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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
/X/ EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-3562
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UTILICORP UNITED INC.
(Exact name of registrant as specified in its charter)
DELAWARE 44-541877
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification
No.)
20 West Ninth, Kansas City, Missouri 64105
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (816) 421-6600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ----------------------------------------------------------- -----------------------------------------------------------
Common Stock, par value $1.00 per share New York, Pacific and Toronto Stock Exchanges
Convertible Subordinated Debentures, New York Stock Exchange
6 5/8%, due July 1, 2011
8 7/8% Cumulative Monthly Income Preferred Securities, New York Stock Exchange
Series A, due June 30, 2025
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 3,
1998 as reported on the New York Stock Exchange, was approximately
$1,835,114,353. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
TITLE OUTSTANDING (AT MARCH 3, 1998)
- ------------------------------------------------------ ------------------------------------------------------
Common Stock, par value $1.00 per share 53,756,549
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Documents Incorporated by Reference Where Incorporated
1997 Annual Report to Shareholders Part 2
Proxy Statement for 1998 Annual Shareholders Meeting Part 3
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INDEX
PAGE NO.
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PART 1
Item 1 Business........................................................................ 3
Item 2 Properties...................................................................... 16
Item 3 Legal Proceedings............................................................... 20
Item 4 Submission of Matters to a Vote of Security Holders............................. 20
PART 2
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters........... 20
Item 6 Selected Financial Data......................................................... 21
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operation..................................................................... 21
Item 8 Financial Statements and Supplementary Data..................................... 21
Item 9 Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.................................................................... 21
PART 3
Item 10 Directors and Executive Officers of the Registrant.............................. 21
Item 11 Executive Compensation.......................................................... 21
Item 12 Security Ownership of Certain Beneficial Owners and Management.................. 21
Item 13 Certain Relationships and Related Transactions.................................. 21
PART 4
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................ 22
REPORT OF INDEPENDANT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE...................................... 23
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS......................................................... 24
INDEX TO EXHIBITS...................................................................................... 25
SIGNATURES............................................................................................. 28
2
PART 1
ITEM 1: BUSINESS
ORGANIZATION AND HISTORY
UtiliCorp United Inc. (the company) is an international energy and energy
services company. The company's principal lines of business are in the following
segments: UtiliCorp Energy Delivery (UED), Generation and Aquila Energy
(Aquila). The company's international operations are managed as stand-alone
companies or investments through locally based management. UED's businesses
consist of the domestic utility distribution and transmission businesses,
on-system appliance repair and servicing businesses, and gas marketing
businesses. Generation's businesses are comprised of domestic electricity
generation and independent power projects. Aquila's businesses are wholesale
energy marketing, natural gas processing and gas gathering businesses. Its gas
processing and gathering businesses, operated by 82%-owned Aquila Gas Pipeline
Corporation (AGP), are in Texas and Oklahoma. The utility businesses operate in
eight states and one province of Canada. Natural gas is marketed throughout the
U.S. and in parts of Canada and the United Kingdom (U.K.). In addition to U.S.,
Canadian, and U.K. businesses, the company has various investments in Australia,
New Zealand and Jamaica.
UtiliCorp Energy Solutions (UES), consisting of retail gas marketing,
appliance repair and service contracts, was realigned during the second quarter
of 1997 into the operations of UED and Aquila. The realignment better leverages
existing support facilities, processes and expertise.
3
The company was formed in 1985 and is incorporated under the laws of the
State of Delaware. Since then, the company has grown principally through utility
mergers, acquisitions and investments as shown below.
MERGERS, ACQUISITIONS AND INVESTMENTS SINCE 1984
CUSTOMERS
AS OF COST (IN
SERVICE OWNERSHIP 12/31/97 MILLIONS)
----------------------------- ----------- ----------- ------------
ORIGINAL UTILITY OPERATIONS(a):
Missouri Public Service................... Electric 100% 196,000 $ --
Missouri Public Service................... Gas 100 46,000 --
----------- ------------
Total Original Utility Operations..... 242,000 --
----------- ------------
DOMESTIC UTILITY MERGERS AND ACQUISITIONS:
Kansas Public Service..................... Gas 100% 28,000 4.8
Peoples Natural Gas(b).................... Gas 100 585,000 369.0
West Virginia Power....................... Electric 100 26,000 21.0
Michigan Gas Utilities.................... Gas 100 145,000 62.0
West Virginia gas system.................. Gas 100 24,000 3.0
WestPlains Energy(c)...................... Electric 100 144,000 209.2
Missouri intrastate pipeline.............. Pipeline 100 -- 78.0
----------- ------------
Total Domestic Utility Mergers and
Acquisitions........................ 952,000 747.0
----------- ------------
INTERNATIONAL INVESTMENTS:
West Kootenay Power....................... Electric 100% 84,000 62.0
WEL Energy Group Ltd.(d).................. Electric 39.6 66,000 41.8
Power New Zealand Ltd.(d)................. Electric 30.6 216,000 138.3
United Energy, Limited.................... Electric 49.9 546,000 257.9
----------- ------------
Total International Investments....... 912,000 500.0
----------- ------------
NON-REGULATED ACQUISITIONS AND
INVESTMENTS:
Independent Power Projects................ Electric 22-50% -- 209.5
Oasis Pipe Line Company................... Pipeline 35 -- 117.7
Other..................................... Gas Marketing and other 100 -- 123.0
----------- ------------
Total Non-Regulated................... -- 450.2
----------- ------------
TOTAL MERGERS, ACQUISITIONS AND
INVESTMENTS SINCE 1984.................. 2,106,000 $ 1,697.2
----------- ------------
----------- ------------
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a) UtiliCorp was formed in 1985 from Missouri Public Service Company, which was
founded in 1917.
b) Cost includes the Nebraska gas system acquired in February 1993 for $78
million and the Kansas gas system acquired in September 1994 for $23
million. Both now operate as part of Peoples Natural Gas.
c) The total value of the WestPlains Energy acquisition was $349.8 million,
including the $209.2 million cash purchase price, assumption of $26.0
million in debt, and the purchase by a third party of the ownership interest
in a generating facility for $114.6 million. WestPlains Energy has use of
that generating capacity through a 27-year operating lease.
d) Ownership interests are held through a 79%-owned subsidiary of the Company.
4
The company had approximately 1.3 million utility customers and 4,640
employees at December 31, 1997. The company's electric utility operations are in
the states of Missouri, Kansas, Colorado and West Virginia and the Canadian
province of British Columbia. The company's gas utility operations are in the
states of Missouri, Kansas, Colorado, Iowa, Nebraska, Minnesota, Michigan and
West Virginia. Aquila markets natural gas throughout the United States and in
four provinces of Canada. The company also markets, transports, and provides
load balancing services for natural gas in the United Kingdom. Aquila's 82%
owned subsidiary, Aquila Gas Pipeline Corporation (AGP), owns or has interests
in 12 active natural gas gathering systems and four natural gas processing
plants in Texas and Oklahoma. The company has its ownership interests in power
projects primarily through Generation in which it has invested in 17 independent
power projects located in seven states and Jamaica. In addition, the company has
made equity investments in three electric distribution companies, two of them in
New Zealand and one in Australia.
BUSINESS GROUP SUMMARY
Segment information for the three years ended December 31, 1997 is
incorporated by reference on pages 57 through 58 of the company's 1997 Annual
Report to Shareholders.
I. ENERGY DELIVERY
ELECTRIC OPERATING STATISTICS
The following table summarizes the sales, volumes and customers of UED's
electric transmission and distribution businesses.
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Sales (in millions):
Residential.......................................... $ 232.1 $ 227.3 $ 219.5 $ 211.4 $ 204.0
Commercial........................................... 154.5 147.3 142.0 140.7 138.1
Industrial........................................... 73.6 70.4 67.9 66.4 63.2
Other................................................ 97.2 74.3 60.7 57.6 54.1
--------- --------- --------- --------- ---------
Total.............................................. 557.4 519.3 490.1 476.1 459.4
Less purchases from Generation..................... 313.6 285.2 263.2 258.7 248.1*
--------- --------- --------- --------- ---------
Total UED.......................................... $ 243.8 $ 234.1 226.9 $ 217.4 $ 211.3
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Volumes (MWH 000's)
Residential.......................................... 2,942 2,897 2,758 2,639 2,597
Commercial........................................... 2,409 2,308 2,236 2,190 2,128
Industrial........................................... 1,727 1,660 1,608 1,535 1,430
Other................................................ 1,390 1,939 1,372 1,230 1,090
--------- --------- --------- --------- ---------
Total.............................................. 8,468 8,804 7,974 7,594 7,245
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Customers
Residential.......................................... 313,598 308,271 302,857 297,801 292,546
Commercial........................................... 48,012 46,651 47,378 46,470 45,709
Industrial........................................... 290 286 288 285 266
Other................................................ 3,590 3,606 3,556 3,545 3,513
--------- --------- --------- --------- ---------
Total.............................................. 365,490 358,814 354,079 348,101 342,034
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
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* Estimated.
5
UED obtains all of its power supply from Generation with the exception of
its business in West Virginia, which purchases its power supply from an
unrelated party.
GAS OPERATING STATISTICS
The following table summarizes the sales, volumes and customers of UED's gas
distribution businesses.
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Sales (in millions)
Residential.......................................... $ 464.4 $ 429.1 $ 362.2 $ 356.4 $ 380.2
Commercial........................................... 205.8 192.6 153.9 156.9 177.5
Industrial........................................... 46.8 45.8 45.8 66.7 89.8
Other................................................ 50.4 60.4 54.9 38.6 38.6
--------- --------- --------- --------- ---------
Total.............................................. $ 767.4 $ 727.9 $ 616.8 $ 618.6 $ 686.1
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Volumes (MCF- 000's)
Residential.......................................... 77,594 81,698 76,461 71,208 74,421
Commercial........................................... 39,128 40,698 37,282 35,952 40,232
Industrial........................................... 11,059 10,944 12,901 18,439 26,868
Transportation....................................... 158,937 166,562 178,114 135,924 115,877
Other................................................ 678 1,611 1,827 2,420 3,672
--------- --------- --------- --------- ---------
Total.............................................. 287,396 301,513 306,585 263,943 261,070
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Customers
Residential.......................................... 744,238 728,867 713,586 698,156 661,930
Commercial........................................... 78,925 77,742 76,430 76,015 73,365
Industrial........................................... 2,491 3,725 3,790 3,878 3,874
Other................................................ 2,491 2,573 2,815 1,581 1,185
--------- --------- --------- --------- ---------
Total.............................................. 828,145 812,907 796,621 779,630 740,354
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Except for its West Virginia operations, UED procures natural gas through a
central gas supply department. For West Virginia, UED procures its gas from
local suppliers and the spot market.
REGULATION
The utility businesses of UED and Generation are regulated on a combined
basis and are impacted similarly by competition and seasonality. The
consolidated utility businesses are regulated by the following commissions:
STATE/JURISDICTION COMMISSION
- --------------------------- -----------------------------------------------------------
Kansas Kansas Corporation Commission
Michigan Michigan Public Service Commission
Missouri Public Service Commission of the State of Missouri
Minnesota Minnesota Public Utilities Commission
Iowa Iowa State Utilities Board
West Virginia Public Service Commission of West Virginia
Colorado Public Utilities Commission of the State of Colorado
Federal Federal Energy Regulatory Commission
There is no state regulatory agency in Nebraska. Each municipality served by
the company regulates local rates and services.
6
The following is a summary of the recent rate case activity of the company:
TYPE OF DATE DATE AMOUNT AMOUNT
RATE CASE DESIGNATION SERVICE REQUESTED GRANTED REQUESTED GRANTED
- ------------------------------------ ----------- ----------- --------- ------------- -----------
(IN MILLIONS)
Michigan
U-10960 Gas 10/31/95 3/28/97 $ 5.2 $ 1.7
Kansas
193,787U Gas 12/31/95 12/1/96 5.1 3.5
Nebraska
Rate Area 2 Gas 5/31/96 10/1/96 5.5 3.4
Nebraska
Rate Areas 1&3 Gas 8/1/95 2/1/96 5.2 2.8
In the first quarter of 1997, the Staff of the Missouri Public Service
Commission (the Staff) filed a complaint against the company seeking to reduce
annual Missouri electric revenues by $23 million. In September 1997, the Staff
increased its recommendation for a rate reduction to $28.5 million. In a
separate filing with the Staff, the company requested to increase electric rates
by $24.6 million. The Staff is reviewing the company's position with the final
order to be issued in March 1998. The primary differences between these two
dockets center on rate of return, capital structure, transition costs,
depreciation methods and corporate allocations.
The company's filing is designed to recover inflationary and other cost
increases which include the investment of approximately $20 million in plant and
facility improvements. The rate increase also reflects the request for a
temporary surcharge of $.0028 per kilowatt-hour to cover costs related to
transitioning to the competitive customer-choice marketplace. In addition, the
filing includes a mechanism to lessen the impact of the surcharge on consumers,
and requests the Staff approve the establishment of a $1 million fund to assist
low-income customers.
The Commission is expected to issue a final order by March 7, 1998, with new
rates effective March 17, 1998. Although this matter is still pending, the
public scenarios under consideration by the Commission range from a $12 million
to a $23 million rate reduction.
ENVIRONMENTAL
The company is subject to various environmental laws, including regulations
governing air, water quality and the storage and disposal of hazardous or toxic
wastes. The company assesses, on an ongoing basis, measures to ensure the
compliance with laws and regulations related to hazardous materials and
hazardous waste compliance and remediation activities. Compliance with existing
regulations, and those which may be promulgated in the future, can result in
considerable capital expenditures and operation and maintenance expense. A
discussion of the environmental matters of the company follows.
MANUFACTURED GAS PLANTS
The company owns or previously operated 29 former manufactured gas plants
(MGPs) which may, or may not, require some form of environmental remediation.
The company has contacted appropriate federal and state agencies and is in the
process of determining what, if any, specific cleanup activities may be needed
at these sites.
As of December 31, 1997, the company estimates its cleanup costs on its
identified MGP sites will be approximately $6.2 million. These amounts could
change materially based upon further investigations, the actions of
environmental agencies and the financial viability of other responsible parties.
Additionally, the ultimate liability may be significantly affected if the
company is held responsible for
7
parties not financially able to contribute to these costs. Based on prior
experience, available facts and existing law, the company has recorded a
liability of $6.2 million representing its estimate of the amount of
environmental costs currently expected to be incurred.
The company has received favorable rate orders for recovery of its
environmental cleanup costs in certain jurisdictions. In other jurisdictions, a
favorable regulatory precedent exists for the recovery of these costs. The
company is also pursuing recovery from insurance carriers and other potentially
responsible parties.
OTHER
In December 1996, the U.S. Environmental Protection Agency (EPA) promulgated
its final rule for nitrous oxide (NOx) emissions pursuant to the requirements of
the Clean Air Act Amendments of 1990. The new NOx regulations will impact one of
the company's power plants by necessitating the installation of additional
emissions control equipment by January 1, 2000. The company estimates that it
will spend approximately $2.0 million to comply with these rules.
It is management's opinion that the ultimate resolution of these
environmental matters will not have a material adverse impact upon the financial
position or results of operations of the company.
SEASONAL VARIATIONS OF BUSINESS
The company's utility and independent power project businesses are
weather-sensitive. The company has both summer and winter peaking utility assets
to reduce dependence on a single peak season. The table below shows peak times
for its consolidated utility businesses.
JURISDICTION PEAK
- --------------------------------------- ------------------------------
Gas utility operations November through March
Electric utility operations--
Missouri, Kansas and Colorado July and August
West Virginia November through March
II. AQUILA ENERGY
WHOLESALE ENERGY MARKETING
Aquila's wholesale energy marketing business is conducted through various
operating units, collectively referred to as Energy Marketing. Energy Marketing
is a gas and power marketing company with a marketing, supply and transportation
network consisting of relations with gas producers, local distribution
companies, and end-users throughout the United States and Canada. Energy
Marketing adds value for customers by leveraging its national position in
financial deal structuring in gas and power marketing. It provides services such
as complex fuel supply arrangements, energy management services and project
development consulting. For the five years in the period ended December 31,
1997, Energy Marketing had gas marketing volumes of 5.5, 2.1, 1.4, 1.0, and 1.4
billion cubic feet a day (BCF/d), respectively.
In 1995, Energy Marketing began selling electricity to wholesale customers,
much as it markets natural gas. Aquila expects that the electricity marketing
industry will expand rapidly as electricity futures trading is developed and the
infrastructure of this industry segment is established. Aquila's wholesale power
sales have grown from 129,000 megawatt hours in 1995 to 65.3 million megawatt
hours in 1997, ranking it among the nation's largest volume power marketers.
Energy Marketing utilizes certain types of fixed-price contracts in
connection with its natural gas, natural gas liquids, and power marketing
businesses. These include contracts that commit the company to purchase or sell
natural gas and other commodities at fixed prices in the future (i.e.,
fixed-price
8
forward purchase and sales contracts), futures and options contracts traded on
the NYMEX and swaps and other types of financial instruments traded in the
over-the-counter financial markets.
The availability and use of these types of contracts allows the company to
manage and hedge its contractual commitments, reduce its exposure relative to
the volatility of cash market prices, take advantage of carefully selected
arbitrage opportunities via open positions, protect its investment in natural
gas storage inventories and to provide price risk management services to its
customers. The company is also able to secure additional sources of energy or
create additional markets for existing supply through the use of exchange for
physical transactions allowed by NYMEX. The company's domestic and Canadian
natural gas and electricity trading activities are referred to herein as price
risk management activities and are reflected in the accompanying financial
statements using the mark-to-market method of accounting.
Although the company generally attempts to balance its fixed-price physical
and financial purchase and sales contracts in terms of contract volumes and the
timing of performance and delivery obligations, net open positions often exist
or are established due to the origination of new transactions and the company
assessment of, and response to, changing market conditions. The company will at
times create a net open position or allow a net open position to continue when
it believes, based upon competitive information gained from its energy marketing
activities, that future price movements will be consistent with its net open
position. To the extent that the company has a net open position, the company is
exposed to the risk that fluctuating market prices may adversely impact its
financial position or results of operations.
In addition to the risk associated with price movements, credit risk is also
inherent in the company's risk management activities. Credit risk relates to the
risk of loss resulting from the non-performance of a counterparty of its
contractual obligations. The company maintains credit policies with regard to
its counterparties that the company believes significantly minimize overall
credit risk. These policies include the thorough review of potential
counterparties' financial condition, collateral requirements under certain
circumstances, monitoring of net exposure to each counterparty and the use of
standardized agreements which allow for the netting of positive and negative
exposures associated with each counter party.
GAS GATHERING AND PROCESSING
Aquila through AGP gathers and processes natural gas and natural gas
liquids. AGP owns and operates a 3,434-mile intrastate gas transmission and
gathering network and four processing plants that extract and sell natural gas
liquids.
Key operating statistics for AGP are presented in the table below.
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Natural gas throughput (million cubic feet per day).................. 483 493 506 371 325
Natural gas liquids produced (thousand barrels per day).............. 37 41 32 31 31
Pipeline miles owned................................................. 3,434 3,416 3,311 2,718 2,531
Through two transactions in July and November 1996, Aquila Energy and its 82
percent-owned AGP acquired a combined 40% of the outstanding capital stock of
Oasis Pipe Line Company (Oasis) and related transportation rights for
approximately $132 million. The 600-mile Oasis pipeline system spans the state
of Texas and links Aquila's gathering systems to the Waha, Texas hub and the
Katy, Texas hub. As part of the purchase, another owner had the option to buy
one-fifth of Oasis, including 5% now owned by Aquila, on or before April 1,
1997. In 1997, the option was exercised and Aquila sold the 5% at book value.
9
III. GENERATION
ELECTRIC UTILITY GENERATION
Generation manages the company's domestic regulated electric generation and
supply businesses in Colorado, Kansas and Missouri. Collectively, the generating
plants located in these three states had the capacity to generate 1,679
megawatts (MW) of electricity during the year ended December 31, 1997. The
following table shows the overall fuel mix, and the generation capability for
the past five years.
SOURCE 1997 1996 1995 1994 1993
- ------------------------------------------------- --------- --------- --------- --------- ---------
(MW)
Coal............................................. 889 885 875 868 864
Gas and oil...................................... 790 784 705 705 700
--------- --------- --------- --------- ---------
Total generation capability.................... 1,679 1,669 1,580 1,573 1,564
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
A listing of Generation's generating plants is provided in the "Properties"
section of this Form 10-K. Generation also sells electricity to the wholesale
market. For the year ended December 31, 1997, Generation sold 1,546 megawatt
hours to non-affiliated parties.
INDEPENDENT POWER PROJECTS
UtilCo Group Inc. (UtilCo) participates in the ownership and operation of
facilities in the independent and wholesale power generation market. Consistent
with the company's overall strategy to minimize risk through diversification,
UtilCo has invested in generation facilities which are geographically diverse
and use a variety of fuels and proven technologies. Additionally, each project
is a producer of competitively priced wholesale power in its geographic region
and has a long-term market for its output. To date, UtilCo has made investments
in 17 projects located in seven states and Jamaica, with a total net ownership
of approximately 341 MW of generating capacity. A description and listing of the
power projects appears on page 15 of this Form 10-K.
IV. INTERNATIONAL
The company's international operations are managed separately from the four
business groups previously discussed. The international businesses have local
management and report separately to the company. The contribution to earnings
from international businesses was 14%, 25%, and 12% for the years ended December
31, 1997, 1996 and 1995, respectively. As of December 31, 1997, the company had
$907.9 million invested internationally. The following discussion briefly
describes the operations of these businesses.
AUSTRALIA
In September 1995, Power Partnership Pty Limited (PPL), of which the company
owns 49.9%, acquired United Energy Limited (UE), an Australian electric
distribution utility, from the State of Victoria. The company paid approximately
$257.9 million for its 49.9% ownership interest in PPL. The company manages the
operation of UE on behalf of PPL and receives a management fee consisting of a
base amount indexed to the consumer price index and a variable amount based on
UE's financial performance.
10
Summarized UE financial information as of and for the year ended December
31, 1997 is as follows:
(IN
MILLIONS)
------------
Sales........................................................................... $ 498.0
------------
------------
Net income...................................................................... $ 20.0
------------
------------
Total assets.................................................................... $ 114.5
------------
------------
Liabilities..................................................................... $ 15.4
Equity.......................................................................... 99.1
------------
Total liabilities and equity.................................................... $ 114.5
------------
------------
NEW ZEALAND
The New Zealand operations mainly consist of UtiliCorp N.Z., Inc. (UNZ), a
79%-owned subsidiary, which purchased a 29.4% ownership interest in Power New
Zealand Limited (PNZ), primarily in November 1995. As additional shares were
purchased throughout 1996 and 1997, the ownership interest in PNZ increased to
30.6%. In addition, UNZ has a 39.6% ownership position in WEL Energy Group
Limited (WEL). Both PNZ and WEL are New Zealand electric distribution utilities
serving 216,000 and 66,000 customers, respectively.
Summarized PNZ and WEL financial information as of and for the years ended
September 30, 1997 and June 30, 1997, respectively, are as follows:
PNZ WEL
--------- ---------
(IN MILLIONS)
Sales.................................................................... $ 282.7 $ 68.2
--------- ---------
--------- ---------
Net income............................................................... $ 32.4 $ 10.9
--------- ---------
--------- ---------
Total assets............................................................. $ 523.6 $ 114.5
--------- ---------
--------- ---------
Liabilities.............................................................. $ 103.5 $ 15.4
Equity................................................................... 420.1 99.5
--------- ---------
Total liabilities and equity............................................. $ 523.6 $ 114.5
--------- ---------
--------- ---------
UNITED KINGDOM
The company has several business ventures in the United Kingdom (U.K.) that
market natural gas and transportation services to wholesale, industrial, and
residential customers. United Gas Limited (UGL) is the company's primary U.K.
subsidiary. UGL markets gas directly and indirectly to approximately 96,000
customers and had sales volumes of 68 BCF for the year ended December 31, 1997,
an increase of 12 BCF from 1996.
The contestability of the residential gas markets began in April 1996 and
have continued through 1997. Residential gas markets will be fully contestable
by the summer of 1998. In connection with the opening of this market, new
suppliers have entered the market. These include companies with a strong
residential brand such as electricity companies, water companies, and grocery
chains who are adding natural gas to their exiting products and offering
multiple products to the residential marketplace.
Since a large number of new suppliers are from outside the natural gas
industry, UGL has developed natural gas transportation and load balancing
services that are targeted at these new suppliers. These products allow UGL to
leverage its existing expertise and information technology systems to generate
revenue while managing operational risks for new suppliers.
11
In 1997 and 1996, the company realigned certain of its business
relationships in the United Kingdom (UK). The equity relationships with Western
Gas Limited, Caledonian Gas Limited, Egas Limited and Midlands Gas Limited
(Midlands) were terminated. As part of the termination of the equity
relationship in Midlands, the company assumed an interest in two unfavorable
long-term gas supply contracts (for deliveries through 2005) that is assimilated
into its existing portfolio of sales and supply contracts.
At December 31, 1997, the company's portfolio of fixed price contracts was
in a net long position, as it included supply commitments of 66 BCF through 2005
and sales commitments of 50 BCF through 1999. Depending on the long term price
of natural gas, estimated losses on the above portfolio range between $19
million and $26 million due to the two long term supply contracts referred to
above. Since the U.K. natural gas market does not have liquid long-term pricing,
it is difficult to estimate the future profitability of the portfolio. Based on
management's estimates and available market data at December 31, 1997, the
company is carrying a $19 million pretax reserve relating to future losses that
may exist within the portfolio of contracts. Management believes that this
reserve is adequate and that any additional losses would not be material.
On April 15, 1996, the company acquired the 25% interest in UtiliCorp U.K.,
Inc., it did not already own for approximately $12 million. This transaction was
accounted for as a purchase.
CANADA
In Canada, the company owns West Kootenay Power Ltd. (WKP), a hydro-electric
utility in British Columbia. WKP has four hydro-electric generation facilities
with a capacity of 205 megawatts and 962 miles of transmission lines that serve
84,225 customers in south central British Columbia. WKP generates about half of
its power requirements and purchases the remaining requirements through power
contracts.
The following table summarizes the sales, volumes and customers of WKP.
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Sales (in millions):
Residential................................................. $ 36.2 $ 37.0 $ 32.9 $ 34.4 $ 32.8
Commercial.................................................. 18.8 19.7 19.1 16.6 18.1
Industrial.................................................. 8.5 9.4 9.4 8.7 12.8
Other....................................................... 26.3 26.8 26.2 21.2 23.8
--------- --------- --------- --------- ---------
Total..................................................... $ 89.8 $ 92.9 $ 87.6 $ 80.9 $ 87.5
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Volumes (MWH 000s)
Residential................................................. 943 990 920 873 939
Commercial.................................................. 474 467 440 421 400
Industrial.................................................. 266 313 319 362 491
Other....................................................... 874 909 892 869 849
--------- --------- --------- --------- ---------
Total..................................................... 2,557 2,679 2,571 2,525 2,679
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Customers
Residential................................................. 74,934 73,413 71,844 70,142 67,883
Commercial.................................................. 8,195 8,041 7,888 7,974 7,766
Industrial.................................................. 36 37 36 36 36
Other....................................................... 1,060 1,045 1,019 161 165
--------- --------- --------- --------- ---------
Total..................................................... 84,225 82,536 80,787 78,313 75,850
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
12
WKP is regulated by the British Columbia Utilities Commission. WKP is in the
third year of a three year incentive based rate setting mechanism. This
mechanism is the first of its kind for electric utilities in Canada and was the
result of a negotiated settlement with customers and regulators. The mechanism
calls for equal sharing of savings between the customer and WKP in situations
where WKP performs over and above negotiated performance expectations.
COMPETITION
ELECTRIC
The electric industry has increasingly become more competitive as federal
and state regulators move to a more unregulated environment. At the federal
level, the passage of the Energy Policy Act of 1992 (Energy Act) allowed the
Federal Energy Regulatory Commission (FERC) to order electric utilities to grant
access to transmission systems by third-party power producers. The Energy Act
specifically prohibits federally mandated wheeling of power for retail
customers. In April 1996, the FERC issued its Order No. 888, and subsequently
Order Nos. 888-A and 888-B, which opened wholesale power sales to competition
and required public utilities owning, controlling, or operating transmission
lines to file non-discriminatory open access tariffs that offer others the same
transmission service they provide themselves. The company has open access
tariffs in each of its electric jurisdictions.
On the federal legislative front, several bills in congress have been
proposed on electric restructuring matters, but no bill currently has wide
support or is ready for passage. Without federal restructuring guidelines,
electric restructuring is taking place on a state-by-state basis without
consistency between states.
In each of the company's domestic electric jurisdictions, various
restructuring proposals are being proposed in the state legislature. The pace of
electric restructuring is unpredictable and subject to change.
GAS
The competitive forces affecting the company's electric operations are also
affecting the company's gas operations. As competing electric utilities reduce
costs, it becomes more difficult to obtain new customers through fuel switching
opportunities and in certain cases the increased competition may result in loss
of customers. The Federal Energy Regulatory Commission (FERC) Order 636 shifted
gas supply responsibilities from traditional pipeline company sources to
distribution utilities, and allows customers to bypass the company's system by
connecting directly to a transportation pipeline. In addition, the mix of gas
sales has changed between industrial transportation and large commercial
customers. The company has addressed increased competition and industry changes
in several ways. First, its natural gas is priced competitively in its
respective service territories compared to alternate energy sources. Second, in
1993 the company established a central gas procurement function designed to take
advantage of opportunities created by FERC Order 636. Besides offering low cost
natural gas, the company offers a wide range of energy solutions to meet its
customers' needs.
The company currently accounts for the economic effects of regulation in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," and
accordingly has recorded certain costs as regulatory assets in the financial
statements. The company expects that its rates will continue to be based on
historical costs for the foreseeable future. If the company discontinued
applying SFAS No. 71, it would be required to make adjustment to the carrying
value of certain assets.
13
ENERGY MARKETING
The company has adopted a plan to provide both natural gas and electric
power commodity services to its wholesale customers from an integrated wholesale
marketing staff. This allows the company to fully meet the needs of customers
that continue to have an ever-increasing portfolio of energy options from which
to choose. A number of recent mergers and consolidations of entities in the
energy marketing industry have increased the focus on controlling market share
on a volumetric basis. The company expects the energy marketing industry to
consolidate into a few megamarketing companies. Electric power marketing will be
affected by the regulatory environment of the industry. It is currently unclear
as to when the various regulatory agencies will open access to all power
customers, including retail users. These regulatory decisions may have a
significant impact on the future economics of the power marketing sector.
EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICER PROFESSIONAL EXPERIENCE
- -------------------------- --------------------------------------------------------------------------------------
Richard C. Green, Jr. TITLES: Chairman of the Board and Chief Executive Officer
AGE: 43
5-YEAR HISTORY: Chairman of the Board of Directors since February 1989 and Chief
Executive Officer since May 1985. Mr. Green previously was also President from May
1985 to February 1996. Mr. Green is a director of BHA Group, Inc., and CAT, Ltd.
Robert K. Green TITLES: President and Chief Operating Officer of the company, and Chairman of the
Board of United Energy Limited
AGE: 36
5-YEAR HISTORY: President since February 1996. Executive Vice President from January
1993 to February 1996. Prior to January 1993, Mr. Green was President of the
Missouri Public Service division between 1993 and 1991. Between 1991 and 1989 Mr.
Green held various division officer positions with Missouri Public Service. Mr.
Green is also a director of UMB Bank, n.a.
Charles K. Dempster TITLE: Chairman of the Board and President of UtiliCorp U.K., Inc.
AGE: 55
5-YEAR HISTORY: In present position since November 1995. Before current position Mr.
Dempster was Vice President, Energy Resources from September 1994. From December
1995 to January 1993, Mr. Dempster was President of Aquila Energy Corporation, a
subsidiary of the company. Prior to being employed by the company, Mr. Dempster was
President of Reliance Pipeline Company since 1987.
James G. Miller TITLE: Senior Vice President, Energy Delivery
AGE: 49
5-YEAR HISTORY: In present position since September 1994. Prior positions included
various division President posts from 1983.
14
EXECUTIVE OFFICER PROFESSIONAL EXPERIENCE
- -------------------------- --------------------------------------------------------------------------------------
Harvey J. Padewer TITLE: Senior Vice President, Energy Group and President of Aquila Energy Corporation.
AGE: 50
5-YEAR HISTORY: Present position since January 1996. From May 1995, Mr. Padewer was
Vice President, Power Services. Prior to being employed by the company Mr. Padewer
was employed by Asea Brown Boveri Power Generation, Inc., at various officer level
positions for over five years.
James S. Brook TITLE: Vice President, Controller and Chief Accounting Officer
AGE: 48
5-YEAR HISTORY: Present position since November 1993. Prior to current position, Mr.
Brook held various Vice President positions at Missouri Public Service and West
Kootenay Power since 1980.
Dale J. Wolf TITLE: Vice President, Finance and Corporate Secretary
AGE: 58
5-YEAR HISTORY: Held present position for 8 years. Prior position was Vice President,
Finance and Treasurer for four years.
All officers are elected annually by the Board of Directors for a term of
one year. Robert K. Green is the brother of Richard C. Green, Jr., and Avis G.
Tucker, Director, is the aunt of Richard C. Green, Jr. and Robert K. Green.
15
ITEM 2: PROPERTIES
The company owns electric production, transmission and distribution systems
and gas transmission and distribution systems throughout its service
territories. The company also owns gas gathering, processing and pipeline
systems. Substantially all utility plant assets in Michigan are mortgaged
pursuant to an Indenture of Mortgage and Deed of Trust dated July 1, 1951, as
supplemented. Substantially all of the company's Canadian utility plant is
mortgaged under terms of a separate indenture.
UTILITY FACILITIES
The company's electric generation facilities, as of December 31, 1997, are
as follows:
UNIT CAPABILITY NET
(KW NET, PER GENERATION
UNIT LOCATION YEAR INSTALLED HOUR) FUEL (MW HOURS)
- -------------------------- -------------------------- ------------------- --------------- --------- ------------
MISSOURI:
Sibley #1 - #3 Sibley 1960, 1962, 1969 496,000 Coal 2,850,803
Ralph Green #3 Pleasant Hill 1981 72,000 Gas 21,588
Nevada Nevada 1974 20,000 Oil 145
Greenwood #1 - #4 Greenwood 1975 - 1979 247,000 Gas/Oil 103,935
KCI #1 and #2 Kansas City 1970 33,000 Gas 2,071
- ---------------------------------------------------------------------------------------------------------------------
KANSAS:
Judson Large #4 Dodge City 1969 143,000 Gas/Oil 377,552
Arthur Mullergren #3 Great Bend 1963 90,000 Gas/Oil 150,608
Cimarron River #1 - #2 Liberal 1963, 1967 72,000 Gas 53,953
Clifton #1 - #2 Clifton 1974 73,000 Gas/Oil 30,303
Jeffrey #1 - #3 St. Mary's 1978, 1980, 1983 352,000 Coal 2,283,552
- ---------------------------------------------------------------------------------------------------------------------
COLORADO:
W.N. Clark #1 - #2 Canon City 1955, 1959 41,000 Coal 240,849
Pueblo #6 Pueblo 1949 20,000 Gas/Oil 10,427
Diesel #'s 1,2,3,4,5 Pueblo 1964 10,000 Oil 242
Diesel #'s 1,2,3,4,5 Rocky Ford 1964 10,000 Oil 1,259
- ---------------------------------------------------------------------------------------------------------------------
CANADA:
No. 1 Lower Bonnington, BC 1925 42,000 Hydro 320,017
No. 2 Upper Bonnington, BC 1907 60,000 Hydro 424,963
No. 3 South Slocan, BC 1928 53,000 Hydro 417,976
No. 4 Corra Linn, BC 1932 50,000 Hydro 338,001
- ---------------------------------------------------------------------------------------------------------------------
TOTAL 1,884,000 7,628,244
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
At December 31, 1997, the company had transmission and distribution lines as
follows:
LENGTH (POLE
DESCRIPTION MILES)
- -------------------------------------------------------------------------------- ------------
Transmission lines.............................................................. 5,250
Overhead distribution lines..................................................... 15,383
Underground distribution lines.................................................. 2,671
------------
Total....................................................................... 23,304
------------
------------
At December 31, 1997, the company's gas utility operations had 3,148 miles
of gas gathering and transmission pipelines and 22,879 miles of distribution
mains and service lines located throughout its service territories.
16
GAS PROCESSING AND GATHERING ASSETS
AGP owned and/or operated 12 active natural gas pipeline systems with an
aggregate length of approximately 3,434 miles. These pipelines do not form an
interconnected system. Set forth below is information with respect to AGP's
pipeline systems as of December 31, 1997:
GAS THROUGHPUT AVG. DAILY GAS
MILES OF CAPACITY THROUGHPUT
PIPELINE (A)(B) (A)(B)(C)
GATHERING SYSTEMS LOCATION (A) (MMCF/D) (MMCF/D)
- ---------------------------------------------- ----------------- ----------- ----------------- -------------------
Southeast Texas............................... SE Texas 2,285 710 416
Mentone....................................... W. Texas 13 60 --
Gomez......................................... W. Texas 11 40 --
Menard County................................. C. Texas 120 30 4
Maverick County............................... W. Texas 121 20 2
Rhoda Walker.................................. W. Texas 21 20 8
Panola County................................. E. Texas 23 8 1
Elk City...................................... SW Oklahoma 155 115 84
Mooreland..................................... NW Oklahoma 327 40 12
Brooks-Hidalgo--23%........................... S. Texas 97 75 3
Dorado--40%................................... S. Texas 57 40 11
Benedum/Wilshire--20%(d)...................... W. Texas 204 125 3
Warwink(e).................................... W. Texas -- -- 25
----- ----- ---
3,434 1,283 569
Fuel and Shrinkage............................ -- -- (86)
----- ----- ---
Total..................................... 3,434 1,283 483
----- ----- ---
----- ----- ---
- ------------------------
(a) All mileage, capacity and volume information is approximate. Capacity
figures are management's estimates based on existing facilities without
regard to the present availability of natural gas.
(b) Gross gas throughput capacity is included at 100% while average gas
throughput is presented at the Company's present joint venture ownership
interest.
(c) Excludes off-system marketing sales with average daily volumes of 687 MMcf/d
sold from other companies' facilities
(d) In 1997, the Company's ownership percentage increased from 5% to 20%.
(e) On December 1, 1997, the Warwink Joint Venture was sold. Average gas
throughput has been included for the period for which the Company had
ownership in Warwink.
At December 31, 1997, the Company owned 35% of the capital stock of Oasis
and the right to transport 280 MMcf/d of natural gas on Oasis' pipeline, plus
the opportunity to utilize excess capacity on an interruptible basis. The Oasis
pipeline is a 600-mile, 36-inch diameter natural gas pipeline which connects the
Waha, Texas hub to the Katy, Texas hub. The Oasis pipeline has one (1) Bcf/d of
throughput capacity. The volumes transported on the Oasis pipeline are reflected
in the off-system marketing activities of the Company. The Company utilizes the
equity method of accounting for its investment in the capital stock of Oasis.
17
At December 31, 1997, AGP owned and/or operated an interest in four natural
gas processing plants. Set forth below is information with respect to AGP's
processing plants as of December 31, 1997:
GAS THROUGHPUT GAS THROUGHPUT NGLS PRODUCTION
CAPACITY(A) (A)(B) (A)(B)
PROCESSING PLANTS (MMCF/D) (MMCF/D) (MBBLS/D)(D)
- ---------------------------------------------------------- ------------------- ------------------- -------------------
La Grange, Texas.......................................... 230 175 23.4
Somerville, Texas......................................... 28 15 .6
Benedum, Texas 5%......................................... 125 13 .8
Elk City, Oklahoma........................................ 115 83 4.1
--- --- ---
Total owned plants........................................ 498 286 28.9
Katy, Texas(c)............................................ -- 200 8.1
--- --- ---
Total................................................. 498 486 37.0
--- --- ---
--- --- ---
- ------------------------
(a) All capacity and volume information is approximate. Capacity figures are
management's estimates based on existing facilities without regard to the
present availability of natural gas.
(b) Volumes from joint venture have been included at the present AGP ownership
interest.
(c) This plant is owned and operated by a third party from which AGP receives a
portion of the NGLs produced from gas AGP delivers to the plant. The plant
is included in this section for informational purposes to show the gas
throughput and NGLs production that AGP received utilizing the access to
this plant.
(d) Thousands of barrels per day (MBbls/d).
The availability of natural gas reserves to AGP depends on their development
in the area served by its pipelines and on AGP's ability to purchase gas
currently sold to or transported through other pipelines. The development of
additional gas reserves will be affected by many factors including the prices of
natural gas and crude oil, exploration and development costs and the presence of
natural gas reserves in the areas served by AGP's systems.
18
INDEPENDENT POWER PROJECTS
Information regarding the company's generating projects is set forth below.
TYPE OF PERCENT CAPACITY
PROJECT & LOCATION INVESTMENT OWNED (MW)(A) FUEL DATE IN SERVICE
- ----------------------------- ----------------- ----------- ----------- -------------------- -------------------
Mega Renewables G.P., 4 General 49.75% 12.2 Hydro Spring 1987(b)
projects in California partnership
- ---------------------------------------------------------------------------------------------------------------------
Topsham Hydro Partners, Maine Leveraged lease 50 13.9 Hydro October 1987
- ---------------------------------------------------------------------------------------------------------------------
Stockton CoGen Company, General 50 60.0 Coal March 1988(c)
California partnership
- ---------------------------------------------------------------------------------------------------------------------
Westwood Energy Properties, Limited 38 29.25 Waste coal July 1988
Pennsylvania partnership
- ---------------------------------------------------------------------------------------------------------------------
BAF Energy L.P., California Limited 23.1 120.0 Natural Gas May 1989
partnership
- ---------------------------------------------------------------------------------------------------------------------
Rumford Cogeneration Company Limited 24.3 85.0 Coal and waste wood May 1990
L.P., Maine partnership
- ---------------------------------------------------------------------------------------------------------------------
Koma Kulshan Associates, Limited 49.75 13.7 Hydro October 1990
Washington partnership
- ---------------------------------------------------------------------------------------------------------------------
Badger Creek Limited, Limited 49.75 50.0 Natural gas April 1991
California partnership
- ---------------------------------------------------------------------------------------------------------------------
McKittrick Limited, Limited 49.75 50.0 Natural gas October 1991
California partnership
- ---------------------------------------------------------------------------------------------------------------------
Live Oak Limited, California Limited 50 50.0 Natural gas April 1992
partnership
- ---------------------------------------------------------------------------------------------------------------------
Lockport Energy Associates, Limited 22.56 180.0 Natural gas December 1992
L.P., New York partnership
- ---------------------------------------------------------------------------------------------------------------------
Orlando Cogen Limited, L.P., Limited 50 125.7 Natural gas September 1993
Florida partnership
- ---------------------------------------------------------------------------------------------------------------------
Naheola Cogeneration LP, Limited 50 81.2 Black liquor solids, March 1993(d)
Alabama partnership coal, gas, wood
- ---------------------------------------------------------------------------------------------------------------------
Jamaica Private Power Limited liability 21.5 60.0 Diesel January 1997
Company, Jamaica company
- ---------------------------------------------------------------------------------------------------------------------
(a) Nominal gross capacity.
(b) Interest acquired by the company in June 1989.
(c) Interest acquired by the company in December 1988.
(d) Interest acquired by the company in May 1995.
19
ITEM 3: LEGAL PROCEEDINGS
William Alpern vs. UtiliCorp United Inc. On June 17, 1992, a class action
suit was filed by a stockholder against the company in the United States
District Court for the Western District of Missouri. Plaintiff alleges that the
company violated Section 10(b) of the Securities Exchange Act of 1934, as
amended, and Rule 10b-5 of the Securities and Exchange Commission, both by
making misrepresentations and omitting to state material facts in connection
with public disclosures. Plaintiff also alleges a claim under Section 11 of the
Securities Act of 1933, as amended. Plaintiff seeks unspecified compensatory
damages. The District Court dismissed the case by granting summary judgment to
UtiliCorp. Plaintiff appealed that decision to the United States Court of
Appeals for the Eighth Circuit. On May 17, 1996, the Court of Appeals reversed
the decision of the District Court, reinstated plaintiff's claims and remanded
the case back to the District Court. In December 1997, the Company made a $2
million payment to the plaintiffs to resolve the case. The settlement was
approved and the case dismissed by the District Court in January 1998.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders in the fourth
quarter of 1997.
PART 2
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The company's common stock (par $1) is listed on the New York, Pacific and
Toronto stock exchanges under the symbol UCU. At December 31, 1997, the company
had 41,849 common shareholders of record. Information relating to market prices
of common stock and cash dividends on common stock is set forth in the table
below.
MARKET PRICE
HIGH LOW CASH DIVIDENDS
--------- --------- -------------------
1997 QUARTERS
First................................................. $ 28.25 $ 25.50 $ .44
Second................................................ 29.38 25.75 .44
Third................................................. 30.88 29.00 .44
Fourth................................................ 39.06 30.13 .44
1996 QUARTERS
First................................................. $ 30.25 $ 28.25 $ .44
Second................................................ 29.13 25.75 .44
Third................................................. 29.13 26.50 .44
Fourth................................................ 27.25 26.38 .44
20
ITEM 6: SELECTED FINANCIAL DATA
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
IN MILLIONS EXCEPT PER SHARE
Sales.............................................. $ 8,296.3 $ 4,332.3 $ 2,792.6 $ 2,398.1 $ 2,746.1
Income from operations............................. 243.3 225.8 227.1 228.0 144.0
Net income......................................... 122.1 105.8 79.8 94.4 86.4
Earnings available for common shares............... 121.8 103.7 77.7 91.4 79.5
Basic earnings per common share.................... 2.27 2.20 1.72 2.08 1.95
Cash dividends per common share.................... 1.76 1.76 1.72 1.70 1.62
Total assets....................................... 5,113.5 4,739.8 3,885.9 3,111.1 2,850.5
Short-term debt (including current maturities)..... 263.4 277.7 303.7 321.2 71.8
Long-term debt..................................... 1,358.6 1,470.7 1,355.4 976.9 1,009.7
Company-obligated mandatorily redeemable preferred
securities of a partnership...................... 100.0 100.0 100.0 -- --
Preference and preferred stock..................... -- 25.0 25.4 25.4 83.9
Common shareholders' equity........................ 1,163.6 1,158.0 946.3 906.8 851.7
Items between years that impact comparability are described and are
incorporated by reference on page 26 in the company's 1997 Annual Report to
Shareholders.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information required by this item is incorporated by reference on pages
26 through 38 in the company's 1997 Annual Report to Shareholders.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference on pages
39 through 60 of the company's 1997 Annual Report to Shareholders.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART 3
ITEMS 10, 11, 12 AND 13: DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY,
EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT,AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding these items appears in the company's proxy statement
for its annual meeting of shareholders to be held May 6, 1998 and is hereby
incorporated by reference in this Annual Report on Form 10-K. For information
with respect to the executive officers of the company, see "Executive Officers
of the Registrant" following Item 1 in Part 1 of this Form 10-K.
21
PART 4
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS:
PAGE NO.
-----------
Consolidated Statements of Income for the three years ended December 31, 1997...... *
Consolidated Balance Sheets at December 31, 1997 and 1996.......................... *
Consolidated Statements of Common Shareowners' Equity for the three years ended
December 31, 1997................................................................ *
Consolidated Statements of Cash Flows for the three years ended December 31, 1997 *
Notes to Consolidated Financial Statements......................................... *
Report of Independent Public Accountants........................................... *
- ------------------------
* Incorporated by reference on pages 39 through 60 of the company's 1997 Annual
Report to Shareholders.
(2) Financial Statement Schedule
Report of Independent Accountants on Financial Statement
Schedule.......................................................... 23
Schedule II Valuation and Qualifying Accounts for the years 1997,
1996 and 1995................................................... 24
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) LIST OF EXHIBITS *
The following exhibits relate to a management contract or compensatory plan
or arrangement:
10(a)(2) UtiliCorp United Inc. Deferred Income Plan.
10(a)(3) UtiliCorp United Inc. Amended and Restated 1986 Stock Incentive
Plan.
10(a)(4) UtiliCorp United Inc. Annual and Long-Term Incentive Plan.
10(a)(5) UtiliCorp United Inc. 1990 Non-Employee Director Stock Plan.
10(a)(6) Severance Compensation Agreement.
10(a)(7) Executive Severance Payment Agreement.
10(a)(8) Split Dollar Agreement.
10(a)(9) Supplemental Retirement Agreement.
10(a)(11) UtiliCorp United Inc. Life Insurance Program for Officers.
10(a)(12) Summary of Terms and Conditions of Employment of Charles K.
Dempster.
10(a)(13) Summary of Terms and Conditions of Employment of Terry G.
Westbrook.
10(a)(14) Employment Agreement for Richard C. Green, Jr.
10(a)(15) Employment Agreement for Robert K. Green.
- ------------------------
* Incorporated by reference to the Index to Exhibits.
(b) Reports on Form 8-K
None
22
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of UtiliCorp United Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements for 1997, 1996 and 1995 described on page
60 of UtiliCorp United Inc.'s 1997 Annual Report to shareholders, which is
incorporated by reference in this Form 10-K, and have issued our report thereon
dated February 3, 1998. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The Financial Statement Schedule
listed in Item 14(a)2 is presented for the purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
February 3, 1998
23
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(IN MILLIONS)
COLUMN E
COLUMN B COLUMN D -------------------
----------- COLUMN C -------------- DEDUCTIONS FROM COLUMN F
COLUMN A BEGINNING ------------------- ADDITIONS RESERVES FOR -----------------
- ----------------------------------- BALANCE AT PURCHASE OF A CHARGED TO PURPOSES FOR ENDING BALANCE
DESCRIPTION JANUARY 1 BUSINESS EXPENSE WHICH CREATED AT DECEMBER 31
- ----------------------------------- ----------- ------------------- -------------- ------------------- -----------------
Price Risk Management-- credit and
service reserves:
1997............................. $ 57.2 -- 3.2 -- $ 60.4
1996............................. $ 70.6 -- -- 13.4 $ 57.2
1995............................. -- -- 70.6(1) -- $ 70.6
Reserve for United
Kingdom gas contracts:
1997............................. $ 14.0 -- 5.0 -- $ 19.0
1996............................. $ 11.0 -- 3.0 -- $ 14.0
1995............................. -- -- 11.0 -- $ 11.0
- ------------------------
(1) Amount established in connection with change in accounting principle to the
mark-to-market method of accounting for domestic natural gas trading
activities in 1996.
24
UTILICORP UNITED INC.
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
*3(a)(1) Certificate of Incorporation of the Company. (Exhibit 3(a)(1) to the Company's Annual Report on Form
10-K for the year ended December 31, 1991.)
*3(a)(2) Certificate of Amendment to Certificate of Incorporation of the Company. (Exhibit 4(a)(1) to
Registration Statement No. 33-16990 filed September 3, 1987.)
*3(a)(3) and By-laws of the Company as amended. (Exhibit 3(a)(4) and 4(a)(1) to the company's Annual Report on
4(a)(1) Form 10-K for the year ended December 31, 1996).
*4(a)(2) Certificate of Incorporation of the Company. (Exhibit 4(a)(1) to the Company's Annual Report on Form
10-K for the year ended December 31, 1991.)
*4(a)(3) Certificate of Amendment to Certificate of Incorporation of the Company. (Exhibit 4(a)(1) to
Registration Statement No. 33-16990 filed September 3, 1987.)
*4(b)(1) Indenture, dated as of November 1, 1990, between the Company and The First National Bank of Chicago,
Trustee. (Exhibit 4(a) to the Company's Current Report on Form 8-K, dated November 30, 1990.)
*4(b)(2) First Supplemental Indenture, dated as of November 27, 1990. (Exhibit 4(b) to the Company's Current
Report on Form 8-K, dated November 30, 1990.)
*4(b)(3) Second Supplemental Indenture, dated as of November 15, 1991. (Exhibit 4(a) to UtiliCorp United
Inc.'s Current Report on Form 8-K dated December 19, 1991.)
*4(b)(4) Third Supplemental Indenture, dated as of January 15, 1992. (Exhibit 4(c)(4) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991.)
*4(b)(5) Fourth Supplemental Indenture, dated as of February 24, 1993. (Exhibit 4(c)(5) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.)
*4(b)(6) Fifth Supplemental Indenture, dated as of April 1, 1993. (Exhibit 4(c)(6) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.)
*4(b)(7) Sixth Supplemental Indenture, dated as of November 1, 1994. (Exhibit 4(d)(7) to the Company's
Registration Statement on Form S-3 No. 33-57167, filed January 4, 1995.
*4(b)(8) Seventh Supplemental Indenture, dated as of June 1, 1995. (Exhibit 4 to the Company's Form 10-Q for
the period ended June 30, 1995.)
*4(b)(9) Eighth Supplemental Indenture, dated as of October 1, 1996 (Exhibit 4(b)(9) to the company's Annual
Report on Form 10-K for the year ended December 31, 1996).
*4(b)(10) Ninth Supplemental Indenture, dated as of September 1, 1997 (Exhibit 4 to the company's quarterly
report on Form 10-Q for the period ended September 30, 1997).
*4(c) Twentieth Supplemental Indenture, dated as of May 26, 1989, Supplement to Indenture of Mortgage and
Deed of Trust, dated July 1, 1951. (Exhibit 4(d) to Registration Statement No. 33-45382, filed
January 30, 1992.) Long-Term debt instruments of the Company in amounts not exceeding 10 percent
of the total assets of the Company and its subsidiaries on a consolidated basis will be furnished
to the Commission upon request.
25
EXHIBIT
NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
*4(d)(1) Indenture, dated as of June 1, 1995, Junior Subordinated Debentures. (Exhibit 4(d)(1) to the
company's Annual Report on Form 10-K for the year ended December 31, 1995.)
*4(d)(2) First Supplemental Indenture, dated as of June 1, 1995, Supplement to Indenture dated June 1, 1995.
(Exhibit 4(d)(2) to the company's Annual Report on Form 10-K for the year ended December 31,
1995.)
*4(e) Form of Rights Agreement between UtiliCorp United Inc. and First Chicago Trust Company of New York,
as Rights Agent. (Exhibit 4 to the company's Form 10-Q for the period ended September 30, 1996.)
*10(a)(1) Agreement for the Construction and Ownership of Jeffrey Energy Center, dated as of January 13, 1975,
among Missouri Public Service Company, The Kansas Power & Light Company, Kansas Gas and Electric
Company and Central Telephone & Utilities Corporation. (Exhibit 5(e)(1) to Registration Statement
No. 2-54964, filed November 7, 1975.)
*10(a)(2) UtiliCorp United Inc. Deferred Income Plan. (Exhibit 10(a)(2) to the Company's Annual Report on Form
10-K for the year ended December 31, 1991.)
*10(a)(3) UtiliCorp United Inc. Amended and Restated 1986 Stock Incentive Plan. (Exhibit 10 (a)(3) to the
company's Annual Report on Form 10-K for the year ended December 31, 1995.)
*10(a)(4) UtiliCorp United Inc. Annual and Long-Term Incentive Plan. (Exhibit 10(a)(4) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994)
*10(a)(5) UtiliCorp United Inc. 1990 Non-Employee Director Stock Plan. (Exhibit 10(a)(5) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.)
*10(a)(6) Form of Severance Compensation Agreement between UtiliCorp United Inc., and certain Executives of
the Company. (Exhibit 10 (a)(7) to the company's Annual Report on Form 10-K for the year ended
December 31, 1995.)
*10(a)(7) Executive Severance Payment Agreement (Exhibit 10 to the Company's Quarterly Report on Form 10-Q
filed for the quarter ended September 30, 1993.)
*10(a)(8) Split Dollar Agreement dated as of June 12, 1985, between the Company and James G. Miller. (Exhibit
10(a)(10) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.)
*10(a)(9) Supplemental Retirement Agreement dated as of January 27, 1983, between the Company and James G.
Miller. (Exhibit 10(a)(11) to the Company's Annual Report on Form 10-K for the year ended December
31, 1994.)
*10(a)(10) Lease Agreement dated as of August 15, 1991, between Wilmington Trust Company, as Lessor, and the
Company, as Lessee. (Exhibit 10(a)(13) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.)
*10(a)(11) UtiliCorp United Inc. Life Insurance Program for Officers. (Exhibit 10 (a)(13) to the company's
Annual Report on Form 10-K for the year ended December 31, 1995.)
*10(a)(12) Summary of Terms and Conditions of Employment of Charles K. Dempster. (Exhibit 10 to the company's
quarterly report on Form 10-Q for the period ended March 31, 1996.)
26
EXHIBIT
NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
*10(a)(13) Summary of Terms and Conditions of Employment of Terry G. Westbrook (Exhibit 10(a)(13) to the
company's Annual Report on Form 10-K for the year ended December 31, 1996).
*10(a)(14) Employment Agreement for Richard C. Green, Jr. (Exhibit 10(a)(14) to the company's Annual Report on
Form 10-K for the year ended December 31, 1996).
*10(a)(15) Employment Agreement for Robert K. Green (Exhibit 10(a)(15) to the company's Annual Report on Form
10-K for the year ended December 31, 1996).
13 Annual Report to Shareholders for the year ended December 31, 1997 (pages 26 to 60).
21 Subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
- ------------------------
* Exhibits marked with an asterisk are incorporated by reference as indicated
pursuant to Rule 12(b)-23.
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
UTILICORP UNITED INC.
By: /s/ RICHARD C. GREEN, JR.
----------------------------
Richard C. Green, Jr. Chairman of the Board of
Directors, Chief Executive
Officer (Principal Executive
Officer)
Date: March 19, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ RICHARD C. GREEN, JR.
----------------------------
Richard C. Green, Jr. Chairman of the Board of
Directors, Chief Executive
Officer (Principal Executive
Officer)
Date: March 19, 1998
By: /s/ ROBERT K. GREEN
----------------------------
Robert K. Green
President, Chief Operating
Officer and Director
Date: March 19, 1998
By: /s/ JAMES S. BROOK
----------------------------
James S. Brook
Vice President, Controller and
Chief Accounting Officer
Date: March 19, 1998
By: /s/ JOHN R. BAKER
----------------------------
John R. Baker
Director
Date: March 19, 1998
By: /s/ AVIS G. TUCKER
----------------------------
Avis G. Tucker
Director
Date: March 19, 1998
28
By: /s/ ROBERT F. JACKSON
----------------------------
Robert F. Jackson
Director
Date: March 19, 1998
By: /s/ L. PATTON KLINE
----------------------------
L. Patton Kline
Director
Date: March 19, 1998
By: /s/ HERMAN CAIN
----------------------------
Herman Cain
Director
Date: March 19, 1998
By: /s/ IRVINE O. HOCKADAY,
JR.
----------------------------
Irvine O. Hockaday, Jr.
Director
Date: March 19, 1998
By: /s/ DR. STANLEY O.
IKENBERRY
----------------------------
Dr. Stanley O. Ikenberry
Director
Date: March 19, 1998
29