WITH DIRECT ACCESS SCHEDULED TO BEGIN ON Jan. 1, 1998, California regulators are moving quickly to set up their long-considered policies on electric restructuring. The restructuring actions touch...
Success is in the Details: Rationalize, Organize, and Plan
approach from top to bottom, beginning with our board of directors. The total number of directors of Iowa-Illinois and Midwest Resources is 23, with four from inside the two companies and 19 from outside. The two boards of directors have agreed that after the merger becomes effective, the MidAmerican Energy Co. board will have no more than 19 directors (em 17 outside and 2 inside. They further agree that by mid-1997 the new company will have no more than 16 directors (em a reduction of 7, or 30 percent.
Consistent with the strategic merger of equals concept, and to provide senior management continuity for the new company, we agreed to a plan of succession as an integral part of the merger agreement. The transition mechanism we chose to implement that plan was the "Office of the CEO."
When the new company is formed, Stan Bright and I will share executive responsibilities in the "Office of the CEO" (em he as president and I as chairman. Our merger plan defines each of our specific responsibilities during the transition period. At the end of the first year of operation, Stan will become CEO, and I will continue as chairman of the board until I retire in May 1997.
We chose a "business unit" approach to MidAmerican's management organization to position the gas and electric operations and InterCoast Energy Co. as competitive stand-alone businesses (em a strategic decision that allowed us to locate them in the three major communities in Iowa that we serve. Doing so was important because it demonstrated our continuing commitment to maintain a significant corporate presence in those communities and to provide stability for a greater number of employees than would relocation to a single location.
While we expect the electric business unit will initially be vertically integrated, our structure provides the flexibility to disaggregate it if we desire. Any changes will depend ultimately on how the competitive industry evolves, and which structure will best suit the demands of the marketplace.
MidAmerican and its nonregulated subsidiaries will be headquartered in Des Moines, the state capitol. The electric business will be headquartered in Davenport, the Quad Cities area where Iowa-Illinois was located. And the gas business will be headquartered in Sioux City, on the western border.
The nonregulated businesses (em InterCoast Energy Co. (IowaIllinois) and Midwest Capital Group (Midwest Resources) (em are being reorganized and will operate as separate subsidiaries of MidAmerican. The businesses of InterCoast include all nonregulated activities not related to service-area business development. These include oil and gas acquisitions, development, and production; nonregulated energy services, such as power marketing; and financial investments.
Midwest Capital will be a regional business development company, retaining Midwest Resources's business development projects. It will also hold and manage the loans, obligations, properties, and financial investments associated with economic development for Iowa-Illinois. Our business development efforts will continue as a key strategy for growth in our service territory.
Our best estimate of the time needed to complete the merger was 12-18 months. We expected that period would be required to obtain