-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UVR2y+2gplZrmKpVpMvXa5jiUWGqSTwuszHvb6KwbeOUnj9N08JNyOMdhf4Ry9wi iANufVObb2KZkcfy2SpRUw== 0000032689-01-000013.txt : 20010312 0000032689-01-000013.hdr.sgml : 20010312 ACCESSION NUMBER: 0000032689-01-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE DISTRICT ELECTRIC CO CENTRAL INDEX KEY: 0000032689 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 440236370 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-03368 FILM NUMBER: 1565425 BUSINESS ADDRESS: STREET 1: 602 JOPLIN ST CITY: JOPLIN STATE: MO ZIP: 64801 BUSINESS PHONE: 4176255100 MAIL ADDRESS: STREET 1: P.O. BOX 127 CITY: JOPLIN STATE: MO ZIP: 64802 10-K 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000 or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ____________. Commission file number: 1-3368 THE EMPIRE DISTRICT ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Kansas 44-0236370 (State of Incorporation) (I.R.S. Employer Identification No.) 602 Joplin Street, Joplin, Missouri 64801 (Address of principal executive offices) (zip code) Registrant's telephone number: (417) 625-5100 Securities registered pursuant to Section 12(b) of the Act: Name of each Title of each class exchange on which registered Common Stock ($1 par value) New York Stock Exchange Preference Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 1, 2001, 17,608,466 shares of common stock were outstanding. Based upon the closing price on the New York Stock Exchange on March 1, 2001, the aggregate market value of the common stock of the Company held by nonaffiliates was approximately $356,571,437. The following documents have been incorporated by reference into the parts of the Form 10-K as indicated: The Company's proxy statement, Part of Item 10 of Part III filed pursuant To Regulation 14A under the Securities All of Item 11 of Part III Exchange Act of 1934, for its 2000 Annual Meeting of Part of Item 12 of Part III Stockholders to be held on April 25, 2001. All of Item 13 of Part III TABLE OF CONTENTS Page Forward Looking Statements 3 PART I ITEM 1. BUSINESS 3 General 3 Electric Generating Facilities and Capacity 4 Construction Program 5 Fuel 5 Employees 6 Electric Operating Statistics 7 Executive Officers and Other Officers of Empire 8 Regulation 8 Environmental Matters 9 Conditions Respecting Financing 10 ITEM 2. PROPERTIES 11 Electric Facilities 11 Water Facilities 12 ITEM 3. LEGAL PROCEEDINGS 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED 13 STOCKHOLDER MATTERS ITEM 6. SELECTED FINANCIAL DATA 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15 Terminated Merger With UtiliCorp 15 Results of Operations 15 Liquidity and Capital Resources 20 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 43 FINANCIAL DISCLOSURE PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 43 ITEM 11. EXECUTIVE COMPENSATION 43 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 43 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 43 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 44 SIGNATURES 48 FORWARD LOOKING STATEMENTS Certain matters discussed in this quarterly report are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements address future plans, objectives, expectations and events or conditions concerning various matters such as capital expenditures (including those planned in connection with the State Line Combined Cycle Unit), earnings, competition, litigation, environmental compliance, rate and other regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those currently anticipated in such statements, by reason of factors such as the cost and availability of purchased power and fuel (including the continuation of significantly increased natural gas prices); unexpected consequences resulting from the unsuccessful merger with UtiliCorp; delays in or increased costs of construction; electric utility restructuring, including ongoing state and federal activities; weather, business and economic conditions; legislation; regulation, including rate relief (including the outcome of the pending interim and permanent rate cases seeking recovery of increased fuel and other costs and the inclusion of the State Line Combined Cycle in the rate base) and environmental regulation (such as NOx regulation); competition, including the impact of deregulation on off-system sales; and other circumstances affecting anticipated rates, revenues and costs. PART I ITEM 1. BUSINESS General The Empire District Electric Company, a Kansas corporation organized in 1909, is an operating public utility engaged in the generation, purchase, transmission, distribution and sale of electricity in parts of Missouri, Kansas, Oklahoma and Arkansas. We also provide water service to three towns in Missouri. In 2000, 99.6% of our gross operating revenues were provided from the sale of electricity and 0.4% from the sale of water. Empire and UtiliCorp United, Inc. entered into an Agreement and Plan of Merger, dated as of May 10, 1999, which provided for our merger with and into UtiliCorp, with UtiliCorp being the surviving corporation. At a special meeting held on September 3, 1999, the merger was approved by our stockholders. The merger was conditioned, among other things, upon approvals of various federal and state regulatory agencies, with either company having the right to terminate the merger agreement if all regulatory approvals were not obtained by December 31, 2000. All approvals were not received by this date and UtiliCorp notified us on January 2, 2001 that it was terminating the merger agreement. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information. The territory served by our electric operations embraces an area of about 10,000 square miles with a population of over 330,000. The service territory is located principally in Southwestern Missouri and also includes smaller areas in Southeastern Kansas, Northeastern Oklahoma and Northwestern Arkansas. The principal activities of these areas are light industry, agriculture and tourism. Of our total 2000 retail electric revenues, approximately 88% came from Missouri customers, 6% from Kansas customers, 3% from Oklahoma customers and 3% from Arkansas customers. We supply electric service at retail to 119 incorporated communities and to various unincorporated areas and at wholesale to four municipally-owned distribution systems and two rural electric cooperatives. The largest urban area we serve is the city of Joplin, Missouri, and its immediate vicinity, with a population of approximately 144,000. We operate under franchises having original terms of twenty years or longer in virtually all of the incorporated communities. Approximately 50% of our electric operating revenues in 2000 were derived from incorporated communities with franchises having at least ten years remaining and approximately 19% were derived from incorporated communities in which our franchises have remaining terms of ten years or less. Although our franchises contain no renewal provisions, in recent years we have obtained renewals of all of our expiring electric franchises prior to the expiration dates. Our electric operating revenues in 2000 were derived as follows: residential 42%, commercial 30%, industrial 16%, wholesale 8% and other 4%. Our largest single on-system wholesale customer is the city of Monett, Missouri, which in 2000 accounted for approximately 3% of electric revenues. No single retail customer accounted for more than 1% of electric revenues in 2000. We made an investment of approximately $1.9 million in 2000 and $0.5 million in 1999 in fiber optics cable and equipment which we are using in our own operations and leasing to other entities. We also offer electronic monitored security services, generators, surge suppressors, decorative lighting and other energy services. Electric Generating Facilities and Capacity At December 31, 2000, our generating plants consisted of the Asbury Plant (aggregate generating capacity of 213 megawatts), the Riverton Plant (aggregate generating capacity of 136 megawatts), the Empire Energy Center (aggregate generating capacity of 180 megawatts), the State Line Power Plant (aggregate generating capacity of 253 megawatts) and the Ozark Beach Hydroelectric Plant (aggregate generating capacity of 16 megawatts). We also have a 12% ownership interest (80 megawatt capacity) in Unit No. 1 at the Iatan Generating Station. We are currently constructing a 350 megawatt expansion at the State Line Power Plant which will result in a 500 megawatt combined-cycle unit (the "Combined Cycle Unit") with commercial operation scheduled for June 2001. This is a joint effort with Westar Generating, Inc. (WGI), a subsidiary of Western Resources, Inc., from which we will be entitled to approximately 150 megawatts of additional generating capacity. See Item 2, "Properties - Electric Facilities" for further information about these plants. We are a member of the Southwest Power Pool, referred to as SPP, a regional division of the North American Electric Reliability Council (NERC), which requires its members to maintain a 12% capacity margin and provides for contingency reserve sharing, regional near real-time security assessment 24 hours per day and many other functions. We are participating with other utility members in the restructuring of the SPP to make it a regional transmission organization (RTO). The SPP filed with the FERC on December 30, 1999 for RTO status. This filing was rejected by the FERC as not meeting certain requirements of its Order 2000. The SPP filed a second request in the fourth quarter of 2000 addressing the FERC's concerns and continuing to seek RTO status. The FERC has not yet ruled on the modified filing. See Item 7, ""Management's Discussion and Analysis of Financial Condition and Results of Operations - Competition." We currently supplement our on-system generating capacity with purchases of capacity and energy from other utilities in order to meet the demands of our customers and the capacity margins applicable to us under current pooling agreements and NERC rules. We have entered into agreements for such purchases with Western Resources and Southwestern Public Service Company (a subsidiary of XCEL Energy) which terminate on May 31, 2001. In addition, we have contracted with Western Resources for the purchase of capacity and energy through May 31, 2010. The amount of capacity purchased under these contracts supplements our on-system capacity and contributes to meeting our current expectations of future power needs. The following chart sets forth our purchase commitments and our anticipated owned capacity (in megawatts) during the indicated contract years (which run from June 1 to May 31 of the following year). The reduction in purchased power commitments in 2001 reflects the May 31 termination of the contracts as described above and the installation of additional generation from the State Line Combined Cycle Unit scheduled to go into commercial operation in June 2001. We currently expect to purchase additional capacity to meet reserve margins in 2003 through 2005 of 30 to 100 megawatts per year based on current forecast of load. Purchased Anticipated Contract Power Owned Year Commitment Capacity Total 2000 287 878 1165 2001 162 1026 1188 2002 162 1026 1188 2003 162 1026 1188 2004 162 1026 1188 2005 162 1026 1188
The charges for capacity purchases under the contracts referred to above during calendar year 2000 amounted to approximately $22.3 million. Minimum charges for capacity purchases under such contracts total approximately $91.04 million for the period June 1, 2001, through May 31, 2006. The maximum hourly demand on our system reached a new record high of 993 megawatts on August 30, 2000. Our previous record peak of 979 megawatts was established in August 1999. We set a new maximum hourly winter demand of 941 megawatts on December 19, 2000. Construction Program Total gross property additions (including construction work in progress) for the three years ended December 31, 2000, amounted to $252.9 million, and retirements during the same period amounted to $14.0 million. Our total construction-related expenditures, including allowance for funds used during construction, referred to as AFUDC, were $131.8 million in 2000 and for the next three years are estimated for planning purposes to be as follows: Estimated Construction Expenditures (amounts in millions) 2001 2002 2003 Total New generating facilities $ 25.0* $ 0.2 $ 1.1 $ 26.3 Additions to existing generating facilities 10.0 8.9 13.0 31.9 Transmission facilities 5.8 4.1 3.0 12.9 Distribution system additions 20.8 22.8 24.0 67.6 General and other additions 1.7 2.3 2.1 6.1 Total $ 63.3 $ 38.3 $ 43.2 $ 144.8 * Includes $4.0 million of AFUDC
Our projected construction plans include expenditures for the 350 megawatt expansion project at the State Line Power Plant scheduled for commercial operation in June 2001. Additions to our transmission and distribution systems to meet projected increases in customer demand constitute the majority of the remainder of the projected construction expenditures for the three-year period listed above. Estimated construction expenditures are reviewed and adjusted for, among other things, revised estimates of future capacity needs, the cost of funds necessary for construction and the availability and cost of alternative power. Actual construction expenditures may vary significantly from the estimates due to a number of factors including changes in equipment delivery schedules, changes in customer requirements, construction delays, ability to raise capital, environmental matters, the extent to which we receive timely and adequate rate increases, the extent of competition from independent power producers and co-generators, other changes in business conditions and changes in legislation and regulation, including those relating to the energy industry. See "Regulation" below and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Competition." Fuel Coal supplied approximately 82.5% of our total fuel requirements in 2000 based on kilowatt-hours generated. The remainder was supplied by natural gas (16.3%) with oil generation providing 1.2%. Our Asbury Plant is fueled primarily by coal with oil being used as startup fuel. The Plant is currently burning a coal blend consisting of approximately 86% Western coal (Powder River Basin) and 14% blend coal on a tonnage basis. Our average coal inventory target at Asbury is approximately 60 days. As of December 31, 2000, we had sufficient coal on hand to supply anticipated requirements at Asbury for 90 days. Our Riverton Plant fuel requirements are primarily met by coal with the remainder supplied by natural gas and oil. The Riverton Plant is currently burning 100% Western coal (Powder River Basin) on Unit No. 8 and a blend consisting of approximately 75% Western coal (Powder River Basin) and 25% blend coal on Unit No. 7 on a tonnage basis. Our average coal inventory target at Riverton is approximately 60 days. As of December 31, 2000, we had coal supplies on hand to meet anticipated requirements at the Riverton Plant for 54 days. We have a long-term contract, expiring in 2004, with a subsidiary of Peabody Holding Company, Inc. for the supply of low sulfur Western coal (Powder River Basin) at the Asbury and Riverton Plants during the term of the contract. This Peabody coal is supplied from the Rochelle/North Antelope mines located in Campbell County, Wyoming, and is shipped to the Asbury Plant by rail, a distance of approximately 800 miles. The coal is delivered under a transportation contract with Union Pacific Railroad Company and The Kansas City Southern Railway Company. We are currently leasing one 125-car aluminum unit train, which delivers Peabody coal to the Asbury Plant. The Peabody coal is transported from Asbury to Riverton via truck. Asbury blend coal is currently being supplied under a short-term contract, expiring December 31, 2001, with GENWAL Resources, Inc. This coal is supplied from the Crandall Canyon mine near Huntington, Utah and has been transported by rail by Union Pacific Railroad Company and The Kansas City Southern Railway Company. We are currently negotiating a contract with the Burlington Northern and Santa Fe Railway Company for transportation of this coal. The Riverton Plant blend coal is supplied under a contract expiring December 31, 2001, with Phoenix Coal Sales. The Phoenix coal is transported to Riverton via truck. Since 1995, our Energy Center and State Line combustion turbine facilities have been fueled primarily by natural gas with oil being used as a backup fuel. Based on current and projected natural gas prices versus oil prices, it is expected that the Energy Center facility will be operated throughout the first quarter of 2001 on oil when it is more economical to do so. We have increased our target oil inventory at the Energy Center facility from three days of full load operation to five days. We continue to maintain an oil inventory of approximately three days of full load operation for State Line Unit No. 1. We have a firm agreement with Williams Natural Gas Company, expiring May 31, 2016, for the transportation of natural gas to the State Line Power Plant, which is jointly owned with Westar Generating. This transportation can also supply natural gas to the Energy Center or the Riverton Plant, as elected by us on a secondary basis. We expect that our remaining gas transportation requirements, as well as the majority of our natural gas supply requirements, will be met by short-term forward contracts with up to five years duration and spot purchases. Unit No. 1 at the Iatan Plant is a coal-fired generating unit which is jointly-owned by Kansas City Power & Light (70%), UtiliCorp (18%) and us (12%). Low sulfur Western coal in quantities sufficient to meet substantially all of Iatan's requirements is supplied under a long-term contract expiring on December 31, 2003, between the joint owners and the Thunder Basin Coal Company. The coal is transported by rail under a contract expiring on December 31, 2010, with the Burlington Northern and Santa Fe Railway Company and the Kansas City Southern Railway. The remainder of Iatan Unit No. 1's requirements for coal are met with spot purchases. The following table sets forth a comparison of the costs, including transportation costs, per million btu of various types of fuels used in our facilities: 2000 1999 1998 Coal - Iatan $ 0.823 $ 0.806 $ 0.857 Coal - Asbury 1.076 1.074 1.100 Coal - Riverton 1.167 1.222 1.214 Natural Gas 3.349 2.549 2.495 Oil 6.117 3.869 4.386
Our weighted cost of fuel burned per kilowatt-hour generated was 1.846 cents in 2000, 1.561 cents in 1999 and 1.570 cents in 1998. Employees At December 31, 2000, we had 603 full-time employees, of whom 340 were members of Local 1474 of The International Brotherhood of Electrical Workers. On January 17, 2000, we and the IBEW entered into a new three-year labor agreement effective November 1, 1999. The agreement provided, among other things, for a 3.25% increase in wages effective October 25, 1999, a 3.5% increase effective November 6, 2000 and a minimum increase of 2% effective October 22, 2001. ELECTRIC OPERATING STATISTICS (1) 2000 1999 1998 1997 1996 Electric Operating Revenues (000s): Residential $ 108,572 $ 98,787 $ 100,567 $ 88,636 $ 86,014 Commercial 77,601 73,773 71,810 64,940 61,811 Industrial 42,711 41,030 39,805 37,192 35,213 Public authorities 5,927 5,847 5,559 4,995 4,180 Wholesale on-system 11,738 10,682 10,928 9,730 9,482 Miscellaneous 4,546 3,856 4,006 3,341 3,639 Total system 251,095 233,975 232,675 208,834 200,339 Wholesale off-system 7,842 7,090 6,126 5,473 4,595 Total electric operating 258,937 241,065 238,801 214,307 204,934 revenues Electricity generated and purchased (000s of Kwh): Steam 2,193,847 2,378,130 2,228,103 2,372,914 2,231,062 Hydro 51,132 86,349 70,631 77,578 62,860 Combustion turbine 455,678 520,340 439,517 211,872 162,679 Total generated 2,700,657 2,984,819 2,738,251 2,662,364 2,456,601 Purchased 2,255,076 1,686,782 1,970,348 1,839,833 1,968,898 Total generated and 4,955,733 4,671,601 4,708,599 4,502,197 4,425,499 purchased Interchange (net) 145 (138) (1,894) 1,018 (1,087) Total system input 4,955,878 4,671,463 4,706,705 4,503,215 4,424,412 Maximum hourly system 993,000 979,000 916,000 876,000 842,000 demand (Kw) Owned capacity (end of 878,000 878,000 878,000 878,000 724,000 period) (Kw) Annual load factor (%) 55.12 52.16 55.72 55.38 56.85 Electric sales (000s of Kwh): Residential 1,660,928 1,509,176 1,548,630 1,429,787 1,440,512 Commercial 1,333,310 1,260,597 1,246,323 1,171,848 1,154,879 Industrial 1,015,779 988,114 960,783 943,287 923,730 Public authorities 96,403 99,739 98,675 101,122 95,652 Wholesale on-system 309,633 297,614 299,256 273,035 262,330 Total system 4,416,053 4,155,240 4,153,667 3,919,079 3,877,103 Wholesale off-system 161,293 198,234 235,391 253,060 219,814 Total electric sales 4,577,346 4,353,474 4,389,058 4,172,139 4,096,917 Company use (000s of Kwh) 8,714 8,583 8,940 9,688 9,584 Lost and unaccounted for 369,818 309,406 308,707 321,388 317,911 (000s of Kwh) Total system input 4,955,878 4,671,463 4,706,705 4,503,215 4,424,412 Customers (average number of monthly bills rendered): Residential 123,618 121,523 119,265 117,271 115,116 Commercial 22,504 22,206 21,774 21,323 20,758 Industrial 345 350 354 346 346 Public authorities 1,674 1,759 1,739 1,720 1,696 Wholesale on-system 7 7 7 7 7 Total system 148,148 145,845 143,139 140,667 137,923 Wholesale off-system 6 6 6 7 9 Total 148,154 145,851 143,145 140,674 137,932 Average annual sales per 13,436 12,419 12,985 12,192 12,514 residential customer (Kwh) Average annual revenue per $ 878.29 $ 812.91 $ 843.22 $ 755.82 $ 747.19 residential customer Average residential revenue 6.54 6.55 6.49 6.20 5.97 per Kwh Average commercial revenue 5.82 5.85 5.76 5.54 5.35 per Kwh Average industrial revenue 4.20 4.15 4.14 3.94 3.81 per Kwh (1) See Item 6 - Selected Financial Data for additional financial information regarding Empire.
Executive Officers and Other Officers of Empire The names of our officers, their ages and years of service with Empire as of December 31, 2000, positions held and effective date of such positions are presented below. Each of our executive officers has held executive officer or management positions within Empire for at least the last five years. Age at With the Officer Name 12/31/00 Positions with the Company Company since since M.W. McKinney 56 President and Chief Executive Officer 1967 1982 (1997), Executive Vice President - Commercial Operations (1995), Executive Vice President (1994), Vice President - Customer Services (1982) Director (1991) V.E. Brill* 59 Vice President - Energy Supply (1995) 1962 1975 Vice President - Finance (1983) Director (1989) R.B. Fancher** 60 Vice President - Finance (1995), Vice 1972 1984 President - Corporate Services (1984) C.A. Stark 56 Vice President - General Services 1980 1995 (1995), Director of Corporate Planning (1988) W.L. Gipson*** 43 Executive Vice President (2001), Vice 1981 1997 President - Commercial Operations (1997), General Manager (1997), Director of Commercial Operations (1995), Economic Development Manager (1987) D.W. Gibson**** 54 Vice President - Finance (2001), 1979 1991 Director of Financial Services and Assistant Secretary (1991) D.L. Coit***** 50 Controller and Assistant Treasurer 1971 2000 (2000) and Assistant Secretary (2001) Manager Property Accounting (1983) J.S. Watson 48 Secretary-Treasurer (1995), 1994 1995 Accounting Staff Specialist (1994) *V.E. Brill retired from his position as Vice President - Energy Supply effective February 28, 2001 and from his position as Director effective April 25, 2001. **R.B. Fancher retired from his position as Vice President - Finance effective February 28, 2001. ***W.L. Gipson was elected Executive Vice President February 1, 2001 ****D.W. Gibson was elected Vice President - Finance February 1, 2001. *****D.L. Coit was elected Assistant Secretary February 1, 2001. Regulation General. As a public utility, we are subject to the jurisdiction of the Missouri Public Service Commission, the State Corporation Commission of the State of Kansas, the Corporation Commission of Oklahoma and the Arkansas Public Service Commission with respect to services and facilities, rates and charges, accounting, valuation of property, depreciation and various other matters. Each such Commission has jurisdiction over the creation of liens on property located in its state to secure bonds or other securities. The Kansas Commission also has jurisdiction over the issuance of securities. Our transmission and sale at wholesale of electric energy in interstate commerce and our facilities are also subject to the jurisdiction of the Federal Energy Regulatory Commission, referred to as FERC, under the Federal Power Act. FERC jurisdiction extends to, among other things, rates and charges in connection with such transmission and sale; the sale, lease or other disposition of such facilities and accounting matters. See discussion in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Competition." Our Ozark Beach Hydroelectric Plant is operated under a license from FERC. See Item 2, "Properties - Electric Facilities." We are disputing a Headwater Benefits Determination Report we received from FERC on September 9, 1991. The report calculates an assessment to us for headwater benefits received at the Ozark Beach Hydroelectric Plant for the period 1973 through 1990 in the amount of $705,724, and calculates an annual assessment thereafter of $42,914 for the years 1991 through 2011. We believe that the methodology used in making the assessment was incorrect and are contesting the determination. As of December 31, 2000, FERC had not responded to the comments filed by us on July 31, 1992. We are currently accruing an amount monthly equal to what we believe the correct assessment to be. During 2000, approximately 91% of our electric operating revenues were received from retail customers. Approximately 88%, 6%, 3% and 3% of such retail revenues were derived from sales in Missouri, Kansas, Oklahoma and Arkansas, respectively. Sales subject to FERC jurisdiction represented approximately 8% of our electric operating revenues during 2000. Rates. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Operating Revenues and Kilowatt-Hour Sales" for information concerning recent electric rate proceedings. Fuel Adjustment Clauses. Fuel adjustment clauses permit changes in fuel costs to be passed along to customers without the need for a rate proceeding. Fuel adjustment clauses are not permitted under Missouri law. Pursuant to an agreement with the Kansas Commission, entered into in connection with a 1989 rate proceeding, a fuel adjustment clause is not applicable to our retail electric sales in Kansas. Automatic fuel adjustment clauses are presently applicable to retail electric sales in Oklahoma and system wholesale kilowatt-hour sales under FERC jurisdiction. Arkansas has implemented an Energy Cost Recovery Rider that replaces the previous fuel adjustment clause. This rider is adjusted for changing fuel and purchased power costs on an annual basis rather than the monthly adjustment used by the previous fuel adjustment clause. Any increases in fuel costs may be recovered in Missouri and Kansas only through rate filings made with the appropriate Commissions. Environmental Matters We are subject to various federal, state, and local laws and regulations with respect to air and water quality as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations. Air. The 1990 Amendments to the Clean Air Act, referred to as the 1990 Amendments, affect the Asbury, Riverton, State Line and Iatan Power Plants. The 1990 Amendments require affected plants to meet certain emission standards, including maximum emission levels for sulfur dioxide (SO2) and nitrogen oxide (NOx). When a plant becomes an affected unit for a particular emission, it locks in the then current emission standards. The Asbury Plant became an affected unit under the 1990 Amendments for both SO2 and NOx on January 1, 1995. The Iatan Plant became an affected unit for both SO2 and NOx on January 1, 2000. The Riverton Plant became an affected unit for NOx in November 1996 and for SO2 on January 1, 2000. The State Line Plant became an affected unit for SO2 and NOx on January 1, 2000. SO2 Emissions. Under the 1990 Amendments, the amount of SO2 an affected unit can emit is regulated. Each affected unit has been awarded a specific number of emission allowances, each of which allows the holder to emit one ton of SO2. Utilities covered by the 1990 Amendments must have emission allowances equal to the number of tons of SO2 emitted during a given year by each of their affected units. Allowances may be traded between plants, utilities or "banked" for future use. A market for the trading of emission allowances exists on the Chicago Board of Trade. The Environmental Protection Agency ("EPA") withholds annually a percentage of the emission allowances awarded to each affected unit and sells those emission allowances through a direct auction. We receive compensation from the EPA for the sale of these allowances. Our Asbury, Riverton and Iatan plants currently burn a blend of low sulfur Wyoming coal and higher sulfur local coal or burn 100% low sulfur Wyoming coal. The State Line Plant is a gas-fired facility and does not receive SO2 allowances. However, annual allowance requirements for the State Line Plant, which are not expected to exceed 20 allowances per year, will be transferred from our inventoried bank of allowances. We anticipate, based on current operations, that the combined actual SO2 allowance need for all affected plant facilities will exceed the number of allowances awarded to us annually by the EPA. The SO2 allowances needed to compensate for this deficit will come from our inventoried bank of allowances. The inventoried bank of allowances should be sufficient to cover the annual actual emissions deficit for a minimum of 10 years. We currently have 35,000 banked allowances. NOx Emissions. The Asbury Plant is in compliance with current NOx requirements The Iatan Plant and the Riverton Plant are each in compliance with the NOx limits applicable to them under the 1990 Amendments as currently operated. In April 2000 the Missouri Department of Natural Resources promulgated a final rule addressing the ozone moderate non- attainment classification of the St. Louis area. The final regulation set a maximum NOx emission rate of 0.25 lbs/mmBtu for Eastern Missouri and a maximum NOx emission rate of 0.35lbs/mmBtu for Western Missouri. The Iatan, Asbury, State Line and Energy Center facilities are affected by this regulation. The compliance date is set for May 1, 2003. The Iatan, State Line and Energy Center units presently meet this emission limit. The Asbury Plant does not. The regulation provides for a NOx emission trading program and for the generation of Early Reduction Credits during the years 2000, 2001 and 2002. Early Reduction Credits may be used for compliance during 2003 and 2004. We are evaluating our options at this time. In order to comply with the emission rate at Asbury, installation of a selective catalytic reduction system appears to be the most viable option. However, NOx trading and the purchase of Early Reduction Credits may permit the delay of the installation until 2004 or 2005. Also, the compliance date may be delayed to coincide with the May 31, 2004 compliance date of the EPA's NOx SIP call which is applicable to Eastern Missouri. We have construction and operating permits for our State Line Power Plant and have continuously operated in compliance with those permits since they went into operation on May 30, 1995 for Unit No. 1 and June 18, 1997 for Unit No. 2. In July 2000, we received a request for information from the EPA regarding the State Line Power Plant. The information request indicated that the State Line Power Plant units should have an Acid Rain Permit under Title IV of the 1990 Amendments to the Clean Air Act. In response, in August 2000, we applied for the required Acid Rain Permit with the Missouri Department of Natural Resources. A continuous emission monitoring system has been installed on Unit No. 1. Unit No. 2 has been off- line since September 2000 for construction work associated with its inclusion in the new combined cycle unit. A continuous monitoring system will be installed and operational before the unit is placed back in service in mid-2001. Emission data requests have been submitted for the year 2000 for both units. As a result of this situation, we may be subject to fines but, at this time, we cannot predict the final amount of such fines, if any. Finalization of the situation is expected in 2001. Water. We operate under the Kansas and Missouri Water Pollution Plans that were implemented in response to the Federal Water Pollution Control Act Amendments of 1972. The Asbury, Iatan, Riverton, Energy Center and State Line facilities are in compliance with applicable regulations and have received discharge permits and subsequent renewals as required. The Asbury permit was issued in 2000. The Riverton Plant's National Pollution Discharge Elimination System ("NPDES") Permit expired in September 2000. We have received the draft permit from the Kansas Department of Health and Environment. This permit will be put on public notice in 2001 without any significant changes. We continue to operate under the existing permit until finalization of the new permit. The State Line Plant is currently in the process of applying for a new NPDES Permit pertaining to the expansion of the plant. This permit is needed, and is expected to be issued, by July 2001. Other. Under Title 5 of the 1990 Amendments, we must obtain site operating permits for each of our plants from the authorities in the state in which the plant is located. These permits, which are valid for five years, regulate the plant site's total emissions; including emissions from stacks, individual pieces of equipment, road dust, coal dust and steam leaks. We have been issued permits for Asbury, State Line and the Energy Center Power Plants. The Riverton Plant has not been issued an operating permit at this time. The State of Kansas requested that we draft the Title V Permit and submit it to the state. The permit has been drafted and submitted. We expect this permit will be issued during 2001. Conditions Respecting Financing Our Indenture of Mortgage and Deed of Trust, dated as of September 1, 1944, as amended and supplemented (the "Mortgage"), and our Restated Articles of Incorporation (the "Restated Articles"), specify earnings coverage and other conditions which must be complied with in connection with the issuance of additional first mortgage bonds or cumulative preferred stock, or the incurrence of unsecured indebtedness. The Mortgage generally permits the issuance of additional bonds only if net earnings (as defined) for a specified twelve-month period are at least twice the annual interest requirements on all bonds at the time outstanding, including the additional issue and all indebtedness of prior rank. Under this test, on December 31, 2000, we could have issued under the Mortgage approximately $122.2 million principal amount of additional bonds (at an assumed interest rate of 7.50%). In addition to the interest coverage requirement, the Mortgage provides that new bonds must be issued against, among other things, retired bonds or 60% of net property additions. At December 31, 2000, we had retired bonds and net property additions which would enable the issuance of at least $223.4 million principal amount of bonds. Under the Restated Articles, (a) cumulative preferred stock may be issued only if our net income available for interest and dividends (as defined) for a specified twelve-month period is at least 1-1/2 times the sum of the annual interest requirements on all indebtedness and the annual dividend requirements on all cumulative preferred stock, to be outstanding immediately after the issuance of such additional shares, and (b) so long as any preferred stock is outstanding, the amount of unsecured indebtedness outstanding may not exceed 20% of the sum of the outstanding secured indebtedness plus our capital and surplus. We redeemed all of our outstanding preferred stock on August 2, 1999 and accordingly, the Articles do not restrict the amount of unsecured indebtedness that we may have outstanding. ITEM 2. PROPERTIES Electric Facilities At December 31, 2000, we owned generating facilities (including its interest in Iatan Unit No. 1) with an aggregate generating capacity of 878 megawatts. Our principal electric generating plant is the Asbury Plant with 213 megawatts of generating capacity. The Plant, located near Asbury, Missouri, is a coal-fired generating station with two steam turbine generating units. The Plant presently accounts for approximately 24% of our owned generating capacity and in 2000 accounted for approximately 48% of the energy generated by us. Routine plant maintenance, during which the entire Plant is taken out of service, is scheduled once each year, normally for approximately four weeks in the spring. Every fifth year the spring outage is scheduled to be extended to a total of six weeks to permit inspection of the Unit No. 1 turbine. The last such outage was in 1996 and the next such extended outage is scheduled to occur between September 15, 2001 and November 25, 2001, a total of ten weeks. The 2001 five-year major generator turbine inspection is being extended to allow for the change out of Asbury's five cyclone burners and the upgrading of the control system to a digital system. The Unit No. 2 turbine is inspected approximately every 35,000 hours of operations. The unit can be overhauled without Unit No. 1 having to come off-line. When the Asbury Plant is out of service, we typically experience increased purchased power and fuel costs associated with replacement energy. This year's outage is being moved to the fall when the new State Line Combined Cycle Unit is expected to be operational to help decrease the need for purchased power. See Item 1 "Business - Regulation - Fuel Adjustment Clauses," for additional information concerning increased purchased power and fuel costs. Our generating plant located at Riverton, Kansas, has two steam-electric generating units with an aggregate generating capacity of 92 megawatts and three gas-fired combustion turbine units with an aggregate generating capacity of 44 megawatts. The steam-electric generating units burn coal as a primary fuel and have the capability of burning natural gas. The last five-year scheduled maintenance outage for the Riverton Plant occurred during the second quarter of 1998. We own a 12% undivided interest in the 670 megawatt coal-fired Unit No. 1 at the Iatan Generating Station located 35 miles northwest of Kansas City, Missouri, as well as a 3% interest in the site and a 12% interest in certain common facilities. We are entitled to 12% of the unit's available capacity and are obligated to pay for that percentage of the operating costs of the Unit. Kansas City Power & Light and UtiliCorp own 70% and 18%, respectively, of the Unit. Kansas City Power & Light operates the unit for the joint owners. See Note 10 of "Notes to Financial Statements" under Item 8. We also have two combustion turbine peaking units at the Empire Energy Center in Jasper County, Missouri, with an aggregate generating capacity of 180 megawatts. These peaking units operate on natural gas as well as oil. Our State Line Power Plant, which is located west of Joplin, Missouri, presently consists of two combustion turbine units with an aggregate generating capacity of 253 megawatts. These units burn natural gas as a primary fuel and have the capability of burning oil. Unit No. 1 was placed in service in mid-1995 and Unit No. 2 was placed in service in mid-1997. On July 26, 1999, we and Westar Generating, Inc., a subsidiary of Western Resources, Inc., entered into agreements for the construction, ownership and operation of a 500-megawatt combined-cycle unit at the State Line Power Plant (the "Combined Cycle Unit"). This Combined Cycle Unit will consist of the combination of an additional combustion turbine, two heat recovery steam generators and a steam turbine and auxiliary equipment with an already existing combustion turbine. We will own an undivided 60% interest in the Combined Cycle Unit with Westar Generating owning the remainder. We are entitled to 60% of the capacity of the Combined Cycle Unit. We will contribute our existing 152-megawatt State Line Unit No. 2 combustion turbine to the Combined Cycle Unit, and as a result, upon commercial operation, the Combined Cycle Unit will provide us with approximately 150 megawatts of additional capacity. The total cost of this construction expansion project is estimated to be $204 million. Our share of this amount, after the transfer to Westar Generating of an undivided 40% joint ownership interest in the existing State Line Unit No. 2 and certain other property at book value, is expected to be approximately $108 million. Our hydroelectric generating plant, located on the White River at Ozark Beach, Missouri, has a generating capacity of 16 megawatts, subject to river flow. We have a long-term license from FERC to operate this plant which forms Lake Taneycomo in Southwestern Missouri. At December 31, 2000, our transmission system consisted of approximately 22 miles of 345 kV lines, 420 miles of 161 kV lines, 754 miles of 69 kV lines and 81 miles of 34.5 kV lines. Its distribution system consisted of approximately 6,301 miles of line. Our electric generation stations are located on land owned in fee. We own a 3% undivided interest as tenant in common with Kansas City Power & Light and UtiliCorp in the land for the Iatan Generating Station. We will own a similar interest in 60% of the land used for the State Line Combined Cycle Unit. Substantially all of our electric transmission and distribution facilities are located either (1) on property leased or owned in fee; (2) over streets, alleys, highways and other public places, under franchises or other rights; or (3) over private property by virtue of easements obtained from the record holders of title. Substantially all of our property, plant and equipment are subject to the Mortgage. Water Facilities We also own and operate water pumping facilities and distribution systems consisting of a total of approximately 80 miles of water mains in three communities in Missouri. ITEM 3. LEGAL PROCEEDINGS No legal proceedings required to be disclosed by this Item are pending. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is listed on the New York Stock Exchange. On March 1, 2001, there were 7,060 record holders of our common stock. The high and low sale prices for our common stock as reported by the New York Stock Exchange for composite transactions, and the amount per share of quarterly dividends declared and paid on the common stock for each quarter of 2000 and 1999 were as follows: Price of Common Stock Dividends Paid 2000 1999 Per Share High Low High Low 2000 1999 First Quarter $ 23.125 $ 18.938 $ 25.625 $ 22.000 $ 0.32 $ 0.32 Second Quarter 24.563 19.688 26.313 20.688 0.32 0.32 Third Quarter 27.063 22.125 26.750 25.375 0.32 0.32 Fourth Quarter 30.750 22.875 25.688 21.688 0.32 0.32
Holders of our common stock are entitled to dividends if, as, and when declared by the Board of Directors, out of funds legally available therefore, subject to the prior rights of holders of any outstanding cumulative preferred stock and preference stock. The Mortgage and the Restated Articles contain certain dividend restrictions. The most restrictive of these is contained in the Mortgage, which provides that we may not declare or pay any dividends (other than dividends payable in shares of its common stock) or make any other distribution on, or purchase (other than with the proceeds of additional common stock financing) any shares of, our common stock if the cumulative aggregate amount thereof after August 31, 1944, (exclusive of the first quarterly dividend of $98,000 paid after said date) would exceed the earned surplus (as defined) accumulated subsequent to August 31, 1944, or the date of succession in the event that another corporation succeeds to our rights and liabilities by a merger or consolidation. As of December 31, 2000, this dividend restriction did not affect any of our retained earnings. Our Dividend Reinvestment and Stock Purchase Plan was terminated on October 1, 2000 in compliance with terms of the merger agreement with UtiliCorp United Inc. We will implement a new Direct Stock Purchase and Dividend Reinvestment Plan effective in the second quarter 2001. Participants in this plan may acquire, at a 3% discount, newly issued common shares with reinvested dividends. Participants may also purchase, at market value, newly issued common shares with optional cash payments on a weekly basis. We will also offer participants the option of safekeeping for their stock certificates. On April 27, 2000, the Board of Directors approved a new shareholder rights plan to replace the existing shareholder rights plan which expired on July 25, 2000. At the Board of Directors meeting, the Directors declared a dividend distribution of one right for each share of our Common Stock to holders of record of our Common Stock at the close of business on July 26, 2000. The new shareholders rights plan provides each of the common stockholders one Preference Stock Purchase Right ("Right") for each share of common stock owned. One Right enables the holder to acquire one one-hundredth of a share of Series A Participating Preference Stock (or, under certain circumstances, other securities) at a price of $75 per one-hundredth of a share, subject to adjustment. The rights (other than those held by an acquiring person or group ("Acquiring Person")) will be exercisable only if an Acquiring Person acquires 10% or more of our common stock or if certain other events occur. See Note 5 of "Notes to Financial Statements" under Item 8 for additional information. Our By-laws provide that K.S.A. Sections 17-1286 through 17- 1298, the Kansas Control Share Acquisitions Act, will not apply to control share acquisitions of our capital stock. See Note 4 of "Notes to Financial Statements" under Item 8 for additional information regarding our common stock. ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands, except per share amounts) 2000 1999 1998 1997 1996 Operating revenues $ 260,003 $ 242,162 $ 239,858 $ 215,311 $ 205,984 Operating income $ 45,902 $ 42,576 $ 47,372 $ 40,962 $ 36,652 Total allowance for funds $ 5,775 $ 1,193 $ 409 $ 1,226 $ 1,420 used during construction Net income $ 23,617 $ 22,170(1)$ 28,323 $ 23,793 $ 22,049 Earnings applicable to 23,617 19,463(1)$ 25,912 $ 21,377 $ 19,633 common stock Weighted average number of common shares outstanding 17,503,665 17,237,805 16,932,704 16,599,269 16,015,858 Basic and diluted earnings $ 1.35 $ 1.13(1)$ 1.53 $ 1.29 $ 1.23 per weighted average shares outstanding Cash dividends per common $ 1.28 $ 1.28 $ 1.28 $ 1.28 $ 1.28 share Common dividends paid as a percentage of earnings applicable to common stock 94.9% 114.5% 83.7% 99.4% 104.5% Allowance for funds used during construction as a percentage of earnings applicable to common stock 24.5% 6.2% 1.6% 5.7% 7.2% Book value per common share outstanding at end of year $ 13.62 $ 13.44 $ 13.40 $ 13.03 $ 12.93 Capitalization: Common equity $ 240,153 $ 234,188 $ 229,791 $ 219,034 $ 213,091 Preferred stock without mandatory redemption $ 0 $ 0 $ 32,634 $ 32,902 $ 32,902 provisions Long-term debt $ 325,644 $ 345,850 $ 246,093 $ 196,385 $ 219,533 Ratio of earnings to fixed 2.25 2.70 3.32 3.01 3.11 charges Ratio of earnings to combined fixed charges and preferred stock dividend requirements 2.25 2.40 2.78 2.50 2.53 Total assets $ 829,739 $ 731,409 $ 653,294 $ 626,465 $ 596,980 Utility plant in service at original cost $ 918,622 $ 870,329 $ 831,496 $ 797,839 $ 717,890 Utility plant expenditures during the year $ 129,965 $ 69,642 $ 47,366 $ 53,280 $ 59,373 (1) Reflects $5,772,292 of merger costs associated with our proposed merger with UtiliCorp.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TERMINATED MERGER WITH UTILICORP Empire and UtiliCorp United Inc., a Delaware corporation ("UtiliCorp"), entered into an Agreement and Plan of Merger, dated as of May 10, 1999 (the "Merger Agreement"), which provided for a merger of our company with and into UtiliCorp, with UtiliCorp being the surviving corporation. The merger was conditioned, among other things, upon approvals of various federal and state regulatory agencies, with either company having the right to terminate the Merger Agreement if all regulatory approvals were not obtained by December 31, 2000. All approvals were not received by this date and UtiliCorp notified us on January 2, 2001 that it was exercising its right to terminate the Merger Agreement. On July 26, 2000, the FERC granted conditional approval to the Merger. On December 4, 2000, the Company received an order from the Administrative Law Judge ("ALJ") of the Arkansas Public Service Commission ruling that the proposed regulatory plan not be approved. In addition, the ALJ stated that he was unable to separate the application for approval of the merger and the proposed regulatory plan, and therefore could not conclude that the merger was consistent with the public interest, the standard for merger approval in Arkansas. On December 11, 2000, the Arkansas Public Service Commission issued an order adopting and affirming the December 4, 2000 order without modification. On December 14, 2000, we and UtiliCorp filed for a rehearing with the Arkansas Public Service Commission. The Oklahoma Corporation Commission approved the proposed merger on December 11, 2000 but did not address the proposed regulatory plan, indicating that such issues would be addressed if raised in future rate proceedings. The Missouri Public Service Commission approved the proposed merger on December 28, 2000 but rejected the proposed regulatory plan. The Kansas Corporation Commission had not yet ruled on the proposed merger and regulatory plan when the Merger Agreement was terminated by UtiliCorp on January 2, 2001. As a result of the termination of the merger by UtiliCorp, approximately $6.1 million in merger related expenses that were not tax deductible when incurred by us, have now become deductible. This deduction was taken in January 2001, decreasing income tax expense and increasing operating income for the first quarter of 2001 by approximately $2.3 million. RESULTS OF OPERATIONS The following discussion analyzes significant changes in the results of operations for the year ended December 31, 2000, compared to the year ended December 31, 1999, and for the year ended December 31, 1999, compared to the year ended December 31, 1998. Operating Revenues and Kilowatt-Hour Sales Of our total electric operating revenues during 2000, approximately 42% were from residential customers, 30% from commercial customers, 16% from industrial customers, 5% from wholesale on-system customers and 3% from wholesale off-system transactions. The remainder of such revenues were derived from miscellaneous sources. The percentage changes from the prior year in kilowatt-hour ("Kwh") sales and revenue by major customer class were as follows: Kwh Sales Revenues 2000 1999 2000 1999 Residential 10.1% (2.6)% 9.9% (1.8)% Commercial 5.8 1.2 5.2 2.7 Industrial 2.8 2.8 4.1 3.1 Wholesale On- 4.0 (0.6) 9.9 (2.3) System Total System 6.3 0.1 7.1 0.6
Kwh sales and revenues for our on-system customers increased during 2000 primarily due to above-average temperatures in August and September of 2000 as well as unseasonably cold temperatures in November and December of 2000. Customer growth in 2000 remained at the same rate as experienced in 1999. Residential Kwh sales increased 10.1% with revenues increasing 9.9% as compared to 1999 primarily due to the weather conditions described above. Commercial Kwh sales increased 5.8% with revenues increasing 5.2% due to these weather conditions as well as continued increases in business activity throughout our service territory. Industrial classes also showed an increase in Kwh sales and revenues due to continued increases in business activity throughout our service territory. On-system wholesale Kwh sales increased 4.0% in 2000, reflecting these weather conditions. Revenues associated with these sales increased more than the corresponding Kwh sales as a result of the operation of the fuel adjustment clause applicable to such FERC regulated sales. This clause permits the pass through to customers of changes in fuel and purchased power costs. Kwh sales for our on-system customers increased slightly during 1999 while revenues increased slightly more than the corresponding increase in Kwh sales. Customer growth increased slightly in 1999 over the 1.8% growth rate in 1998. Despite above- average temperatures in July and August of 1999, residential Kwh sales decreased 2.6% with revenues decreasing 1.8% as compared to 1998. This decrease was primarily due to unusually mild temperatures during the second quarter of 1999, as well as in September, November and December, and the unusually warm second and third quarters of 1998. Commercial and industrial classes showed an increase in Kwh sales and revenues due to continued increases in business activity throughout the Company's service territory. On-system wholesale Kwh sales were down slightly in 1999, reflecting the mild temperatures. Revenues associated with these sales decreased more than the corresponding Kwh sales as a result of the operation of the fuel adjustment clause applicable to such FERC regulated sales. On November 3, 2000, we filed a request with the Missouri Public Service Commission for a general annual increase in rates for our Missouri electric customers in the amount of $41,467,926, or 19.36%. This request is to allow us to recover expenses resulting from significantly higher natural gas prices than the levels contemplated by our existing rates as well as our investment in the Combined Cycle Unit currently under construction at the State Line Power Plant and other plant additions which have occurred since our last rate increase in September 1997. The Missouri Commission has scheduled an evidentiary hearing for May 29, 2001 through June 8, 2001. Any rate increase approved as a result of the filing would not become effective before late in the third quarter of 2001. We cannot predict the extent of any increase which might be granted as a result of this filing. Because of the timing of the decision with respect to the November 2000 request and the resulting delay in recovery of permanent rates as well as the expectation of continuing high natural gas prices and increased gas usage when the State Line Combined Cycle Unit begins operation, we filed a request with the Missouri Public Service Commission on February 16, 2001 for an interim increase in rates for our Missouri electric customers in the amount of $16,770,495, or 8.18%. We asked for this increase to be collected between March 1, 2001 and September 30, 2001, when we anticipate the permanent case could be concluded. On March 8, 2001 the Missouri Commission dismissed the interim case stating that Empire had failed to show that it was facing an emergency or near emergency situation, the standard for interim relief, and as a result no interim rate increase was granted. We will continue to actively pursue the permanent rate case described above. In addition to sales to our own customers, we sell power to other utilities as available and provide transmission service through our system for transactions between other energy suppliers. During 2000 revenues from such off-system transactions were approximately $10.6 million as compared to approximately $9.6 million in 1999 and approximately $8.3 million during 1998, despite a decline in Kwh sales for both years. The increase in revenues during 2000 while Kwh sales were declining was primarily the result of the ability to sell power at market-based rates. Pursuant to orders issued by the FERC and subsequent tariffs filed by us and SPP, these off-system sales have been opened up to competition. See "- Competition" below for more information on these open-access tariffs. Our future revenues from the sale of electricity will continue to be affected by economic conditions, business activities, competition, weather, fuel costs, regulation, the utilities' change from a regulated to a competitive environment, changes in electric rate levels and changing patterns of electric energy use by customers and our ability to receive adequate and timely rate relief. Operating Revenue Deductions During 2000, total operating expenses increased approximately $19.5 million (15.3%) compared to the prior year. Total purchased power costs increased by approximately $20.5 million (46.0%) during 2000 reflecting increased demand in the third and fourth quarters of 2000. Decreased availability of some of our generating units during the third quarter of 2000 and escalating natural gas prices (which at times made it more economical to purchase power than to run our gas-fired units, particularly in September) added to the increase in purchased power. The Riverton Plant's coal-fired Unit No. 7 was out of service for its scheduled fall outage from September 15 to November 9 and Unit No. 8, also coal-fired, was out of service for its scheduled fall outage from September 29 to October 16. The State Line Plant's Unit No. 2 was taken out of service on September 12 to begin its transformation into a combined- cycle unit and will be out of service until the combined-cycle unit goes into commercial operation, which is scheduled for June 2001. Total fuel costs were up approximately $3.6 million (8.1%) during 2000 as compared to the same period in 1999 primarily reflecting the increased generation from the gas turbines at the Energy Center and the State Line Power Plant in the fourth quarter of 2000. The extremely cold temperatures in December resulted in a significant increase in the price of purchased power, making it more economical for us to run our gas-fired turbines. In addition, escalating natural gas prices made it more economical for the Energy Center to run its dual-fuel turbines mainly on oil in December. Natural gas prices were higher by 31.3% during 2000 as compared to 1999. Merger related expenses, which were not tax deductible when they were incurred, were $5.4 million (94.3%) less during 2000 as compared to 1999. Other operating expenses increased approximately $0.7 million (2.3%) during 2000, compared to 1999, mainly due to a $0.5 million addition to the bad debt reserve in the third quarter. Maintenance and repairs expense decreased approximately $1.6 million (9.5%) during 2000 primarily due to decreased maintenance on the combustion turbines at Energy Center as well as decreased levels of distribution maintenance. Depreciation and amortization expense increased approximately $1.4 million (5.4%) during 2000, compared to 1999, due to increased levels of plant and equipment placed in service. Total provision for income taxes decreased approximately $4.5 million (28.3%) during 2000 due primarily to lower taxable income. See Note 9 of "Notes to Financial Statements" under Item 8 for additional information regarding income taxes. Other taxes decreased approximately $0.3 million (2.6%) during the year. During 1999, total operating expenses increased approximately $6.1 million (5.1%) compared to the prior year. Merger related expenses, which were not tax deductible when they were incurred, contributed $5.8 million to this increase. Total purchased power costs decreased by approximately $2.9 million (6.0%) during 1999, primarily due to increased availability of our generating units. The Asbury Plant set a new continuous run record of 190 days in 1999. Total fuel costs were up approximately $3.4 million (8.1%) during 1999 as compared to the same period in 1998 primarily reflecting the increased generation from the gas turbines at the State Line Power Plant. The hot temperatures in July and August resulted in a significant increase in the price of purchased power, making it more economical for us to run our gas turbines during those months. In addition, natural gas prices were higher by 1.5% during 1999 as compared to 1998, contributing to the increase. Other operating expenses decreased slightly by approximately $0.1 million (0.4%) during 1999, compared to 1998. Maintenance and repairs expense decreased approximately $1.2 million (6.7%) during 1999 primarily due to decreased maintenance costs at Asbury and Riverton. The Riverton Plant had a five-year scheduled maintenance outage in 1998. These decreases offset maintenance and repairs expense resulting from a New Year's Day ice storm that interrupted service to approximately 35,000 of our Missouri and Kansas customers over a three day period. Depreciation and amortization expense increased approximately $1.4 million (5.6%) during 1999, compared to 1998, due to increased levels of plant and equipment placed in service. Total income taxes decreased approximately $0.3 million (2.0%) during 1999 due primarily to lower taxable income during 1999. See Note 9 of "Notes to Financial Statements" under Item 8 for additional information regarding income taxes. Other taxes were up approximately $1.1 million (8.8%) during the year largely as a result of increased property taxes. Nonoperating Items Total allowance for funds used during construction ("AFUDC") amounted to approximately 24.5% of earnings applicable to common stock during 2000, 6.1% during 1999, and 1.6% during 1998. AFUDC increased significantly during 2000 reflecting higher levels of construction work in progress related to the State Line Project. AFUDC increased during 1999 over the same period in 1998, also reflecting the higher levels of construction work in progress due mainly to the State Line Project. See Note 1 of "Notes to Financial Statements" under Item 8. Total AFUDC will decrease following the completion of the State Line Project scheduled for June 2001. Interest charges on long-term debt increased $7.0 million (35.8%) during 2000 due to the issuance of $100 million of our unsecured Senior Notes in November 1999. Interest charges on long- term debt increased $1.5 million (8.6%) during 1999 as compared to the prior year due to the issuance of $50 million of our First Mortgage Bonds in April 1998 as well as the Senior Notes in November 1999. The proceeds from the Senior Notes were used to repay short-term indebtedness, including approximately $33.1 million in commercial paper incurred in connection with our preferred stock redemption on August 2, 1999, as well as that incurred in connection with our construction program. The proceeds from our First Mortgage Bonds were added to our general funds and were used to repay $23 million of our First Mortgage Bonds due May 1, 1998 and to repay short-term indebtedness, including that incurred in connection with our construction program. Commercial paper interest decreased $0.4 million (25.4%) during the year due to decreased usage of short-term debt for financing purposes. Interest income increased $0.1 million (27.5%), reflecting the higher balances of cash available for investment. Earnings Basic and diluted earnings per weighted average share of common stock were $1.35 during 2000 compared to $1.13 in 1999. Excluding merger related expenses, earnings per share would have been $1.37 during 2000 compared to $1.46 in 1999. Earnings per share, although higher because of favorable weather conditions, increased AFUDC and decreased merger expenses, were negatively impacted by significantly increased natural gas prices and purchased power costs. Basic and diluted earnings per weighted average share of common stock were $1.13 during 1999 compared to $1.53 in 1998. Earnings per share were down primarily due to the $5.8 million in merger costs incurred during 1999, as well as $1.3 million in excess consideration paid on redemption of our preferred stock. Earnings for 1999 were also negatively impacted by mild temperatures and increased interest expense. Excluding the $5.8 million in merger costs, earnings per share would have been $1.46. We anticipate that assuming normal weather conditions and continued high natural gas prices, our earnings in 2001 are likely to decline until we receive adequate and timely rate relief as a result of the permanent rate increase we are seeking as disclosed above. In addition, earnings for the first quarter of 2001 will reflect the reversal of the non-deductibility of merger related expenses as discussed above. This will have the effect of increasing net income for the first quarter by approximately $2.3 million. Earnings for the first quarter of 2001 will also reflect $1.2 million of expenses related to severance benefits incurred under our Change in Control severance pay plan. Competition Federal regulation, such as The National Energy Policy Act of 1992 (the "Energy Act") has promoted and is expected to continue to promote competition in the electric utility industry. The Energy Act, among other things, eases restrictions on independent power producers, delegates authority to the FERC to order wholesale wheeling and grants individual states the power to order retail wheeling. At this time, Oklahoma and Arkansas are the only states in which we operate that have taken any such action. In Missouri, the Public Service Commission adopted an order in 1997 establishing a docket and creating a task force on retail electric competition. No legislative action has yet been taken and none is expected during the current year. In Kansas, although different bills have been introduced into the House and Senate, no legislative action has been taken. In Oklahoma, the Electric Restructuring Act of 1997 was passed by the Legislature and signed into law by the Governor. The bill, with a target date of July 1, 2002, was designed to provide for the orderly restructuring of the electric utility industry in the state and move the state toward open competition for electric generation. An Electric Utility Task Force was formed to study all issues in Oklahoma and to prepare legislation to provide a more comprehensive framework for the transition to retail open access. That legislation was defeated during the Oklahoma Legislature's 2000 session but will be debated again in the 2001 session. The target date of July 1, 2002 remains intact but an extension of this date will also be debated. The Arkansas Legislature passed a bill in April 1999 that would deregulate the state's electricity industry as early as January 2002. The bill would freeze rates for three years for residential and small business customers of utilities that seek to recover stranded costs, and freeze rates for one year for residential and small business customers of utilities, such as us, that do not seek to recover stranded costs. The Staff of the Arkansas Public Service Commission filed testimony in October 2000 recommending that the Commission encourage the legislature to extend the date for retail open access beyond the current statutory deadline of June 30, 2003. A bill supported by legislative leaders and the governor was introduced in January 2001. The bill was enacted in February 2001 and will delay deregulation until October 2003 and give the Commission authority to set further delays in one- year increments until October 2005. Approximately 2.93% of our retail electric revenue for 2000 was derived from sales subject to Arkansas regulation. In April 1996, the FERC issued Order No. 888 which required all electric utilities that own, operate, or control interstate transmission facilities to file open access tariffs that offer all wholesale buyers and sellers of electricity the same transmission services that they provide themselves. The utility would have to take service under those tariffs for its own wholesale power transactions. Order 888 required a functional unbundling of transmission and power marketing services. We and the Southwestern Power Pool ("SPP") have filed open access transmission tariffs covering these wholesale transmission services. The SPP tariff applies to most of the transmission services for which our tariff was designed. Where that is the case, we share revenues received from such transmission services with other members of the SPP based on a megawatt mile method of calculating transmission service charges. There are, however, limited circumstances where our tariff still applies and we receive 100% of the revenues from the transmission services. The SPP tariff will continue to apply unless and until a new tariff is filed as part of any regional transmission organization, or RTO, which we may join as discussed below. On December 15, 1999, the FERC issued Order No. 2000 which encourages the development of RTOs. RTOs are designed to control the wholesale transmission services of the utilities in its region. Order 2000 is intended to continue the process of promoting open and more competitive markets in bulk power sales of electricity that was begun with Order 888. The SPP filed with the FERC on December 30, 1999 for RTO status. This filing was rejected by the FERC as not meeting certain requirements of its Order 2000. The SPP filed a second request in the fourth quarter of 2000 addressing the FERC's concerns and continuing to seek RTO status. The FERC has not yet ruled on the modified filing. We do not expect the implementation of Order 2000 to have a significantly different impact on our results of operations than the implementation of Order 888 and the operation of the SPP tariff had. Several factors exist which may enhance our ability to compete if deregulation occurs. Historically, we have been able to generate and purchase power relatively inexpensively. Despite the increased natural gas prices and purchased power costs during 2000, our retail rates were still approximately 17% less than the electric industry average. In addition, less than 5% of our electric operating revenues are derived from sales to on-system wholesale customers, the type of customer for which the FERC is already requiring wheeling. Our reliance on purchased power should also be diminished when the State Line Combined Cycle Unit becomes operational later this year. We are continuing our investments in non-regulated businesses which we commenced in 1996. We now lease capacity on our broadband fiber optics network and provide electronic monitored security, decorative lighting and other energy services. LIQUIDITY AND CAPITAL RESOURCES Our construction-related expenditures totaled approximately $133.9 million, $71.9 million, and $51.9 million in 2000, 1999 and 1998, respectively. A breakdown of our 2000 construction expenditures is as follows: Construction Expenditures (amounts in millions) 2000 New construction - State Line Combined Cycle Unit $ 75.5 Distribution and transmission system additions 37.0 Combustion turbine improvements and upgrades 7.3 Additions and replacements - Asbury and Riverton 7.7 Capitalized software costs 0.6 Fiber optics 1.9 General and other additions 3.9 Total $133.9
Approximately 25% of construction expenditures and other funds requirements for 2000 were satisfied internally from operations. The other 75% of such requirements were satisfied from short term borrowings and the issuance of $100 million aggregate principal amount of unsecured senior notes in November 1999. The unusually low percentage of these requirements that was satisfied internally from operations was due primarily to increased construction expenditures in 2000. We estimate that our construction expenditures will total approximately $63.3 million in 2001, $38.3 million in 2002 and $43.2 million in 2003. Of these amounts, we anticipate that we will spend $20.8 million, $22.8 million and $24.0 million in 2001, 2002 and 2003, respectively, for additions to our distribution system to meet projected increases in customer demand. These construction expenditure estimates also include approximately $25.0 million, $0.2 million and $1.1 million in 2001, 2002 and 2003 respectively, for the Combined Cycle Unit at the State Line Power Plant. The total cost of this construction expansion project is estimated to be $204 million. Our 60% share of this amount is approximately $122 million before considering our contribution of 40% of already existing property. However, after the transfer to Westar Generating of an undivided 40% joint ownership interest in the existing State Line Unit No.2 and certain other property at book value as described below, our net cash requirement is expected to be approximately $108 million, excluding AFUDC. For more information on the Combined Cycle Unit see Item 2, "Properties - Electric Facilities." Work is continuing and the Combined Cycle Unit is projected to be placed into commercial operation by the target date of June 2001. We experienced a tightening labor market for required skilled craftsmen during the third and fourth quarters of 2000 which resulted in increased project labor costs. The project is now fully staffed with the required skilled craftsmen and work is continuing. In April, we placed one of our contractors at the State Line Power Plant in default of its contract and awarded completion of the work to another. The contractor in default petitioned for arbitration, claiming that its contract was not terminated for fault but rather at our convenience and sought certain damages. We responded with a claim of our own against the contractor. The dispute was settled to both parties' satisfaction through mediation in January 2001. Westar Generating is responsible for 40% of our expenditures made in connection with the construction and operation of the Combined Cycle Unit. In addition, Westar Generating had been making monthly prepayments to us, the last of which was made in October 2000. These prepayments were for the future transfer to Westar Generating of its 40% joint ownership interest in the existing State Line Unit No. 2, as well as an interest in certain underlying and surrounding land and other property and equipment now owned by us. The Missouri and Arkansas Commissions have approved our application for permission to sell and transfer an interest in these assets to Westar Generating. The transfer of these assets is scheduled for March 2001. The prepayments are reflected in State Line advance payments on the balance sheet. See Item 8, "Financial Statements and Supplementary Data." We estimate that internally generated funds will provide at least 75% of the funds required in 2001, 2002 and 2003 for estimated construction expenditures. As in the past, we intend to utilize short-term debt to finance the additional amounts needed for such construction and repay such borrowings with the proceeds of sales of public offerings of long-term debt or equity securities, including the sale of our common stock pursuant to our Employee Stock Purchase Plan and from internally-generated funds. Our Board of Directors authorized the termination of our Dividend Reinvestment and Stock Purchase Plan effective October 1, 2000 as contemplated by the Merger Agreement. Our Board of Directors voted at the February 1, 2001 meeting to reestablish a Dividend Reinvestment and Stock Purchase Plan for later this year. We will continue to utilize short-term debt as needed to support normal operations or other temporary requirements and have a $100 million line of credit. See Note 6 of "Notes to Financial Statements" regarding our line of credit. We financed our preferred stock redemption on August 2, 1999 with approximately $33.1 million in commercial paper. After redeeming all of our preferred stock, we are no longer restricted by our Articles as to the amount of unsecured indebtedness that we may have outstanding at any one time. On February 8, 2001, we filed an $80 million shelf registration statement with the SEC for issuance of our unsecured debt securities and preferred securities of two newly created trusts. This amount includes $30 million of unsold securities previously registered. On March 1, 2001, one of these newly created trusts, Empire District Electric Trust I, issued 2,000,000 8 1/2% Trust Preferred Securities (liquidation amount $25 per preferred security) in a public underwritten offering. Holders of the trust preferred securities are entitled to receive distributions at an annual rate of 8 1/2% of the $25 liquidation amount. Distributions are payable quarterly and are tax deductible by us. The sole asset of the trust is $51.6 million aggregate principal amount of 8 1/2% Junior Subordinated Debentures due March 1, 2031 issued by us. The terms and interest payments on these debentures correspond to the terms and distributions on the trust preferred securities. We have entered into a limited guarantee of payment of distributions, redemption payments and payments in liquidation with respect to the trust preferred securities. This guarantee, when considered together with our obligations under the related debentures and indenture and the trust agreement governing the trust, provide a full and unconditional guarantee by us of amounts due on the outstanding trust preferred securities. The net proceeds of this offering were added to our general funds and were used to repay short-term indebtedness. We also have an effective shelf registration statement on file with the SEC under which up to an aggregate of $50 million of our common stock, first mortgage bonds and unsecured debt securities remain available for issuance. On November 19, 1999, we issued $100 million aggregate principal amount of our unsecured Senior Notes, the net proceeds of which were added to our general funds and were used to repay short-term indebtedness, including indebtedness incurred in connection with our preferred stock redemption and in connection with our construction program. On April 28, 1998, we sold to the public in an underwritten offering $50 million aggregate principal amount of our First Mortgage Bonds, 6 1/2% Series due 2010. The net proceeds from this sale were added to our general funds and were used to repay $23 million of our First Mortgage Bonds, 5.70% Series due May 1, 1998 and to repay short-term indebtedness, including indebtedness incurred in connection with our construction program. Following announcement of the merger with UtiliCorp, the ratings for our first mortgage bonds (other than the 5.20% Pollution Control Series due 2013 and the 5.30% Pollution Control Series due 2013) were placed on credit watch with downward implication by each of Moody's Investors Service and Standard & Poor's. Standard & Poor's removed the credit watch but kept the downward implication in January 2001 after the merger was terminated. As of December 31, 2000, the ratings for our securities were as follows: Moody's Standard & Poor's First Mortgage Bonds A2 A- First Mortgage Bonds - Aaa AAA Pollution Control Series Senior Notes A3 Not Rated Commercial Paper P-1 A-2 Trust Preferred Securities baa1 BBB
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk. We are exposed to changes in interest rates as a result of significant financing through our issuance of commercial paper. We manage our interest rate exposure by limiting our variable-rate exposure to a certain percentage of total capitalization, as set by policy, and by monitoring the effects of market changes in interest rates. See Notes 6 and 7 of "Notes to Financial Statements" under Item 8 for further information. If market interest rates average 1% more in 2001 than in 2000, our interest expense would increase, and income before taxes would decrease by approximately $700,000. This amount has been determined by considering the impact of the hypothetical interest rates on our commercial paper balances as of December 31, 2000. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. In the event of a significant change in interest rates, management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our financial structure. Commodity Price Risk. We are exposed to the impact of market fluctuations in the price and transportation costs of coal, natural gas, and electricity and employ established policies and procedures to manage the risks associated with these market fluctuations. At this time none of our commodity purchase or sale contracts meet the definition of financial instruments. ITEM 8. FINANCIAL STATEMENTS AND SUPLEMENTARY DATA Report of Independent Accountants To the Board of Directors and Stockholders of The Empire District Electric Company In our opinion, the financial statements listed in the index appearing under Item 14(a)(1) on page 44 present fairly, in all material respects, the financial position of The Empire District Electric Company at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 14(a)(2) on page 44 present fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP St. Louis, Missouri January 31, 2001 Balance Sheet December 31, 2000 1999 Assets Utility plant, at original cost: Electric $ 921,033,228 $ 871,263,673 Water 7,528,233 7,023,246 Construction work in progress 120,126,571 41,712,243 1,048,688,032 919,999,162 Accumulated depreciation 328,370,253 303,951,518 720,317,779 616,047,644 Current assets: Cash and cash equivalents 2,490,580 20,778,856 Accounts receivable - trade, net 19,960,839 17,377,963 Accrued unbilled revenues 11,824,546 6,660,318 Accounts receivable - other 3,631,654 6,726,734 Fuel, materials and supplies 14,589,253 15,978,790 Prepaid expenses 3,034,716 1,129,021 55,531,588 68,651,682 Noncurrent assets and deferred charges: Regulatory assets 36,590,292 37,075,852 Unamortized debt issuance costs 3,769,628 4,175,240 Other 13,530,017 5,458,466 53,889,937 46,709,558 Total Assets $ 829,739,304 $ 731,408,884 Capitalization and Liabilities Common stock, $1 par value, 20,000,000 shares authorized, 17,596,530 and 17,369,855 shares issued and outstanding, respectively $ 17,596,530 $ 17,369,855 Capital in excess of par value 168,439,089 163,909,731 Retained earnings 54,117,292 52,908,432 Total common stockholders' equity 240,152,911 234,188,018 Long-term debt 325,643,766 345,850,169 565,796,677 580,038,187 Current liabilities: Current maturities of long-term debt 20,000,000 - (Note 6) Accounts payable and accrued liabilities 35,782,456 25,232,221 Commercial paper 69,500,000 - Customer deposits 3,789,583 3,686,691 Taxes accrued 1,823,513 - Interest accrued 5,402,131 5,026,356 136,297,683 33,945,268 Commitments and Contingencies (Note 11) Noncurrent liabilities and deferred credits: Regulatory liability 14,170,175 15,295,992 Deferred income taxes 83,581,349 78,913,545 Unamortized investment tax credits 7,231,000 7,811,000 Postretirement benefits other than pensions 4,835,897 4,592,721 State Line advance payments 14,399,757 7,895,241 Other 3,426,766 2,916,930 127,644,944 117,425,429 Total Capitalization and Liabilities $ 829,739,304 $ 731,408,884
The accompanying notes are an integral part of these financial statements. Statement of Income Year ended December 31, 2000 1999 1998 Operating revenues: Electric $ 258,937,329 $ 241,065,202 $ 238,800,831 Water 1,066,129 1,096,338 1,057,460 260,003,458 242,161,540 239,858,291 Operating revenue deductions: Operating expenses: Fuel 48,899,577 45,251,427 41,876,064 Purchased power 65,238,096 44,696,792 47,572,541 Merger related expenses 327,397 5,772,292 - Other 32,570,495 31,833,132 31,972,081 147,035,565 127,553,643 121,420,686 Maintenance and repairs 14,795,210 16,345,268 17,522,871 Depreciation and amortization 27,783,573 26,366,695 24,980,637 Provision for income taxes 11,375,000 15,862,429 16,190,000 Other taxes 13,112,095 13,457,782 12,372,321 214,101,443 199,585,817 192,486,515 Operating income 45,902,015 42,575,723 47,371,776 Other income and deductions: Allowance for equity funds used during construction 2,373,710 56,845 8,938 Interest income 641,602 503,355 263,801 Other - net (660,285) (662,118) (840,557) 2,355,027 (101,918) (567,818) Income before interest $ 48,257,042 $ 42,473,805 $ 46,803,958 charges Interest charges: Long-term debt 26,355,901 19,402,734 17,873,833 Allowance for borrowed funds used during construction (3,401,325) (1,135,776) (400,044) Other 1,685,312 2,036,708 1,006,831 24,639,888 20,303,666 18,480,620 Net income 23,617,154 22,170,139 28,323,338 Preferred stock dividend requirements - 1,403,025 2,411,784 Excess consideration on redemption of preferred stock - 1,304,504 - Net income applicable to $ 23,617,154 $ 19,462,610 $ 25,911,554 common stock Weighted average number of common shares outstanding 17,503,665 17,237,805 16,932,704 Basic and diluted earnings per weighted average share of common stock $ 1.35 $ 1.13 $ 1.53 Dividends per share of common stock $ 1.28 $ 1.28 $ 1.28
The accompanying notes are an integral part of these financial statements. Statement of Common Stockhloder's Equity Year ended December 31, 2000 1999 1998 Common stock, $1 par value: Balance, beginning of year $ 17,369,855 $ 17,108,799 $ 16,776,654 Stock/stock units issued through: Dividend reinvestment and stock purchase plan 185,622 223,910 259,267 Employee benefit plans 41,053 37,146 72,878 Balance, end of year $ 17,596,530 $ 17,369,855 $ 17,108,799 Capital in excess of par value: Balance, beginning of year $ 163,909,731 $ 156,975,596 $ 150,784,239 Excess of net proceeds over par value of stock issued: Stock plans 4,529,358 6,934,135 6,191,357 Balance, end of year $ 168,439,089 $ 163,909,731 $ 156,975,596 Retained earnings: Balance, beginning of year $ 52,908,432 $ 55,706,779 $ 51,472,897 Net income 23,617,154 22,170,139 28,323,338 76,525,586 77,876,918 79,796,235 Less dividends declared: 8 1/8% preferred stock - 1,349,474 2,027,390 5% preferred stock - 124,642 195,090 4 3/4% preferred stock - 126,094 190,000 Common stock 22,408,294 22,063,772 21,676,976 22,408,294 23,663,982 24,089,456 Less: excess consideration on redemption of preferred stock - 1,304,504 - Balance, end of year $ 54,117,292 $ 52,908,432 $ 55,706,779
The accompanying notes are an integral part of these financial statements. Statement of Cash Flows Year ended December 31, 2000 1999 1998 Operating activities Net income $ 23,617,154 $ 22,170,139 $ 28,323,338 Adjustments to reconcile net income to cash flows: Depreciation and amortization 31,240,530 29,672,416 28,323,595 Pension income (7,780,497) (4,325,229) (2,239,850) Deferred income taxes, net 2,053,000 4,480,000 3,390,000 Investment tax credit, net (580,000) (580,000) (580,000) Allowance for equity funds used during construction (2,373,710) (56,845) (8,938) Issuance of common stock for 401(k) plan 760,405 753,203 702,801 Issuance of common stock units for director retirement plan 84,000 84,000 711,000 Other - - 66,955 Cash flows impacted by changes in: Accounts receivable and accrued unbilled revenues (4,652,024) (9,309,949) (584,001) Fuel, materials and supplies 1,389,537 (274,112) (2,489,610) Prepaid expenses and deferred charges 1,427,249) (3,050,794) 2,431,806 Accounts payable and accrued liabilities 10,550,235 8,135,949 2,233,691 Customer deposits, interest and taxes accrued 2,302,180 971,596 84,941 Other liabilities and other deferred credits 753,012 434,255 (1,883,100) Net cash provided by operating activities 55,936,573 49,104,629 58,482,628 Investing activities Construction expenditures (133,933,927) (71,935,978) (51,917,153) Allowance for equity funds used during construction 2,373,710 56,845 8,938 Net cash used in investing activities (131,560,217) (71,879,133) (51,908,215) Financing activities Proceeds from issuance of first mortgage bonds $ - $ - $ 49,672,000 Proceeds from issuance of senior notes - 99,818,000 - Proceeds from issuance of common stock 3,911,628 6,357,989 5,109,701 Redemption of preferred stock - (32,634,263) - Reacquired preferred stock - - (267,537) Excess consideration on redemption of preferred stock - (1,304,504) - Dividends (22,408,294) (23,663,982) (24,089,456) Repayment of first mortgage bonds (286,000) (110,000) (23,000,000) Net proceeds (repayments) from short-term borrowings 69,500,000 (14,500,000) (13,500,000) Payment of debt issue costs 113,518 (797,837) (551,687) State line advance payments 6,504,516 7,895,241 - Net cash provided by/(used in) financing activities 57,335,368 41,060,644 (6,626,979) Net (decrease) increase in cash and cash equivalents (18,288,276) 18,286,140 (52,566) Cash and cash equivalents, beginning of year 20,778,856 2,492,716 2,545,282 Cash and cash equivalents, end of year $ 2,490,580 $ 20,778,856 $ 2,492,716
Cash and cash equivalents include cash on hand and temporary investments purchased with an initial maturity of three months or less. Interest paid was $26,485,000, $19,301,000, $17,439,000, for the years ended December 31, 2000, 1999 and 1998, respectively. Income taxes paid were $8,801,000, $12,221,000 and $14,088,000 for the years ended December 31, 2000, 1999 and 1998, respectively. The accompanying notes are an integral part of these financial statements. 1. Summary of Accounting Policies The Company is subject to regulation by the Missouri Public Service Commission (MoPSC), the State Corporation Commission of the State of Kansas (KCC), the Corporation Commission of Oklahoma (OCC), the Arkansas Public Service Commission (APSC) and the Federal Energy Regulatory Commission (FERC). The accounting policies of the Company are in accordance with the rate-making practices of the regulatory authorities and, as such, conform to generally accepted accounting principles as applied to regulated public utilities. The Company's electric revenues in 2000 were derived as follows: residential 42%, commercial 30%, industrial 16%, wholesale 8% and other 4%. Following is a description of the Company's significant accounting policies: Property and Plant The costs of additions to property and plant and replacements for retired property units are capitalized. Costs include labor, material and an allocation of general and administrative costs plus an allowance for funds used during construction. Maintenance expenditures and the renewal of items not considered units of property are charged to income as incurred. The cost of units retired is charged to accumulated depreciation, which is credited with salvage and charged with removal costs. Depreciation Provisions for depreciation are computed at straight-line rates as approved by regulatory authorities. Such provisions approximated 3.2%, 3.2% and 3.2% of depreciable property for 2000, 1999 and 1998, respectively. Depreciation expense for the years ended December 31, 2000, 1999 and 1998 was $29,664,000, $28,135,000 and $26,655,000, respectively Computations of Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding plus the incremental shares that would have been outstanding under the assumed exercise of dilutive stock options and their equivalents. The weighted average number of common shares outstanding used to compute basic earnings per share for the 2000, 1999 and 1998 periods was 17,503,665, 17,237,805 and 16,932,704, respectively. Dilutive stock options for the 2000, 1999 and 1998 periods were 7,105, 5,290 and 7,775, respectively. Allowance for Funds Used During Construction As provided in the regulatory Uniform System of Accounts, utility plant is recorded at original cost, including an allowance for funds used during construction (AFUDC) when first placed in service. The AFUDC is a utility industry accounting practice whereby the cost of borrowed funds and the cost of equity funds (preferred and common stockholders' equity) applicable to the Company's construction program are capitalized as a cost of construction. This accounting practice offsets the effect on earnings of the cost of financing current construction, and treats such financing costs in the same manner as construction charges for labor and materials. AFUDC does not represent current cash income. Recognition of this item as a cost of utility plant is in accordance with regulatory rate practice under which such plant costs are permitted as a component of rate base and the provision for depreciation. In accordance with the methodology prescribed by FERC, the Company utilized aggregate rates of 8.4% for 2000, 5.4% for 1999 and 5.9% for 1998 (on a before-tax basis) compounded semiannually. Income Taxes Deferred tax assets and liabilities are recognized for the tax consequences of transactions that have been treated differently for financial reporting and tax return purposes, measured using statutory tax rates. Investment tax credits utilized in prior years were deferred and are being amortized over the useful lives of the properties to which they relate. Unamortized Debt Discount, Premium and Expense Discount, premium and expense associated with long-term debt are amortized over the lives of the related issues. Costs, including gains and losses, related to refunded long-term debt are amortized over the lives of the related new debt issues. Accrued Unbilled Revenue The Company accrues estimated, but unbilled, revenue and also a liability for the related taxes. Accumulated Provision for Uncollectible Accounts The accumulated provision for uncollectible accounts was $964,000 at December 31, 2000 and $372,000 at December 31, 1999. Franchise Taxes Franchise taxes are collected for and remitted to their respective cities. Operating revenues include franchise taxes of $4,560,000, $4,400,000, and $4,400,000 for each of the years ended December 31, 2000, 1999 and 1998, respectively. Liability Insurance The Company carries excess liability insurance for workers' compensation and public liability claims. In order to provide for the cost of losses not covered by insurance, an allowance for injuries and damages is maintained based on loss experience of the Company. State Line Advance Payments The Company is currently receiving advance payments from Westar Generating, Inc. (WGI) for WGI's share of the existing State Line facility (See Note 10). Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the period. Actual amounts could differ from those estimates. 2. Merger Agreement The Company and UtiliCorp United, Inc., a Delaware corporation ("UtiliCorp"), entered into an Agreement and Plan of Merger, dated as of May 10, 1999 (the "Merger Agreement"), which provided for a merger of the Company with and into UtiliCorp, with UtiliCorp being the surviving corporation (the "Merger"). The Merger was unanimously approved by the Boards of Directors of the constituent companies. The Merger Agreement required the Company to redeem all of its outstanding preferred stock according to its terms prior to the closing. On August 2, 1999, the Company redeemed all of its outstanding preferred stock for approximately $34,200,000. The Company called a special meeting of stockholders on September 3, 1999, for the purpose of voting on the proposed merger with UtiliCorp. The merger proposal passed with 76.3% of the Company's outstanding shares being voted in favor of the proposal. Under the terms of the Merger Agreement, either company could terminate the Merger Agreement without penalty if all regulatory approvals were not obtained prior to December 31, 2000. On January 2, 2001, UtiliCorp exercised its right to terminate the Merger Agreement based on the aforementioned clause. Upon termination of the merger, approximately $6.1 million of merger related costs that had not been deductible for income tax purposes became deductible. As a result, the Company will recognize a tax benefit of approximately $2.3 million in the first quarter of 2001. The stockholder approval of the merger effected a change in control under the Company's Change in Control Severance Pay Plan (the "Plan"). Certain key employees became eligible to receive compensation as specified under the terms of the Plan. The termination of the Merger did not relieve the Company of its obligation under the Plan. As of December 31, 2000, the Company had incurred approximately $194,000 of obligations to individuals electing voluntary termination under the Plan. Subsequent to that date, the Company incurred approximately $1,154,000 in additional obligations under the Plan. 3. Regulatory Matters During the three years ending December 31, 2000, the following rate changes were requested or in effect: Arkansas On February 19, 1998, the Company filed a request with the APSC to increase rates in Arkansas by $618,000 annually. An agreement was reached to stipulate an increase of $359,000 on June 16, 1998, and the Company received an order from the Arkansas Commission on July 21, 1998 approving the stipulated rate increase. Missouri On November 3, 2000, the Company filed a request with the MoPSC to increase rates in Missouri by approximately $41,500,000 annually. The request is currently under review by the MoPSC. Effects of Regulation In accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71), the Company's financial statements reflect ratemaking policies prescribed by the regulatory commissions having jurisdiction over the Company (the MoPSC, the KCC, the OCC, the APSC and the FERC). Certain expenses and credits, normally reflected in income as incurred, are recognized when included in rates and recovered from or refunded to customers. As such, the Company has recorded certain regulatory assets which are expected to result in future revenues as these costs are recovered through the ratemaking process. Historically, all costs of this nature which are determined by the Company's regulators to have been prudently incurred have been recoverable through rates in the course of normal ratemaking procedures and the Company believes that the items detailed below will be afforded similar treatment. The Company recorded the following regulatory assets and regulatory liability which are being amortized over periods of up to 25 years: December 31, 2000 1999 Regulatory Assets Income taxes $ 25,724,995 $ 24,236,008 Unamortized loss on reacquired debt 8,270,284 8,811,488 Coal contract restructuring costs 1,383,848 1,882,941 Gas supply realignment costs 559,370 829,773 Asbury five year maintenance 263,105 894,567 Other postretirement benefits 388,690 421,075 Total Regulatory Assets $ 36,590,292 $ 37,075,852 Regulatory Liability Income taxes $ 14,170,175 $ 15,295,992
The Company continually assesses the recoverability of its regulatory assets. Under current accounting standards, regulatory assets and liabilities are eliminated through a charge or credit, respectively, to earnings if and when it is no longer probable that such amounts will be recovered through future revenues. Deregulation If and when retail electric competition legislation is passed in the states the Company serves, the Company may determine that it no longer meets the criteria set forth in SFAS 71 with respect to continued recognition of some or all of the regulatory assets and liabilities. Any regulatory changes that would require the Company to discontinue application of SFAS 71 based upon competitive or other events may also impact the valuation of certain utility plant investments. Impairment of regulatory assets or utility plant investments could have a material adverse effect on the Company's financial condition and results of operations. In Missouri, the Public Service Commission adopted an order in 1997 establishing a docket and creating a task force on retail electric competition. No legislative action has yet been taken and none is expected during 2001. In Kansas, although different bills have been introduced into the House and Senate, no legislative action has been taken. In Oklahoma, the Electric Restructuring Act of 1997 was passed by the Legislature and signed into law by the Governor. The bill, with a target date of July 1, 2002, was designed to provide for the orderly restructuring of the electric utility industry in the state and move the state toward open competition for electric generation. None of the Company's plant investment or regulatory assets were considered impaired as a result of the bill. The Arkansas Legislature passed a bill in April 1999 that would deregulate the state's electricity industry as early as January 2002. The bill would freeze rates for three years for residential and small business customers of utilities that seek to recover stranded costs, and freeze rates for one year for residential and small business customers of utilities, such as the Company, that do not seek to recover stranded costs. The Staff of the Arkansas Public Service Commission filed testimony in October 2000 recommending that the Commission encourage the legislature to extend the date for retail open access beyond the current legal deadline of June 30, 2003. A bill supported by legislative leaders and the governor was introduced in January 2001. The bill was enacted in February 2001 and will delay deregulation until October 2003 and give the Commission authority to set further delays in one-year increments until October 2005. Approximately 2.93% of the Company's retail electric revenue for 2000 was derived from sales subject to Arkansas regulation. 4. Common Stock On August 1, 1998, the Company implemented a new stock unit plan for directors (the Director Retirement Plan) to provide directors the opportunity to accumulate retirement benefits in the form of common stock units in lieu of cash which was how benefits accumulated under the previous cash retirement plan for directors. The new Director Retirement Plan also provided directors the opportunity to convert previously earned cash retirement benefits to common stock units. 100,000 shares are authorized under this new plan. Each common stock unit earns dividends in the form of common stock units and can be redeemed for one share of common stock upon retirement by the director. The number of units granted annually is computed by dividing the director's retainer fee by the fair market value of the Company's common stock on January 1 of the year the units are granted. Common stock unit dividends are computed based on the fair market value of the Company's stock on the dividend's record date. During 2000, 3,759 units were granted under the Director Retirement Plan for services provided in 2000 and 2,469 units were granted pursuant to the reinvestment plan described below. The Company's Dividend Reinvestment and Stock Purchase Plan (the Reinvestment Plan), which was terminated effective October 1, 2000, allowed common and preferred stockholders to reinvest dividends paid by the Company into newly issued shares of the Company's common stock at 95% of the market price average. Stockholders were also allowed to purchase, for cash and within specified limits, additional stock at 100% of the market price average. Participants in the Reinvestment Plan did not pay commissions or service charges in connection with purchases under the Reinvestment Plan. The Company is in the process of instituting a similar plan during fiscal 2001. The Company's Employee Stock Purchase Plan, which terminates on May 31, 2003, permits the grant to eligible employees of options to purchase common stock at 90% of the lower of market value at date of grant or at date of exercise. Contingent employee stock purchase subscriptions outstanding and the maximum prices per share were 40,880 shares at $21.83, 63,985 shares at $23.35, 50,368 shares at $18.34 on December 31, 2000, 1999 and 1998, respectively. Shares were issued at $21.26 per share in 2000, $18.34 per share in 1999, and $15.53 per share in 1998. The Company's 1996 Incentive Plan (the Stock Incentive Plan) provides for the grant of up to 650,000 shares of common stock through January 2006. The terms and conditions of any option or stock grant are determined by the Board of Directors' Compensation Committee, within the provisions of the Stock Incentive Plan. The Stock Incentive Plan permits grants of stock options and restricted stock to qualified employees and permits Directors to receive common stock in lieu of cash compensation for service as a Director. During February 2000, February 1999 and January 1998, grants for 2,160, 1,144, and 1,535 shares, respectively, of restricted stock were made to qualified employees under the Stock Incentive Plan. For grants made to date, the restrictions typically lapse and the shares are issuable to employees who continue service with the Company three years from the date of grant. For employees whose service is terminated by death, retirement, disability, or under certain circumstances following a change in control of the Company prior to the restrictions lapsing, the shares are issuable immediately. For other terminations, the grant is forfeited. During 2000, 1999 and 1998, 3,368, 3,300 and 2,641 shares, respectively, were issued under the Stock Incentive Plan. No options have been granted under the Stock Incentive Plan. In 1996, the Company adopted the disclosure-only method under SFAS 123, "Accounting for Stock- Based Compensation." If the fair value based accounting method under this statement had been used to account for stock-based compensation costs, the effect on 2000, 1999 and 1998 net income and earnings per share would have been immaterial. The Company's Employee 401(k) Retirement Plan (the 401(k) Plan) allows participating employees to defer up to 15% of their annual compensation up to a specified limit. The Company matches 50% of each employee's deferrals by contributing shares of the Company's common stock, such matching contributions not to exceed 3% of the employee's annual compensation. The Company contributed 33,926, 30,404 and 33,274 shares of common stock in 2000, 1999 and 1998, respectively, valued at market prices on the dates of contributions. The stock issuances to effect the contributions were not cash transactions and are not reflected as a source of cash in the Statement of Cash Flows. At December 31, 2000, 1,073,616 shares remain available for issuance under the foregoing plans. 5. Preferred Stock The Company has 2,500,000 shares of preference stock authorized, including 500,000 shares of Series A Participating Preference Stock, none of which have been issued. The Company has 5,000,000 shares of $10.00 par value cumulative preferred stock authorized. There was no preferred stock issued and outstanding at December 31, 2000 or 1999. On August 2, 1999 the Company redeemed all outstanding 5%, 4_%, and 81/8% series of cumulative preferred stock. Holders were paid the following amounts per share plus accumulated and unpaid dividends: 5% cumulative - $10.50 (aggregate amount $4,009,110); 4_% cumulative - $10.20 (aggregate amount $4,080,000); and 81/8 cumulative - $10 (aggregate amount $24,809,980). On February 8, 2001, the Company filed a registration statement with the Securities and Exchange Commission allowing the Company to sell $80,000,000 of preferred securities, including $30,000,000 of unsold securities previously registered under a separate registration statement. Preference Stock Purchase Rights On April 27, 2000, the Board of Directors approved a new shareholder rights plan to replace the existing shareholder rights plan which expired on July 25, 2000. The new shareholder rights plan provides each of the common stockholders one Preference Stock Purchase Right ("Right") for each share of common stock owned as compared to one-half of one right per common share under the prior shareholder rights plan. Each Right enables the holder to acquire one one-hundredth of a share of Series A Participating Preference Stock (or, under certain circumstances, other securities) at a price of $75 per one one-hundredth share, subject to adjustment. The Rights (other than those held by an acquiring person or group (Acquiring Person)), which expire July 25, 2010, will be exercisable only if an Acquiring Person acquires 10% or more of the Company's common stock or if certain other events occur. The Rights may be redeemed by the Company in whole, but not in part, for $0.01 per Right, prior to 10 days after the first public announcement of the acquisition of 10% or more of the Company's common stock by an Acquiring Person. The Company had 17,544,600 and 8,663,648 Preference Stock Purchase Rights (Rights) outstanding at December 31, 2000 and 1999, respectively. In addition, upon the occurrence of a merger or other business combination, or an event of the type described in the preceding paragraph, holders of the Rights, other than an Acquiring Person, will be entitled, upon exercise of a Right, to receive either common stock of the Company or common stock of the Acquiring Person having a value equal to two times the exercise price of the Right. Any time after an Acquiring Person acquires 10% or more (but less than 50%) of the Company's outstanding common stock, the Board of Directors may, at its option, exchange part or all of the Rights (other than Rights held by the Acquiring Person) for common stock of the Company on a one-for-one basis. 6. Long-Term Debt The principal amount of all series of first mortgage bonds outstanding at any one time is limited by terms of the mortgage to $1,000,000,000. Substantially all property, plant and equipment is subject to the lien of the mortgage. At December 31, 2000 and 1999 the long-term debt outstanding was as follows: 2000 1999 First mortgage bonds: 7 1/2% Series due 2002 $ 37,500,000 $ 37,500,000 7.60% Series due 2005 10,000,000 10,000,000 81/8% Series due 2009 (1) 20,000,000 20,000,000 6 1/2% Series due 2010 50,000,000 50,000,000 7.20% Series due 2016 25,000,000 25,000,000 9 3/4% Series due 2020 2,250,000 2,250,000 7% Series due 2023 45,000,000 45,000,000 7 3/4% Series due 2025 30,000,000 30,000,000 7 1/4% Series due 2028 13,330,000 13,616,000 5.3% Pollution Control Series due 2013 8,000,000 8,000,000 5.2% Pollution Control Series due 2013 5,200,000 5,200,000 246,280,000 246,566,000 Senior Notes, 7.70% Series due 2004 100,000,000 100,000,000 Less unamortized net discount (636,234) (715,831) Less current maturities of long-term debt (20,000,000) - $ 325,643,766 $ 345,850,169 (1) Holders of this series have the right to require the Company to repurchase all or any portion of the bonds at a price of 100% of the principal amount plus accrued interest, if any, on November 1, 2001. Holders must apply for this redemption during the period September 1, 2001 to October 1, 2001. The carrying amount of the Company's long-term debt was $345,643,766 and $345,850,169 at December 31, 2000 and 1999, respectively, and its fair market value was estimated to be approximately $333,748,477 and $329,118,000, respectively. This estimate was based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturation. The estimated fair market value may not represent the actual value that could have been realized as of year-end or that will be realizable in the future. At December 31, 2000, the Company had a $50,000,000 unsecured line of credit. Borrowings are at the higher of the bank's prime commercial rate or 50 basis points above the Federal overnight Fed Funds rate and are due 370 days from the date of each loan, not to exceed June 27, 2001, the final credit expiration date. The Company also had a $25,000,000 unsecured line of credit at December 31, 2000, bearing interest based on the bank's prime commercial rate. This unsecured line of credit expires on July 31, 2001. These arrangements do not serve to legally restrict the use of the Company's cash. The lines of credit are also utilized to support the Company's issuance of commercial paper although they are not assigned specifically to such support. There were no outstanding borrowings under these agreements at December 31, 2000 or 1999. On November 18, 1999, the Company sold to the public in an underwritten offering $100 million aggregate principal amount of its Senior Notes, 7.70% Series due 2004. The net proceeds of this sale were added to the Company's general funds and were used to repay short-term indebtedness, including indebtedness incurred in connection with the redemption of the Company's preferred stock and the Company's construction program. On April 28, 1998, the Company sold to the public in an underwritten offering $50 million aggregate principal amount of its First Mortgage Bonds, 6.50% Series due 2010. The net proceeds from this sale were added to the Company's general funds and were used to repay $23 million of the Company's First Mortgage Bonds, 5.70% Series due May 1, 1999 and to repay short-term indebtedness, including indebtedness incurred in connection with the Company's construction program. 7. Short-term Borrowings Short-term commercial paper outstanding and notes payable averaged $17,846,995 and $30,796,000 daily during 2000 and 1999, respectively, with the highest month-end balances being $69,500,000 and $65,000,000, respectively. The weighted daily average interest rates during 2000, 1999 and 1998 were 7.0%, 5.4% and 5.9%, respectively. The weighted average interest rates of borrowings outstanding at December 31, 2000 and 1999 were, 7.77% and 6.12%, respectively. 8. Retirement Benefits Pensions In 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The Company's noncontributory defined benefit pension plan includes all employees meeting minimum age and service requirements. The benefits are based on years of service and the employee's average annual basic earnings. Annual contributions to the plan are at least equal to the minimum funding requirements of ERISA. Plan assets consist of common stocks, United States government obligations, federal agency bonds, corporate bonds and commingled trust funds. The following table sets forth the plan's projected benefit obligation, the fair value of the plan's assets and its funded status: 2000 1999 1998 Benefit obligation at beginning of year $ 72,288,124 $ 77,285,598 $ 78,360,097 Service cost 2,182,798 2,516,067 2,400,303 Interest cost 5,579,276 5,368,097 5,046,012 Amendments - 1,744,656 - Actuarial (gain)/loss (250,025) (10,076,097) (4,065,095) Benefits paid (4,582,209) (4,550,197) (4,455,719) Benefit obligation at end of year $ 75,217,964 $ 72,288,124 $ 77,285,598 2000 1999 1998 Fair value of plan assets at beginning of year $ 104,485,842 $ 93,153,901 $ 82,106,242 Actual return on plan assets (1,005,567) 15,882,138 15,503,378 Benefits paid (4,582,209) (4,550,197) (4,455,719) Fair value of plan assets at end of year $ 98,898,066 $ 104,485,842 $ 93,153,901 Funded status $ 23,680,102 $ 32,197,718 $ 15,868,303 Unrecognized net assets at January 1, 1986 being amortized over 17 years (982,313) (1,473,468) (1,964,623) Unrecognized prior service cost 4,266,641 4,786,072 3,560,847 Unrecognized net gain (15,357,002) (31,683,391) (18,028,407) Prepaid/(accrued) pension cost $ 11,607,428 $ 3,826,931 $ (563,880) Assumptions used in calculating the projected benefit obligation for 2000 and 1999 include the following: 2000 1999 1998 Weighted average discount rate 7.75% 8.00% 7.00% Rate of increase in compensation levels 5.00% 5.50% 5.50% Expected long-term rate of return on plan assets 9.00% 9.00% 9.00% Net pension benefit for 2000, 1999 and 1998 is comprised of the following components: 2000 1999 1998 Service cost - benefits earned during the period $ 2,182,798 $ 2,516,067 $ 2,400,303 Interest cost on projected benefit obligation 5,579,276 5,368,097 5,046,012 Expected return on plan assets (9,181,211) (8,323,982) (7,173,641) Net amortization and deferral (6,361,360) (3,950,993) (2,512,524) Net pension benefit $ (7,780,497) $ (4,390,811) $ (2,239,850) Other Postretirement Benefits The Company provides certain healthcare and life insurance benefits to eligible retired employees, their dependents and survivors. Participants generally become eligible for retiree healthcare benefits after reaching age 55 with 5 years of service. Effective January 1, 1993, the Company adopted SFAS 106, which requires recognition of these benefits on an accrual basis during the active service period of the employees. The Company elected to amortize its transition obligation (approximately $21,700,000) related to SFAS 106 over a twenty year period. Prior to adoption of SFAS 106, the Company recognized the cost of such postretirement benefits on a pay-as-you-go (i.e., cash) basis. The states of Missouri, Kansas, Oklahoma, and Arkansas authorize the recovery of SFAS 106 costs through rates. In accordance with the above rate orders, the Company established two separate trusts in 1994, one for those retirees who were subject to a collectively bargained agreement and the other for all other retirees, to fund retiree healthcare and life insurance benefits. The Company's funding policy is to contribute annually an amount at least equal to the revenues collected for the amount of postretirement benefits costs allowed in rates. Assets in these trusts amounted to approximately $16,100,000 at December 31, 2000, $10,600,000 at December 31, 1999 and $6,800,000 at December 31, 1998. Postretirement benefits, a portion of which have been capitalized and/or deferred, for 2000, 1999 and 1998 included the following components: 2000 1999 1998 Service cost on benefits earned during the year $ 931,469 $ 781,017 $ 558,983 Interest cost on projected benefit obligation 3,142,872 2,281,028 1,593,181 Return on assets (1,007,118) (618,353) (375,581) Amortization of unrecognized transition obligation 1,084,017 1,084,017 1,084,017 Unrecognized net (gain)/loss 1,990,806 1,207,628 (720,744) Net periodic postretirement benefit cost $ 6,142,045 $ 4,735,337 $ 2,139,856 The estimated funded status of the Company's obligations under SFAS 106 at December 31, 2000, 1999 and 1998 using a weighted average discount rate of 7.75%, 8.0% and 7.0%, respectively, is as follows: 2000 1999 1998 Benefit obligation at beginning of year $ 28,669,028 $ 24,580,797 $ 23,978,240 Service cost 931,469 781,017 558,983 Interest cost 3,142,872 2,281,028 1,593,181 Actuarial (gain)/loss 5,908,539 2,227,896 (353,055) Benefits paid (1,400,654) (1,201,710) (1,196,552) Benefit obligation at end of year $ 37,251,254 $ 28,669,028 $ 24,580,797 Fair value of plan assets at beginning of year $ 10,552,442 $ 6,803,302 $ 5,691,142 Employer contributions 5,735,695 4,604,982 2,102,087 Actual return on plan assets 1,168,343 345,870 206,625 Benefits paid (1,400,654) (1,201,710) (1,196,552) Fair value of plan assets at end of year $ 16,055,828 $ 10,552,444 $ 6,803,302 Funded Status $(21,195,426) $(18,116,584) $(17,777,495) Unrecognized transition obligation 13,008,191 14,092,208 15,176,225 Unrecognized net gain 3,262,230 (494,279) (1,787,030) Accrued postretirement benefit cost $ (4,925,005) $(4,518,655) $ (4,388,300) The assumed 2001 cost trend rate used to measure the expected cost of healthcare benefits is 9%. The trend rate decreases through 2003 to an ultimate rate of 6% for 2004 and subsequent years. The effect of a 1% increase in each future year's assumed healthcare cost trend rate would increase the current service and interest cost from $4,100,000 to $5,000,000 and the accumulated postretirement benefit obligation from $37,300,000 to $44,400,000. 9. Income Taxes The provision for income taxes is different from the amount of income tax determined by applying the statutory income tax rate to income before income taxes as a result of the following differences: 2000 1999 1998 Computed "expected" federal provision $ 12,290,000 $ 13,360,000 $ 15,480,000 State taxes, net of federal effect 1,090,000 1,180,000 1,370,000 Adjustment to taxes resulting from: Nondeductible merger costs 120,000 2,200,000 - Investment tax credit amortization (580,000) (580,000) (580,000) Other (1,420,000) (160,000) (370,000) Actual provision $ 11,500,000 $ 16,000,000 $ 15,900,000 Income tax expense components for the years shown are as follows: 2000 1999 1998 Taxes currently payable Included in operating revenue deductions: Federal $ 8,852,000 $ 10,761,000 $ 12,110,000 State 1,203,000 1,329,000 1,430,000 Included in "other - net" (28,000) 10,000 (450,000) 10,027,000 12,100,000 13,090,000 Deferred taxes Depreciation and amortization differences 2,136,000 2,991,800 3,077,000 Loss on reacquired debt (206,000) (206,000) (213,000) Postretirement benefits 1,408,000 928,000 528,000 Other (1,158,000) (118,371) (454,000) Asbury five-year maintenance (241,000) (241,000) (241,000) Software development costs (39,000) 998,000 533,000 Included in "other-net" 153,000 127,571 160,000 Deferred investment tax credits, net (580,000) (580,000) (580,000) Total income tax expense $ 11,500,000 $ 16,000,000 $ 15,900,000 Under SFAS 109, temporary differences gave rise to deferred tax assets and deferred tax liabilities at year end 2000 and 1999 as follows: Balances as of December 31, 2000 1999 Deferred Tax Deferred Tax Deferred Tax Deferred Tax Assets Liabilities Assets Liabilities Noncurrent Depreciation and other property related $ 10,661,065 $ 94,692,058 $ 10,630,457 $ 91,009,149 Unamortized investment tax credits 4,545,873 - 4,910,498 - Miscellaneous book/tax recognition differences 2,548,908 6,645,137 3,561,786 7,007,137 Total deferred taxes $ 17,755,846 $101,337,195 $ 19,102,741 $ 98,016,286 10. Commonly Owned Facilities The Company owns a 12% undivided interest in the Iatan Power Plant, a coal-fired 670 megawatt generating unit near Weston, Missouri. The Company is entitled to 12% of the available capacity and is obligated for that percentage of costs which are included in corresponding operating expense classifications in the Statement of Income. At December 31, 2000 and 1999, the Company's property, plant and equipment accounts include the cost of its ownership interest in the unit of $45,455,000 and $44,656,000, respectively, and accumulated depreciation of $30,089,000 and $28,689,000, respectively. On July 26, 1999, the Company and Westar Generating, Inc. ("WGI"), a subsidiary of Western Resources, Inc., entered into agreements for the construction, ownership and operation of a 500-megawatt combined cycle unit at the State Line Power Plant (the "State Line Combined Cycle Unit"). Work has begun and the State Line Combined Cycle Unit is projected to be operational by June 2001. The Company will own an undivided 60% interest in the State Line Combined Cycle Unit with WGI owning the remainder. The Company is entitled to 60% of the capacity of the State Line Combined Cycle Unit. The Company will contribute its existing 152- megawatt State Line Unit No. 2 combustion turbine to the State Line Combined Cycle Unit, and as a result, upon commercial operation, the State Line Combined Cycle Unit will provide the Company with approximately 150 megawatts of additional capacity. The total cost of the State Line Combined Cycle Unit is estimated to be $204,000,000. The Company's share of this amount, after the transfer to WGI of an undivided 40% joint ownership interest in the existing State Line Unit No. 2 and certain other property at book value, is expected to be approximately $122,400,000. The Company and WGI are responsible for their own financing of the project and the Company is billing WGI for its share of monthly construction costs as well as advance payments for WGI's share of the existing State Line Unit No. 2 combustion turbine. 11. Commitments and Contingencies The Company is a party to various claims and legal proceedings arising out of the normal course of its business. In the opinion of management, the ultimate outcome of these claims and lawsuits will not have a material adverse affect upon the financial condition or results of operations of the Company. The Company's 2001 construction budget, including AFUDC, is $63,334,000. The Company's three-year construction program for 2001 through 2003, including AFUDC, is estimated to be approximately $144,778,000. The Company has entered into long-term agreements to purchase capacity and energy, to obtain supplies of coal and to provide natural gas transportation. Under such contracts, the Company incurred purchased power and fuel costs of approximately $52,000,000, $50,000,000 and $64,000,000 in 2000, 1999 and 1998, respectively. Certain of these contracts provide for minimum and maximum annual amounts to be purchased and further provide, in part, for cash settlements to be made when minimum amounts are not purchased. In the event that no purchases of coal, energy and transportation services are made, an event considered unlikely by management, minimum annual cash settlements would approximate $35,000,000 in 2001, $29,000,000 in 2002, $28,000,000 in 2003 and 27,000,000 in 2004 and reducing to lesser amounts thereafter through 2012. 12. Selected Quarterly Information (Unaudited) A summary of operations for the quarterly periods of 2000 and 1999 is as follows: Quarters First Second Third Fourth (dollars in thousands except per share amounts) 2000: Operating revenues $ 54,030 $ 57,428 $ 86,223 $ 62,322 Operating income 8,033 9,314 19,672 8,853 Net income 2,371 3,583 14,332 3,330 Net income applicable 2,371 3,583 14,332 3,330 to common stock Basic and diluted earnings per average share of $ .14 $ .21 $ .82 $ .19 common stock Quarters First Second Third Fourth (dollars in thousands except per share amounts) 1999: Operating revenues $ 54,742 $ 53,309 $ 81,460 $ 52,650 Operating income 10,004 5,022 17,995 9,556 Net income 5,238 302 13,004 3,626 Net income applicable to common stock 4,639 (295) 11,493 3,626 Basic and diluted earnings per average share of common stock $ .27 $ (.02) $ .66 $ .21 The sum of the quarterly earnings per average share of common stock may not equal the earnings per average share of common stock as computed on an annual basis due to rounding. 13. Recently Issued Accounting Standards On June 15, 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FAS 133 will not have a significant effect on the Company's results of operations or its financial position. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item with respect to directors and directorships and with respect to Section 16(a) Beneficial Ownership Reporting Compliance may be found in our proxy statement for our Annual Meeting of Stockholders to be held April 25, 2001, which is incorporated herein by reference. Pursuant to instruction 3 of paragraph (b) of Item 401 of Regulation S-K, the information required by this Item with respect to executive officers is set forth in Item 1 of Part I of this Form 10-K under "Executive Officers and Other Officers of Empire." ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation may be found in our proxy statement for our Annual Meeting of Stockholders to be held April 25, 2001, which is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding the number of shares of our equity securities beneficially owned by our directors and certain executive officers and by the directors and executive officers as a group may be found in our proxy statement for our Annual Meeting of Stockholders to be held April 25, 2001, which is incorporated herein by reference. To our knowledge, no person is the beneficial owner of 5% or more of any class of our voting securities, and there are no arrangements the operation of which may at a subsequent date result in a change in control of Empire. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item with respect to certain relationships and related transactions may be found in our proxy statement for our Annual Meeting of Stockholders to be held April 25, 2001, which is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8- K Index to Financial Statements and Financial Statement Schedule Covered by Report of Independent Auditors Balance sheets at December 31, 2000 and 1999 24 Statements of income for each of the three years in the period 25 ended December 31, 2000 Statements of common stockholders' equity for each of the three years in the period ended December 31, 2000 26 Statements of cash flows for each of the three years in the 27 period ended December 31, 2000 Notes to financial statements 28 Schedule for the years ended December 31, 2000, 1999 and 1998: Schedule II - Valuation and qualifying accounts 47 All other schedules are omitted as the required information is either not present, is not present in sufficient amounts, or the information required therein is included in the financial statements or notes thereto. List of Exhibits (3) (a) - The Restated Articles of Incorporation of Empire ) (Incorporated by reference to Exhibit 4(a) to Registration Statement No. 33-54539 on Form S-3). (b) - By-laws of Empire as amended January 23, 1992 (Incorporated by reference to Exhibit 3(f) to Annual Report Form 10-K for year ended December 31, 1991, File No. 1-3368). (4) (a) - Indenture of Mortgage and Deed of Trust dated as of September 1, 1944 and First Supplemental Indenture thereto among Empire, The Bank of New York and State Street Bank and Trust Company of Missouri, N.A. (Incorporated by reference to Exhibits B(1) and B(2) to Form 10, File No. 1- 3368). (b) - Third Supplemental Indenture to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 2(c) to Form S-7, File No. 2-59924). (c) - Sixth through Eighth Supplemental Indentures to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 2(c) to Form S-7, File No. 2-59924). (d) - Fourteenth Supplemental Indenture to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4(f) to Form S-3, File No. 33-56635). (e) - Seventeenth Supplemental Indenture dated as of December 1, 1990 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4(j) to Annual Report on Form 10-K for year ended December 31, 1990, File No. 1- 3368). (f) - Eighteenth Supplemental Indenture dated as of July 1, 1992 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4 to Form 10-Q for quarter ended June 30, 1992, File No. 1-3368). (g) - Twentieth Supplemental Indenture dated as of June 1, 1993 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4(m) to Form S-3, File No. 33-66748). (h) - Twenty-First Supplemental Indenture dated as of October 1, 1993 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4 to Form 10-Q for quarter ended September 30, 1993, File No. 1-3368). (i) - Twenty-Second Supplemental Indenture dated as of November 1, 1993 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4(k) to Annual Report on Form 10-K for year ended December 31, 1993, File No. 1- 3368). (j) - Twenty-Third Supplemental Indenture dated as of November 1, 1993 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4(l) to Annual Report on Form 10-K for year ended December 31, 1993, File No. 1- 3368). (k) - Twenty-Fourth Supplemental Indenture dated as of March 1, 1994 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4(m) to Annual Report on Form 10-K for year ended December 31, 1993, File No. 1- 3368). (l) - Twenty-Fifth Supplemental Indenture dated as of November 1, 1994 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4(p) to Registration Statement No. 33-56635 on Form S-3). (m) - Twenty-Sixth Supplemental Indenture dated as of April 1, 1995 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4 to Form 10-Q for quarter ended March 31, 1995, File No. 1-3368). (n) - Twenty-Seventh Supplemental Indenture dated as of June 1, 1995 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4 to Form 10-Q for quarter ended June 30, 1995, File No. 1-3368). (o) - Twenty-Eighth Supplemental Indenture dated as of December 1, 1996 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4 to Annual Report on Form 10-K for year ended December 31, 1996, File No. 1- 3368). (p) Twenty-Ninth Supplemental Indenture dated as of April 1, 1998 to Indenture of Mortgage and Deed of Trust (Incorporated by reference to Exhibit 4 to Form 10-Q for quarter ended March 31, 1998, File No. 1-3368). (q) Indenture for Unsecured Debt Securities, dated as of September 10, 1999 between Empire and Wells Fargo Bank Minnesota, National Association (Incorporated by reference to Exhibit 4(v) to Registration Statement No. 333-87015 on Form S-3). (r) - Securities Resolution No. 1, dated as of November 16, 1999, of Empire under the Indenture for Unsecured Debt Securities.* (s) - Securities Resolution No. 2, dated as of February 22, 2001, of Empire under the Indenture for Unsecured Debt Securities.* (t) - Rights Agreement dated as of April 27, 2000 between Empire and Mellon Investor Services LLC (Incorporated by reference to Exhibit 4 to Form 10-Q for the quarter ended March 31, 2000, File No. 1-3368). (10)(a) - 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 4.1 to Form S-8, File No. 33-64639). (b) - Management Incentive Plan (A description of this Plan is incorporated by reference to page 5 of Empire's Proxy Statement for its Annual Meeting of Stockholders held April 27, 1989). (c) - Deferred Compensation Plan for Directors (Incorporated by reference to Exhibit 10(d) to Annual Report on Form 10-K for year ended December 31, 1990, File No. 1-3368). (d) - The Empire District Electric Company Change in Control Severance Pay Plan and Forms of Agreement (Incorporated by reference to Exhibit 10 to Form 10-Q for quarter ended September 30, 1991, File No. 1-3368). (e) - Amendment to The Empire District Electric Company Change in Control Severance Pay Plan and revised Forms of Agreement (Incorporated by reference to Exhibit 10 to Form 10-Q for quarter ended June 30, 1996, File No. 1-3368). (f) - The Empire District Electric Company Supplemental Executive Retirement Plan. (Incorporated by reference to Exhibit 10(e) to Annual Report on Form 10-K for year ended December 31, 1994, File No. 1-3368). (g) Retirement Plan for Directors as amended August 1, 1998 (Incorporated by reference to Exhibit 10(a) to Form Q for quarter ended September 30, 1998, File No. 1-3368). (h) Stock Unit Plan for Directors (Incorporated by reference to Exhibit 10(b) to Form Q for quarter ended September 30, 1998, File No. 1-3368). (12) - Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements.* (23) - Consent of PricewaterhouseCoopers LLP* (24) - Powers of Attorney.* This exhibit is a compensatory plan or arrangement as contemplated by Item 14(a)(3) of Form 10-K. *Filed herewith Reports on Form 8-K (a) In a current report dated December 7, 2000, Empire filed, under Item 5. "Other Events," a press release concerning an order from the Administrative Law Judge of the Arkansas Public Service Commission relating to Empire's proposed merger with UtiliCorp United Inc. (b) In a current report dated December 12, 2000, Empire filed, under Item 5. "Other Events," a press release concerning orders from the Arkansas Public Service Commission and the Corporation Commission of the State of Oklahoma relating to Empire's proposed merger with UtiliCorp United Inc. (c) In a current report dated December 29, 2000, Empire filed, under Item 5. "Other Events," a press release concerning an order from the Missouri Public Service Commission relating to Empire's proposed merger with UtiliCorp United Inc. SCHEDULE II Valuation and Qualifying Accounts Years ended December 31, 2000, 1999 and 1998 Balance Additions Deductions from Balance At Charged to Other Accounts reserve at Beginning Charged to close of of period income Description Amt. Description Amt. period Year ended December 31, 2000: Reserve deducted Recovery of from assets: amounts Accumulated previously Accounts provision for written off written off Uncollectible accounts $ 371,946 $1,283,268 $119,293 $ 807,297 $ 967,209 Reserve not shown separately in balance sheet: Property, plant Injuries and & equipment and Claims and damages Reserve clearing accounts expenses (Note A) $1,000,000 $ 722,200 $722,200 $1,044,400 $1,400,000 Year ended December 31, 1999: Reserve deducted Recovery of from assets: amounts Accumulated previously Accounts provision for written off written off Uncollectible $275,876 $ 580,873 $372,955 $ 857,758 $ 371,946 accounts Reserve not shown separately in balance sheet: Property, plant Injuries and & equipment and Claims and damages reserve clearing accounts expenses (Note A) $1,314,461 $407,163 $407,163 $1,128,787 $1,000,000 Year ended December 31, 1998: Reserve deducted Recovery of from assets: amounts Accumulated previously Accounts provision for written off written off Uncollectible $278,741 $586,000 $448,718 $1,037,583 $275,876 accounts Reserve not shown separately in balance sheet: Property, plant Injuries and & equipment and Claims and dmages Reserve clearing accounts expenses (Note A) $1,311,995 $580,832 $530,011 $1,108,377 $1,314,461 NOTE A: This reserve is provided for workers' compensation, certain postemployment benefits and public liability damages. Empire at December 31, 2000 carried insurance for workers' compensation claims in excess of $250,000 and for public liability claims in excess of $300,000. The injuries and damages reserve is included on the Balance Sheet in the section "Noncurrent liabilities and deferred credits" in the category "Other". 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. THE EMPIRE DISTRICT ELECTRIC COMPANY M. W. MCKINNEY By......................... M.W. McKinney, President Date: March 9, 2001 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 date indicated. M. W. MCKINNEY Date M. W. McKinney, President and Director (Principal Executive Officer) D. W. GIBSON D. W. Gibson, Vice President-Finance (Principal Financial Officer) D. L. COIT D. L. Coit, Controller and Assistant Treasurer and Assistant Secretary (Principal Accounting Officer) V. E. BRILL* V. E. Brill, Director M. F. CHUBB, JR.* M. F. Chubb, Jr., Director R. D. HAMMONS* R. D. Hammons, Director March 9, 2001 R. C. HARTLEY* R. C. Hartley, Director J. R. HERSCHEND* J. R. Herschend, Director F. E. JEFFRIES* F. E. Jeffries, Director R. E. MAYES* R. E. Mayes, Director R. L. LAMB* R. L. Lamb, Director M. M. POSNER* M. M. Posner, Director D. W. GIBSON *By................................... (D. W. Gibson, As attorney in fact for each of the persons indicated) EX-4 2 0002.txt EXHIBIT (4)(r) SECURITIES RESOLUTION NO. 1 OF THE EMPIRE DISTRICT ELECTRIC COMPANY I, Janet S. Watson, Secretary-Treasurer of The Empire District Electric Company (the "Company"), do hereby certify that the attached is a true and correct copy of Securities Resolution No. 1 duly adopted by the President and Vice President - Finance of the Company pursuant to authorization delegated to them by the Board of Directors of the Company at a meeting called and held on October 28, 1999; and I do further certify that said resolution has not been rescinded and remains in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of THE EMPIRE DISTRICT ELECTRIC COMPANY this 16th day of November, 1999. By: /s/ Janet S. Watson Name: Janet S. Watson Title: Secretary-Treasurer [CORPORATE SEAL] 7.70% Senior Notes Due 2004 SECURITIES RESOLUTION NO. 1 OF THE EMPIRE DISTRICT ELECTRIC COMPANY The actions described below are taken by the President and Vice President - Finance of THE EMPIRE DISTRICT ELECTRIC COMPANY (the "Company"), pursuant to Board (as such term is defined in the Indenture referred to below) delegation, in accordance with resolutions adopted by the Board of the Company on October 28, 1999, and Section 2.01 of the Indenture dated September 10, 1999 (the "Indenture") between the Company and Norwest Bank Minnesota, National Association, as Trustee. Terms used herein and not defined have the same meaning given such terms in the Indenture. RESOLVED, that a new series of Securities is authorized as follows: 1. The title of the series is 7.70% Senior Notes Due 2004 (the "Notes"). 2. The form of the Notes shall be substantially in form of Exhibit 1 hereto. 3. The Notes shall have the terms set forth in Exhibit 1. 4. The Notes shall have such other terms as are set forth in Exhibit 2 hereto. 5. The Notes shall be sold to the underwriters named in the prospectus supplement dated November 16, 1999 on the following terms: Price to Public: 99.818% Underwriting Discount: 0.600% This Securities Resolution shall be effective as of November 16, 1999. /s/ Myron W. McKinney _______________ Name: Myron W. McKinney Title: President and Chief Executive Officer /s/ Robert B. Fancher __________________ Name: Robert B. Fancher Title: Vice President - Finance EXHIBIT 1 CUSIP 291641 AV 0 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. $100,000,000 THE EMPIRE DISTRICT ELECTRIC COMPANY 7.70% Senior Notes Due 2004 THE EMPIRE DISTRICT ELECTRIC COMPANY promises to pay to Cede & Co. or registered assigns the principal sum of One Hundred Million Dollars on November 15, 2004 Interest Payment Dates: May 15 and November 15 Record Dates: May 1 and November 1 Dated: November 19, 1999 NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Transfer Agent and Paying Agent THE EMPIRE DISTRICT ELECTRIC COMPANY By: [Title of Authorized Officer] By: [Title of the Authorized Officer] (SEAL) Authenticated: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Registrar By: _____________________________ Authorized Signature THE EMPIRE DISTRICT ELECTRIC COMPANY 7.70% Senior Notes Due 2004 1. Interest. The Empire District Electric Company (the "Company"), a Kansas corporation, promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest on May 15 and November 15 of each year commencing May 15, 2000. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from November 19, 1999. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Securities to the persons who are registered holders of Securities at the close of business on the record date for the next interest payment date, except as otherwise provided in the Indenture. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may pay principal and interest by check payable in such money. It may mail an interest check to a holder's registered address. 3. Securities Agents. Initially, Norwest Bank Minnesota, National Association, Attention: Corporate Trust Department, will act as Paying Agent, Transfer Agent and Registrar. The Company may change any Paying Agent or Transfer Agent without notice or provide for more than one such agent. The Company or any Affiliate may act in any such capacity. Subject to certain conditions, the Company may change the Trustee. 4. Indenture. The Company issued $100,000,000 principal amount of the securities of this series (the "Securities") under an Indenture dated as of September 10, 1999 (the "Indenture") between the Company and Norwest Bank Minnesota, National Association (the "Trustee"). The terms of the Securities include those stated in the Indenture and in the Securities Resolution creating the Securities and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb). Securityholders are referred to the Indenture, the Securities Resolution and the Trust Indenture Act of 1939 for a statement of such terms. 5. Optional Redemption. The Company may at its option redeem all or part of the Securities on at least 30 days, but not more than 60 days, prior notice mailed to the registered address of each holder of Securities whose Securities are to be redeemed. The redemption price shall equal the greater of: (i) 100% of the principal amount of the Securities to be redeemed; or (ii) the sum of the present values of the Remaining Scheduled Payments discounted to the date of redemption, on a semiannual basis (assuming a 360- day year consisting of twelve 30-day months), at the Treasury Rate plus 15 basis points plus accrued and unpaid interest thereon to the date of redemption. 6. Notice of Redemption. Notice of redemption shall be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each holder of Securities to be redeemed at such holder's registered address. A notice of redemption may provide that it is subject to the occurrence of any event before the date fixed for such redemption as described in such notice ("Conditional Redemption"), and such notice of Conditional Redemption shall be of no effect unless all such conditions to the redemption have occurred on or before such date or have been waived by the Company. 7. Denominations, Transfer, Exchange. The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Transfer Agent may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or the Indenture. The Transfer Agent need not exchange or register the transfer of any Security or portion of a Security selected for redemption. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before a selection of Securities is to be redeemed. 8. Persons Deemed Owners. The registered holder of a Security may be treated as its owner for all purposes. 9. Amendments and Waivers. Subject to certain exceptions, the Indenture or the Securities may be amended with the consent of the holders of a majority in principal amount of the securities of all series affected by the amendment. Subject to certain exceptions, a default on a series may be waived with the consent of the holders of a majority in principal amount of the series. Without the consent of any Securityholder, the Indenture or the Securities may be amended, among other things, to cure any ambiguity, omission, defect or inconsistency; to provide for assumption of Company obligations to Securityholders; or to make any change that does not materially adversely affect the rights of any Securityholder. 10. Restrictive Covenants. The Securities are unsecured general obligations of the Company limited to $100,000,000 principal amount. The Indenture does not limit other unsecured debt. 11. Successors. When a successor assumes all the obligations of the Company under the Securities and the Indenture, the Company will be released from those obligations. 12. Defeasance Prior to Redemption or Maturity. Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity. U.S. Government Obligations are securities backed by the full faith and credit of the United States of America or certificates representing an ownership interest in such Obligations. 13. Defaults and Remedies. An Event of Default includes: default for 60 days in payment of interest on the Securities; default in payment of principal on the Securities; default for 60 days in payment or satisfaction of any sinking fund obligation; default by the Company for a specified period after notice to it in the performance of any of its other agreements applicable to the Securities; certain events of bankruptcy or insolvency; and any other Event of Default provided for in the series. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Securities may declare the principal of all the Securities to be due and payable immediately. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. 14. Trustee Dealings with Company. Norwest Bank Minnesota, National Association, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 15. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication. This Security shall not be valid until authenticated by a manual signature of the Registrar. 17. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), U/G/M/A (=Uniform Gifts to Minors Act) and U/T/M/A (=Uniform Transfers to Minors Act). The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture and the Securities Resolution, which contains the text of this Security in larger type. Requests may be made to: Secretary, The Empire District Electric Company, 602 Joplin Street, Joplin, Missouri 64801. EXHIBIT 2 7.70% Senior Notes due 2004 Supplemental Terms In addition to the terms set forth in Exhibit 1 to Securities Resolution No. 1, the 7.70% Senior Notes due 2004 (the "7.70 Notes") shall have the following terms: Section 1. Definitions. Capitalized terms used and not defined herein shall have the meaning given such terms in the Indenture. The following are additional definitions applicable to the 7.70% Notes: "Comparable Treasury Issue" means the United States Treasury security selected by Salomon Smith Barney Inc. or its affiliates as having a maturity comparable to the remaining term of the notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt of comparable maturity to the remaining term of the notes. "Comparable Treasury Price" means the average of three Reference Treasury Dealer Quotations obtained by the trustee for the redemption date. "Depositary" means, with respect to the 7.70% Notes issued as a global Security, The Depository Trust Company, New York, New York, or any successor thereto registered under the Securities Exchange Act of 1934 or other applicable statute or regulation. "Reference Treasury Dealers" means Salomon Smith Barney Inc. and its successors, so long as it or any of its successors continues to be a primary U.S. Government securities dealer, and any two other primary U.S. Government securities dealers chosen by the Company. If Salomon Smith Barney Inc. or any of its successors ceases to be a primary U.S. Government securities dealer, the Company will appoint in its place another nationally recognized investment banking firm that is a primary U.S. Government securities dealer. "Reference Treasury Dealer Quotation" means the average, as determined by the trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the trustee by a Reference Treasury Dealer at 3:30 p.m., New York City time, on the third business day preceding the redemption date. "Remaining Scheduled Payments" means the remaining scheduled payments of the principal and interest that would be due if the notes selected for redemption were not redeemed. However, if the redemption date is not a scheduled interest payment date, the amount of the next succeeding scheduled interest payment on these notes will be reduced by the amount of interest accrued on these notes to the redemption date. "Treasury Rate" means an annual rate equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date. The semiannual equivalent yield to maturity will be computed as of the third business day immediately preceding the redemption date. Section 2. Securities Issuable as Global Securities. (a) The 7.70% Notes shall be issued in the form of one or more permanent global Securities and shall, except as otherwise provided in this Section 2, be registered only in the name of the Depositary or its nominee. Each global Security shall bear a legend substantially to the following effect: "Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein." (b) If at any time (i) the Depositary with respect to the 7.70% Notes notifies the Company that it is unwilling or unable to continue as Depositary for such global Security or (ii) the Depositary for the 7.70% Notes shall no longer be eligible or in good standing under the Securities Exchange Act of 1934 or other applicable statute or regulation, the Company shall appoint a successor Depositary with respect to such global Security. If a successor Depositary for such global Security is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Transfer Agent shall register the exchange of such global Security for an equal principal amount of Registered Securities in the manner provided in Section 2.07 of the Indenture. (c) The Transfer Agent shall register the transfer or exchange of a global Security for Registered Securities pursuant to Section 2.07 of the Indenture if (i) a Default or Event of Default shall have occurred and be continuing with respect to the 7.70% Notes or (ii) the Company determines that the 7.70% Notes shall no longer be represented by global Securities. (d) In any exchange provided for in the preceding paragraphs (b) or (c), the Company will execute and the Registrar will authenticate and deliver Registered Securities. Registered Securities issued in exchange for a global Security shall be in such names and denominations as the Depositary for such global Security shall instruct the Registrar. The Registrar shall deliver such Registered Securities to the persons in whose names such Securities are so registered. Section 3. Optional Redemption. The Company may at its option redeem all or part of the Securities on at least 30 days, but not more than 60 days, prior notice mailed to the registered address of each holder of Securities whose Securities are to be redeemed. The redemption price shall equal the greater of: (a) 100% of the principal amount of the Securities to be redeemed; or (b) the sum of the present values of the Remaining Scheduled Payments discounted to the date of redemption, on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months), at the Treasury Rate plus 15 basis points; plus accrued and unpaid interest thereon to the date of redemption. On and after the redemption date, interest shall cease to accrue on the Securities or any portion thereof called for redemption. On or before the redemption date, the Company shall deposit with the Paying Agent money sufficient to pay the redemption price of and accrued interest on the Securities to be redeemed on such date. If less than all of the Securities are to be redeemed, the Trustee shall select the Securities, or portions thereof, to be redeemed by a method considered by the Trustee to be fair and appropriate. EXHIBIT (4) (s) SECURITIES RESOLUTION NO. 2 OF THE EMPIRE DISTRICT ELECTRIC COMPANY I, Janet S. Watson, Secretary-Treasurer of The Empire District Electric Company (the "Company"), do hereby certify that the attached is a true and correct copy of Securities Resolution No. 2 duly adopted by the President and Vice President - Finance of the Company pursuant to authorization delegated to them by the Board of Directors of the Company at a meeting called and held on February 1, 2001; and I do further certify that said resolution has not been rescinded and remains in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of THE EMPIRE DISTRICT ELECTRIC COMPANY this 22nd day of February, 2001. By: /s/ Janet S. Watson Name: Janet S. Watson Title: Secretary-Treasurer [CORPORATE SEAL] 8 1/2% Junior Subordinated Debentures due 2031 SECURITIES RESOLUTION NO. 2 OF THE EMPIRE DISTRICT ELECTRIC COMPANY The actions described below are taken by the President and Vice President - Finance of THE EMPIRE DISTRICT ELECTRIC COMPANY (the "Company"), pursuant to Board (as such term is defined in the Indenture referred to below) delegation, in accordance with resolutions adopted by the Board of the Company on February 1, 2001, and Section 2.01 of the Indenture dated September 10, 1999 (the "Indenture") between the Company and Wells Fargo Bank Minnesota, National Association, as Trustee. Capitalized terms used herein and not defined have the same meaning given such terms in the Indenture. RESOLVED, that a new series of Securities is authorized as follows: 1. The title of the series is 8 1/2% Junior Subordinated Debentures due 2031 (the "Debentures"). 2. The form of the Debentures shall be substantially in form of Exhibit 1 hereto. 3. The Debentures shall have the terms set forth in Exhibit 1. 4. The Debentures shall have such other terms as are set forth in Exhibit 2 hereto. 5. The Debentures shall be sold to Empire District Electric Trust I at a price equal to 100% of the principal amount thereof. This Securities Resolution shall be effective as of February 22, 2001. /s/ Myron W. McKinney Name: Myron W. McKinney Title: President and Chief Executive Officer /s/ Robert B. Fancher Name: Robert B. Fancher Title: Vice President - Finance EXHIBIT 1 No. $[ ] THE EMPIRE DISTRICT ELECTRIC COMPANY 8 1/2% Junior Subordinated Debentures due 2031 THE EMPIRE DISTRICT ELECTRIC COMPANY promises to pay to Wells Fargo Bank Minnesota, National Association in its capacity as Property Trustee under the Amended and Restated Trust Agreement dated as of March 1, 2001, or registered assigns the principal sum of [ ] on March 1, 2031 Interest Payment Dates: March 1, June 1, September 1 and December 1 Record Dates: February 15, May 15, August 15 and November 15 Dated: March 1, 2001 WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION Transfer Agent and Paying Agent THE EMPIRE DISTRICT ELECTRIC COMPANY By: [Title of Authorized Officer] By: [Title of the Authorized Officer] (SEAL) Authenticated: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION Registrar By: _____________________________ Authorized Signature THE EMPIRE DISTRICT ELECTRIC COMPANY 8 1/2% Junior Subordinated Debentures due 2031 1. Interest. The Empire District Electric Company (the "Company"), a Kansas corporation, promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest on March 1, June 1, September 1 and December 1 of each year commencing June 1, 2001, except as otherwise provided for in the Securities Resolution No. 2 dated as of February 22, 2001 authorizing the creation of the Securities (the "Securities Resolution"). Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from March 1, 2001. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Securities to the persons who are registered holders of Securities at the close of business on the record date for the next interest payment date, except as otherwise provided in the Indenture or the Securities Resolution. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may pay principal and interest by check payable in such money. It may mail an interest check to a holder's registered address. 3. Securities Agents. Initially, Wells Fargo Bank Minnesota, National Association, Attention: Corporate Trust Department, will act as Paying Agent, Transfer Agent and Registrar. The Company may change any Paying Agent or Transfer Agent without notice or provide for more than one such agent. The Company or any Affiliate may act in any such capacity. Subject to certain conditions, the Company may change the Trustee. 4. Indenture; Subordination. The Company issued $51,550,000 principal amount of the securities of this series (the "Securities") under an Indenture dated as of September 10, 1999 (the "Indenture") between the Company and Wells Fargo Bank Minnesota, National Association (the "Trustee"). The terms of the Securities include those stated in the Indenture and in the Securities Resolution creating the Securities and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb). Securityholders are referred to the Indenture, the Securities Resolution and the Trust Indenture Act of 1939 for a statement of such terms, including the provisions relating to (i) extension of interest payments in Article IV of Exhibit 2 to the Securities Resolution and (ii) subordination in Article VI thereof. Capitalized terms used herein and not defined have the same meaning given such terms in the Indenture. 5. Optional Redemption. On or after March 1, 2006, the Company may redeem all the Securities at any time or some of them from time to time at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to the redemption date. 6. Additional Optional Redemption. In addition to redemptions pursuant to the above paragraph 5, if a Special Event (as defined below) has occurred and is continuing then the Company shall have the right upon not less than 30 days' nor more than 60 days' notice to the Holders of the Securities to redeem the Securities, in whole but not in part, for cash within 90 days following the occurrence of such Special Event (the "90 Day Period") at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon, if any, to the date of such redemption (the "Redemption Price"); provided, however, that in the case of a Tax Event (as defined below), if at the time there is available to the Company the opportunity to eliminate, within the 90 Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, Empire District Electric Trust I (the "Trust") or the holders of the securities issued by the Trust, the Company shall pursue such Ministerial Action instead of redemption, and, provided, further, that the Company shall have no right to redeem the Securities while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Amended and Restated Trust Agreement of the Trust, dated as of March 1, 2001. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price is to be paid. A "Special Event" shall mean either a Tax Event or an Investment Company Event. "Tax Event" shall mean that the Trust shall have received an opinion of counsel (which may be regular counsel to the Company or an Affiliate) experienced in such matters to the effect that, as a result of any (a) amendment to, or change (including any announced proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof, or (b) official administrative written decision, pronouncement or action or judicial decision interpreting or applying such laws or regulations, in each case which amendment or change is effective or which proposed change, pronouncement, action or decision is announced on or after the date of issuance of the Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of opinion of counsel, subject to United States federal income tax with respect to interest received on the Securities, (ii) interest payable by the Company to the Trust on the Securities is not, or will not within 90 days of the date of the opinion of counsel, be deductible for United States federal income tax purposes, or (iii) the Trust is, or will be within 90 days of the date of opinion of counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" shall mean the Trust will have received an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority on or after the date of original issuance of the Securities by the Trust, the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended. 7. Notice of Redemption. Notice of redemption shall be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each holder of Securities to be redeemed at such holder's registered address. A notice of redemption may provide that it is subject to the occurrence of any event before the date fixed for such redemption as described in such notice ("Conditional Redemption"), and such notice of Conditional Redemption shall be of no effect unless all such conditions to the redemption have occurred on or before such date or have been waived by the Company. 8. Denominations, Transfer, Exchange. The Securities are in registered form without coupons in denominations of $25 and whole multiples of $25. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Transfer Agent may require a holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or the Indenture. The Transfer Agent need not exchange or register the transfer of any Security or portion of a Security selected for redemption. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before a selection of Securities is to be redeemed. 9. Persons Deemed Owners. The registered holder of a Security may be treated as its owner for all purposes. 10. Amendments and Waivers. The Indenture and the Securities may be amended, and any default may be waived. Subject to certain exceptions, the Company and the Trustee may amend the Securities and the Indenture with the written consent of the holders of a majority in aggregate liquidation amount of the preferred securities of the Trust whose rights will be adversely affected by such amendment and if the principal (and premium, if any) of the Securities and all accrued and unpaid interest thereon have been paid in full. Furthermore, no amendment can be made to the provisions of the Indenture allowing holders of preferred securities of the Trust to sue directly following the Company's failure to make timely payments on the Securities as described above without the prior consent of the holder of each preferred security of the Trust then outstanding unless and until the principal (and premium, if any) of the Securities and all accrued and unpaid interest thereon have been paid in full. Without the consent of any Securityholder, the Indenture or the Securities may be amended, among other things, to cure any ambiguity, omission, defect or inconsistency; to provide for assumption of Company obligations to Securityholders; or to make any change that does not materially adversely affect the rights of any Securityholder. 11. Restrictive Covenants. The Securities are unsecured general obligations of the Company limited to $51,550,000 principal amount. The Indenture does not limit other unsecured debt. 12. Successors. When a successor assumes all the obligations of the Company under the Securities and the Indenture, the Company will be released from those obligations. 13. Defeasance Prior to Redemption or Maturity. Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity. U.S. Government Obligations are securities backed by the full faith and credit of the United States of America or certificates representing an ownership interest in such Obligations. 14. Defaults and Remedies. An Event of Default includes: default for 60 days in payment of interest on the Securities; default in payment of principal on the Securities; default for 60 days in payment or satisfaction of any sinking fund obligation; default by the Company for a specified period after notice to it in the performance of any of its other agreements applicable to the Securities; certain events of bankruptcy or insolvency; and any other Event of Default provided for in the series. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Securities may declare the principal of all the Securities to be due and payable immediately. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. 15. Trustee Dealings with Company. Wells Fargo Bank Minnesota, National Association, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 16. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication. This Security shall not be valid until authenticated by a manual signature of the Registrar. 18. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), U/G/M/A (=Uniform Gifts to Minors Act) and U/T/M/A (=Uniform Transfers to Minors Act). The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture and the Securities Resolution, which contains the text of this Security in larger type. Requests may be made to: Secretary, The Empire District Electric Company, 602 Joplin Street, Joplin, Missouri 64801. EXHIBIT 2 8 1/2% Junior Subordinated Debentures due 2031 Supplemental Terms In addition to the terms set forth in Exhibit 1 to Securities Resolution No. 2, the 8 1/2% Junior Subordinated Debentures due 2031 (the "Debentures") shall have the following terms: ARTICLE I DEFINITIONS SECTION 1.1. Definition of Terms Unless the context otherwise requires: 1. (a) a term defined in the Indenture has the same meaning when used in this Securities Resolution; 2. (b) a term defined anywhere in this Securities Resolution has the same meaning throughout; 3. (c) the singular includes the plural and vice versa; 4. (d) headings are for convenience of reference only and do not affect interpretation; 5. (e) the following terms have the meanings given to them in the Trust Agreement: (i) Administrative Trustee; (ii) Business Day; (iii) Clearing Agency; (iv) Common Security; (v) Delaware Trustee; (vi) Guarantee; (vii) Preferred Security; (viii) Preferred Securities Certificate; (ix) Property Trustee; (x) Purchase Agreement; and (xi) Trust Securities; and 6. (f) the following terms have the meanings given to them in this Section 1.1(f): "Additional Interest" shall have the meaning set forth in Section 2.5(c). "Change in 1940 Act Law" shall have the meaning set forth in Section 3.1. "Compounded Interest" shall have the meaning set forth in Section 4.1. "Coupon Rate" shall have the meaning set forth in Section 2.5(a). "Deferred Interest" shall have the meaning set forth in Section 4.1. "Depository" shall have the meaning set forth in Section 2.8. "Dissolution Event" means that the Trust is to be dissolved in accordance with the Trust Agreement, and the Debentures held by the Property Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Trust Agreement. "Extended Interest Payment Period" shall have the meaning set forth in Section 4.1. "Global Debenture" shall have the meaning set forth in Section 2.4(a). "Interest Payment Date" shall have the meaning set forth in Section 2.5(a). "Investment Company Event" shall have the meaning set forth in Section 3.1. "Maturity Date" means the date on which the Debentures mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any. "Ministerial Action" shall have the meaning set forth in Section 3.1. "90 Day Period" shall have the meaning set forth in Section 3.1. "Non Book-Entry Preferred Securities" shall have the meaning set forth in Section 2.4(a). "Optional Redemption Price" shall have the meaning set forth in Section 3.2(a). "Redemption Price" shall have the meaning set forth in Section 3.1. "Senior Indebtedness" means: (i) any indebtedness (A) of the Company for money borrowed and (B) evidenced by securities, debentures, bonds, notes or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of such obligor under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), except for any such indebtedness that is by its terms subordinated to or pari passu with the Debentures, as the case may be. For greater certainty, "Senior Indebtedness" includes all indebtedness for money borrowed between or among the Company and its Affiliates, except for such indebtedness that is by its terms subordinated to or pari passu with the Debentures, as the case may be. Such Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the benefits of Article VI hereof irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. "Special Event" shall have the meaning set forth in Section 3.1. "Tax Event" shall have the meaning set forth in Section 3.1. "Trust" means Empire District Electric Trust I, a Delaware statutory business trust. "Trust Agreement" means the Amended and Restated Trust Agreement of the Trust, dated as of March 1, 2001. ARTICLE II GENERAL TERMS AND CONDITIONS OF THE DEBENTURES SECTION 2.1. Designation and Principal Amount. There is hereby authorized a series of Securities designated the "8 1/2% Junior Subordinated Debentures due March 1, 2031," limited in aggregate principal amount to $51,550,000, to be substantially in the form of Exhibit 1 to the Securities Resolution, subject to changes in the form thereof made by the Company and acceptable to the Trustee. SECTION 2.2. Maturity. The Maturity Date of the Debentures is March 1, 2031. SECTION 2.3. Form and Payment. Except as provided in Section 2.4, the Debentures shall be issued in fully registered certificated form without interest coupons in denominations of $25 or integral multiples of $25. The place of payment for the Debentures issued in certificated form where the transfer of such Debentures will be registrable and where such Debentures will be exchangeable for Debentures bearing identical terms and provisions shall be the Corporate Trust Department of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Holder at such address as shall appear in the security register. Notwithstanding the foregoing, so long as the Holder of any Debentures is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Interest, if any) on such Debentures held by the Property Trustee will be made at such place and to such account as may be designated to the Company in writing by the Property Trustee. SECTION 2.4. Global Debenture. 1. (a) In connection with a Dissolution Event, (i) the Debentures in certificated form (other than the Debentures to be distributed to the Company as the holder of the Common Securities) may be presented to the Trustee by the Property Trustee in exchange for a global Debenture in an aggregate principal amount equal to the aggregate principal amount of all outstanding Debentures (a "Global Debenture"), to be registered in the name of the Depository, or its nominee, and delivered by the Trustee to the Depository for crediting to the accounts of its participants pursuant to the instructions of the Administrative Trustee. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this Securities Resolution. Payments on the Debentures issued as a Global Debenture will be made to the Depository; and (ii) if any Preferred Securities are held in non book-entry certificated form, the Debentures in certificated form (other than the Debentures to be distributed to the Company as the holder of the Common Securities) may be presented to the Trustee by the Property Trustee and any Preferred Security Certificate which represents Preferred Securities other than Preferred Securities held by the Clearing Agency or its nominee ("Non Book-Entry Preferred Securities") will be deemed to represent beneficial interests in Debentures presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until such Preferred Security Certificates are presented to the Security Registrar for transfer or reissuance at which time such Preferred Security Certificates will be canceled and a Debenture, registered in the name of the holder of the Preferred Security Certificate or the transferee of the holder of such Preferred Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security Certificate canceled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this Securities Resolution. On issue of such Debentures, Debentures with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been canceled. 2. (b) Unless and until it is exchanged for the Debentures in registered form, a Global Debenture may be transferred, in whole but not in part, only to another nominee of the Depository, or to a successor Depository selected or approved by the Company or to a nominee of such successor Depository. 3. (c) If at any time the Depository notifies the Company that it is unwilling or unable to continue as Depository or if at any time the Depository for such series shall no longer be registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, and a successor Depository for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, the Company will execute, and, subject to Article 2 of the Indenture, the Trustee, upon written notice from the Company, will authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. In addition, the Company may at any time determine that the Debentures shall no longer be represented by the Global Debenture. In such event the Company will execute, and subject to Section 2.02 of the Indenture, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company, will authenticate and deliver the Debentures in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. Upon the exchange of the Global Debenture for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debenture shall be cancelled by the Trustee. Such Debentures in definitive registered form issued in exchange for the Global Debenture shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Debentures to the Depository for delivery to the Persons in whose names such Debentures are so registered. SECTION 2.5. Interest. 1. (a) Each Debenture will bear interest at the rate of 8 1/2% per annum (the "Coupon Rate") from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article IV) quarterly in arrears on March 1, June 1, September 1 and December 1 of each year (each, an "Interest Payment Date"), commencing on June 1, 2001, to the Person in whose name such Debenture or any predecessor Debenture is registered at the close of business on the regular record date for such interest installment, which, in respect of (i) Debentures of which the Property Trustee is the Holder and the Preferred Securities are in book-entry only form or (ii) a Global Debenture, shall be the close of business on the Business Day next preceding that Interest Payment Date. Notwithstanding the foregoing sentence, if (i) the Debentures are held by the Property Trustee and the Preferred Securities are no longer in book-entry only form or (ii) the Debentures are not represented by a Global Debenture, the Company may select a regular record date for such interest installment which shall be any date at least one Business Day but less than sixty Business Days before an Interest Payment Date. 2. (b) The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed in such a 90-day period. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. 3. (c) If, at any time while the Property Trustee is the Holder of any Debentures, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company will pay as additional interest ("Additional Interest") on the Debentures held by the Property Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other government charges been imposed. SECTION 2.6. Redemption. The Debentures are not subject to redemption at the option of the Holder and are subject to redemption solely at the option of the Company or otherwise as provided in Article III hereof. SECTION 2.7. No Sinking Fund. The Debentures shall not be entitled to the benefit of any sinking fund or analogous provision. SECTION 2.8. Depository. The Depository Trust Company (or its nominee) shall act as the initial Depository (the "Depository") for any Global Debenture which may be issued pursuant to this Securities Resolution. SECTION 2.9. Appointment of Agents. The Company hereby appoints, or confirms the appointment of, Wells Fargo Bank Minnesota, National Association, as the initial Trustee, Registrar and Paying Agent with respect to the Debentures, subject to the provisions of the Indenture with respect to resignation, removal and succession, and subject, further, to the right of the Company to appoint additional agents (including Paying Agents). ARTICLE III REDEMPTION OF THE DEBENTURES SECTION 3.1. Special Event Redemption. If a Special Event (as defined below) has occurred and is continuing then, notwithstanding Section 3.2(a) but subject to Section 3.2(b), the Company shall have the right upon not less than 30 days' nor more than 60 days' notice to the Holders of the Debentures to redeem the Debentures, in whole but not in part, for cash within 90 days following the occurrence of such Special Event (the "90 Day Period") at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon, including Compounded Interest and Additional Interest, if any, to the date of such redemption (the "Redemption Price"); provided, however, that in the case of an occurrence of a Tax Event (as defined below), if at the time there is available to the Company the opportunity to eliminate, within the 90 Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the Holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption, and, provided, further, that the Company shall have no right to redeem the Debentures while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Trust Agreement. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price is to be paid. A "Special Event" shall mean either a Tax Event or an Investment Company Event. "Tax Event" shall mean that the Company shall have received an opinion of counsel (which may be regular counsel to the Company or an Affiliate, but not an employee thereof, which must be acceptable to the Property Trustee) experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or (b) any official administrative written decision, pronouncement or action or judicial decision interpreting or applying such laws or regulations by any court, governmental agency or regulatory authority, in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation or application is issued or announced on or after the date of original issuance of Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of the opinion of counsel, subject to United States federal income tax with respect to interest received on the Debentures, (ii) interest payable by the Company to the Trust on the Debentures is not, or will not be within 90 days of the date of the opinion of counsel, deductible for United States federal income tax purposes, or (iii) the Trust is, or will be within 90 days of the date of the opinion of counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. "Investment Company Event" shall mean the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that the Trust is or will be considered an "Investment Company" that is required to be registered under the Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities. SECTION 3.2. Optional Redemption by Company 1. (a) Subject to the provisions of Section 3.2(b) and to the provisions of Article 3 of the Indenture, except as otherwise may be specified in this Securities Resolution, the Company shall have the right to redeem the Debentures, in whole or in part, from time to time, on or after March 1, 2006, upon not less than 30 days' nor more than 60 days' notice to the Holders of the Debentures at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon, including Compounded Interest and Additional Interest, if any, to the date of such redemption (the "Optional Redemption Price"). If the Debentures are only partially redeemed pursuant to this Section 3.2, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided, that if at the time of redemption the Debentures are registered as a Global Debenture, the Depository shall determine, in accordance with its procedures, the principal amount of such Debentures held by each Debenture Holder to be redeemed. The Optional Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Optional Redemption Price by 10:00 a.m., New York time, on the date such Optional Redemption Price is to be paid. 2. (b) If a partial redemption of the Debentures would result in the delisting of the Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Debentures in whole. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1. Extension of Interest Payment Period. The Company shall have the right, at any time and from time to time during the term of the Debentures, so long as no Event of Default with respect to the Debentures has occurred and is continuing, to defer payments of interest by extending the interest payment period of such Debentures for a period not exceeding 20 consecutive quarters (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable; provided that no Extended Interest Payment Period may extend beyond the Maturity Date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Company shall pay all interest accrued and unpaid on the Debentures, including any Additional Interest and Compounded Interest (together, "Deferred Interest") that shall be payable to the Holders of the Debentures in whose names the Debentures are registered in the security register on the first record date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters or extend beyond the Maturity Date. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except (i) at the end thereof and (ii) upon a redemption of the Debentures during an Extended Interest Payment Period, but the Company may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. SECTION 4.2. Notice of Extension. (a) If the Property Trustee is the only registered Holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to the Administrative Trustees, the Property Trustee and the Trustee of its selection of such Extended Interest Payment Period at least one Business Day before the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities issued by the Trust are payable, or (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities issued by the Trust, but in any event at least one Business Day before such record date. (b) If the Property Trustee is not the only Holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the Holders of the Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period at least ten Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self- regulatory organization or to Holders of the Debentures. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in the maximum Extended Interest Payment Period permitted under Section 4.1. SECTION 4.3. Limitation of Transactions. If (i) the Company shall exercise its right to defer payment of interest as provided in Section 4.1, (ii) there shall have occurred any Event of Default, as defined in the Indenture, or (iii) the Company shall be in default with respect to its payment obligations under the Guarantee, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (i) as a result of a reclassification of its capital stock or the exchange or conversion of one class or series of its capital stock for another class or series of its capital stock, (ii) any payment of a dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (iii) purchases of its common stock related to the issuance of such stock under any of the Company's benefit plans for its directors, officers or employees, (iv) obligations under any dividend reinvestment plan or stock purchase plan of the Company, (v) the purchase of fractional interests in shares of its capital stock pursuant to the conversion or exchange provisions of such capital stock or security being converted or exchanged or (vi) dividends or distributions in its common stock) or make any guarantee payment with respect thereto, (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Debentures and (c) the Company shall not make any guarantee payments with respect to any of the payment obligations referred to in (b) above (other than pursuant to the Guarantee and any similar guarantee issued by the Company on behalf of holders of preferred securities issued by an issuer holding Securities issued under the Indenture). ARTICLE V EXPENSES SECTION 5.1. Payment of Expenses. In connection with the offering, sale and issuance of the Debentures to the Property Trustee and in connection with the sale of the Trust Securities by the Trust, the Company, in its capacity as borrower with respect to the Debentures, shall: (a) pay all costs and expenses relating to the offering, sale and issuance of the Debentures, including commissions to the underwriters payable pursuant to the Purchase Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 7.06 of the Indenture; (b) pay all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions to the underwriters in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); (c) be primarily liable for any indemnification obligations arising with respect to the Trust Agreement; and (d) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. SECTION 5.2. Payment Upon Resignation or Removal. Upon termination of this Securities Resolution or the Indenture or the removal or resignation of the Trustee pursuant to Section 7.07 of the Indenture, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation. Upon termination of the Trust Agreement or the removal or resignation of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to Section 8.10 of the Trust Agreement, the Company shall pay to the Delaware Trustee or the Property Trustee, as the case may be, all amounts accrued to the date of such termination, removal or resignation. ARTICLE VI SUBORDINATION SECTION 6.1. Subordination. The Company resolves, and each Holder of Debentures issued hereunder by such Holder's acceptance thereof covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article VI; and each Holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, premium, if any, and interest on all Debentures issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness, whether outstanding at the date of this Securities Resolution or thereafter incurred. This Article shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and they and/or each of them may enforce such provisions. No provision of this Article VI shall prevent the occurrence of any Default or Event of Default with respect to the Debentures. SECTION 6.2. Default on Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other amount due on any Senior Indebtedness, or in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then, in either case, no payment shall be made by the Company to the Holders of the Debentures with respect to the principal (including redemption and sinking fund payments) of, premium, if any, interest on, or any other amount owing in respect of, the Debentures. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder of the Debentures when such payment is prohibited by the preceding paragraph of this Section 6.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 6.3. Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment or distribution is made by the Company to the Holders of the Debentures on account of the principal of, premium, if any, interest on, or any other amount owing in respect of, the Debentures; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, which the Holders of the Debentures or the Trustee would be entitled to receive from the Company, except for the provisions of this Article VI, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of Debentures or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the Holders of the Debentures before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article VI, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article VI with respect to the Debentures to the payment of all Senior Indebtedness that may at the time be outstanding, provided, however, that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article 5 of the Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 6.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article 5 of the Indenture. Nothing in Section 6.2 hereof or in this Section 6.3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.06 of the Indenture. SECTION 6.4. Subrogation. Subject to the payment in full of all Senior Indebtedness, the rights of the Holders of the Debentures shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to such Senior Indebtedness until the principal of, premium, if any, and interest on, and all other amounts owing in respect of, the Debentures shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Holders of the Debentures or the Trustee would be entitled except for the provisions of this Article VI, and no payment over pursuant to the provisions of this Article VI, to or for the benefit of the holders of such Senior Indebtedness by Holders of the Debentures or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Debentures be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article VI are and are intended solely for the purposes of defining the relative rights of the Holders of the Debentures, on the one hand, and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article VI or elsewhere in this Securities Resolution or the Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Debentures the principal of (and premium, if any) and interest on and all other amounts owing in respect of the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under the Indenture, as amended and supplemented by this Securities Resolution, subject to the rights, if any, under this Article VI of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article VI, the Trustee, subject to the provisions of Section 7.01 of the Indenture, and the Holders of the Debentures, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Debentures, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article VI. SECTION 6.5. Trustee to Effectuate Subordination. Each Holder of a Debenture by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article VI and appoints the Trustee as such Holder's attorney- in-fact for any and all such purposes. SECTION 6.6. Notice by the Company. The Company shall give prompt written notice to a Trust Officer of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article VI. Notwithstanding the provisions of this Article VI or any other provision of the Indenture and this Securities Resolution, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article VI unless and until a Trust Officer shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any representative or trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.01 of the Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 6.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture) then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 7.01 of the Indenture, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a representative or trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a representative or trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article VI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article VI, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 6.7. Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article VI in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in the Indenture or this Securities Resolution shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article VI, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into the Indenture or this Securities Resolution against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Section 7.01 of the Indenture, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to Holders of Debentures, the Company or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article VI or otherwise. SECTION 6.8. Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of the Indenture or this Securities Resolution, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Debentures, without incurring responsibility to the Holders of the Debentures and without impairing or releasing the subordination provided in this Article VI or the obligations hereunder of the Holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. ARTICLE VII COVENANT TO LIST ON EXCHANGE SECTION 7.1. Listing on an Exchange. If the Debentures are to be distributed to the holders of Preferred Securities as described in Section 2.4(a), the Company will, if the Debentures are not already so listed, use its best efforts to list such Debentures on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. EX-12 3 0003.txt EXHIBIT (12) Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements Year ended December 31, 2000 2000 1999 1998 1997 1996 Income before provision for income taxes And fixed charges $ 63,197,851 $ 60,689,149 $ 63,261,581 $ 54,880,632 $ 49,713,981 (Note A) Fixed charges: Interest on first mortgage bonds $ 17,414,513 $ 18,528,871 $ 17,012,160 $ 15,704,380 $ 14,014,643 Amortization of debt discount and Expense less premium 1,042,217 873,863 861,673 888,662 866,921 Interest on 1,247,690 1,673,077 659,741 1,143,254 675,890 short-term debt Interest on 7,899,171 929,150 1,500 - 3,000 notes payable Other interest 437,621 363,632 345,590 336,642 276,880 Rental expense representative of an Interest factor 39,485 150,417 157,579 164,715 127,440 (Note B) Total fixed charges $ 28,080,697 $ 22,519,010 $ 19,038,243 $ 18,237,653 $ 15,964,774 Preferred stock dividend requirements: Preferred stock dividend requirements Not deductible for tax purposes $ 0 $ 1,600,210 $ 2,334,444 $ 2,338,304 $ 2,338,304 Ratio of income before provision for Income taxes to net income 1.487 1.722 1.561 1.540 1.531 Nondeductible dividend 0 2,755,562 3,644,067 3,600,988 3,579,943 requirements Deductible dividends 0 0 78,036 78,036 78,036 Total preferred stock Dividend requirements $ 0 $ 2,755,562 $ 3,722,103 $ 3,679,024 $ 3,657,979 Total combined fixed charges and Preferred stock dividend requirements $ 28,080,697 $ 25,274,572 $ 22,760,346 $ 21,916,677 $ 19,622,753 Ratio of earnings 2.25 2.70 3.32 3.01 3.11 to fixed charges Ratio of earnings to combined fixed charges And preferred stock 2.25 2.40 2.78 2.50 2.53 dividend requirements NOTE A: For the purpose of determining earnings in the calculation of the ratio, net income has been increased by the provision for income taxes, non-operating income taxes and by the sum of fixed charges as shown above. NOTE B: One-third of rental expense (which approximates the interest factor).
EX-23 4 0004.txt EXHIBIT (23) Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos.33-9238, 2-64667, 33-64639 and 33-34807 which also serves as a Post-Effective Amendment to Form S-8 No. 2-67598) and in the Prospectus constituting part of the Registration Statements on Form S-3 (Nos. 333-87015, 333-55210 which also serves as a Post-Effective Amendment to Form S-3 No. 333-35129, 33-52713, 33-56635 and 33-54539 which also serves as a Post-Effective Amendment to Form S-3 No. 33-35308) of The Empire District Electric Company of our report dated January 31, 2001 relating to the financial statements and financial statement schedules, which appears in this Form 10-K. PricewaterhouseCoopers LLP St. Louis, Missouri March 7, 2001 EX-24 5 0005.txt EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ VIRGIL E. BRILL VIRGIL E. BRILL EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ MELVIN F. CHUBB, JR. MELVIN F. CHUBB, JR. EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ R. DWAIN HAMMONS R. DWAIN HAMMONS EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ ROSS C. HARTLEY ROSS C. HARTLEY EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ JACK R. HERSCHEND JACK R. HERSCHEND EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ FRANCIS E. JEFFRIES FRANCIS E. JEFFRIES EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ ROY E. MAYES ROY E. MAYES EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ ROBERT L. LAMB ROBERT L. LAMB EXHIBIT (24) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of THE EMPIRE DISTRICT ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Kansas, does hereby constitute and appoint M. W. MCKINNEY and D. W. GIBSON, and each of them, the true and lawful attorney-in-fact of the undersigned, in the name, place and stead of the undersigned, to sign the name of the undersigned to the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2000, File Number 1-3368, to be filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to any amendment thereto, and to cause the same to be filed with the Securities and Exchange Commission, it being intended to give and hereby giving and granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned could do if personally present; and the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or any one of them, shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 1st day of February 2001. /s/ MARY McCLEARY POSNER MARY McCLEARY POSNER -----END PRIVACY-ENHANCED MESSAGE-----