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ANNUAL d a s ~ REPORI
' 1988
9506050325 950531 PDR ADOCK 05000344 I PDR ,
M __ _ - ______- _ _ _ _ _ - ______
CORPORATE PROFILE
f2fCmC: PACinC Powm/Umi Pows
Paci6 Corps electric utility business serves 1.3 million base i highly diversified, which reduces adverse effects retail customers and is the third largest utility in the from a downturn in any particular industry. ' West. It operates the nation's largest open access, high- 1993PtmauAsct voltage transmission system which, combined with its Revenues were up 6 percent, to $2.5 billion,73 per- 8 low electncity production costs, allows a to sell whole- cent of Paci6 Corps total. Earnings contribution was - sale energy to over 30 other $322 million,84 percent of PacifiCorps earnings from w - entities throughout the West. ,. continuing operations. -|( Fhe company is also the 12th largest U.S. coal producer based 1984Omon y [' g , , on tons mined, supplying coal As one of the natmn s lowest cost producers, '. , f < */ g i 7 exclusively to PacifiCorp plants. Paci6 Corp continues to prove it can prosper in a com- . petitive utility market. Its on-going objective is to MAMUS Washington, ' business, while emphasizing quality customer service Idaho, hiontana and northern California. Retail power and environmental stewardship. sales come from a nearly equal mix of residential, com- mercial and industrial customers. Even the industrial
IMCOMMUMCATIONs: PACIRC TMCOM
PacifiCorps telecommunications business is operat- Wyoming. It also pmvides long distance services in cd by Pacific Telecom, an 87 percent-owned subsidiary. Alaska through an extensive system of satellite carth sta- It is one of the nation's largest nonBell telephone tions, a state-of-the-art communications satellite and a companies and its strength lies in the successful opera- high capacity undersea 6ber optic cable connecting tion of local telephone exchanges in largely rural Alaska to the lower 48 states. communities throughout 11 1993 PIMMMANCE West ern and hiidwestern Revenues were up 1 percent, to $709 million, 21 states. PTl is also one of the percent of Paci6 Corps total. Earnings contribution was - founding companies in the 9 M $51 million,13 percent of PacifiCorps earnings from North Paci6c Cable, the first [ continuing operations. h direct trans-Paci6c 6ber optic [ *' h%a.',e cable system between the U.S. 1994 Ounou and Japan. PTI plans to expand its local exchange business in rural and suburban areas through proposed acquisitions, MAMUS and to consider future expansion opportunities as thev Pacific Telecom serves 398,700 access lines in arise. Also, the Alaska market restructuring issue will Alaska, Colorado, Idaho, Iowa, hiinnesota, hiontana, continue to require attention in 1994, as a viable, long- Nevada, Oregon, Washington, Wisconsin and term solution is sought. Co m is -
Financial Highlights 1 Electric 6 Of6cers 54
Financial Review 2 Telecommunications 14 Board of Directors 55
To Our Shareholders 3 linancial Section 19 Investor Information 56 Com Pitoin
hiaintenance work on the 230 kilovolt circuit breaker transmission system reaches throughout the West and bushings helps keep the Sigurd substation in central pmvides the company with the flexibilirv to efficiently Utah running smoothly. PacifiCorp's extensive and economically meet customers' energy needs.
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CON 80L2ATED REVENUES dI|||IOM UI i101LARU
3soo
MilIis re01 Ih it1 ARN IN I P1 Pl R %HTRi WOLN h. It )R 11!! MAR
|mw l+> i. om; .[r) 3 00 l'c.cn:ap bu 1995 1992 ( omp nen 6 anwih Dernarms Resuti 2soo Revenues s 3,4:2 s 3,242 5% 3% ' - Income from Operations 916 633 45 ; 20m * income from Continuing Operations 423 iso 2 , j * * ! Discontinued Operations 52 (4 91) ' "" Cumulative Effect on Prior Years of Change in ! i ' - * * Accounting for income Taxes , 4 ; * * "o Net income (loss) 479 (341) i !
* ' Earnings (loss) on Common Stock 44o (378 ) 1 ; I
Data na COMMON SHanE i I ! soo
' Earnings (loss) > ; ; * ' ' Continuing Operations s ' t.4o 5 42 (1) g * * Discontinued Operations .19 (i.8)4 88 89 90 91 92 94 Cumulative Effect on Prior Years of Change in 13 (>me, * * .on - Accounting for income Taxes %, Telecommunications * Total .6o (i.42) (2) % lleuric ()perations Dividends Paida) s. 95 142 (ii) (2) Book Wlue si.6 io.75 8 (1) EARNINGS AND > % Stock Price Range zoVs - 16Vs 25 - 18% (3)N 2'M DIVIDENDS PAID Fansciat PosmoN av DictMsta 31 PER COMMON SHARE V " " Id #" Assets s 11,959 $ it,257 6 3 2'" CapitalizationM 7 773 7,725 1 2 Capital Structure
, long-Term Debt and Capital lease Obligations 5o% 54%
Preferred Stock 8 8 'd Common Equity 42 38 Ornta Stari: Tics Return on Average Common Equir3M x25% 74%
Market to Book Wlue (YearEnd) i66 % 184 % ! '" Cash Flow from Continuing Operations s i,o37 s 942 < Common Shares (Awrace. Tbsands) 274,55: 266,s27
..mo. .eng ,m.,a,a a IWJ ip.u awro s the IturJ o' Dor.r.a. e m I cbwn Ho 1 ma osy if a mJueca a im,4.imard un .a rN ( omp.ir s s i ok po An ib bwdonna md ;nu do i t dda ihon iam Ahi anJ i nuh rn.1:ang ior . to n JcSt .m! .apa .| ' .awh obhpeu.m ( ul ( L ubrrd u mL anone t*ntt ru m.ay opr a i cw L.,h n,:4pn i ' s har gn m ' F ' buludq gm d shn ha rcmen tov ! I'if e a 4 a peru ng
b o 88 N9 90 91 02 (J ) % l.arntnp "R! lbidends l' aid *
( A ulaicJ uung carnmp inom onnnump ogn r suon culueng su per dwt of qv.ul t h.irges m 1+)2
* \(( beettfii44 < a} al IcIl
| I ' Pncli Ceap 1 i
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TOTAL INVE8TMENT RETURN FIVE-YEAR teEXED EANENG8 COMPOUND RATE THERMAL PLANT PER COMMON SHARE 1988-1993 PERFORMANCE ACCE88 LINES il><>LL4ky (I'l klDT1 TQI It AITNT A t AIL 4 Bill 1T IIHOUL4NIW
t.25 20 88 % 400
, 350
Loo g i i 4 is 3oo
82 25o 75 80
* lo 200 ,
' '_ 78
g 15o
! a e . 76
' 5 too .25
72 50 1
- o o , . . . . . 7o o 88 89 90 91 92 43 .84 85- 86- 87- 88 89- 88 89 90 91 92 93 88 89 90 9t 92 93
% PacifiCorp* %, PacifiCorp i:ive Year Moving Averages % Standard & Poor's 500* % Standard & Poor's 500 g pgg % Standard & Poori1:lectrics* % Top 50 Utilitics' fB NERC Equivalent'
, !%ithrjn roults weic uliulmed ueng 1Raoked in non vrunun of t Nonh Amenon 1 Iccuh Relubiluy s f rom tonunmnp oivraouns. %Iomon Brothers' I letinu. Count d; infonnanon for 19'O i not ntin i , carnapo,ms nev fnp 5hy, mlwr m n,.n share or 5 i6 mden ni amu *-
*l yurcs mdntd to a tw of Swo m niNM Sum knavneT Sam n Acas La Gem Carnut: Tamuit Ptm Poromimet * PadfiCor;61993 net intome was * PadtiCorp's five-year total investmeni Through enhanted maintenance Pacific Telecom experienced a 5 per- 5&9 million. return stands ai 8.5 percent. methods. new materials and other im- cent increase in local telephone pmvements. PacifiCorp's thernul plants exchange access lines in 1993, for a * Net income from PadtiCorp's * The MP Ws sn(L price appreda- have experienced steady increases in total of more than 398 "00 access continuing operations was $423 non anJ dividends mmbined to return plant equivalent availabihty - the imes. Access line growth in its senice milhon. 14.5 percent. amount of time a plant is available to areas has exca&J the national average produce at full-load. in recent years. O laminp per mmmon share were 51.60 * The top 50 of the Salomon Brothers' compared to 1992 loss per share of 1.lectrics. ranked by IW2 revenues, in rnent years. PadfCorp's plant Most of the growth in 1993 was due 51.42. retumed 16.2 pcttent over the five-year equivalent availability has grow n at a to population increases in many of the period, rate that is about three nmes faster than areas it serves. Pacific Telewm also e tw3 caminp per mmmon share from the national average for wmparable continues to look for appropriate continumg operations was 51 40 thermal plants. opportunities to expand the laal tele- wmparcJ to s 42 in t w2. phone exchange business through acquisitions.
! PACIiiCIIP
L______- .. _ -. - - 1 !
! y,%,nyy R O b 11 unid!$gwhji g.,a ,
The utHity business is changing, and PaciflCorp is well positioned to compete in this new marketplace. This position didn't come without deliberate effort. in addition to expanding our geographic reach and economic size through mergers and acquisitions, several hard calls were necessary, including the decision early in 1993 to sell NERCO, PaciflCorp's former natural resources subsidiary. Those actions weren't easy, but with changes in | 1 the industry on the horizon, they were needed. The result is a thriving, l profitable electric and telecommunications utility company focused on its strength as a low-cost power producer and recognized provider of | quality telecommunication services. Financial results for 1993 are Indicative of the earnings | capability of these operations.
n 1993, PacifiCorp reponed consolidated earnings on common stock from continuing operations of $383 million, or $1.40 per share. This compares to $113 million, or 50.42 per share reported in 1992, a year in which earnings were negatively affect- ed by after-tax valuation adjustments of $213 million, or 50.80 per share. Revenues for the year were $3.4 billion, compared to $3.2 billion in 1992. Electric operations - through Pacific Power and Utah Power - showed a 6 percent increase in revenues over 1992. Wholesale elec-
- p . tric revenues increased 17 percent, or $72 million, and retail electric rev-
, enues, helped by a tetum to more normal weather conditions in the senice j , area, grew $67 million, or 4 percent. ; Telecommunications revenues grew $5 million, or 1 percent. In ;; } addition, Pacific Telecom's profitable sale of a noncore international communications subsidiary provided a one-time luost of $52 million
. , or 50.19 per share to PacifiCorp's 1993 earnings. The solid financial .csults for 1993 follow the difficult but neces- sary steps taken to restructure the company and reset our dividend g level in early 1993. In the period since announcing those actions, the
'
. financial community has recognized the competitive position and
'
, long-term value of PacifiCorp.
-
A.M. cuA80N FRtDimCM W. eucKMAN I Va enAmuaN am PatsuNT A2 cMT foamin rRESENT AND Extcunvt ometa l PaciriCeir car Extcunvt omcra 3 l
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Our ongoing objective is to continue to increase share- PaoircTING ENYlRONMENT A l.0NC41ME COMMITMENT holder value by improving and building on our comperi- '' "'P "' " I"" E~ 'i *' '" * * i' * '"' ' " '''P "'I' tive position, and by responding aggressively to growing and corpor te citizen in the environmental arena, and a stifTer competition from others. reputation for secking solutions instead of avoiding issues. COMPtilitoN COMEs 10 hEcTaic INoustav One example.is the experimental tree-planting program the company started in 1992 to test cost-effective offset PacifiCorp recogniecd nearly a decade ago that the elec- strategies for carbon dioxide emissions from coal-fired tric energy industry was starting to undergo a fundamen. tal and probably permanent change. New, nonutility Po"er plants and other sources. Plantings have continued thmugh 1993, and more are planned for 1991 suppliers arrived, presenting both utilities and customers While there is no current law to restrict arbon emissions, with options fhr how they acquire and use their energy voluntary mitigation programs such as ours serve as a con- supplies. Utilities began facing competition they had not structive method to test possible solutions for the future. previously seen. Many utilities still fear these changes. PacifiCorp, how. By taking a leadership role in shaping ftnure regula- ever, decided early to be active in this new marketplace tion, PacifiCorp hopes to develop innovative strategies that rely on sound economics and the best technical and developed a competitive strategy to be a low-cost pro- information. ducer with transmission access across seasonal boundaries
and into higher cost markets. Low-cost producers have UPc0 MING CHRENGEs FoR 1984 the dexibility to beuer handle market changes. PadEorp also applied this leadership philosophy in This market position also provided us the opportuni- p ng shape the Clean Air Act Amendments of 1990 to ty to increase the amount of megawatt-hours sold on the g w ut ssmneHe ty in Iw they would meet the wholesale market by 78 percent in the past five years. new nrimtandards for sulfur dioxide and other emissions. The company continues to trim costs in order to ofter P" '*P "'#1~f''J Pl*"'5"'' "' '1F "!li" '" * P1i '"'' power at a competitive price. We look fhr ways to gain with the tougher sulfur emission levels that take efTect in more efiiciencies while still pmviding the high quality ser- the year 2000. vice our customers expect and deserve. n the next decade, we will be relicensing virtual- We've also adopted a variety ofinnovative approaches ly all ofour hydroelectric proiccts with the Federal Energy to acquiring and managing our generating resources. gulamrpnmuwon. mughout the process, we will Because of the excellent performance from our plants and | wo w U amcerned parties o seek solutions which ) mines, our power pmduction costs per unit ofenergv pro- protect the environment and preserve this kiw-cost resource duced are significantly less than the national average. " " " ' ' " " * " " * ' And, as we look (br new ways to meet the power needs On the telaonununicadons side, the main issue being of an increasing number ofcustomers, we are diversifying f ced is the Alaska market restructuring, a topic of dis- our coal-fired and hydmelectric power base with cogen- mw on in dw nate for dw pan 10 yms. A pmp(ml m solw eration, conservation measures and renewable sources such the inue was made in Ocmba 1993 by the Federal-State as wind and solar energv. Joint Boad ma by the Federai Ommunications These ahernatives not only make economic sense, thev Commission. Alascom, the Pacific Telewm subsidiary also make environmental sense. which provides long distance service in Alaska, filed an application (br review a month later, commenting on a variety of the Board's findings.
4 PACIfICIiF
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Meanwhile, Alascom and AT&T, which is interested Mmaram CHNGE: AmouncEn in entering the Alaska interstate long distance business. Funnics W. Bucuum signed an agreement last October to exchange propn.etary information relating to Alascons structure and operations. Fred Buckman is the new President and Chief Executive Officer of PacifiCorp, effative Feb.1,1994. He was nxxuit- and to promote the possibih.ty of a negotiated resolun.on ed from Consumers Power ofJackson, Mich., America's of this issue. fourth-larpt combination electric and gas utility, and a sub- To date, no decisions have been made, but the compa- sidiary of CMS Energy. ny will continue to seek a viable, long-term solution which Until moving to PacifiCorp, Fred spent most of his working years with Consumers Power, serving as_its protects our shareholders, .mvestment while assuring that President since 1988 and, since 1992, also as Chief all Alaska customers continue to receive telecommunica- Executive Oflicer. He is a 1970 graduate of MIT with a tion senice at affordable prices. Ph.D. in nuclear engineering. 3 " Focus os aun CORE BUSWESS Dos C. Im sEE
In 1992 and into early 1993, PacifiCorp accelerated its . - Don Frisbee rea.re d from
~ cfTorts to refocus the company on what it does best - the h s position as Chairman of the management ofits solid utility operations. Board in February 1994, As noted, Pacific Telecom completed the sale ofits inter. when he reached the man-
. datory retirement age. Keith . national communications subsid.iary m 1993. Once the McK,ennon was named the sale of two smaller units is finished in 1994, Pacific Telecom new Chairman (see page 55). t will have r.a significant noncore business. It is focused on Don served as Chairman for ' - expanding its local exchange propenics and continuing to almost 22 years, and has been an employee of the company provide quality service to its customers. since 1953. He has provided . In 1993, agreement was teached to purchase 50.000 access vitalleadership for the compa- lino in Colorado from US WEST, and a lener ofintent to pur- ny and served as a model for chase another 34,100 access lines from US WEST in Oregc.n civic leadership as well. While his invoh ement in the com- pany will be missed, he will continue his community and Washington was signed in mid-March 1994. acovmes as Chairman Emeritus. During 1993, PacifiCorp Financial Services added to reserves to accommodate continuing downsizing cfTorts as A.M. States market condm. .ons allow. The results fmm 1993 show what PacifiCorp c.m achieve Al Gleason took on a new role in February 1994, when he was named Vice Chairman. He served as PacifiCorp - when f.ocused on .as strengths as a un.lity companv. Through - ' Pres.i dent and Chief Execun.ve Oflicer for the past five the efforts ofour dedicatal empk>yce group, u kok toward years, while the electric operations of the company continued business success through the rest of the 1990s. doubled in size. During his last year before nonnal retirement, Al will be working with Pacific Telecom management in reviewing PacifiCorp's investment and future opportunities in the [ telecommunications industry. Al is well-suited for this task; -'? -- - he led the growth of Pacific Telecom from two small local Frederick W. Buckman A. M. Gleason telephone properties into what it is today - one of the Anidmr and Mu Guirman and I rgest nonBell telephone entities in the country. Chiefihrairi:r Offiar Former nnident and Chiefihrairi:r Offiar
PaciriCeae i
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No matter what the weather, PaciflCorp
crews work to keep power flowing to customers.
Salt Lake City is the largest city served by the com-
pany and one of the fastest growing parts of the
service area.
4 PacariCeer
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.
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Increased competition is coming to the electric utility' business, and . PaciflCorp is ready. As one of the lowest cost producers in the country, PaciflCorp can provide electricity to its retail and wholesale customers at prices substantiaNy lower than iaost investor-owned utilities. And, with
_ its extensive transmission' system, the company has the flexibility to transfer power throughout the West. Theough Pacific Power and Utah Power, PacifiCorp's electric utility divi-
| . siens, the company serves 1.3 million retail customers and an increasing number of wholesale customers. The service area continues to grow, ben- efiting from a large in-migration of people in certain portions.
L ELECTR C T
f he overall population growth rates fo the racific Northwest and Mountain states are among the highest in the nation. There was an increase of more than 27,600
y . customers in raci6Cor;A electric service area in 1993, continuing a growth momen-
rum that is higher than it has been in at least five years.
m" racifiCor;A economic development group continues its cfTorts
to bring in new industry. Recent success stories include the relo-
PACIHCORP's MARKET DIVERSITY cation of a 6berglass products manufacturer to southern Oregon:
ENERay ilEVENUES 1993 a large retail distribution center and stainless steel tank manu.
facturer locating in Utah: and a metal castings manufacturer
relocating from southern California to Wyoming.
These etTorts not only increase electric revenue: they create
a stronger wmmunities by expanding and diversifying the local ,+ j economics and creating new jobs.
Oq" L . ,
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M10lChllt 2 D"'o D Industrial 28
% Commercial 22 % Residential :s I% Other 2
PacariCaaP 7
_ _ _ _ -
__ CAPACITY Rts0uaCE MIX-TOTAL CAPACITY: 10,040 MW The national average cost of electric-
Other Thennal g,& Hydro ity during that survey period (winter Mid-Columbia ' ' " Other thdm months of 1992-1993) was 8.89 cents
Naughmn 1-3 per kilowan-hour: PacifiCorjN average -sw f7Ewa llonneu.lle i,ower 8 Adminhoarion Peak . ''* E "" "# ' '# " " " ' ' "" * # Dave Johnstnn 1-4 %uthern a Cahtorma 1 dison period. f %; Hydrotleenic Huntinpon i N q.g Other % Therm.d WHOLESALE COMPLEMINTS RETAlt ~@" ?^9 3 % Conuact Peaking Humel l-3 Jim ihiJger l-4 %, Other Resourses The same low prices which give
PacifiCorp a competitive edge in the PacifiCorp's energy comes from many different gerierating sources, which provides flexib!!ity and reduces company exposure to unit outages. retail market are contributing to an expansion in wholesale
( )ne thing w hith attracts new businesses to PacifiCor[0 sales. Wholesale sales complement PacifiCorp's retail busi-
servite area is low energy ptites. PatitiCorp's average ness and help the company maintain stable, low prices for
electric rate is at least 25 percent lower than the average all customers.
elettric rate for cath of the three major electric utilities in Of the West's 10 largest investor-owned utilities,
California, and is also significantly lower than desert PacifiCorp sells, in dollar volume, the greatest amount of
Southwest state markets. wholesale energy. %st of these wholesale sales are under
PatifiCorp has been able to reduce its retail prices by an firm contract, which should a.ssure the company stable,
average of 10 percent from January 1988 through 1992. predictable revenues and cash flow.
A sli ht increase in some states occurred in the fall of 1993 The 1992 National Energv Policy Act provided fi>r fiir-
due to a pass-through price increase from the llonneville ther competition in wholesale markets by opening up
Power Administration, a fideral power marketing and transmission line access to a wider variety of energy sup-
transmission agency. PacitiCoriA prites, how ever. remain
. comparable to local public utility districts and are actual- od' | .
- ly less subject to t hange, compared to those Pl:I)s u hic h
' rely on |5l'A Iktr a largCr portkoll til (be[r power. [' MM - .f.u, lile 13f est testi!!s Iroill a stilli-annual surtCy conducted , e'. . g , by !!)C Nationa! Assotiation of Negulatory k[tility ' fg , ('tifilnliwitine!% pl.lted I}ve Patiti('Drp areas as } laving anlon"
tilC 2b least esperhive w klitel residclitial electrit bills ill lik ' a t ot tilt ry. - , ,
1 PaciriCeaP
- _ _ . _ -. - - ______.
1
pliers. As a restdt, increased competition is expected for LOW-COST PRODUCil0N A KEY ADVANTAGE ' industrial customers and possibly other retail loads
Ikcruse it has worked for vears' to kiwer costs and stream- PaciGCorp views competition as an opportunity, as the line operations, PacifiCorp enjoys significant power gener- '
companv' has successfully managed open access to its trans- - ation cost advantages. The company's combined production mission lines since the merger between PacifiCorp and - and transmission cost is one-third below the average ofoth- Utah Power five years ago.
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Most of the company's power comer from . er Western investor-owned utsh. .oes. And, it owns 46 per- coal-fired facihties such as the Jim Bridger plant cent of the power from the West's 10 lowest-cost coal-fired (abare) in Wycming. By working closely with thermal plants. The next largest ownerslu.p share held by | industrial customers (left), PacifiCorp can help . any other investor-owned utih.ty is less than 10 percent. them improve their operations through elec-
tretechnoloDies. Pacific Power's Tom Wangler pany, in part because PacifiCorp owns and operates mines (slanding) helped Ochoco Lumber, Prineville, adjacent to many ofits plants. About 60 percent of the coal Dre., lucrease the efficiency of its lumber
drying process.
PatiliCeat 3
. ______._
.
' ~ - .- , comes from these s . , j burned at PacifiCorp plants .. ~- . ,f,. , t " captive" mines. The close proximity minimizes coal trans- g i- , " ~ '
- portation aists and maximim operating flexibility at the . .
'.. ' generating plants. And, the high-quality, low-sulfur coal, ~ -
' coupled with already installed pollution control equipment, th [
means the company will not face any significant .. }.
, increases in pn doction costs to comply with Clean Air Act
-
Amendments when they take full efTect in the year 2000. . * PaciflCorp mined 20 million tons ofcoal in 1993 for the . . > y, py ., s .t. exclusive use of the generating plants it manages. The deliv- i..- 'X . .g g.1.ff j.y _ _ _ _ _ .
cred cost for this coal was 91 cents per million liritish ther- . . a.m - Y ^ N.9 ,, 45.,m...... , -- mal units, almost 50 cents less than the national average. % , . . , , . '' , 42 f. %,.. . . '~ ' DIVERSITY Sount im NEw Rtsouncts , * * = . ' j.[g..Q. .
rw- - .. ""' Most of the company's power comes fiom coal-fired Mhe - # N' . r_ .
generation, and PacitiCorp setks to dwersify its resource port- . .;
~ fidio to gain more flexibility. Hydropower remains an s - F [; .d!" '
important low-cost resource, contributing significantly to .7 /".
.. ~ the company's electric resource mix. .
PacifiCorp also is looking to natural gas as a fuel source.
. . The Gadsby plant in Sah 1.ake City is being reactivated
and will burn natural gas. One unit began operation in up to 50 percent of the plant itself at various intervals.
1991: the other two units should start up in 1994. Also, The first opportunity is when the plant begins commercial
the Naughton plant in Wyoming will begin burning a mix operation, scheduled for mid-1996.
of natural gas and coal later in 1994 to reduce sulfur emis- As new resources are needed, PacifiCorp works with
sions from the plant. other entities to help develop the projects. Combustion
Perhaps the most significant new generation project turbines are planned in Arizona to handle peak loads,
announted in 1993 is a 474 megawatt natural gas-fired working with Arimna Public Service. 'livo wind farm pro-
cogeneration plant in I lermiston, Ore. 'lhe facility is being jects are planned for Wyoming and Washington. And, a 50
planned, financed and built by U.S. Generating Company, megawatt cogeneration facility is under construction at
a Maryland-based independent power producer. PacifiCorp the James River paper mill in southwest Washington. In all
will buy all the plant's output, and has an option to own cases, PacifiCorp looks for the least-cost options.
Il PAC 1I| C O || P
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" .
<
s ENVIRONMENTAL STEWARDSHIP AN IMPORTANT PRi0mTy I
' PacifiCorp is committed to minimizing and finding ...... - , - , .a. t . r . .- , m : Q Jow. cost but effective solutions to the inevitable environ- E. xgn - ,
(. ;if . mentalimpacts associated with the generation and deliv- g- ery ofelectricity. A pilot program to test the effectiveness . 6f.. | of planting trees to offset carbon dioxide emissions is in " " "" e ._ ' , .h$| ~ ; y . $.y.f g, absorb carbon dioxide from the atmosphere. The program ,, | 3. . ~ , . . ;.f g- 3 tests what could be a relatively inexpensive way to reduce | .. t 6. . : - 1 .- .y . m . m. 'e v. V_ ., j - gy - carbon dioxide levels in the atmosphere.
'
. . ., As part ofits environmental commitment, PacifiCorp
p . also is involved in the development of renewable energy ' : H , . ' . . - ; resources, including the two windfarms: photovoltaic pilot 1 ' p - projects in Utah, Wyoming and Oregon, and a solar pow- '\ 3 'i V er tower project in California.
Exploring cost-effective energy efliciency programs is
, another element of the company's environmental philos- , ophy. Various programs are available for all retail customer
. groups, and new options are being explored.
One pilot program last year distributed more than 100,000
energ efficient showerbeads to Oreg in itsidential customers. By operating coal mines adjacent to many of Fmm that k.nure . d time program alone, enough energv should its plants, PactflCorp can better control costs. A k ved to serve about 5,800 new homes. conveyor bell (left) delivers coal from Jim EMPLOYEE INVOLVEMENT KEY TO Success Bridger mine to the neighboring plant. A Pacific
Power crew (above)in Medtord, Ore., installs Employees are active panicipants in the company's envi-
underground service to a new residential devel- ronmental commitment. Through the " Green Corps" vol-
opment. The Medford area has experienced sub- unteer program, employees planned and implemented
stantial growth; construction permits in 1993 measures ranging from wetlands improvements and arbore-
were nearly double 1992 levels. tums to hical recycling programs - all to help make their
communities better places to live.
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TRANSMISSION SYSTEM ', ' PaovmtS EmcitNcits * 1 ).
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' \ , One of PacifiCorp's \r%3 % m. strengths is its transmis- g ' Cy o @,,JR:d:' M r;r .d,_ _ ~*x~;~7 y~ K;g:V
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2 . bA1Ni~ .| USPER [i N ~ ; SPOKANE :g '3 ; .- reaches throughout the " 46,3 :*.." -f .; 4 West and provides the com- g$ , , p. ' ' ' ror 1 ' fs, .. w d[ y[j } y| M 'pany with many options to . -Tr . s jp ' . 4. g. . -Q j - I boy and sell power. By tak- - f , g .- . . . , ,- ;* , r ; ~'N .. g, r; .H r3 L ing advantage et seasonal ' ' f(g' ~ hMSEl ... dlVersities and time lone ,I) > r ;! 3,,! 4 , variations in the large sf. ; CASPEK DC region it serves, PacifiCorp h- :; m~Yb.m y ., h -4( 4 zy( g- g efficiently uses its power w< go4 ''] . ,, 3 . . - < n ^ , :.m n supply resources to meet
- ?IE. . r;;gJtMu""" ., .;i i b.- i mINO : iJ. ' s; , 4: 1 customer ticeds while mint- 3 A, " Lc(, , - .p ' , + . s) . , gg j' F ' N. ; ga - mizing power costs. h , g yg E :: : ,
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ELECTRIC OPERATIONS d I. Penning reautstory saprerst, PacitlCorp's Northern Idstic prep- Bt *serv. ice Area erlie,s, serving 8,85F customers, @ Major hmer 11 ants will be 8cid to Washington Water
. M "dI E "C' Pewsr etnder an agreement sn- ) em. Company-Ow ncJ Trammiwion 1.ines enunces in February 1984. Bellms me Company Aucu the property best nects Pacificorp's g e Other Trammiwion 1. inn ablective to be a low cost, compet- ltive provider of elettricity.
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A rapidly growing part of Pacific Telecom's
service area is hilspel, Mont. in 1983, the num-
ber of customer access lines in Mantana
increased more than 6 percent. Pacific Telecom
provides local exchange service to hundreds of
communities throughout the West, Midwest
and Alaska.
14 P8C1fIC1RP
____ - -_ - ______. _.
Pacific Telecom expects continued growth with an increasing focus on ; . local telephone exchange operations. The number of customer access lines ; increased 5 percent in 1983, for a year-end total of 898,700. Pemling reg- ulatory approval,50,000 more lines will be added in 1984 with Pacific . Telecom's acquisition from US WEST Communications of 45 telephone exchanges in parts of rural Colorade. One of Pacific Telecom's greatest strengths is its ability to provide high quality service and updated technology to rural and suburban telephone cus- temers. it has a long and successful history of operating in smaller markets
- and continues to look for appropriate opportunities to expand its operations. -
IELECOMMUN CATIONS
ven as Pacific Telecom expands through additional acquisitions oflocal telep ine
territory. Many ofits market areas are gaining recognition as attractiw places to live E andexchange are expciiencing population growth increases that exceed national properties, averages. it is also experiencing solid internal growth in its existing service For ex.:mple, the Montana service area grew approximately 6 percent - or 2,742 new access lines - in 1293. Pacific
Telecom's western Washington properties experienced similar
Access L.INES BY STATE growth. Overall, Pacifk. Telecom's access line growth last year was r ughly double the industry average. Washmgton n2.ps , Another Pacific Telecom business experiencing substantial Idaho i.249 Moniana 45 456 Colorado 8a6: growth is cellular communications. In 1993, there were 10.800 ' Wyoming Other iasi U774 new subscribers, a 65 percent increase over 1992.
6 c- , Iowa i.4 o " OregS" . 45 7s Expansion opportunities for cellular operations will continue
.. h to be explored, c>pecially in the Midwest where most of the y , g57k ]' company's cellular activity is now concentrated.
honsi bb78 - laska 108,57* 70.762
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Cot 0RADo Acovismos Pam in March of 1994, Pacific Telecom signed a letter of
! ' in August of 1993, Pacific Telecom signed an agree- intent with US WEST to purchase 34,100 access lines in
ment with US WF5r Communications to purduse 45 tele- Oregon and Washington.
phone exchange pmpenies in Colorado for an estimated Pacific Telecom intends to examine other opportunities,
| $207 million. The transaction is expected to close in.the especially as properties within the general geography ofits
second half of 1994. existing service area become available.
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HIGH-QUAUTY ARVICE Rmam a Pamir Scenic vistas and rugged settings are typical af
Pacific Telecom's Eagle, Colo., service market. Pacific lelecom ha a srtong tradition of keeping its net-
Pacific Telecorn plans to close later in 1984 on the work modernini and offering customen, higfx]tulity senice.
purchase of an additional 45 telephone exchange Through a major upgrading program that spanned
properties in Colorado, more than ten years, virtually all of Pacific Telecom's local
exchange customers are now served bv computer-based
digital switching centers. Convening these centers to dig-
ital equipment improved the entire network's operating p
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. efficiency and service quality, and also made possible an MOVING Gui 0F NONCORE ACnymES
expanded range ofcustomer product ofTerings such as call As it concentrates on the kical telephone business, Pacific waiting, speed dialing and voice mail. Telecom has, over the past few years, divested virtually all Digital switches with special equipment also provide ofits noncore acthities. The sale oTTRT Communications, the network intelligence for more advanced "interacthe" an international communications operation, to IDB services like Caller ID, where the incoming caller's name Communications Gmup was completed in September 1993,
and number are displayed.' Pacific Telecom has been offer- with significantly better results than initially anticipated. ing this service on a trial basis for over a year and expects Pacific Telecom received $1 million and 4.5 million to expand its availability in 1994, shares ofIDB common stock in the transaction. The stock Pacific Telecom is also upgrading its network with fiber price for IDB, a domestic and international communica- optic technologv. Last year 106 miles of new fiber optic tion: network operator, increased dramatically during the cable were installed, significandy increasing network car- period between agreement date and closing. The $52 mil- rying capacity and also providing higher quality trans- lion after-tax gain in 1993 from the sale more than erased
mission - most noticeable in the improved clarity' ofvoice the $40 million after-tax loss recorded on PacifiCorp's conversations. in all, the network has some 1,132 miles
of fiber optic cable in service.
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'E. ' "*[j . ' ? PACIHC IELECOM'8 SERVICE TERRITORY ..- . . .,,$ b ,,,,c %. ' I - - _a Pacific Telecom is one of the nation's i squaw g. - . . - , i E ,. p'e ,., ,4 ^ . g-( , i. +M , leadmg telecommunications companies. Its - - A> j .4 4 ,k . N' > am e r + - rrais | .my :, ,.njp,y ,lg . 5 f :af'#"b i I " M** g J local exchange oporations span an 11-state .. ~ s, ~. ,( ! area. it also provides long distance ser- | Aw| QQ < W Uf 1
* | - S vices in Alaska through an extensive sys- . . ^ ' - ;i TELECOMMUNICADONS . tem of satellite earth stations, combined d, 1 4 O local Telephone Service Area Nv ' With digital microwave radio links and a O Local Exchange Pending Acquirition* y & ,'/ ( Ag Major Lanh Stations g communications sateHite. ut Microwave Radio Station 4 { *1mludo Ortwn and hbmpoo pmpoun, announad slanth 1%4
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In 1993, Paci6c Telecom al.so reached an agreement to To date, the FCC has taken no action on the Gnal rec-
sell I'll Harhor Bay and UpSouth Corp. to IntclCom Group, ommendations. Pacific Telecom co~n tinues to se$k"a long ~ _
Inc. (AMfXrITO in exchange for more than 853,000 shares term solution which protects shareholders' investment in the
ofcommon stock and $200,000. These companies provide state while assuring that all Alaska customers c5ntinue to mmive -
regioral microwave telecommunications senices and satel- telecommunication senices at affordable prides. ?
. t lite canh station senices in Adanta, San Francisco and New Pacific Telecom, with its reneded emphasis orflocal : Jersey. The sale is expected to close by mid-1994. exchange operations, is a strong company with good oppor-
As a result of these transactions, Pacific Telecom is rede- tunities for growth.- . - -s , _, ' ' ploying its resources to pursue a growth strategy centered e
' on its local exchange operations. t
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. Pacific Telecom, through its wholly owned subsidiary
. Alascom, also provides intrastate and interstate telecom-
munication services in Alaska. For nearly a decade, the
| | Federal Communications Commission (FCC) has had an +
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open docket to comider Alaska market restructuring issues. _
in October 1993, a Federal-State Joint Board established Digital system improvements have nuule possi-
by the FCC made final recommendations to modify the ble a wide range of product offerings to schoots
existing market structure. (left) and other customers. Portable communica-
tions (abare) make it easier for busy people to
keep in touch.
13 PaeitiCser
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.
| FINANCIAL SECTION CONTENTS
L
MANAGW5fs lhsCussW Am ANatyss w
, FamCIAL Common Mo RESULT w OPEIUmoNs 20 -
REPWT w MMAGEMBli , 38- )
ImEPassT AuerTas'REPWT $8
, STATaelis w ComouoATs imCoME Am RETAme Emms: 87
CoNsouoATEo BALMCE SilEETs SS 1
STATamiTs e CoNsoUDATB cam Flows 40 l i NOTE: To CoNsoUDATED F1NANCIAL STATaelis 41 ) |
I
l ' PaciFiCeie 13
. - _ - - _ _ _ _ _ - _ _ - . . _ __-______-_ SUMMARY |NFORMATION
MILLIONS OF DO! LARS IFOR THF YFAR 5. Year 1993 to 1992 Compound Percenuge Annual 1993 1992 1991 1990 1989 1988 cmnpanen c,u.th RcytNuts s3,412 4 53 242.0 53 168.3 s3.o93 9 53.oo7.o s29446 5% 3%
- INCOME FROM OPERA 110N3 9:55 633 .o 94i.3 923.o 9oo.: 8951 45 * Nt1INc0ME (LO ) 479. (34o.4) 507 2 473 9 45.66 446.7 i EARNINGS CONTReim0N (l088) ON COMMON STOCE Continuing operations
Electric Operations 322 3 202 9 346 6 334 2 329 6 - 309.o 59 i-
- Telecommunications 5o.9 57 3 766 76.6 64 2 so.3 (ii) '
OtheJ4 so.2 (147 3) (31) (19 3) (12'o). 7.o 1o7 8 * TOTAL 38 34 U29 420.1 39i.5 31.88 366.3 i - * * Discontinued operationsM $2 4 (490.6) 6o.4 - 6o.5 62.6 59 7 Cumulative effect ofchange in * * accounting for income taxes 4.o - - - - - * TOTAL s 439.8 s (177.7) s 480.s s 4s2.o s 444 4 s 426.o i EARNING 3 (l083) PER SHABt Continuing operations
Electric Operations s i.17 s 76 s i.34 s 1 37 s 1 34 s 1.25 54 (2) ;
Telecommunications .19 .21 3o 31 .26 .21 - (io) (2); Otheda) .o4 (.55) (.ci) (.o8) (.o4) .o3 rov 6 * TOTAL i.40 42 1.63 1.60 1 56 i.49 (i) ' * ~ * Discontinued operationsN .19 (i.8)4 .23 .25 .25 .24 Cumu'ative effect ofchange in
- - - - * -* accounting for income taxes .on -
* TOTAL s i.6o s (1 42) s i.86 s i.85 s i.8i s 1.73 (2) CA3M DIVIDENDS PER COMMON SMART
Paid s n.195 s 1 52 s i.47 s 14i s 1 35 s 23o5 (ii): (2)I * Declared s 1.oS s 1 53 s 14 85 s 1425 s 136 5 s i.635 (29)' OrntR INr0nMATION
Total assets s 11,959 s 11,257 s it,91o s 11,2o1 s 10,886 s 1o,448 6 3 Total employeesW m3,635 13,o 9 3 13,239 13,4n 12,56o 13,318 4 - Common shareholders of
record (77musands) 157 5 165 7 162 3 164 6 171.o 188.o (5) (4). Book value per share s 11.61 s 10 75 s 134o s 12.69 s' 12.29 s 11 91 8- (i) . Marier price per share s 19% s 19 % s 25% s 22 % s 22 % s 17 % (3) 2
Price earnings multiple (d) i38 21 5 15 4 14.o 14 7 11 7 (36 ) 3 Id Pretaxinterestcoverage ) 2.6 2.0 25 24 13 23 30 ' '2 Return on averace common equity (d) n2 5 74 12.5 12.9 12.8 12.s 69 -
* Not a meamngful number. M Other mdudeuhe operanonud Pau6 Corp finandal Scruco, int.. and independent power production. m well as the acovmn of PacMCorp Holdmp. Inc W Ihonunued operanons reprnented the Compmn interor in N1 RCO. Inc and TRT Communicanons. Inc. k) 1.2duJn empkwen of dmonnmied operanont (d) Cak ulated mmg rammp from mnimumg operanom. endudmg special durgn in 1992. See Nove 13 to Consohdated hnancial Sutements. Indudmg the elleci of pial durgn.1992 ratios werr a followv pnu cammp muhiple 4'; preux mierest coverage. I h and n turn on average mmmon equiry 3 4
i C1FlCiRP ,
In 1993, the Company implemented its strategic + Discontinued operations carning contribution in business plan to strengthen the scope and competitive 1993 was 552 million compared with losses of 5491 position tfits demic utility and telea>mmunic2tions oper- million in 1992. A $52 million gain on the closing of cions, and to reduce the size and scope of its other the sale of an intemational communications subsidiary cliversified activities. Actions were taken to improve and was recorded in 1993. Losses from asser dispositions build on the Company's strengths and to focus and write-downs at NERCO of $451 million and val- manapment and other resouras on opportunities in these uation adjustments and operating kisses of $40 million core businesses, which are expected to face increased tdating to the intemational communications subsidiary comptition. were recorded in 1992. During 1993, the Company o>mpleted the sales of + The average number of common shares out- its mining and resource development subsidiary, standing increased 3% due to the issuance of 6 million NERCO, Inc. ("NERCO'), and an intemational com- shares in a September 1993 public offering ar.d issuances munications operation. These businesses had been das- under the dividend reinvestment and empime stock own- sified as discontinued operations. The Company's ership plans. fmancial services business continues on its course of controlled liquidation ofcenain assets. By eliminating g gg and reducing these busmess acovmes, the Company expcts to reduce carning volantity while reducing pr* + Electric Operations' eaming uintribution dedined sure on capital and management resources. Reflecting $144 million or 41% primarily due to mild we.Jher these downsizing activities, the Board of Directors conditions, higher power costs, write-offs, increased reduced the indicated annual dividend rate on the pension contributions and higher preferred dividend Company's common stock to $1.08 from $1.54 per requirements, offset in part by increased energy sales to share effective with the May 1993 dividend payment. other utilities. + Telecommunications'earningcontribution from 1993 Cowe To198? continuing operations dedined $19 million or 25% pri- ' marily due to lower out-of-period revenues, competi- * ElectricOperanons eartunpcontnbutionincmd tion in the state ofAlaska and knver cable capacity sales. L $119 million or 59% primarily due to the effects of + The negative contribution of other businesses 570 million ofwnte-offs and adjustments in 1992, an . . mcreased by 5144 million primarily due to after-tax increan in energy sales and .mcreased hydroelectnc gen- eration, partially offset by higher employee benefit special charges of $132 million. expenses. + Discontinued operations' kisses in 1992 were 5491
. , . . million compared to earning of $60 million in 1991. + Telecommum. canons earmngs contnbun.on . Adverse commodm. .es markets, lower than expected oil
from connnuing operations dedined a. .mi!! ion or 11% . ..
. and gas production volumes and the decision to sell , pnmarily due to the effect ofgains in 1992 on sales of certain operations led to the numerous asset write-downs a noncore investment and cellular operations, and losses at NERCO in 1992. In addition, a 540 mil- + The carnings contribution of other businesses lion loss relating to the d.isposal of an international increased $158 million primarily due to the effect of . . . : commumcanons subsid.iary was recogmzed in 1992. special charges of $132 milh.on m 1992, m, terest rev- + The average number of common shares out- enues from a note received in June 1993 in connecn.on . . standm.g increased 3% due to issuances under the wah the sale or,NERCO, by means of a merger, and dividend reinvestment and employee stock ownersh.ip income from an m, dependent power subsidiarv. ' plans and issuances of shares to the pubh. c.
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_-. ______. _ _ . ,. . ,
bouemr AW CAMBL RESOURCES
Mll1 IONS Of DOLIAR5 iIOR THE YlAR
Aaual l'ornmied
1991 1992 1993 1994 1995 1996
nit Cass Ftow.: n,sm .. Camisons- ,Onnatows . ., ., , ,. . v- - , i DectricOperations - 1 s 74o . ~s 624 s746 ; ' ETelecommunications no. 177 iso
4 L O&er - :17o - 23 93 Tofu r.ozo 942 s,o37 Casu Divaties Pas 409 44o 366 Nti 5 611 5 502 5 671 s575-625 5575-625 5650-700
Cousinscran 1
8 's "6N s CA881 FLOWS Ucctric Uheratim: ' s 5o4 s-55 s 636 l? ' $6E.' 68i@ FRou CONTINUING > Telecommunications . m 109 3o3 n4- . up ' ' n2
OPERATIONS - -- - " Other -4 3 BYSEGMENT 4 anwoxsof trutzgo Tein 7o3 649 742 86o 729 797
Aceastress amo levistarsis 1 iloo , ' ' ' ' - ' i ! | , Electric Operations 292' '2796 .s/ 's5o% ' -' -: ! Telecommunications ' 41 3- 23 428W 4 | | . iooo . ' - -- Other' 23 - - (3) .'- 1 39 .- Tein Carlin 8mmes si.os9 s 1.oor s Sos s i.278 s 729 s 947 I goo L. J Matsmits er Lens TEmi BEST AM | Camn Liast Osusaries: ' f L Electric Operations - s 88 s ur- s' 62 s' . So ' -s. d' |s .1889 6m - - -d Telecommunications '16 29 . 32 . 16 u3 12 - t 'n; i Other n7 3u 273 ' 61 - 52 ' i - Totu s 44 s 45i s376 s is7 s 22 s 222 400 * - - > -' Ormen REFeaNCas s 179 5 7 51 s864
(4) The Gimpanyi prnent c umaic of comirustion expenditures a lwing reviewed and red 6xiuiris to ilu c csiinuito are aniitip.iicd. 200 (b) Intludn nontadi asqumuon unes of 52% milhon relaung to Gehnado-Uic pmpernes aquired in April 1992 through als usumption I of long icrm debt and liabiliun. (d Paufn 'lclnomi propwd squisiinm of US U..Wl' G inmusinasioin. Inc. propertwa in Gelormlo. Oregon and Wehmgton. t $ce T1.IN.OMMlNk.AlION% page 2+ ' idi paufiGup may escrtw in ops n to purchaw a 50% imernt in a 4'4 megawart, naiural gas 4 red generaung plani in Ilermmon. Oregon. O 5ee 1.1|CTkk. OP! RATION % page 23 91 92 93
Other Q Telecommunications I.lectric Operations
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1
p PatiriCser
______. - _ _ . Eiicinic OPERAll0NS 'The Company's estimated construction expen- Electric Operations uses snrral tools to plan for ditures for 1994 through 1996 are set forth below. future growth. The planning process starts with the These estimates are being te iewed and reductions Company's least-ctst plan, which is revisal every tm pars. are anticipated. The Company's three-year financial forecast is derived muu ms from the least-cost plan. These plans define how the 1994 1995 1996
Company intends to acquire eflicient, cost-efTective Production s163 s 185 s 246 energy resources for its customers and achieve its finan- : Transmission 103 ios i38 cial and operating goals. p;stribution 249 g4 144 For the period 1994 to 1998, annual retail Other 22 166 ' 157 megawatt-hour sales are expected to increase at an aver- Tem sn6 s 6:o 5 68s age rate of 2% per year, exduding the impact of the Company's demand-side emciency programs. After included .m the table above are the Company,s demand-side resources are considered, sales would be . CAPITAL SPENDING estimates of the costs of acqu. .nng demand-side recurces. Mix BY SECMENT expected to increase 1.6% per year. T.he Company,s .. ', The Company is implementing demand-side programs mctvn plan rdies on no single energv source to meet customers
to improve the energy efliciency of residences, com- . . 1* necds. 'The Company has identified a variety ofresource . 4 , mercial buildings and industnal facih. .nes - both new alternatives to manage supply and demand, such as pur- and existing. chases ofexisting power plants, improvements in equip- In October 1993, the Company entered into a - ! ment and operations at its own generating tacihnes, . 80 long-term agreement with Hermiston Generaung ;t ! .. .t : , power purchase agrtrments and demand-side resources. , ' Company, LP. to purchase electncity from a 474 1 ' ' i i Demand-side options indude customer efficiency pm- =. 4 megawatt, natural gas-fired generating plant to be built I ;i i grams to reduce existing energv use and to make new cus. near Hermiston, Oregon. During the first 15 years of i 3I' |: -|60 : I tomer usage more cfTicient. ; j(; , , , the 20-year contract, the Company will acquire more than . ' | k - On February 15,1994, the Company announced . . . ; . 3.000,000 MWh ofpower annually, bep.nnmg m mid- ) | i ; , its intent to transfer the ownersh.ip ofallits electric prop- < ; 1996. The Company has the option to acqu:re up to a l - - " J 1 4o erties in nonhern Idaho to Washington Water Power . m i, I 50% interest in the facility at the contract operanon , Company ("WTP"). The service area had 9,852 cus- !
- | . date and at 5 and 20 years fol!owing the contract oper- | i tomers and $13 milh.on m retad.saks revenues .m 1993. . i !
.
; . ation date. The agreement is subject to termination bv' i The cash purchase price for the propenies is expected to . ( -i).> _ , 20 . i ,! 31 ' the Company- if certain gas supply and transmission be approximately $30 million. Factors such as . isolan.on ! .; 'l < 1 , contracts are not secured or Federal Energv Regulatory'
. and remoteness of the area, the absence of Company' Comm. .ission ("FERC,,) approval is not obtamed. t! ij!, ;j. transmission b.ne to the ama, impending inauto in whed- ' >> r ! Whenever the c,ompany has power available and i ,is' o ing prices and reducu.nns of the 1 onneville Power . . the market pre is favorable,'.it makes off-system sales, 91 92 93
Administration ("PiPA") exchange credit forced upward . generally to other etih. .nes. Off-system. sales permit the % Other pressure on prices in northem Idaho and led to the dec.i- Compan.y to use edsting and newly acquired power % Telecommunications sion to sell the properties. The transaction is subject to supplies in a mannen that keeps down long-run costs %. . Elecinc. o.perations regulatory review and final documentation. The . tv in for retail customers ana orovides- added flexibih. ' Company hopes to dose the transaction during the ' meeting changes .m customer demand. summer of 1994. .Ihe Company expects to suppon its capital require-
During 1993, the Company- .mvested in con- ments through . -mternally generated cash flow and struction mnsisting ofproduction, $165 nu.llion: trans- issuances of add. .inonal debt, preferred stock and com- mission, $117 million: distribution, $237 million; and . mon stock in amounts that should result m a modest other, $117 milh.on. . . . . improvement m the equiry component ofits capital structure.
|
1 1
PaeiriCar . . ______
:
Ill.ECOMMUMCAMg est. Completion of this transaction will be dependent Over the past few years, Pacific Telecom's strate. upon receipt of appropriate regulatory approvals. Transition planning effons have mmmenced and Pacific gy has been to focus on its core business of prmiding Lx.al exchange senice to suburban and rural markers and Telemm expects to close the transaction in late 1994. On March 15,1994, Pacific Telecom signed long distance services in the state ofAlaska, and to dwest its dhrrsified ponfolio of noncore businesses. This strat_ leners ofintent with USWC to acquire cenain rur- egy is being implemented through the acquisition of al exchange propenies located in Oregon and local exchange properties, the sale of cenain interna- Washington from USWC for $183 million in cash, tional operations, the consolidation and sale ofcellular subject to certain purchase price adjustments at clos- holdings, und ongoing efforts to achieve a satisfactory ing. These propenies represent 49 exchanges that restructuring of the Alaska long distance nurketplace. serve approximately 34,100 access lines Many of With the completed sale of TRT Communications, these exchanges are contiguous to or located near Inc. ("TRT") and upon closing of the pending sale of exchanges that Pacific Telecom owns and operates two additional nonmre operations, Pacific Telecom wilj in these states. The transaction is subject to negoti- have exited from all ofits material noncore businesses. ation of a definitive purchase agreement with USWC, In 1993, Pacific Telecom had no major construc. which is expected to be completed in early April tion projects that requiwd more than one year to com- 1994. Completion of the transaction will also be plete. During 1993. Pacific Telecom's construction dependent on corporate, regulatory and governmental expenditurrs consisted of 574 million for kical exchange approvals, all of which should be received by late operations, $18 million for long lines, $7 million for 1994 or early 1995. cellular operations and $4 million for other. These Pacific Telemm expects to fund these acquisitions expenditures related mainly to network upgrades and through the issuance of external debt and the use of growth in Pacific Telecom's operations. internally generated funds. Future local exchange Construction expenditures for 1994 through 1996 company acquisitions may require a significant are estimated to be as follows: amount of funding depending on Pacific Telecom's mmuom success in pursuing its strategy. Pacific Telecom 1994 1995 i996 expects to fund such acquisitions through a combi- nation of internally generated funds, external debt localexchange s 99 s 94 * ' 79 and may, if necessary to maintain appropriate capi- longlines - 29 u. 'n tahati n rati s, consider equity issuances to help Cellular 7 6 5 fund the acquisitions. 2 . Other -9 2 In 1985, the Federal Communications TotAt s na s n9 5 ut Commission ("FCC") established a Federal-StateJoint Board (" Joint Board") to review the interstate market Pacific Telecom is seeking to expand its local stmctun ofAlaska and to reconcile various existing and exchange operations a-1 cellular interests through emerging federal policies afTecting universal acquisitions that complement its existing properties sen. ice, rate integration and competition. In October and operations. In August 1993, Pacific Telecom 1993, the Joint Ikurd released a Final Recommended signed a definitive agreement with US WINF Decision ("FRD"), which proposed, among other mat- Communications, Inc. ("USWC"), under which it will ters, to terminate the Joint Services Agreement ("JSA") acquire certain rural telephone exchange propenies in between Pacific Telecom's subsidiary, Alascom, Inc. Colorado. The properties include 45 exchanges that ("Alanom"), and American Telephone and Telegraph sent 50,000 access lines. Pacific Telecom expects to Conipany ("AT&T") effathe September 1,1995. The pay $207 million for these propenies at closing, subject JSA has been in effect since January 1,1980. In addi- to a puichase price adjustment mechanism baut prin' non, Alasmm wouki rtxrhr a $150 million payment fmm cipally on the estimated book value of the assets to be AT&T for accelerated cost rtmvery in two equal install- ! acquind. Pacific Telecom spent $6 million in 1993 ments of $75 million each: AT&T would be required j and expects to spend $28 million in 1994 to upgrade to continue to utilize Alascom's facilities for the ori;;i- i the service to these propenies. If the transaction does nation and termination ofinterstate trafiic on a declin- not close, USWC is required to reimburse Pacific ing satte for a perial of two and one-halfyears following Telecom for these expenditures, together with inter-
N PiCIfICIIP
. ______. r _
terminat5on oftheJSA; and Alascom would create an tures, the Company increased its 1993 coverage of interstate tarifffor carrier services based upon an as yet construction expenditures. The increased cover- to be developed allocation ofcosts between rural and age is attributable to a 17% decrease in dividends nonrural locations. Subsequent to the issuance of the paid and 10% growth in the Company's cash flows FRD, Alascom filed an application for review of the provided by continuing operations. FRD with the FCCt others have in rum filed objec- tions to Alascom's application. To date, the FCC has letsim AcimTE: taken no action on either the FRD or Alascom's appli- In 1993, net cash flows used in investing activities cation. Under applicable Federal statutes, the FCC will were $263 million, reflecting construction expendi- render the final decision in this proceeding. As a prac- tures of $742 million, mainly by Electric Operations, tical matter, sina a majority of the FCC Commissioners net of cash proceeds of $384 million from the dispo- participate as members of the Joint Board, the final sition of the 82% interest in NERCO held by da;isions of the FCC often reflect recommendations of PacifiCorp Holding, Inc. ("Holdinp") and $195 mil- the Joint Board. lion received by Pacific Telecom from the sale ofIDB On October 12,1993, Pacific Telemm and AT&T Corununications Group, Inc. ("IDB") common stock, entered into an agreement to exchange proprietary infor- which was received through the sale ofTRT. The pro- marion relating to Alascom's structure and operations ceeds from the disposition of NERCO were used to
for the purpose ofpromoting a negotiated resolution to repay short-term debt and to fund a $225 mill'on, loan sorm or all of the issues rdating to theJSA and die restruc- to a subsidiary of the purchaser. The loan is repayable ture of the Alaska interstate market. Pacific Telecom is by the borrower as, and only to the extent that, it unable to predict the outcome of this matter. receives certain future coal contract revenues. The Company is the beneficiary oflife insurance Ortiinim ACTMTE: policies and in 1993 obtained advances against the Cash provided by operating activities contin- cash surrender value of these policies. At December ues to be the Company's primary source of funds to 31,1993, the balance was $70 million. The advances finance operating netds, dividends and construc- currendy bear interest at 6.5% and are payable from the tion expenditures. Cash generated by continuing proceeds of the insurance contracts in the event of the operations less dividends paid provided for 90%, insured's death or cancellation of the contracts. 72% and 87% of construction expenditures in 1993,1992 and 1991, respectively. Despite a $48 million, or 7%, increase in construction expendi-
,
a
PieitiCsar +
- _ _ _ _ _ - __ _
Imscac Actwts MilUoNS OF DotMRs / DFCEMPLit 31
1993 1992 1991 1990 1989 1988
dommon equity s 3,263 s 2,9o8 's 3,5:2 s 3,208 ' s 3,ooy ' iiz,936 | Preferred stock 36 7 -- 417 _342 342 242 246 ; Preferred t,tock subject to 6- sig 219 _ 15o So yo 56 } ' niandatory redemption 4 ;Long-term borrowings , 3,924 4a8 4,348 _ 3,944 - ),795 3453' ,Long4ctm botmwings
[ currendymaturing 15$ 42o 274 30'8 4o7 4o2 |Shon-term debt 454 m 681 698- - t.o. s 979
COMMON STDu 1994, declining to $300 million in 1997. Holdings has During 1993, the Company issued 10,441,675 pledged its shares of Pacific Telecom and PFS and cer- shares ofits common stock to the public and under the tain other assets, including the note received in con- nection with the disposition of NERCO, as security for COMMON EQtliTy Dividend Reinvestment and Employee Savings and ow non oftui!L4ko Stock Ownership Plans. The issuances included repayment ofits obligations under the Agreement and other agreements. In conjunction with the Agreement, 4000 6,000,000 shares of common stock sold to the public in late September 1993 for net proceeds of 5115 million. Holdings and PFS entered into a new intercompany borrowing agreement. 35 " PREmu1ED STDCX Holdings has executed various agreements that In January 1993, the Company redeemed 500 support the cirdit ratings and credit facilities of PFS, 3* shares ofits Series B auction rate preferred stock at stat- under which Holdings has agreed to maintain owner- ed value or 550 million. ship of not less than 80% c.f the voting shares of PFS; 2500 provide equity mntributions to PFS to cause its tangi- Lord IERM DEET, bCLUDrs CUREDiT MATURmEt ble net wonh to come into compliance with applicable 2mo long-term debt decreased $522 million in 1993 as covenants in the event such covenants are violated; and a result of debt repayments of $1.2 billion, net ofdebt provide liquidity support to enable PFS to fund debt isoo issuances of 5699 million. Pacific Tekrom's long-term maturities. debt decreased 5160 million due to the application of moo proceeds from the sale ofIDB common stock. 'lLe CAmALWm0N (MS long-term debt of PacifiCorp Financial Services, Inc De Company s Artides ofincorporation limit the amount of uncured debt outstanding to the equhalent son ("PFS") and Holdinp decreased $390 million prinar- ily due to proceeds from the disposition of NERCO of 30% of total defmed equiry and secured debt. Under
o and net principal payments received on fmance assets. this provision, approximately $1.3 billion principal 88 89 90 91 92 93 During 1993, PacifiCorp's long-term debt increased amount of additional unsecured debt could have been 561 million primarily due to the refmancing oflong- outstanding at December 31,1993. term debt with inwrest rates from 7.9% to 8.9% through issuance of the Company's mortgage bonds or pre- the issuance oflong-ictm debt with interest rates of ferred stock is limited by caminp coverage and fundable 4.5% to 7.4% property provisions of the Company's mortgage inden- As of December 31,1993, the Company had tures and its Articles ofInwrporation. Under these pro- 5850 million of mongage bonds and common stock visions and at current interest rates, approximately registeml with the Securities and Exchange Conunission. 53.1 billion of additional mortgage bonds or $2.8 bil- In September 1993, Holdings entered into a five- lion of preferred stock could have been issued at year, 5500 million revolving credit agreement Deumber 31,1993. However, anain of the Company's FAgreement"), and revohing credit agreements of $350 credit facilities would have limited additional long-term million for iIoldings and 5430 million for PFS were borrowings to approximately $1.0 billion. terminated. The commitment under the Agreement dalines by S50 million per year lqinning in December
PaeiriCeer 1
I i Under the Company's principal credit agreement, ing, its timing and impaa and the effect, if any, cadmn it is an event ofdefauh if any person or group acquires dioxide emissiens have on warming. As a coal-based
35% or more of the Company's mmmon shares or if, utility, the passage of a cartun tax or a stringent across- I
during any period of 14 consecutive months, individ- the-board emission reduction could make it difficuh ; uals who were directors of the Company on the first for the Company to achieve its goal of providing com- day of such period (and any new directors whose elec- petitively priced energy. The Company is investigating tion or nomination was approved by such individuals cost-effective ways of offsetting future carbon dioxide and direaors) cease to wnstitute a majority of the Board emissions and is undertaking demonstration projeas ofDirectort Foradditionalinformation regardingbank involving tree planting as a possible means of ofTset- cralit agreements, lines of credit and other shon-term ting emissions. lurawing facilities and related limitations on terrow- The Company continues to monitor the results ings, see Note 4 to Consolidated Financial Statements. ofresearch conceming the possible relationship between heakh effects from exposure to electmmagnetic fields lEAHON (" EMF") and the delivery and use of electricity. The Due to the capital intensive nature the Company's Company has supponed EMF research in the past, and core businesses, inflation may have a significant impact continues to encourage such research. on replaament ofproperty, aajuisitian and development Actions under the Endangered Species Act with aaivities and final mine reclamation. The efTects of respea to cenain salmon and other endangered or threat- inflation on the Company's utility businesses are not ened species could resuh in restrictions on the Federal significant to ongoing operations. While the rate-mak, hydropower system and affect regional power supplies ing prcress gives no recognition to the current cost of and costs. These actions could also resuh in funher replacing plant, based upon past practices, the restrictions on timber hanesting and adversely affect Company's utility businesses expect to be allowed to kilowatt-hour sales to the Company's customers in the nmver and cam on the increased cost of their net invat_ wwd products industry. ment when replacement of facilities actually occurs. The Company is mnendv in the prtes ofrdiansing certain ofits hydroelectric projects under the Federal BOW 8M M Power Act and will be relicensing nearly all ofits hydro- During 1991, the Environmental Pmtection electric capacity in the next decade. As part of relicens- ] ing, the FERC is expected to impose conditions dcsipted Agency (" EPA") and the states began the process of m address the impact of the projects on fish and other implementing the newly amaxksi Clean Air.Act ("Act"). envir nmental concerns. The Company is unable to Through the ongoing mk making process, the EPA has predict the impact ofimposition of such conditions, issued regulations to implement the Act's acid rain pro- visions: established a national emissions alkwance trad- but capital expenditures and operating costs could increase in fature paioJ3 and cenain pmjeus may not ing system; and required monitoring ofplant emissions. be emnomical m opaate. The Company's generating plants burn low-sul- Several Superfund sites have been identAd where phur coal. Major construction expenditures twe already been made at many plants to reduce sulphur dioxide the Cmnpany has been onnay be daignated as a poten- emissions, but some additional expenditures may be ti Hy resiensible pany in such cases, the Company necessary. The plant most afTected by the Act is the re iews the circumstances and, where possible, negoti- ates with other potentially responsible parties to pro- Centralia Plant in Washinpon. He Company is studv- vide ftmds for clean-up and, if necessary, monitoring ing how to bring this plant into compliance in a cost- aivities. In addition, insurance resources are rniewed efTective manner by the required Januarv 1,2000 compliance deadline. Since the Act does not mandate and investig ted. Future costs associated with the disposition of these maners are not expected to be the uc ofa panicular emission ruluction technoky, the Company will have the flexibility to select fmm sever- mataial to the Company's consolidated resuhs of , "5' al possible compliance strategies. P" " The greenhouse efTea is believed to occur when unain trace gases in the atmosphere trap radiant heat. ; There is uncenainty regardmg the amount of warm-
PaciFICar i
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ELECTRIC OPERATIONS MILLIONS OF [OllCN FOR THE YLAR
5. Year 170 to iW2 Comp,und Pen,cnrage Annual 34) 9 3 1992 1991 199o 1989 1988 Caparwm Growth
REvENuts
Residential 5 69 89 s 649.8 5 66.83 s 66.64 s 6 464 s 61.1-5 8% 2%
Commercial 543 9 526 9 517 4 Sop.o . $17 3 526 5 3 i
- industrial 66.29 695 .6 674 9 673.8 67 o.6 67 o.2 1
- Other 29,8 29 9 34.2 34.3 328 42.6 (7)
Prtail sales n,968.8 1,902.2 i.89 o.3 r,863 .7 1,872 5 1,89 o.4 4
Wholesale - Grm 42L5 3565 264 7 209 9 19o.3 150.8 19 23
Tholesale - non6rm 77 3 71 3 59 9 ' 748 79 0 87 4 8 (2) '
Wholesale sales 499 8 427 8 324 6 288 3 269 3 238 2 17 16
Other 338 32 4 396 32 5 33 9 31.o 18 4
Totu 2,5o69 23624 2.2 si.8 2.184.s 2,i7s.7 2.is9.6 6 3 ExrENE:
Depreciation and amortization 28o.5 286.6 256 .o 235 4 227.8 231 4 : h) 4
Ogrations, nuintenance and other i,442.1 1,398.1 1 n2.8 t.2o41 r,192 9 1,183 .4 3 4 RECTRIC OPERATIONS ToTu r,722.6 M8 4- i.88.8 149.s i,co. 7 2 4 ,MllllO Vs (H !!!>l!ARU Mi+8 67 .; |NCoME FRoM 0rtRArioN 78 43 783 .o 74s.o 7ss.o 744.8 16 i # ,' NETINCOME 31.66 240.2 373 3 3s6.i 3so.8 329 7 SI 2
. PREFERRED DIVIDENo REQUlHEMENT 21.2 20.7 ...... 39 3 37 3 26.7 21 9 5 14 EARNING 3 CoNTRIBUnoNW 5 322 3 s 202 9 5 46.6 5 W.2 s 329.6 5 to9.o s9 i 2 Identifiable assets s 9,181 s 8,192 5 7,665 s 7,o27 s 6,728 s 6 459 12 7
Capital spending s 673 s 864Ms 796 s 4s9 s 344 s 26 5' (26). 9 Number ofemployees 9,475M 9,555 9,419 8,974 8,913 9,163 (1) i
300 EXPENSE 8
Fuel s 4 647 s 479.o s 424.i s 4o35 s 397 4 s 412.1 (3) 2
Purcha. sed power s 274 9 s 21o.2 s 176 4 s 149 6 ' s 133 3 s 81.1 31 28
- icoo Other operations s 287 9 s 288.o s 249 7 s 259 5 s 2 71.1 s 295 7 (1)
Maintenance s 172.2 s 167 8 ' s 146 6 s 151.2 .s 158 7 s 16.o5 3 1 $ Administrative and general s 138.2 s 144 5 s rig.1 s 139 5 s 135 7 s 136 7 (4) - 6 300 Depreciation and amortization s 280 5 5 286.6 s 25 .o s 235 4 s 227 8 s 2314 (2) 4 - Taxes, other than income taxes s 1o42 s 108.6 s 96 9. s 100.8 s 976 s' 92.8 (4) 2
- Income taxes - utility s x88.8 s 17o.5 s 18o.8 s 169 .7 s 189 .i s ' 184 4 11 s 26 g income taxes - other (9 5) s (12.8) s (6.5) s (79) s (.9) s (9 9) .I M N 90 91 92 (H |NTERE81 CAPITALIZED AFUDC - equity s 43 s 73 s 79 s 84.s ro.5 s 72 (41) (to) ; Q Resenue., AFUDC - debt s 89 s 79-s 14 0 $ 12.2 5 77 ;8 .$. Inwmc f. rom Operan.ons 96 s
. Earnings C.ontrhution ENtRsv SALE: MMwnsofMN Residential 12,o55 11,23 o 11,354 1o,990 1o,756 1o,491 7 3
Commercial so,o85 9,733 9,416 9,1o1 - 8,8o3 8,666 4 3
Industrial 19,67 1 19,942 19,322 '19 507 18,87 8 18,o85 (i) 2-
Other 6o2 6o6 692 6o9 7so 7xt (i) (3) .
Retail sales 42,4:3 4i,sii 40,784 4o.288 39,196 37 953 2 2
Wholesale - 6rm si,9:9 10,455 7a49 6,147 5 44i 4,33 14 22 Wholesale - non6rm 3,o3o 29 6s 2,946 3,323 3 118 4,o66 2 (6)' Wholesale sales 14,949 13420 10,295 9,47o 8,559 8,397 11 12 Totn p.362 s49u si.o 9 49.7s8 c, ss 46.;so 4 4
w Iw n..i wtica rimm amm. of mwr.si on mwru,mpn3 bornming ananp menn and mdudo munne taes on a wparait-company ham ib Im tudmg n.mu A Aqumnon unn of s2% millum wlat.ng to the Colorad+t'w propernes u In 1M 12~ cmplow of 1%i (,cortarmn. Inc wue rep.ned in other himnew. I P A C1IIC 9 R P futeenluuocrs Emca accrue propeny tax savings which will be passed to cus- u>mers in the future, PacifiCorp generates pmver primarily at coal-fired and hydroelectric plants and relics on a transmission + Wholesale sales revenues increased $72 million or and distribution netwoik to serve retail and wholesale 17% on increased volume of 11% New contracts customers throughout the Pacific Northwest, Rocky added $36 million and increased prices added 515 mil- Mountain and desert Southwest regions. PacifiCorp lion to revenue from long-term firm contract sales, aho offer = retail customers a variety of services encour. Secondary and short-term firm sales revenues increased aging efficient use of energv. $17 million as a result of higher volume and prices. Earnings depend on efliciently and economically Operating rapenses increased $38 million or 2% balancing power-supply resources with customer + Fuel expense decreased 514 million or 3% pri- demand; utility commission practices; regional eco- marily due to reductions of $10 million resulting from nomic conditions: retention of municipal franchises; luer fuel costs and 57 million from a 1% decrease in weather variations affecting customer usage and hydro- thermal generation as a result ofincreased hydr riec- KILOWATT HGUR electnc pmducnon; fuel costs; wholesale firm power tric generation and increased purchases of hydroelec_ SALES BY marketing results; environmental ar;d tax legislation; tric pur. CUSTOMER SEGMENT movs orruonn7-norre end the cost of debt and equity capital. . - + Purchased power expense increased 565 million 60 Purs Susy or 31% reflecting a 539 million or 23% increase in
PacifiCorp seeks to minimize retail price increas- kM punhases; a 515 million increase due to higher f es. From January 1,1988 through December 31,1993, prices fm secondarv purchases in early 1993 and for .I
- the Company reduced prices paid by retail customers fmn pumhases nd thuffect ofan 511 miHior decrease fg by $178 million, or 10% on an annualind basis. These in BPA exchange benefits. The secondary purchases | I decreases were made possible by power supply coordi- were higher due to increased kWh sales and the avail- . | {40 bility oflower cost hydroelectric power. . nation, insurance savings, lower interest rates and work | | | force reductions. The it$ crease in the federal income tax BPA, a wholesale power and wheeling supplier, ! l ! ! incre sed its rates effective October 1,1993. The new ! t rate, BPA price increases, possible rising interest rates, ! !F and hydroelectric relicensing and other cost increases "c* "ill increase the Company's capacity and whccl- | ; ing apene by appmxirn.udy 517 niinion annuaHy ; ; are among the factors expected to place upward pres. ^9, sure on the Company's costs and pricing structure in and wiH nuuce the Company's net residential exchange | ' the next several vears. See ENVIRONMENTAL 1sSLU benefits by approximatelv $30 million annuallv. Retail on page 27 sales prices were increased in Oregon, Washington, i m Montana and Idaho to reflect the reduction in the BPA | 1933 Came To 1832 exchange benefits.
Rennues increased $145 million or 6% in certain circumstances, BPA has the option of , .o 9' 92 93 + Retail sales revenues increased $67 million or 4% in3plementing an interim rate increase of up to 10% M 89 90 on increased volume of 2%. Residential revenues for the period October 1,1994 through September 30, g g. g increased 549 million or 8% primarily due to the 1995. Ifa maximum increasc otcurred. it would reduce g ingg $26 million efTect of colder temperatures in 1993, a the Company's residential exchange benefits by approx- 13( Commercial 2% increase in the number of customers and a 5% imately $20 million for the 12-month period. The % hi&mW ~ increase in average annual customer usage. Residential Company would consider requesting price increases revenues also increased 55 miHion and industrial rev. th.u wiH aHow it m recover the loss of benefits. enues increased 56 million due to the effect of the + Other operations expense iemained constant. decrease in BPA exchange benefits. Commercial rev- Increased empki,we apense of 516 million and increascd enues increased $17 million or 3%, primarily due to a demand side management expense of $5 million were 2% increase in the number of customers [md a 1% offset by the 519 miHion effect ofcharges in 1992 relat- increase in average customer usage. ing primarily to cancellation of a coal purchase option Beginning in April 1994, retail sales revenues are and a contract settlement. Emplovce expense increased expected to decline by 57 million annually due to the as a result of the adoption of Statement of Financial effect of a rate reduction in Oregon attributable to Accounting Standards FSFAS") 106, " Employers' 57 million of previously accrued property tax savings Accounting for Postretirement Benefits Other Than resulting from a ballot measure which limited proper- Pensions? on Januav 1,1993 and higher pension and ry taxes. During 1994, the Company will continue to benefits expense.
PacifICear , ELECTRIC OPERATIONS mamuua
M car IWho lW2 Com;muixi Pertenur Annual 1993 1992 1991 1990 1989 1988 Gimg armm 0,rowth Funcy Sounct /%) . , . - -
Hydroelectric .- 6 4 6 7 8 .y. so'~ (3)d
' - - ;- Other s' '2 i . (5o).
Purchase and exchange contracts - 26 L 13 15 14 ; 14 fi, uf .:23; J 18j
Neusta er Cos19 Meat (buand>) ' Residential 1,535 - 1,112 - 1,op3 I ' 1,o76 - _ r o6o ' ' r",o"47 '2: E
' Commercial 152 149 ; 146 142 142 .140 1 '2 = 2Lj
industrial 38- -17 . . 16 15 - 13 - 12- 6 8 hi ' o ' Other ~ 3 3 :3 3- 3 3 - m
TOlat i,308 !.281 1.258 I 236 I.218 1,202 2 2 ' Residential average annual ENERGY SOURCE 4 unawn usage (Brh) 'so,733 . so.183 1o,446 11o 2 83 10,2o9 so,o7o i5- : 1 1: ,00 Residemial average annual . [ ]) revenue per customer (Dufan) 622~ 598 612 . 6o5 613 625 6'' ? -O I - Residential revenue per kWh (Cents)I5J ~58 . . $.8 _ 54 ' 6.o f 6.2 ;(i)] ; Mats or Let so ., ~ ~ . , e, - , Transmission s4,90o ' 4,90oi 14,90o 14 90o . ; 14,7o0 ~ :14,600 ]; i Distribution ' [44,800.. . 44,500 . 44,40o 7 ' 44,200 144400 .40001 1& c -2 -
i t Srsitu Ptan Demane (Mepram) so ,.-,,.a.n - < - 6,554 '6,734 6,4o7 5,978 5,939 . (3) ; " f2M; Net system loadW-summer 64o5- a .
! 7,623'- 6,875.' | 6,267 } - winter 7,268 6,968 7,ot9 ' 4' 33
> - 6,5o3 , : TotalfirmloadM-summer - 8,39o ' 8,477 7,639 7,oi9 - 6,74: (1) ~ . 53 4 8,88 6,83 6 . .jj | - winter 3 , 8,335 .. m 7,7 o. .8,417; 7,559 3
, 8vsitu Carastnv (Megawatts # . . . - . . . .y - . - summer 9,757 . 9 753 . 9,629 S,5 51 ' . 8,57o 8,923 ;2j 2 i - winter 9,9:6 - 0,982 9m6 ' 9.14! 8,948 8.Ru - (1) 2i
! w imiuan ,,n 4, m whoicuic wie.. (b)Intludn oil-miem firm whoicule uln. ) Owiied and somrastual pneraimg ca;uh htv ar the time of micm firm [wk. o 88 89 90 91 92 93 + Maintenance expense increased $4 million or 3% + Depreciation and amortization expense decirased primarily due to $8 million resuhing from unsched- $6 million or 2% due to a $24 million reduction pri- Q 'Punhase"""d'" & Exchange uled plant outages, the $3 million efTect of the addition marily resuhing from extending the depreciable lives of Q Hydn.clecui' of new plants during 1992 and $7 million ofincreased thermal plants. 'Ihe reduction w as largely ofTset by addi- Q cml employee expense. The increases were offset in part by tional depmiation attributable to increased plant in ser- the efket of a $17 million write-ofTin 1992 of obso- vice, induding the addition of new plants in April 1992. lete materials and supplies inventory. Pension msts for 1993 were $46 million mmpared + Administrative and general expense decreased to $27 million in 1992. 'Ihe Company expects pension $6 million or 440 primarily due to valuation adjust. funding in years 1994 through 1998 to be at a level ments in 1992 of $11 million relating to deferred costs, between $40 and $50 million cach year. Approximately ' ofhet in pan by increased cmployee expense of $3 mil- 69% of the cost is alkicarn! ro various catcyrics ofoper- lion in 1993. ating expenws as descrilul above.
3 P1Cli| CIIP
______Earnizgs esntribution increased $119 million or 59%. + Purchased power expense increased 534 million + Inwme from operations increased $107 million or or 19% due to higher prices, panially offset by a 5% 16% primarily due to $61 million of write-offs and decrease in volumes purchased. Firm purchases increasul adjustments in 1992. Decreased BPA exchange cred_ $20 million and secondary purchases increased $16 its increased retail sales revenue and purchased power million primarily due to higher prices. expense $11 million each, with no efTect on income + Other operations expense increased $38 million from operations. or 15% primarily due to a $ 10 mil! ion increase in wheel- + Other inmme was $13 million in 1993 compared ing expense as a result ofincreased volumes wheckx1, a with other expense of $27 million in 1992. A gain of contract settlement and a BPA price increase; a $9 mil- $5 mibn from the sale ofpn guty and a $5 million inautse lion increase for pension funding; a $9 million charge in the cash surrender value oflife insurance were record _ in 1992 relating to cancellation of a coal ed in 1993. Le 1992 expense included $20 million of purchase option; and increased expense of $8 million due valuation adjustments relating to investments in cogen- to acquisitions ofinterests in thermal generating plants. eration projects, a coal lease and other properties. + Maintenance expense increased $21 millan or + Income tax expense increased $22 million 14% primarily due to a $17 million write-oft or KILOWATT-HOUR SALES BY obsolete materials and supplies inventory and the acqui- or 14% primarily due to the $50 million efkct of high_ CUSTOMER SEGMENT er taxable income and the $5 million effect ofa higher sition ofinterests in thermal generating plants. mm federal income tax rate. He tax increase was partially + Administrative and general exp< nse increased $25 offset by $8 million of 1992 tax adjustments recorded million or 21% primarily due to increased pension fund- in 1993 and $25 million of other tax reductiom. ing and the effect of adjustments in 1991 that reduced insurance reserves and benefit accruals. 1982 Cwm To 1991 + Depreciation and amortization expense increased Rennues increased $111 million or 5%. $31 million or 12% primarily due to acquisitions of * interests in thermal generating plants. + Retail sales revenues increased $12 million or 1%. + Taxes other than income taxes increased $12 mil- Commercial revenues increased $10 million duc to , hon or 12% due to acquisitions ofinterests in thermal increased customers and customer usage, partially off- gener ting plants and propeny tax adjustments in 1991 set by selective price reductions and the effccts of mild i993 relating to valuation wrrections and settlement refunds. weather. Industrial revenues increased $21 million due to higher contract revenue and increased sales to irri. Earnings contribution decreased $144 million or 41%. % wholesale gation customers. Resid:ntial revenues decreased + Income from operations decreased $105 million % Industrial $14 million primarily due to price reductions and the or 13%. % cornrnercial effect ofmild weather that contributed to a 3% decrease + Other expertse increased $44 million pnmarily due % Residential in average usage, ofTset in part by a 2% increase in to $20 million of valuation adjustments relating to customers. investments in cogeneration projects, a coal lease and + Wholesale sales revenues increased $103 other propenies; a $14 million reduction in interest million or 32% primarily due to a 30% increase in income; and the $6 million effect of a terminated sale volume sold. long-term firm power sales increased ofwater rights. $69 million from contracts implemented afterJuly 1991 + Provision for income taxes decreased $17 and $14 million from sales under previously existing million or 10% due to decreased taxable income, agreements. Shon-term firm sales increased $9 mi!! ion partially ofTset by reversal of prior flow-through tax and secondary sales were up $11 million. depreciation. Operating evpenses inacased $216 million or 15%. + Preferred dividend requirements increased $11 o rnhn r M> dx to issuanas ofprefentd stock in August + Fuel expense increased $55 million or 13% due 1991 nd May and June 1992. to increased coal-fired generation as a result of the acquisition of additional plant capacity, incrcasal off-sp- tem sales and poor hydro conditions. As a result of drought conditions, the Company's hydroelectric pro- jects set an all-time low generation rewrd. The 1992 hydrcelwtric output was 21% below the previous low- est year, which was 1977
PaeiFiCear 7
TELECOMMUNICATlWIS
MILijONS OF DOIlARS/FOR TilF iTAR
5. Year IW3 ro lW2 conmound Pen emage Annual 1993 1992 1991 199o 1989 1988 comp u m cemh
REVENuf8 local network service $ 81.8 s 74 1 s $84 s $77 s 55 4 s . 5m 1o% 2 nok
Network access service 183 9 274 9 168.2 '147 4 127 8 12o.3 5 9
long distance network senice - 2625 275 4 286.1 153 8 '2740 270.0 ' (5) (1) ;
' Private line service ' 63 .8 70 4 66.o . 6o. 53-8 6L3 '(9) I.
' ' # -- *' Sales ofcable capacity 49 m.8 ' 30 9- 83 2 - ' (5sl Other inz.2 - 998 1o4.8 So.7 62.2 58.3 - ' 13 14 -
Tatat yo9.i 704.s 724 4 682 9 577 7 s6o.o i 5 Eartnets
' Depreciation and amortization 110.0 - ' 114 1 117 3 roL9 958 935 (4) . -.5 Operations, maintenance &other 458 3 45r.8 - 447 5 ' 426.8 . 3454 349 9 I 6 TELECOMMUNICAT10N8 WHUONS Of DOUARY Y'S 9 5 ' luceME fteM 0rtnAimus 8 159.6 116.5 2 goo , r4o.8 13 6 154 2 133 8 4 , , , ! ! j | luceHE FROM CONinuus OrtnAtions'al 548 67 2 89 .s 95 4 75.i 8 (13) - . ! 56 . , , ' Minority interest and other 18.8' 700 L. j. 75 99 12 9 io.9 3.3 - (24) ' (26 I i | ! ; EAnass: Comineures Fnou ' j- ! Cosinnes OPEnAll0N 'd) s509 5 57.1 5 76.6 $ 76.6 5 64.2 8 so.1 (!!) - 6oo 'g | | Identifiable assets s1479: s 1,513 s t,674 51,7o3- s 1.192 - 's 1,2o6 '" (2) L '4 soo t | [ d _ d _j Capital spending s 126 $ 14o s ' 236' s 473 .s 18o _ s J 17o - (to) - -(6)] ' Number ofemployees N 2,834 2,89r ' 3,o$o - 34:2' 2 2,737 - 34 85 - (2) - (4) , ! | | tr 400 |-3 ,7 q 4 Telephone access lines (77musands) 399 379_ 357 34o - 253' 24o-- -5 | | | | | longlines originating billed 300 -h - minutes f3 fill 6ms) 7o 679 654 632 597 - s12' 5-- :7
* Nor a nwaningM number. | ! 200 F -. --b a . - a, (a) Dorn not retkct chmmarkm ofimercu on imenompny borrowing arrangemenu anJ indu$h income ines on a scpraw4ompny hae ' I (b) I aciuda empimecs of dmonrimwd operai. ora |
' 100 ' 4-M FACTWl8 IfluMCfE EANWG8 + Network access senice revenues (fees charged to long-
Pacific Telecom provides voice, data, video and other distance interexchange carriers using the lxal exchange net-
' ' ' services through long lines and kwal exchange operations, work to access their customers) increased $9 million or 5% Pacific Telecom aho operates, maintains and sells capacity on primarily due to an increw of $8 million in Univenal Senice Fund ("USF") support, funded by interexchange carriers, Q Revenues the North Pacific Cable. Pricing for senices is both rate reg. "'hich helps fund nontraffic sensitive costs that are above Q inwmc from Operations ulated and market driven. Inng-tenn profitability in franchised Q Farninps Contribution service territories is influenced by technological develop _ the national average. frmn Lontinuing ments, efficiency ofoperations, cost ofcapital and competi, An indexed cap has been placed on USF growth to tion. Pacific Telecom's revenues for 1993 were derived 48% allow growth at a rate no faster than the rate ofgrowth in the U.5/s t, tal working local k> ops. The indexed rate may be in from king lines,45% fmm kical exchange companies,3% from effect for up m twym while the FCC and a Joint Board > cable and backhaul capacity sales and related cable senices and reevaluate the USF assistance mechanism. Placing the indexed 2% from cellular operations. See discussion ofAlaska restruc. turing in Ti.ituntsitNicATioNs on pages 24 and 25. cap on USF growth will have a negative impact on Pacific Telecom's revenues, but the impact is not expected to be 1983 Courseis 1982 material. Revenues inewased55 million or 1%- + long distance network senice revenues (charges for 4 local network service revenues (kical telephone ser- long-distance calling senices) decreased 513 million or 5% vices to residential and business customers) increased $8 primarily due to the $11 million revenue effect of a kiwer rate million or 10% primarily due to the effects ofintemal access base resulting mainly from the sale of satellite transponders line growth of 5% that added 56 million and $1 million of in late 1992, the $5 million revenue effect of recoverable revenues from enhanced and extended senices. expense reductions and $3 million due to lower verage rates
E. pacific 1RF
_-_- _ - - __ per minute for intrastare message toll senices. These decreas- ily due to lower borrowing levels in 1993. es were offset in part by an increase in out-of-period rev- + Other expense increased 527 million due to the effect enue adjustments of 56 million. of a $21 million gain in 1992 from the sale of an invest- + Private line senice revenues (charges for dedicated facil- ment in a noncore business and a 56 million decrease in ities that provide communications services to major cus- gains from sales and exchanges ofcellular operations. romers) decreased 57 million or 9% primarily due to the $ income tax expense decreased 59 million or 27% sale ofa por. ion of the Alaska Spur in late 1992 to a customer due to a favorable setdement of state income taxes for 1992 that previously used those services. recorded in 1993 and lower taxable income. + Sales of cable capacity revenues (sales of capacity in a 1992 Cwm To1991 submarine fiber optic cable between the U. S. and Japan) Revenues denrasedS20 million or3%. decreased 56 million or 55%. Approximately 51% of the
. + local network service revenues increased 56 million
North Pacific Cable,s capacity has been sold - 1%,4%, . or 8% primarily due to an mternal access line growth rate of 10% and 36% sold in 1993,1992,1991 and 1990, respec-
. . . 6% that added 54 million and local service rate increases ovely. A competing AT&T cable was placed .m service m totaling $1 million.
1992 and AT&T has announced plans for an additional . * Network access service revenues increased 57 million ACCESS llNES Pacific cable system to be completed between 1995 and . or 4% primarily due to mcreased USF support,57 million: BY REGION 1997. The competition from AT&T, adverse economic muse . higher expense recovery, $3 million; and acquisitions,51 mil- condm. .ons m Japan and other Far East countries and outages i 4* lion. PartiaDy offsetting these increases were knver out-of-peri- ~ on the North Pacific Cable may have contributed to the | I . od revenue adjustments of 52 million and rate decreases of is mvesn- dowing of cable capacity sales. Pacific Telecom . . gg _ g , gating use of the North Pacific Cable to provide video ser- + Long distance networt service revenues decreased vices. Pacific Telecom continues to market the remaining
511 million or 4% primarily' due to a 512 milhon reduc- - I -too cable capacity and believes that most of the remaining capac- . . I non n out-of-period revenue adjustments, a 59 milh.on iry can be sold over the next five years. i reducu.an resuhing from the m.troduc: ion of competition m - , j no + Other revenues increased $13 million or 13% pn.- . m Alaska .m May 1991 and the effects of a 56 miUion annu- -; . marily due to mcreased cellular revenues of 56 million, on:- . al rate decreasem | Alaska that became effecu.ve m July 1991. I. 200 time revenue of $3 milhon from service in Saudi Arab.ia and ,. As a resuh ofcompetition, intrastate minute volumes det hned
54 milh.on from resale of.long lines equipment. . . ,. . : 7%. These reduct ons were offset m part by .mcreased inter- , 30 ' Operatirg crpenses iorased S2 million. state revenues of $11 million relating to an increased rate ' 0 Operations expense increased 56 million or 3% pri- f return and increased recoverable expenses. , nutily due to a 512 million increase in leased circuit expense + Sales f cable capacity revenues decreased $20 . |j relating mainly to the lease of satellite transponders and million or 65%. 54 mdlion ofincreavd customer operations expense relar- Operating expenses uere und>anged yI | ing to customer growth, aatuisitions and higher direc:ory assis- + Operaions expenses decreased 511 million or - 4 o "D9 tance expense. The increases were partiaHy offset by a 55 5% primarily due to an 58 million reduction stemming 9' 92 93 million reduction as a result oflower cable capacity sales from lower cable capacity sales and 57 million of expense g gi g and a 52 million reduction in access expense. in 1991 for leasing transponders on an interim satellite, par- k Edwest + Maintenance expense increased 55 million or 4% pri- tially offset by increased expense relating to growth in cellular k~ Western marily due to 56 million of expense from a long lines service operations, local exchange company acquisitions and access contract and equipment resale. line growth. + Administrative and general expense decreased 56 mil- + Administrative and general expenses increased 512 mil- lion or 6% primarily due to the effect of an accrual in 1992 lion or 15% primarily due to 57 million relating to development for an early retirement program. of customer support and billing software and $6 million ' + Depreciation and amortization expense decreased 54 relaing to an early retirement program. million or 4% primanily due to a 57 million decrease relat- g,,,,,g,,,,,,;5,,,,,,,,,,,,,,,,,g,,,,,,,,,, ing to the sale of sateihte transponders, offset in part by the decrrased S19 million or 25%. 52 million effect ofincreased depreciation rates and $1 mil- + Income from operations decreased $21 million. i lion resuhing from growth m. cellular operations. + interest capitalized decreased 56 million due to krnings wntribution decuased $6 million or 11%. Se absence oflong-term construction projects in 1992 ver- + income from operations increased 52 million. sus the effect of construction of the replacement satellite o Interest expense decreased 58 million or 15% primar- and cable in 1991.
PaiFiCeaP
| Own est income recorded on the note received in connection with Consistent with PacifiCorp's strategic focus on its core the disposition of NERCO and a 53 million gain from the utility operations. PFS plans to sell, over the next several sale of an investment in a cogeneration project. Partiath off- years, substantial portions ofits assets. Cash generated from setting these increases was PFS' negative contribution of these sales will be used primarily to pay down debt. PFS 53 million resulting from additional valuation and impair- presently expects to retain only its tax advantaged invest- ment charges of 525 million after-tax. ments in leveraged lease assets (primarily aircraft and project PFS and Holdings' negative contribution of 5147 mil- f nance) and low-income housing projects (included with lion in 1992 was primarily due to after-tax special charges of real esta c), which presently represent 5479 million of 5132 mi!! ion relating to asset reduction plans, as well as the its .uwts. write-offofcertain intangible assets primarily associated with The 510 million earnings contribution of other busi- PFS' computer leasing unit. nesses in 1993 resulted from 511 million of after-tax inter-
The following is a summary of PFS' assets and revenues by business line: M!!110NS OF IX)1LARS
1993 1992 1991 10nMu Rt nNin Ri nNM h AwrT5 Af FOR 1m AWB Al tor mE Ashuh Ar FOR THF MAMFND YlAR 11ARLND il AR MAR I ND YtAR
Aviation financing s 454 s . (8.6W . s . so6 ? -s 33 5 sL 5 63 - s . 35 4 L'j
Computer leasing 88 19 1 13 9 L 28 6 390; $1.1
Other 117 - 368 353 - 4p '478 453' Total fmance 759. : 49 2 998 to p ; ; 1,44o 131.8 - 3 Real estate 314 . 493L , 252 29 7 254~ 2p : 'i Manufacturing ' 31 41 4' 16 T4 0.2 24 3j.2 :
- =- - Agriculture 2o 38 7 * Tein s i,iu s 179.6 s 1,276 s 17s.: s 1,718 s i92.1
W An impornwnc t-harge of 522 nulhon for terwn ainufi under operating leaws redmed nci avianon finana rnenua
At December 31,1993, the aviation portfolio (with Given the limital number and rdasdy lay size ofindi- net assets of 5454 million) consisted of 52 aircraft,51 of vidual kran and lease assets, PFS analyzes each discrete account which were placed with 15 separate carriers and one (with in its process of establishing the level of allowance for cred- a book value of 59 million) was being held for lease or sale. it losses. PFS' allowance and earnings are subject to a high- In February 1994, this aircraft was put on lease. About 90% er degree of volatility than larger more diversified finance of the aircraft are Stage 111 noise compliant. companies, a situation which is magnified by the current The aviation industry has been adversely affected by weak industry conditions in aviation and real estate. a variety of factors during the past three years. This has Allowances for credit losses and accumulated valuation and impacted PFS' aviation finance portfolio in a number of impairment charges were 5115 million and 590 million at wavs, induding having one lessee / borrower (involving two December 31,1993 and 1992, respectively. planes) currendy invo!ved as debtor-in-possession in bank- PFS and Hoklings expect to fund scheduled debt matte ruptcy proceedings. Although industry performance appears rities and financing commitments through cash flow from to be stabilizing. further deterioration may occur. loss pro- operations atd funber asset sales. visions have been established based u;mn PFS' best estimate of the present situation.
.
34 PaiFiteir
_ - _ . _ _ - _ _ - - -__- - -___-______._ -- Deane Omms A subsidiary of Pacific Telecom, International On June 2,1993, I foldinp sold, by means of a merg- Communications Holdings, Inc. ("ICH"), closed the sale er, its 02% ownership interest in NERCO to a subsidiary of of its wholly owned subsidiary, TRT, to IDB on RTZ America, Inc. ("RTZ") for $12 per NERCO com- September 23,1993. Pacific Telecom received 4,500,000 mon share, or $384 million. In connection with this trans- shares ofIDB common stock and $1 million in cash in action, a subsidiary of Holding kraned $225 million at 13% exchange for the stock of TRT and the stock of another interest to a subsidiary of RTZ, with repayment contingent srnaller subsidiary. Based on appreciation in the market val- upn future revenues received undct a coal supply contract. ue ofIDB common stock, the Company recorded an after- The sale resulted in a pin of approximately $183 million, tax gain of $52 million at closing of the transaction. The including earning through June 2,1993, which has been Company had recorded valuation adjustments and operat- deferred and is being recognized in earninp, using a mod- ing losses totaling $40 million in 1992 based, in pan, on ified installment method, as the $225 million loan is repaid. the then value of the IDB common stock to be received by The loan could extend through 2009, but is prepayable Pacific Telecom as consideration in the sale. The IDB com- without premium. mon stock was sold in November 1993 and the net pro- The Company incurred after-tax losses from the dis- ceeds of $195 million were used to pay down Pacific Telecom continued operations of NERCO of $ 146 million, $21 mil- debt. The Company incurred after-tax losses relating to dis- lion and $285 million for the first, third and founh quarters continued operations ofICH totaling $6 million in the third of 1992, re,pxtively. In the wond quaner of 1992, NERCO quarter of 1992, $34 million in the founh quarter of 1992 reported earning of $1 million, and $7 million ir.1991.
PacirICeaP 35
_ ,
REPORT OF MANAGEMENT I
The management of PacifiCorp is responsible for with its audit. Management con iders the internal auditors' preparing the acwmpanying consolidated f nancial state- and Deloitte & Touche's recommendations concerning the ments and for dicir inegrity and objeaivity. The statements Company's internal control structure and takes wst-effeaive were prepartd in aaordance with generally acceped account- actions to respond appropriately to these recommendations. ing principles giving consideration to materiality. The finan- The Company's principles of business conduct are cial statements indude amounu that are based on publiciud thmughour the Company. The principles address, management's best estimates and judgments. Management among other things, puential conflias ofinterests, com- also prepared the other infonnation in the annual report pliance with laws, including those relating to financial dis- and is resp >nsible for its accuracy and con isteng with the dosure and the confidentiality of pmprietary information. financial statements. The Audit Commince of the Board of Directon is The Company's financial statements have been audit- comprised tolely of outside direaors. It meets at least quar- ed by Deloine & Touche, independent public accountants. terly with the Chairpersons ofdivisions and subsidiary audit Manat;ement has made available to Ddoitte & Touche all committees, management, Deloitte & Touche, internal the Company's financial record 3 and re!ated data, as well as auditors and counsel to review the work ofeach and ensure the minutes of shareholders' and direnon' meetings. the Committee's responsibilities are being properly dis- Management ofihe Company has established and ciurged. Ddoine & Touche and internal auditon have free maintains an internal control structure that pmvides rea- access to the Commince, without management present, to sonable assurance as to the integrity and reliability of the discuss their audit work and their evaluations of the ade- financial statements, the proteaion of assets from unau- quacy of the internal control struaure and the quality of > thoriecd use or disposition and the prevention and detec- financial reporting. tion of fraudulent financial reporting. The Company mainuins an imernal auditing program that independent- ly assesws the dTeniveness of the internal comrol struaure and rewmmends pnsible improvements. Deloine & Touche also considered the internal control struaure in wnnection
|NDEPENDENT AUDITORS' REPORT i
I 7h de Am/ofDinam aw/ShareM/m o/PaafCorp In our opinion, such fmancial statements present fair- ly, in all material respects, the consolidated financial position We have audited the aaompanying wnsolidated bal- of PacifiCorp and sulwidiarics at December 31, lW3 and 1992, ance sheets of PacifiCorp and subsidiaries as of December 31, and the resuhs of dicir operations and their cash flows for each 1W3 and 1W2, and the related sutements of consolidated of three yean in the period ended December 31,1993 in j inwme and reuined earnings and ofconsolidated cash flows conformity with generally accepted aaounting principles. for each of the three years in the period ended December 31, As discussed in Notes 9 and 11 to the consolidated IW3. These wnsolid.ned financial suremenu are the respin- financial statements, the Company changed its method of sibility of the Company's management. Our responsibility acmunting for income taxes and other postretirement ben- is to espress an opinion on these financial sutements based efits in the year ended December 31,1993. on our audits. We condumd our audits in accordanse with general- ly aucped auditing sundards. Those sundards require that we plan and perform the audit to obtain reasonable assurance f . / cd almut whether the financ. ui statements are free of material missurement. An audit indudes examining, on a test basis, DEI OITTE & TOUCIE evidente supponing the amounn and disdosures in the Portland, Oregon financial statements. An audit also indudes awessing the February 18,1994 acmunting principles used and significant estimates nude by management, as well as evaluating the overall financial sute. ' ment presenuuon. We beheve that our audits provide a rea- j sonable basis for our opinion. |
N PAeirICear *
. _ __ STATEMENTS OF CONSOUDATED INCOME AND REWNED EARNINGS i | ) MilllON5 0F IK el.lARs / FOR 11f f. Yl AR I.NDID I>l El MP,1 R 31 ,
1993 1992 199I RivtN0t s 3,412 4 s 1.242.o s p68.3 EartNat ,. . . : ; Operations 1,373 9 1,376.6 1,139 8 ; Maintenance ' 2972- 287 9 . - 164 .2 '' . ; . Administrative and general 247 4 292 2- 239 9 , Depreciation and amortization 404 8' '4525 38 13 , Taxes, other than income taxes sig.9 123 3 no.6
Financial Services' interest expense ' 53 7 70 5 91.2
T81' * ,496 9 2.609.o 2.227.0 INc0Mt IROM OPERArl0N8 9 55 61to 9413 ImitRr:I ExrtN3t AND OTHtR - DISPOSITION OF INCOME r Interest expense 3.p.4 6 323 2 33 o FROM OPERATIONS R Interest capitalized (13 9 ) (16.2) (2t.5) anmoxs omnuru Minority interest and other (3 9) 66.8 33 , iwo . ' TsTAL 3os.4 192.o u7.8 !
Income from continuing operations before income taxes . ' 6ao.1 ' 24t.o 623 5 , . | ' i Income taxes 187 4 90.8 176 7 ' 800 INCOME FROM CONimUtNs OrtRAriON: BEFORE COMULAUVt Errect a CHANat 5 AccouNrms PRacertt 422 7 iso.2 446 8 600 Discontinued operations leu applicMle i,tcome Ltv
expmre (benefith >993 /sd o,19n /(sr785),1991/$ds 51 4 (490.6) 60 4 ' g ;{ Cumularive efTect on prior years of change in c.ccounting for income taxes - - 4.o -j jj ; 400 NtilNc0Mt (LO ) 479 1 040 4) 507.2 RetAmt0 EARNaCS, dANUARY l 210 4 999.6 907 9 Cash dividend 3 declared 2*
' Preferred stock 095) (39.o) (28.0) g Common stock perJuare: 1993I sua,19yIs1.s31991Isi.4 8s (298 7) (410.6) (344)8 ^ ~ - ( Common and preferred stock retired and ESOP dividend tax savings .8 (p)
RttAnt0 EARNass, OtetustR 31 s ut.t s zio.4 s 999.6
EARMNC8 (LOSS) ON COMMON 810cM Net mcume don) 200 /cu rrrkrrrddividend requiremeru 5 439 8 s (377 7) 5 48 05 88 89 90 91 92 93 Aserage numher of common shares outstanding (Nmandd 274,55: 266.s27 258 3s % Dividends Paid EARNINGS (l088) rtR COMMON SHARE [$ Income Taxes Continuing operations s s. s 14o 42 1.63 Interest Expense & Other Discontinued operations 19 (3 84 ) .23 , % Retained Earnings - - Cumulative effect on prior years of change in accounting for income taxes .> .or ca,un.u,ng,,,gn,m TOTAL s i.6o 5 (i.42 ) s 1.86 ' """"""5 1W2 spcm)P thsges '""". ed "d"* Sec naic 13 (%x auompanpor Noncs to Conwh.Lml I manual No.urmenid
1
i
|
Paeii| Ceer 1 1
| ! r. ,
, ConsouoATED BAULNCE SHEETS j
MILLIONS OF [UIIARS / DECEMBFR 3I i Assers i993 1992 Pn0PERTY, PLM1 AW E0WPutNT
~ ^ Elchric.: s so,ooo.6 f s 9 328.1 Telecommunications 1,6 49 9 .~ ,1,61o.5 >
' Ocher : ' 6 5.8 ~ 65 .6
' - Accumulated depreciation and amortization - (3,863 5) (34517)-
) Net - 7,82.85 7755257y Construction workin progress 356.8- 3op ' S ' Tetu Paartstr, Ptant am Eeuerstui 8,2o96 7.857.6 Connent A :Ef
' PROPERTV, PUWT [ Cash and cash equivalsnts1 i si.2 . 5o.22 ANI EQNPMENil ' Accounts receivable leaallowanafordouyulanounozz993 s8.2/ and1992 /sp.6 '. 49.o 8 ~ . 4 1.8 . h ONS ' Materials, supplies and fuel stock atawrage con sep - 215 9 ^ ORK 88 IMHJJON5 OfisollARS) Inventory.. *]O.i - : 1041|}; Finance assets -1i87 .' 287 6 L , , , , 9000 ' j i { j Other - 8o.5 - 53 6 < | | ! | Totu CunnEmi Asstis 954 7 i.o94 2 7100 r ' OTHEn Asstis ' fI [Invesiments in and advances to arTdiated companies . 251.5. 192.b{ Cost in excess of net assets of busmesses acquaed s71.s ' ' 169 .1 f
6000 ' - Rei;ulatory assets- net 9749 238.8 : - Finance note receivable 223 3 . coa : < Financeassets 56 14' ;6276 0- Real estate investments 3o37 293 7 i Deferred charges and other 3o79 47o.5 }- 3 Net assets of discontinued operations - p2 5 l' * Toru OTNEn Aestis 2,794 8 2,304 7 Totu Asstis s is,959.i s it.256.s
(See acwmpnnng Notes to Cunwilidated I mowul Suwmems)
o 88 89 90 91 92 9)
Q CWIP
Q Telecommunications , Q Hectric |
,
4
I
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i
AC1I| CIRP I
MilllONS O} IK)LI ARS / DI CEM111 R .41 CAPliAltlAlloN ANO l.lABEITES 1993 1992
Ceuman EtmTV Common sharchokler capital barn autlwriud750,ooo,ooo; | darn ountanding 1993 281,o:0,717/ and 1992 /270,579,042 $ 1,953 4 s 1,755 1
Retained earnings - 3513 zio.4 ' Guarantees ofEmployee Stock Ownerddp Plan borrowings (4L2) (57 4) Tein Comuss Enany 3,162.6 2 908.2 Pautnus8Tocs 36 74 4r7 4 Pantanta BioCu SUsJECT TO MANDA10nv RtotuPrion 2:9.o 2:9.o Lent-Trau Disi Amo CAPITAL l.tAtt OstisAtions 3,923 6 4.i81 4 |
CanumiLiAsn.na CAPITALIZATION Long-term debt and capital lease obligations (INN
currently maturing - 155 6 420 3 ,, ioo
Notes payable and commercial paper 553 5 553 4 Accounts payable 36 o.5 312 4 i||g|[.|j Taxes, interest and dividends payabic 25t5 417 2 - go
1 11.2 - : tji!j justomer deposits and other 13o.4 ; Toin Cunntal LiAsunns i,4433 i.89 .7 ; i!i Datnus Cunns - .s'||| - 60 Income taxes 1,833 3 972.1 *; investment tax credits 1o0.0 2o92 If,!!,I : f ' Other 6o57 429 5 || : 4 TOTAL DUtnuD CarDnB 2,639.o i,6to.8 (f{ Mmon:Tv initust 86.o t no4 2 , _ {! '| Comunutsis Ann CoNilNCENCK8 (Su Mla 7and8) {f{{ 20 Tern CAPRAU2All0N ANO llASKnE8 $U,9591 5 H.256.5 ,
(Nec auemp.mymg Ne to Conwlulaicd i in.mtul suicments) - . [ i i! ' ! ; !. j o 90 9i 92 93
% Common Equiry % Preferred Stock % I.ong-Term Debt & Capital trase Obligations
.
|
PaciFiCar ------
SWEMENTS OF CON 80UOM Bi CASH FL0ws
Min ions oryt.1ARs / Y1 AR I.NDID DI Cf.MBI R 3: 19.13 r992 1991 Casa Ftown enou Ortaarms Acnynre
income frorn continuing operations 8 4227 s Iso.2 5 446 .8 - Adjustments to reconcile income from continuing operations to net cash provided by operating activities - . Depreciation and amortization 468 3 507 7 48 57- Deferred income taxes and investment tax credits - net . 135 -(641) (315) ? ' - Interest capitalized on equity funds | (4 2) - (7 3) , ' (113) - - ' Payment from sale of power entidements - 114 1 Minorityinterest and other . 27 1 - 70.8 (20. )
' - ' Specialcharges -1 18 5 7..
' ' Accounts receivable and prepayments .52 9 (6.6) 49 9 ;
Materials, supplies, fuel stock and inventory . , M.s 56 7 47.o Accounts payable and accrued liabilities (6.o)-9 458 (6o.2) ! Net cah provided by continuing operations : x437 4 - 941.6 1,o2o.4 Na cash provided (used) by dkondt ued e4vrations : i "14 2 ' (ish) ?
RT Casa Pnovato er Ortnains Acnynus n,o37 4 955.8 864 9 Caen Flows enou luvt:TesAcimit:
- Construction ~ (Nr.5) (69 4.o) ' (7o2.6) : Operating companics and assets acquired (s6 4) . (40.8) (3o95)? Investments and advances to afilliated companies - net _ (46.8) ' (io.9) - (46 8) ;
, Proceeds from sales of assets 6o2.8 4143 8 78.8 ' Proceeds from sales of fmance assets and principal payments 168 3 - 2819 476.8? Purchase of fmance assets (57 7) (125 6) (55o.1) . Investment in finance note (225.o)- - - ~ Other 53 2 - ' 2o.6 o.r ki Cass Unto a invtsins Acimias (263. ) (425.o) (i.o45 3) Casu Ftows rnou Fnances Acimits Changes in short-term debt (8.6) ' ('74 5) (3o.o)1
Procttds fromlong-term debt ' 9 4 1,0 21.1 _ 6 89 8 91 Proceeds from issuance ofcommon stock 197 4- 'I84,8 . 199 3- Proceeds from issuance of preferred stock - ' 195 2 ' 94'8 Dividends paid (366 7) - . (439 5) - (408.6) ? Repayments oflong term debt and capitallease obligations - ( ,23o.9) (i.ipo.2) - (782.8) ~ Redemptions ofcapital stock (5o.o) . (56 1) (.5) . Other (33 4 ) (25! 2) (rs.o) ki Cain Psovero (Unto) sv 5mascas Acimits (793 3) (ss6.4) 81.9 Drentant a Caen aan Cass EsavattNT: ( 9.o) (25.6) (96.5) Cain ano Cain Esevattats at Besumes or Ytan 5o.2 75.8 172.3
Casm ano Caen Esevattuis at Emo or Ytan s 31.2 s so.2 s 7s.8
hwnpnpng Nom in Conmidated hnanual Namenni
I
($ EA8lI| 0$8P
__ _ _ .______- - _ - - . - - _ - . - _ _ - _ _ - - . - - ______- _ _ _ - _ _ - _ _ _ _ _ - _ _ NOTES ID CONSOUDATED Fnacm Swmans m Emo omm si,issa. iss2 - o
NOTE L SIMAn Of Sosncmi Accousim Pouca
Bass a Patsmista The cost in excess of net assets of consolidated businesses The consolidated fmancial statements of PacifiCorp (the acquired is generally amottized over 40 years. ' Comp 2ny") encompass two businesses primarily of a utility - Improny Vuusim nature-1 learic Operations (Pacific Power and Utah Pow cr) and Inventories are generaily va!ued at the lower of average cost an 87%nvned Telecommunications operation (Pacific Telecom. or market. Inc.); and a wholly owned Financial senices business (PacifiCap Financial Services, Inc.). The Company's w holly owned sub- Iksmaront Asstis sidiary, PacifiCorp 11oldings, Inc. rifoldings"), holds all ofits The Company's utilin operations capitalize certain costs in nonclectric utility investments. Together these businesses are accordance with regulatory authority whereby those costs will be referred to herein as the Companies. Signifcant intercompany recovered in future periods. Regulatory assets-net at Decemix r 31 tr2nsactions and balancn have been climinated. included the following 1993 - deferred taxes-net,5716 million; In June 1993. Holdings sold by merger its 82% interest in deferred pension costs,5128 million; and various other costs of a mining and resource development business (NERCO, Inc.). 5131 million; 1992 - deferred pension costs of $135 million and in September 1993, Pacific Telemm, Inc. CPaci6c Telecom") various other costs,5104 million. cLwed the , ale ofits interest in an international wmmunications g g , business ITRT Communications, Inc.). See Note 2.
. _ Direct fmancm.g lease revenue is rewgnized as a constant Investments m and advances to amliated wmpam.es rep- . -vield on asset carrving values. Operating lease revenues consist resent imestments in unwnsolid.ned affih.ated companies car- - ' . ofperiod.ic rentals, primarily monthly. The cost of equipment ned on the equity bas.is, which approximates the C,ompany,5 - . . under operating lease is. deprec.iated on a straight-line basis over equiry m the.ir underiving net !mok value. . - - the lease term. Irveraged lease revenue is rewrded so as to pro- ikClafoRY AuTnonmts duce a constant yield on the outstanding investments in periods Accounting for the utility businesses wnforms with gener- when Financial Services' net investment in the lease is positive. ally accepted accounting principles as applied to regulated public Ce utilities and as prescrilni by federal agencies and the commissions . C.osts of debt and equity funds applicable to electnc and of the various states in which the un.lity businesses operate. . . . . telecommun.icanon util.ity properties are capitalized during con- Casu as Casu EauivemT: struction. Generally, the composite capitalization rates were For the purposes of these financial statements. the Company 5.1% for 1993,7.1% for 1992 and 9.4% for 1991. considers al! liquid investments with original maturities of three Irrow Taxts months or less to be cash equivaients. FA.ccuve . January 1,1993, the L, impany adcpted Statement Promtry, Plam am Ecuram of Financial Accounting Standards FSFAS") 109/ Accounting Propeny, plani and equipment are stated at original cost for Income Taxes.' This statement requires use of the liability of contracted services. direct labor and material, interest capital- method of accounting for deferred income t2xes. Deferred tax ized during construaion and indirect charges for engineering, liabilities and assets reflect the expected future tax consequences, supervision and similar overhead items. He cost ofdepreciable based on enacted tax law, of temporary differences between the utility propenin retired, including the wst of removal. less sal- tax bases of assets and liabilities and their fmancial reponing vage, is charged to accumulated depreciation. Telewmmuni- amounts. The cumulative effect of adoption of SFAS 109 result- cations plant at December 31,1993,indaded 570 million relating ed in an increase in consolidated net income in 1993 of 54 mil- to cellular franchises that are being amortired mer 40 years. hon.or 50 01 per share. Investment tax credits are deferred and amortized to income Demeiarm am Ararvarm over the average nu. mated lises of the properties. Depreciation and amonization is computed generally by the straight-line method over the estima ed useful livn of the related Ikveu ikcotnim assets. Prm isions for depreciation (exJuding amortization ofcap- The Company accrues estimated unbilled revenun for ekc- ital leases) in the utility busines es were 3%,3.8% and 3.9% of tric senices provided after cycle billing to month-end. average depreciable aswis in 1993.1992 and 1991, respeahelv. - IkCLA3mCanoN In 1993, based on a study by an independent consultant, Certain amounts from prior years have been reclassified to the L, >mpany extended the ik es ofits thermal generating plants. . .
. conform with the 1993 method of presentation. These ntlassi- decreasing depreciation expense by $24 md. hon and increasing fications had no effect on previousiv reported consolidated ' net income by $ 16 milhon and earnings per share by 50% . i net income. | | | PseiiiCe: P | |1| - __ _ _ _ - _ _ _ _ - ______- ______
|
Non 2. DecommED GPEllATIONs 1 1 4 On February 18,1993, Holding announced an agree- revenues received under a coal supply contract. The sale J ment to sell, by means of a merger, its interest in an 82% resulted in a gain of approximately $ 183 million, including j owned mining and resource development business, NERCO, earninp through June 2,1993, which has been deferred ' inc. (*NERCO"), to a subsidiary of RTZ America, Inc. and is being recognized in carninp, using a malified install- ('RTZ'). On June 2,1993, Holding completed the sale ment method, as the loan is repaid. The loan could extend for a cash consideration of $ 12 per NERCO common share, through 2009, but is prepayable without premium. The fair , or $384 million. In connection with this transaction, a sub- value of the fmance note approximates its carrying value at sidiary of Holding loaned $225 million at 13% interest to December 31,1993. a subsidiary of RTZ, with repayment contingent upon future 1 I The summarized 1992 and 1991 discontinued operations of NERCO are as folkms: | MilllONS 01 DOLLARS / IOR Tile YlAR | t 1992 1991 i i Revenues s 672.o .s 929 67 , Costs and expenses 668.o: J 803 7 , ' losses on asset dispositis arid write-downs 7:o.8 '- Income (loss) fror.: operations before income taxes # 1(7o6.8) us.9 l . ! Income tax (bes efit) expense 135 6) p.8 'Minori:vintsi and other 300 3 .(15 4)! Incen (Lr.4) raau DisceN1NWes Ortsaiuna s (4so.9) s 67.7
A subsidiary of Pacific Telecom, International in September 1993 on the transaction. The IDB common Communications Holdinp, Inc. ("lCH"), closed the sale stock was registered and sold in a public offering in November ofits wholly owned subsidiary, TRT Communications, 1993 and Pacific Telecom received $45 per share before Inc. ("TRT"), to IDB Communications Group, Inc. ("lDB") commissions and expenses. on September 23,1993. TRT had been shown as a discon- From the discontinued operations of ICH, the tinued operation, pending comp!ction of an agreement to Company incurred losses in 1992 of 540 million, which sell. Pacific Telecom received 4,500,000 shares ofIDB com- included 59 mdlion of operating losses and a 531 million mon stock and $1 million in cash in exchange for the stock vahiation adjustment, and 57 million of operating losses in of TRT and the stock of another smaller subsidiary. Based 1991. The valuation adjustment was based on the market on appreciation in the market value of the IDB common value of the !DB common stock at the time the agreement stock, the Company recorded a $52 million gain at closing was signed.
Non 3. FRANCE Assets
Imtstment in finance assets, net of allowances for cred- tion and 562 million at December 31,1993 and 1992, it losses and accumulated impairment charges of $80 mil- respectively, was as follows:
, MilllONS OF DOI.LAR5/DI Cf MBT R 31 1993 1992 Finance recchables s 22 9 s : 36 o.7 ' 1 ) leveraged leases 339 4 '339 3 | Operatingleases 156- up ~ Totat 68o.: 8s2 .. . - - . 1 -less current portion 18 .6 | :87 7 Lons-Trau lavtsrutui a Fnanct A stis s 561 4 s 627.6
O PACIIIC0BP
. . _ - ______Payment terms offmance receivables and operating leas- respectively. The estimated unguaranteed residual value of es are generally from two to five years, while payment terms leased assets induded in finance assets was $245 million and ofleveraged leases, which are presented net of principal and $252 million at December 31,1993 and 1992, respectively. interest on third pany nonrecourse debt, are up to 25 years. Deferred income tax liability related to leveraged leas- Finance assets are net of unearned income of $254 mil- es was 5308 mdlion and $292 million at December 31,1993 lion and $279 million at December 31,1993 and 1992, and 1992, respectively.
NOTE 4, SHORT-TERM DEBT AND BORROWING ARRANGEMENTS
The Companies'short-term debt and borrowing arrangements are as follows: MllllONS OF dot.LAR$ / DE.CEMIER 31.198 PACIFICORP SUBMDIARIES Revolving credit agreements s 500 s 814 Commercialpaper outstanding ' (187) - (50) Arrowing under banklines (77) '' (297) > AvasAstr CaraciTV s 236 s 467
Covenants in certain PacifiCorp reimbursement agree- revolving credit agreements on a long-term basis. At ments relating to letters of credit limit short-term borrow- December 31,1993, subsidiaries had $60 million of short- ings to 12% of defined capitalization (limiting such term debt classified as long term. Consolidated commir- borrowing by PacifiCorp to approximately 5491 million at ment fees were approximately $4 million in 1993 and 1992 December 31,1993). The Companies hase the intent and and 52 mil! ion in 1991. ability to support short-term borrowings through various
NOTE 5. COMMON AND PRErtRRt0 ST0cx
Changes in shares ofcapital stock and common shareholder capital are listed below:
THOUS ANDS OF SHARIS / MII.IIONS OF DOILAR$ G atmN Saws 5mRD sMRF O SIMON PRt F E Rk1D HiUUR Sru x Suk Cmu
Batasct, Januaaf 1,1881 2s2.823 3,843 s 2 377.o 1991 Sales through Dividend Riinvestment and Sc6ck Purchase Plan . 2,933 - 6i.i
-- , Sales through Employees' Stock Plans . 224 -SA Sales to public 6,oso 1,ooo ' 125.6
- Disposhion ofshares held by Holding- 57 - 12 Batamct, kctmets 31,1981 262 o96 4,843 2,574 1
- 2 1992 Sales through Dhidend Reinvestment and Stock Purchase Plan 3,781. 81 4 -
- Sales through Employees' Stock Plans . I,o7o 23 4 i > [ Sales to public - 3,308 5,75o . . 70.o '
' > Redemptions - J (6o)- (.8) '
> '- Disposition of shares held by Holding - 324 71 j
Baumet, kCtMBen 31,1992 270,579 1o.533 2,7ss.2 I - ' L 1993 Sales through Dividend Reinvestment and Stock'Pirchase Plan 2 947 56 2' l ~ - Sales through Employees' Stock Plara 853 15 9 j
- Sales to public . 6,642 128 3 * < - : Redemptions and repurchases ' (1) (2.2) | Batamct, Dictants 31,1998 28i.on io.m s 2mt.4 |
l At December 31,1993, there were 15.035.454 autho- Plan and the Ernployee Savinp and Stock Ownership Plans ' rired but unissued shares of common stock reserved for and for sales to the public. Eligible employees under the issuarwr under the Dnilend Reinvestment and Stock Purdur employee plans may direct their pretax chttive contributions
Pac | | iCeie e
l
_ - -______- ______. _ , ......
into the purchase of the Company's common stock. The Generally, preferred stock is redeemable at stipulated | Company makes matching contributions equal to a per- prices plus accrued dividends, subject to certain restrictions. : centage of empk>yee contributions, which are also invested Upon invohmcary liquidation, all preferred stock is entitled q in the Company's common stock. Employee contributions to stated value or specified preference amount per share plus ' eligible for matching contributions are limited to 6% of accrued dhidends.
compensation. ! I
PiensiEn Stocs Ooi TAesis THOt3 ANDS OI $HARIS / Mil 1JONS OF DOLLARS / DIGMBER 31 l 1993 1993 1992 1992 Sants SHARI3 AMotwr SHARLs AMotxr
SUBJEciis MANsAisai REB 8dri10N I NS Pa'r Serial Prefe? red,16,00d Shares' Authorizhd - ) E s7 22 (sioo stated value) . 44o 44.o 44o s 44 4 P m Dwase 3 REQUEEM0ti !. 77o | im sooo L ; 1,000 - 2004- j WILLIONS OF DOLLARD - 7,4g 7$o : 75 0 - 750 75.o 1 40 isTAL s 119.o s 219.o | | ! I i Nei SasJECT TO MANBArtti REIBIPilON
' ? si.16 isis stated'value)' 193 s'48 193' -s 4E 1.18 . 420. ' 30 5 42o' 1o.5 ?
_ 35 _ y. , .g. g, | ) - ' 176 394- 98 394- '98
- i y. 12.6 - L 12.6 ' |- 1 98 . 5o2 502 1 ' i 2.13 .666 a6 7 . . 666 -- 16 7. 1
- _ . . . ._.. _J 30 . x 9 8, Series 1992 - 5r000 - 125.o ' 5,ooo I 12501 ' ! ' Auction Rate (stoo,ooo stated value)W s .10o.o -2 iso.o --- ! $ Serial Preferred $10o Stated Value Per j ' l - Share,3,500 Shares Authorized
- - 25 [ -+ - - 7 % 2 a- .2 a.
j E4516 85 85- : 85 85:
i , '70 70 - 4 72 70 70-- / |' r ; i 42 42:4 | | | 5 00 42 '42 , 66 - 6.6 66 : 6.6 | 88 89 90 9: 9: 93 E 54o
. 6.co 6 .6 6 .6
; 18 ' s.8 . '18 1.8 i 740 796- 135 13 5 135 13 5 ' 8 92. 69~ ~ 6.y - 65 69|
9.oS . 165 16 5- 165 - - 16 5 1 , |$% Preferred, stoo Stated Value, 127 Shares Authorized and Outstanding ' 127 x2 7 127 12 7 181AL s367 4 s 417 4
(44 Dmdend raies at Detember 31. IW3 t,n 500 sharn c.m h of Sern A and Scre C were 3AS% and 3 46%, reywely.
The fair value, based upon bid prices from an invest- plus accrued dividends on No Par Serial Preferred Stock are ment bank, of the redeemable preferred stock is estimated as follows: beginning in 1997,15,000 shares of the $7.12 to be 5234 million, or 107% of the carrying value, and series are redeemable annually; the 57.70 series is rtdeemable $218 million, or 99% of the carrving value, at December 31, in its entirety on August 15,2001; and 37,500 shares of the 1993 and 1992, respectively. $7.48 series are redeemable on each June 15 from 2002 Mandatory redemption requiremems at stated value through 2006, with all shares outstanding on June 15,2007
44 P1CIi| C1IP
--__- - _ _ _ - _ _ _ _ - ______- ______- - _ - ______- _ - ______
redeemable on that date. Mandatory redemption require- 1992. If the Company is in default in its obligation to make ments for 1993 through 1996 on the $7.12 series were satis- any future redemptions on the $7.12 series or the $7.48 series, fuky the purchase of60.mo shares at a diuunt in Ihrmhet it may not pay cash dhidends on common stock.
CTE 8, LONC-IERM DEBT AND CAPITAL LEASE OBLIGATIONS
The Comp 2ny's long-term debt and capital lease obligations were as follows: Mill.lONS OF IX.)11ARS / Di'CEMBLR 31 i993 1992 PacmCow ~ ' ' [ Fiist mortgage and collateraitrdt bonds S
' [ . Maturing 1994 through 1998 /45494Wa) s ~ 65 1.2 's ~5713 , Maturing 1999 through 2003 / 5 951o% . 7437 L 895 5 ; EMBEDDED COST OF L 3 Maturing 2004 through 2008 / 6.857 .9% - 257 7 :455 5 - MORTGAGE BOM DEBT [[ Maturing 2009 through 2o13/ 7 349.2% 216 5 168 5 rPERCENT/
| k | Maturing 2o 4 through 2o18 / 8 348 7% v4.s 2o2.8 - , 9,o p Maturing 2o19 through 2023 / 6 7%8.5% 54:4, 175.o .- | | | Guaranty ofpollution control revenue lxmds
y j 6% due 2003 21 3 22 3 - _
' h |5 6%io.7% due1994 through 2023N 271.0 12729 -- 85 ' Variable rate due 2005 through zo19M' 404 9' 407 4 Funds held by trustees - (.9) ; | . i Commercial paper and uncommitted bank lines - 93.o -
f leveraged ESOP loan guaranty 16 7 - 27 3 - s.o } Unamortized premium' add discount 10.1 11.0 ' : Capitallease obliptions zi.6 ' 18.2
Tata 3,217.i 3.i67 .o
less current maturities - 70 3 52 3 ~ i 75 j ' _ Totat 3,146.8 3.ir4 7 | Issimiamt
| 2411.8% First mortgage notes and bonds maturing through 2028 155 7 . 171 7
{ j.8%:2% Notes due thmugh 200[D 188 5 231.o - 7.o 4 . 88 89 90 91 92 93 [ Unsecured domestic credit agreements - 206.0 k [Commercialpaper and uncommitted banklines )(a so.o . 155.o
.! Variable rate notes due through 1997(c)(d) 25 5' 49 5 =
[5441o.7% Medium-term notes due through 2006(* 236.o . 3731 1 |45%tz% Nonrecourse debt due through 2o3: 172.2 :2o871
braged ESOPloan guaranty 25 4 3o.1 pitallease obliptions E.8 ~9 .6 * Tetz 862.i n.49 7 I ; less current maturities 835 368.o Tets 776 8 1.o66.7 Tela s 3,921.6 5 4.18i.4
W hlades 5% millain of 9.4% lena sued io secure obhganom under an equivalent Io vear yen hun. A currency swap movened the 6 sed rare yen liabihrv m a floatmg rme Ui dollar haluhn bud on wmonth 1.lBOR pha .02% (amerest rate 3% as thember 31. 'PO). (h! Snured by plrdged lieu naingap and milectal rnnt lona gencially at the same interes rain, matunty darn and redemptiori prtw'n ions a the irtured peillution mmnil revenue bondt k) Interru rain Autuaic bawd on .arann rain, pnnwily on $rrt 6 aic of dernn run, mierbank bornwing rain or pnmc rarn. (d) nc Gmipamn have the abibry to suppon shon-verm born-mp and turtem &% bemg tr6narwed on a long-term ham ihrough revolving hno of urdit and iheretint, bwd upon manarmemi mient. havr daw 6cd 560 milhon of Juin-term debi and 5% milhon of curruuly marunng long term debt c kmg-irrm debt m imO
PAtiIIC3RP 45
______In accordance w ith SFAS 107,'Disch>sures about Fair earnings and other provisions of the mortgage indentures. Value of Financial Instruments," the fair value of the The Company and Holdings guarantee cenain debt Company's long-term debt at December 31,1993 and of the i everaged ESOP Trust established under the K Plus December 31,1992 has been estimated by discounting the Plan (the " Trust"). In addition, the Company and Holdings projected future cash flows, using the current rate at which guarantee the Trust's performance under certain interest rate similar loans would be made to terrowers with similar cred- swaps having a mtal notional principal amount of $24 mil- it ratings and for the same maturities. The fair value of the lion that were entered into by the Trust and a commercial Company's long-term debt, including current ponion and bank. These arrang:ments change the interest rate exposure excluding leveraged ESOP loan guarantees and capital lease on the variable rate debt guaranteed by the Company and obligations, is estimated to be $13 billion, or 106% of the Holdings to effective rates of 7% and 6.7% respectively, at carrying value of S4.0 billion, and $4.6 billion. or 102% of December 31,1993. The debt was used to acquire the the carrying value of $4.5 billion, at December 31,1993 Company's common sto<.k. Common equity has been and 1992, respectively. reduced and long-term debt has been increased by the The Companies have entered into interest rate swap amount of the debt guaranteed. Remaining unalkicated com- and exchange agreements to reduce the impact of changes mon shares held in trust total 1,921,287. in interest rates on their variable rate long-term debt. At Nonrecourse long-term notes are secured by assign- December 31,1993, the Companies had outstanding eleven ment of related finance receivables, asset security interests interest rate contracts with commercial banks and Fonune and cash flows from operating leases. The noteholders have 500 companies, having a total notional principal amount no additional recourse to the Companies, of $283 million. These agreements effectively change the hiaturity and sinking fimd requirements on all long- Companies' interest rate exposure on the underlying vari- term debt and capital lease obligations and redeemable pre- able rate debt to rates of 5.7% to 9% These contracts mature ferred stock outstanding are $157 million, $221 million, at various times up to the > car 2002. The Companies are $222 million, $241 million and $315 million in 1994 exposed to credit loss in the event of nonperformance by through 1998, respectively. the other parties to the interest rate swap agreements. The Company's hiongages and Deeds of Trust, as However, the Companies do not anricipate nonperformance supplemented, relating to its long-term debt, restrict the by the munterpanies. payment of cash dividends and other distributions on com- The fair value ofiuerest rate swaps is the estimated mon stock. At December 31,1993, the Company's retained amount the Company would pay to terminate the swap earnings available for these purposes was $266 million. agreements, taking into account current interest rates and Holdings has pkdged its shares of Pacific Telecom and the curu nt cnzditwonhiness of the swap counterpanies. The Financial Services stock and cenain other assets, induding estimated termination cost would have been $65 million the note received in connection with the NERCO disposi- and $64 million at December 31,1993 and 1992, respec- tion, as security for repayment ofits obligations under cer- tively. tain debt agreements. Approximately $7 biHion of the assets of the The Company made inierest payments, net of capi- Companies secure long-term debt and capital lease obliga- talized interest, of $436 million, $482 million and $475
tions. First mongage and collateral trust bonds of the million in 1993,1992 and 1991, respectively. I Company may be issued in amounts limited by propeny, I i,
NOTE 7. LEASES
The Companies lease certain propenics under leases Future minimum lease payments under noncancel- with various expiration dates and renewal options. Rentals lah!e operating leases are $40 nullion,535 million, $32 on lea 3e renewak are subject to negoti.uion. Cen.un lea.ses million, $31 million and $50 million for 1994 through | provide for options to purchase at fair market value. The 1998, respectively. In October 1992, the tran.sponders on Companics are aho committed to pay au taxes, expenses of Telecommunications'satelHie were sold and leased back , operation (other than depreciation) and maintenance applic- unJer an operating lease agreement. I able to the leased property. Net rent expense for the years ending December 31, 1993,1992 and 1991 was $60 million, $51 million and $60 milbon. respectively.
i I P a ciriC eir CTE 8, COMMITMENTS AND CONTINGENCIES
Couraucros me Otan The Company and its subsidiaries are parties to vari- Construaion and acquisitions are estimated at $1.278 ous legal claims, actions and complaints, cenain of which million for 1994. As a pan of these programs, substantial involve material amounts. Although the Company is unable commitments have been made. to predia with cenainty whether or not it will ultimardy be Several Superfund sites have been identified where the successful in these legal proceedings or, if not, what the Company lus been or may be designated as a potentially impact might be, management presendy believes that dis- responsible pany. Future costs associated with the disposi- position of these maners will not have a materially adverse tion of these maners are not expected to he material to the efht on the Company's consolidated results ofoperations. Company's consolidated results of operations.
Jasmv Omo Puwis At December 31,1993, Electric Operations' participation in jointly owned plants was as follows: Mll.t.lONS OF IMIIARS Funor PLwr G wrmm. OrM ATNM ' |N 84 DMum) TOM |N SHARf sutVICI DI PRICIAf h >N Plk UM ss
Centrd; - 47 5% .' s 175 6 s978 s 56 )im Bridger Unitsi,2,3 and4 66 7 7 81.8 '272.6- 3h Trojan (4) 25- m - --
Colstrip Units 3 and 4 - io.o 199 3 ' ~ 47 6 1.o
Hunter Unit : ' ' 93 8 252.1 855 4: Hunter Unit 2 6o.3 - 18o.1 ,56.8 - 14 [Wyodak 80.0 289 4 86 3 - : 2o.2 .
Craig Station Units i and 2 . 19 3 - 144 1@ - 29- . 473- 'Hayden Station Unit : - 24 5 ' 15.oM : u.5 - .6 : Hayden Station Unit 2 ' 12.6 -16.4S 75= 4
(a) Plant. msentury. firl aiw.I deuemrnmioning tosa r<>caling $3 minion relating to the Tniian Plant, were included in reguleory aswin-nct at Decemlvr 31,1Wi Recovery of thew rmts i, pending appnrral of tertain regulaiorv commiciom. A l'.stluden unalkwaved acqmunon ademments of $1.M n illion.
Under the joint agreements, each panicipating utility ating expenses and debt senice). These costs are included is responsible for financing its share of construction, oper- in operations expense. Electric Operations is required to pay ating and leasing costs. Fjectric Operations' ponion is record- its portion of the debt service, whether or not any power is ed in its applicable operations, maintenance and tax accounts. pmduced. The arrangements provide for nonwithdrawable Substantial amounts of power are purchased from sev- power and most of them also provide for additional power, eral hydroelectric projects under long-term arrangements withdrawahle by the districts upon one to five years' notice, with public utility districts. These purchases are made on a For 1993, such purchases approximated 2.9% of energy %st-of-senice" basis for a stated percentage of project out- requirements; an additional 12.7% was obtained through put and for a like percentage of project annual costs (oper- other purchase and i . ; interchange arrangements.
At December 31,1993, Electric Operations' share oflong-term arrangements with public utility districts was as follows: a.o n4nw nu omwr csvin- tw m u Am funm Emm hW) op orm 1 Caru
.Wanapum zoo 9 155,444 18 7% s -55
Pries: Rapids : zoos 1o9,602 13 9 38
Rocky Reach zon - 6 4.297 53 1.8 ' Wells 2o18 54,t98 ' 7.o 19 Tsia 18tm s n.o
(a) Annual m ts. in milhoni uf dollan. wwlude deh wrvia of 58 milhon.
s PaeiFiCsaP U r ,
NOTE 8, COMMITMENTS AND CONTINGENCIES
Cassinueras me Oran The Company and its subsidiaries are parties to vari- Construction and acquisitions are estimated at $1,278 ous legal claims, actions and complaints, certain of which million for 1994. As a part of these programs, substantial involve material amounts. Akhough the Company is unable commitments have been made. to predict with cenainty whether or not it will uhimately be Several Superfund sites have been identified where the successful in these legal proceedings or, if not, what the Comp 2ny has been or may be designated as a potentially impact might be, management presently believes that dis- respomible party. Future costs associated with the dhposi- position of these matters will not have a materially adverse tion of these matters are not expected to be material to the erTect on the Company's consolidated results ofoperations. Company's consolidated resuhs of operations.
Jemi Owwo Pimi At December 31,1993, Electric Operations' panicipation in joindy owned plants was as follows: MilllONS OF DOLLARS Fuant Itea CONOtUnOS Olua rh >Ns ' h As uMetAnti WonA IN $mai SE k vt< 1 DirnraaniN Pumat o
Centralia - ~ 475% ' s 175 6 s978 .$ 56.
Jim Bridger Units 1,2,3 and4 '- : 66.7 ' 78 1.8 ' 272.6 . 39
- - jTrojan(*) 25 - . ;Colstrip Units 3 and4 to.o ~199 3 47.6 to
Hunter Unit s 93 8 ' 252.1 - 85 5 . .6 , Hunter Unit 2 6o.3 ' 18o.1 56 .8 . ' L4 - Wyodak ;80.o ' 289 4 86 3 2o.2 ! , 4 LCraig Station Units and 2' 19 3 ~ 1441 ) 47 3 .29- Hayden Station Unit i . 24 5 15.oS$ - n.5 .6 Hayden Station Unit 2 : n.6 16.4S ) 75 L .4
(a) Plant. invemory. 6 el and deu.mmmaining mm roialing $29 mdlion relaiing to the Tropn Plant. were iiwiuded in regulaiory aucu.nci at December 31, im Recovery of thoc ama in pendmg approval otienain regul.nory commmions 4)Iacludes unallocated aquninon adimemenn of Sl3'i mill.on.
Under the joint agreements, each panicipating utility ating expenses and debt service). These costs are included it responsible for fmancing its share of construction, oper- in operations expense. Electric Operations is required to pay ating and leasing costs. Electric Operations' portion is record- its ponion of the debt service, whether or not any power is ed in its applicable operations, maintenance and tax accounts. produced. The arrangements provide for nonwithdrarable Substantial amounts of power are purchased from sev- power and most of them aho provide for additional power, eral hydroelectric projects under long-term arrangements withdrawable by the districts upon one to five years' notice. with public utility districts. These purchases are made on a For 1993, such purchases approximated 2.9% of energy " cost-of sen ice" basis for a stated percentage of project out- requirements; an additional 12.7% was obtained through put and for a like percentage of project anntul costs (oper- other purchase and net interchange arrangements.
At December 31,1993. Electric Operations' share oflong-term arrangements with public utihty districts was as follows: | t.tvarnw kn Ownv7 Carum * Pim eami ANNui f umn Exrinis thT ) oF Oart r Gwiv4'
Wanapum _ : 2o09 155,444 18 7 % .s'55
Priest Rapids .20o5 -- 109,6o2 13 9 - 38 i Rocky Reach 2ou 64 a97 53 1.8 l Wells 2018 54,198 7.o I.9 | Tern 48u4 s n.o
(a) Annual com. m nullioni of doll 4n. uniude dein sen ne of 58 milhom
|
PaeiriCeir | ) <
. He Company has a 4% interest in the Imermountain equal to the Company's 4% entitlement of the Project at a Power Project (" Project"), located in central Utah. The price equivalent to 4% of the expenses and debt senice of - Company and the City ofins Angeles have agreed that the the Project. City will purchase capacity and energy fmm Company plants
NOTE 9. INCOME TAXES
The Companyi effective combined federal and state of 35% in 1993 and 34% in 1992 and 1991 was applied to income tax rate from continuing operations was 31% in income from continuing operations before income taxes and 1993. 38% in 1992 and 28% in 1991. The difference the recorded tax expense is reconciled as follows: between taxes calcalated as if the statutorv federal tax rate
MillK)N5 OF DOI.1ARS / FOR Till ifAR
EFFECTIVE 8993 1992 399 |NCOME TAX RATE CoMmts ImRu hcom ims s 213 5 s 8t.9 s 212.o (U kG XT1 kMTM MA8E) M IAX RftmM fRoM so r.8 , Excess (deficiency) of tax over book ' depreciation (flow-through basis) (9 4) (20 3)
investment tax credits 15 1 15 2 16.7 | Depletion 53 49 52', #' ^ AfTordable housing credits 87 no.o 72 i ' ; Purchase accounting adjustments ~ (12.0) (.6)
, Other items capitalized and miscellaneous differences it.6 40 < ; y 13 8 9 ! | [ IotAl 33 5 (13) 41.9 k, FEDER bcoW IAX ISO.o 83 2 170.I 35 *'|/ .g i ITAll hCoM IAx, Ntf or frotnit lucom tax Bum 74 7.6 6.6 s - s - , TsTAt bcow TA:EXPENIE s 187 4 s 90.8 s 176.7
. . /f [. it w' . ! g. \ >
~ The provision for income taxes is summarized as follows: | Mll1lONS OF 1ULI ARS / FOR THE iTAR 25 1- - 993 1992 199 Cumst _
| Federal s 703 s 145 2 s 189 7 20 ' 88 89 90 9t 92 91 State 36 97 18 5'- TotAt 154 9 208.2 ~ 73 9 cal ul.ord using wn, trom gg u.nmmng oi,mnon. Federal 12o.9 (49 6) ~ (6.4f State 77 7 (8.4) ' loiAL 128.6 (48 9) (14.8) bVE8TWwiIAX CRIDIT3 (15 1) (15.2 ) (16.7) Ici41 INCOME IAX Eartw8t 5 is7 4 s 90.8 s i?6.7
The Company adopted SFAS 109," Accounting for per share. Assets increased $619 million and liabilities income Taxes," effective January 1,1993. This statement increased 5619 million, reflecting deferred income tax lia- requires use of the liability method of accounting for deferred bilities and related regulatory assets recorded for cumulative income taxes. Deferred tax liabilities and assets reflect tL income tax temporary ditTerences which will be recovered expected future tax consequences, based on enacted tax law, throuF hrates when the temporarv differences reverse. The of temporary d&rences between the tax hises of assets and regulatory asset is primarily based upon differences between habilities and their financial reporting amounts. The cumu- the book and tax bases of utility plant in service and the lative effect of adoption of SFAS 109 resulted in an increase accumulated rescrve for depreciation. in consolidated net income in 1W3 of 54 million, or 50.01 IPACIIIC0IP - ______
%e tax effects ofsignificant items comprising the Company's the Company's federal income tax returns for 1987 and net deferred tax liability are as follows: 1988, and has proposed cenain adjustments increasing tax- MitJJONS Oi IM111ARS / DIGMiti R 31. Im es by $26 million.The Company has appealed adjustments Detamai;baenmts totaling more than the net proposed increased tax. ~ ' pmperty,plaitt And equipment s n,i98.o ! Conferences with the IRS are ongoing in 1994. [hynlamryasset : ' 816.8 : In the opinion of management, the outcome of the kOther deferredliabilities ' .i97_7 1983 thmugh 1988 federal income tax examinatiorn will Detans T3 Assns not have a material effect on the Company's consolidated ~ fmancial position or results of operation:.
[Rhorfliabilityi , ' (mo.9) The Company's 1989 and 1990 federal income tax 'I Bookieserves not deductible for tax . (too.3)- retums are currendy under examination by the IRS. IkT Butants Tan bAsEHV $ 1.8 n.) Financial Senices acquires housing projects that qual- | ify for the low income housing credit established as pan of The Internal Revenue Sem.ce ( IRS,,) completed .its the Tax Reform Act of 1986 to provide an incentive for the examination of the Company,s federal income tax returns development and preservation of privately owned afford- for the years 1983 through 1986. The Company and the able rental housing. Annual tax benefits scheduled to be IRS have agreed to a setdement on all of the issues, except received from these projects are expected to be 59 million for cen2in issues relating to the Company,s abandonment
. each year from 1994 through 1998. I ofits 10% interest in U, shington Public Power Supply
. .The Company made income tax payments, net of System Unit 3. .The L.impany and the IRS continue to dis- refunds. of 5143 million, $146 million and 5172 million | cuss the remaining unagreed issues. in 1993,1992 and 1991, respectively. During 1993, the IRS completed its examination of
| | Nott 10. RETIREMENT PLANS | The Companics have perisEn~ plans covering sub- imum amount of pension expense which can be deducted stantially all of their employees. Benefits under these plans for federal income tax purposes. Unfunded prior senice costs ~ are generally based on the employee's years of senice and are amonized over the remaining senice period ofemploy- j average monthly pay in the 60 consecutive months of high- ecs expected to receive benefits. At December 31,1993, plan I est pay out of the last 120 months, with adjustments, to assets were primarily invested in common stocks, bonds and ) reflect benefits estimated to be received from Social Security. U.S. govemment obligations. l I Pension costs are funded annually by no more than the max-
Net pension cost is summarized as follows: MILIJONS OF liOLLARS / FOR Till Yl AR
1993 1992 1991 ' hSErvice cost- benefits earned s 19 2 s 17 2 s 16 9 - Jmerest cost on pmjeced benefit obligation . 70.8 66.8 63 6 hActual gain on plan assets (89 5). ' (18.o) - (104 5) Net anvarrization and deferral - 44.o (23 5) 6.849 [Regulamry deferralW -34' (6.5) (5p) - Iki Pmaien Casi s 47 9 s 36.o s x2.7
w i u Opmnom hme, sea mnmm, manan,m in pomm .na <, nam man regui iorv .uthonne,io aern ,he ainnen PacarICsir e --______. - 4 The ftmded status, net pension liability and significant assumptions are as follows: MILI.!ONS OF !X111AR$ / DFCLMBER 31 199} 1992 huhrial presetit Value of benefit obliptions -j IVened benefit obligation - e1835 3 s 64.8 d F Accumulated benefir obligation - < 868.o - " 7n.o 1 %vjected benefit obliption a,oop.5 ' ' 816.2j han nuets at fair value ! 705 8 J '53898 , Projected benera obliption'in excess of plan assersi , ~(ap77)1 ) (2324)j * .. iiArecognized prior service oost i < 1:74: pnrecogniud net (pin) loss 1 , 5.o (82'.1) . , tid |; [ Unrecognized het obliption at January t, bEing amortiud over 8 to 16' years t 99., ; {1o5'2j. ;Minimumliability adjustment'- (ad.3) ' (26.8)f Nn Penses laanni s (196.7) s (224 9) Discount rate 75% 8-9% Expected long-term rate of return on assets 875-9% 8-9% Rate ofincrease in comtiensation levels 5-6% 6-6.s% Electric Operations otTered early retirement incentive ed of 568 million. Electric Operations has received regula- programs in 1987 and 1990. Induded in the table above is tory accounting orders to defer these costs as a regulatory the present value of all future termination benefits provid- asset to be amortized over 20 and 30 years. NOTE 11. OTHER POSTRETIREMENT BENEFITS Electric Operations and Telecommunications provide prior service cost, was $319 million at Januacy 1,1993, and health care and life insurance benefits for their eligible retirees is being amortized over a period of 20 years. For those on a basis substantially similar to those who are active employ- employees already retired at January 1,1993, the Company ces. Efkctive January 1,1993, the Company adopted SFAS will continue to fund postretirement benefit expense on a 106," Employers' Accounting for Postretirement Benefus pay-as-you-go basis. For those employees retiring after Othcr Than Pensions." The cost of postretirement benefas January 1,1993, the Company will fund postretirement are now accrued over the active service period of employ- benefa expense through a combination of funding vehicles. cet Prior to 1993, the cost of these benefits. 512 million in The Company funded $36 million of postretirement ben- 1992 and $10 million in 1991, was charged to operating efit expense during 1993. These funds are invested in bonds expenses as claims and premiums were paid. The transition and wmmon stock. obligation. which represents the previously unrecognized The nei periodic postretirement benefit cost is summarized as follows; MILLIONS OF DOLLARS / DF(1MBI R 31 1993 fervice costs - benefits earned - , s-769 Jnterest east on accumulated postretirement benefit obligation - 28.8 3 pmortization of transition obliption c ' 26.o ' : ' Ecgulatory deferral ;(5 6)] ' Actual return on plan assets -(.2) i Nu Pimanc Perunarutsi BENEm C681 s 46.6 H Pacific it . 8 _ _ - ______...... > { t The accumulated postretirement benefit obligation ("APDO*) was as follows: i MI!.13ON5 OF IX)I TARS / Di CI AtliLR 31 1993 Retirees and deper%ms} s 257.o . Fully eligible active plan panicipancs ~ 3o.9 . Other active plan panicipants 13o.2 .APB0 4os.: ' 7 . | Plan asactsat fair vailue 39 4 [APBO.in' excess ofplan assets ' - 368 7 { [Unrecopized hrior service cost .8 , f [ Unrecognized transition obligation (3o27): - ,Unruognized nelloss ' (47 8) - Accous PsaruimmiBrum Deusarms s 19.o The weighted average discount rate used in determin- 4.5% thereafter. The health care cost trend rate assumptions ) ing the accumulated postretirement benefit obhgation was have a significant effect on the amounts reponed. Increasing i ; 7.5%. He assumed health care cost trend rates for panici- the assumed health care cost trend rate by one percentage I I pants under age 65 were 12% to i4%, with gradual decreas- point would have increased the APBO as of December 31, es to 5% over 9 to 11 years and 4.5% thereafter. The assunut 1993 by $25 million and the annual net periodic postre- health care cost trend rate for participants over age 65 was tirement benefit cost by $3 million. 10%, with gradual decreases to 5% over 9 to 11 years and , Non12. Acovism0NS j On April 15,1992, the Company purchased 243 control revenue bonds. ; | I megawatts of generating assets and fuel resources from On April 8,1991, Electric Operations purchased an Colorado-Ute Electric Association, Inc. for $279 million. equiry interest in the Wyodak Plant. On June 8,1991, the The purchase was fmanced with $250 million of first mon- Company retired its share of the Wyodak debt, which had pge and collateral trust bonds, induding $48 million issued been recorded as a capital lease obligation, with issuances of as collaural for obligations assumed relating to pollution medium-term notes and cash. Noncash investing and financing activities associated with these acquisitions were as follows: MilllONS OF IMillARS 1992 t991 Net assets acquired s (179 3) s (169 9); [ Disposition of net propeny under capital lease - - 131 5 | Iong-tenn debt assumed 25o.3 105 6 | . Accrued liabilities and deferred credits assumed 49 8.o Retirement of obligations under capital lease - 6 32-5) On July 15,1991,13cctric Operations paid 5234 mil- related common facilities and commenced providing pow- ; lion to Arimna Public Service Company ("APS') to pur- er to APS under a related power supply agreement. } chase Unit 4 of the Cholla coal-fired generating plant and PacirICeiF 51 ___ _ -_ _ .- . - _ _ _ . NOTE 13. SPECIAL DIARGES As a result of credit rating downgrades in 1992, The following table is a summary of the special charges Financial Services and Holdings experienced restricted access by income statement category to debt markets. In order to improve this situation, these MUJONS OF IOU ARS subsidiaries attempted to reduce debt with cash generated 1992 by accelerating s les of underperforming and nonstrategic Revenues . r s . soj t awts. Related to this action, Financial Services and Holdings | Operations expense ;73j recorded various pretax adjustments of 5186 million to the hdministrative and gen 5ral expense . , k21j I carrying value of certain assets in the first quarter of 1992. Depreciation and amortization [38 j Other expense : < , , 144}f Income taxesE 64)) NET Afits Tax Caanst s n2 NOTE 14. BUSINESS SEGMENT 8 MilllONS OF IUl.lARS 1.uciksi lhmn ih mnmm O*.w u nu rto Onu rp m kRM Anim Onu pW OMMTEM YEAR EN0fB DECEMBER 31,1993 .. . , .. _ , _m ,,, . m. , ., y_..y~., ,yy Revenues 1 : s 2,507 ; ?s 196 , ' - s ; fj ) - - s 34 2 s 1. 7.- o9. - - _ a 3 Income from operations , pi6 4 (9): Mj . 78 .' 341 ) ' Depreciation and amortization . 28t ' ; 14 | ^4o5 : Liio.- .. d * Capital spending . ,Sosi 'N- 126o 1.42; 0- 37. . a identifiable asserst - ri,959 E "9,18: = -: 2,479 I', 299 | L-3 ..YEnn ENefe DECEMBEn 31,1982. - _ . . , , nn. - , _ . . , ,,,,.;a,.,.,,,,-,,.,,,gmn c Revenues < ; s .3 242 s 2,362 L :.s. 7o5L . . 5 '17.5 (sL 47+ 2 (18 ); Income from operations- 633 '678: .J38 3 C-j Depreciation and amortization L453 c > 287 : 114 ' 52 E Capital spending ?t ,001; M (3) - - Mo1 . ,"-4 h '. 864 . Identifiable assets c u,257 ' 8,1921 ' I,513 /1.326'. 226(ch YEsa EnsE0 DECEMBER 31,1991 ,,m _.s ., . r,y. -y - o y, , .- .m , Revenues si 3,1681 s 2,252 ' s: .724 y s 192. ,s.. -3 3 Income from operations : 94i j. 738 J159 L (r)| E- ] L 8: 6 - Depreciation and amortization 3 25 . sr7 - L8: J Capital q>ending : 1,o59 ' |796. 236 . 27: - '] Identifiable assets n,9so ' 7,665 1,674 : 1 1,863 ' 708 4 m huluan die onanom of founte. real nute. nunu6auring and agrauln.re unvu.n of nn.mei.a sermn and independen p,wer pn duaion. ' as wdl e the acnvum of Iloidinp | | | I | PairiCee __. l | NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED) j Mll.l k )N5 ()! I nOI.l A R$ / Qt ' AR11 R 1 NI)l D Men M.i Nrnuma Det Wm a u m m u 1983 m. , Revenues s 523- s ' 8o9 2 -$ 8617 s 879A hhcome from operations ; 245 9 - 1992 238 4 23to ;}ncome from continuing operations - nL5. 91 9 105 2' u31. ) - - Discontinued operations - 52 4 4 - - [Cumuladve effect ofchange in accounting principle 4.o - fetincome" n65- 91 9 157,.6 ' u31] Iarning on common stock 106 5, 82.2' 147 8 . 103 3' " 8 Drning per common share from continuing operations 3' , 30 35 ~.37. $ [trning per common share 39 3o 54 37 , I | Common dividends paid per share 35'8 .27 .27 .O . Common dividends dedared per share .27 - .27 .27 ,27 s COMMON STOCK Common stock price per share (NYSE) MARKET PRICE ' ' ^#"## # """ k High 20 % 19% 20 % 20 % - likw . 16 1 . . 17%. ,18 % . .18 L lo 3o 1992 , _ . . - . . . - ., ._ Revenues s 78o.o 's. 7 33 s Bu.o ' s 867 7 t 3 25 25 income from operations 81 7 - 186.2 ' 228.6 136 5 ' J ncome Coss) from conunumg operations (33 7) ~ 66.o 97 2 .2o.7 j ! - IDiscontinued operations , (145 8) 34 (26 7) (3t9 5)j zo . zo j Net income (loss) (179 5) 67 4 70 5 (298 .8) { i I Isrning (loss) on common stock -(186 7) 588 ; $9.8' (309 6) \ "~ M $arninp (loss) per common share from continuing operations (a5) .22 32 o3.[ Iarning (loss) per common share 071) '.22 .22 ' (us)j 8 8 Common dividends paid per share. 375 375 35 -.3 5 : $ io ,o 8 8 Common dividends declared per shase 375 35 35 .385 1 dommon stock price per share (NYSE) ) Nigh 25 % 23% 23 % 33% $ 5 low u% 2% 22 % '28 % -- ' A signi6 cant portion of the operations are of a seasonal The 6rst quarter of 1992 indudes special charges to ! Qi Q2 Q3 Q4 Q1 Q2 Q3 Q4 | nature. reduce the carrying value of certain assets. See Note 13. 92 93 ' Previously reponed quarterly information has been The founh quarter of 1992 indudes various unusual revised to reAcet certain redassi6 cations. These redassi6ca- charges totaling 550 million after-tax. The items primarily tions had no cHect on previously reponed consolidated net relate to obsolete inventon valuation adjustments, contract income. settlements and a number of other items. See E11CTRIC See DISCONTlNiTD OPl RATIONS on page OPLMTIONS on pages 29. 30 and 31. 35 and Note 2 for information regarding diwontinued operations. PaciiiCear OrrlCERS PacrCone Dennis P. Steinberg,47 Grma Ceumm ViceIbrsident Frederick W. Buckman,48 + 1978 Stoel Rives BoleyJones Midentand Chief & Grey Evcutire Offcer Jacqueline S. Bell,52 + 1994 Controller homm Aumor.: $1980 William J. Glasgow,47 Deloitte & Touche Senior Vice President and William E. Peressini,37 ChiefFinancialOffcer. 71rasurer facifiCorp, and Chairman +1985 and ChiefExecurite Ofcer, PacifCorp Financial Pacre Pows Seriices, Inc. + 1988 Paul G. Lorenzini,51 Prrsident John A. Bohling,50 + 1987 Senior Vice President + 1966 Diana E. Snowden,46 Senior Vice kident Shelley R. Faigle,42 + 1986 Senior Vice President + 1973 than Pows Harry A. Haycock,58 Veri R. Topham,59 Senior Vice kident k ident + 1960 + 1972 Daniel L Spalding,40 John E. Mooney,57 Senior Vice hident Ereaitiie Vice nrsident + 1981 + 1960 Sally A. Nofziger,57 Pacre Tarcou Vice kident and Corporate Secretary Charles E. Robinson,60 + 1962 Chairman, kident and ChiefEreastite Ofcer Thomas J. Imeson,43 +1960 Vice hrsident + 1985 James H. Huesgen,44 Erecutiir Vice hident and Robert E Lanz,51 ChiefFinandalOf#cer Vice kident + 1983 + 1973 PacrCor.P FRANCIR S8VELS Richard T. O'Brien,39 Vice kident Michael C. Henderson,47 +1983 M ident + 1991 + Icar each oficer joinedthe company PACiiiCear . . _ _ __ ._ _- DIRECTORS Keith R. hicKennon,60 John C. Hampton,68 Chairman Chairman and Chief PacifCory Exenctitr Ojiur & * lbrtland, Oregon Hampton Resources. Inc. ' ,, + 1990 lbrtland, Oregon + 1983 A. hi. Gleason,64 , Vice Chainnan Stanley K. Hathaway,69 % ' PacifiCorp Partner i Portland, Oregon Hathaway, Speight, Kunz +1988 & liauruvin McKoma EucmlCnuum ; Cheyenne, Wyoming | C. hi. Bishop, Jr.,69 + 1975 Viu Chairman Keith hicKennonwaselected < Pendleton %Ien Afills Nolan E. Karras,49 Chairman ofthe PacifiCorp | lbrtLznd, Oregem ImrstmentAdviser Board af Directors early in + 1970 Kamu 6 Associates. Inc. 1994, folknving the retirement Roy Utah of Don C. Frisbee (see page Frederick W. Buckman,48 + 1993 5.) Keith has served on the Arsident and Chief PacifiCorp Board since 1990. Executiw Offiur Don hi Wheeler,65 PacifiCorp hrsident and Genend Neith recently moved to Portland, Oirgon Afanager Portland after retiring as ' + 1994 WhulerAfachinery Chief Executive Officer of Company DowCorning Corporation. C. Edd Conover, 54 Salt Lake City, Utah He remains as Chairman of , Genera /Afanager + 1989 the Board of Dow Corning, Finanu Industry Cmuy and is also on the Tektronix | Tandem Computen Nancy Wilgenhusch,46 Inc. Board of Directors. , Incorporated nrsident Cupertino, California Afarylhurst College +1991 Afarylhunt. Orrgon + 1986 Richard C. Edgley,58 | Alember ofPresiding Bishopric + uareachdirector , The Chmrh offesus CMst electedto board y ofL2tter-daySaints " Salt Lake City Utah + 1987 | | I ! : ! ' l ' | | | ' PacifiCear 2 i _ - _ . _ _ . _ . . . . - _ . _ . _ ...... - . - _ . _ . . ______, INVEST] |NFORMATl0N : . f Sim Excamot Lsins: Dnem Runt: Tai me Stocs Pimenan Pim PacifiCorp's common stock is listed on the New York Stock PacifiCorp's dividend reinvestment plan is a convenient way Exchange and the Pacific Stock Exchange under the symbol PPW. for shareholders to increase their investment in the company. Daily quotes on the common stock can be obtained by Under the plan, quarterly dividends from common and pre- checking the New York Stock Exchange composite transactions ferred shares (all or a ponion) may le automatically applied toward listed in local newspapers. purchase of additional shares of common stock, in addition, cash The company's preferred stock and first mongage bonds contributions of up to $25,000 per quaner can be made. All, or ; are infrequently traded in the over-the-counter market, with any portion, of the reinvestment shares can be sold through the + the exception of one 1992 preferred stock series, listed on the plan upon termination of panicipation. A small commission fee [ New York Stock Exchange. is charged when applicable. - pg,t g a , a Existing shareholders cm open a dividend reinvestment account Financial analysts, stockbrokers, interested investors and with either dividends from existing shares or with an initial cash financial media desiring information about PacifiCorp should c ntribution. For a prospectus, enrollment card or other infor- contact the following individuals in Investor Relations: mation, call or write the Shareholder Services depanment. Chris Hunter (503) 731-2090 Boenotsa lemana , Bruce Williams (503) 731-2124 Inquiries concerning lost bonds, interest payments, changes * of address and other matters relating to ownership should be | Snarnotto Somets no lemarun directed to: ) Shareholder Services may be reached from all long distance Corporate Trust Operations Dept. call kications at (800) 233-5453. Ponland-area callers should use Tcllas and Mail Unit 731-2002. The roll-free telephone number is answered between 55 Exchange Place - Basement A New York, NY 10260-0023 7:00 a.m. and 5:00 p.m. Pacific time Monday-Thursday, and (212) 235-0900 7:00 a.m. to 4:00 p.m. on Fridav.' Shareholder Services will assist you with: B ndholders needing funher assistance should contact: + Stock transfer and name change requirements PacifiCorp Shareholder Services + Address changes (503) 731-2002 + Replacement ofdividend checks Toll-Free Number:(800) 233-5453 + Duplicate 1099 forms and W-9 tax certification forms Amunt Mtriac + Notices oflost or destroyed stock certificates The 1994 Annual Meetingof + Dividend Reinvestment Plan statement history and PacifiCorp Shareholders will be: information regarding the plan Wednesday, May 11,1994 + Other questions concerning PacifiCorp smck ownership. 1:30 p.m. Pacific Daylight Time Red Lion Hotel / Uoyd Center Shareholders' written correspondence may be submined to: 1000 NE Multnomah PacifiCorp Shareholder Services Portland, Oregon 700 N.E. Multnomah St., Suite 700 Fm 10-l( Portland, Oregon 97232-4107 A copy of the company's 199310-K, filed with the Securities Tamarin Acavi and Exchange Commission, may be obtained by contacting , PacifiCorp maintains shareholder records and acts as Transfer Investor Relations at the corporate headquaners address. Agent and Registrar for the company's common and preferred Dmone Pumi f ' stock issues. Dividends on the company's common and preferred stock in 1994 are expected to be paid on or almut: February 15 May 16 August 15 Number 15 h a raciriciar - -_ . - . . .-. - ______. . . . . ______ . 9PACIFICORP - 700 N.E. h1ULTNOMAH STREET, SUITE 1600 PORTIAND, OR 97232-4116 (503) 731-2000 Pm Pons 920 S.W. sixth AVENUE I PORTLAND, OR 97204-1236 j (503) 464-5000 I Ulm Pons 201 SOUTH hiAIN STREET, SUTFE 2300 SALT LAKE Crn', UT 84140-0023 (801) 220-2000 Pm Tasou, k. 805 BROADTAY P.O. box 9901 \'ANCOUVER, TA 98668-9901 (206) 696-0983 anum 1ARRY M i ARNAND / M ARK CONAllAN PacrCar Fswon Smax ,k. IURTIAND. OR 'f 825 N.E. hiciTNOMAH STREET, SUnT 775 4 reamen | MAJOR PHOTOGRAPllY: O C. BRUCE FORSTLR PORTLAND, OR 97232-2152 COVI.R l'1101 O. O OVAK ARSIANI AN (503) 797-7200 I - @ r ______. o rm PacincORP j ______- . _ __ , , , a. . . - . , ~.. . , . . ~ , ,- p r u , ''- 1a i . . . ,- , . .y .c ..f , , .- * ,r + / . ,. .. , # \ J,,, ., ,f O y $ j 04"'gj+-- g . , , , s. p 9 , , ,,. < , . 4 M, b 6 's * "..' +: , , 6 _q_ - ', f ,g f T _ ' #'- f. , # ',W".u.. N 9 A-|, 3g n - ( . *s. n M- , i ,t1,,, , ', / 43/ 4 1 ' &. * - * ,, , A.# b, # ' .) g. ' a , 4 . | y , .se:. g,., - , , I *%x - . . . r% - j .g, ;;, . . , , k .p[' _ < ,, . t. .; e . > :<- , , s w t'*N ,; n: . . . .V - >p . ,Js.. , . , , 9.s . . . .% s < , - . y_ m'.. .t . .- - - , ., 'p > '% U #1; 1 1, 4 t 't -, . t ; + . . . t A. t I '. p y a "^ ' t. ^ if s s t ' t.| *< c - " .- 1 L <; .ef * 3 ' ? - ~ . - 'M .4 v ,. , 4 s p, t y Y # # #<,,- .y j ?P %'.,#- - fi: - w,4 - . " ^ . (f.:') PACIF CORP . > s. J M - 4 y #' t ,. 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