Back to GetFilings.com
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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, 1998
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
------------------------
UTILICORP UNITED INC.
(Exact name of registrant as specified in its charter)
DELAWARE 44-0541877
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification
No.)
20 West Ninth Street, 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 12, 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 15,
1999 as reported on the New York Stock Exchange, was approximately
$2,132,635,622. 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 15, 1999)
- ------------------------------------------------------ ------------------------------------------------------
Common Stock, par value $1.00 per share 93,605,985
- --------------------------------------------------------------------------------------------------------------
Documents Incorporated by Reference: Where Incorporated:
1998 Annual Report to Shareholders Part 2
Proxy Statement for 1999 Annual Shareholders Meeting Part 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEX
PAGE
-----
PART 1
Item 1 Business............................................................................ 3
Item 2 Properties.......................................................................... 16
Item 3 Legal Proceedings................................................................... 19
Item 4 Submission of Matters to a Vote of Security Holders................................. 19
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
Operations........................................................................ 21
Item 7a Quantitative and Qualitative Disclosures about Market Risk.......................... 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 Company..................................... 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
INDEX TO EXHIBITS.......................................................................................... 26
SIGNATURES................................................................................................. 29
2
PART 1
ITEM 1. BUSINESS.
ORGANIZATION AND HISTORY
UtiliCorp United Inc. (the company, which may be referred to as we, us, or
our) is a multinational energy solutions provider. We conduct business through
the following business segments:
- REGULATED BUSINESSES--includes our domestic utility generation,
distribution and transmission businesses. Regulated businesses also
includes appliance repair/servicing and limited gas marketing businesses.
- AQUILA ENERGY--includes our natural gas and electricity marketing and
trading businesses, and Aquila Gas Pipeline Corporation, a publicly traded
natural gas gathering, processing and transportation company.
- INTERNATIONAL--includes our investments in an electric distribution
company in Australia, 79% owned UnitedNetworks Limited, (an electric
transmission company) in New Zealand, a gas transportation and risk
merchant company in the United Kingdom and an electric utility in Canada.
OUR STRATEGY
Our strategy is to operate energy delivery networks and to be a leading
energy merchant in the markets in which we compete. We believe this strategic
focus positions us to compete effectively in a deregulated energy marketplace.
The key elements of our strategy include:
- ALIGNMENT OF BUSINESSES TO ADDRESS A CHANGING COMPETITIVE ENVIRONMENT. We
believe that our distinct, yet inter-related, business groups enable us to
better manage our operations in the changing marketplace in which we
operate. Our corporate structure allows us to manage each of these
businesses individually, improving our ability to maximize their
profitability while providing low cost, high quality energy and energy
related products and services to our customers.
- PURSUIT OF STRATEGIC MERGERS, ACQUISITIONS, ALLIANCES, JOINT VENTURES AND
PARTNERSHIPS. Growth through mergers and acquisitions has been a major
part of our strategy for more than a decade. We believe that our
approximately $2.7 billion of investments in mergers and acquisitions has
played an integral role in establishing us as a leading diversified energy
provider. Most recently, we have completed several transactions to enhance
our operations in New Zealand and on March 11, 1999 submitted a winning
bid for a gas utility in Australia.
- IMPROVE OPERATIONAL EXCELLENCE. We constantly seek to improve our
operational performance. Over the last several years we have consolidated
operations of our domestic electric and natural gas distribution
businesses. As an example, our Regulated Businesses group is implementing
a single billing and accounting system for all of our domestic regulated
utilities in eight states. We have reduced the number of field offices
from 129 to 57, resulting in the elimination of 380 positions. We have
developed an energy marketing, trading and risk management system at
Aquila that will support substantially greater marketing and trading
volumes without the need for material additional investment.
- FOCUSED INTERNATIONAL OPERATIONS. Our International group is focused on
seeking early entry into markets that provide a combination of stable and
attractive political and economic environments and markets open or opening
to competition in electric or natural gas sales. As an example, we were
the first non-Australian company to invest in and manage an Australian
electric distribution company. As owners and managers of our international
operations, we seek to
3
transfer our domestic knowledge and skills to improve the performance of
those operations. At the same time, we benefit from experience gained in
new, competitive international marketplaces, and we are using the
knowledge gained overseas to better position ourselves for domestic
deregulation.
- RISK MANAGEMENT. In order to compete effectively and profitably in energy
marketing and trading, we have an independent trading control officer who
reports directly to our President and also reports independently to the
Board of Directors. We closely monitor our operations and have written
policies and established trading limits. We have developed proprietary
risk management software which we license to other companies.
OUR COMPETITIVE STRENGTHS
We believe that we have developed substantial competitive strengths that
will enable us to continue to successfully execute our strategy. These strengths
include:
- Low cost, non-nuclear electric and natural gas utility businesses focused
on superior customer service.
- Market-leading position in energy marketing and trading.
- Experienced management team whose compensation is directly tied to
shareholder value.
- Proven risk management policies and procedures to limit exposure to
commodity market positions.
- Successful operation of competitive non-regulated businesses
- International operations in New Zealand, Australia, the United Kingdom,
and Canada from which we believe we have gained valuable experience in
competitive markets.
- Proven track record of quickly and successfully integrating domestic and
international mergers and acquisitions.
MERGERS & ACQUISITIONS
ST. JOSEPH LIGHT & POWER
In March 1999, we signed a definitive agreement with St. Joseph Light &
Power Company to merge in a transaction valued at approximately $270 million.
The agreement is subject to approvals by St. Joseph shareholders, and by state
and federal regulatory agencies. The merger is expected to be completed sometime
in mid-2000.
MULTINET GAS/IKON ENERGY
In March 1999, we and an Australian partner made a successful bid of $1.26
billion to acquire the natural gas utility Multinet Gas/Ikon Energy from the
State of Victoria, Australia. The acquisition is expected to be completed by
April 1999, with our ownership interest at 25.5%.
BUSINESS GROUP SUMMARY
Segment information for the three years ended December 31, 1998 is
incorporated by reference to pages 56 through 58 of our 1998 Annual Report to
Shareholders.
4
I. REGULATED BUSINESSES
ELECTRIC OPERATING STATISTICS
The following table summarizes Regulated Businesses' sales, volumes and
customers for electric generation, transmission and distribution businesses.
1998-1994
1998 1997 1996 1995 1994 CAGR*
--------- --------- --------- --------- --------- -------------
Sales (in millions)
Residential...................................... $ 244.8 $ 232.1 $ 227.3 $ 219.5 $ 211.4 3.7%
Commercial....................................... 161.3 154.5 147.3 142.0 140.7 3.5%
Industrial....................................... 74.8 73.6 70.4 67.9 66.4 3.0%
Other............................................ 46.7 97.2 74.3 60.7 57.6 (5.1)%
--------- --------- --------- --------- ---------
Total.......................................... $ 527.6 $ 557.4 $ 519.3 $ 490.1 $ 476.1 2.6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Volumes (Gigawatt Hours (GWH)-000's)
Residential...................................... 3,169 2,942 2,897 2,758 2,639 4.7%
Commercial....................................... 2,585 2,409 2,308 2,236 2,190 4.2%
Industrial....................................... 1,779 1,727 1,660 1,608 1,535 3.8%
Other............................................ 905 1,390 1,939 1,372 1,230 (7.4 )%
--------- --------- --------- --------- ---------
Total.......................................... 8,438 8,468 8,804 7,974 7,594 2.7%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Customers
Residential...................................... 320,740 313,598 308,271 302,857 297,801 1.9%
Commercial....................................... 48,800 48,012 46,651 47,378 46,470 1.2%
Industrial....................................... 305 290 286 288 285 1.7%
Other............................................ 3,560 3,590 3,606 3,556 3,545 .1%
--------- --------- --------- --------- ---------
Total.......................................... 373,405 365,490 358,814 354,079 348,101 1.8%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
- ------------------------
* Compound annual growth rate
5
GAS OPERATING STATISTICS
The following table summarizes Regulated Businesses' sales, volumes and
customers for gas distribution businesses.
1998-1994
1998 1997 1996 1995 1994 CAGR*
--------- --------- --------- --------- --------- -------------
Sales (in millions)
Residential...................................... $ 379.4 $ 464.4 $ 429.1 $ 362.2 $ 356.4 1.6%
Commercial....................................... 161.2 205.8 192.6 153.9 156.9 .7%
Industrial....................................... 34.1 46.8 45.8 45.8 66.7 (15.4)%
Other............................................ 47.7 50.4 60.4 54.9 38.6 5.4%
--------- --------- --------- --------- ---------
Total.......................................... $ 622.4 $ 767.4 $ 727.9 $ 616.8 $ 618.6 .2%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Volumes--(Thousand Cubic Feet
(MCF)-000's)
Residential...................................... 66,564 77,594 81,698 76,461 71,208 (1.7 )%
Commercial....................................... 33,228 39,128 40,698 37,282 35,952 (2.0 )%
Industrial....................................... 8,631 11,059 10,944 12,901 18,439 (17.3 )%
Transportation................................... 140,499 158,937 166,562 178,114 135,924 .8%
Other............................................ 1,088 678 1,611 1,827 2,420 (18.1 )%
--------- --------- --------- --------- ---------
Total.......................................... 250,010 287,396 301,513 306,585 263,943 (1.3 )%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Customers
Residential...................................... 761,650 744,238 728,867 713,586 698,156 2.2%
Commercial....................................... 77,971 78,925 77,742 76,430 76,015 .6%
Industrial....................................... 1,982 2,491 3,725 3,790 3,878 (15.4 )%
Other............................................ 9,986 2,491 2,573 2,815 1,581 58.5%
--------- --------- --------- --------- ---------
Total.......................................... 851,589 828,145 812,907 796,621 779,630 2.2%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
- ------------------------
* Compound annual growth rate
REGULATION
The following is a summary of our pending rate case activity.
TYPE OF DATE AMOUNT
RATE CASE DESIGNATION (IN MILLIONS) SERVICE REQUESTED REQUESTED
- --------------------------------------------------------- --------- ----------- -------------
West Virginia............................................ Gas 10/30/98 $ 2.9
West Virginia............................................ Electric 12/15/98 $ 4.7
In April 1998, we were ordered to reduce Missouri electric rates by $16.9
million plus increase depreciation expense by $5.8 million. This rate reduction
lowered 1998 EBIT by $16.3 million.
ENVIRONMENTAL
We are subject to various environmental laws. These include regulations
governing air and water quality and the storage and disposal of hazardous or
toxic wastes. We continually assess ways to ensure we comply with laws and
regulations on hazardous materials and hazardous waste and remediation
activities.
6
We own or previously operated 29 former manufactured gas plants (MGP's)
which may, or may not, require some form of environmental remediation. We have
contacted appropriate federal and state agencies and are working to determine
what, if any, specific cleanup activities these sites may require.
As of December 31, 1998, we estimate cleanup costs on our identified MGP
sites to be $10.0 million. This estimate could change materially when we have
investigated further. It could also be affected by the actions of environmental
agencies and the financial viability of other responsible parties. Ultimate
liability also may be affected significantly if we are held responsible for
parties unable to contribute financially to the cleanup effort.
We have received favorable rate orders that enable us to recover
environmental cleanup costs in certain jurisdictions. In other jurisdictions,
there are favorable regulatory precedents for recovery of these costs. We are
also pursuing recovery from insurance carriers and other potentially responsible
parties.
In December 1996, the U.S. Environmental Protection Agency (EPA) published
its final rule for nitrous oxide (NOx) emissions as required by the Clean Air
Act Amendments of 1990. The new NOx regulations require that we install
additional emissions control equipment at one of our power plants by January 1,
2000.
In October 1998, the EPA published new air quality standards to further
reduce the emission of NOx. These more strict standards will require us to
install new equipment on our baseload coal units in Missouri that we estimate
will cost $35 million. The ultimate cost is under debate and subject to change.
The new standards as written are effective in May 2003.
We do not expect final resolution of these environmental matters to have a
material adverse effect on our financial position or results of operations.
SEASONAL VARIATIONS OF BUSINESS
Our utility and independent power project businesses are weather-sensitive.
We have both summer and winter peaking utility assets to reduce dependence on a
single peak season. The table below shows peak times for our utility businesses.
JURISDICTION PEAK
- --------------------------------------------- ------------------------------
Gas utility operations November through March
Missouri, Kansas and Colorado electric July and August
West Virginia electric 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 focused on control of mid-stream energy assets. For the five years
ended December 31, 1998, Energy Marketing had marketing volumes of 9.6, 6.8,
3.5, 1.9, 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 continue to expand rapidly as
7
liquidity and maturity increases. Aquila's wholesale power sales have grown from
129,000 megawatt hours (MWH) in 1995 to 121.2 million MWH in 1998, ranking it
third among the nation's largest volume power marketers.
Energy Marketing utilizes certain types of fixed-price contracts in
connection with its natural gas and power marketing businesses. These include
contracts that commit us to purchase or sell natural gas and other commodities
at fixed prices in the future (i.e., fixed-price 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 us to manage and
hedge our contractual commitments, reduce our exposure relative to the
volatility of cash market prices, take advantage of carefully selected arbitrage
opportunities via open positions, protect our investment in natural gas storage
inventories and provide price risk management services to our customers. We are
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. We refer to our domestic and Canadian natural gas and
electricity trading activities as price risk management activities. These are
reflected in the accompanying financial statements using the mark-to-market
method of accounting.
Although we generally attempt to balance our 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 our assessment
of, and response to, changing market conditions. We will occasionally create a
net open position or allow a net open position to continue when we believe,
based upon competitive information gained from our energy marketing activities,
that future price movements will be consistent with our net open position. When
we have a net open position, we are exposed to fluctuating market prices.
In addition to price risk movements, credit risk is also inherent in our
risk management activities. Our trading and marketing business is also exposed
to counterparty credit risk resulting from a counterparty not fulfilling its
contractual obligations. Our credit policies with regard to our counterparties
attempt to minimize overall credit risk. Our credit procedures include a
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 counterparty. Our credit
policy is monitored and administered by a function independent of the trading
and marketing activities.
GAS GATHERING AND PROCESSING
Aquila Gas Pipeline (AQP) gathers and processes natural gas and natural gas
liquids. AQP owns and operates a 3,403-mile intrastate gas transmission and
gathering network and four processing plants that extract and sell natural gas
liquids.
Key operating statistics for AQP are presented in the table below.
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Natural gas throughput (million cubic feet per day(MMcf/d)).......... 475 483 493 506 371
Natural gas liquids produced (thousand barrels per day).............. 25 37 41 32 31
Pipeline miles owned................................................. 3,403 3,434 3,416 3,311 2,718
Aquila Energy and AQP own 35% of the capital stock of Oasis Pipe Line
Company (Oasis) and have 280 MMcf/d of firm intrastate transportation capacity.
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.
8
In 1998, AQP entered into a joint venture ownership and operation agreement
with a third party in the Austin Chalk area in Texas to gather and transport the
natural gas produced from specified wells. The sales contract accounted for
approximately 2% of AQP's total natural gas sales in 1998.
In November 1998, we made a proposal to acquire the 18% of AQP's common
stock we do not already own for $8.00 per share. An independent committee of
AQP's Board of Directors is evaluating the proposal.
INDEPENDENT POWER PROJECTS
Aquila Energy 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, Aquila
Energy 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, Aquila Energy has made
investments in 17 projects located in seven states and Jamaica, with a total net
ownership of approximately 332 MW of generating capacity. A description and
listing of the power projects appears on page X of this report.
We anticipate further expansion or investment in the independent power
projects business through a newly formed entity focused on structuring and
obtaining control of mid-stream energy assets.
III. INTERNATIONAL
Our international operations are managed separately from the other two
business groups. However, these energy operations are consistent with either the
delivery network or energy merchant strategies. We manage our international
businesses with local management that reports separately to the company. The
normalized contribution to earnings before interest and taxes from international
businesses was 20.8%, 17.0%, and 25.2% of our total for the years ended December
31, 1998, 1997 and 1996, respectively. As of December 31, 1998, approximately
$1,655.0 million of our total assets relate to our international businesses. The
following discussion briefly describes our international businesses.
AUSTRALIA
We acquired an effective 49.9% ownership interest in United Energy Limited
(UEL), an electric distribution utility serving 546,000 customers in the state
of Victoria. As part of a management agreement between us and UEL, we manage the
utility for a fee as well as participate in its earnings.
In May 1998, UEL sold 42% of its common stock to the Australian public and
as a result, we recorded a $45.3 million gain. The partial sale to the public
reduced our effective ownership percentage to 29%. Concurrent with UEL's stock
offering, we bought an additional 5% in UEL from another company to bring our
ownership to 34%. Prior to the common stock sale, UEL repaid approximately $101
million in debt notes owed to us. The management agreement between us and UEL
remains in place.
UEL distributes and sells electricity with a majority of its sales earned
from the regulated distribution network business. The regulated distribution
sales and connection charges for access to its distribution system will be
reviewed by the Office of the Regulator General (OGR), with new rates becoming
effective for five years beginning January 1, 2001.
9
The retail market in which UEL operates is being progressively opened to
competition, with all customers becoming contestable by January 1, 2001. The
following table shows the timing of electricity markets opening to competition
in Victoria:
DATE OF
THRESHOLD ELIGIBILITY PERCENT OF MARKET CUSTOMER TYPE
- ---------------------------------- ----------------- ----------------------- --------------------------------------
GREATER THAN 5MW.................. Dec 1994 22% Large heavy industrial
GREATER THAN 1MW.................. July 1995 7% Large commercial industrial
GREATER THAN 750MWh............... July 1996 12% Medium commercial/light industrial
GREATER THAN 160MWh............... July 1998 8% Small commercial
All remaining customers........... January 2001 51% Residential
NEW ZEALAND
Through a series of transactions in 1998, we gained control of Power New
Zealand through the purchase of an additional 48% interest for $245 million,
increasing our ownership to 78.6%. Concurrent with this acquisition, we sold our
39.6% interest in New Zealand's WEL Energy Group, which we acquired throughout
1995, 1996, and 1997, and bought out our 21% minority partner in our New Zealand
subsidiary, UtiliCorp N.Z, Inc.
New Zealand's Electricity Industry Reform Act of 1998 requires all the
country's utilities to separate ownership of their lines (network) and supply
(generation and retail) businesses. Power New Zealand, with approximately 90% of
its assets and earnings in the lines area, in November 1998 announced its
intention to remain in the network business and to exit the supply business. It
also agreed to purchase the Wellington-based lines assets of TransAlta New
Zealand Ltd. and to sell to TransAlta its retail electricity business serving
the Auckland area for a net expenditure by Power New Zealand of $238 million.
Because Power New Zealand's name transferred to TransAlta as part of the retail
business TransAlta acquired, the network business became UnitedNetworks Limited
on January 1, 1999. Also in 1998, Power New Zealand agreed to purchase the
electric line assets of neighboring power company TrustPower Limited for
approximately $261 million. The assets became part of a greater network which
includes parts of metropolitan Auckland and other areas in the central and
southern regions of New Zealand's North Island. The TrustPower transaction
closed January 1999. Completion of the TransAlta and TrustPower transactions
created the country's largest electricity distribution network, serving about
468,000 customers.
UNITED KINGDOM
We market transportation/shipping and balancing services to gas suppliers.
The fees we collect are priced as a unit per volume consumed. The gas markets in
the United Kingdom are fully competitive with end user customers being able to
choose their gas supplier. The deregulation of the gas markets resulted in many
new retail gas suppliers competing for the approximately 19 million gas
customers in the United Kingdom. As of December 31, 1998, we had approximately 1
million indirect customers, an increase of 900,000 customers since December 31,
1997.
In early 1999 we applied for our electricity supply license. Also this year,
we will begin trading electricity and offering a bundled electricity supply
service to our customers.
We have developed a European expansion plan and anticipate leveraging our UK
operations to begin marketing energy, as deregulation allows, on the European
Continent in 1999.
In June 1998, we paid $25.6 million to a third party to cancel two
take-or-pay contracts and related guarantees effective April 1, 1998, that
required us to take gas at significantly above-market prices until 2005. Between
1995 and 1997, we reserved $19.0 million against the estimated future losses on
these contracts, resulting in a "One Time" net settlement loss of $6.6 million.
10
In July 1998, we lost a long-standing dispute with one of our previous
suppliers related to a take-or-pay gas supply contract. We were arguing that the
supplier did not make proper deliveries pursuant to the supply contract and
further materially breached the contract. Accordingly we began paying the
supplier the prevailing market prices which were lower than the contract price.
The difference between the two prices accumulated to approximately $38.0
million, an amount we had previously recorded as a liability.
A court ruling required us to pay this $38.0 million price difference along
with interest of $6.8 million that accumulated from the date the contract
invoices were due. This interest payment was recorded as a one-time loss. We are
appealing the court's decision and are seeking recovery of the $44.8 million.
CANADA
We own West Kootenay Power Ltd. (WKP), a hydro-electric utility in British
Columbia, Canada. WKP has four hydro-electric generation facilities with a
capacity of 205 megawatts and 962 miles of transmission lines that serve
approximately 86,000 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.
1998-
1994
1998 1997 1996 1995 1994 CAGR*
--------- --------- --------- --------- --------- -----------
Sales (in millions)
Residential................................................ $ 34.3 $ 36.2 $ 37.0 $ 32.9 $ 34.4 (.1)%
Commercial................................................. 18.1 18.8 19.7 19.1 16.6 2.2%
Industrial................................................. 8.2 8.5 9.4 9.4 8.7 (1.5 )%
Other...................................................... 26.4 26.3 26.8 26.2 21.2 5.6%
--------- --------- --------- --------- ---------
Total.................................................... $ 87.0 $ 89.8 $ 92.9 $ 87.6 $ 80.9 1.8%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Volumes (MWH 000s)
Residential................................................ 935 943 990 920 873 1.7%
Commercial................................................. 484 474 467 440 421 3.5%
Industrial................................................. 263 266 313 319 362 (7.7 )%
Other...................................................... 899 874 909 892 869 .9%
--------- --------- --------- --------- ---------
Total.................................................... 2,581 2,557 2,679 2,571 2,525 .6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Customers
Residential................................................ 76,172 74,934 73,413 71,844 70,142 2.1%
Commercial................................................. 8,378 8,195 8,041 7,888 7,974 1.2%
Industrial................................................. 34 36 37 36 36 (1.4 )%
Other...................................................... 1,054 1,060 1,045 1,019 927 3.3%
--------- --------- --------- --------- ---------
Total.................................................... 85,638 84,225 82,536 80,787 78,313 2.3%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
* COMPOUND ANNUAL GROWTH RATE
WKP is regulated by the British Columbia Utilities Commission. The
Commission approved renewal of the incentive based rate setting mechanism for
1999. This mechanism was 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 if WKP
performs over and above negotiated performance expectations.
11
COMPETITION
DOMESTIC UTILITY OPERATIONS
Our domestic utility businesses operate in a regulated environment despite
various legislative deregulation efforts at the federal level. Industrial and
large commercial customers largely have access to energy sources so some of the
competitive pricing benefits have been transferred to these customers through
open access tariffs relating to transmission lines and pipelines. Without
federal legislation, competition at the retail level cannot form since the rules
will be different in each state. Based on our assessment of retail competition
possibilities, we reduced most retail activities, preferring to wait until the
market develops more fully.
ACCOUNTING IMPLICATIONS
We currently record the economic effects of regulation in accordance with
the provisions of Statement of Financial Accounting Standards No. 71 (SFAS 71),
"Accounting for the Effects of Certain Types of Regulation." Accordingly, our
balance sheet reflects certain costs as regulatory assets. We expect that our
rates will continue to be based on historical costs for the foreseeable future.
If we discontinued applying SFAS No. 71, we would make adjustments to the
carrying value of our regulatory assets. Total net regulatory assets at December
31, 1998 were $96.5 million.
ENERGY MARKETING
Our energy marketing businesses operate in a fully competitive environment
that rewards participants on price, service and execution. Our energy marketing
businesses compete for customers with some of the largest utility and energy
companies in North America. The industry is premised on large volume sales with
relatively low margins. Companies that operate in this industry must fully
understand the price sensitivity and volatility of commodities. The public
became more aware of some of the risks associated with this industry when a
number of companies announced sudden losses resulting from the June price spike
in electricity. We expect price volatility and we expect events like the June
price spike to recur.
12
OUR EXECUTIVE TEAM
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
Richard C. Green, Jr. (Rick) 44 Chairman of the Board and Chief Executive Officer
Robert K. Green (Bob) 37 President and Chief Operating Officer
James G. Miller (Jim) 50 Senior Vice President, Energy Delivery
Charles K. Dempster (Chuck) 56 Senior Vice President; Chairman and Chief Executive
Officer, Aquila Energy Corporation
Edward A. Mills (Ed) 39 President and Chief Operating Officer, Aquila Energy
Corporation
Jon R. Empson 53 Senior Vice President, Regulatory, Legislative, and
Environmental Services
Robert L. Howell 58 Senior Vice President, Corporate Development (will
retire April 1, 1999)
Sally C. McElwreath 58 Senior Vice President, Corporate Communications
Leo E. Morton 53 Senior Vice President, Human Resources and Operations
Support
Dale J. Wolf 59 Vice President, Finance, Treasurer and Corporate
Secretary
James S. Brook (Jim) 49 Vice President, Controller and Chief Accounting
Officer
INTERNATIONAL
Donald G. Bacon (Don) 61 President, West Kootenay Power; Chief Executive
Officer, UnitedNetworks Limited
Charles K. Dempster (Chuck) 56 Interim Chairman and President, UtiliCorp U.K., Inc.
Robert K. Green (Bob) 37 Chairman, United Energy Limited; Chairman,
UnitedNetworks Limited
R. Paul Perkins 56 Senior Vice President, Australasia
Keith Stamm 38 Chief Executive Officer, United Energy Limited
RICHARD C. GREEN, JR. (B.S. Business--Southern Methodist University)
Rick joined us in 1976 and held various financial and operating positions
between 1976 and 1982. In 1982, Rick was appointed Executive Vice President at
Missouri Public Service, the predecessor to UtiliCorp. In 1985, Rick became the
Chairman, President, and Chief Executive Officer and held those positions until
1996. Rick has been Chairman and Chief Executive Officer since 1996.
ROBERT K. GREEN (B.S. Engineering, Princeton University; J.D. Law,
Vanderbilt University)
Bob joined UtiliCorp in 1988 as Assistant Division Counsel and in 1989 was
appointed to Division Counsel. Between 1989 and 1992, Bob held executive level
positions at Missouri Public Service. In 1993, Bob was appointed Executive Vice
President and in 1996 assumed additional duties as
President. Bob also is the Chairman of
United Energy
13
Limited, Ltd., a 34% owned foreign traded Australian company and UnitedNetworks
Limited, a 79% owned foreign traded New Zealand company.
JAMES G. MILLER (B.S. Electrical Engineering, M.B.A Management, University
of Wisconsin)
Jim joined the company in 1983 as President, Michigan Gas Utilities, a
company acquired by us in 198X. In 1991, Jim was appointed President, WestPlains
Energy and in 1995 was appointed Senior Vice President, Energy Delivery. Prior
to Jim's employment at UtiliCorp, Jim worked for Wisconsin Power and Light
Company in various financial and operating capacities.
CHARLES K. DEMPSTER (B.S. Civil Engineering, University of Houston)
Chuck joined us in 1993 as President of Aquila Energy Corporation. In 1994,
he was appointed Senior Vice President, Energy Resources. In 1995, Chuck became
Chairman and CEO of UtiliCorp U.K., Inc and in 1998, Chuck became Senior Vice
President, UtiliCorp; Chairman and Chief Executive Officer, Aquila Energy
Corporation. Prior to joining us, Chuck was President, Reliance Pipeline
Corporation between 1993 and 1987. Prior to 1987, Chuck held executive positions
at NICOR and Enron.
EDWARD A. MILLS (University of Texas, M.B.A., Finance, Rice University)
Ed joined our company in 1993 as Director of Risk Management and Trading,
Aquila. In 1998, Ed was appointed President and Chief Operating Officer, Aquila
Energy. Prior to joining our company, Ed held executive and management positions
at Fina Oil and Chemical Company, Texas Commerce Bank, and Springer Holding
Company.
JON R. EMPSON (B.A. Economics, Carleton College, M.B.A, Economics,
University of Nebraska at Omaha)
Jon joined our company in 1986 as Vice President, Regulation, Finance and
Administration. In 1993, Jon was appointed Senior Vice President, Gas Supply and
Regulatory Services and in 1996 he was appointed Senior Vice President,
Regulatory, Legislative and Environmental Services. Prior to joining UtiliCorp,
Jon worked for a predecessor company in various executive and management
positions for 7 years, held executive management positions of the Omaha Chamber
of Commerce and Omaha Economic Development Council and worked as an economist
with the Department of Housing and Urban Development.
SALLY C. MCELWREATH (B.A. Social Sciences, M.B.A. Public Relations, Pace
University)
Sally joined us in 1994 as Senior Vice President, Corporate Communications.
Prior to joining our company, Sally was Vice President, Corporate Communications
for MacMillan Inc. and for The Travel Channel; Director of Marketing
Communications for Trans World Airways and Manager of Corporate Communications
for United Airlines beginning in 1971. Prior to 1971, she held various positions
with ARCO and Sinclair Oil Corporation.
LEO E. MORTON (B.S. Mechanical Engineering, Tuskegee University; M.S.
Management, Massachusetts Institute of Technology)
Leo joined our company in 1994 as Senior Vice President, Operations Support
and was appointed to his current position in 1996. Prior to working for us, Leo
held executive and management positions in manufacturing and engineering for
AT&T beginning in 1973.
DALE J. WOLF (B.S. Business Administration, Fort Hays State University;
M.B.A Finance, University of Missouri)
Dale joined our company in 1962 as a staff accountant at Missouri Public
Service. Between 1962 and 1972, Dale held various accounting and finance
positions. In 1972, Dale was appointed Assistant Treasurer and in 1976,
Treasurer. In 1984, Dale was promoted to Vice President and Treasurer for
Missouri Public Service. When UtiliCorp was formed in 1985, Dale became its Vice
President, Finance and Treasurer. In 1989, Dale assumed the Corporate Secretary
responsibilities.
14
JAMES S. BROOK (B.S. Commerce, University of Manitoba, Chartered Accountant;
M.B.A. University of Kansas)
Jim joined our company in 1976 as a financial assistant at West Kootenay
Power. In 1978, Jim was appointed to Manager, Financial Administration and in
1980, Jim was appointed as Chief Financial Officer. In 1990, Jim was appointed
to Senior Vice President, Administration at Missouri Public Service and in 1993
was appointed to his current position at Corporate.
DONALD G. BACON (B.S. Civil Engineering, University of Alberta)
Don joined our company in 1993 as President of West Kootenay Power. In 1997,
Don became Power New Zealand's Chief Executive Officer in addition to his
responsibilities in Canada. Prior to Don's employment with us, he was a Vice
President at TransAlta Utilities Corporation between 1988 and 1993 and in
various operating positions from 1975 and 1988.
R. PAUL PERKINS (B.A. International Relations, University of North Carolina)
Paul joined us in 1994 as Vice President, Corporate Development. Paul's
primary focus in Corporate Development was in international opportunities. In
1997, Paul was appointed Senior Vice President, Australia. Prior to joining
UtiliCorp, Paul was a regional manager for WMX Technologies between 1992 and
1994 focusing on Latin America and the Caribbean. Paul worked for Texaco Inc. as
a Division Manager, Supply and Trading for Latin America and West Africa between
1990 and 1992. Paul worked for Texaco between 1978 and 1990 in other
international capacities.
KEITH G. STAMM (B.S. Mechanical Engineering, University of Missouri at
Columbia; M.B.A. Finance, Rockurst College. Licensed professional engineer)
Keith joined our company in 1983 as a staff engineer at our Sibley Power
Plant. Between 1985 and 1995, Keith held various operating positions. In 1995,
Keith was promoted to Vice President, Energy Trading and in 1996, promoted to
Vice President and General Manager, Regulated Power. In 1997, Keith became the
Chief Executive Officer of United Energy Limited.
15
ITEM 2. PROPERTIES.
We own electric production, transmission and distribution systems and gas
transmission and distribution systems throughout our service territories. We
also own 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 our Canadian utility plant is mortgaged under terms of a separate
indenture.
UTILITY FACILITIES
Our electric generation plants, as of December 31, 1998, 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 3,090,148
Ralph Green #3 Pleasant Hill 1981 74,000 Gas 35,100
Nevada Nevada 1974 20,000 Oil 1,117
Greenwood #1 - #4 Greenwood 1975 - 1979 247,000 Gas/Oil 200,524
KCI #1 and #2 Kansas City 1970 33,000 Gas 6,876
- ---------------------------------------------------------------------------------------------------------------------
KANSAS:
Judson Large #4 Dodge City 1969 143,000 Gas 386,481
Arthur Mullergren #3 Great Bend 1963 90,000 Gas 258,932
Cimarron River #1 -- #2 Liberal 1963, 1967 72,000 Gas 145,822
Clifton #1 -- #2 Clifton 1974 73,000 Gas/Oil 45,563
Jeffrey #1 -- #3 St. Mary's 1978, 1980, 1983 352,000 Coal 2,223,054
- ---------------------------------------------------------------------------------------------------------------------
COLORADO:
W.N. Clark #1 -- #2 Canon City 1955, 1959 40,000 Coal 220,789
Pueblo #6 Pueblo 1949 20,000 Gas 6,969
Diesel #'s 1,2,3,4,5 Pueblo 1964 10,000 Oil 837
Diesel #'s 1,2,3,4,5 Rocky Ford 1964 10,000 Oil 596
- ---------------------------------------------------------------------------------------------------------------------
CANADA:
No. 1 Lower Bonnington, BC 1925 42,000 Hydro 296,796
No. 2 Upper Bonnington, BC 1907 60,000 Hydro 437,944
No. 3 South Slocan, BC 1928 53,000 Hydro 428,771
No. 4 Corra Linn, BC 1932 50,000 Hydro 349,381
-------------------------- ------------------- --------------- --------- ------------
TOTAL 1,885,000 8,135,700
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
The following table shows the overall fuel mix and generation capability for
the past five years.
SOURCE (MW) 1998 1997 1996 1995 1994
- ------------------------------------------------- --------- --------- --------- --------- ---------
Coal............................................. 888 889 885 875 868
Gas and oil...................................... 792 790 784 705 705
Hydro............................................ 205 205 205 205 205
--------- --------- --------- --------- ---------
Total generation capability................ 1,885 1,884 1,874 1,785 1,778
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
16
At December 31, 1998, we had transmission and distribution lines as follows:
LENGTH (POLE
DESCRIPTION MILES)
- -------------------------------------------------------------------------------- ------------
Transmission lines.............................................................. 5,295
Overhead distribution lines..................................................... 21,043
Underground distribution lines.................................................. 6,976
------------
Total....................................................................... 33,314
------------
------------
At December 31, 1998, our gas utility operations had 2,122 miles of gas
gathering and transmission pipelines and 24,056 miles of distribution mains and
service lines located throughout its service territories.
GAS PROCESSING AND GATHERING ASSETS
AQP owned and/or operated 11 active natural gas pipeline systems with an
aggregate length of approximately 3,403 miles. These pipelines do not form an
interconnected system. Set forth below is information with respect to AQP's
pipeline systems as of December 31, 1998:
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/Katy.......................... SE Texas 2,338 732 381
Mentone....................................... W. Texas 13 60 --
Gomez......................................... W. Texas 11 40 --
Menard County................................. C. Texas 120 30 2
Maverick County............................... W. Texas 121 20 2
Rhoda Walker.................................. W. Texas 21 20 2
Panola County................................. E. Texas 23 8 1
Elk City...................................... SW Oklahoma 163 100 69
Mooreland..................................... NW Oklahoma 324 40 11
Brooks-Hidalgo--23%(d)........................ S. Texas -- -- 1
Dorado--40%................................... S. Texas 58 40 9
Benedum/Wilshire--20%......................... W. Texas 211 130 14
----- ----- ---
3,403 1,220 492
Fuel and Shrinkage............................ -- -- (17)
----- ----- ---
Total..................................... 3,403 1,220 475
----- ----- ---
----- ----- ---
- ------------------------
(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 our present joint venture ownership interest.
(c) Excludes off-system marketing sales with average daily volumes of 795
MMcf/d sold from other companies' facilities
(d) In March 1998, Brooks-Hidalgo Joint Venture's ownership interests in
its assets were sold.
At December 31, 1998, we 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
17
the Waha, Texas hub to the Katy, Texas hub. The Oasis pipeline has a 1 Bcf/d of
throughput capacity. We use the equity method of accounting for this investment.
At December 31, 1997, AQP owned and/or operated an interest in four natural
gas processing plants. Set forth below is information with respect to AQP's
processing plants as of December 31, 1998:
GAS THROUGHPUT GAS THROUGHPUT NGLS PRODUCTION
CAPACITY(A) (A),(B) (A),(B)
PROCESSING PLANTS (MMCF/D) (MMCF/D) (MBBLS/D)(D)
- ---------------------------------------------------------- ------------------- ------------------- -------------------
La Grange, Texas.......................................... 230 165 20.2
Somerville, Texas......................................... 28 19 .5
Benedum, Texas 20%........................................ 125 14 .9
Elk City, Oklahoma........................................ 115 69 3.5
--- --- ---
Total owned plants.................................... 498 267 25.1
Katy, Texas(d)............................................ -- 173 --
--- --- ---
Total................................................. 498 440 25.1
--- --- ---
--- --- ---
- ------------------------
(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 ventures have been included at the present AQP
ownership interest.
(c) Thousands of barrels per day (MBbls/d).
(d) This plant is owned and operated by a third party from which AQP receives a
portion of the NGLs produced from gas AQP delivers to the plant. The plant
is included in this section for informational purposes to show the gas
throughput and NGLs production that AQP received utilizing the access to
this plant.
The availability of natural gas reserves to AQP depends on their development
in the area served by its pipelines and on AQP'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 AQP'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 16.58 180.0 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 24.09 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.
ITEM 3. LEGAL PROCEEDINGS.
None.
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 1998.
19
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, 1998, the company
had 41,027 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
CASH
HIGH(A) LOW(A) DIVIDENDS(A)
----------- --------- -------------
1998 QUARTERS
First....................................................................... $ 26.29 $ 23.33 $ .30
Second...................................................................... 26.33 23.21 .30
Third....................................................................... 26.25 22.63 .30
Fourth...................................................................... 24.46 22.87 .30
1997 QUARTERS
First....................................................................... $ 18.83 $ 17.00 $ .2933
Second...................................................................... 19.59 17.17 .2933
Third....................................................................... 20.59 19.33 .2933
Fourth...................................................................... 26.04 20.09 .2933
- ------------------------
(a) All per share amounts have been restated for the 3-for-2 stock split.
20
ITEM 6. SELECTED FINANCIAL DATA.
1998 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------
IN MILLIONS (EXCEPT PER SHARE)
Sales............................................. $ 12,563.4 $ 8,926.3 $ 4,332.3 $ 2,792.6 $ 2,398.1
Income from operations............................ 240.8 243.3 225.8 227.1 228.0
Net income........................................ 132.2 122.1 105.8 79.8 94.4
Earnings available for common shares.............. 132.2 121.8 103.7 77.7 91.4
Basic earnings per common share (a)............... 1.65 1.51 1.46 1.15 1.39
Cash dividends per common share (a)............... 1.20 1.17 1.17 1.15 1.13
Total assets...................................... 5,991.5 5,113.5 4,739.8 3,885.9 3,111.1
Short-term debt (including current maturities).... 484.4 263.4 277.7 303.7 321.2
Long-term debt.................................... 1,375.8 1,358.6 1,470.7 1,355.4 976.9
Company-obligated mandatorily redeemable preferred
securities of a partnership..................... 100.0 100.0 100.0 100.0 --
Preference and preferred stock.................... -- -- 25.0 25.4 25.4
Common shareholders' equity....................... 1,446.3 1,163.6 1,158.0 946.3 906.8
- ------------------------
(a) All per share amounts have been restated for the 3-for-2 stock split.
Items between years that impact comparability are described and are
incorporated by reference on page 27 in the company's 1998 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 to pages
27 through 39 in the company's 1998 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this item is incorporated by reference to pages
36 and 37 in the company's Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to pages
40 through 60 of the company's 1998 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 appear in our proxy statement 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, 1998...... *
Consolidated Balance Sheets at December 31, 1998 and 1997.......................... *
Consolidated Statements of Common Shareowners' Equity for the three years ended
December 31, 1998................................................................ *
Consolidated Statements of Comprehensive Income for the three years ended December
31, 1998......................................................................... *
Consolidated Statements of Cash Flows for the three years ended December 31,
1998............................................................................. *
Notes to Consolidated Financial Statements......................................... *
Report of Independent Public Accountants........................................... *
- ------------------------
* Incorporated by reference to pages 40 through 60 of the company's 1998 Annual
Report to Shareholders.
(2) FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants on Financial Statement Schedule
II................................................................ 24
Valuation and Qualifying Accounts for the years 1998, 1997 and
1996............................................................ 25
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) Supplemental Executive Retirement Plan, Amended and Restated.
10(a)(14) Employment Agreement for Richard C. Green, Jr.
10(a)(15) Employment Agreement for Robert K. Green.
10(a)(16) Capital Accumulation Plan.
10(a)(17) Supplemental Contributory Retirement Plan.
- ------------------------
* Incorporated by reference to the Index to Exhibits.
22
(b) Reports on Form 8-K
A current report on Form 8-K dated November 13, 1998, filed on November 16,
1998, with respect to Item 5 and Item 7 was filed with the Securities and
Exchange Commission by the Registrant.
A current report on Form 8-K dated December 10, 1998, filed on December 14,
1998, with respect to Item 7 was filed with the Securities and Exchange
Commission by the Registrant.
23
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 1998, 1997 and 1996 described on
page 60 of UtiliCorp United Inc.'s Annual Report to shareholders, which is
incorporated by reference in this Form 10-K, and have issued our report
thereon dated February 1, 1999. 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 the responsibility of the
company's management and is presented for the purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic consolidated 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.
/s/ ARTHUR ANDERSEN LLP
Kansas City, Missouri
February 1, 1999
24
UTILICORP UNITED INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(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 DECEMBER 31 BUSINESS EXPENSE WHICH CREATED AT DECEMBER 31
- ------------------------------- --------------- ------------------- -------------- ------------------- -----------------
Price Risk Management credit
and service reserves:
1998......................... $ 60.4 -- -- 7.9 $ 52.5
1997......................... $ 57.2 -- 3.2 -- $ 60.4
1996......................... $ 70.6 -- -- 13.4 $ 57.2
Reserve for United Kingdom gas
contracts
1998......................... $ 19.0 -- 6.6 25.6 $ --
1997......................... $ 14.0 -- 5.0 -- $ 19.0
1996......................... $ 11.0 -- 3.0 -- $ 14.0
25
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) By-laws of the Company as amended. (Exhibit 3.1 on Form 10-Q for the quarter ended June 30, 1998.)
*4(a)(1) 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)(2) Certificate of Amendment to Certificate of Incorporation of the Company.
(Exhibit 3.2 on Form 10-Q for the quarter ended June 30, 1998.)
*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.
26
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 10.3 to the company's
Form 10-Q for the quarter ended June 30, 1998.)
*10(a)(4) UtiliCorp United Inc. Annual and Long-Term Incentive Plan. (Exhibit 10.4 to the Company's Form 10-Q
for the quarter ended June 30, 1998).
*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.)
*10(a)(13) Supplemental Executive Retirement Plan, Amended and Restated, effective as of January 1, 1998.
(Exhibit 10.1 on Form 10-Q for the quarter ended June 30, 1998.)
27
EXHIBIT
NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
*10(a)(14) Employment Agreement for Richard C. Green, Jr. (Exhibit 10.4 on Form 10-Q for the quarter ended June
30, 1998.)
*10(a)(15) Employment Agreement for Robert K. Green (Exhibit 10.5 on Form 10-Q for the quarter ended June 30,
1998.)
*10(a)(16) Capital Accumulation Plan, effective as of January 1, 1998. (Exhibit 10(a)(1) to the company's Form
10-Q for the quarter ended March 31, 1998.)
*10(a)(17) Supplemental Contributory Retirement Plan, effective as of January 1, 1998. (Exhibit 10(a)(2) to the
company's Form 10-Q for the quarter ended March 31, 1998.)
13 Annual Report to Shareholders for the year ended December 31, 1998
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.
28
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, there unto 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 25, 1999
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 25, 1999
By: /s/ ROBERT K. GREEN
----------------------------
Robert K. Green
President, Chief Operating
Officer and Director
Date: March 25, 1999
By: /s/ JAMES S. BROOK
----------------------------
James S. Brook
Vice President, Controller and
Chief Accounting Officer
Date: March 25, 1999
By: /s/ JOHN R. BAKER
----------------------------
John R. Baker
Director
Date: March 25, 1999
By: /s/ AVIS G. TUCKER
----------------------------
Avis G. Tucker
Director
Date: March 25, 1999
29
By: /s/ ROBERT F. JACKSON
----------------------------
Robert F. Jackson
Director
Date: March 25, 1999
By: /s/ L. PATTON KLINE
----------------------------
L. Patton Kline
Director
Date: March 25, 1999
By: /s/ HERMAN CAIN
----------------------------
Herman Cain
Director
Date: March 25, 1999
By: /s/ IRVINE O. HOCKADAY,
JR.
----------------------------
Irvine O. Hockaday, Jr.
Director
Date: March 25, 1999
By: /s/ DR. STANLEY O.
IKENBERRY
----------------------------
Dr. Stanley O. Ikenberry
Director
Date: March 25, 1999
30