter $5.2 million pre-tax gain
from the sale of a combustion turbine and a first quarter $3.3 million
pre-tax gain from the sale of HDC's investment in assisted living
properties.
Income Taxes
The decrease in income taxes between periods is consistent with lower
taxable income. The effective rate was 34 percent and 36 percent for the
six months ended June 30, 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
WPLH's liquidity is primarily determined by the level of cash generated
from its utility operations and the funding requirements of WP&L's ongoing
construction and maintenance programs. WP&L finances its construction
expenditures through internally generated funds supplemented, when
required, by outside financing. On June 30, 1997, WP&L issued $105
million of 7% debentures due June 15, 2007. Approximately $50 million of
the net proceeds was used to pay maturing short-term debt. The balance of
the proceeds will be used to retire at maturity the $55 million of WP&L
First Mortgage Bonds, Series Z, 6.125%, due July 15, 1997.
During the first six months of 1997, WPLH generated sufficient cash flows
from operations and financing activities to cover operating expenses, cash
dividends and investing activities. Cash flows from operations increased
to $70.0 million for the six months ended June 30, 1997 compared with
$67.6 million for the same period in 1996. The increase in cash flows
from financing activities of $122.5 million is primarily a result of the
debentures issued as discussed above. Cash flows used for investing
activities increased $91.2 million from June 30, 1996 to June 30, 1997.
Cash flows related to investing activities in 1996 were offset by
recognition of $22 million in proceeds primarily from the sale of the
investment in assisted living properties at HDC and $36 million in
proceeds from the sale of a combustion turbine at WP&L.
Rates and Regulatory Matters
The PSCW approved new rates effective April 29, 1997, which extend through
1998. On average WP&L's retail electric rates declined by 2.4 percent and
retail gas rates declined by 2.2 percent. Other items included in the
rate order were: authorization of a surcharge to collect replacement power
costs while Kewaunee was out of service; authorization of an increase in
the return on equity to 11.7 percent from 11.5 percent; a requirement to
maintain a utility common equity level of 51.98 percent as compared with
51.93 percent; reinstatement of the electric fuel adjustment clause (in
May and June, WP&L was within the PSCW allowable range); continuation of a
modified gas performance based ratemaking incentive mechanism; and a
modified SO2 incentive (no incentive was earned through June 30, 1997).
The gas performance incentive was modified to eliminate the maximum gain
or loss to be recognized by WP&L. The incentive includes a sharing
mechanism, whereby 40 percent of all gains and losses relative to current
commodity prices as well as other benchmarks are recognized by WP&L rather
than refunded to or recovered from customers. For the six months ended
June 30, 1997, the contribution to gas margin was $0.3 million.
Industry Outlook
The primary business of WPLH is that of WP&L, which is subject to
regulation by the PSCW and the FERC. The PSCW's inquiries into the future
structure of the natural gas and electric utility industries are ongoing.
The stated goal of the PSCW in the natural gas docket is "to accommodate
competition but not create it." The goal of the electric restructuring
process is to create open access transmission and distribution services
for all customers and create competitive generation and customer service
markets. Additional proceedings, as well as consultation with the
Wisconsin legislature, are planned prior to a target implementation date
after the year 2000. WPLH cannot currently predict what impact, if any,
these proceedings may have on its future financial condition or results of
operations. WPLH's strategy for dealing with these emerging issues
includes seeking growth opportunities, improving customer service, ongoing
cost reductions and productivity enhancements. The major objective of
these actions is to allow WP&L to better prepare for a competitive,
deregulated electric utility industry.
On April 24, 1996, the FERC issued two orders (Nos. 888 and 889) that will
promote competition by opening access to the nation's wholesale power
market. The new orders require public utilities that own, control or
operate transmission systems to provide the same transmission access and
service for wholesale transactions that they provide to themselves. On
March 4, 1997, FERC issued its orders on rehearing in FERC orders No. 888-
A and No. 889-A. The purpose of the orders on rehearing are to address
continued areas of disagreement or areas that required clarification in
FERC's final rules. In compliance with these orders, WP&L filed revised
transmission tariffs. WPLH cannot predict the long-term consequences of
these rules on its results of operations or financial condition.
WP&L complies with the provisions of SFAS No. 71 "Accounting for the
Effects of Certain Types of Regulation." In the event WP&L determines
that it no longer meets the criteria for following SFAS 71, the accounting
impact would be an extraordinary, non-cash charge to operations of an
amount that could be material. Criteria that give rise to the
discontinuance of SFAS 71 include (1) increasing competition that
restricts WP&L's ability to establish prices to recover specific costs and
(2) a significant change in the manner in which rates are set by
regulators from cost-based regulation to another form of regulation. WP&L
periodically reviews these criteria to ensure that the continuing
application of SFAS 71 is appropriate. WP&L believes that it still meets
the requirements of SFAS 71.
Power Supply
In April 1997, members of the Wisconsin Reliability Assessment Group
announced that certain areas in Wisconsin and the Upper Midwest region
would be facing unusual electric supply challenges that could affect
customers through September 1997. Approximately one-third of the region's
nuclear generating capacity was temporarily out of service due to
maintenance outages. This included Kewaunee, which is operated by WPSC
and co-owned by WP&L and MG&E, and the Point Beach nuclear power plant
operated by WEPCO, as well as several nuclear units owned by Commonwealth
Edison in northern Illinois. Several actions have taken place in an
attempt to ensure adequate power supplies for customers in the summer
months, such as rescheduling maintenance to increase plant availability,
upgrading the transmission system to improve capacity, and continuing
efforts to bring other nuclear plants on line. In addition, Kewaunee was
returned to service June 12, 1997 which alleviates some of the concerns
about electricity shortages.
No assurance can be given that business and residential customers will not
be impacted due to electric energy supply challenges. However, to date,
Wisconsin utilities have been able to meet all customer demand except
those customers on voluntary interruption programs.
Financing and Capital Structure
The level of short-term borrowing fluctuates based on seasonal corporate
needs, the timing of long-term financing and capital market conditions.
WP&L generally borrows on a short-term basis to provide interim financing
of construction and capital expenditures in excess of available internally
generated funds. To maintain flexibility in its capital structure and to
take advantage of favorable short-term rates, WP&L also uses proceeds from
the sales of accounts receivable and unbilled revenues to finance a
portion of its long-term cash needs. WPLH's bank lines of credit of $120
million at June 30,1997 are available to support these borrowings.
WPLH's capitalization at June 30, 1997, including the current maturities
of long-term debt, variable rate demand bonds and short-term debt,
consisted of 46 percent common equity, 5 percent preferred stock and 49
percent debt. The common equity total capitalization ratio was 46 percent
at June 30, 1997 and 48 percent at December 31, 1996.
Capital Requirements
WPLH's largest subsidiary, WP&L, is a capital-intensive business and
requires large investments in long-lived assets. Therefore, WPLH's most
significant capital requirements relate to construction expenditures at
WP&L. Construction expenditures for the six months ended June 30, 1997
were $58.8 million. The estimated capital expenditures for the remainder
of 1997 are $88.4 million. These are expected to be funded primarily
through internally generated funds.
WP&L has a 41 percent ownership interest in Kewaunee. Kewaunee resumed
operations on June 12, 1997 after being out of service since September 21,
1996 for refueling and repairs to the steam generator tubes. Kewaunee is
jointly owned by WP&L, WPSC and MG&E. The joint owners continue to
analyze and discuss other options related to the future of Kewaunee
including various ownership transfer alternatives. The steam generator
tube repair costs were approximately $7.5 million. WP&L's share of these
costs is $3.1 million. The PSCW has authorized deferral of such costs
incurred after March 20, 1997. Therefore, WP&L has deferred $2.1 million
of these costs. WP&L will request future rate recovery of these deferred
costs. The PSCW authorization to defer repair costs does not constitute
assurance of future recovery in customer rates or a finding that such
costs have been prudently incurred.
WP&L incurred additional costs associated with the acquisition of
replacement power while Kewaunee was out of service. These costs were
approximately $500,000 per week. WP&L was authorized to include a
surcharge on customer bills with a refund provision, effective April
29,1997 through July 1, 1997, to recover the additional costs of
replacement power during that period. The surcharge of $0.223 per mwh was
discontinued on July 1, 1997 and a small refund will be paid to customers.
Refer to WPLH's 1996 Annual Report on Form 10-K for additional information
on Kewaunee.
The net book value of WP&L's share of Kewaunee as of June 30, 1997 was
$51.4 million, excluding the value of nuclear fuel.
INFLATION
The impacts of inflation on WP&L currently are mitigated through
ratemaking methodologies, customer growth and productivity improvements.
Inflationary impacts on the nonregulated businesses are not anticipated to
be material to WPLH.
OTHER EVENTS
Union Contract
WP&L and the International Brotherhood of Electrical Workers, Local 965,
reached agreement on a new three-year collective bargaining contract on
June 14, 1996. The new agreement included increases in the base wage
during the first, second and third years of the contract of 3 percent, 3
percent and 3.25 percent, respectively. The new agreement was effective
retroactive to June 1, 1996, with wages retroactive to May 26, 1996, which
was the beginning of a pay period. As of June 30, 1997, the contract
covered 1,613 of WP&L's employees, or approximately 69 percent of the
total employees at WP&L.
Joint Venture
On June 11, 1997, WPLH announced the formation of a joint venture with
Cargill, Inc. The joint venture, to be named Cargill-IEC, will be an
energy-commodity trading company that will offer a range of energy
trading, marketing and risk management services to wholesale electric
customers. WPLH, through its subsidiary, HES, has been an active
participant in the bulk power market since 1994. Power trading will begin
under the joint venture upon receipt of a FERC license which is
anticipated during the third quarter of 1997.
Dividend Declaration
On July 23, 1997, the Board of Directors of WPLH declared a quarterly
dividend on WPLH's Common Stock. The dividend is 50 cents per share
payable August 15, 1997 to shareowners of record on July 31, 1997.
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WISCONSIN POWER AND LIGHT COMPANY
FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(this page left blank intentionally)
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
Operating revenues:
Electric $ 151,306 $ 137,084 $ 309,733 $ 285,584
Gas 23,633 28,002 95,212 99,743
Water 1,126 1,031 2,125 2,024
------- ------- ------- -------
176,065 166,117 407,070 387,351
------- ------- ------- -------
Operating expenses:
Electric
production fuels 28,329 27,339 58,403 55,944
Purchased power 33,679 17,070 67,070 32,993
Purchased gas 13,884 15,690 61,266 61,054
Other operation 31,068 32,951 65,408 66,710
Maintenance 14,882 10,940 25,161 19,491
Depreciation and
amortization 25,539 21,010 50,376 42,677
Taxes other than
income 7,990 7,447 15,417 15,004
------- ------- ------- -------
155,371 132,447 343,101 293,873
------- ------- ------- -------
20,694 33,670 63,969 93,478
------- ------- ------- -------
Operating income
Interest expense and
other:
Interest expense 5,877 7,858 13,882 15,614
Allowance for
funds used during
construction (680) (583) (1,521) (1,359)
Other (2,636) (7,238) (4,949) (8,134)
------- ------- ------- -------
2,561 37 7,412 6,121
------- ------- ------- -------
Income before income
taxes and preferred
dividend
requirement 18,133 33,633 56,557 87,357
Income taxes 7,089 13,267 22,162 34,213
Preferred dividend
requirement 828 828 1,656 1,656
------- ------- ------- -------
Net income $ 10,216 $ 19,538 $ 32,739 $ 51,488
======= ======= ======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
ASSETS (in thousands)
Utility plant:
Plant in service--
Electric $ 1,767,540 $ 1,729,311
Gas 231,352 227,809
Water 24,516 23,905
Common 185,045 152,093
---------- ----------
2,208,453 2,133,118
Less--accumulated provision
for depreciation 1,014,232 967,436
---------- ----------
1,194,221 1,165,682
Construction work in
progress 34,572 55,519
Nuclear fuel, net 20,880 19,368
---------- ----------
1,249,673 1,240,569
---------- ----------
Other property and equipment,
net 1,397 1,397
---------- ----------
Investments:
Nuclear decommissioning
trust funds 102,074 90,671
Other investments 15,022 15,354
---------- ----------
117,096 106,025
---------- ----------
Current assets:
Cash and equivalents 35,111 4,167
Net accounts receivable and
unbilled revenue 18,966 34,220
Coal, at average cost 18,623 15,841
Materials and supplies, at
average cost 19,943 19,915
Gas in storage, at average
cost 5,069 9,992
Prepayments and other 22,114 22,053
---------- ----------
119,826 106,188
---------- ----------
Deferred charges:
Regulatory assets 161,880 160,877
Other 73,595 62,758
---------- ----------
235,475 223,635
---------- ----------
TOTAL ASSETS $ 1,723,467 $ 1,677,814
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $5 par value,
authorized 18,000,000 shares,
issued and outstanding--
13,236,601 shares $ 66,183 $ 66,183
Additional paid-in capital 199,169 199,170
Reinvested earnings 302,064 310,805
-------- --------
Total common equity 567,416 576,158
-------- --------
Preferred stock without
mandatory redemption:
Cumulative, without par value,
authorized 3,750,000 shares,
maximum aggregate stated value
$150,000,000
Cumulative, without par value,
$100 stated value--
449,765 shares outstanding 44,977 44,977
Cumulative, without par
value, $25 stated value--
599,460 shares outstanding 14,986 14,986
-------- --------
Total preferred stock 59,963 59,963
-------- --------
Long-term debt, net 363,393 258,660
-------- --------
990,772 894,781
-------- --------
Current liabilities:
Current maturities of long-term
debt 55,000 55,000
Variable rate demand bonds 56,975 56,975
Short-term debt 23,500 69,500
Accounts payable and accruals 84,989 92,719
Accrued payroll and vacation 9,397 11,687
Accrued taxes 830 3,616
Accrued interest 7,507 7,504
Other 34,769 34,424
-------- --------
272,967 331,425
-------- --------
Other credits:
Accumulated deferred income
taxes 248,686 244,817
Accumulated deferred investment
tax credits 35,985 36,931
Accrued environmental
remediation costs 73,583 74,075
Deferred credits and other 101,474 95,785
-------- --------
459,728 451,608
-------- --------
TOTAL CAPITALIZATION AND
LIABILITIES $1,723,467 $1,677,814
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1997 1996
(in thousands)
Cash flows generated from (used for)
operating activities:
Net income $ 34,395 $ 53,144
Adjustments to reconcile net
income to net cash generated
from operating activities:
Depreciation and amortization 50,376 42,677
Deferred income taxes 585 2,140
Investment tax credit restored (946) (955)
Amortization of nuclear fuel 202 4,329
Allowance for equity funds used
during construction (1,135) (905)
Gain on sale of other property
and equipment -- (5,676)
Changes in assets and
liabilities:
Net accounts receivable and
unbilled revenue 15,254 16,724
Inventories 2,113 1,088
Prepayments and other (61) (4,467)
Accounts payable and accruals (10,017) (21,303)
Accrued taxes (2,786) 6,905
Other, net 1,882 (2,594)
------- -------
Net cash from (used for)
operating activities 89,862 91,107
------- -------
Cash flows generated from (used for)
financing activities:
Common stock cash dividends (41,480) (28,982)
Preferred stock dividends (1,656) (1,656)
Proceeds from issuance of
long-term debt 105,000 --
Net change in short-term debt (46,000) (49,500)
Retirement of first mortgage
bonds -- (5,001)
Other, net (267) --
-------- -------
Net cash from (used for)
financing activities 15,597 (85,139)
-------- -------
Cash flows generated from (used for)
investing activities:
Proceeds from sale of other
property and equipment -- 36,264
Additions to utility plant,
excluding AFUDC (57,269) (50,963)
Allowance for borrowed funds
used during construction (386) (454)
Dedicated decommissioning
trust funds (11,403) (11,390)
Additions to nuclear fuel (1,714) (2,710)
Other, net (3,743) 25,480
------- -------
Net cash from (used for)
investing activities (74,515) (3,773)
------ -------
Net increase (decrease) in cash and
equivalents 30,944 2,195
Cash and equivalents at beginning of
period 4,167 4,671
------- -------
Cash and equivalents at end of
period $ 35,111 $ 6,866
======= =======
Supplemental disclosures of cash
flow information:
Cash paid during the period:
Interest on debt $ 14,646 $ 14,650
Income taxes $ 17,270 $ 22,837
The accompanying notes are an integral part of the
consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been
prepared by WP&L, without audit, pursuant to the rules and regulations
of the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. The consolidated financial statements include WP&L and its
wholly-owned consolidated subsidiaries. WP&L is a subsidiary of WPLH.
These financial statements should be read in conjunction with the
financial statements and the notes included in WP&L's latest Annual
Report on Form 10-K.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of (a)
the consolidated results of operations for the three and six months
ended June 30, 1997 and 1996, (b) the consolidated financial position
at June 30, 1997 and December 31, 1996, and (c) the consolidated
statement of cash flows for the six months ended June 30, 1997 and
1996, have been made. Because of the seasonal nature of WP&L's
operations, results for the three and six months ended June 30, 1997
are not necessarily indicative of results that may be expected for the
year ending December 31, 1997.
2. On April 28, 1997, WP&L entered into an interest rate forward contract
to hedge interest rate risk related to the anticipated issuance of $105
million of long-term debt securities. The securities were issued on
June 30, 1997 and the forward contract was settled which resulted in a
cash payment of $3.8 million by WP&L. This payment will be recognized
as an adjustment to interest expense over the life of the new debt
securities to approximate the interest rate implicit in the forward
contract.
3. On June 30, 1997, WP&L issued $105 million of 7% debentures due June
15, 2007. Approximately $50 million of the net proceeds was used to
reduce outstanding short-term debt. The balance of the proceeds will
be used to retire at maturity the $55 million of WP&L First Mortgage
Bonds, Series Z, 6.125%, due July 15, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PROPOSED MERGER
WPLH, IES and IPC have entered into an Agreement and Plan of Merger, as
amended, dated November 10, 1995, which provides for the combination of
all three companies. The new company will be named IEC.
IES is a holding company headquartered in Cedar Rapids, Iowa, and is the
parent company of IES Utilities and IES Diversified. IES Utilities
supplies electric and gas service to approximately 336,000 and 176,000
customers, respectively, in Iowa. IES Diversified and its principal
subsidiaries are primarily engaged in the energy-related, transportation
and real estate development businesses. IPC, a public utility
headquartered in Dubuque, Iowa, supplies electric and gas service to
approximately 165,000 and 49,000 customers, respectively, in northeast
Iowa, northwest Illinois and southern Minnesota.
The proposed merger, which will be accounted for as a pooling of
interests, was approved by the respective shareowners on September 5,
1996. The merger is conditioned on the receipt of approvals of several
federal and state regulatory agencies. The status of these approvals is
as follows:
On May 7, 1997, the ICC issued an order approving the proposed merger.
On March 24, 1997, the MPUC issued an order approving the merger without
hearings, subject to a number of technical conditions that the parties are
willing to meet. Included is a 4-year rate freeze for IPC's Minnesota
customers.
On May 7, 1997, WP&L filed testimony with the PSCW proposing a rate freeze
from the date of the merger approval through calendar year 2000. The PSCW
completed hearings related to the merger in June 1997. Hearings regarding
the merger were completed in July 1997 before the IUB. Approvals from the
PSCW and IUB are still pending.
The FERC issued an order on January 15, 1997. Some limited issues were
set for hearings that began on April 23, 1997 and ended on May 2, 1997.
On July 3, 1997, an administrative law judge issued a non-binding
recommendation that FERC approve the merger subject to the terms of a
stipulation agreement on competition issues entered into between the
companies and the FERC trial staff. Approval from the FERC is still
pending.
Given that the merger was not consummated before July 7, 1997, the merger
partners are required to submit new information to the DOJ pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act. The DOJ completed its
impact review of the merger on market power earlier and all requirements
of this review were satisfied. The merger partners do not believe the
resubmission will cause any material delays in finalizing the merger.
The companies expect to receive final decisions on all outstanding
regulatory approvals relating to the merger by the end of 1997.
Additional information regarding the merger is available in WPLH's 1996
Annual Report on Form 10-K
THREE MONTHS ENDED JUNE 30, 1997 VS. JUNE 30, 1996:
OVERVIEW
WP&L reported consolidated second quarter net income of $10.2 million
compared with $19.5 million for the same period in 1996. Contributing to
the decrease in earnings were lower electric margin due to plant outages
and reduced gas margin due to warmer weather in the second quarter of 1997
as compared with the same period in 1996. In addition, a $3.4 million
after-tax gain was recognized on the sale of a combustion turbine in the
second quarter of 1996.
Electric Operations
Revenues and Costs kWhs Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $ 45,206 $ 43,776 3% 652,831 633,695 3% 340,160 334,035 2%
Industrial 38,908 36,450 7% 1,049,251 1,003,872 5% 837 810 3%
Commercial 25,738 24,519 5% 437,705 421,098 4% 46,356 45,300 2%
Sales to other
Utilities 40,047 31,367 28% 1,405,889 1,290,219 9% 107 92 16%
Other 1,407 972 45% 13,264 15,591 (15%) 1,741 1,742 (0%)
-------- -------- -------- --------- ------- -------
Total $151,306 $137,084 10% 3,558,940 3,364,475 6% 389,201 381,979 2%
======== ======== ==== ========= ========= ==== ======= ======= ====
Electric
Production Fuels 28,329 27,339 4%
Purchased Power 33,679 17,070 97%
-------- --------
Margin $ 89,298 $ 92,675 (4%)
======== ======== ====
Electric revenues increased $14.2 million, or 10 percent, as compared with
the second quarter of 1996. Continued customer growth, economic strength
in the service area and increased sales to other utilities contributed to
the increase in revenues.
WP&L had an average retail rate reduction of 2.4 percent effective April
29, 1997. The Kewaunee surcharge, which also was effective April 29, 1997
through July 1, 1997, offset this rate decrease for the second quarter.
Refer to the "Rates and Regulatory Matters" section below for further
discussion of these rate modifications.
Despite higher electric revenues, electric margin decreased $3.4 million,
or 4 percent, as compared with the second quarter of 1996. The decline in
margin reflects the impact of the shutdown at Kewaunee throughout most of
the second quarter of 1997 for steam generator tube repairs, as well as
several temporary, routine outages at WP&L's coal-fired plants during
April and May of 1997. These outages caused a greater reliance on more
costly purchased power to meet customer requirements. Refer to the
"Capital Requirements" section below for further discussion of the
Kewaunee plant outage. The Kewaunee outage and increased sales to other
utilities resulted in a 97 percent increase in purchased power.
Gas Operations
Revenues and Costs Therms Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $ 11,774 $ 14,703 (20%) 20,553 23,245 (12%) 135,378 131,093 3%
Commercial and
Industrial 6,125 7,855 (22%) 13,958 15,493 (10%) 16,632 16,160 3%
Interruptible 454 611 (26%) 1,346 1,659 (19%) 285 258 10%
Transportation
and other 5,280 4,833 9% 38,254 34,339 11% 379 266 42%
-------- -------- ------- ------- -------- -------
Total $ 23,633 $ 28,002 (16%) 74,111 74,736 (1%) 152,674 147,777 3%
======= ======= ==== ======= ======= ==== ======= ======= ====
13,884 15,690 (12%)
------- --------
Purchased Gas
Margin $ 9,749 $ 12,312 (21%)
======= ======== ====
Gas revenues decreased $4.4 million, or 16 percent, as compared with the
second quarter of 1996. Revenues declined due to the pass through to
customers of lower costs per therm of natural gas, the average retail rate
decrease of 2.2 percent effective April 29, 1997 and lower therm sales to
native customers due to warmer weather in the second quarter of 1997.
Although total therm sales remained relatively unchanged, a shift in the
sales mix from residential, commercial and interruptible customers to
lower margin transportation customers resulted in reduced margins.
Effective January 1, 1995, the PSCW approved the replacement of the
purchased gas adjustment clause with an adjustment mechanism based on a
prescribed commodity price index. Fluctuations in WP&L's commodity cost
of gas as compared with the price index are subject to a customer sharing
mechanism, with WP&L's gains or losses limited to $1.1 million annually.
WP&L realized unfavorable contributions to gas margin of $0.5 million and
$0.1 million for the second quarters of 1997 and 1996, respectively. The
review of the gas incentive program for 1996 by the PSCW resulted in a
$5.9 million refund to residential natural gas customers in April 1997.
A modified gas incentive mechanism has been approved and is effective with
the retail rate order discussed below under "Rates and Regulatory Matters."
Maintenance Expense
Maintenance expense increased as a result of higher plant maintenance
expenses at Kewaunee and several of WP&L's coal-fired plants, as discussed
above under "Electric Operations."
Depreciation and Amortization
Depreciation expense increased due to higher depreciation rates at WP&L
approved by the PSCW, effective January 1, 1997, and property additions.
Additional contributions to the nuclear decommissioning trust fund also
contributed to the increase in depreciation expense.
Interest Expense and Other
The decrease in interest expense primarily reflects a favorable settlement
of outstanding tax issues related to permanent differences and nonutility
operations in the second quarter of 1997. Other income in the second
quarter of 1996 included a $5.2 million pre-tax gain from the sale of a
combustion turbine.
Income Taxes
The decrease in income taxes between quarters is consistent with lower
taxable income.
SIX MONTHS ENDED JUNE 30, 1997 VS. JUNE 30, 1996
OVERVIEW
WP&L reported consolidated net income for the six months ended June 30, 1997
of $32.7 million compared with $51.5 million for the same period in 1996.
Contributing to the decrease in earnings were lower electric margin due to
plant outages and reduced gas margin due to warmer weather for the six
months ended June 30, 1997 as compared with the same period in 1996. In
addition, a $3.4 million after-tax gain was recognized on the sale of a
combustion turbine in the second quarter of 1996.
Electric Operations
Revenues and Costs kWhs Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $100,011 $ 99,428 1% 1,463,644 1,467,364 (0%) 340,160 334,035 2%
Industrial 74,190 70,562 5% 2,044,569 1,935,459 6% 837 810 3%
Commercial 52,538 50,918 3% 904,564 869,064 4% 46,356 45,300 2%
Sales to other
Utilities 78,551 62,278 26% 2,792,847 2,482,561 12% 107 92 16%
Other 4,443 2,398 85% 33,457 30,271 11% 1,741 1,742 (0%)
-------- -------- --------- --------- -------- --------
Total $309,733 $285,584 8% 7,239,081 6,784,719 7% 389,201 381,979 2%
======== ======== ==== ========= ========= ==== ======== ======== ====
Electric
Production Fuels 58,403 55,944 4%
Purchased Power 67,070 32,993 103%
-------- --------
Margin $184,260 $196,647 (6%)
======== ======== ====
Electric revenues increased $24.1 million, or 8 percent, as compared with
the six months ended June 30, 1996. Continued customer growth, economic
strength in the service area and increased sales to other utilities offset
the impact of warmer weather in 1997.
WP&L had an average retail rate decrease of 2.4 percent effective April
29, 1997. The Kewaunee surcharge, which also was effective April 29, 1997
through July 1, 1997, offset this rate decrease for the second quarter.
Refer to the "Rates and Regulatory Matters" section below for further
discussion of these rate modifications.
Despite higher electric revenues, electric margin decreased $12.4 million,
or 6 percent, as compared with the six months ended June 30, 1996. The
decline in margin reflects the impact of the shutdown at Kewaunee
throughout most of the first half of 1997 for steam generator tube repairs
as well as several temporary, routine outages at WP&L's coal-fired plants
through the first five months of 1997. These outages caused a greater
reliance on more costly purchased power to meet customer requirements.
Refer to the "Capital Requirements" section below for further discussion
of the Kewaunee plant outage. The Kewaunee outage and increased sales to
other utilities resulted in a 103 percent increase in purchased power.
Gas Operations
Revenues and Costs Therms Sold Customers at
(In Thousands) Change (In Thousands) Change Month End Change
1997 1996 1997 1996 1997 1996
Residential
and Farm $ 53,406 $ 54,137 (1%) 81,082 89,112 (9%) 135,378 131,093 3%
Commercial and
Industrial 30,237 29,642 2% 56,086 60,355 (7%) 16,632 16,160 3%
Interruptible 1,337 1,675 (20%) 3,299 4,627 (29%) 285 258 10%
Transportation
and other 10,232 14,289 (28%) 100,036 99,758 0% 379 266 42%
-------- -------- ------- ------- ------- -------
Total $ 95,212 $ 99,743 (5%) 240,503 253,852 (5%) 152,674 147,777 3%
======= ======= ==== ======= ======= ==== ======= ======= ====
61,266 61,054 0%
-------- --------
Purchased Gas
Margin $ 33,946 $ 38,689 (12%)
======== ======== =====
Gas revenues decreased $4.5 million, or 5 percent, as compared with the
six months ended June 30, 1996. The average retail rate decrease of 2.2
percent effective April 29, 1997 and reduced therm sales due to warmer
weather in the first half of 1997 resulted in the revenue decrease. A
shift in the sales mix from residential, commercial and interruptible
customers to lower margin transportation customers resulted in reduced
margins.
Effective January 1, 1995, the PSCW approved the replacement of the
purchased gas adjustment clause with an adjustment mechanism based on a
prescribed commodity price index. Fluctuations in WP&L's commodity cost
of gas as compared with the price index are subject to a customer sharing
mechanism, with WP&L's gains or losses limited to $1.1 million. WP&L
realized favorable contributions to gas margin of $0.3 million and $0.9
million for the six months ended June 30, 1997 and 1996, respectively.
The review of the gas incentive program for 1996 by the PSCW resulted in a
$5.9 million refund to residential natural gas customers in April 1997. A
modified gas incentive mechanism has been approved and is effective with
the retail rate order discussed below under "Rates and Regulatory
Matters."
Maintenance Expense
Maintenance expense increased as a result of higher plant maintenance
expenses at Kewaunee and several of WP&L's coal-fired plants, as discussed
above under "Electric Operations."
Depreciation and Amortization
Depreciation expense increased due to higher depreciation rates at WP&L
approved by the PSCW, effective January 1, 1997, and property additions.
Additional contributions to the nuclear decommissioning trust fund also
contributed to the increase in depreciation expense.
Interest Expense and Other
The decrease in interest expense primarily reflects a favorable settlement
of an outstanding tax issues related to permanent differences and
nonutility operations in the second quarter of 1997. Other income in the
second quarter of 1996 included a $5.2 million pre-tax gain from the sale
of a combustion turbine.
Income Taxes
The decrease in income taxes between periods is consistent with lower
taxable income. The effective rate was 39 percent for the six months
ended June 30, 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
WP&L's liquidity is primarily determined by the level of cash generated
from its operations and the funding requirements of it's ongoing
construction and maintenance programs. WP&L finances its construction
expenditures through internally generated funds supplemented, when
required, by outside financing. On June 30, 1997, WP&L issued $105
million of 7% debentures due June 15, 2007. Approximately $50 million of
the net proceeds was used to pay maturing short-term debt. The balance of
the proceeds will be used to retire at maturity the $55 million of WP&L
First Mortgage Bonds, Series Z, 6.125%, due July 15, 1997.
During the first six months of 1997, WP&L generated sufficient cash flows
from operations and financing activities to cover operating expenses, cash
dividends and investing activities. Cash flows from operations decreased
to $89.9 million for the six months ended June 30, 1997 compared with
$91.1 million for the same period in 1996. The increase in cash flows
from financing activities of $100.7 million is primarily a result of the
debentures issued as discussed above. Cash flows used for investing
activities increased $78.3 million from June 30, 1996 to June 30, 1997.
Cash flows related to investing activities in 1996 were offset by
recognition of $36 million in proceeds from the sale of a combustion
turbine.
Rates and Regulatory Matters
The PSCW approved new rates effective April 29, 1997, which extend through
1998. On average WP&L's retail electric rates declined by 2.4 percent and
retail gas rates declined by 2.2 percent. Other items included in the
rate order were: authorization of a surcharge to collect replacement power
costs while Kewaunee was out of service; authorization of an increase in
the return on equity to 11.7 percent from 11.5 percent; a requirement to
maintain a utility common equity level of 51.98 percent as compared with
51.93 percent; reinstatement of the electric fuel adjustment clause (in
May and June, WP&L was within the PSCW allowable range); continuation of a
modified gas performance based ratemaking incentive mechanism; and a
modified SO2 incentive (no incentive was earned through June 30, 1997).
The gas performance incentive was modified to eliminate the maximum gain
or loss to be recognized by WP&L. The incentive includes a sharing
mechanism, whereby 40 percent of all gains and losses relative to current
commodity prices as well as other benchmarks are recognized by WP&L rather
than refunded to or recovered from customers. For the six months ended
June 30, 1997, the contribution to gas margin was $0.3 million.
Industry Outlook
The PSCW's inquiries into the future structure of the natural gas and
electric utility industries are ongoing. The stated goal of the PSCW in
the natural gas docket is "to accommodate competition but not create it."
The goal of the electric restructuring process is to create open access
transmission and distribution services for all customers and create
competitive generation and customer service markets. Additional
proceedings, as well as consultation with the Wisconsin legislature, are
planned prior to a target implementation date after the year 2000. WP&L
cannot currently predict what impact, if any, these proceedings may have
on its future financial condition or results of operations. WP&L's
strategy for dealing with these emerging issues includes seeking growth
opportunities, improving customer service, ongoing cost reductions and
productivity enhancements. The major objective of these actions is to
allow WP&L to better prepare for a competitive, deregulated electric
utility industry.
On April 24, 1996, the FERC issued two orders (Nos. 888 and 889) that will
promote competition by opening access to the nation's wholesale power
market. The new orders require public utilities that own, control or
operate transmission systems to provide the same transmission access and
service for wholesale transactions that they provide to themselves. On
March 4, 1997, FERC issued its orders on rehearing in FERC orders No. 888-
A and No. 889-A. The purpose of the orders on rehearing are to address
continued areas of disagreement or areas that required clarification in
FERC's final rules. In compliance with these orders, WP&L filed revised
transmission tariffs. WP&L cannot predict the long-term consequences of
these rules on its results of operations or financial condition.
WP&L complies with the provisions of SFAS No. 71 "Accounting for the
Effects of Certain Types of Regulation." In the event WP&L determines
that it no longer meets the criteria for following SFAS 71, the accounting
impact would be an extraordinary, non-cash charge to operations of an
amount that could be material. Criteria that give rise to the
discontinuance of SFAS 71 include (1) increasing competition that
restricts WP&L's ability to establish prices to recover specific costs and
(2) a significant change in the manner in which rates are set by
regulators from cost-based regulation to another form of regulation. WP&L
periodically reviews these criteria to ensure that the continuing
application of SFAS 71 is appropriate. WP&L believes that it still meets
the requirements of SFAS 71.
Power Supply
In April 1997, members of the Wisconsin Reliability Assessment Group
announced that certain areas in Wisconsin and the Upper Midwest region
would be facing unusual electric supply challenges that could affect
customers through September 1997. Approximately one-third of the region's
nuclear generating capacity was temporarily out of service due to
maintenance outages. This included Kewaunee, which is operated by WPSC
and co-owned by WP&L and MG&E, and the Point Beach nuclear power plant
operated by WEPCO, as well as several nuclear units owned by Commonwealth
Edison in northern Illinois. Several actions have taken place in an
attempt to ensure adequate power supplies for customers in the summer
months, such as rescheduling maintenance to increase plant availability,
upgrading the transmission system to improve capacity, and continuing
efforts to bring other nuclear plants on line. In addition, Kewaunee was
returned to service June 12, 1997 which alleviates some of the concerns
about electricity shortages.
No assurance can be given that business and residential customers will not
be impacted due to electric energy supply challenges. However, to date,
Wisconsin utilities have been able to meet all customer demand except
those customers on voluntary interruption programs.
Financing and Capital Structure
The level of short-term borrowing fluctuates based on seasonal corporate
needs, the timing of long-term financing and capital market conditions.
WP&L generally borrows on a short-term basis to provide interim financing
of construction and capital expenditures in excess of available internally
generated funds. To maintain flexibility in its capital structure and to
take advantage of favorable short-term rates, WP&L also uses proceeds from
the sales of accounts receivable and unbilled revenues to finance a
portion of its long-term cash needs. WP&L's bank lines of credit of $70
million at June 30,1997 are available to support these borrowings.
WP&L's capitalization at June 30, 1997, including the current maturities
of long-term debt, variable rate demand bonds and short-term debt,
consisted of 50 percent common equity, 5 percent preferred stock and 45
percent debt. The common equity total capitalization ratio was 50 percent
at June 30, 1997 and 53 percent at December 31, 1996.
Capital Requirements
WP&L is a capital-intensive business and requires large investments in
long-lived assets. Therefore, WP&L's most significant capital
requirements relate to construction expenditures. Construction
expenditures for the six months ended June 30, 1997 were $58.8 million.
The estimated capital expenditures for the remainder of 1997 are $88.4
million. These are expected to be funded primarily through internally
generated funds.
WP&L has a 41 percent ownership interest in Kewaunee. Kewaunee resumed
operations on June 12, 1997 after being out of service since September 21,
1996 for refueling and repairs to the steam generator tubes. Kewaunee is
jointly owned by WP&L, WPSC and MG&E. The joint owners continue to
analyze and discuss other options related to the future of Kewaunee
including various ownership transfer alternatives. The steam generator
tube repair costs were approximately $7.5 million. WP&L's share of these
costs is $3.1 million. The PSCW has authorized deferral of such costs
incurred after March 20, 1997. Therefore, WP&L has deferred $2.1 million
of these costs. WP&L will request future rate recovery of these deferred
costs. The PSCW authorization to defer repair costs does not constitute
assurance of future recovery in customer rates or a finding that such
costs have been prudently incurred.
WP&L incurred additional costs associated with the acquisition of
replacement power while Kewaunee was out of service. These costs were
approximately $500,000 per week. WP&L was authorized to include a
surcharge on customer bills with a refund provision, effective April
29,1997 through July 1, 1997, to recover the additional costs of
replacement power during that period. The surcharge of $0.223 per mwh was
discontinued on July 1, 1997 and a small refund will be paid to customers.
Refer to WP&L's 1996 Annual Report on Form 10-K for additional information
on Kewaunee.
The net book value of WP&L's share of Kewaunee as of June 30, 1997 was
$51.4 million, excluding the value of nuclear fuel.
INFLATION
The impacts of inflation on WP&L currently are mitigated through
ratemaking methodologies, customer growth and productivity improvements.
Inflationary impacts on WP&L are not anticipated to be material.
OTHER EVENTS
Union Contract
WP&L and the International Brotherhood of Electrical Workers, Local 965,
reached agreement on a new three-year collective bargaining contract on
June 14, 1996. The new agreement included increases in the base wage
during the first, second and third years of the contract of 3 percent, 3
percent and 3.25 percent, respectively. The new agreement was effective
retroactive to June 1, 1996, with wages retroactive to May 26, 1996, which
was the beginning of a pay period. As of June 30, 1997, the contract
covered 1,613 of WP&L's employees, or approximately 69 percent of the
total employees at WP&L.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At WPLH's annual meeting of shareowners held on April 23, 1997, Erroll B.
Davis, Jr., Milton E. Neshek and Carol T. Toussaint were elected as
directors for terms expiring in 2000. The following sets forth
certain information with respect to the election of directors at the
annual meeting.
Shares Withholding
Name of Nominee Shares Voted For Authority
Erroll B. Davis, Jr. 25,204,313 771,270
Milton E. Neshek 25,316,006 659,577
Carol T. Toussaint 25,255,389 720,194
At WP&L's annual meeting of shareowners held on April 23, 1997, Erroll B.
Davis, Jr., Milton E. Neshek and Carol T. Toussaint were elected as
directors for terms expiring in 2000. The following sets forth
certain information with respect to the election of directors at the
annual meeting.
Shares Withholding
Name of Nominee Shares Voted For Authority
Erroll B. Davis, Jr. 429,181 4,101
Milton E. Neshek 429,817 3,465
Carol T. Toussaint 429,755 3,527
The following table sets forth the other directors of WPLH and WP&L whose
terms of office continued after the 1997 annual meetings.
Name of Director Year in Which Term Expires
L. David Carley 1998
Donald R. Haldeman 1998
Arnold M. Nemirow 1998
Judith D. Pyle 1998
Rockne G. Flowers 1999
Katherine C. Lyall 1999
Henry C. Prange 1999
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
4 A Indenture, dated as of June 20, 1997, between WP&L and Firstar
Trust Company, as Trustee, relating to debt securities
(incorporated by reference to Exhibit 4.33 to Amendment No. 2
to WP&L's Registration Statement on Form S-3 (Registration No.
33-60917))
4 B Officers' Certificate, dated as of June 25, 1997, creating the
7% debentures due June 15, 2007 of WP&L (incorporated by
reference to Exhibit 4 to WP&L's Current Report on Form 8-K,
dated June 25, 1997)
27 A Financial Data Schedule of WPLH
27 B Financial Data Schedule of WP&L
2. Reports on Form 8-K: WP&L filed a Current Report on Form 8-K, dated
June 25, 1997, reporting under Item 5 that it had agreed to sell
$105 million of 7% debentures due June 15, 2007. The debentures are
covered by a Registration Statement on Form S-3 (Registration No.
33-60917).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 11th day of August 1997.
WPL Holdings, Inc.
By: /s/ Edward M. Gleason
Edward M. Gleason, Vice President, Treasurer and Corporate Secretary
(principal financial officer)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 11th day of August 1997.
Wisconsin Power and Light Company
By: /s/ Edward M. Gleason
Edward M. Gleason, Controller, Treasurer and Corporate Secretary
(principal financial officer)
EXHIBIT INDEX
Exhibit No. Description
4 A Indenture, dated as of June 20, 1997, between WP&L and Firstar
Trust Company, as Trustee, relating to debt securities
(incorporated by reference to Exhibit 4.33 to Amendment No. 2
to WP&L's Registration Statement on Form S-3 (Registration No.
33-60917))
4 B Officers' Certificate, dated as of June 25, 1997, creating the
7% debentures due June 15, 2007 of WP&L (incorporated by
reference to Exhibit 4 to WP&L's Current Report on Form 8-K,
dated June 25, 1997)
27 A Financial Data Schedule of WPLH
27 B Financial Data Schedule of WP&L