MIDWEST RESOURCES INC. History

Company History:

Midwest Resources Inc., the largest supplier of gas and electricity in Iowa, is a utility holding company that formed when Iowa Resources Inc. and Midwest Energy Company merged in 1990; its subsidiaries are Midwest Power Systems Inc. and Midwest Capital Group, Inc. Midwest Power Systems has two divisions: Midwest Power and Midwest Gas. Midwest Power provides electric service to 412,000 customers in Iowa and South Dakota. Midwest Gas serves 363,000 customers in Iowa, Minnesota, Nebraska, and South Dakota. Midwest Capital Group operates the diversified investments of Midwest Resources, which include real estate development, construction of generation facilities and electric lines, railcar leasing and management, coal transportation, and telecommunications. MIDWEST ENERGY COMPANY

The origins of Midwest Energy Company can be traced in part to Andrew M. Hunt, a surgeon who had served in the Union Army during the Civil War. In the years following the conflict, he established a flourishing medical and dental practice in Sioux City, Iowa, while serving on both the city council and the local school board. In 1869 he petitioned for and was granted a franchise to build a system of gas streetlamps for the town, which was then on America's western frontier.

Hunt, however, lacked the capital for such a venture. Following a three-year search, he recruited six Sioux City businessmen and a Chicago construction magnate to form the Sioux City Gas Light Company. Bankers John P. Allison and George Weare, real estate developers and brothers Charles E. and D. T. Hedges, and merchants James E. Booge and Henry Ford provided local backing for the company. Amasa E. Swift of Chicago and his partner in another gas works venture, George P. Wright, provided 50 percent of the capital the construction company used to start the venture.

On March 17, 1873, the first gas lamps in Sioux City were lit. In the years that followed, the Sioux City Gas Light Company underwent a succession of changes in ownership. In 1889, United Gas Improvement purchased the Sioux City Gas Light Company and immediately converted its plant from coal to water.

Also included in the Sioux City Gas Light Company buyout were the assets of the Sioux City Electric Company. Founded in 1888, Sioux City Electric became the first company to supply electricity to the town's homes and businesses while selling lamps, later called light bulbs, to city merchants. The company soon formed a partnership with Sioux City Gas Light, which had been eager to exploit the burgeoning new technology.

In 1901 United Gas Improvement consolidated the two companies as the Sioux City Gas and Electric Company. Leonard Lamb Kellogg, who had risen to the top of the gas company, headed the combined operation. Under his leadership, Sioux City Gas and Electric became an efficient operation that provided service at low rates.

The merger of Sioux City's primary gas and electric companies followed one of the era's most exciting developments--electric-powered streetcars. In 1890 the Sioux City Railway Company hired Frank Sprague, who, three years earlier, had electrified the streetcar system of Richmond, Virginia, the first large-scale application of electric traction motors to everyday streetcar use. Under his auspices, Sioux City became the third city in the world to have an electric-powered public transit system.

Soon embryonic streetcar companies began appearing in Sioux City. The excitement, however, was short-lived. Devastated by the Panic of 1893, these companies either went bankrupt or remained afloat by paying employees with vouchers that could be redeemed by local merchants for food or clothing. Finally in 1899 the Bank of Montreal, one of the industry's major underwriters, negotiated a consolidation of the city's streetcar lines as the Sioux City Traction Company.

Renamed the Sioux City Service Company, the streetcar line merged with Sioux City Gas and Electric on August 28, 1922. That marriage brought the utility company the generating capacity of the streetcar line's powerhouse as well as the streetcar system itself, which remained a profitable asset until the late 1930s.

The 1920s also saw the consolidation of rural utilities as companies vied to link small Iowa towns with the power of electricity. One such company, Boston-backed Iowa Light, Heat and Power, had spent the early part of the decade rapidly buying up utility companies in the state's small communities. By 1925 its activity had attracted the attention of United Gas Improvement, the parent company of Sioux City Gas and Electric. Negotiations soon followed and on June 16, 1925, Iowa Light, Heat and Power became a subsidiary of Sioux City Gas and Electric. The Bostonians who had run Iowa Light, Heat and Power promptly traded their positions for stock in the holding company.

Following this purchase, Sioux City Gas and Electric began expansion into neighboring South Dakota and Nebraska. However, a strong foothold in Nebraska slipped away when the state adopted stiff utility municipalization laws during the 1930s, forcing the company to divest itself of its Nebraska electric properties.

The company experienced greater success in South Dakota. Under the name of its subsidiary, the South Dakota Public Service Company, Sioux City Gas and Electric and its sister company, the Iowa Public Service Company (also a subsidiary of United Gas Improvement), made acquisitions that led to a slow but steady growth in South Dakota. By 1934, still in the depths of the Great Depression, an eight-year-old South Dakota Public Service boasted revenues of more than $33,000. After acquiring the Yankton Gas Company in 1938, the Public Service Company's revenues had grown to $118,000.

But two factors soon combined to slow that spurt of growth. First, the Northwestern Public Service Company proved to be tough competition. Owned by Samuel Insull, who had served as Thomas Edison's private secretary, Northwestern had already acquired extensive holdings throughout the state when the Iowa Public Service subsidiary arrived. Second, World War II, with its attendant materials rationing and labor shortages, hampered the growth of South Dakota Public Service.

While expansion continued, Sioux City Gas and Electric and Iowa Public Service underwent a series of ownership changes. United Gas Improvement had long sought ownership of the Philadelphia Electric Company. By early 1928, a deal was struck with its parent company, American Electric Power Corporation, giving United Gas Improvement the Philadelphia utility for $7 million, payment being divided equally between cash and stock in Sioux City Gas and Electric and Iowa Public Service.

In June 1939 the United States Supreme Court affirmed the constitutionality of the 1935 act, and Penn-Western Gas and Electric was forced to distribute its shares in Sioux City Gas and Electric to shareholders. World War II slowed the process, but by the fall of 1949, Sioux City Gas and Electric and Iowa Public Service were officially reorganized and merged under the name Iowa Public Service.

In 1950, following a national trend, Iowa Public Service converted its operations from manufactured to natural gas. As a result, gas rates in Sioux City dropped 10 percent, touching off a period of growth for the company. The number of gas-heated homes in Sioux City rose dramatically during the 1950s and 1960s as did the demand for electricity. To meet this need, Iowa Public Service eventually constructed four generating facilities at Port Neal, an area south of Sioux City on the Missouri River.

During the 1980s energy consumption leveled off, prompting Iowa Public Service to seek non-utility investments. For example, the company backed Dakota Dunes, a $25 million, 2,000-acre development in Union County, South Dakota, that included homesites, an industrial park, and a championship 18-hole golf course. To operate its increasingly diversified business enterprise, Iowa Public Service restructured as the Midwest Energy Company, a holding company not unlike those of the 1920s and 1930s. Under the new formation, Iowa Public Service became a subsidiary of Midwest Energy with the sole responsibility of utility operations. This then allowed Midwest Energy to seek out investment opportunities not available to regulated utilities. IOWA RESOURCES INC.

Iowa Resources Inc. was formed in 1979 as a holding company for Iowa Power Inc., a utility whose history extends back to 1884. That year marked the appearance of the first electric lights in Des Moines, Iowa. Electricity was provided by the Des Moines Edison Light Company, which had been founded in 1878 as the Des Moines Edison Light and Power Company. By 1886 electricity was supplied to 396 customers at a cost of 25 cents per kilowatt-hour.

As the years passed, Des Moines Edison Light Company made considerable innovations in its methods of providing power. The company began constructing the first steam plant in the Des Moines area in 1889. 1902 saw the installation of the first underground distribution system in Iowa. Located in downtown Des Moines, the system was modernized frequently. Also during the early 1900s, the company changed its name several times: to the Des Moines Electric Company in 1908, the Des Moines Railway and Light Company in 1909, and the Des Moines Electric Light Company in 1913.

As Des Moines Electric Light Company moved into the 1930s, it continued to grow. Despite the economic Great Depression, which forced the company to cut wages by 20 percent, 19 small utilities were acquired, allowing Des Moines Electric to expand its service to a greater number of towns. By 1943, when all acquisitions were combined under the name of Iowa Power and Light Company, the company owned the Des Moines Gas Company and the Iowa properties of Iowa-Nebraska Light and Power Company. The final significant acquisition was made in 1949, with the addition of the Council Bluffs territory.

Three decades later, in 1979, Iowa Power and Light Company changed its corporate structure and became a subsidiary of the holding company Iowa Resources Inc. Gas, electric, and power operations were separated into three divisions. Functioning as a sister company of Iowa Power and Light, Iowa Gas Company became a wholly owned subsidiary of Iowa Resources in 1984. In 1985 Iowa Gas was sold to Midwest Energy Company.

The mid- to late 1980s brought challenges to Iowa Power and Light. In a tighter electricity market, the utility focused on efficiency, effective marketing techniques, and the performance of its non-utility interests. Iowa Power and Light's real estate subsidiaries include Middlewood Mall, which has a one-third interest in an office complex known as The Kaleidoscope at the Hub, and Middlewood, Inc. Other subsidiaries, such as Iowa Computer Resources, Inc. (ICR), a software provider; ENERCOR, Inc., an oil-drilling venture; UNITRAIN, Inc., an operator of railcars for unit trains; ENSERCO, Inc., a financial services subsidiary; and IOR Telecom Inc., the company's foray into fiber optic services, continued to thrive throughout the 1980s.

On October 7, 1988, after the utility suffered the financial losses of an Iowa Utilities Board (IUB) order to reduce its revenues, Iowa Power and Light was given permission by industry regulators to increase its rates, and it began to rebound. Also in 1988, in response to increased demand for electric services, Iowa Power and Light opened two new service centers in the Des Moines metropolitan area, the Greenfield center and the Walnut Ridge center, where a new energy management system (EMS) to control and monitor power generation and transmission was planned to replace the utility's 20-year-old system in Des Moines.

In 1989, after experiencing a period of financial prosperity that extended from 1983 to 1988, Iowa Power and Light Company shortened its name to Iowa Power Inc. Construction of the $11 million control center at Walnut Ridge was underway by the end of the year, with a scheduled completion date of June of 1991. An ever-expanding and profitable arm of Iowa Resources Inc., Iowa Power, along with its diverse subsidiaries, emerged from the 1980s on strong financial ground.

In November of 1990 Midwest Energy merged with Iowa Resources, Inc., to form Midwest Resources Inc., the largest utility company in Iowa. Mark W. Putney of Iowa Resources was named chairman and chief executive officer of the newly formed corporation. Russell E. Christiansen of Midwest Energy was named vice chairman, president, and chief operating officer, and in November of 1992 he succeeded Putney as chairman and CEO. Midwest Resources topped the $1 billion revenue mark in 1991 and has assets of nearly $2.5 billion.

In July of 1992 regulators gave final approval to the merger of Midwest Resources' principal utility subsidiaries, Iowa Power and Iowa Public Service, into Midwest Power Systems Inc.

Principal Subsidiaries: Midwest Power Systems Inc.; Midwest Capital Group, Inc.

Further Reading:

• A Century of Service: Iowa Power and Light Company, Des Moines, IA, Iowa Power and Light Company, 1984.
• Iowa Resources Inc. annual reports, 1985-89.
• Scott, Carlee R., 'Midwest Energy, Iowa Resources Set Accord for Merger,' Wall Street Journal, March 19, 1990.
• Beck, Bill, The Service People: An Illustrated History of Midwest Energy Company, Sioux City, Iowa Public Service Co., 1991.

Source: International Directory of Company Histories, Vol. 6. St. James Press, 1992.

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