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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to_________
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
___________ _____________________________ __________________
1-10628 CIPSCO INCORPORATED 37-1260920
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
Securitites registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Class on Which Registered
______________ _____________________
CIPSCO INCORPORATED
Common Stock, without par value New York Stock Exchange
Chicago Stock Exchange
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
None
Securities registered pursuant to Section 12(g) of the Act:
CIPSCO INCORPORATED
None
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY,
Cumulative Preferred Stock, par value $100 per share
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Indicate by check mark whether the registrants (1) have 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
Registrants were required to file such reports), and (2) have 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 registrants' 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]
Aggregate market value at February 1, 1995 of the voting stock held by
non-affiliates of CIPSCO Incorporated (CIPSCO) - $986,499,200 - Common Stock,
without par value. Number of shares outstanding of each of CIPSCO's classes
of common stock at February 1, 1995: 34,069,542 shares of Common Stock,
without par value.
Aggregate market value at February 1, 1995 of the voting stock held by
non-affiliates of Central Illinois Public Service Company (CIPS) - $17,021,800
- - Cumulative Preferred Stock (par value $100 per share) [Note: Excludes value
of 400,000 shares of Cumulative Preferred Stock for which CIPS has been unable
to determine market value.] Number of shares outstanding of each of CIPS'
classes of common stock at February 1, 1995: 25,452,373 shares of Common
Stock, without par value (all owned by CIPSCO).
Documents Incorporated By Reference:
A portion of CIPSCO's Proxy Statement relating to its 1995 Annual Meeting
of Shareholders is incorporated by reference in Part III hereof.
A portion of CIPS's Proxy Statement relating to its 1995 Annual Meeting
of Shareholders is incorporated by reference in Part III hereof.
=============================================================================
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CIPSCO INCORPORATED
AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business
CIPSCO Incorporated and its Subsidiaries. . . . . . . 5
Non-Utility Subsidiary - CIPSCO Investment Company. . 5
Utility Subsidiary - Central Illinois Public
Service Company . . . . . . . . . . . . . . . . . . 6
General . . . . . . . . . . . . . . . . . . . . . . 6
Revenues. . . . . . . . . . . . . . . . . . . . . . 6
Competition -- General. . . . . . . . . . . . . . . 8
Competition -- Electric Business. . . . . . . . . . 8
Competition -- Gas Business . . . . . . . . . . . . 9
Utility Industry. . . . . . . . . . . . . . . . . . 10
Construction Program and Financing. . . . . . . . . 10
Rate Matters. . . . . . . . . . . . . . . . . . . . 12
Electric Operations . . . . . . . . . . . . . . . . 13
Electric Power Sales/Participation Agreements . . . 15
Gas Operations. . . . . . . . . . . . . . . . . . . 16
Fuel. . . . . . . . . . . . . . . . . . . . . . . . 17
Regulation. . . . . . . . . . . . . . . . . . . . . 18
Environmental Matters . . . . . . . . . . . . . . . 19
Employees . . . . . . . . . . . . . . . . . . . . . 20
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 21
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 22
Item 4. Submission of Matters to a Vote of Security Holders. . . 23
Executive Officers of the Registrants. . . . . . . . . . 23
PART II
Item 5. Market for Registrants' Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . 26
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . 27
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 28
Item 8. Financial Statements and Supplementary Data. . . . . . . 37
CIPSCO Consolidated Financial Statements . . . . . . . . 37
Report of Independent Public Accountants . . . . . . . . 44
Notes to Consolidated Financial Statements . . . . . . . 45
CIPS Financial Statements. . . . . . . . . . . . . . . . 67
Report of Independent Public Accountants . . . . . . . . 74
Notes to Financial Statements. . . . . . . . . . . . . . 75
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Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . 84
PART III
Item 10. Directors and Executive Officers of the Registrants. . . 84
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . 85
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . 85
Item 13. Certain Relationships and Related Transactions . . . . . 86
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. . . . . . . . . . . . . . . . . . 86
Signatures . . . . . . . . . . . . . . . . . . . . . . . 92
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 94
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PART I
Item 1. Business
CIPSCO INCORPORATED AND ITS SUBSIDIARIES
________________________________________
GENERAL. CIPSCO Incorporated (CIPSCO) was incorporated in the State of
Illinois on July 11, 1986. CIPSCO has two first-tier subsidiaries: CIPSCO
Investment Company (CIC), an investment subsidiary, and Central Illinois
Public Service Company (CIPS), an electric and gas public utility engaged in
the sale of electricity and natural gas in portions of central and southern
Illinois.
Effective October 1, 1990, CIPSCO became the parent holding company of
CIPS. CIPSCO owns 100% of the outstanding common stock of CIPS representing
in excess of 96% of the voting securities of CIPS.
CIPSCO was created as a holding company to provide the flexibility and
capability to respond to increasing competition and risks in the utility
business, thereby enhancing the long-term earnings potential of the
organization while maintaining the strength of the utility business of CIPS as
the predominant part of the holding company.
CIPSCO's business is conducted through properties and employees of CIPS
and CIPSCO reimburses CIPS for their use. Each of CIPSCO's officers is also
an officer of CIPS. CIPSCO's principal executive office is located in
Springfield, Illinois.
CIPSCO is a public-utility holding company as defined in the Public
Utility Holding Company Act of 1935, but is exempt, by virtue of an order
issued September 18, 1990, from all the provisions of that act except
provisions relating to the acquisition of securities of public utility
companies. CIPSCO is not subject to regulation as a utility under the
Illinois Public Utilities Act or the Federal Power Act.
The ability of CIPSCO to pay dividends on its common stock is dependent
upon distributions made to it by CIPS and on amounts earned by CIPSCO on its
other investments.
NON-UTILITY SUBSIDIARY - CIPSCO INVESTMENT COMPANY
__________________________________________________
GENERAL. CIPSCO Investment Company (CIC), an Illinois corporation and
the non-utility subsidiary of CIPSCO, was incorporated on October 2, 1990.
CIC was formed for the purpose of managing non-utility investments and
providing investment management services to CIPSCO and its affiliates. CIC's
investment portfolio includes money-market investments, common stocks, mutual
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funds, hedged preferred stocks, hedged common stocks, and equity interests in
lease transactions and energy related projects. Investments are held in the
four subsidiaries of CIC: CIPSCO Securities Company, CIPSCO Leasing Company,
CIPSCO Energy Company and CIPSCO Venture Company. CIPSCO Securities Company
invests in marketable securities, CIPSCO Leasing Company makes long-term
investments in leveraged lease transactions, CIPSCO Energy Company makes
investments in energy-related projects and CIPSCO Venture Company makes
investments within the CIPS utility service territory.
UTILITY SUBSIDIARY - CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
____________________________________________________________
GENERAL. Central Illinois Public Service Company (CIPS), an Illinois
corporation, was organized in 1902. CIPS is a public utility operating
company engaged in the sale of electricity and natural gas in portions of
central and southern Illinois. CIPS generates, transmits and distributes
electricity and, through interchange agreements with other utility systems,
purchases and sells power on a firm basis, in emergency situations or when
economical to do so. CIPS sells and distributes natural gas which it
purchases from natural gas producers and other suppliers and transports
natural gas purchased by end-users directly from suppliers. The principal
executive offices of CIPS are located in Springfield, Illinois.
CIPS furnishes electric service to about 317,000 retail customers in 557
incorporated and unincorporated communities and adjacent suburban and rural
areas. See Business - Electric Operations and - Electric Power
Sales/Participation Agreements regarding certain electric power arrangements
with other utility systems.
CIPS also furnishes natural gas service to about 166,000 retail customers
in 267 incorporated and unincorporated communities and adjacent suburban and
rural areas and provides gas transportation service to about 320 end-users.
CIPS furnishes both electric and natural gas service in 236 of the communities
served by it.
The territory served by CIPS, located in 66 counties in Illinois, has an
estimated population of 820,000 and is devoted principally to agriculture and
diversified industrial operations. Key industries include petroleum and
petrochemical industries, food processing, metal fabrication and coal mining.
The electric and gas utility business of CIPS is expected to provide the
major portion of CIPSCO's assets and earnings for the foreseeable future.
REVENUES. The total operating revenues of CIPS for the year 1994 were
$835,882,000 of which about 83% was derived from the sale of electricity and
about 17% from the sale of natural gas. The retail electric revenues were
derived approximately as follows (percentage of total electric operating
revenue): 31% from residential customers, 26% from commercial customers, 17%
from industrial customers and 2% from public authorities and other. The
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electric revenues from sales for resale were derived approximately as follows
(percentage of total electric operating revenue): 11% from power supply
agreements, 10% from interchange sales (economy/emergency) and 3% from
cooperatives and municipal customers. Sales of power to the petroleum,
related petrochemical industries and to the coal mining industry contributed
about 6% of total electric revenues. Sales to these three industries
accounted for approximately 37% of the 1994 electric revenue derived from the
industrial customer group. Revenues from the coal mining industry may decline
in the future as a result of declining consumption of Illinois coal, as many
industrial coal customers shift to lower sulfur coal or other fuels as a means
of complying with the Clean Air Act Amendments of 1990. The natural gas
revenues for the year 1994 were derived approximately as follows: 63% from
residential customers, 22% from commercial customers, 9% from industrial
customers and 6% from transportation service customers and miscellaneous.
The sources of the operating revenues of CIPS for the years indicated
were as follows:
Electric 1994 1993 1992
________ ________ ________ ________
(in thousands)
Residential . . . . . . . . . . . . . . . . $213,377 $219,510 $197,120
Commercial. . . . . . . . . . . . . . . . . 178,723 176,154 169,460
Industrial. . . . . . . . . . . . . . . . . 118,917 112,382 109,648
Public authorities and other. . . . . . . . 13,799 15,144 12,970
________ ________ ________
Total retail revenues . . . . . . . . . 524,816 523,190 489,198
________ ________ ________
Power supply agreements . . . . . . . . . . 78,613 69,668 59,768
Interchange sales (economy/emergency) . . . 71,779 74,644 27,094
Cooperatives and municipals . . . . . . . . 22,250 21,347 19,582
________ ________ ________
Total sales for resale . . . . . . . . . 172,642 165,659 106,444
________ ________ ________
Total electric revenues. . . . . . . . . $697,458 $688,849 $595,642
======== ======== ========
Natural Gas 1994 1993 1992
___________ ________ ________ ________
(in thousands)
Residential . . . . . . . . . . . . . . . . $ 86,919 $ 92,213 $ 86,968
Commercial. . . . . . . . . . . . . . . . . 30,577 32,023 31,036
Industrial. . . . . . . . . . . . . . . . . 12,897 12,139 6,445
Transportation service. . . . . . . . . . . 7,586 8,915 9,269
Miscellaneous . . . . . . . . . . . . . . . 445 417 42
-------- -------- --------
Total gas revenues. . . . . . . . . . . . $138,424 $145,707 $133,760
======== ======== ========
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The portions of operating income of CIPS, before income taxes,
attributable to electric operations were approximately $147,070,000 (93%) in
1994, $154,779,000 (95%) in 1993 and $123,228,000 (92%) in 1992. The portions
of operating income, before income taxes, attributable to gas operations were
approximately $11,528,000 (7%) in 1994, $7,621,000 (5%) in 1993 and
$10,916,000 (8%) in 1992.
Identifiable assets relating to electric and gas operations were as
follows:
1994 1993 1992
__________ __________ __________
(in thousands)
Electric operations . . . . . . . . . . $1,469,601 $1,459,073 $1,443,578
Gas operations. . . . . . . . . . . . . 176,788 177,857 188,321
Other . . . . . . . . . . . . . . . . . 32,261 31,532 13,160
---------- ---------- ----------
Total assets. . . . . . . . . . . . . $1,678,650 $1,668,462 $1,645,059
========== ========== ==========
COMPETITION -- GENERAL. In order to assess the various opportunities in the
electric and natural gas energy marketplace and to implement strategies which
take advantage of those opportunities, effective January 1, 1995, CIPS
established a new marketing function. The efforts of this new function will
be directed at product and service development programs and activities.
In early 1994 CIPS undertook a "business process re-engineering" program for
the purpose of consolidating and streamlining its electric and natural gas
utility business segments, in both its corporate headquarters and in its field
operations. The changes resulting from the program are designed to enable
CIPS to better serve its customers while controlling and reducing overall
operating costs.
Early in 1995, CIPS instituted a voluntary separation plan. Under the plan,
eligible employees could leave CIPS and receive a package of benefits. The
final date for eligible employees to accept the offer under the separation
plan was February 25, 1995. The one-time cost of the plan is expected to be
approximately $5 million (pre-tax), but is expected to be partially offset in
1995 and create additional savings in future years by reducing total annual
operating expenses.
COMPETITION -- ELECTRIC BUSINESS. Competition among suppliers of electric
energy is increasing. In particular, competition for interchange sales, which
is based primarily on price and availability of energy, has become much more
intense in recent years.
CIPS is responding to overall increased competition in a number of ways
designed to lower its costs and increase sales. Since instituting an economic
development incentive rate in 1985, the CIPS economic development program has
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been expanded to include new customer and community development initiatives.
The Key Account Program is an ongoing program in which senior management plays
a critical role in communicating CIPS' competitive advantages to its largest
industrial customers. Additional services to customers have included energy
technology assistance and market development programs. CIPS works in
partnership with communities throughout the service area to implement projects
to respond to growth opportunities. This, in combination with the ongoing
business development initiatives including industrial site location
assistance, community profiles and technical development services, is designed
to maximize economic development throughout the CIPS territory. In addition
to a general program of controlling costs, in 1987 CIPS initiated a major
program of renegotiating long-term coal supply contracts. Savings from these
renegotiation efforts continued during 1994. Further renegotiation is
expected in 1995. This program has helped and will continue to help CIPS
control its fuel costs.
CIPS faces competition from non-utility generators of power. The National
Energy Policy Act of 1992 ("NEPA"), among other things, creates exempt
wholesale generators who are largely exempt from traditional utility
regulation. Under NEPA these producers may gain access to utility
transmission lines. (See Management's Discussion and Analysis of Financial
Condition and Results of Operations.) These and other developments will
enhance competition over time and will give customers and CIPS opportunities
to take advantage of competitive markets. In addition to non-utility
generators, large retail customers may decide to install cogeneration or other
facilities and supply their own electricity which will increase pressures on
CIPS to be a low cost provider. It is possible that retail wheeling
legislation could be introduced at any time in Illinois. The Illinois
Commerce Commission (the "Illinois commission") has established a task force
to gather information on these issues and help formulate an approach for
Illinois.
During 1994, CIPS had generating capacity sales agreements with other
utility systems which represented approximately 530 megawatts or 19% of CIPS'
total generating capacity. Under one such agreement a utility system reduced
its participation by 115 megawatts as a result of a scheduled contract
reduction, which represents about 4% of total generating capacity, effective
January 1, 1995. Earlier this year CIPS reached an agreement with Union
Electric Company for the sale of 150 megawatts of capacity and energy
beginning June 1998 through May 2005. Over the next several years CIPS will
have about 300 megawatts of capacity available to market. At the present time
CIPS has offers pending to other electric systems for medium- and long-term
contracts that would total 1,220 megawatts of capacity per year, subject to
availability. (See Business - Utility Subsidiary - Central Illinois Public
Service Company - Electric Power Sales/Participation Agreements.)
COMPETITION -- GAS BUSINESS. Competition in the natural gas industry is
increasing. For a number of years, CIPS customers have had the ability to
purchase natural gas from producers or other suppliers and transport that gas
through the interstate pipelines and the CIPS system. CIPS collects a rate
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for transportation through its system. Recent policies of the Federal Energy
Regulatory Commission ("FERC") such as Order 636 (see Gas Operations below)
have increased the competitive nature of the gas business. In certain cases
customers have the ability to receive their gas supply directly from pipelines
and bypass the CIPS system. CIPS has negotiated or is currently negotiating
with a number of its larger industrial gas customers regarding flexible rates
to address the more competitive environment in which CIPS is operating. While
CIPS has had to provide lower rates to retain some customers, CIPS has used
this same flexibility to obtain some new loads.
UTILITY INDUSTRY. CIPS is experiencing some of the problems common to
electric and gas utility companies, namely, increased competition for
customers, increased construction costs, delays and uncertainties in the
regulatory process and costs of compliance with environmental and other laws
and regulations.
CONSTRUCTION PROGRAM AND FINANCING. Total construction expenditures for
CIPS for 1995 through 1999 are estimated at $449 million. For 1995,
anticipated construction expenditures are $98 million for replacements and
improvements and consist of about $27 million for electric production
facilities, $13 million for electric transmission facilities, $47 million for
electric distribution and general facilities, and $11 million for gas utility
facilities. Included in the 5-year construction forecast is an estimate of
$40 million for environmental compliance, including compliance with
regulations under the Clean Air Act Amendments of 1990. CIPS is evaluating
alternatives for reducing fuel costs and other expenses while maintaining
environmental compliance. Maintaining the current compliance strategy, or
adoption of certain alternatives in fuel and/or environmental strategies,
could result in substantial increases in capital expenditures in the 1995-1999
period from the amounts shown above. Additional external financing could be
required. (See Management's Discussion and Analysis of Financial Condition
and Results of Operations - Central Illinois Public Service Company - Capital
and Financing Requirements and CIPS Results of Operations (1992-1994) - Fuel
Strategies and - Clean Air Act.)
CIPS continuously reviews its construction program, which may be affected
by numerous factors, including the rate of load growth, escalation of
construction costs, fuel shortages, changes in governmental and environmental
regulations, customers' patterns of consumption and conservation of energy,
the adequacy of rate relief and the ability of CIPS to raise necessary
capital. Load growth projections are subject to a number of uncertainties due
to various influences on customer consumption, economic conditions and the
effect of rates on consumption and peak load demand.
CIPS has no electric generating units under construction. On May 11,
1993, the Illinois commission approved CIPS' most recent "least cost resource"
plan which includes the 20-year generating unit plan of the utility. As
demonstrated by the plan, CIPS will not require additional generating capacity
or demand-side resources during the 1993-2013 planning period. Pursuant to
the plan, CIPS will engage in several demand-side management activities
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intended to enhance its capability to deliver demand-side management resources
in the future. CIPS is in the process of developing its next "least cost
resource" plan to be filed with the Illinois commission by July 1, 1995. CIPS
does not anticipate any significant changes in its least cost resource plan.
For a discussion of the funds requirements for the period 1995-1999 and
the assumptions as to the sources of funds to meet those requirements, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Central Illinois Public Service Company - Capital and Financing
Requirements.
Under an effective shelf registration statement on file with the
Securities and Exchange Commission CIPS may issue an aggregate of up to $50
million of first mortgage bonds, medium-term notes and/or preferred stock.
Current authority for such securities issuances granted by the Illinois
commission extends through December 31, 1996. See Management's Discussion and
Analysis of Financial Condition and Results of Operations - Central Illinois
Public Service Company - Capital and Financing Requirements.
The issuance by CIPS of first mortgage bonds, medium-term notes and/or
other secured debt securities, common stock, preferred stock and certain
unsecured debt securities is subject to the receipt of necessary regulatory
approvals. (See Business - Utility Subsidiary - Central Illinois Public
Service Company - Regulation.)
The Mortgage Indenture of CIPS, as presently operative, permits the
issuance of additional first mortgage bonds up to 60% of available net
expenditures for bondable property, provided the "net earnings" of CIPS
(determined after deducting income taxes and otherwise as provided in the
Mortgage Indenture) for a recent 12-month period equal at least twice the
annual interest requirements on all first mortgage bonds outstanding (and on
all equally secured and prior lien indebtedness) and on the bonds then to be
issued. At December 31, 1994, the more restrictive of these requirements was
the "net earnings" test. The "net earnings" of CIPS for the year ended
December 31, 1994, so computed, were equal to 5.73 times the interest for one
year on the aggregate amount of bonds outstanding under the Mortgage Indenture
at December 31, 1994. Based on the "net earnings" of CIPS (so computed) for
the year ended December 31, 1994, and the bonds outstanding under the Mortgage
Indenture at December 31, 1994, CIPS could have issued about $450 million of
additional first mortgage bonds under the foregoing interest coverage
provision (assuming an annual interest rate of 8.3% on such bonds).
The Articles of Incorporation of CIPS provide, in effect, that so long as
any CIPS preferred stock is outstanding, CIPS shall not, without the requisite
vote of the holders of preferred stock, unless the retirement of such stock is
provided for, (a) issue any preferred or equal ranking stock (except to retire
or in exchange for an equal amount thereof) unless the "gross income available
for interest" of CIPS for a recent 12-month period is at least one and one-
half (1-1/2) times the sum of (i) one year's interest on all funded debt and
notes maturing more than 12 months after the date of issuance of such shares
and (ii) one year's dividend requirement on all preferred stock to be
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outstanding after such issue, or (b) issue or assume any unsecured debt
securities maturing less than two years from the date of issuance or
assumption (except for certain refunding or retirement purposes) if
immediately after such issuance or assumption the total amount of all such
unsecured debt securities would exceed 20% of the sum of all secured debt
securities and the capital and surplus of CIPS. For the year ended December
31, 1994, the "gross income available for interest" of CIPS equalled 3.17
times the sum of the annual interest charges and dividend requirements on all
such funded debt, notes and preferred stock outstanding at December 31, 1994.
Such "gross income available for interest" was sufficient under the test to
support the issuance of additional preferred stock (assuming an annual
dividend rate on such preferred stock of 8.25%) in an amount in excess of the
maximum amount ($185 million) of authorized and unissued preferred stock under
the Articles.
RATE MATTERS. The most recent CIPS retail rate case before the Illinois
commission resulted in electric and natural gas rate increases which became
effective March 20, 1992. In its decision, the Illinois commission allowed a
return on net original cost rate base of 9.77% (electric) and 9.88% (natural
gas) and a return on common equity of 12.28% (electric) and 12.50% (natural
gas).
On March 6, 1991, the Illinois commission commenced a generic proceeding
(Docket No. 91-0081 for CIPS) to consider whether costs related to the cleanup
and restoration of former manufactured gas plant sites (environmental
remediation sites) should be recoverable from ratepayers by Illinois utilities
(including CIPS) and, if recoverable, what recovery mechanism should be
utilized. See Note 2 of Notes to Consolidated Financial Statements included
under Item 8 of this report for a discussion of the regulatory and legal
proceedings related to the recovery of remediation and related costs. On
March 26, 1993, the Illinois commission entered an order accepting the
proposed riders filed by CIPS designed to recover environmental cleanup costs
and associated legal expenses relating to its environmental remediation sites
(including costs previously incurred and deferred). The riders were filed in
response to the Illinois commission's generic order described in Note 2 of
Notes to Consolidated Financial Statements. CIPS began recovering amounts
under the riders in April, 1993. A total of $2.9 million was collected from
customers through December 31, 1994 under the electric environmental
adjustment clause rider and the gas environmental adjustment clause rider. In
April 1994 the Illinois commission initiated reconciliation proceedings to
determine whether the costs incurred by CIPS for environmental remediation
activities were prudently incurred costs and whether revenues collected under
the riders can be reconciled with the level of prudent costs incurred for
environmental remediation activities. CIPS has filed testimony and provided
data to the Illinois commission regarding the reconciliation proceeding. A
status hearing is scheduled for May 1995. The Illinois commission can order
refunds to customers if it determines that costs incurred for environmental
remediation activities were not prudently incurred or revenues collected under
the riders were in excess of costs properly recoverable under the riders.
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The Illinois commission conducts annual proceedings to determine whether
the electric fuel and purchased gas charges collected by CIPS in each year
pursuant to the applicable fuel adjustment and purchased gas adjustment
clauses reflect the actual costs of electric fuel and natural gas prudently
purchased in that year and to reconcile revenues collected under the clauses
during the year with actual costs incurred. The Illinois commission can order
refunds to customers if it determines that actual costs of fuel or purchased
gas were less than the amounts charged to customers pursuant to the clauses or
if it finds that CIPS was imprudent in its purchases of fuel or gas. The
Illinois commission has completed its review of fuel adjustment and purchased
gas adjustment charges for all years prior to 1993. No significant refunds or
adjustments were required for those years. Fuel reconciliation proceedings
for the year 1993 commenced in July 1994. (See Business - Utility Subsidiary
- - Central Illinois Public Service Company - Fuel.)
The most recent general rate increase of CIPS approved by the FERC became
effective in 1984. There are currently no rate proceedings pending at the
FERC, and CIPS has no plans for any such rate increase filings. All of CIPS'
requirements sales to cooperatives and municipals for resale are through
negotiated service agreements.
As a result of the retail rate increase granted to CIPS in 1992 referred
to above, a corresponding rate adjustment was granted by the FERC for certain
customers who purchase power from CIPS for resale. This rate adjustment was
provided for in the service agreements between CIPS and these customers.
In January 1985, CIPS received approval from the Illinois commission for
an economic development rate which is designed to encourage industrial
expansion and stimulate job creation in the service territory of CIPS. Under
the economic development rate, each qualifying electric customer receives
incentive rates for a maximum period of five years. In June 1986, CIPS
received further approval which grants flexibility to negotiate agreements to
fit the specific needs of certain industrial prospects. Effective June 13,
1994 the Illinois commission granted CIPS approval to offer qualifying
customers the economic development rate through January 1, 2000. The scope of
the rate was broadened to include those cutomers who receive service under the
commercial time of use rate classification. In addition, the minimum of
incremental load necessary to qualify for the special contract rate was
lowered to 500 KW from 2,000 KW. Since the rate was instituted in 1985, about
150 new or existing business expansions have led to the creation of over
10,000 new jobs in the CIPS service territory.
ELECTRIC OPERATIONS. Since late 1977 CIPS has been a net off-system
seller of electricity and during 1994 it generated 123% of its system
requirements.
The maximum gross system load to date on the CIPS electrical system, on a
one-hour integrated basis, occurred on July 5, 1994, and was 2,194,000
kilowatts. Gross system load includes sales to electric cooperative and
-13-
municipal customers (but excludes emergency and interchange sales). The 1994
maximum gross system load of 2,194,000 kilowatts was 1.7% greater than the
historical maximum gross system load of 2,157,000 which occurred in 1993.
CIPS, Illinois Power Company and Union Electric Company are parties to an
Interconnection Agreement providing for the coordination and interconnected
operation of their respective electric systems and the interchange of power
and energy at rates and under conditions set forth therein, including the
maintenance by the parties of minimum reserve capacity positions. The
Agreement provides that CIPS will maintain a minimum 15% system reserve
capacity. CIPS, Illinois Power and Union Electric are parties to an
Interconnection Agreement with Tennessee Valley Authority (TVA) providing for
the interconnection of the TVA system with the systems of the three companies
to exchange economy and emergency power and for other working arrangements.
In addition, CIPS has interconnection agreements with various other
neighboring utilities, including Central Illinois Light Company, Commonwealth
Edison Company, Indiana Michigan Power Company, Public Service Company of
Indiana, Inc., Iowa Electric Light and Power Company and Northern Indiana
Public Service Company. These agreements provide for various interchanges,
emergency services and other working arrangements.
CIPS owns 20% (and three other utilities own the remaining 80%) of the
common stock of Electric Energy, Inc., and is entitled to receive from it
varying amounts of power. Electric Energy, Inc. owns and operates a 1,015,000
kilowatt coal-fired power station located in Joppa, Illinois.
CIPS is a member of the Mid-America Interconnected Network reliability
council made up of utilities, public power generators, power marketers and
others, which has as its purpose the promotion of maximum coordination of
planning, construction and utilization of generation and transmission
facilities on a regional basis in order to assure the reliability of electric
bulk power supply in the area served.
One municipal agency, two municipal electric systems, one cooperative
agency and one cooperative are engaged in the generation of electricity
within, or in close proximity to, portions of the territory served by CIPS.
Electric and magnetic fields (sometimes referred to as EMF) surround
electric wires or conductors of electricity, such as electrical tools,
household wiring and appliances and electric transmission and distribution
lines, such as those owned by CIPS. A number of statistical and laboratory
studies have investigated whether EMF pose human health risks. The United
States Environmental Protection Agency (USEPA) stated in its December 1992
brochure "Questions and Answers about Electric and Magnetic Fields" that "Some
epidemiological evidence is suggestive of an association between surrogate
measurements of magnetic field exposure and certain cancer outcomes. Though
the body of evidence cannot be dismissed, it is not complete enough at this
time to draw meaningful conclusions." The nation's electric utilities,
including CIPS, have participated in the sponsorship of millions of dollars of
-14-
EMF research. CIPS has also agreed to participate in the National EMF
Research and Public Information Dissemination Program, a 5-year $65 million
effort headed by the United States Department of Energy aimed at furthering
EMF research. Through its participation with Electric Power Research
Institute, CIPS will continue its investigation and research with regard to
the possible health effects posed by exposure to EMF.
ELECTRIC POWER SALES/PARTICIPATION AGREEMENTS. As shown in the table below,
CIPS currently has contracts with Norris Electric Cooperative, City of Newton,
Village of Greenup and Mt. Carmel Public Utility Company for the sale of
electric power. These contracts provide for firm full requirements service
which obligates CIPS to maintain adequate system reserves to support the
contracts, or to supply the requirements with off-system purchases.
Peak Contract
Demand Expiration
Contract (Megawatts) Date
________ ___________ __________
Norris Electric Cooperative. . . . . . . . . 49 MW 2007
City of Newton . . . . . . . . . . . . . . . 5 MW 1999
Village of Greenup . . . . . . . . . . . . . 2 MW 1999
Mt. Carmel Public Utility Co. . . . . . . . 40 MW 2001
In 1990, CIPS entered into an agreement with Central Illinois Light
Company ("CILCO") to sell to CILCO, beginning January 1, 1991, limited term
power through May, 1998. The agreement calls for a minimum contract delivery
rate of 70 megawatts in 1995 rising to 90 megawatts by the end of the contract
period. At CILCO's request, and provided the capacity is available, purchases
can be increased to 100 megawatts at any time during the contract period with
prior written notice. In November 1992, CIPS entered into an agreement with
CILCO to sell to CILCO limited term power for the period of June, 1998 through
May, 2002. The agreement calls for a minimum contract delivery rate of 100
megawatts for the entire period. At CILCO`s request, and provided the
capacity is available, purchases can be increased to 150 megawatts with prior
written notice.
In addition, CIPS sells electric power to three power pooling agencies
through negotiated capacity participation agreements identified in the
following table. These agencies include Soyland Power Cooperative (Soyland),
Illinois Municipal Electric Agency (IMEA) and Wabash Valley Power Association
(WVPA).
Maximum
Capability Contract
Entitlement Expiration
Contract (Megawatts) Date
________ ___________ __________
Soyland . . . . . . . . . 102 MW 1999
IMEA. . . . . . . . . . . 122 MW 2014
WVPA. . . . . . . . . . . 65 MW 2011
-15-
GAS OPERATIONS. CIPS distributes and sells natural gas to 267
incorporated and unincorporated communities located in 41 counties of central
and southern Illinois. The CIPS service territory is predominantly made up of
small towns and rural areas. Of the communities served, only 5 have
populations greater than 15,000. CIPS operates 4,551 miles of transmission
and distribution mains, and its customer density is approximately 36 customers
per mile of main.
Six interstate pipelines pass through various portions of the CIPS service
area: Panhandle Eastern Pipe Line Company, Texas Eastern Transmission
Corporation, Natural Gas Pipeline Company, Texas Gas Transmission Company,
Midwestern Gas Transmission Company and Trunkline Gas Company. CIPS has
multiple interconnections with each of these pipelines, with the total of all
such interconnections being 46. Most of the CIPS system is integrated by
virtue of CIPS owned pipelines, or by transportation agreements with
interstate pipelines.
CIPS owns and operates four underground storage fields which provide a
total peak day capacity of 41,500 thousand cubic feet per day (mcf/day). CIPS
also operates one propane-air peak shaving facility which has a peak day
capacity rating of 10,000 mcf/day.
The peak day firm demand recorded by CIPS in 1994 was 306,859 mcf which
was reached on January 15, 1994. This demand level is 3.8% less than the all-
time peak demand of 319,033 mcf which occurred on December 24, 1983. During
1994, the CIPS throughput (total of sales and transportation) was 35.6 billion
cubic feet (bcf) compared to 36.5 bcf experienced in 1972, the year of highest
historical throughput. In 1994, CIPS transported 12.0 bcf of customer-owned
gas which represented 34% of the total system throughput. Volumes of
customer-owned gas transported in 1993 and 1992 were 10.8 bcf and 11.8 bcf,
respectively. The average cost per mcf of natural gas purchased from all
suppliers was about $3.41 in 1994, $3.66 in 1993 and $3.66 in 1992.
The rate schedules of CIPS applicable to all of its gas sales include a
uniform purchased gas adjustment clause, which permits CIPS to adjust its
rates to its customers to reflect substantially all changes in the cost of
purchased gas. (See Note 1 of Notes to Consolidated Financial Statements
included under Item 8 of this report. See Business - Utility Subsidiary -
Central Illinois Public Service Company - Rate Matters.)
In 1992, the FERC issued orders (together called Order 636) which address
pipeline service restructuring. Order 636 required interstate pipelines to
"unbundle" their sales service, and offer separately the components of that
service (i.e., gas supply, transportation and storage). Order 636
essentially precludes interstate pipelines from selling natural gas. However,
many pipelines have established separate unregulated marketing affiliates
which function as gas merchants in competition with producers and other
sellers of gas. The Illinois commission order permitting CIPS to collect
transition costs from customers was upheld on appeal.
-16-
Each of the six pipelines providing service to CIPS have made restructured
services filings at FERC to comply with Order 636. The last such filing was
effective December 1, 1993.
See Note 2 of Notes to Consolidated Financial Statements included under
Item 8 of this report for a discussion of various matters related to Order 636
transition costs.
Full implementation of Order 636 has resulted in several changes in CIPS'
gas supply portfolio. Pipeline sales service contracts have been replaced by
direct purchase gas supply contracts coupled with gas transportation contracts
with various pipelines and storage contracts with pipelines or other
independent storage service providers. In some cases CIPS has also contracted
for so-called "no-notice" services with interstate pipelines. Under such
contracts, the pipeline company combines and manages a number of independent
transportation and storage contracts in order to provide flexibility in the
amount of gas actually delivered to CIPS on any day. Such flexibility, which
was formerly provided by the pipeline sales service, is needed for CIPS to
economically meet the highly weather sensitive needs of its firm service
customers.
In addition to its diversified portfolio of gas supply, transportation,
leased storage and no-notice service contracts, CIPS owned storage and
propane-air facilities provide additional reliability and flexibility to meet
peak day and peak season requirements. In recent years CIPS has made
investments to construct additional pipeline interconnections, increase CIPS
owned storage capacity, improve reliability of existing storage facilities,
modernize propane-air facilities and improve data acquisition capabilities.
At the same time CIPS has reorganized and enhanced its gas supply planning and
procurement functions.
FUEL. Over 99% of the net kilowatthour generation of CIPS in 1994 was
provided by coal-fired generating units and the remainder by an oil-fired
unit.
The average costs of fuel consumed by CIPS, per ton and per million Btu,
for the periods shown were as follows:
1994 1993 1992
----- ----- -----
Per ton ($) . . . . . . . . . . . . 35.44 36.62 36.46
Per million Btu ($) . . . . . . . . 1.65 1.67 1.67
In 1994, approximately 19.6% of the coal purchased for electric generation
was purchased on a spot basis at average delivered costs of $30.20 per ton and
$1.36 per million Btu.
The retail fuel adjustment clause (FAC) of CIPS is consistent with the
uniform FAC mandated by the Illinois commission for all electric utilities as
applicable to retail electric sales in Illinois. The FAC provides for the
recovery of changes in electric fuel costs, including certain transportation
-17-
costs of coal, in billings to retail customers. CIPS adjusts fuel expense to
recognize over- or under-recoveries of allowable fuel costs. The cumulative
effect is deferred on the Balance Sheet as a Current Asset or Current
Liability, pending automatic reflection in future billings to customers. In
1992, CIPS received Illinois commission approval to include certain coal
transportation costs in the FAC in accordance with the August 1991
modifications to the Illinois Public Utilities Act.
CIPS also has contractual arrangements with certain other utility system
customers which contain a fuel adjustment clause or provide for a sharing of
fuel costs which permit CIPS to adjust its rates to such customers to reflect
substantially all changes in the cost of fuel (including all transportation
costs) used to supply those customers.
The amount of coal supplies on hand at the generating stations of CIPS
varies from time to time. CIPS generally attempts to maintain a 65-day
supply. Approximately 80% of the annual coal requirements of the generating
facilities of CIPS are being met by long-term coal contracts expiring at
various dates from 1995 to 2010. As contracts approach their expiration, or
when appropriate, CIPS evaluates alternative supply arrangements based on then
current and expected market conditions for coal. CIPS believes there are
adequate reserves reasonably available to supply its existing generating units
with the quantity and quality of coal required for the foreseeable future.
See Management's Discussion and Analysis of Financial Condition and
Results of Operations - Central Illinois Public Service Company - Capital and
Financial Requirements and - CIPS Results of Operations (1992-1994) - Fuel
Strategies and - Clean Air Act.
REGULATION. CIPS is subject to regulation by the Illinois commission as
to rates, accounting practices, issuance of certain securities and in other
respects as provided by Illinois law. The Electric Supplier Act of Illinois
permits utilities and electric cooperatives to delineate their respective
service areas, subject to the approval of the Illinois commission, and gives
the Illinois commission power to determine, pursuant to guidelines provided in
the Act, whether a prospective electric customer will be furnished service by
a public utility or by a cooperative. (See Item 3. Legal Proceedings.)
The FERC has jurisdiction under the Federal Power Act over certain of the
electric utility facilities and operations, accounting practices, issuance or
acquisition of certain securities and electric rates of CIPS for resale and
interchange customers. CIPS has been classified as a "public utility" within
the meaning of that Act. CIPS has been declared exempt from the federal
Natural Gas Act.
CIPS is presently exempt from all the provisions of the Public Utility
Holding Company Act of 1935, except provisions thereof relating to the
acquisition of securities of other public utility companies, until further
action by the Securities and Exchange Commission, by virtue of an annual
exemption statement filed by CIPS with the Commission pursuant to Rule 2 under
the Act.
-18-
ENVIRONMENTAL MATTERS. CIPS is subject to regulation with respect to air
and water quality standards, standards relating to the discharge and disposal
of solid and hazardous wastes and other environmental matters by various
federal, state and local authorities. The Illinois Pollution Control Board
(the "Board") has jurisdiction over all phases of environmental control by the
State of Illinois and has authority to grant variances from environmental
requirements. The Illinois Environmental Protection Agency (the "Agency") has
authority to issue permits, investigate violations and recommend enforcement
cases. The Illinois Attorney General has the authority to prosecute
enforcement cases. The USEPA has jurisdiction to promulgate and enforce air
and water quality standards in addition to those standards which relate to the
discharge and disposal of solid and hazardous wastes.
Air pollution control regulations promulgated by the Board impose
restrictions on emissions of particulate, sulfur dioxide, nitrogen oxides and
other air pollutants and require that CIPS obtain permits from the Agency for
the construction and operation of its generating facilities in compliance with
these regulations. CIPS has secured all necessary operating permits for all
of its existing generating facilities and is in substantial compliance with
the provisions contained therein. Future construction projects may require
additional construction permits.
Current compliance strategy regarding the sulfur dioxide emission
requirements of Phase I (effective in 1995) and Phase II (effective in 2000)
of the Clean Air Act Amendments of 1990 is expected to be accomplished through
switching to lower sulfur coal for several generating units. In addition,
CIPS is evaluating various alternatives to determine whether renovations to
the existing scrubber at Newton Unit 1 are required to allow existing or
additional levels of scrubbing or if the compliance strategy should be changed
to place more reliance on fuel switching. (See Management's Discussion and
Analysis of Financial Condition and Results of Operations - CIPS Results of
Operations (1992-1994) - Fuel Strategies and - Clean Air Act.) In January
1991, CIPS entered into a long-term contract for the purchase of lower sulfur
Illinois coal at its Coffeen Power Station to meet the requirements under the
Clean Air Act Amendments. This new contract replaced an existing contract
and, in addition to providing the source of coal for clean air compliance,
resulted in lower fuel costs. The new contract provides for certain charges
in the event of termination of the contract as described in Note 2 of Notes to
Consolidated Financial Statements included under Item 8 of this report. Under
the Clean Air Act Amendments each utility must have, beginning in 1995,
sufficient emission allowances, which are granted by the USEPA, to cover the
amount of sulfur dioxide to be emitted each year from its generating stations.
Any emission allowances in excess of a utility's needs for a year can be
retained by it for future use or sold. Based upon CIPS' current compliance
program, CIPS expects to have available allowances (after consideration of
allowances sold) in excess of its requirements.
Water pollution control regulations promulgated by the Board impose
restrictions on effluent discharges, set water quality standards and require
CIPS to obtain construction permits for certain facilities and National
Pollutant Discharge Elimination System ("NPDES") permits for discharges into
-19-
public waters. CIPS has secured all necessary NPDES permits for all of its
generating units and is in substantial compliance with the currently effective
provisions contained therein. In 1994, CIPS appealed to the Illinois
Pollution Control Board the permit conditions then imposed in renewed permits
for the Coffeen and Newton power stations, which were scheduled to take effect
in 1997, on the basis that it would not be feasible to comply with certain
conditions of the permits. In January 1995, the subject permits were reissued
with revised conditions and the appeal was withdrawn. CIPS expects to be able
to comply with the revised permit conditions.
Pollution control regulations promulgated by the Board impose restrictions
on the discharge and disposal of solid and hazardous waste, and determine
design standards to prevent contamination of groundwater. CIPS has secured
all necessary permits and authorizations for disposal and is in substantial
compliance with the provisions contained therein. Future construction
projects may require additional authorizations or permits.
See the subcaption "Environmental Remediation Costs" under Note 2 of the
Notes to Consolidated Financial Statements, included under Item 8 of this
report, for information relating to costs incurred and to be incurred in
connection with the remediation of certain sites where gas had been
manufactured from coal and which contain potentially harmful materials.
EMPLOYEES. The business of CIPSCO is conducted through the use of
employees of CIPS and CIPSCO reimburses CIPS for the cost of using those
employees.
The composition of the work force of CIPS at the payroll period nearest
year-end 1994 and 1993 was as follows:
Number of Employees
-------------------
Employee Group 1994 1993
- -------------- ----- -----
Salaried. . . . . . . . . . . . . . . . . 1,201 1,218
IBEW - 702. . . . . . . . . . . . . . . . 915 922
IUOE - 148. . . . . . . . . . . . . . . . 476 479
----- -----
Total . . . . . . . . . . . . . . . . . . 2,592 2,619
===== =====
Contracts with IBEW - 702 and IUOE - 148 extend through June 30, 1995.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations - CIPS Results of Operations (1992-1994) -- Labor Disputes for a
discussion of matters involving those employees represented by labor unions.
-20-
Item 2. Properties.
Currently, CIPSCO principally conducts its business through the use of the
properties of CIPS. CIC leases office space pursuant to a lease expiring
August 31, 1995. CIPSCO has no other material properties.
The electric generating facilities of CIPS consist of the following:
Estimated
1995 Summer
Year Capability
Station and Unit Fuel Installed (KW)
- ---------------- ---- --------- -----------
Newton
Unit 1 . . . . . . . . . . . . . . Coal 1977 555,000
Unit 2 . . . . . . . . . . . . . . Coal 1982 555,000
Coffeen
Unit 1 . . . . . . . . . . . . . . Coal 1965 325,000
Unit 2 . . . . . . . . . . . . . . Coal 1972 550,000
Grand Tower
Unit 3 . . . . . . . . . . . . . . Coal 1951 82,000
Unit 4 . . . . . . . . . . . . . . Coal 1958 104,000
Hutsonville
Unit 3 . . . . . . . . . . . . . . Coal 1953 76,000
Unit 4 . . . . . . . . . . . . . . Coal 1954 77,000
Diesel Unit. . . . . . . . . . . . Oil 1968 3,000
Meredosia
Unit 1 . . . . . . . . . . . . . . Coal 1948 62,000
Unit 2 . . . . . . . . . . . . . . Coal 1949 62,000
Unit 3 . . . . . . . . . . . . . . Coal 1960 215,000
Unit 4 . . . . . . . . . . . . . . Oil 1975 168,000
__________
Total . . . . . . . . . . . . . 2,834,000
==========
All of the generating stations are located in Illinois on land owned in
fee by CIPS.
-21-
At December 31, 1994, CIPS owned 13,013 pole miles of overhead electric
lines and 891 miles of underground electric lines. At that date, CIPS also
owned 4,551 miles of natural gas transmission and distribution mains, four
underground gas storage fields and one propane-air gas plant used to
supplement the available pipeline supply of natural gas during periods of
abnormally high demands.
Substantially all of the permanent fixed utility property of CIPS is
subject to the lien of the Mortgage Indenture securing CIPS first mortgage
bonds.
Item 3. Legal Proceedings.
CIPSCO is not involved in any material legal proceedings.
With respect to CIPS, actions were brought against CIPS by Southwestern
Electric Cooperative, Inc. ("Southwestern") on October 30, 1991 in the Macon
County, Illinois Circuit Court and by Wayne-White Counties Electric
Cooperative ("Wayne-White" and together with Southwestern, the "Distribution
Cooperatives") on August 15, 1991 in the White County, Illinois Circuit Court.
Soyland Power Cooperative ("Soyland"), a generating and transmission
cooperative that supplies power to the Distribution Cooperatives, was also a
plaintiff in the actions. In various prior cases brought before the Illinois
commission and finally determined on appeal, the Distribution Cooperatives
prevailed in disputes between each of them and CIPS as to which of them was
entitled to serve certain electric customers under the Illinois Electric
Supplier Act ("ESA") and certain service area agreements entered into pursuant
to the ESA. Based on the results of the prior proceedings, these suits, in
general, sought actual damages for breach of the service area agreements and
punitive damages based on various grounds, such as tortious interference with
contractual relationships and business expectancies and violation of the
Illinois Public Utilities Act.
A CIPS motion to dismiss the Southwestern/Soyland case was successful
only as to certain counts. In the remaining counts, Southwestern sought
$182,000 in alleged actual damages for breach of the service area agreement
and an additional $5 million in punitive damages for both interference with a
contractual relationship and a business expectancy (it was not clear whether
these claims were intended as separate bases for the recovery of $5 million in
punitive damages or were cumulative). In addition, Soyland sought $323,000 in
alleged actual damages and $5 million in punitive damages for interference
with a business expectancy. In the Wayne-White/Soyland action, Wayne-White
sought unspecified alleged actual damages for breach of the service area
agreement and additional unspecified punitive damages for violation of the
Public Utilities Act and interference with a business expectancy. In
addition, Soyland claimed $819,000 in alleged actual damages based on breach
of the service area agreement and an additional $5 million in punitive damages
based on interference with both a contractual relationship and a business
expectancy and based on violation of the Public Utilities Act (again, it was
not clear whether these claims were intended as separate bases for the
recovery of $5 million in punitive damages or were cumulative). On March 11,
-22-
1993, Soyland was dismissed from the Wayne-White action on statute of
limitations grounds and the claims by Wayne-White under the Illinois Public
Utilities Act were dismissed. Soyland filed an appeal of its dismissal.
In early 1995, all parties (CIPS, Soyland and the Distribution
Cooperatives) to the above listed legal claims and other matters entered into
a settlement agreement, subject to final approval by all parties. By the
terms of the settlement agreement the parties agreed that 1) the lawsuits
brought against CIPS by Soyland, Southwestern and Wayne-White would be
dismissed; 2) CIPS would credit $400,000 against the monthly billings CIPS
issues to Soyland for electric energy Soyland purchases from CIPS and CIPS
would recognize that, in certain instances, Soyland has rights under the
Service Area Agreements between CIPS and Soyland's Distribution Cooperative
customers.
In May and Hryhorysak v. Central Illinois Public Service Company and
Hanson Engineers, Inc., Docket 91-L-56, the plaintiffs brought an action in
the Circuit Court for the Fourth Judicial Circuit, Christian County, Illinois
claiming that, as a result of exposure to carcinogens contained in coal tar at
the CIPS Taylorville gas plant site, plaintiffs' children had suffered from a
rare childhood cancer known as "neuroblastoma." As amended, the complaint
seeks damages on behalf of four children, one of whom is deceased. A
plaintiffs' motion to amend the complaint to seek punitive damages was denied
in 1994. Substantial discovery has been conducted in the case which is
scheduled for trial in late summer 1995. CIPS is vigorously defending the
action and believes it has meritorious defenses. Management believes that
insurance may be available with respect to the defense of these claims.
Management believes that final disposition of this matter will not have a
material adverse effect on financial position or results of operations.
See Item 1. Business - Utility Subsidiary - Central Illinois Public
Service Company - Rate Matters, - Gas Operations and - Environmental Matters
with respect to certain matters involving CIPS. See also Note 2 of Notes to
Consolidated Financial Statements included under Item 8 of this report.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders of either
CIPSCO or CIPS during the three months ended December 31, 1994.
Executive Officers of CIPSCO (ages at December 31, 1994).
Name Age Positions Held
_____ ___ ______________
C. L. Greenwalt 61 President and Chief Executive Officer of
CIPSCO*
President and Chief Executive Officer of CIPS
and Chairman of the Board of CIC
-23-
Name Age Positions Held
_____ ___ ______________
R. W. Jackson 64 Senior Vice President, Secretary and Chief
Financial Officer of CIPSCO*
Senior Vice President - Finance and Secretary
of CIPS
President and Chief Executive Officer of CIC
J. C. Fiaush 64 Controller, Chief Accounting Officer and
Assistant Treasurer of CIPSCO and Controller
of CIPS
C. D. Nelson 41 Treasurer, Assistant Secretary and Assistant
Controller of CIPSCO and Treasurer and
Assistant Secretary of CIPS
______________________
* Messrs. Greenwalt and Jackson are directors of CIPSCO.
The present term of office of the above executive officers extends to the
first meeting of CIPSCO's Board of Directors after the next annual election of
Directors, scheduled to be held on April 26, 1995. There is no family
relationship between any executive officer and any other executive officer or
any director.
Each of the officers named above has been employed by CIPSCO and/or CIPS
for more than the past five years in various executive capacities.
Executive Officers of CIPS (ages at December 31, 1994).
Name Age Positions Held
_____ ___ ______________
C. L. Greenwalt 61 President and Chief Executive Officer*
R. W. Jackson 64 Senior Vice President Finance and Secretary*
L. A. Dodd 56 Senior Vice President Operations
J. G. Bachman 46 Vice President Marketing
W. A. Koertner 45 Vice President Corporate Services
G. W. Moorman 51 Vice President Power Supply
W. R. Morgan 58 Vice President Division Operations
W. R. Voisin 59 Vice President Public Relations
J. C. Fiaush 64 Controller (Principal Accounting Officer)*
C. D. Nelson 41 Treasurer and Assistant Secretary*
______________________
* Messrs. Greenwalt and Jackson are directors of CIPS and are also officers
and directors of CIPSCO. Mr. Fiaush and Mr. Nelson are also officers of
CIPSCO.
-24-
The present term of office of the above executive officers extends to the
first meeting of the Board of Directors of CIPS after the next annual election
of Directors, scheduled to be held on April 26, 1995. There is no family
relationship between any executive officer and any other executive officer or
any director.
All of the officers named above have been employed by CIPS in their
present positions for more than the past five years except as indicated below:
Mr. Dodd served as Vice President Division Operations from August 1, 1989
to July 1, 1990 when he was named Senior Vice President Operations.
Mr. Bachman served as Vice President Corporate Planning from August 1,
1989 to January 1, 1995, when he was named Vice President Marketing.
Mr. Koertner served as Vice President Financial Services from August 1,
1989 to April 1, 1993, when he was named Vice President Corporate Services.
Mr. Morgan served as Vice President Corporate Services from August 5,
1980 to July 1, 1990, when he became Vice President Division Operations.
-25-
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
CIPSCO
CIPSCO's common stock is publicly held and traded on both the New York
Stock Exchange and the Chicago Stock Exchange. The table below sets forth,
for the periods indicated, the dividends per share of common stock of CIPSCO
and the high and low sales prices of the CIPSCO common stock as reported in
New York Stock Exchange Composite listings.
Quarter
_______
1994 First Second Third Fourth
____ _____ ______ _____ ______
Price Range
High $30 5/8 $30 1/4 $28 1/2 $28 3/8
Low 27 7/8 25 1/4 25 1/2 26 1/4
Close 28 1/8 25 1/2 27 1/8 27
______ ______ ______ ______
Cash dividends
declared (cents) $ .49 $ .50 $ .50 $ .50
====== ====== ====== ======
1993
____
Price Range
High $32 3/4 $33 5/8 $33 3/4 $33 3/8
Low 29 1/4 31 1/4 32 29 1/4
Close 32 3/4 32 33 5/8 30 3/4
______ ______ ______ ______
Cash dividends
declared (cents) $ .48 $ .49 $ .49 $ .49
====== ====== ====== ======
The approximate number of CIPSCO common shareholders of record as of
December 31, 1994, was 40,221.
-26-
CIPS
All the common stock of CIPS is owned by CIPSCO and is not publicly
traded. The following table sets forth the cash distributions on common stock
paid to CIPSCO by CIPS, which, in some cases, were used to repurchase common
shares of CIPS for the periods indicated:
1994 1993
____ ____
First Quarter . . . . . . . . . . $17,000,000 $16,500,000*
Second Quarter . . . . . . . . . . $17,200,000 $16,750,000*
Third Quarter . . . . . . . . . . $17,200,000 $16,750,000
Fourth Quarter . . . . . . . . . . $17,200,000 $16,750,000
* Reflects the repurchase of common shares of CIPS.
DIVIDEND RESTRICTIONS
CIPSCO and CIPS are subject to restrictions on the use of retained
earnings for cash dividends on common stock as described in Note 6 of Notes to
Consolidated Financial Statements included under Item 8 of this report. The
ability of CIPSCO to pay dividends on its common stock is dependent upon
distributions made to it by CIPS and on amounts earned by CIPSCO on its other
investments.
Item 6. Selected Financial Data.
CIPSCO
For the Years Ended
December 31, 1994 1993 1992 1991 1990
__________ __________ __________ __________ __________
(in thousands, except per share data)
Operating Revenues $ 844,615 $ 844,760 $ 739,877 $ 722,081 $ 699,721
Operating Income 165,345 170,735 142,986 154,820 144,063
Net Income 83,954 85,498 72,499 72,065 65,756
Earnings per common
share 2.46 2.51 2.13 2.11 1.92
Dividends declared
per common share 1.99 1.95 1.91 1.87 1.83
As of December 31,
Total Assets $1,777,357 $1,757,750 $1,725,456 $1,751,574 $1,720,059
Long-Term Debt 474,619 494,323 503,700 496,420 496,319
-27-
CIPS
For the Years Ended
December 31, 1994 1993 1992 1991 1990
__________ __________ __________ __________ __________
(in thousands)
Operating Revenues $ 835,882 $ 834,556 $ 729,402 $ 710,205 $ 685,226
Operating Income 110,678 113,651 97,372 104,039 97,135
Net Income 81,913 84,011 72,601 75,683 71,562
Preferred Dividends 3,510 3,718 4,549 5,396 5,617
Earnings for Common
Stock 78,403 80,293 68,052 70,287 65,945
As of December 31,
Total Assets $1,678,650 $1,668,462 $1,645,059 $1,691,843 $1,665,614
Long-Term Debt 474,619 494,323 503,700 496,420 496,319
Preferred Stock
subject to mandatory
redemption - - - 18,245 21,245
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
____________________________________
CIPSCO Incorporated is a holding company incorporated under the laws of
Illinois. Its principal subsidiary is Central Illinois Public Service Company
(CIPS), an electric and natural gas utility. Another subsidiary, CIPSCO
Investment Company (CIC), has subsidiaries engaged in non-utility investing
activities. Material changes in the consolidated financial condition and
results of operations are primarily attributable to CIPS operations, except
where noted.
CIPSCO Incorporated
Fundamental strengths of the financial position of CIPSCO and its
subsidiaries remained intact during 1994. CIPSCO's business activities are
conducted by CIPS and CIC. A discussion of the financial condition of CIPS
and CIC follows in the sections below.
CIPSCO may become involved in additional businesses or investments
directly, through a subsidiary or through the formation of one or more
additional subsidiaries. The sources of capital to finance these activities
will depend on the nature of the investment and market conditions.
-28-
The total number of shares of common stock authorized under CIPSCO's
articles of incorporation is 100 million. At year-end 1994, a total of
34,069,542 shares of common stock was outstanding. This was 38,164 shares, or
0.1 percent, lower than at year-end 1993 reflecting the repurchase of shares
by the Company from holders of less than 100 shares through an oddlot
repurchase program. No underwritten offerings of common stock are planned
through 1999.
CIPSCO is authorized to issue 4.6 million shares of preferred stock, none
of which has been issued. There are no constraints in the CIPSCO articles of
incorporation as to the amount of debt which may be issued. However, CIPSCO
has had no debt outstanding.
At year-end 1994, CIPSCO had no temporary investments or short-term
borrowings.
CIPSCO Investment Company
At year-end 1994 there were $98 million of non-utility investments managed
by CIC and subsidiaries.
One of those subsidiaries, CIPSCO Securities Company, invests in
marketable securities. At year end it had invested approximately $44 million
in hedged portfolios of preferred and common stocks and other marketable
securities.
Another subsidiary, CIPSCO Leasing Company, invests in long-term leveraged
lease transactions. At year end, $34 million was invested in leased assets
consisting of a commercial jet aircraft, an interest in a natural gas liquids
plant, natural gas processing equipment and retail department store
properties.
A third subsidiary, CIPSCO Energy Company (CEC), seeks energy-related
investment opportunities. Through 1994, it purchased existing leases, or
interests in such leases, for nine combustion turbine generating units leased
to five investor-owned utilities in the United States. At year-end 1994 CEC
had $16 million invested.
A fourth subsidiary, CIPSCO Venture Company (CVC), was established in 1994
primarily to invest within the CIPS service territory. CVC's initial
investment consisted of $.5 million for the construction of a building which
is leased to a manufacturing firm.
In the near term, CIC will seek additional investments which yield higher
returns than the types of temporary investments available to CIPS. The long-
term goal of CIC's investment policy is to earn returns that exceed the
allowed return in the regulated utility business.
CIC may become involved in additional non-utility activities directly,
through a subsidiary or through the formation of one or more additional
subsidiaries. The sources of capital to finance these activities will depend
on the nature of the investment and market conditions.
At year-end 1994, CIC had $3.3 million of temporary investments and no
short-term borrowings.
-29-
Central Illinois Public Service Company
FINANCIAL CONDITION. The utility's financial position remained
fundamentally strong during 1994.
In recent years a strong capital structure and ample cash flows have
minimized the need to access capital markets, other than for refinancings.
Neither CIPSCO nor CIPS has had to raise additional capital through the sale
of common stock to the general public since 1980. Common stock was issued and
sold to existing shareholders by CIPS through a dividend reinvestment plan
until 1984.
The long-range financial objectives for the capital structure of the
utility subsidiary are: a debt ratio of no more than 45 percent, a common
equity ratio of no less than 45 percent, and a preferred equity ratio of no
more than 10 percent. At December 31, 1994, capitalization consisted of 42
percent long-term debt, 51 percent common equity and 7 percent preferred
stock.
At year end, 25,452,373 shares of CIPS common stock were outstanding, all
of which were held by CIPSCO Incorporated.
CAPITAL AND FINANCING REQUIREMENTS. Construction expenditures were $97
million in 1994. Of that amount, $83 million and $14 million related to
improvements and replacements to the electric and natural gas systems,
respectively.
In 1995 construction expenditures are expected to be about $98 million.
Of that amount, $87 million is scheduled for electric facilities, while gas
system expenditures are estimated at $11 million.
For the five-year period 1995-1999, construction expenditures are
estimated at $449 million. This is $47 million, or 9 percent, less than was
spent in the preceding five years. The projected five-year amounts include
about $40 million for environmental compliance including compliance with the
Clean Air Act Amendments of 1990.
In addition to construction funds, projected capital requirements for the
1995-1999 period include $123 million for scheduled debt retirements.
Capital requirements for the 1995-1999 period are expected to be met
primarily through internally generated funds. External financing to fund
scheduled debt retirements may be required. If external financing were needed
to fund the construction program, such financing could consist of funds from
the parent, including the issuance of CIPS common stock to the parent, the
issuance of short-term debt, long-term debt or preferred stock, or any
combination of the four. Refinancings to lower the costs of capital may also
occur, depending on market conditions.
During the year, CIPS received extended authority from the Illinois
Commerce Commission to issue up to $60 million of first mortgage bonds,
medium-term notes and/or preferred stock through December 31, 1996.
Capital and financing requirements may be affected by such factors as
availability and cost of capital, load growth, changes in construction
expenditures, regulatory developments, changes in environmental regulations
and other governmental activities.
-30-
CIPS is evaluating alternatives for reducing fuel costs and other expenses
while maintaining environmental compliance. The current compliance strategy,
or adoption of certain alternatives in fuel and/or environmental strategies,
could result in substantial increases in capital expenditures in the 1995-1999
period from the amounts shown above. Additional external financing could be
required. (See Fuel Strategies and Clean Air Act below.)
FINANCING FLEXIBILITY AND LIQUIDITY. The utility's ability to finance the
construction program at reasonable cost and to provide for other capital needs
is dependent upon its ability to earn a fair return on capital. Financing
flexibility is enhanced by providing a high percentage of total capital
requirements from internal sources and having the ability, if necessary, to
issue long-term securities and to obtain short-term credit. Flexibility also
is provided by the parent corporation which is capable of providing additional
capital if circumstances warrant. Security issues by the utility are subject
to regulatory approvals.
The utility's mortgage indenture limits the amount of first mortgage bonds
which may be issued. At December 31, 1994, CIPS could have issued about $450
million of additional first mortgage bonds under the indenture, assuming an
annual interest rate of 8.3 percent.
CIPS' articles of incorporation limit amounts of preferred stock which may
be issued. Assuming a preferred dividend rate of 8.25 percent, the utility
could have issued all $185 million of authorized, but unissued preferred stock
remaining as of year end.
At year-end 1994, CIPS had $2.6 million of temporary investments and $15.0
million of short-term borrowings.
CONSOLIDATED RESULTS OF OPERATIONS
----------------------------------
(1992-1994)
EARNINGS. Net income and earnings per share declined 1.8 percent in 1994
to $84.0 million and $2.46, respectively, compared with an increase of 18
percent in 1993. The return on average common equity for 1994 was 13.1%
compared with 13.7% in 1993 and 11.8% in 1992.
The declines in net income, earnings per share, and return on average
common equity in 1994 were in line with expectations, as the increases in 1993
were primarily attributable to unusually high interchange sales by CIPS to
other utilities caused by hot weather, a coal miners' strike and Midwest
flooding. Contributing to the declines in 1994 were higher operating expenses
primarily attributable to labor settlement costs and higher maintenance costs.
INVESTMENT REVENUES. Investment revenues are comprised of income from
temporary investments, long-term marketable securities, and leveraged leases.
Investment revenues declined $1.5 million in 1994 due principally to
reduced revenue from leasing investment transactions.
In 1993, investment revenues decreased slightly due to a decline in
average temporary investment balances in 1993 compared with 1992.
-31-
CIPS RESULTS OF OPERATIONS
--------------------------
(1992-1994)
ELECTRIC OPERATIONS. Electric kilowatthour sales, including interchange
sales, declined 3 percent in 1994. Cooling degree days for 1994 were 11
percent lower than in 1993 and 9 percent lower than average.
The 1994 electric margin (revenues less revenue taxes, fuel and purchased
power) was $421.6 million compared to $418.2 million in 1993 and $381.4
million in 1992. The 1994 margin was favorably impacted by sales growth to
commercial and industrial customers and by higher margin ratios on interchange
economy and emergency sales to other utilities. The 1993 margin was favorably
impacted by hot summer weather and increased interchange sales opportunities
resulting from the hot weather, a coal miner's strike and Midwest flooding.
Fuel costs were $1.65 per million Btu in 1994 and $1.67 per million Btu in
1993 and 1992. Purchased power amounts fluctuated between years according to
system requirements and sales opportunities.
GAS OPERATIONS. Therm sales declined 1.3 percent in 1994 due principally
to the mild weather in the fourth quarter of 1994 as compared to the same
quarter in 1993. Heating degree days for 1994 were 8 percent lower than in
1993 and 4 percent lower than average.
The 1994 gas margin (revenue less revenue taxes and gas costs) was $46.1
million compared to $48.2 million in 1993 and $44.6 million in 1992. The 1994
gas margin was negatively impacted by mild weather during 1994. Gas costs
fluctuated according to system requirements in each year. The average price
paid for gas from suppliers declined two and one-half cents per therm in 1994
and remained unchanged in 1993 and 1992.
OPERATING EXPENSES. Other operation expenses declined 2 percent in 1994,
due principally to a reduction in the postretirement medical costs and
deferral of certain litigation expenses involved with an environmental matter.
Consistent with the ratemaking treatment for environmental remediation site
costs, $1.9 million expensed in 1993 was credited to expense and deferred in
1994.
Other operation expenses increased 9 percent in 1993 compared with 1992
due principally to postretirement medical costs which CIPS began accruing in
April 1992.
Maintenance expense changes between years are due to the normal planning
and scheduling of major power plant maintenance outages.
Depreciation and amortization expense increases are primarily due to
property additions.
Taxes other than income taxes generally will change as retail revenues
change; however, taxes other than income taxes increased in 1994 compared to
1993, primarily due to payroll taxes which were reduced in 1993 due to the
lockout of union-represented employees.
Interest on long-term debt decreased in both 1994 and 1993 due to
retirement of debt in 1994 and refinancing of long-term debt in 1993 at lower
interest rates.
-32-
Miscellaneous, net, for 1993 decreased due to a one-time increase in
miscellaneous income in 1992 resulting from a Federal Energy Regulatory
Commission (FERC) order involving wholesale customers.
Income tax expense reflects the changes in pre-tax income between years.
In addition, the federal tax rate changed from 34 percent to 35 percent
effective January 1, 1993.
OTHER MATTERS. Customer usage of electricity and natural gas varies with
weather conditions, general business conditions, the state of the economy and
the cost of energy services. The level of sales also is impacted by
conditions in the interchange market. Further, certain large gas customers
can purchase gas from alternative suppliers or bypass the utility system by
switching to other fuels or by connecting directly to pipelines.
Rates for retail electric and gas service are regulated by the Illinois
Commerce Commission. Non-retail electric rates are regulated by FERC.
The utility's rates are designed to recover operating costs including
depreciation on utility plant investment. Changes in the cost of fuel for
electric generation and gas costs generally are reflected in billings to
customers on a timely basis through fuel and purchased gas adjustment clauses.
Inflation continues to be a factor affecting operations, earnings,
shareholders' equity and financial performance.
The capacity participation agreement with one of CIPS's wholesale
customers calls for a 115-megawatt reduction for the customer starting in
1995. This scheduled contract reduction will reduce wholesale power supply
participation revenues for CIPS by approximately $9 million ($5.5 million
after tax) per year. The reduction in revenues is expected to be partially
offset by increases in revenues through normal growth and other marketing
initiatives.
Taking into account the recent reduction, CIPS has about 300 megawatts of
uncommitted generating capacity over the next several years. CIPS expects
other sales opportunities in the retail and wholesale electric markets will be
forthcoming. A new marketing group was established January 1, 1995 in order
to enhance the ability of CIPS to increase its market share. Recently CIPS
reached an agreement with Union Electric Company to sell 150 megawatts of
capacity and energy from 1998 to 2005. The sale to UE is subject to
regulatory approval.
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS No. 115). Under the statement, the Company's investments in
debt and marketable securities are reported at fair value with unrealized
gains and losses reported as a net amount in a separate component of
shareholders' equity until realized. The adoption of SFAS No. 115 did not
have a material effect on financial position or results of operations.
During 1994, CIPS initiated a business process re-engineering study to
review all aspects of the utility's business. Initial recommendations to make
operations more efficient and cost effective have been made. The study will
continue into 1995 when final recommendations and implementation of plans to
streamline the utility's business processes will take place.
CIPS plans to accomplish personnel reductions of 13 to 15 percent over the
next several years through voluntary separation and attrition. Early in 1995,
CIPS offered a voluntary separation program to most regular salaried
-33-
employees. The voluntary separation program provides eligible employees the
option of leaving the utility and receiving a package of benefits. The
program is expected to cost about $5 million (pre-tax), but will be partially
offset in 1995 and create additional savings in future years by reducing total
annual operating expenses.
ENVIRONMENTAL REMEDIATION COSTS. The utility has identified 13 former
manufactured gas plant sites (environmental remediation sites) which contain
potentially harmful materials. In 1990, one site was added to the United
States Environmental Protection Agency (USEPA) Superfund list. The utility is
implementing an approved long-term remedial plan for the site. Costs and
associated legal expenses related to studies and remediation work have been
incurred at other sites.
Since 1987, the estimated incurred costs related to studies and
remediation at these 13 sites and associated legal expenses and certain
carrying charges are being accrued and deferred rather than expensed
currently, pending recovery either from rates, from insurance carriers or from
other parties.
Management believes that costs incurred in connection with the sites that
are not recovered from insurance carriers or other parties will be recovered
through utility rates. Accordingly, management believes that costs incurred
in connection with these sites will not have a material adverse effect on
financial position or results of operations. (See Note 2 to Consolidated
Financial Statements.)
FUEL STRATEGIES. In order to reduce fuel costs and other expenses while
remaining in compliance with environmental requirements, CIPS is evaluating
various alternatives. These alternatives involve one or more of the
following; renegotiation of existing fuel contracts; buyout, buydown,
replacement or termination of fuel contracts; switching to other coal
suppliers; switching to lower sulfur coal; discontinuance of, or renovation
and continued operation of, the scrubber at Newton Unit 1. The study of these
alternatives is not complete and management has not decided whether its fuel
and environmental compliance strategies will change. Maintaining the current
compliance strategy, or adoption of certain alternatives in fuel and/or
environmental strategies, could have a significant effect on operation and
maintenance expense, fuel expense, construction expenditures, financing needs
and rate-making treatment. Capital expenditures for the various alternatives
could range from $20 to $80 million over the 1995-1999 period. External
financing to fund such additional capital requirements may be required. If
the entire additional amount were financed with new debt capital, management
anticipates the debt ratio would not exceed the stated financial objective of
maintaining a debt ratio of no more than 45 percent.
CLEAN AIR ACT. CIPS' current compliance strategy for Phases I and II of
the Clean Air Act Amendments of 1990 is to switch to lower sulfur coal at some
generating units along with increased scrubbing at Newton Unit 1. The
currently estimated capital costs of compliance based on the current strategy
are included in the five-year construction budget. As described under "Fuel
Strategies" above, however, the five-year construction costs may increase if
studies being undertaken by CIPS indicate that renovations to the Newton Unit
-34-
1 scrubber are required to allow existing or additional levels of scrubbing or
if such studies indicate that CIPS should change its compliance strategy to
place more reliance on fuel switching. (See Note 2 to Consolidated Financial
Statements.)
FERC ORDER 636. During 1992, FERC issued Order No. 636. This and
successor orders have resulted in substantial restructuring of the service
obligations of interstate pipeline suppliers. (See Note 2 to Consolidated
Financial Statements.)
ENERGY POLICY ACT. The National Energy Policy Act of 1992 (NEPA)
contains, among other provisions, legislation designed to promote competition
in the development of wholesale power generation in the electric utility
industry. NEPA exempts a new class of independent power producers from
traditional utility regulation. This new class of producers may build
generating plants and sell electricity in wholesale markets without the same
constraints as regulated utilities. NEPA also allows FERC to order wholesale
"wheeling" by public utilities to provide utility and non-utility generators
access to public utility transmission facilities. Public utilities not
voluntarily providing access to their transportation system at agreed upon
rates may be ordered to deliver power at rates to be established by FERC.
Although the final impact of the provisions of NEPA cannot be predicted,
management believes increased competition in generation and transmission may
affect the traditional marketing and pricing strategies of the utility
business.
LABOR DISPUTES. The International Union of Operating Engineers Local 148
and the International Brotherhood of Electrical Workers Local 702 each filed
unfair labor practice charges in 1993 with the National Labor Relations Board
(NLRB) relating to the legality of a lockout by CIPS of both unions during
1993. The Peoria Regional Office of the NLRB has issued complaints against
CIPS concerning its lockout of both unions. The unions seek, among other
things, back pay and other benefits for the period of the lockout. CIPS
estimates the amount of back pay and other benefits for both unions to be less
than $12 million. Management believes the lockout was both lawful and
reasonable and that the final resolution of the disputes will not have a
material adverse effect on financial position or results of operations of the
Company or CIPS. (See Note 2 to Consolidated Financial Statements.)
GRAPHIC MATERIAL APPENDIX
[Graph]
This bar graph displays the six-year (1989-1994) comparison of the rate of
return on average common equity and would relate to the Financial Condition
portion of the preceeding Management's Discussion and Analysis.
Rate of Return on Average Common Equity
(in percent)
11.0% 11.0% 11.9% 11.8% 13.7% 13.1%
Year '89 '90 '91 '92 '93 '94
-35-
[Graph]
This bar graph displays the six-year (1989-1994) comparison of CIPSCO
capitalization (total dollar amount for each year is either slightly above or
slightly below $1.2 billion (rounded)) and would relate to the Financial
Condition portion of the preceeding Management's Discussion and Analysis.
CIPSCO CAPITALIZATION
(in billions of dollars and percent)
Long-Term Debt 42% 42% 42% 42% 41% 39%
Preferred Stock 7 7 7 6 7 7
Common Equity 51 51 51 52 52 54
Year '89 '90 '91 '92 '93 '94
[Graph]
This bar graph displays the six-year (1989-1994) comparison of market value to
book value and would relate to the Capital and Financing Requirements portion
of the preceeding Management's Discussion and Analysis.
(in dollar per common share at year end)
Market Value 22.88 21.75 27.88 30.25 30.75 27.00
Book Value 17.52 17.63 17.86 18.08 18.60 19.01
Year '89 '90 '91 '92 '93 '94
[Graph]
This bar graph displays the six-year (1989-1994) comparison of system
generating capability at the time of peak to gross system peak and would
relate to the Capital and Financing Requirements portion of the preceeding
Management's Discussion and Analysis.
(in megawatts)
System Generating
Capability at
Time of Peak 2,637 2,647 2,679 2,707 2,727 2,844
Gross System Peak 1,954 2,027 2,093 1,930 2,157 2,194
Year '89 '90 '91 '92 '93 '94
-36-
[Graph]
This bar graph displays the six-year (1989-1994) comparison of heating and
cooling degree days matched against normal temperatures and would relate to
the Electric Operations portion of the preceeding Management's Discussion and
Analysis.
(Degree days based on average daily temperature of 65 degrees)
Heating Degree Days 5,632 4,681 5,013 5,030 5,702 5,222
Compared to Normal 5,441 5,441 5,441 5,441 5,441 5,441
Cooling Degree Days 1,171 1,178 1,543 884 1,213 1,078
Compared to Normal 1,182 1,182 1,182 1,182 1,182 1,182
Year '89 '90 '91 '92 '93 '94
Item 8. Financial Statements and Supplementary Data.
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
(in thousands)
Operating Revenues:
Electric $ 697,427 $ 688,820 $ 593,973
Provision for revenue refunds - - 1,646
_________ _________ _________
697,427 688,820 595,619
Gas 138,418 145,702 133,756
Investment 8,770 10,238 10,502
_________ _________ _________
Total operating revenues 844,615 844,760 739,877
_________ _________ _________
Operating Expenses:
Fuel for electric generation 196,324 186,938 172,544
Purchased power 55,543 60,181 21,094
Gas costs 85,043 90,097 82,553
Other operation 140,068 142,716 131,305
Maintenance 65,176 61,218 64,092
Depreciation and amortization 81,099 78,062 74,170
Taxes other than income taxes 56,017 54,813 51,133
_________ _________ _________
-37-
Total operating expenses 679,270 674,025 596,891
_________ _________ _________
Operating Income 165,345 170,735 142,986
_________ _________ _________
Interest and Other Charges:
Interest on long-term debt of subsidiary 32,842 34,421 36,397
Interest on provision for revenue
refunds - - (803)
Other interest charges 378 603 398
Allowance for funds used during
construction (919) (2,259) (3,226)
Preferred stock dividends of subsidiary 3,510 3,718 4,549
Miscellaneous, net (3,502) (3,107) (7,579)
_________ _________ _________
Total interest and other charges 32,309 33,376 29,736
_________ _________ _________
Income Before Income Taxes 133,036 137,359 113,250
Income taxes 49,082 51,861 40,751
_________ _________ _________
Net Income $ 83,954 $ 85,498 $ 72,499
========== ========== ==========
Average Shares of Common Stock Outstanding 34,107 34,108 34,108
Earnings Per Average Share of Common Stock $2.46 $2.51 $2.13
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-38-
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
___________________________
1994 1993
_____________ ____________
(in thousands)
ASSETS
Utility Plant, at original cost:
Electric $2,264,930 $2,172,259
Gas 220,347 208,208
__________ __________
2,485,277 2,380,467
Less--Accumulated depreciation 1,077,533 1,020,097
__________ __________
1,407,744 1,360,370
Construction work in progress 31,816 61,104
__________ __________
1,439,560 1,421,474
__________ __________
Current Assets:
Cash 1,963 4,630
Temporary investments, at cost which
approximates market 5,875 5,527
Accounts receivable, net 67,579 61,445
Accrued unbilled revenues 30,484 38,774
Materials and supplies, at average
cost 39,817 40,824
Fuel for electric generation, at
average cost 30,305 26,046
Gas stored underground, at average
cost 13,167 14,335
Prepayments 10,925 10,142
__________ __________
200,115 201,723
__________ __________
Investments and Other Assets:
Investment in marketable securities 43,929 42,703
Investment in leveraged leases 49,933 42,216
Other 43,820 49,634
__________ __________
137,682 134,553
__________ __________
$1,777,357 $1,757,750
========== ==========
-39-
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity:
Common stock, no par value,
authorized shares, 100,000,000;
outstanding 34,069,542 and
34,107,706 shares, respectively $ 356,812 $ 357,212
Retained earnings 292,418 277,040
Unrealized investment losses, net (1,617) -
__________ __________
647,613 634,252
Preferred stock of subsidiary 80,000 80,000
Long-term debt of subsidiary 459,619 474,323
__________ __________
1,187,232 1,188,575
__________ __________
Current Liabilities:
Long-term debt of subsidiary due
within one year 15,000 20,000
Short-term borrowings 14,985 -
Accounts payable 54,021 56,039
Accrued wages 9,833 12,775
Accrued taxes 12,629 12,973
Accrued interest 9,408 9,204
Other 31,488 34,902
__________ __________
147,364 145,893
__________ __________
Deferred Credits:
Accumulated deferred income taxes 313,072 294,732
Investment tax credits 55,595 58,962
Regulatory liabilities, net 74,094 69,588
__________ __________
442,761 423,282
__________ __________
$1,777,357 $1,757,750
========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-40-
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
(in thousands)
OPERATING ACTIVITIES:
Net income $ 83,954 $ 85,498 $ 72,499
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 81,099 78,062 74,170
Allowance for equity funds used during
construction (AFUDC) (630) (1,459) (2,162)
Deferred income taxes, net 19,891 7,900 20,149
Investment tax credit amortization (3,367) (3,366) (3,336)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues 2,156 (15,603) 4,900
Fuel for electric generation (4,259) 8,336 2,872
Other inventories 2,175 (4,450) (667)
Prepayments (783) 5,502 21,159
Other assets 5,814 19,231 (19,761)
Accounts payable and other (5,433) 6,009 19,225
Accrued wages, taxes and interest (3,082) 5,867 (4,580)
Accumulated provision for revenue
refunds - - (75,449)
Other 626 4,400 (5,580)
__________ __________ _________
Net cash provided by operating
activities 178,161 195,927 103,439
__________ __________ _________
INVESTING ACTIVITIES:
Utility construction expenditures,
excluding AFUDC (95,682) (85,453) (117,198)
Allowance for borrowed funds used during
construction (289) (800) (1,064)
Changes in temporary investments (348) (2,949) 95,575
Long-term investment in marketable
securities (2,843) (2,790) (3,510)
Long-term investment in leveraged
leases (7,717) (10,832) (13,388)
__________ __________ _________
Net cash used in investing activities (106,879) (102,824) (39,585)
__________ __________ _________
-41-
FINANCING ACTIVITIES:
Common stock dividends paid (67,874) (66,510) (65,146)
Proceeds from issuance of long-term debt
of subsidiary - 195,000 199,000
Repayment of long-term debt of subsidiary (20,000) (205,000) (190,500)
Retirement of common stock (1,020) - -
Redemption of preferred stock of
subsidiary - (27,500) (18,245)
Proceeds from issuance of preferred stock
of subsidiary - 42,500 -
Proceeds from issuance of (repayment of)
short-term borrowings 14,985 (21,393) 21,393
Issuance expense, discount and premium (40) (7,104) (11,718)
_________ _________ _________
Net cash used in financing activities (73,949) (90,007) (65,216)
_________ _________ _________
Net increase (decrease) in cash (2,667) 3,096 (1,362)
Cash at beginning of year 4,630 1,534 2,896
_________ _________ _________
Cash at end of year $ 1,963 $ 4,630 $ 1,534
========= ========= =========
Supplemental disclosures of cash flow
information:
Cash payments during the year:
Interest, net of amounts capitalized $ 30,714 $ 31,058 $ 38,382
Income taxes $ 34,264 $ 36,718 $ 10,326
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-42-
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
(in thousands)
Balance, beginning of year $ 277,040 $ 259,338 $ 251,893
Add (deduct):
Net income 83,954 85,498 72,499
Common stock dividends ($1.99, $1.95
and $1.91 per share, respectively) (67,874) (66,510) (65,146)
Other (702) (1,286) 92
_________ _________ _________
Balance, end of year $ 292,418 $ 277,040 $ 259,338
========= ========= =========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-43-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CIPSCO Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance sheets of CIPSCO
Incorporated (an Illinois corporation) and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CIPSCO Incorporated and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 27, 1995
-44-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of CIPSCO Incorporated, a holding company, Central Illinois
Public Service Company (CIPS), a combination electric and gas utility, and
CIPSCO Investment Company (CIC). The four subsidiaries of CIC are CIPSCO
Securities Company, which invests in marketable securities; CIPSCO Leasing
Company, which invests in leveraged leases directly or through subsidiaries;
CIPSCO Energy Company, which invests in energy projects or leases through
subsidiary companies; and CIPSCO Venture Company, which invests in
opportunities within the CIPS utility service territory to assist economic
development efforts in the region. All significant intercompany balances and
transactions have been eliminated from the consolidated financial statements.
Certain items previously reported for years prior to 1994 have been
reclassified to conform with the current-year presentation.
The operating revenues of all investment activities are included under
the caption Operating Revenues, "Investment." Operating expenses are included
under the appropriate captions as shown on the Consolidated Statements of
Income.
Concentration of Credit Risk. CIPS provides electric service to about 317,000
customers in 557 communities and natural gas service to approximately 166,000
customers in 267 communities throughout a 20,000-square-mile area in central
and southern Illinois. Credit risk is spread over a diversified base of
residential, commercial and industrial customers.
See Note 3 to Consolidated Financial Statements for a discussion of
receivables related to the leveraged lease investments.
Regulation. CIPS is a public utility subject to regulation by the Illinois
Commerce Commission (Illinois commission) and the Federal Energy Regulatory
Commission (FERC). The utility maintains its accounts in accordance with the
Uniform System of Accounts as defined by these agencies. Its accounting
policies conform to generally accepted accounting principles applicable to
rate-regulated enterprises and reflect the effects of the ratemaking process.
Operating Revenues. CIPS accrues an estimate of electric and gas revenues for
service rendered but unbilled at the end of each accounting period.
Investment revenues are comprised of interest on temporary investments
and income from marketable securities and leveraged leases.
Utility Plant. Utility plant in service is stated at original cost.
Substantially all of the utility plant of CIPS is subject to the lien of its
first mortgage bond indenture. Additions to utility plant include the cost of
contracted services, material, labor, overheads and an allowance for funds
used during construction. Maintenance and repair of property and replacement
-45-
of minor items of property are charged to operating expenses. Property
retired is removed from utility plant accounts and charged to accumulated
depreciation.
Allowance for Funds Used During Construction (AFUDC). AFUDC is included in
Construction Work in Progress (CWIP) and represents the cost of financing that
construction. AFUDC does not represent a current source of cash funds. The
inclusion of AFUDC in CWIP affords the opportunity to earn a return on the
cost of construction capital after the related asset is placed in service and
included in the rate base.
The AFUDC rate, based on a formula prescribed by the FERC, on a before-
tax basis, was 9% in 1994 and 1993, and 10% in 1992.
Depreciation. Depreciation expense is based on remaining life straight-line
rates (composite, approximately 3.4% in 1994 and 1993, and 3.3% in 1992)
applied to the various classes of depreciable property.
Fuel and Gas Costs. CIPS adjusts fuel expense to recognize over- or under-
recoveries from customers of allowable fuel costs through the uniform fuel
adjustment clause (FAC). The FAC provides for the current recovery of changes
in the cost of fuel for electric generation in billings to customers.
Monthly, the difference between revenues recorded through application of the
FAC and recoverable fuel costs is recorded as a current asset or liability,
pending reflection in future billings to customers, with a corresponding
decrease or increase in cost of fuel for electric generation.
The uniform purchased gas adjustment clause (PGA) provides a matching of
gas costs with revenues. Monthly, the difference between revenues recorded
through application of the PGA and recoverable gas costs is recorded as a
current asset or liability with a corresponding decrease or increase in the
gas cost. The cumulative difference for the calendar year is collected from,
or refunded to, customers over a one-year period beginning in the following
April.
The Illinois commission conducts annual reconciliation proceedings with
respect to each year's FAC and PGA revenues and has completed its review for
all years prior to 1993. Reconciliation proceedings for 1993 commenced in
July 1994. No reconciliation proceeding has yet commenced for the year 1994.
Income Taxes and Investment Tax Credits. Deferred income taxes are recorded
which result from the use of accelerated depreciation methods, rapid
amortization, repair allowance and certain other temporary differences in
recognition of income and expense for tax and financial statement purposes.
CIPSCO and its subsidiaries file a consolidated federal income tax return.
Income taxes are allocated to the individual companies, based on their
respective taxable income or loss. Investment tax credits are being amortized
over the estimated average useful lives of the related properties.
The Company adopted, effective January 1, 1993, the liability method of
accounting for deferred income taxes required by Statement of Financial
Accounting Standards (SFAS) No. 109. This statement required the
establishment of deferred tax liabilities and assets for all temporary
-46-
differences between the tax basis of assets and liabilities and the amounts
reported in the financial statements. (See Note 10 to Consolidated Financial
Statements.)
Cash and Temporary Investments. Temporary investments consist of deposits and
U.S. Treasury obligations. For purposes of Consolidated Statements of Cash
Flows, temporary investments are not considered cash equivalents.
Marketable Securities. CIC holds a portfolio consisting primarily of common
and preferred stocks that are substantially hedged with futures and options.
(See Note 11 to Consolidated Financial Statements.) All securities are
publicly traded. The investments and related hedging instruments are managed
by professional investment managers in an overall managed portfolio strategy.
Common stocks consist of investments that are representative of the Standard &
Poor's 100 Index. Preferred stocks consist of perpetual and sinking fund
issues primarily of public utilities, utility holding companies, commercial
banks and bank holding companies. The portfolio also includes an investment
in a limited partnership which pools money from multiple investors to invest
in a variety of investment vehicles.
The investments in common and preferred stocks and the options and
futures used to hedge these investments are measured at market value on the
Consolidated Balance Sheets with the change in value reflected in the
valuation caption of the capitalization section in conformity with SFAS No.
115 "Accounting for Certain Investments in Debt and Equity Securities." Gains
and losses on marketable securities are recognized when realized for Income
Statement purposes. Gains and losses on purchased hedges are deferred until
the gains and losses on the underlying securities are realized and recognized.
For hedged investments, the investment and related hedging instrument have
been combined on the Consolidated Balance Sheets.
-47-
2. COMMITMENTS AND CONTINGENCIES
Environmental Remediation Costs. The utility and certain of its predecessors
and other affiliates operated facilities in the past for manufacturing gas
from coal. In connection with manufacturing gas, various by-products were
produced, some of which remain on sites where the facilities were located.
The utility has identified 13 of these former manufactured gas plant sites
(environmental remediation sites) which contain potentially harmful materials.
Under directives from the Illinois Environmental Protection Agency (IEPA),
CIPS has incurred costs and associated legal expenses related to the
investigation and remediation of the sites.
One site was added to the United States Environmental Protection Agency
(USEPA) Superfund list on August 30, 1990. On September 30, 1992 the IEPA, in
consultation with the USEPA, decided that the long-term remedial plan for this
site should consist of a ground-water pump-and-treat program. The IEPA and
CIPS entered into an agreement, which received required court approval on
March 14, 1994, for CIPS to carry out the remedial action with the IEPA
providing oversight. It is not known at this time what specific remedial
action will be required at the other 12 sites.
In 1987, CIPS filed a lawsuit against a number of insurance carriers
seeking full indemnification for all costs in connection with certain
environmental sites. As of December 31, 1994, all but two insurance carriers
have settled. In 1991, a circuit court entered a verdict in favor of CIPS
involving the coverage under one environmental liability policy. On August
26, 1994, the Illinois Appellate Court reversed the circuit court ruling on
the basis that no claim was made during the policy coverage period. CIPS
filed an appeal to the Illinois Supreme Court on December 27, 1994. The
Illinois Supreme Court has discretion to accept or deny the appeal.
The estimated incurred costs relating to studies and remediation at these
13 sites and associated legal expenses are being accrued and deferred rather
than expensed currently, pending recovery through rates, from insurance
carriers or other parties. At December 31, 1994, the $38.7 million has been
deferred representing costs incurred and estimates for costs of completing
studies at various sites and an estimate of remediation costs at the Superfund
site. The total of the costs deferred, net of recoveries from insurers and
through rate riders described below, was $1.3 million at December 31, 1994.
In 1992, the Illinois commission issued an Order (the Generic Order) in
its consolidated generic proceeding regarding appropriate ratemaking treatment
of cleanup costs incurred by Illinois utilities with respect to environmental
remediation sites. The Generic Order indicates that allowed cleanup costs may
include prudently incurred cost of investigation, assessment and cleanup of
environmental remediation sites, as well as litigation costs, including those
involved in insurance recovery claims. The Generic Order authorizes utilities,
including CIPS, to propose a mechanism to recover cleanup costs which is
consistent with the provisions of the order. Such a mechanism must, among
other things, provide for (1) recovery of cleanup costs over a five-year
period, excluding carrying costs associated with the unrecovered balance of
cleanup costs from the time that the recovery mechanism becomes effective; (2)
a return to ratepayers over a five-year amortization period of any
reimbursement of cleanup costs received from insurance carriers or other
-48-
parties; and (3) a prudence review of each utility's expenditures. The
Generic Order was upheld on appeal by the Third District Illinois Appellate
Court. That decision held that a rate rider mechanism is an appropriate means
for utilities to recover cleanup costs.
On April 6, 1994, the Illinois Supreme Court granted an intervenor's
Petition for Leave to Appeal. The intervenor maintains that recovery of
clean-up costs should not be allowed and that use of a rider mechanism for
cost recovery is unlawful. CIPS and other utilities opposed the arguments of
the intervenor and argued that the Illinois commission's decision to deny
recovery of carrying costs associated with unrecovered balance of clean-up
costs should be reversed. Management cannot predict what action the Illinois
Supreme Court may take in this matter.
On March 26, 1993, the Illinois commission approved CIPS' proposed
environmental cost-recovery rate riders, effective with April 1993 billings to
customers. Known as the electric environmental adjustment clause and the gas
environmental adjustment clause, the riders are designed to enable CIPS to
recover from its customers costs associated with cleanup of the environmental
remediation sites, along with associated legal expenses, over a five-year
period on terms consistent with the Generic Order. The environmental
adjustment clause riders provide for an annual review of amounts recovered
through the riders. Amounts found to have been incorrectly included would be
subject to refund. Through December 31, 1994, CIPS collected $2.9 million
from its customers pursuant to the riders.
The total costs to be incurred for the cleanup of these sites or the
possible recovery from insurance carriers and other parties cannot be
estimated. Management believes that any costs incurred in connection with the
sites that are not recovered from insurance carriers or other parties will be
recovered through utility rates. Accordingly, management believes that costs
incurred in connection with these sites will not have a material adverse
effect on financial position or results of operations.
FERC Order 636. During 1992, FERC issued Order No. 636. This and successor
orders have resulted in substantial restructuring of the service obligations
of interstate pipeline suppliers. Order No. 636 provided mechanisms for
pipelines to recover transition costs associated with the restructuring. CIPS
has paid substantially all direct transition costs associated with the
pipeline restructuring and is currently recovering all transition costs in its
rates. Any future transition costs identified and billed from pipeline
suppliers are expected to be recoverable from customers of CIPS.
-49-
Clean Air Act. CIPS' current compliance strategy to meet Phase I and II of
the sulfur dioxide emission reduction requirements of the Clean Air Act
Amendments of 1990 (Amendments) is to switch to a lower sulfur coal at some of
its units along with increased scrubbing with its existing scrubber at Newton
Unit 1. The current estimated capital costs of compliance based on the
current strategy is included in the five-year construction budget. However,
the five-year construction costs may increase if studies being undertaken by
CIPS indicate that renovations to the Newton Unit 1 scrubber are required to
allow existing or additional levels of scrubbing or if such studies indicate
that CIPS should change its compliance strategy to place more reliance on fuel
switching.
In 1991, in accordance with the plan to switch some units to lower sulfur
coal, the utility signed a long-term coal contract with an existing supplier
for lower sulfur Illinois coal. Due to the magnitude of the supplier's
capital investment, the contract includes a graduated termination charge. In
1995 CIPS can terminate the contract under certain conditions, and CIPS would
be required to pay approximately $41 million (plus an inflation adjustment) in
termination charges. During 1995, and each subsequent year, the termination
charge is reduced according to a formula using tons of coal purchased. The
termination charge would not be effective if CIPS terminated the contract due
to failure of the coal to meet quality specifications provided for in the
contract.
Labor Disputes. The International Union of Operating Engineers Local 148 and
the International Brotherhood of Electrical Workers Local 702 have both filed
unfair labor practice charges with the National Labor Relations Board (NLRB)
relating to the legality of the lockout by CIPS of both unions during 1993.
The Peoria Regional Office of the NLRB has issued complaints against CIPS
concerning its lockout of both unions. Both unions seek, among other things,
back pay and other benefits for the period of the lockout. CIPS estimates the
amount of back pay and other benefits for both unions to be less than $12
million dollars. A hearing, before an administrative law judge of the NLRB,
began in 1994 and is scheduled to be completed during 1995. Management
believes the lockout was both lawful and reasonable and that the final
resolution of the disputes will not have a material adverse effect on
financial position or results of operations of the Company or CIPS.
Other Issues. CIPSCO's utility subsidiary is involved in other legal and
administrative proceedings before various courts and agencies with respect to
rates, taxes, gas and electric fuel cost reconciliations, service area
disputes, environmental torts and other matters. Although unable to predict
the outcome of these matters, management believes that appropriate liabilities
have been established and that final disposition of these actions will not
have a material adverse effect on financial position or results of operations.
-50-
3. LEVERAGED LEASES
CIC and its subsidiaries are the lessors in several leveraged lease
arrangements involving a commercial jet aircraft, an interest in a natural gas
liquids plant, natural gas processing equipment, retail department store
properties, and combustion turbine generating units. These leases expire in
various years beginning in 1999 through 2013.
The aggregate residual values are estimated to be 42 percent of the
aggregate cost. CIC's aggregate equity investment represents 22 percent of
the aggregate purchase price of the properties. The remaining 78 percent was
financed by nonrecourse debt provided by lenders who have been granted, as
their sole remedy in the event of default by the lessees, an assignment of
rentals due under the leases and a security interest in the leased properties.
The following is a summary of the components of CIC's net investment in
leveraged leases at December 31:
1994 1993 1992
_________ _________ ____________
(in thousands)
Rentals receivable
(net of nonrecourse debt) $ 24,894 $ 25,776 $ 25,196
Estimated residual value of
leased property 64,599 53,671 33,094
Less - Unearned and deferred income (39,560) (37,231) (26,906)
_______ _______ _______
Investment in leveraged leases 49,933 42,216 31,384
Less - Deferred taxes, net of AMT (25,817) (19,777) (7,942)
_______ _______ _______
Net investment $ 24,116 $ 22,439 $ 23,442
======= ======= =======
The following is a summary of the components of income from leveraged
leases for the years ended December 31:
1994 1993 1992
_________ _________ ____________
(in thousands)
Income before income taxes $ 4,664 $ 4,702 $ 3,071
Income tax expense (1,874) (2,037) (1,165)
_______ _______ _______
Income from leveraged leases $ 2,790 $ 2,665 $ 1,906
======= ======= =======
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4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
CIPS sponsors a defined benefit pension plan covering substantially all of its
employees. The benefits are based on years of service and employees' final
average pay. Pension costs are accrued on a current basis in accordance with
actuarial determinations. The pension plan is funded in compliance with
income tax regulations and federal funding requirements. CIPS uses a
September 30 measurement date for its valuation of pension plan assets and
liabilities. The utility also provides certain employees with pension
benefits which exceed the qualified plan limits imposed by federal tax law.
Funded Status of Pension Plan
(in thousands)
1994 1993 1992
_________ _________ _________
Fair value of plan assets* $188,449 $177,824 $150,729
_______ _______ _______
Accumulated benefit obligations:**
Vested benefits 120,032 125,641 98,770
Nonvested benefits 3,644 559 284
Effect of projected future
compensation levels (based on 4.8%
annual increases in 1994, 4.3% in
1993 and 4.5% in 1992) 38,974 41,214 37,025
_______ _______ _______
Total projected benefit obligation 162,650 167,414 136,079
_______ _______ _______
Plan assets in excess of projected
benefit obligation $ 25,799 $ 10,410 $ 14,650
======= ======= =======
________________________
* Plan assets are invested in common and preferred stocks, bonds, money
market instruments, guaranteed income contracts and real estate.
** The assumed weighted average discount rate was 7.75% for 1994, 6.50% for
1993 and 7.25% for 1992.
-52-
Pension Plan Assets in Excess of Projected Benefit Obligation
(in thousands)
1994 1993 1992
_________ _________ _________
Plan assets in excess of projected
benefit obligation $ 25,799 $ 10,410 $ 14,650
Unrecognized transition asset (being
amortized over 18.2 years) (4,399) (4,862) (5,325)
Unrecognized net (gain) loss (23,146) (5,188) (13,617)
Unrecognized prior service cost 5,679 760 1,590
_______ _______ _______
Prepaid (Accrued) pension costs at
September 30 3,933 1,120 (2,702)
Expense, net of funding October to
December (80) 1,944 91
_______ _______ _______
Prepaid (Accrued) pension costs at
December 31 $ 3,853 $ 3,064 $ (2,611)
======= ======= =======
Components of Net Pension Expense
(in thousands)
1994 1993 1992
_________ _________ _________
Service cost (present value of benefits
earned during the year) $ 8,053 $ 6,398 $ 5,721
Interest cost on projected benefit
obligation 10,846 10,193 9,302
Actual return on plan assets (expected
long-term rate of return was 8%) (6,795) (21,101) (13,755)
Deferred investment gains (losses) (6,242) 10,071 4,834
Amortization of the unrecognized prior
service cost 61 118 118
Amortization of the transition amount (463) (463) (463)
_______ _______ _______
Net pension expense $ 5,460 $ 5,216 $ 5,757
======= ======= =======
Effective January 1, 1993, CIPS adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions". The standard requires
companies to recognize the cost of providing postretirement medical and life
insurance benefits over the employees' service period. CIPS is funding the
-53-
medical benefits under two Voluntary Employee Beneficiary Association trusts
(VEBA), and a 401(h) account established within the CIPS retirement income
trust.
CIPS sponsors postretirement plans providing medical and life benefits
for certain of its retirees and their eligible dependents. The medical plan
pays percentages of eligible medical expenses incurred by covered retirees
after a deductible has been met, and after taking into account payment by
Medicare or other providers. Currently, participants become eligible for
coverage if they retire from CIPS after meeting age and years of service
eligiblity requirements. The life insurance plan continues for all retirees
who have been in the plan as employees for ten years or more. CIPS uses a
September 30 measurement date for its valuation of postretirement assets and
liabilities.
Funded Status of Postretirement Benefit Plans
(in thousands)
1994 1993
_________ ________
Fair value of plan assets* $ 26,874 $ 13,302
_______ _______
Accumulated benefit obligations:
Retirees 47,494 47,269
Fully eligible active employees 15,407 15,006
Other active employees 64,188 67,007
_______ _______
Total accumulated benefit obligations 127,089 129,282
_______ _______
Accumulated benefit obligations in excess of
plan assets (100,215) (115,980)
Unrecognized transition obligation (being
amortized over 20 years) 104,695 110,511
Unrecognized net (gain) loss (including
changes in assumptions) (21,307) (11,185)
_______ _______
Accrued postretirement benefit cost at September 30 (16,827) (16,654)
Expense, net of funding, October to December 14,906 14,912
_______ _______
Accrued postretirement benefit cost at December 31 $ (1,921) $ (1,742)
======= =======
* Plan assets are invested in common and preferred stocks, bonds, money market
instruments, guaranteed income contracts and real estate.
-54-
Components of Postretirement Benefit Cost
(in thousands)
1994 1993
_________ _________
Service costs on benefits earned $ 4,108 $ 4,215
Interest costs on accumulated benefit obligations 8,918 9,948
Actual return on plan assets (212) (1,038)
Deferred investment gains (losses) (1,601) 397
Amortization of transition amounts 5,816 5,816
_______ _______
Postretirement benefit cost $ 17,029 $ 19,338
======= =======
For purposes of calculating the postretirement benefit obligation it is
assumed that health-care costs will increase by 11.4% in 1995, and that the
rate of increase thereafter (the health-care cost trend rate) will decline to
4% in 2007 and subsequent years. The health-care cost trend rate has a
significant effect on the amounts reported for costs each year as well as on
the accumulated postretirement benefit obligation. To illustrate, increasing
the assumed health-care cost trend rate by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of
September 30, 1994 by $18.8 million and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost $2.5
million annually. The weighted-average discount rate used to determine the
accumulated postretirement benefit obligation was 8.25 percent in 1994 and 7
percent in 1993. The expected long-term rate of return on plan assets was 8
percent in both years.
In March 1992, CIPS was granted rates by the Illinois commission which
included CIPS' estimated postretirement costs determined on an accrual basis
of accounting. CIPS' financial reporting for postretirement costs is
consistent with the rate treatment. Therefore, adoption of SFAS No. 106 did
not have a material effect on financial position or results of operations.
The Company adopted SFAS No. 112, "Employers' Accounting for
Postretirement Benefits," in 1993. The statement required the accrual of
certain postemployment benefits for former or inactive employees. The adoption
of SFAS No. 112 did not have a material effect on financial position or
results of operations.
-55-
5. PREFERRED STOCK OF SUBSIDIARY
The CIPS preferred stock is generally redeemable at the option of CIPS, on 30 days notice at the
redemption prices shown below.
At December 31, 1994 and 1993 the preferred stock authorized and outstanding was:
1994 1993
Current Amount Amount
Shares Par Redemption Shares (in (in
Authorized Value Series Price(a) Issued thousands) thousands)
__________ _____ ______ __________ ______ __________ __________
CIPSCO 4,600,000(b) - - - - - -
CIPS
Cumulative 2,000,000(b) $100 4.00% $101.00 150,000 $ 15,000 $ 15,000
100 4.25% 102.00 50,000 5,000 5,000
100 4.90% 102.00 75,000 7,500 7,500
100 4.92% 103.50 50,000 5,000 5,000
100 5.16% 102.00 50,000 5,000 5,000
100 1993 Auction(c) 100.00 300,000 30,000 30,000
100 6.625% 100.00(d) 125,000 12,500 12,500
_______ _______ _______
800,000 80,000 80,000
CIPS
No par(e) 2,600,000(b) - - - - - -
_______ _______ _______
800,000 $ 80,000 $ 80,000
======= ======= =======
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_________________________
(a) Accrued dividends, if any, would be added to the current redemption price.
(b) The Board of Directors has the authority to fix and determine the relative
rights and preferences of the authorized and unissued shares.
(c) Dividend rate for each dividend period (currently every 49 days) is set at
a then current market rate according to an auction procedure. The rate at
December 31, 1994 was 4.19%
(d) Not redeemable prior to October 1, 1998.
(e) Aggregate stated value cannot exceed $65,000,000.
-57-
6. COMMON SHAREHOLDERS' EQUITY
Common Stock. In December 1994, CIPSCO purchased 38,164 shares from
shareholders who held less than 100 shares. The repurchase reduced common
stock and retained earnings.
Retained Earnings. CIPSCO is subject to restrictions on the use of retained
earnings for cash dividends on common stock applicable to all corporations
under the Illinois Business Corporation Act. CIPS is subject to the same
restrictions, as well as those contained in its mortgage indenture and articles
of incorporation. At December 31, 1994, 1993 and 1992, no amount of retained
earnings was restricted.
7. LINES OF CREDIT AND SHORT-TERM BORROWINGS
External financing needs may be met from the sale of commercial paper or short-
term borrowings from banks. CIPSCO and CIC have joint bank lines of credit of
$30 million. The banks are compensated for these lines of credit.
CIPS has arrangements for bank lines of credit which totaled $72.8 million
at December 31, 1994. CIPS compensates banks for lines of credit totaling $60
million. The bank lines of credit are for corporate purposes including the
support of any commercial paper borrowings. At December 31, 1994 there were no
short-term borrowings from the lines of credit at CIPSCO, CIC, or CIPS,
however, CIPS did have $15.0 million in commercial paper outstanding.
8. LONG-TERM DEBT OF SUBSIDIARY
Maturities and sinking fund requirements of CIPS' long-term debt through 1999
are as follows:
Sinking Fund
Maturities Requirements Total
__________ ____________ _______
(in thousands)
1995 $15,000 $150 $15,150
1996 - 150 150
1997 58,000 - 58,000
1998 - - -
1999 50,000 - 50,000
-58-
In 1994 and 1993 the sinking fund requirements were satisfied by the
application of net expenditures for bondable property in an amount equal to
166-2/3 percent of the annual requirement. The utility expects to meet the
1995 requirement in the same manner.
Long-term debt outstanding at December 31, was:
1994 1993
Amount Amount
______ ______
(in thousands)
First mortgage bonds (principal amount):
Series J, 4 1/2% due 5/1/1994 $ - $20,000
Series K, 4 5/8% due 6/1/1995 15,000 15,000
Series L, 5 7/8% due 5/1/1997 15,000 15,000
Series 6 5/8% due 8/1/2009
(for Newton pollution control) 1,000 1,000
Series W, 7 1/8% due 5/15/1999 50,000 50,000
Series W, 8 1/2% due 5/15/2022 33,000 33,000
Series X, 6 1/8% due 7/1/1997 43,000 43,000
Series X, 7 1/2% due 7/1/2007 50,000 50,000
Series Y, 6 3/4% due 9/15/2002 23,000 23,000
Series Z, 6% due 4/1/2000 25,000 25,000
Series Z, 6 3/8% due 4/1/2003 40,000 40,000
_______ _______
295,000 315,000
_______ _______
Pollution control loan obligations:
1990 Series A, 7.60% due 3/1/2014 20,000 20,000
1990 Series B, 7.60% due 9/1/2013 32,000 32,000
1993 Series A, 6 3/8% due 1/1/2028 35,000 35,000
1993 Series B-1, 4 3/8% due 6/1/2028 17,500 17,500
1993 Series B-2, 5.90% due 6/1/2028 17,500 17,500
1993 Series C-1, 4.20% due 8/15/2026 35,000 35,000
1993 Series C-2, 5.70% due 8/15/2026 25,000 25,000
_______ _______
182,000 182,000
_______ _______
Unamortized net debt premium and discount (2,381) (2,677)
_______ _______
474,619 494,323
Maturities due within one year (15,000) (20,000)
_______ _______
$459,619 $474,323
======= =======
-59-
Interest rates on the 1993 Series B-1 and 1993 Series C-1 bonds will be
adjusted to a then current market rate on June 1, 1998 and August 15, 1998,
respectively. Interest rates on the 1993 Series B-2 and 1993 Series C-2 bonds
are subject to redetermination at the option of the utility commencing June 1,
2003 and August 15, 2003, respectively.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value at
December 31, 1994 and 1993 of each class of financial instruments for which it
is practicable to make such estimates.
Cash and Temporary Investments - The carrying amounts approximate fair value
because of the short-term maturity of these instruments.
Marketable Securities - The fair value is based on quoted market prices
obtained from dealers or investment managers.
Financial Derivatives - The fair value was estimated using market values of
options, calls and futures contracts on organized exchanges.
Short-Term Borrowings - The carrying amounts approximate fair value due to
their short-term maturities.
Preferred Stock of Subsidiary - The fair value was estimated using market
values provided by independent pricing services.
Long-Term Debt of Subsidiary - The fair value was estimated using market values
provided by independent pricing services.
The estimated fair values of the Company's financial instruments as of December
31, are shown below:
1994 1993
_________________ _________________
Carrying Fair Carrying Fair
Value Value Value Value
________ _____ ________ _____
(in thousands)
Marketable Securities $ 43,131 $ 43,131 $ 42,035 $ 43,045
Financial Derivatives 798 798 668 668
Preferred Stock 80,000 52,684 80,000 68,403
Long-term Debt 459,619 447,323 474,323 504,478
-60-
10. INCOME TAXES
The Company uses the liability method of accounting for deferred income taxes
in compliance with SFAS No. 109 "Accounting for Income Taxes" effective January
1, 1993.
Income tax expense includes provisions for deferred taxes to reflect the
effect of temporary differences between the time certain costs are recorded for
financial reporting and when they are deducted for income tax return purposes.
As temporary differences reverse, the related accumulated deferred income taxes
and a portion of the regulatory assets and liabilities are also reversed.
Investment tax credits have been deferred and will continue to be credited to
income over the lives of the related property.
The components of federal and state income tax provisions and investment tax
credits at December 31, were:
1994 1993 1992
________ ________ ________
(in thousands)
Current - - Federal $ 29,048 $ 34,340 $ 7,070
- - State 4,534 6,980 (1,690)
_______ _______ _______
33,582 41,320 5,380
_______ _______ _______
Deferred - - Federal 14,738 12,315 29,679
- - State 4,129 1,592 9,028
_______ _______ _______
18,867* 13,907* 38,707*
_______ _______ _______
Amortization of investment
tax credits (3,367) (3,366) (3,336)
_______ _______ _______
Total income taxes $ 49,082 $ 51,861 $ 40,751
======= ======= =======
-61-
1994 1993 1992
________ ________ ________
(in thousands)
*Detail of Deferred Taxes:
Excess of tax depreciation and
amortization over book $ 6,534 $ 5,825 $ 5,588
Revenue refunds - - 29,526
Leveraged leases 6,040 7,511 8,489
Deferred fuel cost 484 2,782 (2,921)
Deferred environmental site
cleanup costs 5,190 (11,811) 62
Net operating loss carryback - 1,526 (1,526)
Alternative minimum tax credit
carry forward - 7,236 (6,927)
Cost of removal 2,137 1,863 3,108
Unamortized loss on reacquired debt (460) 1,082 3,561
Miscellaneous (1,058) (2,107) (253)
_______ _______ _______
Total $ 18,867 $ 13,907 $ 38,707
======= ======= =======
Reconciliations with statutory federal income tax rates at December 31 were:
1994 1993 1992
____ ____ ____
Effective income tax rate 35.9% 36.8% 34.6%
Amortization of investment tax credits 2.5 2.4 2.8
Tax exempt interest and dividends 1.6 1.5 1.8
State income tax rate, net of federal
income tax benefits (4.0) (3.9) (4.1)
Other, net (1.0) (1.8) (1.1)
____ ____ ____
Statutory federal income tax rate 35.0% 35.0% 34.0%
==== ==== ====
-62-
The components of deferred income taxes at December 31, 1994 and 1993 are:
December 31, December 31,
1994 1993
____________ ____________
(in thousands)
Accumulated deferred income tax
liabilities related to:
Depreciable property $315,364 $310,722
Investment tax credits (22,164) (23,500)
Regulatory liabilities, net (27,742) (27,423)
Leveraged leases 25,817 19,777
Other 21,797 15,156
_______ _______
Accumulated deferred income
taxes per balance sheet $313,072 $294,732
======= =======
Deferred tax assets
(included in prepayments) $ 7,048 $ 5,999
======= =======
-63-
11. DERIVATIVE FINANCIAL INSTRUMENTS
CIC has limited involvement with derivative financial instruments which
includes futures contracts, purchased options and written options in
combination with purchased options. These instruments are used to hedge the
market risk associated with CIC's common and preferred stock investments. (See
Note 1 to Consolidated Financial Statements.) CIC does not hold or issue these
instruments for trading purposes.
Financial futures contracts are for U.S. Treasury obligations and options
contracts are for S & P Indexes and U.S. Treasury obligations. Futures and
options contracts have terms that are one year or less and have little credit
risk as these instruments are traded on organized exchanges.
CIC bears the risk of unfavorable price changes associated with futures
and options which are intended to hedge the opposite change in the market value
of the common and preferred stocks.
Gains and losses on purchased hedges of the equity securities are deferred
as an adjustment to the carrying amount of the hedged equity securities until
the gains or losses on the underlying securities are recognized. The amount of
deferred hedge loss at December 31, 1994 and 1993 was $.2 million and $2.3
million, respectively.
12. REVENUES COLLECTED SUBJECT TO REFUND
In May 1992, the Illinois commission approved a March 18, 1992 settlement
agreement that resolved a proceeding regarding the impact on the utility of the
reduced federal corporate income tax rates established by the Tax Reform Act of
1986. Under terms of the agreement, $73 million, including accrued interest,
was refunded to customers from July through December 1992 in complete
settlement of all issues related to the proceeding.
For the 61-month period, March 1987 through March 1992, a total of $78.4
million had been accrued for refunds. The total liability recorded by the
utility exceeded the settlement agreement amount by $5.4 million resulting in a
$3.3 million (net of taxes) or $.10 per share favorable impact on consolidated
earnings during 1992.
-64-
13. SEGMENTS OF BUSINESS
CIPSCO's primary subsidiary, CIPS, is a public utility engaged in the sale of
electricity which it generates, transmits and distributes. CIPS also sells
natural gas, which it purchases from producers and suppliers and distributes
through its system, and transports customer-owned natural gas. The investments
of CIPSCO and subsidiaries include temporary investments and long-term
investments including marketable securities and leveraged leases. The
following is a summary of operations:
Years Ended December 31,
_________________________________
1994 1993 1992
______ ______ ______
(in thousands)
OPERATING INFORMATION
Electric operations:
Operating revenues $ 697,427 $688,820 $ 595,619
Operating expenses, excluding
provision for income taxes 550,386 534,071 472,414
_________ _________ _________
Pretax operating income 147,041 154,749 123,205
_________ _________ _________
Gas operations:
Operating revenues 138,418 145,702 133,756
Operating expenses, excluding
provision for income taxes 126,896 138,086 122,844
_________ _________ _________
Pretax operating income 11,522 7,616 10,912
_________ _________ _________
Investments:
Operating revenues 8,770 10,238 10,502
Operating expenses, excluding
provision for income taxes 1,988 1,868 1,633
_________ ________ _________
Pretax investment income 6,782 8,370 8,869
_________ ________ _________
Total 165,345 170,735 142,986
_________ ________ _________
Less interest expense and
other charges 32,309 33,376 29,736
Less income taxes 49,082 51,861 40,751
_________ ________ _________
Net income per Consolidated
Statements of Income $ 83,954 $ 85,498 $ 72,499
========= ========= =========
-65-
Depreciation and amortization
expense:
Electric $ 74,496 $ 71,876 $ 68,902
Gas 6,100 5,771 5,252
Corporate 503 415 16
_________ ________ _________
Total $ 81,099 $ 78,062 $ 74,170
========= ========= =========
INVESTMENT INFORMATION
Identifiable assets:
Electric $1,469,601 $1,459,073 $1,435,755
Gas 176,788 177,857 188,019
Temporary investments 5,875 5,527 2,578
Marketable securities 43,929 42,703 39,913
Leveraged leases 49,933 42,216 31,384
Corporate 31,231 30,374 27,807
_________ ________ _________
Total $1,777,357 $1,757,750 $1,725,456
========= ========= =========
Construction expenditues:
Electric $ 82,673 $ 76,956 $ 103,023
Gas 13,928 10,756 17,401
_________ ________ _________
Total $ 96,601 $ 87,712 $ 120,424
========= ========= =========
-66-
Item 8. Financial Statements and Supplementary Data.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENTS OF INCOME
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
(in thousands)
Operating Revenues:
Electric $ 697,458 $ 688,849 $ 593,996
Provision for revenue refunds - - 1,646
_________ _________ _________
697,458 688,849 595,642
Gas 138,424 145,707 133,760
_________ _________ _________
Total operating revenues 835,882 834,556 729,402
_________ _________ _________
Operating Expenses:
Fuel for electric generation 196,324 186,938 172,544
Purchased power 55,543 60,181 21,094
Gas costs 85,043 90,097 82,553
Other operation 138,622 141,310 129,715
Maintenance 65,172 61,216 64,092
Depreciation and amortization 80,596 77,647 74,154
Taxes other than income taxes 55,984 54,767 51,106
Income taxes 47,920 48,749 36,772
_________ _________ _________
Total operating expenses 725,204 720,905 632,030
_________ _________ _________
Operating Income 110,678 113,651 97,372
_________ _________ _________
-67-
Other Income and Deductions:
Allowance for equity funds used during
construction 630 1,459 2,162
Nonoperating income taxes (603) (631) (2,989)
Miscellaneous, net 4,119 3,632 10,978
_________ _________ _________
Total other income and deductions 4,146 4,460 10,151
_________ _________ _________
Income Before Interest Charges 114,824 118,111 107,523
_________ _________ _________
Interest Charges:
Interest on long-term debt 32,842 34,421 36,397
Interest on provision for revenue
refunds - - (803)
Other interest charges 358 479 392
Allowance for borrowed funds used
during construction (289) (800) (1,064)
_________ _________ _________
Total interest charges 32,911 34,100 34,922
_________ _________ _________
Net Income 81,913 84,011 72,601
Preferred stock dividends 3,510 3,718 4,549
_________ _________ _________
Earnings for Common Stock $ 78,403 $ 80,293 $ 68,052
========== ========== ==========
The accompanying notes to financial statements are an integral part of these
statements.
-68-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEETS
December 31,
___________________________
1994 1993
_____________ ____________
(in thousands)
ASSETS
Utility Plant, at original cost:
Electric $2,264,930 $2,172,259
Gas 220,347 208,208
__________ _________
2,485,277 2,380,467
Less--Accumulated depreciation 1,077,533 1,020,097
__________ __________
1,407,744 1,360,370
Construction work in progress 31,816 61,104
__________ __________
1,439,560 1,421,474
__________ __________
Current Assets:
Cash 1,320 4,038
Temporary investments, at cost which
approximates market 2,593 2,734
Accounts receivable, net 67,686 61,591
Accrued unbilled revenues 30,484 38,774
Materials and supplies, at average
cost 39,817 40,824
Fuel for electric generation, at
average cost 30,305 26,046
Gas stored underground, at average
cost 13,167 14,335
Prepayments 10,839 9,847
__________ __________
196,211 198,189
__________ __________
Other Assets 42,879 48,799
__________ __________
$1,678,650 $1,668,462
========== ==========
-69-
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity:
Common stock, no par value,
authorized 45,000,000 shares;
outstanding 25,452,373 shares $ 121,282 $ 121,282
Retained earnings 453,463 443,741
__________ __________
574,745 565,023
Preferred stock 80,000 80,000
Long-term debt 459,619 474,323
__________ __________
1,114,364 1,119,346
__________ __________
Current Liabilities:
Long-term debt due within one year 15,000 20,000
Short-term borrowings 14,985 -
Accounts payable 53,900 55,931
Accrued wages 9,833 12,720
Accrued taxes 12,963 13,391
Accrued interest 9,408 9,204
Other 31,488 34,895
__________ __________
147,577 146,141
__________ __________
Deferred Credits:
Accumulated deferred income taxes 287,020 274,425
Investment tax credits 55,595 58,962
Regulatory liabilities, net 74,094 69,588
__________ __________
416,709 402,975
__________ __________
$1,678,650 $1,668,462
========== ==========
The accompanying notes to financial statements are an integral part of these
statements.
-70-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENTS OF CASH FLOW
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
(in thousands)
OPERATING ACTIVITIES:
Net income $ 81,913 $ 84,011 $ 72,601
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 80,596 77,647 74,154
Allowance for equity funds used during
construction (AFUDC) (630) (1,459) (2,162)
Deferred income taxes, net 14,146 7 16,407
Investment tax credit amortization (3,367) (3,366) (3,336)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues 2,195 (15,270) 4,542
Fuel for electric generation (4,259) 8,336 2,872
Other inventories 2,175 (4,450) (667)
Prepayments (992) 3,305 23,585
Other assets 5,920 14,033 (20,210)
Accounts payable and other liabilities (5,438) 6,106 17,641
Accrued wages, taxes and interest (3,111) 6,217 (5,197)
Accumulated provision for revenue
refunds - - (75,449)
Other 1,129 4,815 (5,991)
__________ __________ _________
Net cash provided by operating
activities 170,277 179,932 98,790
__________ __________ _________
INVESTING ACTIVITIES:
Construction expenditures, excluding
AFUDC (95,682) (85,453) (117,198)
Allowance for borrowed funds used during
construction (289) (800) (1,064)
Changes in temporary investments 141 (156) 92,175
__________ __________ _________
Net cash used in investing activities (95,830) (86,409) (26,087)
__________ __________ _________
-71-
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 195,000 199,000
Repayment of long-term debt (20,000) (205,000) (190,500)
Proceeds from issuance of preferred stock - 42,500 -
Redemption of preferred stock - (27,500) (18,245)
Retirement of common stock - (33,250) (66,100)
Proceeds from issuance of (repayment of)
short-term borrowings 14,985 (17,393) 17,393
Dividends paid:
Preferred stock (3,510) (3,718) (4,549)
Common stock (68,600) (33,500) -
Issuance expense, discount and premium (40) (7,104) (11,718)
_________ _________ _________
Net cash used in financing activities (77,165) (89,965) (74,719)
_________ _________ _________
Net increase (decrease) in cash (2,718) 3,558 (2,016)
Cash at beginning of year 4,038 480 2,496
_________ _________ _________
Cash at end of year $ 1,320 $ 4,038 $ 480
========= ========= =========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest, net of amounts capitalized $ 30,693 $ 30,909 $ 38,382
Income taxes $ 39,829 $ 48,367 $ 12,150
The accompanying notes to financial statements are an integral part of these
statements.
-72-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENTS OF RETAINED EARNINGS
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
(in thousands)
Balance, beginning of year $ 443,741 $ 398,235 $ 330,518
Add (deduct);
Net income 81,913 84,011 72,601
Dividends:
Preferred stock (3,510) (3,718) (4,549)
Common stock (68,600) (33,500) -
Other (81) (1,287) (335)
_________ _________ _________
Balance, end of year $ 453,463 $ 443,741 $ 398,235
========= ========= =========
The accompanying notes to financial statements are an integral part of these
statements.
-73-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Central Illinois Public
Service Company:
We have audited the accompanying balance sheets of Central Illinois Public
Service Company (an Illinois corporation and a wholly owned subsidiary of
CIPSCO Incorporated) as of December 31, 1994 and 1993, and the related
statements of income, retained earnings and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Central Illinois Public
Service Company as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 27, 1995
-74-
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The information contained in Note 1 of Notes to Consolidated Financial
Statements on page 45 is incorporated herein by reference (except for the
captions "Principles of Consolidation" and "Marketable Securities" which are
not included herein).
2. COMMITMENTS AND CONTINGENCIES
The information contained in Note 2 of Notes to Consolidated Financial
Statements on page 48 is incorporated herein by reference.
3. LEVERAGED LEASES
Not applicable.
4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The information contained in Note 4 of Notes to Consolidated Financial
Statements on page 52 is incorporated herein by reference.
5. PREFERRED STOCK
The information contained in Note 5 of Notes to Consolidated Financial
Statements on page 56 is incorporated herein by reference.
-75-
6. COMMON SHAREHOLDERS EQUITY
Common Stock. The authorized common stock, no par value, for CIPS was 45,000,000 shares as of December
31, 1994, 1993 and 1992. All outstanding shares were exchanged with CIPS shareholders for CIPSCO
Incorporated stock on October 1, 1990. During 1992 and for the first half of 1993, CIPSCO Incorporated
which holds all CIPS common shares, had been retiring CIPS shares as detailed in the table below:
Number of Shares Outstanding Amounts (in thousands)
______________________________________ _____________________________
1994 1993 1992 1994 1993 1992
__________ __________ __________ ________ ________ ________
Balance, beginning of year 25,452,373 26,336,718 28,410,703 $121,282 $154,532 $220,632
Common stock retired - (884,345) (2,073,985) - (33,250) (66,100)
Other - - - - - -
__________ __________ __________ _______ _______ ______
Balance, end of year 25,452,373 25,452,373 26,336,718 $121,282 $121,282 $154,532
========== ========== ========== ======= ======= =======
-76-
Retained Earnings. CIPS is subject to restrictions on the use of retained
earnings for cash dividends on common stock applicable to all corporations
under the Illinois Business Corporation Act, as well as those contained in its
mortgage indenture and articles of incorporation. At December 31, 1994, 1993
and 1992, no amount of retained earnings was restricted.
7. LINES OF CREDIT AND SHORT-TERM BORROWINGS
CIPS has arrangements for bank lines of credit which totaled $72.8 million
at December 31, 1994. CIPS compensates banks for lines of credit totaling $60
million. The bank lines of credit are for corporate purposes including the
support of any commercial paper borrowings. At December 31, 1994 there were no
short-term borrowings from the lines of credit at CIPS, however, CIPS did have
$15.0 million in commercial paper outstanding.
8. LONG-TERM DEBT
The information contained in Note 8 of Notes to Consolidated Financial
Statements on page 58 is incorporated herein by reference.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value at
December 31, 1994 and 1993 of each class of financial instruments for which it
is practicable to make such estimates.
Cash and Temporary Investments - The carrying amounts approximate fair value
because of the short-term maturity of these instruments.
Short-Term Borrowings - The carrying amounts approximate fair value due to
their short-term maturities.
Preferred Stock - The fair value was estimated using market values provided by
independent pricing services.
Long-Term Debt - The fair value was estimated using market values provided by
independent pricing services.
The estimated fair value of CIPS' financial instruments as of December 31, are
shown below:
1994 1993
_________________ _________________
Carrying Fair Carrying Fair
Value Value Value Value
________ _____ ________ _____
(in thousands)
Preferred Stock $ 80,000 $ 52,684 $ 80,000 $ 68,403
Long-Term Debt 459,619 447,323 474,323 504,478
-77-
10. INCOME TAXES
CIPS uses the liability method of accounting for deferred income taxes in
compliance with Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" effective January 1, 1993.
Income tax expense includes provisions for deferred taxes to reflect the
effect of temporary differences between the time certain costs are recorded for
financial reporting and when they are deducted for income tax return purposes.
As temporary differences reverse, the related accumulated deferred income taxes
and a portion of the regulatory assets and liabilities are also reversed.
Investment tax credits have been deferred and will continue to be credited to
income over the lives of the related property.
The components of federal and state income tax provisions and investment tax
credits at December 31, were:
1994 1993 1992
________ ________ ________
(in thousands)
Current - - Federal $ 32,826 $ 42,422 $ 6,859
- - State 5,271 8,019 (749)
_______ _______ _______
38,097 50,441 6,110
_______ _______ _______
Deferred - - Federal 10,084 1,483 26,551
- - State 3,106 191 7,447
_______ _______ _______
13,190* 1,674* 33,998*
_______ _______ _______
Amortization of invest-
ment tax credits (3,367) (3,366) (3,336)
_______ _______ _______
Total 47,920 48,749 36,772
_______ _______ _______
Nonoperating income taxes:
Current 687 1,119 2,411
Deferred (84) (488) 578
_______ _______ _______
603 631 2,989
_______ _______ _______
Total income taxes $ 48,523 $ 49,380 $ 39,761
======= ======= =======
-78-
1994 1993 1992
________ ________ ________
(in thousands)
*Detail of Deferred Taxes:
Excess of tax depreciation and
amortization over book $ 6,517 $ 5,785 $ 5,566
Revenue refunds - - 29,526
Deferred fuel cost 484 (2,782) (2,921)
Deferred environmental site
cleanup costs 5,190 (11,811) 62
Alternative minimum tax credit
carryforward - 4,449 (4,449)
Cost of removal 2,137 1,863 3,108
Unamortized loss on reacquired debt (460) 1,082 3,561
Miscellaneous (678) 3,088 (455)
_______ _______ _______
Total $ 13,190 $ 1,674 $ 33,998
======= ======= =======
Reconciliations with statutory federal income tax rates at December 31
were:
1994 1993 1992
________ ________ ________
Effective income tax rate 37.2% 37.0% 35.4%
Amortization of investment tax credits 2.6 2.5 3.0
Tax exempt interest and dividends .7 .7 1.3
State income tax rate, net of federal
income tax benefit (4.2) (4.0) (4.2)
Other, net (1.3) (1.2) (1.5)
____ ____ ____
Statutory federal income tax rate 35.0% 35.0% 34.0%
==== ==== ====
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The components of deferred income taxes at December 31, 1994 and 1993 are:
1994 1993
________ ________
(in thousands)
Accumulated deferred income tax
liabilities related to:
Depreciable property $315,364 $310,722
Investment tax credits (22,164) (23,500)
Regulatory liabilities, net (27,742) (27,423)
Other 21,562 14,626
_______ _______
Accumulated deferred income taxes
per balance sheet $287,020 $274,425
======= =======
Deferred tax assets (included in
prepayments) $ 7,016 $ 5,977
======= =======
11. DERIVATIVE FINANCIAL INSTRUMENTS
Not applicable.
12. REVENUES COLLECTED SUBJECT TO REFUND
The information contained in Note 12 of Notes to Consolidated Financial
Statements on page 64 is incorporated herein by reference.
-80-
13. SEGMENTS OF BUSINESS
CIPS is a public utility engaged in the sale of electricity which it
generates, transmits and distributes. CIPS also sells natural gas, which it
purchases from producers and suppliers and distributes through its system, and
transports customer-owned natural gas. The following is a summary of
operations:
Years Ended December 31,
_________________________________
1994 1993 1992
______ ______ ______
(in thousands)
OPERATING INFORMATION
Electric operations:
Operating revenues $ 697,458 $ 688,849 $ 595,642
Operating expenses, excluding
provision for income taxes 550,388 534,070 472,414
_________ _________ _________
Pretax operating income 147,070 154,779 123,228
_________ _________ _________
Gas operations:
Operating revenues 138,424 145,707 133,760
Operating expenses, excluding
provision for income taxes 126,896 138,086 122,844
_________ _________ _________
Pretax operating income 11,528 7,621 10,916
_________ _________ _________
Total 158,598 162,400 134,144
_________ _________ _________
Plus other income and deductions 4,146 4,460 10,151
Less interest charges 32,911 34,100 34,922
Less income taxes 47,920 48,749 36,772
Less preferred dividends 3,510 3,718 4,549
_________ ________ _________
Earnings for common stock $ 78,403 $ 80,293 $ 68,052
========= ========= =========
Depreciation expense:
Electric $ 74,496 $ 71,876 $ 68,902
Gas 6,100 5,771 5,252
_________ ________ _________
Total $ 80,596 $ 77,647 $ 74,154
========= ========= =========
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INVESTMENT INFORMATION
Identifiable assets:
Electric $1,469,601 $1,459,073 $1,443,578
Gas 176,788 177,857 188,321
Temporary investments 2,593 2,734 2,578
Corporate 29,668 28,798 10,582
_________ _________ _________
Total $1,678,650 $1,668,462 $1,645,059
========= ========= =========
Construction expenditures:
Electric $ 82,673 $ 76,956 $ 103,023
Gas 13,928 10,756 17,401
_________ _________ _________
Total $ 96,601 $ 87,712 $ 120,424
========= ========= =========
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14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The fluctuations in the quarterly results are due to the seasonal nature
of the electric and gas utility business.
Total Total Earnings
Operating Operating for Common
Quarters Revenues Income Stock
________ _________ _________ __________
(in thousands)
1994
First $223,436 $ 20,665 $ 12,544
Second 200,406 26,288 18,307
Third 213,922 40,996 33,013
Fourth 198,118 22,729 14,539
1993
First $209,548 $ 24,726 $ 15,774
Second 187,385 20,093 11,610
Third 232,104 46,204 38,172
Fourth 205,519 22,628 14,737
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Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None for CIPSCO or CIPS.
PART III
Item 10. Directors and Executive Officers of the Registrants.
CIPSCO
The information required by Item 10 relating to each person who is a
nominee for election as director at CIPSCO's 1995 Annual Meeting of
Shareholders is to be set forth in CIPSCO's definitive proxy statement (the
"CIPSCO Proxy Statement") to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934
in connection with CIPSCO's 1995 Annual Meeting of Shareholders. Such
information is incorporated herein by reference to the material appearing under
the caption "Election of Directors -- Director Information" in the CIPSCO Proxy
Statement. Information required by Item 10 relating to executive officers of
CIPSCO is set forth under a separate caption "Executive Officers of CIPSCO" in
Part I hereof.
CIPS
The information required by Item 10 relating to each person who is a
nominee for election as director at CIPS' 1995 Annual Meeting of Shareholders
is to be set forth in CIPS' definitive proxy statement (the "CIPS Proxy
Statement") to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934 in connection with
CIPS' Annual Meeting of Shareholders. Such information is incorporated herein
by reference to the material appearing under the caption "Election of Directors
- -- Director Information" in the CIPS Proxy Statement. Information required by
Item 10 relating to executive officers of CIPS is set forth under a separate
caption "Executive Officers of CIPS" in Part I hereof.
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Item 11. Executive Compensation.
CIPSCO
The information required by Item 11 is to be set forth in the CIPSCO Proxy
Statement. Such information is incorporated herein by reference to the
material appearing under the caption "Election of Directors -- Executive
Compensation" and -- "Directors' Compensation" appearing in the CIPSCO Proxy
Statement; provided, however, that no part of the information appearing under
the portion of the CIPSCO Proxy Statement entitled "Election of Directors --
Compensation Committee Report on Executive Compensation" or -- "Performance
Graph" is deemed to be filed as part of this Form 10-K Annual Report.
CIPS
The information required by Item 11 is to be set forth in the CIPS Proxy
Statement. Such information is incorporated herein by reference to the
material appearing under the caption "Election of Directors -- Executive
Compensation" and -- "Directors' Compensation" appearing in the CIPS Proxy
Statement; provided, however, that no part of the information appearing under
the portion of the CIPS Proxy Statement entitled "Election of Directors --
Compensation Committee Report on Executive Compensation" or -- "Performance
Graph" is deemed to be filed as part of this Form 10-K Annual Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
CIPSCO
The information required by Item 12 is to be set forth in the CIPSCO Proxy
Statement. Such information is incorporated herein by reference to the
material appearing under the captions "Voting Securities Beneficially Owned by
Principal Holders, Directors, Nominees and Executive Officers" and "Election of
Directors -- Director Information" appearing in the CIPSCO Proxy Statement.
CIPS
The information required by Item 12 is to be set forth in the CIPS Proxy
Statement. Such information is incorporated herein by reference to the
material appearing under the captions "Voting Securities Beneficially Owned by
Principal Holders, Directors, Nominees and Executive Officers" and "Election of
Directors -- Director Information" appearing in the CIPS Proxy Statement.
-85-
Item 13. Certain Relationships and Related Transactions.
CIPSCO AND CIPS
CIPSCO is the parent company of CIPS. At December 31, 1994, CIPSCO owned
100% of the common stock of CIPS (representing 96% of the voting shares of
CIPS). There are situations where CIPS interacts with its affiliated companies
through the use of shared facilities, common employees and other business
relationships. In these situations, CIPS receives payment in accordance with
regulatory requirements for the services provided to affiliated companies.
Each individual who is a member of the Board of Directors of CIPSCO is
also a member of the Board of Directors of CIPS. Each of the officers of
CIPSCO is also an officer of CIPS.
PART IV
CIPSCO AND CIPS
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page of this
Report on
Form 10-K
_____________
CIPSCO CIPS
______ ____
(a) 1. Financial statements
Statements of Income for the years ended
December 31, 1994, 1993 and 1992. . . . . . . . . . . 37 67
Balance Sheets - December 31, 1994 and 1993 . . . . . 39 69
Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992. . . . . . . . . . . 41 71
Statements of Retained Earnings for the years
ended December 31, 1994, 1993 and 1992. . . . . . . . 43 73
Report of Independent Public Accountants. . . . . . . 44 74
Notes to Financial Statements . . . . . . . . . . . . 45 75
(a) 2. Schedules supporting financial statements - -
All Financial Statement Schedules have been
omitted as not applicable or not required
or because the information required to be
shown therein is included in the financial
statements or notes thereto.
-86-
Applicable to
Form 10-K of
_____________
CIPSCO CIPS
______ ____
(a) 3. Exhibits
3.01 Amended and Restated Articles of Incorporation
of CIPSCO. (Exhibit 3.01 filed with CIPSCO's
1990 Annual Report on Form 10-K.) Incorporated
by Reference. X
3.02 Restated Articles of Incorporation of CIPS.
(Exhibit 3(b) filed with CIPS' Form 10-Q for
the quarter ended March 1994). Incorporated
by Reference. X
3.03 Bylaws of CIPSCO (Exhibit 3.02 filed with CIPSCO's
1993 Annual Report on Form 10-K). Incorporated
by Reference. X
3.04 Bylaws of CIPS (Exhibit 3(c) filed with CIPS' Form
10-Q for the quarter ended March 1994).
Incorporated by Reference. X
-87-
Applicable to
Form 10-K of
_____________
CIPSCO CIPS
______ ____
4 Indenture of Mortgage or Deed of Trust dated October
1, 1941, from CIPS to Continental Illinois
National Bank and Trust Company of Chicago and
Edmond B. Stofft, as Trustees. (Exhibit 2.01 in
File No. 2-60232.) Supplemental Indentures dated,
respectively September 1, 1947, January 1, 1949,
February 1, 1952, September 1, 1952, June 1, 1954,
February 1, 1958, January 1, 1959, May 1, 1963,
May 1, 1964, June 1, 1965, May 1, 1967, April 1,
1970, April 1, 1971, September 1, 1971, May 1,
1972, December 1, 1973, March 1, 1974, April 1,
1975, October 1, 1976, November 1, 1976, October
1, 1978, August 1, 1979, February 1, 1980,
February 1, 1986, May 15, 1992, July 1, 1992,
September 15, 1992 and April 1, 1993, between
CIPS and the Trustees under the Indenture of
Mortgage or Deed of Trust referred to above
(Amended Exhibit 7(b) in File No. 2-7341;
Second Amended Exhibit 7.03 in File No. 2-7795;
Second Amended Exhibit 4.07 in File No. 2-9353;
Amended Exhibit 4.05 in file No. 2-9802; Amended
Exhibit 4.02 in File No. 2-10944; Amended Exhibit
2.02 in File No. 2-13866; Amended Exhibit 2.02
in File No. 2-14656; Amended Exhibit 2.02 in File
No. 2-21345; Amended Exhibit 2.02 in File No.
2-22326; Amended Exhibit 2.02 in File No.
2-23569; Amended Exhibit 2.02 in File No. 2-26284;
Amended Exhibit 2.02 in File No. 2-36388; Amended
Exhibit 2.02 in File No. 2-39587; Amended
Exhibit 2.02 in File No. 2-41468; Amended
Exhibit 2.02 in File No. 2-43912; Exhibit 2.03
in File No. 2-60232; Amended Exhibit 2.02 in
File No. 2-50146; Amended Exhibit 2.02 in File
No. 2-52886; Second Amended Exhibit 2.04 in
File No. 2-57141; Amended Exhibit 2.04 in File
No. 2-57557; Amended Exhibit 2.06 in File No.
2-62564; Exhibit 2.02(a) in File No. 2-65914;
Amended Exhibit 2.02(a) in File No. 2-66380;
and Amended Exhibit 4.02 in File No. 33-3188;
Exhibit 4.02 to Form 8-K dated May 15, 1992;
Exhibit 4.02 to Form 8-K dated July 1, 1992;
Exhibit 4.02 to Form 8-K dated September 15,
1992; Exhibit 4.02 to Form 8-K dated March 30,
1993.) Incorporated by reference. X X
-88-
Applicable to
Form 10-K of
___________________
CIPSCO CIPS PAGE(S)
______ ____ _______
Exhibits (Continued)
10.01 Form of Deferred Compensation Agreement for
Directors (Exhibit 10.01 filed with CIPSCO's
and CIPS' 1990 Annual Report on Form 10-K)
Incorporated by Reference. . . . . . . . . . . . . X X -
10.02 Amended Form of Deferred Compensation Agreement
for Directors (Exhibit 10.02 filed with CIPSCO's
and CIPS' 1993 Annual Report on Form 10-K)
Incorporated by Reference. . . . . . . . . . . . . X X -
10.03 Form of Special Executive Retirement Plan
(Exhibit 10.03 filed with CIPSCO's and CIPS'
1990 Annual Report on Form 10-K) Incorporated
by Reference . . . . . . . . . . . . . . . . . . . X X -
10.04 Amendment to Form of Special Executive
Retirement Plan (Exhibit 10.04 filed with
CIPSCO's and CIPS' 1993 Annual Report on Form
10-K) Incorporated by Reference. . . . . . . . . . X X -
10.05 Form of Management Continuity Agreement. . . . . . X X 94-112
10.06 Form of Director's Retirement Income Plan
(Exhibit 10.06 filed with CIPSCO's and CIPS'
1990 Annual Report on Form 10-K) Incorporated
by Reference . . . . . . . . . . . . . . . . . . . X X -
10.07 Form of Excess Benefit Retirement Plan (Exhibit
10.07 filed with CIPSCO's and CIPS' 1990 Annual
Report on Form 10-K) Incorporated by Reference . . X X -
10.08 Amendment to Form of Excess Benefit Retirement
Plan (Exhibit 10.08 filed with CIPSCO's and
CIPS' 1993 Annual Report on Form 10-K)
Incorporated by Reference. . . . . . . . . . . . . X X -
10.09 Form of Management Incentive Plan (Exhibit
10.09 filed with CIPSCO's and CIPS' 1990
Annual Report on Form 10-K) Incorporated by
Reference. . . . . . . . . . . . . . . . . . . . . X X -
-89-
Applicable to
Form 10-K of
___________________
CIPSCO CIPS PAGE(S)
______ ____ _______
Exhibits (Continued)
10.10 Form of Excess Benefit Plan . . . . . . . . . . . X X 113-127
10.11 Form of Special Executive Retirement Plan . . . . X X 128-145
12.01 Computation of Ratio of Earnings to Fixed
Charges - CIPSCO. . . . . . . . . . . . . . . . . X 146-147
12.02 Computation of Ratio of Earnings to Fixed
Charges - CIPS. . . . . . . . . . . . . . . . . . X 148-149
21 Subsidiaries of CIPSCO and CIPS . . . . . . . . . X X 150
23.01 Consent of Independent Public Accountants -
CIPSCO. . . . . . . . . . . . . . . . . . . . . . X 151
23.02 Consent of Independent Public Accountants -
CIPS. . . . . . . . . . . . . . . . . . . . . . . X 152
24.01 Powers of Attorney - CIPSCO . . . . . . . . . . . X 153-159
24.02 Powers of Attorney - CIPS. . . . . . . . . . . . X 160-166
27.1 Financial Data Schedule of CIPSCO*. . . . . . . . X -
27.2 Financial Data Schedule of CIPS*. . . . . . . . . X -
99.01 Description of Capital Stock - CIPSCO . . . . . . X 167-169
99.02 Description of Capital Stock - CIPS. . . . . . . X 170-171
Exhibits 10.01 through 10.11 are management contracts or compensatory
plans or arrangements required to be filed as exhibits pursuant to Item 14(c)
hereof.
* Included in electronic filing only.
The following instruments defining the rights of holders of certain
unregistered long-term debt of CIPS have not been filed with the Securities and
Exchange Commission but will be furnished upon request.
-90-
1. Loan Agreement dated as of March 1, 1990, between CIPS and the
Illinois Development Finance Authority (IDFA) in connection with the
IDFA's $20,000,000 Pollution Control Revenue Refunding Bonds, 1990
Series A due March 1, 2014 and $32,000,000 Pollution Control Revenue
Refunding Bonds, 1990 Series B due September 1, 2013.
2. Loan Agreement dated January 1, 1993, between CIPS and IDFA in
connection with IDFA's $35,000,000, 6-3/8% Pollution Control Revenue
Refunding Bonds (Central Illinois Public Service Company Project) 1993
Series A, due January 1, 2028.
3. Loan Agreement dated June 1, 1993, between CIPS and IDFA in
connection with IDFA's $17,500,000 Pollution Control Revenue Refunding
Bonds, 1993 Series B-1 due June 1, 2028 and $17,500,000 Pollution Control
Revenue Refunding Bonds, 1993 Series B-2 due June 1, 2028.
4. Loan Agreement dated August 15, 1993, between CIPS and IDFA in
connection with IDFA's $35,000,000 Pollution Control Revenue Refunding
Bonds, 1993 Series C-1 due August 15, 2026 and $25,000,000 Pollution
Control Revenue Refunding Bonds, 1993 Series C-2 due August 15, 2026.
5. CIPS Credit Agreement dated October 1, 1992 with various banks
providing unsecured lines of credit in an aggregate amount of
$60,000,000.
(b) Reports on Form 8-K
CIPSCO
None.
CIPS
None.
-91-
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.
CIPSCO Incorporated
(Registrant)
By /s/ C. L. GREENWALT
_____________________________________
C. L. Greenwalt
President and Chief Executive Officer
Date: March 3, 1995
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 in the capacities and on the date indicated.
Signature Title
Principal Executive Officer:
/s/ C. L. GREENWALT
C. L. GREENWALT President and Chief Executive Officer
and Director
Principal Financial Officer:
/s/ R. W. JACKSON
R. W. JACKSON Senior Vice President, Chief Financial
Officer, Secretary, Director and as
Attorney-in-Fact*
Principal Accounting Officer:
/s/ J. C. FIAUSH
J. C. FIAUSH Controller, Chief Accounting Officer
and Assistant Treasurer
WILLIAM J. ALLEY* Director
JOHN L. HEATH* Director
GORDON R. LOHMAN* Director
HANNE M. MERRIMAN* Director
DONALD G. RAYMER* Director
THOMAS L. SHADE* Director
JAMES W. WOGSLAND* Director
Date: March 3, 1995
-92-
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.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Registrant)
By /s/ C. L. GREENWALT
_____________________________________
C. L. Greenwalt
President and Chief Executive Officer
Date: March 3, 1995
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 in the capacities and on the date indicated.
Signature Title
Principal Executive Officer:
/s/ C. L. GREENWALT
C. L. GREENWALT President and Chief Executive Officer
and Director
Principal Financial Officer:
/s/ R. W. JACKSON
R. W. JACKSON Senior Vice President and Secretary, Director
and as Attorney-in-Fact*
Principal Accounting Officer:
/s/ J. C. FIAUSH
J. C. FIAUSH Controller
WILLIAM J. ALLEY* Director
JOHN L. HEATH* Director
GORDON R. LOHMAN* Director
HANNE M. MERRIMAN* Director
DONALD G. RAYMER* Director
THOMAS L. SHADE* Director
JAMES W. WOGSLAND* Director
Date: March 3, 1995
-93-