ITEM 1. BUSINESS.
Minnesota Power, a broadly diversified service company incorporated under the laws of the State of Minnesota in 1906, has operations in four business segments: (1) Electric Operations, which include electric and gas services, and coal mining; (2) Water Services, which include water and wastewater services; (3) Automotive Services, which include a network of vehicle auctions, a finance company and an auto transport company; and (4) Investments, which include a securities portfolio, a 21 percent equity investment in a financial guaranty reinsurance and insurance company and real estate operations. Corporate Charges represent general corporate expenses, including interest, not specifically related to any one business segment. As of December 31, 1997 the Company and its subsidiaries had approximately 6,800 employees.
1997 1996 1995 - - - -------------------------------------------------------------------------------- Millions Operating Revenue and Income Electric Operations $ 541.9 $ 529.2 $ 503.5 Water Services 95.5 85.2 66.1 Automotive Services (a) 255.5 183.9 61.6 Investments 60.9 49.9 43.7 Corporate Charges (0.2) (1.3) (2.0) ------- ------- ------- $ 953.6 $ 846.9 $ 672.9 ======= ======= =======
Net Income Electric Operations $ 43.1 $ 39.4 $ 41.0 Water Services 8.2 5.4 (1.0) Automotive Services (a) 14.0 3.7 - Investments 32.1 38.1 41.3 Corporate Charges (19.8) (17.4) (19.4) ------- ------- ------- 77.6 69.2 61.9
Discontinued Operations (b) - - 2.8 ------- ------- ------- $ 77.6 $ 69.2 $ 64.7 ======= ======= =======
- - - --------------------------------------------------------------------------------
Basic and Diluted Earnings Per Share of Common Stock $2.47 $2.28 $2.16
Average Shares of Common Stock - Millions 30.6 29.3 28.5
- - - -------------------------------------------------------------------------------- (a) The Company purchased 80 percent of ADESA, including AFC and Great Rigs, on July 1, 1995, another 3 percent in January 1996 and the remaining 17 percent in August 1996. (b) On June 30, 1995 the Company sold its interest in the paper and pulp business to Consolidated Papers, Inc.
Since 1983 Minnesota Power has been diversifying to reduce its reliance on electricity sales to Minnesota's taconite industry and to gain additional earnings growth potential. Acquisitions have been a primary means of diversification. During 1997 the Company continued its corporate strategy of expanding existing business segments. Electric Operations created a telecommunications subsidiary, while Water Services acquired a water subsidiary and established two non-regulated subsidiaries. Automotive Services added two auction facilities and 25 loan production offices. The Company plans to consider other acquisitions that would complement its businesses, expand its services and contribute to earnings growth.
For a detailed discussion of results of operations and trends, see Management's Discussion and Analysis of Financial Condition and Results of Operations in the Minnesota Power 1997 Annual Report. For business segment information, see Note 1.
ELECTRIC OPERATIONS
Electric Operations generate, transmit, distribute and market electricity. In addition Electric Operations include coal mining, telecommunications and economic development projects within the Company's service area. Electric Operations intend to seek cost saving alternatives and efficiencies, and expand non-regulated services.
- MINNESOTA POWER provides electricity in a 26,000 square mile electric service territory located in northeastern Minnesota. As of December 31, 1997 Minnesota Power was supplying retail electric service to 122,000 customers in 153 cities, towns and communities, and outlying rural areas. The largest city served is Duluth with a population of 85,000 based on the 1990 census. Wholesale electric service for resale is supplied to 15 municipal distribution systems, one private utility and SWL&P.
MPEX, a division of Minnesota Power, is an expansion of the Company's inter-utility marketing group which has been a buyer and seller of capacity and energy for over 25 years in the wholesale power market. The customers of MPEX are other power suppliers in the Midwest and Canada. MPEX also contracts with its customers to provide hourly energy scheduling and power trading services.
- SUPERIOR WATER, LIGHT AND POWER COMPANY sells electricity and natural gas, and provides water service in northwestern Wisconsin. As of December 31, 1997 SWL&P served 14,000 electric customers, 11,000 natural gas customers and 10,000 water customers.
- BNI COAL owns and operates a lignite mine in North Dakota. Two electric generating cooperatives, Minnkota Power and Square Butte, presently consume virtually all of BNI Coal's production of lignite coal under coal supply agreements extending to 2027. Under an agreement with Square Butte, Minnesota Power purchases about 71 percent of the output from the Square Butte unit which is capable of generating up to 455 MW. Minnkota Power has an option to extend its coal supply agreement to 2042. (See - Fuel and Note 5.)
- ELECTRIC OUTLET, INC. is a retail store that sells life-style changing electric products and also researches new products to be offered for sale and distribution.
- MINNESOTA POWER TELECOM, INC., formed in 1997, will provide high volume fiber optic and microwave communications to businesses across the Company's service territory.
- UPPER MINNESOTA PROPERTIES, INC. has invested in affordable housing projects located in Electric Operations' service territory. The Company is also an active participant in a variety of economic development projects throughout Electric Operations' service territory providing resources and expertise.
ELECTRIC SALES
The two major industries in Minnesota Power's service territory are taconite production, and paper and pulp mills. Taconite customers accounted for 31 percent of the Company's electric operating revenue and income in 1997 (32 percent in 1996; 35 percent in 1995). Paper and pulp customers accounted for 12 percent of electric operating revenue and income in 1997 (11 percent in 1996; 12 percent in 1995). Sales to other power suppliers accounted for 12 percent of electric operating revenue and income in 1997 (13 percent in 1996; 9 percent in 1995). As deregulation of the electric utility industry approaches, the Company believes the percentage of electric revenue from sales to other power suppliers will continue to increase. The percentage of electric revenue from taconite customers is expected to decrease as other strategic initiatives, including MPEX and MP Telecom, add to electric operating revenue and income.
Over the last five years, 80 percent of the domestic ore consumed by iron and steel plants in the United States has originated from plants within the Company's electric service territory. Taconite, an iron-bearing rock of relatively low iron content which is abundantly available in Minnesota, is an important domestic source of raw material for the steel industry. Taconite processing plants use large quantities of electric power to grind the ore-bearing rock, and agglomerate and pelletize the iron particles into taconite pellets. Annual taconite production in Minnesota was 47 million tons in 1997 (46 million tons in 1996;
47 million tons in 1995). Based on the Company's research of the taconite industry, 1998 Minnesota taconite production is anticipated to remain at or near the 1997 level. While taconite production is expected to continue at annual levels over 40 million tons, the long-term future of this cyclical industry is less certain. Production may decline gradually some time after the year 2008.
LARGE POWER CUSTOMER CONTRACTS
The Company has Large Power Customer contracts with five taconite producers, four paper and pulp mills, and two pipeline companies (Large Power Customers), each of which requires 10 MW or more of generating capacity. Large Power Customer contracts require the Company to have a certain amount of generating capacity available at all times. In turn each Large Power Customer is required to pay a minimum monthly demand charge that covers the fixed costs associated with having capacity available to serve the customer, including a return on common equity. Most contracts allow customers to establish the level of MW subject to a demand charge on a periodic (pool season) basis and require that a portion of their MW needs be committed on a take-or-pay basis for the entire term of the agreement. In addition to the demand charge, each Large Power Customer is billed an energy charge for each kilowatthour used that recovers the variable costs incurred in generating electricity. Six of the Large Power Customers have interruptible service for a portion of their needs which includes a discounted demand rate and energy priced at the Company's incremental cost after serving all firm power obligations. The Company also provides incremental production service for customer demand levels above the contract take-or-pay levels. There is no demand charge for this service and energy is priced at an increment above the Company's cost. Incremental production service is interruptible.
Each contract continues after the contract termination date, unless the required four-year advance notice of cancellation has been given. Such contracts minimize the impact on earnings that otherwise would result from significant reductions in kilowatthour sales to such customers. Large Power Customers are required to purchase their entire electric service requirements from the Company for the duration of their contracts. The rates and corresponding revenue associated with capacity and energy provided under these contracts are subject to change through the same regulatory process governing all retail electric rates. Minnesota Power has implemented a key account management process to heighten its focus on large commercial and industrial customers' needs, and anticipates continuing negotiations with these customers to explore options to respond to those needs. (See Regulatory Issues - Electric Rates.)
As of March 15, 1998 the minimum annual revenue the Company would collect under contracts with these Large Power Customers, assuming no electric energy use by these customers, is estimated to be $101.8, $78.3, $69.2, $66.5 and $47.3 million during the years 1998, 1999, 2000, 2001 and 2002, respectively. Based on past experiences and projected operating levels, the Company believes revenue from these Large Power Customers will be substantially in excess of the minimum contract amounts.
PURCHASED POWER
Minnesota Power has contracts to purchase capacity and energy from various entities. In addition to the contracts listed below, the Company has entered into various smaller purchased power contracts for the purposes of meeting its capacity needs or brokering power.
STATUS OF MINNESOTA POWER PURCHASED POWER CONTRACTS - - - --------------------------------------------------------------------------------
Entity Contract MW Contract Period - - - ------ ----------- --------------- Participation Power - - - ------------------- Purchases (a) ---------
Square Butte (b) 322 May 6, 1977 through December 31, 2007
LTV Steel 210 May 1, 1995 though April 30, 2000
Silver Bay Power 78 November 1, 1995 through October 31, 2000
- - - -------------------------------------------------------------------------------- (a) Participation power purchase contracts require the Company to pay the demand charges for generating capacity under contract and an energy charge for each MWh purchased. The selling entity is obligated to provide energy as scheduled by the Company from the generating unit specified in the contract as energy is available from that unit.
(b) Under an agreement extending through 2007 with Square Butte, Minnesota Power purchases about 71 percent of the output of a mine-mouth generating unit capable of generating up to 455 MW. The Square Butte generating unit is located near Center, North Dakota and is one of two lignite-fired units at Minnkota Power's Milton R. Young Generating Station. Reductions to about 49 percent of the output are provided for in the contract and, at the option of Square Butte, could begin after a five-year advance notice to the Company. The cost of the power and energy purchased is a proportionate share of Square Butte's fixed and variable costs. The Company is responsible for paying all costs and expenses of Square Butte (including leasing, operating and any debt service costs) if not paid by Square Butte when due. These obligations of the Company are absolute and unconditional, whether or not any power is actually delivered to the Company. (See Note 5.)
CAPACITY SALES
Minnesota Power has contracts to sell capacity to nonaffiliated utility companies. In addition to the contracts listed below, the Company has entered into various smaller capacity sales contracts for the purposes of selling surplus capacity or brokering power.
STATUS OF MINNESOTA POWER CAPACITY SALES CONTRACTS - - - --------------------------------------------------------------------------------
Utility Contract MW Contract Period - - - ------- ----------- --------------- Participation Power - - - ------------------- Sales (a) ----- Interstate Power Company 55 May 1 through October 31 of each year from 1994 through 2000 20 November 1, 1997 through April 30, 1998 35 November 1, 1998 through April 30, 1999 50 November 1, 1999 through April 30, 2000 Firm Power Sales (b) - - - -------------------- Wisconsin Power & Light Company 75 January 1, 1998 through December 31, 2007 Northern States Power Company 150 May 1 through October 31 of each year from 1997 through 2000 - - - -------------------------------------------------------------------------------- (a) Participation power sales contracts require the purchasing utility to pay the demand charges for MW under contract and an energy charge for each MWh purchased. The Company is obligated to provide energy as scheduled by the purchasing utility from the generating unit specified in the contract as energy is available from that unit. (b) Firm power sales contracts require the purchasing utility to pay the demand charges for MW under contract and an energy charge for each MWh purchased. The Company is obligated to provide energy as scheduled by the purchasing utility.
FUEL
The Company purchases low-sulfur, sub-bituminous coal from the Powder River Basin coal field located in Montana and Wyoming. Coal consumption for electric generation at the Company's Minnesota coal-fired generating stations in 1997 was about 4.1 million tons. As of December 31, 1997 the Company had a coal inventory of about 497,000 tons. The Company has three coal supply agreements in place with Montana suppliers. Two terminate in December 1999 and the other terminates in December 2000. Under these agreements the Company has the tonnage flexibility to procure 70 percent to 100 percent of its total coal requirements. The Company will obtain coal in 1998 under these agreements and the spot market. This mix of coal supply options allows the Company to reduce market risk and to take advantage of favorable spot market prices. The Company is exploring future coal supply options and believes that adequate supplies of low-sulfur, sub-bituminous coal will continue to be available.
Burlington Northern Santa Fe Railroad transports the coal by unit train from Montana or Wyoming to the Company's generating stations. The Company and Burlington Northern Santa Fe Railroad have two long-term coal freight-rate contracts that provide for coal deliveries through 2002 to Laskin and through 2003 to Boswell. The Company also has a contract with the Duluth Missabe & Iron Range Railway which is the final destination short-hauler to Laskin. This contract provides for deliveries through 2002. The delivered price of coal is subject to periodic adjustments in freight rates.
Year Ended December 31, COAL DELIVERED TO MINNESOTA POWER 1997 1996 1995 - - - -------------------------------------------------------------------------------- Average Price Per Ton $20.26 $19.30 $19.19 Average Price Per MBtu $1.11 $1.06 $1.07 - - - --------------------------------------------------------------------------------
The generating unit operated by Square Butte burns North Dakota lignite supplied by BNI Coal, a wholly owned subsidiary of the Company, pursuant to the terms of a contract expiring in 2027. Square Butte's cost of lignite burned in 1997 was approximately 64 cents per MBtu. The lignite acreage that has been dedicated to Square Butte by BNI Coal is located on lands essentially all of which are under private control and presently leased by BNI Coal. This lignite supply is sufficient to provide the fuel for the anticipated useful life of the generating unit. Under the various agreements with Square Butte, the Company is unconditionally obligated to pay all costs not paid by Square Butte when due. These costs include the price of lignite purchased under a cost-plus contract from BNI Coal. (See Item 2.
ITEM 2. PROPERTIES.
ELECTRIC OPERATIONS
The Company had an annual and all-time record net peak load of 1,476 MW on February 10, 1997. Information with respect to existing power supply sources is shown below.
The Company has electric transmission and distribution lines of 500 kilovolts (kV) (8 miles), 230 kV (606 miles), 161 kV (43 miles), 138 kV (6 miles), 115 kV (1,260 miles) and less than 115 kV (6,176 miles). The Company owns and operates 176 substations with a total capacity of 8,533 megavoltamperes. Some of the transmission and distribution lines interconnect with other utilities.
The Company owns and has a substantial investment in offices and service buildings, area headquarters, an energy control center, repair shops, motor vehicles, construction equipment and tools, office furniture and equipment, and leases offices and storerooms in various localities within the Company's service territory. It also owns miscellaneous parcels of real estate not presently used in Electric Operations.
Substantially all of the electric plant of the Company is subject to the lien of its Mortgage and Deed of Trust which secures first mortgage bonds issued by the Company. The Company's properties are held by it in fee and are free from other encumbrances, subject to minor exceptions, none of which are of such a nature as to substantially impair the usefulness to the Company of such properties. Other property, including certain offices and equipment, is utilized under leases. In general, some of the electric lines are located on land not owned in fee, but are covered by necessary consents of various governmental authorities or by appropriate rights obtained from owners of private property. These consents and rights are deemed adequate for the purposes for which the properties are being used. In September 1990 the Company sold a portion of Boswell Unit 4 to WPPI. WPPI has the right to use the Company's transmission line facilities to transport its share of generation.
Substantially all of the plant of SWL&P is subject to the lien of its Mortgage and Deed of Trust which secures first mortgage bonds issued by SWL&P.
A large dragline, shop complex, and certain other less significant property and equipment items at BNI Coal are leased under a leveraged lease agreement that expires in 2002. Certain computer and other equipment are leased under operating lease agreements that expire in 2000 and 2007, respectively. All other property and equipment is owned by BNI Coal.
The Company is a member of the Mid-Continent Area Power Pool (MAPP). The MAPP enhances electric service reliability, and provides the opportunity for members to enter into various wholesale power transactions and coordinate planning, installation and operation of new generation and transmission facilities. The MAPP membership consists of various electric power suppliers located in North Dakota, South Dakota, eastern Montana, Nebraska, Iowa, Minnesota, Wisconsin, upper Michigan, Kansas, Manitoba and Saskatchewan, and marketers and brokers located throughout North America. The electric power suppliers are investor-owned utilities including the Company, rural electric generation and transmission cooperatives, public power districts, municipal electric systems, municipal organizations, and the Western Area Power Administration - Billings, Montana. MAPP operates pursuant to an agreement that was approved by MAPP members on March 15, 1996, accepted by the FERC and became effective on November 1, 1996.
WATER SERVICES
Florida Water is the largest investor owned provider of water and wastewater services in Florida, serving more than 170,000 customers in 145 service areas. Florida Water maintains 149 water and wastewater facilities throughout the state with plants ranging in size from 6 connections to greater than 25,000 connections. Florida Water provides its customers with 14 billion gallons of water per year primarily from Florida's underground aquifer. Substantially all of Florida Water's properties used in its water and wastewater operations are encumbered by a mortgage.
Heater has water and wastewater systems located in subdivisions surrounding Raleigh, North Carolina and Fayetteville, North Carolina. Water supply is primarily from ground water deep wells. Community ground water systems vary in size from 25 connections to 6,000 connections. Some systems are supplied by purchased water. Heater has approximately 223 systems and 436 wells serving 28,000 customers. Heater also has 8 wastewater treatment plants, ranging in size from 35,000 gallons per day (gpd) to 250,000 gpd, and 19 lift stations located in its wastewater collection systems. These systems serve approximately 2,000 customers. Substantially all of Heater's properties used in its water and wastewater operations are encumbered by a mortgage.
INVESTMENTS
Property within the Company's real estate operations consists of 2,500 acres of land and approximately 4,000 home sites near Fort Myers, Florida; 1,000 home sites in Citrus County, Florida; and 2,700 home sites and 12,000 acres of residential, industrial and commercial land at Palm Coast, Florida.
AUTOMOTIVE SERVICES
The following table sets forth the vehicle auctions currently owned or leased by ADESA. Each auction has a multi-lane, drive-through auction facility, as well as additional buildings for reconditioning, registration, maintenance, body work, and other ancillary and administrative services. Each auction also has secure parking areas in which it stores vehicles for auction. All vehicle auction property owned by ADESA is subject to liens securing various notes payable.
AFC has loan production offices in 57 locations across North America. Many offices are within auction facilities operated by ADESA and independent auctions.
Great Rigs leases its fleet of 110 automobile carriers under operating leases.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
Material legal and regulatory proceedings are included in the discussion of the Company's business in Item 1 and are incorporated by reference herein.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth quarter of 1997.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company has paid dividends without interruption on its common stock since 1948. A quarterly dividend of $.51 per share on the common stock was paid on March 2, 1998 to the holders of record on February 16, 1998. The Company's common stock is listed on the New York Stock Exchange. Dividends paid per share, and the high and low prices for the Company's common stock for the periods indicated as reported by The Wall Street Journal, Midwest Edition, were as follows:
Dividends Price Range Paid Per Share ----------- -------------- Quarter High Low Quarterly Annual - - - --------------------------------------------------------------------------------
1997 - First $ 29 $ 27 1/4 $ .51 - Second 30 5/8 27 .51 - Third 36 5/16 30 1/4 .51 - Fourth 44 35 3/16 .51 $2.04
1996 - First $ 29 3/4 $ 26 1/8 $ .51 - Second 29 26 .51 - Third 28 3/4 26 .51 - Fourth 28 7/8 26 3/8 .51 $2.04 - - - --------------------------------------------------------------------------------
The amount and timing of dividends payable on the Company's common stock are within the sole discretion of the Company's Board of Directors. In 1997 the Company paid out 82 percent of its per share earnings in dividends. Through increased earnings, the Company's goal is to reduce dividend payout to between 75 percent and 80 percent of per share earnings.
The Company's Articles of Incorporation, and Mortgage and Deed of Trust contain provisions which under certain circumstances would restrict the payment of common stock dividends. As of December 31, 1997 no retained earnings were restricted as a result of these provisions. At March 2, 1998 there were approximately 37,000 common stock shareholders of record.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Financial information presented in the table below may not be comparable between periods due to: (1) the Company's purchase of 80 percent of ADESA, including AFC and Great Rigs, on July 1, 1995, another 3 percent in January 1996 and the remaining 17 percent in August 1996; and (2) and the Company's sale of its interest in the paper and pulp business to Consolidated Papers, Inc. on June 30, 1995.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The management's discussion and analysis of financial condition and results of operations appearing on pages 18 through 31 of the Minnesota Power 1997 Annual Report are incorporated by reference in this Form 10-K Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements, together with the report thereon of Price Waterhouse LLP dated January 26, 1998 appearing on pages 32 through 50 of the Minnesota Power 1997 Annual Report, are incorporated by reference in this Form 10-K Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required for this Item is incorporated by reference herein from the "Election of Directors" section in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders, except for information with respect to executive officers which is set forth in Part I hereof.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The information required for this Item is incorporated by reference herein from the "Compensation of Executive Officers" section in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required for this Item is incorporated by reference herein from the "Security Ownership of Certain Beneficial Owners and Management" section in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required for this Item is incorporated by reference herein from the "Compensation Committee Interlocks and Insider Participation" section in the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Certain Documents Filed as Part of Form 10-K.
(1) Financial Statements
Pages in Annual Report* -------------- Minnesota Power Report of Independent Accountants 31 Consolidated Balance Sheet at December 31, 1997 and 1996 32 For the three years ended December 31, 1997 Consolidated Statement of Income 34 Consolidated Statement of Retained Earnings 34 Consolidated Statement of Cash Flows 35 Notes to Consolidated Financial Statements 36-50 - - - --------------- * Incorporated by reference herein from the Minnesota Power 1997 Annual Report.
Page ---- (2) Financial Statement Schedules Report of Independent Accountants on Financial Statement Schedule 32 Minnesota Power and Subsidiaries Schedule: II-Valuation and Qualifying Accounts and Reserves 33
All other schedules have been omitted either because the information is not required to be reported by the Company or because the information is included in the consolidated financial statements or the notes thereto.
(3) Exhibits including those incorporated by reference
Exhibit Number - - - -------
*2 - Agreement and Plan of Merger by and among Minnesota Power & Light Company, AC Acquisition Sub, Inc., ADESA Corporation and Certain ADESA Management Shareholders dated February 23, 1995 (filed as Exhibit 2 to Form 8-K dated March 3, 1995, File No. 1-3548).
*3(a)1 - Articles of Incorporation, restated as of July 27, 1988 (filed as Exhibit 3(a), File No. 33-24936).
*3(a)2 - Certificate Fixing Terms of Serial Preferred Stock A, $7.125 Series (filed as Exhibit 3(a)2, File No. 33-50143).
*3(a)3 - Certificate Fixing Terms of Serial Preferred Stock A, $6.70 Series (filed as Exhibit 3(a)3, File No. 33-50143).
*3(b) - Bylaws as amended January 23, 1991 (filed as Exhibit 3(b), File No. 33-45549).
Exhibit Number - - - -------
*4(a)1 - Mortgage and Deed of Trust, dated as of September 1, 1945, between the Company and Irving Trust Company (now The Bank of New York)and Richard H. West (W.T. Cunningham, successor), Trustees (filed as Exhibit 7(c), File No. 2-5865).
*4(a)2 - Supplemental Indentures to Mortgage and Deed of Trust:
Reference Number Dated as of File Exhibit ------ ----------- ---- -------
First March 1, 1949 2-7826 7(b) Second July 1, 1951 2-9036 7(c) Third March 1, 1957 2-13075 2(c) Fourth January 1, 1968 2-27794 2(c) Fifth April 1, 1971 2-39537 2(c) Sixth August 1, 1975 2-54116 2(c) Seventh September 1, 1976 2-57014 2(c) Eighth September 1, 1977 2-59690 2(c) Ninth April 1, 1978 2-60866 2(c) Tenth August 1, 1978 2-62852 2(d)2 Eleventh December 1, 1982 2-56649 4(a)3 Twelfth April 1, 1987 33-30224 4(a)3 Thirteenth March 1, 1992 33-47438 4(b) Fourteenth June 1, 1992 33-55240 4(b) Fifteenth July 1, 1992 33-55240 4(c) Sixteenth July 1, 1992 33-55240 4(d) Seventeenth February 1, 1993 33-50143 4(b) Eighteenth July 1, 1993 33-50143 4(c) Nineteenth February 1, 1997 1-3548 (1996 Form 10-K) 4(c)
4(a)3 - Twentieth Supplemental Indenture, dated as of November 1, 1997, between the Company and The Bank of New York (formerly Irving Trust Company) and W.T. Cunningham (successor to Richard H. West), Trustees.
*4(b) - Mortgage and Deed of Trust, dated as of March 1, 1943, between Superior Water, Light and Power Company and Chemical Bank & Trust Company and Howard B. Smith, as Trustees, both succeeded by First Bank N.A., as Trustee (filed as Exhibit 7(c), File No. 2-8668), as supplemented and modified by First Supplemental Indenture thereto dated as of March 1, 1951 (filed as Exhibit 2(d)(1), File No. 2-59690), Second Supplemental Indenture thereto dated as of March 1, 1962 (filed as Exhibit 2(d)1, File No. 2-27794), Third Supplemental Indenture thereto dated July 1, 1976 (filed as Exhibit 2(e)1, File No. 2-57478), Fourth Supplemental Indenture thereto dated as of March 1, 1985 (filed as Exhibit 4(b), File No. 2-78641), Fifth Supplemental Indenture thereto dated as of December 1, 1992 (filed as Exhibit 4(b)1 to Form 10-K for the year ended December 31, 1992, File No. 1-3548), Sixth Supplemental Indenture, dated as of March 24, 1994 (filed as Exhibit 4(b)1 to Form 10-K for the year ended December 31, 1996, File No. 1-3548), Seventh Supplemental Indenture, dated as of November 1, 1994 (filed as Exhibit 4(b)2 to Form 10-K for the year ended December 31, 1996, File No. 1-3548) and Eighth Supplemental Indenture, dated as of January 1, 1997 (filed as Exhibit 4(b)3 to Form 10-K for the year ended December 31, 1996, File No. 1-3548).
Exhibit Number - - - -------
*4(c) - Indenture, dated as of March 1, 1993, between Southern States Utilities, Inc. (now Florida Water Services Corporation) and Nationsbank of Georgia, National Association (now SunTrust Bank, Central Florida, N.A.), as Trustee (filed as Exhibit 4(d) to Form 10-K for the year ended December 31, 1992, File No. 1-3548), as supplemented and modified by First Supplemental Indenture, dated as of March 1, 1993 (filed as Exhibit 4(c)1 to Form 10-K for the year ended December 31, 1996, File No. 1-3548), Second Supplemental Indenture, dated as of March 31, 1997 (filed as Exhibit 4 to Form 10-Q for the quarter ended March 31, 1997, File No. 1-3548) and Third Supplemental Indenture, dated as of May 28, 1997 (filed as Exhibit 4 to Form 10-Q for the quarter ended June 30, 1997, File No. 1-3548).
*4(d) - Amended and Restated Trust Agreement, dated as of March 1, 1996, relating to MP&L Capital I's 8.05% Cumulative Quarterly Income Preferred Securities, between the Company, as Depositor, and The Bank of New York, The Bank of New York (Delaware), Philip R. Halverson, David G. Gartzke and James K. Vizanko, as Trustees (filed as Exhibit 4(a) to Form 10-Q for the quarter ended March 31, 1996, File No. 1-3548).
*4(e) - Amendment No. 1, dated April 11, 1996, to Amended and Restated Trust Agreement, dated as of March 1, 1996, relating to MP&L Capital I's 8.05% Cumulative Quarterly Income Preferred Securities (filed as Exhibit 4(b) to Form 10-Q for the quarter ended March 31, 1996, File No. 1-3548).
*4(f) - Indenture, dated as of March 1, 1996, relating to the Company's 8.05% Junior Subordinated Debentures, Series A, Due 2015, between the Company and The Bank of New York, as Trustee (filed as Exhibit 4(c) to Form 10-Q for the quarter ended March 31, 1996, File No. 1-3548).
*4(g) - Guarantee Agreement, dated as of March 1, 1996, relating to MP&L Capital I's 8.05% Cumulative Quarterly Income Preferred Securities, between the Company, as Guarantor, and The Bank of New York, as Trustee (filed as Exhibit 4(d) to Form 10-Q for the quarter ended March 31, 1996, File No. 1-3548).
*4(h) - Agreement as to Expenses and Liabilities, dated as of March 20, 1996, relating to MP&L Capital I's 8.05% Cumulative Quarterly Income Preferred Securities, between the Company and MP&L Capital I (filed as Exhibit 4(e) to Form 10-Q for the quarter ended March 31, 1996, File No. 1-3548).
*4(i) - Officer's Certificate, dated March 20, 1996, establishing the terms of the 8.05% Junior Subordinated Debentures, Series A, Due 2015 issued in connection with the 8.05% Cumulative Quarterly Income Preferred Securities of MP&L Capital I.
*4(j) - Rights Agreement dated as of July 24, 1996, between Minnesota Power & Light Company and the Corporate Secretary of Minnesota Power & Light Company, as Rights Agent (filed as Exhibit 4 to Form 8-K dated August 2, 1996, File No. 1-3548).
*4(k) - Indenture, dated as of May 15, 1996, relating to the ADESA Corporation's 7.70% Senior Notes, Series A, Due 2006, between ADESA Corporation and The Bank of New York, as Trustee (filed as Exhibit 4(k) to Form 10-K for the year ended December 31, 1996, File No. 1-3548).
*4(l) - Guarantee of Minnesota Power & Light Company, dated as of May 30, 1996, relating to the ADESA Corporation's 7.70% Senior Notes, Series A, Due 2006 (filed as Exhibit 4(l) to Form 10-K for the year ended December 31, 1996, File No. 1-3548).
Exhibit Number - - - -------
*4(m) - ADESA Corporation Officer's Certificate 1-D-1, dated May 30, 1996, relating to the ADESA Corporation's 7.70% Senior Notes, Series A, Due 2006 (filed as Exhibit 4(m) to Form 10-K for the year ended December 31, 1996, File No. 1-3548).
*10(a) - Asset Holdings III, L.P. Note Purchase Agreement, dated as of November 22, 1994 (filed as Exhibit 10(i) to Form 10-K for the year ended December 31, 1995, File No. 1-3548).
*10(b) - Lease and Development Agreement, dated as of November 28, 1994 between Asset Holdings III, L.P., as Lessor and A.D.E. of Knoxville, Inc., as Lessee (filed as Exhibit 10(j) to Form 10-K for the year ended December 31, 1995, File No. 1-3548).
*10(c) - Lease and Development Agreement, dated as of November 28, 1994 between Asset Holdings III, L.P., as Lessor and ADESA-Charlotte, Inc., as Lessee (filed as Exhibit 10(k) to Form 10-K for the year ended December 31, 1995, File No. 1-3548).
*10(d) - Lease and Development Agreement, dated as of December 21, 1994 between Asset Holdings III, L.P., as Lessor and Auto Dealers Exchange of Concord, Inc., as Lessee (filed as Exhibit 10(l) to Form 10-K for the year ended December 31, 1995, File No. 1-3548).
*10(e) - Guaranty and Purchase Option Agreement between Asset Holdings III, L.P. and ADESA Corporation, dated as of November 28, 1994 (filed as Exhibit 10(m) to Form 10-K for the year ended December 31, 1995, File No. 1-3548).
*10(f) - Receivables Purchase Agreement dated as of December 31, 1996, among AFC Funding Corporation, as Seller, Automotive Finance Corporation, as Servicer, Pooled Accounts Receivable Capital Corporation, as Purchaser, and Nesbitt Burns Securities Inc., as Agent (filed as Exhibit 10(f) to Form 10-K for the year ended December 31, 1996, File No. 1-3548).
*10(g) - First Amendment to Receivables Purchase Agreement, dated as of February 28, 1997, among AFC Funding Corporation, as Seller, Automotive Finance Corporation, as Servicer, Pooled Accounts Receivable Capital Corporation, as Purchaser, and Nesbitt Burns Securities Inc., as Agent (filed as Exhibit 10(g) to Form 10-K for the year ended December 31, 1996, File No. 1-3548).
*10(h) - Second Amendment to Receivables Purchase Agreement, dated as of August 15, 1997, among AFC Funding Corporation, as Seller, Automotive Finance Corporation, as Servicer, Pooled Accounts Receivable Capital Corporation, as Purchaser, and Nesbitt Burns Securities Inc., as Agent (filed as Exhibit 10 to Form 10-Q for the quarter ended September 30, 1997, File No. 1-3548).
*10(i) - Purchase and Sale Agreement dated as of December 31, 1996, between AFC Funding Corporation and Automotive Finance Corporation (filed as Exhibit 10(h) to Form 10-K for the year ended December 31, 1996, File No. 1-3548).
+*10(j) - Minnesota Power Executive Annual Incentive Plan, effective January 1, 1996 (filed as Exhibit 10(a) to Form 10-K for the year ended December 31, 1995, File No. 1-3548).
+*10(k) - Minnesota Power and Affiliated Companies Supplemental Executive Retirement Plan, as amended and restated, effective August 1, 1994 (filed as Exhibit 10(b) to Form 10-K for the year ended December 31, 1995, File No. 1-3548).
+*10(l) - Executive Investment Plan-I, as amended and restated, effective November 1, 1988 (filed as Exhibit 10(c) to Form 10-K for the year ended December 31, 1988, File No. 1-3548).
Exhibit Number - - - -------
+*10(m) - Executive Investment Plan-II, as amended and restated, effective November 1, 1988 (filed as Exhibit 10(d) to Form 10-K for the year ended December 31, 1988, File No. 1-3548).
+*10(n) - Deferred Compensation Trust Agreement, as amended and restated, effective January 1, 1989 (filed as Exhibit 10(f) to Form 10-K for the year ended December 31, 1988, File No. 1-3548).
+*10(o) - Executive Long-Term Incentive Plan, as amended and restated, effective January 1, 1994 (filed as Exhibit 10(e) to Form 10-K for the year ended December 31, 1994, File No. 1-3548).
+*10(p) - Minnesota Power Executive Long-Term Incentive Compensation Plan, effective January 1, 1996 (filed as Exhibit 10(a) to Form 10-Q for the quarter ended June 30, 1996, File No. 1-3548).
+*10(q) - Directors' Long-Term Incentive Plan, as amended and restated, effective January 1, 1994 (filed as Exhibit 10(f) to Form 10-K for the year ended December 31, 1994, File No. 1-3548).
+*10(r) - Minnesota Power Director Stock Plan, effective January 1, 1995 (filed as Exhibit 10 to Form 10-Q for the quarter ended March 31, 1995, File No. 1-3548).
+*10(s) - Minnesota Power Director Long-Term Stock Incentive Plan, effective January 1, 1996 (filed as Exhibit 10(b) to Form 10-Q for the quarter ended June 30, 1996, File No. 1-3548).
12 - Computation of Ratios of Earnings to Fixed Charges and Supplemental Ratios of Earnings to Fixed Charges.
13 - Minnesota Power 1997 Annual Report - Management's Discussion and Analysis of Financial Condition and Results of Operations, and the Company's financial statements listed in Item 14 (a)(1) of this report.
*21 - Subsidiaries of the Registrant (reference is made to the Company's Form U-3A-2 for the year ended December 31, 1997, File No. 69-78).
23(a) - Consent of Independent Accountants.
23(b) - Consent of General Counsel.
27 - Financial Data Schedule.
- - - --------------------- * Incorporated herein by reference as indicated. + Management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K.
Report on Form 8-K dated and filed on February 20, 1998 with respect to Item 7. Financial Statements and Exhibits.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Minnesota Power
Our audits of the consolidated financial statements referred to in our report dated January 26, 1998 appearing on page 32 of the 1997 Annual Report to Shareholders of Minnesota Power (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
PRICE WATERHOUSE LLP Minneapolis, Minnesota January 26, 1998
Schedule II
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MINNESOTA POWER & LIGHT COMPANY (Registrant)
Dated: March 25, 1998 By EDWIN L. RUSSELL ------------------------------ Edwin L. Russell Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ----
EDWIN L. RUSSELL March 25, 1998 - - - ----------------------------- Chairman, President, Edwin L. Russell Chief Executive Officer and Director
D.G. GARTZKE March 25, 1998 - - - ----------------------------- Senior Vice President - D.G. Gartzke Finance and Chief Financial Officer
MARK A. SCHOBER Controller March 25, 1998 - - - ----------------------------- Mark A. Schober
Signature Title Date --------- ----- ----
KATHLEEN BREKKEN Director March 25, 1998 - - - ----------------------------- Kathleen Brekken
MERRILL K. CRAGUN Director March 25, 1998 - - - ----------------------------- Merrill K. Cragun
DENNIS E. EVANS Director March 25, 1998 - - - ----------------------------- Dennis E. Evans
PETER J. JOHNSON Director March 25, 1998 - - - ----------------------------- Peter J. Johnson
GEORGE L. MAYER Director March 25, 1998 - - - ----------------------------- George L. Mayer
PAULA F. MCQUEEN Director March 25, 1998 - - - ----------------------------- Paula F. McQueen
ROBERT S. NICKOLOFF Director March 25, 1998 - - - ----------------------------- Robert S. Nickoloff
JACK I. RAJALA Director March 25, 1998 - - - ----------------------------- Jack I. Rajala
EDWIN L. RUSSELL Director March 25, 1998 - - - ----------------------------- Edwin L. Russell
AREND J. SANDBULTE Director March 25, 1998 - - - ----------------------------- Arend J. Sandbulte
NICK SMITH Director March 25, 1998 - - - ----------------------------- Nick Smith
BRUCE W. STENDER Director March 25, 1998 - - - ----------------------------- Bruce W. Stender
DONALD C. WEGMILLER Director March 25, 1998 - - - ----------------------------- Donald C. Wegmiller