EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Earnings and earnings per share fluctuated due to many conditions, the primary
ones being: weather variations, electric rate reductions, sales growth,
fluctuating operating costs, the purchase and sales of utility properties, new
accounting requirements, lower interest expense, and changes in income and
property taxes.
The impacts of the more significant items affecting revenues, costs, and
earnings during the past several years are analyzed and discussed below.
ELECTRIC OPERATING REVENUES
VARIATION FROM PRIOR YEAR
--------------------------
(Millions of Dollars) 1993 1992 1991
------- -------- -------
RATE VARIATIONS $(42.9) $ (.9) $(16.4)
EFFECT OF ABNORMAL WEATHER 74.9 (135.7) 91.2
GROWTH AND OTHER 4.5 59.8 (7.7)
------ ------- ------
$ 36.5 $ (76.8) $ 67.1
====== ======= ======
The increase in 1993 electric revenues primarily reflects the increase in
electricity sales from colder, more normal winter weather in the first quarter
1993 followed by warmer spring and summer weather when compared to 1992. The
lower 1993 electric revenues due to rates reflect the November 1992 Missouri
rate settlement effective January 1, 1993, which decreased rates for all
Missouri electric customers and reduced annual revenues by approximately $42
million. The sale of the Company's Iowa and northern Illinois retail properties
in December 1992 reduced 1993 electric revenues $52 million which was offset by
growth in other service areas, including the territory purchased from Arkansas
Power & Light Company in March 1992.
The decline in 1992 electric revenues was primarily due to unusually mild summer
weather which reduced air conditioning use as compared to 1991. The unusually
warm spring and summer weather in 1991 resulted in significantly increased
electric revenues when compared to the weather experienced in 1990. The lower
1991 electric revenues attributable to rate variations reflect lower rates
resulting from the Missouri rate design settlement, effective November 26, 1990.
Under the terms of this settlement, rate decreases for commercial and industrial
customers reduced revenues by approximately $30 million annually.
The variation in electric revenues attributable to growth and other factors in
1991, 1992, and 1993 primarily reflects differences in economic growth in the
Company's service territory for these periods. In 1991, the Company's service
area experienced the general reduction in economic growth that occurred
nationally and was reflected in lower sales to industrial customers. In 1991,
normalized kilowatthour sales decreased 0.4% compared to 1990. In 1992,
normalized kilowatthour sales increased 3.2% compared to 1991, which reflects
both an improving local economy and the addition of new customers as a result of
the purchase of the Missouri distribution properties of Arkansas Power & Light
Company in March 1992. In 1993, normalized kilowatthour sales decreased 0.8%
reflecting the loss of sales from the sale of the Company's Iowa and northern
Illinois service territory partially offset by an improved local economy. Other
less significant factors contributing to variations in electric sales are
conservation, installation of energy efficient appliances, and changes to and
from alternative fuels.
OPERATING EXPENSES
FUEL AND PURCHASED POWER -- VARIATION FROM PRIOR YEAR
-----------------------------------
(Millions of Dollars) 1993 1992 1991
------ ------ ------
FUEL:
Variation in generation $(18.3) $(36.7) $ 17.3
Price (.4) (6.1) (19.6)
Amortization of uranium
litigation settlement - 2.7 (1.7)
Generation efficiencies 6.7 (.3) 3.6
Department of Energy assessment .4 - -
NET INTERCHANGE SALES AND
PURCHASED POWER VARIATION 17.6 35.7 9.7
------ ------ ------
$ 6.0 $ (4.7) $ 9.3
====== ====== ======
The increased 1993 Fuel and Purchased Power costs reflect increased purchased
power and lower generating efficiencies offset in part by greater hydro
generation and reduced steam generation. Increased power purchases from other
utilities were required in 1993 when flooding interrupted coal deliveries to
several of the Company's fossil fueled power plants. The decreased 1992 Fuel
and Purchased Power costs reflect reduced generation associated with lower
electric sales and a Callaway refueling outage in 1992, greater hydro generation
and lower fuel prices, offset in part by greater net purchased power costs. The
increased 1991 Fuel and Purchased Power costs reflect increased steam plant
generation partly due to less hydro generation, reduced generating efficiencies,
and increased net purchased power costs, offset in part by decreased fuel
prices.
Other variations in 1991 through 1993 operating expenses reflect recurring
conditions such as growth, inflation, and wage increases. In 1993, operations
expenses, other than fuel and purchased power costs, increased $64 million,
primarily due to a $32 million increase in employee postretirement benefits
expense pursuant to Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits other than Pensions", a $14
million increase in natural gas purchased for resale, a $5 million increase in
labor costs, and higher pensions, professional and computer services, regulatory
fees, and provision for injuries and damages. In
16 UNION ELECTRIC 1993
1992, operations expenses, other than fuel and purchased power costs, increased
$7 million, primarily reflecting a $5 million increase in labor costs, a $4
million increase in employee benefit expenses, a $2 million increase in natural
gas purchased for resale, and a $1 million increase in tree trimming expense,
offset in part by a $5 million decrease in nuclear spent fuel disposal cost,
primarily due to the refueling outage at Callaway plant and a refund of
overcharges from the Department of Energy. In 1991, operations expenses, other
than fuel and purchased power costs, increased $8 million, due primarily to a $2
million increase in employee benefit expenses, a $3 million increase in
regulatory expenses, and a $2 million increase in natural gas purchased for
resale.
In 1993, maintenance expenses increased $3 million primarily due to flood-
related labor expenses. In 1992, maintenance expenses increased $17 million,
due to a $20 million increase in Callaway plant maintenance expenses primarily
associated with Callaway's fifth refueling in early 1992, partially offset by
reduced maintenance at fossil-fueled generating plants. In 1991, maintenance
expenses decreased $6 million, primarily due to a $14 million decrease in
Callaway plant maintenance expenses, reflecting the plant's fourth refueling in
late 1990, partially offset by higher tree trimming and storm-related
distribution expenses, and increased maintenance at most generating plants other
than Callaway.
Depreciation expense increased $6 million in 1993, due to increased depreciable
property. Depreciation expense increased $10 million in 1992, primarily due to
the purchase of the Missouri distribution properties of Arkansas Power & Light
Company in early 1992, a $3 million increase in nuclear plant decommissioning
expense and increased other depreciable property. Depreciation expense
increased $4 million in 1991 primarily due to increased depreciable property.
Income taxes from operations in 1993 reflect a higher federal income tax rate
offset by lower pre-tax income. Income taxes from operations decreased $43
million in 1992 due principally to lower pre-tax income. In 1991, income taxes
from operations increased $30 million due principally to higher pre-tax income.
In 1993, other taxes charged to operating expenses increased $6 million,
primarily due to higher gross receipts and real estate taxes. In 1992, other
taxes charged to operating expenses increased $3 million due to a $7 million
increase in real estate taxes, partially offset by a $4 million reduction in
gross receipts taxes associated with lower revenues. In 1991, other taxes
charged to operating expenses increased $3 million, due to a $2 million increase
in license and franchise taxes and a $1 million increase in payroll taxes.
INTEREST
In 1993, 1992 and 1991, interest expense decreased $6 million, $32 million and
$20 million, respectively, primarily due to the refinancing of high-cost debt
with lower cost issues, lower interest rates on variable rate debt and a
reduction in total debt outstanding.
CALLAWAY RATE PHASE-IN PLANS
See Note 1 under Notes to Financial Statements for information relative to
Callaway rate phase-in plans.
OTHER INCOME AND DEDUCTIONS
The 1993 increase in Miscellaneous of $4 million primarily reflects lower
miscellaneous income deductions. The 1992 reduction in Miscellaneous of $3
million primarily reflects reduced charitable contributions and lower
miscellaneous income deductions. The 1991 reduction in Miscellaneous of $13
million primarily reflects a reduction in interest income, greater charitable
contributions, the expense related to obtaining long-term power supply contracts
with certain wholesale customers, and other miscellaneous income deductions.
The December 1992 gain of $18 million, net of tax, from sales of electric
property, is discussed under Liquidity and Capital Resources.
CLEAN AIR ACT AMENDMENTS
Under the Clean Air Act Amendments of 1990, the Company is required to reduce
total annual emissions of sulfur dioxide by approximately two-thirds by the year
2000. Significant reductions in nitrogen oxide will also be required. With
switching to low-sulfur coal and early banking of emission credits, the Company
anticipates that it can comply with the requirements of the law with no
significant increase in revenue needs because the related capital costs,
estimated at about $300 million, will be largely offset by lower fuel costs.
CONTINGENCIES
See Note 10 under Notes to Financial Statements for issues existing at December
31, 1993 that could affect the Company.
LIQUIDITY AND CAPITAL RESOURCES
Construction expenditures averaging approximately $310 million are anticipated
during each of the years 1994 through 1998. The Company completed the
construction of its Callaway plant in late 1984. Additional electric generation
capacity is not anticipated before the year 2000. For funds required in
addition to construction expenditures, see Notes 2, 5, and 6 under Notes to
Financial Statements.
On March 12, 1992, the Company purchased the Missouri retail electric
distribution properties of Arkansas Power & Light Company (a subsidiary of
Entergy Corporation) for $63 million. This acquisition increased the Company's
customers by 26,000 in 10 counties in southeastern
UNION ELECTRIC 1993 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
(continued)
Missouri adjacent to the Company's existing service territory. In connection
with the transaction, the Company entered into a long-term power purchase
agreement with AP&L which allows the Company to serve the new customers cost-
effectively and without building additional generating capacity.
In December 1992, the Company sold its Iowa retail and wholesale electric
distribution properties to Iowa Electric Light & Power (a subsidiary of IES
Industries, Inc.) and its northern Illinois electric distribution properties to
Central Illinois Public Service Company. The Company served approximately
21,000 customers in the areas sold. The net book value of the properties sold
was $34 million. Sales proceeds totaled $68 million. As a result of these
sales, the Company realized a gain in 1992 of $18 million, net of tax. The
Company's hydroelectric generating station near Keokuk, Iowa and related
transmission facilities were not included in the sales.
On January 24, 1994, the Company sold $100 million of first mortgage bonds, 7%
Series due 2024. The Company used the proceeds to repay outstanding commercial
paper.
A nuclear fuel lease agreement provides financing for the Company's nuclear fuel
requirements. Effective February 1, 1994, the maximum which can be financed
under the agreement was increased from $100 million to $120 million. At
December 31, 1993, $99 million of nuclear fuel was financed under the lease.
The Company plans to continue utilizing short-term debt as support for normal
operations and other temporary requirements (see Note 3 under Notes to Financial
Statements). The Company is authorized by the Federal Energy Regulatory
Commission (FERC) to have outstanding at any one time up to $600 million of
short-term unsecured debt instruments.
TAX MATTERS
See Income Taxes in Note 7 under Notes to Financial Statement regarding SFAS No.
109, "Accounting for Income Taxes."
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's financial statements reflect the historical cost of events and
transactions occurring at times when the purchasing power of the dollar was
different. The effects of inflation and changing prices on the Company's
financial statements are most significant in the areas of depreciation and
property, plant, and equipment.
The current replacement cost of the Company's utility plant substantially
exceeds its recorded historical cost. However, the regulatory process limits
the Company to the recovery of the historical cost of utility plant through
depreciation. While the regulatory process does not reflect the current cost of
replacing utility plant, past practice indicates the Company will be allowed to
earn on and to recover the increased cost of its net investment after facilities
are replaced.
The Company, by having assets such as receivables, fuel and materials inventory,
and deferred charges, incurs a loss of purchasing power during periods of
inflation because, after conversion, the cash received for these items will
purchase less. More than offsetting such assets, however, are significant
amounts of long-term debt, deferred income taxes, and current liabilities which
will be paid with dollars of reduced purchasing power.
SELECTED QUARTERLY INFORMATION
(Thousands of Dollars Except Per Share Amounts)
Earnings Earnings
on Per Share
Operating Operating Net Common of Stock
Revenues Income Income Stock Outstanding
- -------------------------------------------------------------------------------------------
QUARTER ENDED: MARCH 31, 1993 $452,966 $ 75,049 $ 44,204 $ 40,523 $ .40
March 31, 1992 430,930 64,188 31,841 28,326 .28
JUNE 30, 1993 512,209 115,298 86,846 83,401 .82
June 30, 1992 501,469 100,080 67,260 63,745 .62
SEPTEMBER 30, 1993 689,330 188,513 161,288 157,641 1.54
September 30, 1992 656,271 195,841 166,759 163,245 1.60
DECEMBER 31, 1993 411,499 32,437 4,822 1,508 .01
December 31, 1992 426,451 51,908 36,888 33,374 .33
- -------------------------------------------------------------------------------------------
Net Income and Earnings on Common Stock for the fourth quarter of 1992 reflect a
gain of $18 million ($.18 per share) from the sale of the Company's Iowa and
northern Illinois retail distribution properties. The Callaway plant was
refueled in the fourth quarter of 1993 and the second quarter of 1992, the
effect of which decreased earnings on common stock by about $21 million ($.20
per share) in each of these quarters. The cost of flooding in the Company's
service territory in 1993 reduced earnings on common stock by $10 million ($.10
per share), primarily in the third quarter.
18 UNION ELECTRIC 1993
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Union Electric Company is responsible for the information and
representations contained in the financial statements and in other sections of
this Annual Report. The financial statements have been prepared in conformity
with generally accepted accounting principles. Other information included in
this report is consistent, where applicable, with the financial statements.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance as to the integrity of the financial records and
the protection of assets. Qualified personnel are selected and an organization
structure is maintained that provides for appropriate functional responsibility.
Written policies and procedures have been developed and are revised as
necessary. The Company maintains and supports an extensive program of internal
audits with appropriate management follow up.
The Board of Directors, through its Auditing Committee comprised of outside
directors, is responsible for ensuring that both management and the independent
accountants fulfill their respective responsibilities relative to the financial
statements. Moreover, the independent accountants have full and free access to
meet with the Auditing Committee, with or without management present, to discuss
auditing or financial reporting matters.
REPORT OF INDEPENDENT ACCOUNTANTS
One Boatmen's Plaza Telephone 314-425-0500
St. Louis, MO 63101
- --------------------------------------------------------------------------------
PRICE WATERHOUSE
To the Stockholders and Board of Directors February 2, 1994
of Union Electric Company
In our opinion, the accompanying balance sheet and the related statements of
income, long-term debt, preferred stock, retained earnings, other paid-in
capital, and cash flows present fairly, in all material respects, the financial
position of Union Electric Company at December 31, 1993 and 1992, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Notes 7 and 8 to the financial statements, the Company changed
its method of accounting for income taxes and for postretirement benefits other
than pensions.
19
STATEMENT OF INCOME UNION ELECTRIC COMPANY
(Thousands of Dollars Except Shares and Per Share Amounts)
YEAR 1993 Year 1992 Year 1991
- --------------------------------------------------------------------------------------------------------------------
OPERATING REVENUES(*):
Electric $ 1,965,980 $ 1,929,468 $ 2,006,258
Gas 99,552 84,159 86,877
Other 472 1,494 3,805
------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUES 2,066,004 2,015,121 2,096,940
OPERATING EXPENSES:
- --------------------------------------------------------------------------------------------------------------------
Operations
Fuel and purchased power 413,054 407,067 411,739
Other 445,535 381,690 374,997
------------------------------------------------------------------------------------------------------------------
858,589 788,757 786,736
Maintenance 190,097 187,267 170,454
Depreciation and nuclear decommissioning 219,633 214,029 204,152
Amortization of phase-in plans deferred costs -- 32,291 32,459
Income taxes 179,475 179,691 222,700
Other taxes(*) 206,913 201,069 197,626
------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1,654,707 1,603,104 1,614,127
------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 411,297 412,017 482,813
- --------------------------------------------------------------------------------------------------------------------
OTHER INCOME AND DEDUCTIONS:
- --------------------------------------------------------------------------------------------------------------------
Gain on sales of electric property -- 34,810 --
Income taxes related to gain on sales of electric property -- (16,711) --
Allowance for equity funds used during construction 6,418 3,115 2,156
Miscellaneous, net 3,919 (71) (2,611)
------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME AND DEDUCTIONS, NET 10,337 21,143 (455)
------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INTEREST CHARGES 421,634 433,160 482,358
- --------------------------------------------------------------------------------------------------------------------
INTEREST CHARGES:
- --------------------------------------------------------------------------------------------------------------------
Interest 129,600 135,319 167,209
Allowance for borrowed funds used during construction (5,126) (4,907) (6,363)
------------------------------------------------------------------------------------------------------------------
NET INTEREST CHARGES 124,474 130,412 160,846
------------------------------------------------------------------------------------------------------------------
NET INCOME 297,160 302,748 321,512
- --------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK DIVIDENDS 14,087 14,058 14,059
- --------------------------------------------------------------------------------------------------------------------
EARNINGS ON COMMON STOCK $ 283,073 $ 288,690 $ 307,453
- --------------------------------------------------------------------------------------------------------------------
(*)Includes license and franchise taxes of $97,791,000, $92,993,000, and
$96,802,000 for the years 1993, 1992, and 1991, respectively.
EARNINGS PER SHARE OF COMMON STOCK (based on average shares outstanding) $2.77 $2.83 $3.01
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS PER SHARE OF COMMON STOCK $2.335 $2.26 $2.18
- --------------------------------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 102,123,834 102,123,834 102,123,834
- --------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements on pages 27 through 32.
20
STATEMENT OF CASH FLOWS UNION ELECTRIC COMPANY
(Thousands of Dollars)
YEAR 1993 Year 1992 Year 1991
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING:
- -------------------------------------------------------------------------------------------
Net income $ 297,160 $ 302,748 $ 321,512
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 210,341 237,659 227,684
Amortization of nuclear fuel 46,441 47,816 71,964
Gain on sales of electric property - (34,810) -
Allowance for funds used during construction (11,544) (8,022) (8,519)
Postretirement benefit accrual 31,970 - -
Deferred income taxes, net 51,154 44,950 50,633
Deferred investment tax credits, net (7,626) (7,414) (7,007)
Changes in assets and liabilities:
Receivables, net (23,568) 22,408 (3,663)
Materials and supplies 46,741 (9,938) (15,182)
Accounts and wages payable (8,258) 12,207 6,346
Taxes accrued (5,762) (10,958) 7,336
Interest and dividends accrued or declared 2,351 (4,242) 5,593
Other, net (2,378) (1,393) 5,486
------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 627,022 591,011 662,183
------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING:
- -------------------------------------------------------------------------------------------
Construction expenditures (266,433) (259,652) (237,159)
Acquisition of electric property - (62,430) -
Sale of water property - 8,500 -
Sales of electric property - 68,702 -
Allowance for funds used during construction 11,544 8,022 8,519
Nuclear fuel expenditures (37,494) (63,779) (25,344)
------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (292,383) (300,637) (253,984)
-------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING:
- -------------------------------------------------------------------------------------------
Dividends on preferred and common stock (252,546) (244,858) (236,690)
Environmental bond funds 30,474 (4,915) (42,585)
Redemptions --
Nuclear fuel lease (52,907) (50,693) (60,178)
Short-term debt - (34,500) (34,000)
Long-term debt (605,500) (520,076) (292,396)
Preferred stock (73,751) (26) (212)
Issuances --
Nuclear fuel lease 51,593 40,534 16,669
Short-term debt 37,600 - -
Long-term debt 455,000 521,500 242,585
Preferred stock 74,438 - -
------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (335,599) (293,034) (406,807)
------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (960) (2,660) 1,392
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,257 4,917 3,525
- -------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,297 $ 2,257 $ 4,917
===========================================================================================
Cash and cash equivalents include cash on hand and temporary investments
purchased with a maturity of three months or less.
================================================================================
See Notes to Financial Statements on pages 27 through 32.
21
BALANCE SHEET UNION ELECTRIC COMPANY
(Thousands of Dollars)
ASSETS DECEMBER 31, 1993 December 31, 1992
- ---------------------------------------------------------------------------------------------
PROPERTY AND PLANT, AT ORIGINAL COST:
- ---------------------------------------------------------------------------------------------
Electric $7,916,493 $7,657,516
Gas 149,167 138,811
Other 34,884 34,994
- ---------------------------------------------------------------------------------------------
8,100,544 7,831,321
Less accumulated depreciation and amortization 3,079,509 2,860,699
- ---------------------------------------------------------------------------------------------
5,021,035 4,970,622
Construction work in progress:
Nuclear fuel in process 101,265 100,098
Other 142,656 130,655
--------------------------------------------------------------------------------------
TOTAL PROPERTY AND PLANT, NET 5,264,956 5,201,375
REGULATORY ASSET - DEFERRED INCOME TAXES 762,331 -
- ---------------------------------------------------------------------------------------------
DEFERRED CHARGES AND OTHER ASSETS:
- ---------------------------------------------------------------------------------------------
Unamortized debt expense 53,451 36,598
Nuclear decommissioning trust fund 44,420 32,541
Other 28,552 24,774
--------------------------------------------------------------------------------------
TOTAL DEFERRED CHARGES AND OTHER ASSETS 126,423 93,913
CURRENT ASSETS:
- ---------------------------------------------------------------------------------------------
Cash 1,297 2,257
Accounts receivable -- trade (less allowance
for doubtful accounts of $6,194 and $5,858,
at respective dates) 178,559 156,459
Unbilled revenue 79,957 80,932
Other accounts and notes receivable 18,319 15,876
Materials and supplies, at average cost --
Fossil fuel 53,123 103,582
Construction and maintenance 87,450 83,732
Environmental bond funds 17,026 47,500
Other 6,129 11,737
--------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 441,860 502,075
--------------------------------------------------------------------------------------
TOTAL ASSETS $6,595,570 $5,797,363
=============================================================================================
See Notes to Financial Statements on pages 27 through 32.
22
CAPITAL AND LIABILITIES DECEMBER 31, 1993 December 31, 1992
- --------------------------------------------------------------------------------------------------------------
CAPITALIZATION:
- --------------------------------------------------------------------------------------------------------------
Common stock, $5 par value, authorized 150,000,000 shares --
outstanding 102,123,834 shares (excluding 42,990 shares
at par value in treasury) $ 510,619 $ 510,619
Other paid-in capital, principally premium on common stock
(see accompanying statement) 717,669 718,482
Retained earnings (see accompanying statement) 977,880 934,919
-------------------------------------------------------------------------------------------------------
Total common stockholders' equity 2,206,168 2,164,020
Preference stock, $1 par value, authorized 7,500,000 shares --
none outstanding
Preferred stock not subject to mandatory redemption
(see accompanying statement) 218,497 217,784
Preferred stock subject to mandatory redemption
(see accompanying statement) 702 728
-------------------------------------------------------------------------------------------------------
Long-term debt (see accompanying statement) 1,777,153 1,668,337
Unamortized discount and premium on debt (10,498) (8,784)
-------------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION 4,192,022 4,042,085
ACCUMULATED DEFERRED INCOME TAXES 1,360,159 841,944
- --------------------------------------------------------------------------------------------------------------
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 178,887 186,513
- --------------------------------------------------------------------------------------------------------------
REGULATORY LIABILITY (Note 7) 266,399 -
- --------------------------------------------------------------------------------------------------------------
ACCUMULATED PROVISION FOR NUCLEAR DECOMMISSIONING 46,093 35,897
- --------------------------------------------------------------------------------------------------------------
OTHER DEFERRED CREDITS AND LIABILITIES 92,227 25,347
- --------------------------------------------------------------------------------------------------------------
CONSTRUCTION COMMITMENTS AND CONTINGENCIES (Notes 9, 10, and 11)
- --------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
- --------------------------------------------------------------------------------------------------------------
Current maturity of long-term debt 30,539 291,169
Accounts payable 153,474 165,311
Wages payable 37,326 33,747
Bank loans 59,600 22,000
Income taxes accrued 25,147 30,925
Accumulated deferred income taxes 28,871 -
Other taxes accrued 17,578 17,562
Interest accrued 41,252 38,700
Dividends declared 3,301 3,502
Other 62,695 62,661
-------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 459,783 665,577
-------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND LIABILITIES $6,595,570 $5,797,363
==============================================================================================================
23
LONG-TERM DEBT UNION ELECTRIC COMPANY
(Thousands of Dollars)
DECEMBER 31, 1993 December 31, 1992
- ----------------------------------------------------------------------------------------
FIRST MORTGAGE BONDS -- note (a)
- ----------------------------------------------------------------------------------------
4 1/2% Series due 1995 $ 35,000 $ 35,000
4 3/4% Series due 1995 3,000 3,000
5 1/2% Series due 1996 30,000 30,000
5 5/8% Series due 1996 5,000 5,000
5 1/2% Series due 1997 40,000 40,000
5 5/8% Series due 1997 5,000 5,000
7% Series due 1998--note (b) - 50,000
6 3/4% Series due 1999 100,000 100,000
7 3/8% Series due 1999--note (b) - 35,000
7 5/8% Series due 2001--note (b) - 50,000
7 7/8% Series due 2001--note (b) - 50,000
8 1/8% Series due 2001--note (b) - 60,000
8.33% Series due 2002 75,000 75,000
7.65% Series due 2003 100,000 100,000
7 3/4% Series due 2003--note (b) - 7,000
6 7/8% Series due 2004 188,000 -
7 3/8% Series due 2004 85,000 85,000
8 3/8% Series due 2004--note (b) - 70,000
6 3/4% Series due 2008 148,000 -
7.40% Series due 2020--note (c) 60,000 60,000
8 3/4% Series due 2021 125,000 125,000
8% Series due 2022 85,000 85,000
8 1/4% Series due 2022 104,000 104,000
7.15% Series due 2023 75,000 -
5.45% Series due 2028--note (c) 44,000 -
UNSECURED LOANS--note (d)
- ----------------------------------------------------------------------------------------
Commercial paper--note (e) 25,000 71,000
MISSOURI ENVIRONMENTAL IMPROVEMENT--
- ----------------------------------------------------------------------------------------
Revenue bonds, 1984 Series A due 2014--note (f) 80,000 80,000
1984 Series B due 2014--note (f) 80,000 80,000
1985 Series A due 2015--note (g) 70,000 70,000
1985 Series B due 2015--note (g) 56,500 56,500
1991 Series due 2020--note (g) 42,585 42,585
1992 Series due 2022--note (g) 47,500 47,500
NUCLEAR FUEL LEASE--note (h) 68,568 46,752
- ----------------------------------------------------------------------------------------
LONG-TERM DEBT--note (i)(j) $1,777,153 $1,668,337
========================================================================================
(a) At December 31, 1993, substantially all of the property and plant was
mortgaged under, and subject to liens of, the respective indentures
pursuant to which the bonds were issued.
(b) Redeemed in 1993.
(c) Environmental Improvement Series.
(d) A bank credit agreement due 1995 permits the Company to borrow up to $200
million. Interest rates will vary depending on market conditions and the
Company's selection of various options under the agreement. At December 31,
1993, no such borrowings were outstanding.
(e) A bank credit agreement due 1996 is utilized to support commercial paper
borrowings up to $300 million on a long-term basis. At December 31, 1993,
the outstanding commercial paper was at an average annualized interest rate
of 3.22%.
(f) Adjustable-fixed rate, interest rate at 2.65% per annum through May 31,
1994; thereafter, interest rates will depend on market conditions and the
Company's selection of an adjusted rate for each annual period or a fixed
rate until maturity.
(g) Interest rates and the periods during which such rates apply, vary
depending on the Company's selection of certain defined rate modes. The
average interest rates at December 31, 1993, for 1985 Series A, 1985 Series
B, 1991 Series and 1992 Series bonds were 2.49%, 2.48%, 2.65% and 2.92%,
respectively.
(h) At December 31, 1993 and 1992, $31 million and $54 million, respectively,
are included under current maturity of long-term debt.
(i) On January 24, 1994, the Company issued $100 million of first mortgage
bonds, 7% Series due 2024.
(j) The estimated fair value of long-term debt at December 31, 1993 is
$1,868,626,000. This estimate is based primarily on market values of actual
or comparable securities at year end. The estimate may not represent actual
values of financial instruments that could have been realized as of year
end or that may be realized in the future.
===============================================================================
See Notes to Financial Statements on pages 27 through 32.
24
PREFERRED STOCK UNION ELECTRIC COMPANY
(Thousands of Dollars)
DECEMBER 31, 1993 December 31, 1992
- -------------------------------------------------------------------------------------------------------------
PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION:
- -------------------------------------------------------------------------------------------------------------
Preferred stock outstanding without par value
(entitled to cumulative dividends) -- note (a)
Stated value of $100 per share --
$7.64 Series -- 330,000 shares $ 33,000 $ -
$7.44 Series -- 330,001 shares 33,000 33,000
$6.40 Series -- 300,000 shares 30,000 30,000
$5.50 Series A -- 14,000 shares 1,400 1,400
$5.50 Series B -- 3,000 shares 300 300
$4.75 Series -- 20,000 shares 2,000 2,000
$4.56 Series -- 200,000 shares 20,000 20,000
$4.50 Series -- 213,595 shares 21,359 21,359
$4.30 Series -- 40,000 shares 4,000 4,000
$4.00 Series -- 150,000 shares 15,000 15,000
$3.70 Series -- 40,000 shares 4,000 4,000
$3.50 Series -- 130,000 shares 13,000 13,000
Stated value of $97.50 per share --
$8.00 Series of 1971 -- 425,000 shares -- note (b) - 41,437
Stated value of $92.25 per share --
$8.00 Series -- 350,000 shares -- note (b) - 32,288
Stated value of $25.00 per share --
$1.735 Series -- 1,657,500 shares 41,438 -
-------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION $218,497 $217,784
=============================================================================================================
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION:
- -------------------------------------------------------------------------------------------------------------
Preferred stock outstanding without par value
(entitled to cumulative dividends) -- note (a)
Stated value of $100 per share --
$6.30 Series -- 7,020 and 7,280 shares at
respective dates, due 2020 -- note (c) $702 $728
-------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION $702 $728
=============================================================================================================
(a) Authorized Union Electric Company total preferred stock -- 25,000,000
shares.
(b) Redeemed in 1993.
(c) The Company is required to retire 260 shares at $100 per share on June 1 of
each year.
================================================================================
See Notes to Financial Statements on pages 27 through 32.
25
STATEMENT OF RETAINED EARNINGS UNION ELECTRIC COMPANY
(Thousands of Dollars)
YEAR 1993 Year 1992 Year 1991
- -------------------------------------------------------------------------------------
BALANCE AT BEGINNING OF PERIOD $ 934,919 $ 877,029 $ 792,207
- -------------------------------------------------------------------------------------
Add:
Net income 297,160 302,748 321,512
-----------------------------------------------------------------------------------
1,232,079 1,179,777 1,113,719
-----------------------------------------------------------------------------------
Deduct:
Preferred stock dividends* 14,087 14,058 14,060
Common stock cash dividends -- $2.335, $2.26,
and $2.18 per share, respectively 238,459 230,800 222,630
Capital stock expense 1,653 -- --
-----------------------------------------------------------------------------------
254,199 244,858 236,690
-----------------------------------------------------------------------------------
(Under mortgage indentures as amended,
free and unrestricted retained earnings at
December 31, 1993 amounted to $942,398)
BALANCE AT CLOSE OF PERIOD $ 977,880 $ 934,919 $ 877,029
=====================================================================================
*Preferred stock dividends include dividends declared, applicable to subsequent
periods.
STATEMENT OF OTHER PAID IN CAPITAL
(Thousands of Dollars)
YEAR 1993 Year 1992 Year 1991
- -------------------------------------------------------------------------------------
BALANCE AT BEGINNING OF PERIOD $ 718,482 $ 718,507 $ 718,473
-----------------------------------------------------------------------------------
Capital stock expense (813) (25) --
Excess of stated value over purchase price of
2,200 shares $7.44 Series preferred stock
retired during 1991 -- -- 34
-----------------------------------------------------------------------------------
BALANCE AT CLOSE OF PERIOD $ 717,669 $ 718,482 $ 718,507
=====================================================================================
See Notes to Financial Statements on pages 27 through 32.
26
NOTES TO FINANCIAL STATEMENTS UNION ELECTRIC COMPANY
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES
The Company is regulated by the Missouri Public Service Commission, Illinois
Commerce Commission, and the Federal Energy Regulatory Commission. The
accounting policies of the Company are in accordance with the rate-making
practices of the regulatory authorities having jurisdiction and, as such,
conform to generally accepted accounting principles as applied to regulated
public utilities. Following is a description of the Company's significant
accounting policies:
PROPERTY AND PLANT
The cost of additions to and betterments of units of property and plant is
capitalized. Cost includes labor, material, applicable taxes, and overheads,
plus an allowance for funds used during construction. Maintenance expenditures
and the renewal of items not considered units of property are charged to income
as incurred. When units of depreciable property are retired, the original cost
and removal cost, less salvage, are charged to accumulated depreciation.
DEPRECIATION
Depreciation is provided over the estimated lives of the various classes of
depreciable property by applying composite rates on a straight-line basis. The
provision for depreciation in 1993, 1992, and 1991 was approximately 3% of the
average depreciable cost.
NUCLEAR FUEL
The cost of nuclear fuel is amortized to fuel expense on a unit-of-production
basis. Spent fuel disposal cost is charged to expense based on kilowatthours
sold.
INCOME TAXES
Effective January 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Under SFAS No. 109,
deferred tax assets and liabilities are recognized for the tax consequences of
transactions that have been treated differently for financial reporting and tax
return purposes, measured using statutory tax rates.
Investment tax credits utilized in prior years were deferred and are being
amortized over the useful lives of the properties to which they relate.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
Allowance for funds used during construction (AFC) is a utility industry
accounting practice whereby the cost of borrowed funds and the cost of equity
funds (preferred and common stockholders' equity) applicable to the Company's
construction program are capitalized as a cost of construction. This
accounting practice offsets the effect on earnings of the cost of financing
current construction, and treats such financing costs in the same manner as
construction charges for labor and materials.
Under accepted rate-making practice, cash recovery of AFC, as well as other
construction costs, occurs when completed projects are placed in service and
reflected in customer rates.
AFC rates are established by the Company consistent with the methodology
prescribed by the Federal Energy Regulatory Commission. Average annual AFC rates
were 7.8% in 1993, 6.2% in 1992, and 7.1% in 1991.
CALLAWAY RATE PHASE-IN PLANS
The Callaway rate phase-in plans effective in 1985 as a result of regulatory
commission orders provided for the partial deferral of a cash recovery of costs
related to the Callaway plant during the early years of the plans with recovery
of such deferrals in the later years of the plans.
A 1987 order of the Missouri Public Service Commission provided that $159
million of deferred costs at December 31, 1987, applicable to Missouri be
recovered in rates over the five years 1988 through 1992.
UNBILLED REVENUE
The Company accrues on its books estimated, but unbilled, revenue and also a
liability for the related taxes.
NOTE 2 -- DEBT RETIREMENT PROVISIONS
During the five years from December 31, 1993, the amounts of debt maturities
totaling $174 million are: $31 million in 1994; $38 million in 1995; $60 million
in 1996; and $45 million in 1997. Amounts for years subsequent to 1994 do not
include nuclear fuel lease payments since the amounts of such payments are not
currently determinable.
Debt retirement provisions contained in some mortgage bond indentures of the
Company require, subject to certain alternatives, the redemption annually of 1%
of the principal amount (as defined) of each series of bonds. In substantially
all instances, as permitted by the indentures, the Company has been pledging
property additions in lieu of such redemptions.
27
NOTE 3 -- SHORT-TERM BORROWINGS
Short-term borrowings of the Company consist of bank loans (maturities generally
on an overnight basis) and commercial paper (maturities generally within 10-45
days). Information relative to short-term borrowings is as follows:
(In thousands except rates)
1993 1992 1991
-------- -------- --------
BANK LOANS AT YEAR END --
Amount outstanding $ 59,600 $ 22,000 $ 56,500
Composite interest rate 3.3% 3.3% 4.7%
MAXIMUM AGGREGATE SHORT-TERM
BORROWINGS AT ANY MONTH END
DURING THE YEAR $101,500 $261,000 $173,000
AVERAGE DAILY SHORT-TERM BORROWINGS
OUTSTANDING DURING THE YEAR --
Aggregate amount $ 42,376 $100,996 $101,181
Weighted composite interest rate 3.2% 3.8% 6.2%
The above weighted composite interest rates were calculated by dividing the
applicable interest expense for the year by the average daily short-term
borrowings shown above.
At December 31, 1993, the Company had committed bank lines of credit aggregating
$187 million ($162 million of which were unused at such date) which make
available interim financing at various rates of interest based on LIBOR, the
bank certificate of deposit rate, or other options, and in support of which the
Company has agreements with its lending banks to pay annual fees up to 0.125%.
These lines of credit are renewable annually at various dates throughout the
year.
NOTE 4 -- NUCLEAR FUEL LEASE
The Company has a lease agreement which provides for the financing of nuclear
fuel. Effective February 1, 1994, the maximum amount which may be financed
under the agreement was increased from $100 million to $120 million. Pursuant to
the terms of the lease, the Company has assigned to the lessor certain contracts
for purchase of nuclear fuel. The lessor obtains, through the issuance of
commercial paper or from direct loans under a committed revolving credit
agreement from commercial banks, the necessary funds to purchase the fuel and
make interest payments when due.
The Company is obligated to reimburse the lessor for all expenditures for
nuclear fuel, interest, and related costs. Obligations under this lease become
due as the nuclear fuel is consumed at the Company's Callaway nuclear plant.
The Company reimbursed the lessor $55.0 million during 1993, $54.3 million
during 1992, and $68.0 million during 1991.
The Company has capitalized the cost, including certain interest costs, of the
leased nuclear fuel and has recorded
the related lease obligation. During the years 1993, 1992, and 1991, the total
interest charges under the lease were $3.1 million, $4.4 million, and $8.5
million (based on average interest rates of 3.6%, 4.3%, and 6.7%, respectively)
of which $1.4 million, $1.3 million, and $1.4 million, respectively, were
capitalized.
NOTE 5 -- PREFERRED STOCK
During the three years ended December 31, 1993, preferred stock, without par
value, was issued or redeemed as follows: issued 1,657,500 shares, $1.735 Series
and 330,000 shares, $7.64 Series in 1993; redeemed 350,000 shares, $8.00 Series
and 425,000 shares, $8.00 Series of 1971 in 1993, and redeemed 2,200 shares,
$7.44 Series in 1991. The Company retired 260 shares, $6.30 Series in 1993,
1992, and 1991.
PREFERRED STOCK REDEMPTION PRICE
- ----------------------------------------------------------------
(PER SHARE)
$7.64 Series $103.82(a)
$7.44 Series 101.00
$6.40 Series 101.50
$5.50 Series A 110.00
$5.50 Series B 103.50
$4.75 Series 102.176
$4.56 Series 102.47
$4.50 Series 110.00(b)
$4.30 Series 105.00
$4.00 Series 105.625
$3.70 Series 104.75
$3.50 Series 110.00
$1.735 Series 25.00(c)
$6.30 Series (d) 100.00
- ----------------------------------------------------------------
(a) Beginning February 15, 2003, eventually declining to $100 per share.
(b) In the event of voluntary liquidation, $105.50.
(c) On or after August 1, 1998.
(d) The Company is required to retire 260 shares at $100 per share on
June 1 of each year.
NOTE 6 -- PREFERRED STOCK MANDATORY REDEMPTION PROVISIONS
During each of the five years 1994 through 1998, the Company will be required to
redeem $26,000 of the preferred stock outstanding at December 31, 1993.
28
NOTE 7 -- INCOME TAXES
Total income tax expense for 1993 resulted in an effective tax rate of 38% on
earnings before income taxes (39% in 1992 and 41% in 1991). The principal
reasons such rates differ from the statutory Federal rate are as follows:
1993 1992 1991
---- ---- ----
STATUTORY FEDERAL INCOME TAX RATE 35% 34% 34%
INCREASES (DECREASES) FROM:
Depreciation differences 2 1 2
Callaway rate phase-in plans - 2 2
State tax 2 3 3
Miscellaneous, net (1) (1) -
--- --- ---
EFFECTIVE INCOME TAX RATE 38% 39% 41%
=== === ===
Income tax expense components for the years shown are as follows (in thousands):
1993 1992 1991
-------- -------- --------
TAXES CURRENTLY PAYABLE
(PRINCIPALLY FEDERAL):
Included in operating expenses $147,062 $147,887 $183,573
Included in other income --
Miscellaneous, net (7,874) 11,586 (8,244)
DEFERRED TAXES
(PRINCIPALLY FEDERAL):
Included in operating expenses --
Depreciation differences 49,566 37,588 41,757
Other (9,527) 1,630 4,377
Included in other income --
Depreciation differences 9,638 6,978 6,834
Other 1,477 (1,246) (2,336)
DEFERRED INVESTMENT TAX CREDITS, NET
Included in operating expenses (7,626) (7,414) (7,007)
-------- -------- --------
TOTAL INCOME TAX EXPENSE $182,716 $197,009 $218,954
======== ======== ========
Effective January 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes." Prior to 1993, in accordance with accepted ratemaking practice,
deferred income taxes were not provided for certain temporary differences flowed
through to customers and the equity component of Allowance for Funds Used During
Construction. SFAS No. 109 requires recognition of the income tax effect of
such temporary differences. Accordingly, a Regulatory Asset, representing the
probable recovery from customers of future income taxes which is expected to
occur when the temporary differences reverse, has been recorded along with a
corresponding deferred tax liability. Also, a Regulatory Liability recognizing
the lower expected revenue resulting from reduced income taxes associated with
amortizing accumulated deferred investment tax credits, has been recorded. The
deferred tax asset corresponding to this Regulatory Liability has been combined
with the deferred tax liabilities.
SFAS No. 109 requires that deferred tax liabilities be adjusted for enacted
changes in tax laws or rates. Accordingly, the Company reduced its deferred tax
liabilities for amounts previously recorded in excess of the current statutory
rate. Recognizing that regulators will probably reduce future revenues for
these excess tax deferrals, the reduction in the deferred tax liability was
credited to the Regulatory Liability.
Adopting SFAS No. 109 increased both assets and liabilities at December 31, 1993
by approximately $762 million, but did not affect the Company's 1993 earnings on
common stock.
Under SFAS No. 109, temporary differences gave rise to deferred tax assets of
$40 million and deferred tax liabilities of $1.43 billion at December 31, 1993.
These are sum-marized as follows (in millions):
DEPRECIATION $ 806
REGULATORY ASSET - NET 496
CAPITALIZED TAXES AND EXPENSES 127
DEFERRED BENEFIT COSTS (30)
DISALLOWED PLANT COSTS (10)
------
TOTAL ACCUMULATED DEFERRED INCOME TAXES, NET $1,389
======
NOTE 8 -- RETIREMENT BENEFITS
The Company has non-contributory, defined-benefit retirement plans covering
substantially all of its employees. Benefits are based on the employees' years
of service and compensation. The Company's funding policy is to contribute
annually at least the minimum amount required by government funding standards,
but not more than can be deducted for Federal income taxes. Plan assets consist
principally of common stocks and fixed income securities.
Pension costs for the years 1993, 1992, and 1991, were $27 million, $25 million,
and $24 million, respectively, of which approximately 18% in 1993 and 1992, and
17% in 1991 were charged to construction accounts.
29
NOTE 8 - RETIREMENT BENEFITS (cont'd)
The plans' funded status follows (in millions):
At December 31,
1993 1992 1991
----- ----- -----
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATION:
Vested benefit obligation $(607) $(492) $(455)
===== ===== =====
Accumulated benefit obligation $(686) $(521) $(481)
===== ===== =====
Projected benefit obligation for service
rendered to date $(820) $(688) $(633)
PLAN ASSETS AT FAIR VALUE 738 671 636
----- ----- -----
(DEFICIENCY) EXCESS OF PLAN ASSETS VERSUS
PROJECTED BENEFIT OBLIGATION (82) (17) 3
UNRECOGNIZED NET GAIN (4) (55) (78)
PRIOR SERVICE COST NOT YET RECOGNIZED IN NET
PERIODIC PENSION COST 93 84 89
UNRECOGNIZED NET ASSETS AT TRANSITION (11) (12) (12)
----- ----- -----
PREPAID PENSION COST $ (4) $ - $ 2
===== ===== =====
Pension costs include the following components
(in millions):
1993 1992 1991
----- ----- -----
SERVICE COST -- BENEFITS EARNED DURING
THE PERIOD $ 18 $ 17 $ 15
INTEREST COST ON PROJECTED BENEFIT OBLIGATION 59 56 52
ACTUAL RETURN ON PLAN ASSETS (89) (52) (110)
NET AMORTIZATION AND DEFERRAL 39 4 67
----- ----- -----
PENSION COST $ 27 $ 25 $ 24
===== ===== =====
For determining the actuarial present value of the projected benefit obligation
in 1993, 1992, and 1991, the weighted average discount rates were 7.25%, 8.5%,
and 8.75%, respectively. The rate of increase in future compensation was 4.25%
in 1993, and 6% in 1992 and 1991. The expected long-term rate of return on plan
assets was 8.5%.
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits for retired employees. Substantially all of
the Company's employees may become eligible for those benefits if they reach
retirement age while working for the Company. Prior to 1993, the costs of
retiree health care and life insurance benefits were recognized on the basis of
claims paid. For 1993, 1992, and 1991, the actual claims paid were $14.6
million, $13.5 million, and $11 million, respectively.
Effective January 1993, the Company adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits other than Pensions," which requires accrual of
expected postretirement benefit costs during employees' years of service. The
present value of the Company's accumulated postretirement benefit obligation is
estimated to be $325 million and the 1993 net periodic postretirement benefit
costs were $53 million, of which approximately 18% was charged to construction
accounts. The Company's transition obligation is being amortized over 20 years.
The plans' status at December 31, 1993 follows (in millions):
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
Active employees eligible for benefits $ (47)
Retired employees (169)
Other active employees (109)
-----
Total benefit obligation (325)
UNRECOGNIZED - TRANSITION OBLIGATION 309
- PRIOR SERVICE COST (44)
- LOSS 21
-----
ACCRUED POSTRETIREMENT BENEFIT COSTS $ (39)
=====
The components of the 1993 net periodic postretirement benefit
cost are as follows (in millions):
SERVICE COST -- BENEFITS EARNED DURING THE PERIOD $ 9
INTEREST COST ON PROJECTED BENEFIT OBLIGATION 28
AMORTIZATION OF TRANSITION OBLIGATION 16
-----
NET PERIODIC COST $ 53
=====
Assumptions for the obligation and expense measurements are
as follows:
DISCOUNT RATE AT MEASUREMENT DATE 7.25%
MEDICAL COST TREND RATE - INITIAL 11.25%
- ULTIMATE 5.25%
ULTIMATE MEDICAL COST TREND RATE EXPECTED IN YEAR 2000
A one percent increase in the medical cost trend rate is estimated to increase
the net periodic cost and the accumulated postretirement benefit obligation by
approximately $4 million and $28 million, respectively.
In January 1993, the Emerging Issues Task Force of the Financial Accounting
Standards Board established the criteria permitting regulated enterprises to
record a regulatory asset offsetting the liability recorded pursuant to SFAS
106. The prescribed criteria preclude the Company from recording a regulatory
asset. As a result, adopting SFAS 106 reduced the Company's 1993 earnings on
common stock by $20 million or 20 cents per share.
NOTE 9 -- CONSTRUCTION COMMITMENTS
The Company is engaged in a construction program under which expenditures
averaging approximately $310 million are anticipated during each of the next
five years.
30
NOTE 10 -- CONTINGENCIES
The Company's insurance coverage for its Callaway plant is as follows:
Property insurance coverage of $500 million provided by American Nuclear
Insurers (ANI) and Mutual Atomic Energy Liability Underwriters (MAELU).
Excess property insurance of $850 million, including $100 million of coverage
for premature decom-missioning costs, provided by ANI/MAELU and Nuclear
Electric Insurance Limited (NEIL), a mutual insurer established by the utility
industry.
Excess property insurance of $1.15 billion pro-vided by NEIL. Under this
policy, the Company could be subject to a maximum retrospective premium
assessment of $11.6 million in any one policy year. The policy also provides
up to an additional $250 million of coverage for premature decommissioning
costs in excess of funds previously collected for decommissioning. Such
coverage is limited to a premature decom-missioning which results from a major
accident.
The NRC requires property insurance proceeds to be first dedicated to reactor
stabilization and decontamination, which may significantly reduce the proceeds
available for property repair and replacement.
A Master Worker Policy issued by ANI/MAELU with an aggregate limit of $400
million for the nuclear industry as a whole to cover claims of workers as a
result of initial radiation exposure after December 31, 1987. Under this
policy, the Company could be subject to a maximum retrospective premium
assessment of $3.1 million.
Accidental outage replacement power cost insurance provided by NEIL.
Thereunder, the Company is insured for up to $3.1 million per week for the
first year, commencing 21 weeks after initiation of the outage and up to $2.1
million per week for the second and third year. Under this policy, the
Company could be subject to a maximum annual retrospective premium assessment
of $3.3 million in any one policy year.
The Atomic Energy Act, as revised August 1988 by the Price-Anderson amendments,
covers liability to third parties for a nuclear incident and, at December 31,
1993, limited such liability to approximately $9.4 billion for each nuclear
incident. Coverage of the first $200 million of liability is provided by
ANI/MAELU. The balance is provided by utility industry retrospective
assessments. The Company's maximum potential assessment under this plan would
be $75.5 million per incident payable in annual installments of not more than
$10 million. Additionally, if the sum of all public liability claims and legal
costs arising from a nuclear incident exceeds the amount of primary and excess
coverage in force, the Company can be assessed an additional $3.8 million. As
required by the Price-Anderson Act, the assessment is subject to an inflationary
adjustment.
To the extent that any losses arising from a nuclear incident at Callaway plant
exceed the limits of, or are not subject to, insurance, or to the extent such
insurance becomes unavailable in the future, the Company may retain the risk of
loss as a self-insurer. Although the Company has no reason to anticipate a
serious nuclear incident at Callaway plant, if such an incident did occur, it
could have a material but presently undeterminable adverse effect on the
Company's financial position.
Under the Clean Air Act Amendments of 1990, the Company is required to reduce
total annual emissions of sulfur dioxide by approximately two-thirds by the year
2000. Significant reductions in nitrogen oxide will also be required. With
switching to low-sulfur coal and early banking of emission credits, the Company
anticipates that it can comply with the requirements of the law with no
significant increase in revenue needs because the related capital costs,
estimated at about $300 million, will be largely offset by lower fuel costs.
As of December 31, 1993, the Company was designated a potentially responsible
party (PRP) by federal and state environmental protection agencies for five
hazardous waste sites. Other hazardous waste sites have been identified for
which the Company may be responsible but has not been designated a PRP. The
Company is continuing to evaluate the remediation costs that will be required
for all of these sites. However, such costs are not expected to have a material
adverse effect on the Company's financial position.
The Company is involved in legal and administrative proceedings before various
courts and agencies with
31
NOTES TO FINANCIAL STATMENTS UNION ELECTRIC COMPANY
(continued)
NOTE 10 -- CONTINGENCIES (cont'd)
respect to matters arising in the ordinary course of business, some of which
involve substantial amounts. Management is of the opinion that the final
disposition of these proceedings will not have a material adverse effect on the
Company's financial position.
In November 1992, the Missouri Public Service Commission (MoPSC) approved a
settlement among various parties involving the Company's Missouri electric
rates. Under the terms of the settlement, rate decreases for all classes of
Missouri electric customers reduced 1993 annual revenues by approximately $42
million. The settlement also provides that no party shall file for a general
increase or decrease in the Company's Missouri electric rates prior to September
1, 1994, except that the Company may request an increase if certain adverse
events occur.
See Management's Discussion and Analysis - Liquidity and Capital Resources for
information regarding the Company's acquisition and sales of electric
properties.
NOTE 11 -- CALLAWAY NUCLEAR PLANT
Under the Nuclear Waste Policy Act of 1982, the U.S. Department of Energy (DOE)
is responsible for the permanent storage and disposal of spent nuclear fuel.
DOE currently charges one mill per kilowatthour sold for future disposal of
spent fuel. Electric rates charged to customers provide for recovery of such
costs. DOE is not expected to have its permanent storage facility for spent
fuel available until at least 2010. The Company has sufficient storage capacity
at the Callaway plant site until 2005 and has viable storage alternatives under
consideration that would provide additional storage facilities. Each
alternative will likely require Nuclear Regulatory Commission approval and may
require other regulatory approvals. The delayed availability of DOE's disposal
facility is not expected to adversely affect the continued operation of the
Callaway plant.
In 1993, the Company recorded a $23 million liability and a corresponding asset
for a special DOE assessment on all utilities owning nuclear plants. The
assessment is for the future decontamination, decommissioning and reclamation of
DOE uranium enrichment facilities. It will be paid and charged to expense over
15 years beginning in 1993.
Callaway plant decommissioning costs are estimated to be $372 million in current
year dollars. Annual decom-missioning costs are charged to depreciation expense
over Callaway's service life and amounted to $6.7 million in 1993. Electric
rates charged to customers provide for recovery of decommissioning costs over
the life of the plant, based on an assumed 40-year life, ending upon expiration
of the plant's operating license in 2024. Every three years, the MoPSC requires
the Company to file updated cost studies for decommissioning Callaway. Electric
rates may be adjusted at such times to reflect changes in cost estimates.
Amounts collected from customers are deposited in a trust fund established to
provide for decommissioning costs. Fund earnings, net of expenses, appear on
the balance sheet as increases in the nuclear decommissioning trust fund and in
the Accumulated Provision for Nuclear Decommissioning. The Callaway site is
assumed to be decommissioned using the DECON (immediate dismantlement)
alternative.
NOTE 12 -- SUPPLEMENTARY INFORMATION
(Thousands of Dollars) 1993 1992 1991
-------- -------- --------
MAINTENANCE AND REPAIRS, CHARGED
DIRECTLY TO:
Operating expenses $190,097 $187,267 $170,454
Other accounts (a) 10,780 10,633 11,064
-------- -------- --------
$200,877 $197,900 $181,518
======== ======== ========
DEPRECIATION, DEPLETION AND
AMORTIZATION OF FIXED AND INTANGIBLE
ASSETS, CHARGED DIRECTLY TO:
Operating expenses $210,341 $237,659 $227,684
Other accounts (a) 9,077 7,827 5,967
-------- -------- --------
$219,418 $245,486 $233,651
======== ======== ========
TAXES, OTHER THAN PAYROLL AND
INCOME TAXES, CHARGED DIRECTLY TO:
Operating expenses -
Real estate and personal property $ 86,536 $ 85,792 $ 78,900
License and franchise 97,791 92,993 96,802
Miscellaneous 1,624 1,700 1,699
-------- -------- --------
185,951 180,485 177,401
Other accounts 5,255 4,900 4,512
-------- -------- --------
$191,206 $185,385 $181,913
======== ======== ========
(a) A substantial portion of amounts charged to other accounts is allocated
to operating expenses through clearing accounts.
(b) The amounts of payroll taxes for the years 1993, 1992, and 1991 were
$20,962,000, $20,584,000,and $20,225,000, respectively.
(c) The amounts of royalties and advertising costs were not material.
(d) Total interest paid (net of amount capitalized) in 1993, 1992, and 1991
was $112 million, $128 million, and $146 million, respectively.
(e) Total income taxes paid in 1993, 1992, and 1991 were $145 million, $170
million, and $168 million, respectively.
===============================================================================
This report and the financial statements contained herein are submitted for the
information of the stockholders of the Company and are not intended to induce,
or for use in connection with, any sale or purchase of any securities of the
Company.
32
1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------
ELECTRIC OPERATING REVENUES (000):
Residential $ 817,713 $ 754,667 $ 831,106 $ 763,539 $ 757,139
Commercial 684,446 676,761 685,799 673,037 668,796
Industrial 373,353 410,370 395,116 411,809 411,614
Other electric utilities 59,160 57,226 65,317 62,167 64,262
Miscellaneous 31,308 30,444 28,920 28,619 28,073
-----------------------------------------------------------------------------------------------------
TOTAL ELECTRIC OPERATING REVENUES $1,965,980 $ 1,929,468 $ 2,006,258 $ 1,939,171 $ 1,929,884
- ------------------------------------------------------------------------------------------------------------
KILOWATTHOUR SALES (000,000):
Residential 10,867 9,690 10,646 9,810 9,724
Commercial 10,989 10,553 10,678 10,276 10,142
Industrial 8,003 9,030 8,524 8,706 8,605
Other electric utilities 1,580 1,488 1,623 1,511 1,534
Miscellaneous 139 144 139 142 141
-----------------------------------------------------------------------------------------------------
TOTAL KILOWATTHOUR SALES 31,578 30,905 31,610 30,445 30,146
- ------------------------------------------------------------------------------------------------------------
ELECTRIC CUSTOMERS (End of year):
- ------------------------------------------------------------------------------------------------------------
Residential 976,390 990,563 962,629 957,102 951,154
Commercial 126,542 127,932 122,152 121,090 119,307
Industrial 6,605 6,828 6,778 6,752 6,714
Electric utilities 17 19 20 21 21
Other 1,630 1,619 1,599 1,644 1,588
-----------------------------------------------------------------------------------------------------
TOTAL ELECTRIC CUSTOMERS 1,111,184 1,126,961 1,093,178 1,086,609 1,078,784
- ------------------------------------------------------------------------------------------------------------
RESIDENTIAL CUSTOMER DATA (Average):
- ------------------------------------------------------------------------------------------------------------
Kilowatthours used 11,151 9,864 11,106 10,283 10,289
Annual electric bill $839.11 $768.20 $867.00 $800.80 $801.14
Revenue per kilowatthour 7.52c 7.79c 7.81c 7.78c 7.79c
- ------------------------------------------------------------------------------------------------------------
GROSS INSTANTANEOUS
PEAK DEMAND (Kilowatts) 7,540,000 7,135,000 7,365,000 7,465,000 7,210,000
- ------------------------------------------------------------------------------------------------------------
CAPABILITY AT TIME OF PEAK,
INCLUDING NET PURCHASES (Kilowatts) 8,597,000 8,407,000 8,285,000 8,132,000 8,255,000
- ------------------------------------------------------------------------------------------------------------
GENERATING CAPABILITY AT
TIME OF PEAK (Kilowatts) 7,963,000 7,868,000 7,868,000 7,760,000 7,837,000
- ------------------------------------------------------------------------------------------------------------
COAL BURNED (Tons) 9,803,000 10,314,000 10,732,000 10,643,000 10,711,000
- ------------------------------------------------------------------------------------------------------------
PRICE PER TON OF COAL $31.66 $31.96 $32.26 $33.85 $33.12
- ------------------------------------------------------------------------------------------------------------
33
1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------------------------
Operating revenues $ 2,066,004 $ 2,015,121 $ 2,096,940 $ 2,023,017
Operating expenses 1,654,707 1,603,104 1,614,127 1,565,477
Operating income 411,297 412,017 482,813 457,540
Callaway rate phase-in plans - 60 107 237
Deferred costs disallowed - - - -
Callaway Unit No. 1 costs disallowed, net - - - -
Loss on cancellation of
Callaway Unit No. 2, net - - - -
Allowance for all funds used
during construction 11,544 8,022 8,519 14,145
Gain on sales of electric property, net - 18,099 - -
Miscellaneous, net 3,919 (131) (2,718) 9,881
Interest (129,600) (135,319) (167,209) (187,584)
Net income 297,160 302,748 321,512 294,219
Preferred stock dividends 14,087 14,058 14,059 14,693
Earnings on common stock 283,073 288,690 307,453 279,526
Average common shares
outstanding 102,123,834 102,123,834 102,123,834 102,123,834
--------------------------------------------------------------------------------------------------------
ASSETS, OBLIGATIONS, AND EQUITY CAPITAL (Year End)
- ---------------------------------------------------------------------------------------------------------------
Total assets $ 6,595,570 $ 5,797,363 $ 5,733,479 $ 5,702,341
Long-term debt obligations 1,766,655 1,659,553 1,730,277 1,948,024
Preferred stock subject to
mandatory redemption 702 728 754 780
Preferred stock not subject to
mandatory redemption 218,497 217,784 217,784 218,004
Common equity 2,206,168 2,164,020 2,106,155 2,021,299
--------------------------------------------------------------------------------------------------------
FINANCIAL INDICES:
- ---------------------------------------------------------------------------------------------------------------
Earnings per share of common stock
(based on average shares outstanding) $2.77 $2.83 $3.01 $2.74
Cash dividends per share of
common stock $2.335 $2.26 $2.18 $2.10
Return on average common stock equity 13.01% 13.70% 14.99% 14.16%
Ratio of earnings to fixed charges (a) 4.66 4.66 4.21 3.57
Book value per common share $21.60 $21.19 $20.62 $19.79
--------------------------------------------------------------------------------------------------------
CAPITALIZATION RATIOS (Year End):
- ---------------------------------------------------------------------------------------------------------------
Common equity 52.6% 53.5% 51.9% 48.3%
Preferred stock not subject to
mandatory redemption 5.2 5.4 5.4 5.2
Preferred stock subject to
mandatory redemption - - - -
Long-term debt 42.2 41.1 42.7 46.5
--------------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0%
--------------------------------------------------------------------------------------------------------
(a) Earnings used in computing the ratio of earnings to fixed charges
consist of net income plus fixed charges (interest on debt,
amortization of debt discount, premium and expense, and a portion of
rentals representative of the interest factor) and income taxes.
34
1989 1988 1987 1986 1985 1984 1983
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
$ 2,010,306 $ 2,029,107 $ 1,946,411 $ 1,807,182 $ 1,591,763 $ 1,412,414 $ 1,401,086
1,543,838 1,544,953 1,457,957 1,287,572 1,173,187 1,172,128 1,160,816
466,468 484,154 488,454 519,610 418,576 240,286 240,270
227 2,408 92,791 59,861 74,631 - -
- - (23,169) - - - -
- - - - (234,780) - -
(30,196) - - - - - -
17,908 14,885 20,477 15,812 106,754 329,669 251,307
- - - - - - -
7,769 (10,648) (15,714) 3,947 (1,709) 1,619 2,509
(176,571) (199,241) (228,961) (247,409) (254,320) (247,308) (218,530)
285,605 291,558 333,878 351,821 109,152 324,266 275,556
19,134 30,425 36,522 49,245 49,836 50,185 46,118
266,471 261,133 297,356 302,576 59,316 274,081 229,438
102,123,834 102,123,834 102,123,834 102,123,834 100,403,016 96,574,699 86,744,282
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
$ 5,760,322 $ 5,827,246 $ 5,957,811 $ 5,895,211 $ 5,738,620 $ 5,819,996 $ 5,146,666
2,106,776 2,188,614 2,357,615 2,436,092 2,454,687 2,457,381 2,108,047
806 60,832 64,608 165,384 173,160 178,936 180,962
227,582 279,784 354,784 354,784 354,784 354,784 354,784
1,954,481 1,895,360 1,837,156 1,743,189 1,630,466 1,695,239 1,526,188
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
$2.61 $2.56 $2.91 $2.96 $0.59 $2.84 $2.64
$2.02 $1.94 $1.92 $1.86 $1.78 $1.72 $1.66
14.03% 14.08% 16.79% 18.16% 3.81% 17.23% 16.79%
3.63 3.35 3.30 2.79 1.14 2.88 2.89
$19.14 $18.56 $17.99 $17.07 $15.97 $17.10 $16.12
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
45.6% 42.8% 39.8% 37.1% 35.3% 36.2% 36.6%
5.3 6.3 7.7 7.6 7.7 7.6 8.5
- 1.4 1.4 3.5 3.8 3.8 4.3
49.1 49.5 51.1 51.8 53.2 52.4 50.6
- ----------------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
- ----------------------------------------------------------------------------------------------------------
35
INVESTOR INFORMATION
DRPlus
DRPlus, UE's stock purchase and dividend reinvestment plan, is a convenient way
for the company's stockholders, employees and customers to purchase common
shares without paying fees. Please see the attached card for more information.
DIRECT DEPOSIT OF DIVIDENDS
Stockholders may have their cash dividends electronically deposited in their
bank accounts on the dividend payment date. Please see the attached card for
more information.
ANNUAL MEETING
The Annual Meeting of Stockholders will convene at 9 a.m. Tuesday, April 26,
1994 at The Saint Louis Art Museum, 1 Fine Arts Drive, Forest Park, St. Louis,
Missouri.
COMMON STOCK AND DIVIDEND INFORMATION
The company's common stock is listed on the New York Stock Exchange (ticker
symbol: UEP). Common stockholders of record totaled 122,279 at December 31,
1993. Union Electric has paid cash dividends on common stock for 88 consecutive
years, since 1906. Under the company's amended mortgage indentures, $35,482,000
of total retained earnings was restricted against payment of common dividends --
except those payable in common stock; retained earnings totaled $977,880,000 at
December 31, 1993.
The following table includes the high and low sales prices and the dividends
paid per common share during the past two years:
1993
Price Range
----------------- Dividends
Quarter Ended High Low Paid
- -------------------------------------------------------
March 31 $40 1/2 $35 3/4 58 (cents)
June 30 41 3/8 38 5/8 58
September 30 44 5/8 40 58
December 31 44 3/8 38 1/8 59 1/2
1992
Price Range
----------------- Dividends
Quarter Ended High Low Paid
- -------------------------------------------------------
March 31 $38 3/4 $32 1/2 56 (cents)
June 30 36 31 3/4 56
September 30 37 7/8 35 5/8 56
December 31 37 3/8 35 1/4 58
INVESTOR SERVICES
The company's Investor Services representatives are available to help you each
business day from 7:30 a.m. to 4:30 p.m. (Central Time). Please write or call:
Union Electric Company
Investor Services Department
P.O. Box 66887
St. Louis, MO 63166-6887
St. Louis area 554-3502
Toll-free 1-800-255-2237
OFFICE
1901 Chouteau Avenue
St. Louis, MO 63103
314-621-3222
STOCK AND FIRST MORTGAGE BOND TRANSFER AGENT AND REGISTRAR
Union Electric Company
TRUSTESS FOR FIRST MORTGAGE BONDS
Boatmen's Trust Company
St. Louis, MO
Harris Trust and Savings Bank and D.G. Donovan, Co-Trustees
Chicago, IL
LaSalle National Trust, N.A.
Chicago, IL
UNION ELECTRIC 1993 37