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FORM 10-K
SECURlTlES AND EXCHANGE COMMlSSlON
WASHINGTON, D. C. 20549
___________________
(Mark One)
(X) Annual Report Pursuant to Section 13 or l5(d) of the Securities
Exchange Act of 1934
(Fee Required)
For the fiscal year ended December 31, 1993
-------------------------------------------
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
(Fee Required)
For the transition period from__________________to___________________
Commission I.R.S. Employer
File State of Identification
Number Registrant Incorporation Number
---------- ---------- ------------- ---------------
1-8644 IPALCO Enterprises, Inc. Indiana 35-1575582
25 Monument Circle
Indianapolis, Indiana 46204
Telephone Number: 317-261-8261
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
------------------- ------------------------------------
IPALCO Enterprises, Inc. New York Stock Exchange
Common Stock (without par value) Chicago Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
____________________________________________________________________
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to the filing requirements
for at least the past 90 days. Yes X No
---------- ----------
As of January 31, 1994, the aggregate market value of the voting
stock held by non-affiliates of the registrant was:
IPALCO Enterprises Inc. Common Stock (without par value) --
$1,158,869,039
As of January 31, 1994, the number of shares outstanding of the
registrant's classes of common stock were:
IPALCO Enterprises Inc. Common Stock (without par value) --
37,692,966 shares
_____________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the IPALCO Enterprises, Inc. definitive Proxy
Statement for the Annual Meeting of Shareholders on April 20, 1994
are incorporated by reference into Part III of this Report.
PART I
Item 1. BUSINESS
ORGANIZATION
IPALCO Enterprises, Inc. (IPALCO) is a holding company and
was incorporated under the laws of the State of Indiana on
September 14, 1983. IPALCO has two (2) subsidiaries: Indianapolis
Power & Light Company (IPL), an electric utility, and Mid-America
Capital Resources, Inc. (Mid-America), a holding company for
unregulated businesses.
DESCRIPTION OF BUSINESS OF SUBSIDIARIES
INDIANAPOLIS POWER & LIGHT COMPANY
GENERAL
IPL is engaged primarily in generating, transmitting,
distributing and selling electric energy in the City of
Indianapolis and neighboring cities, towns, communities, and
adjacent rural areas, all within the State of Indiana, the most
distant point being about forty miles from Indianapolis. It also
produces, distributes and sells steam within a limited area in
such city. There have been no changes in the services rendered,
or in the markets or methods of distribution, since the beginning
of the fiscal year. IPL intends to do business of the same
general character as that in which it is now engaged. No private
or municipally-owned electric public utility companies are
competing with IPL in the territory it serves.
IPL operates under indeterminate permits subject to the
jurisdiction of the Indiana Utility Regulatory Commission (IURC).
Such permits are subject to revocation by the IURC for cause. The
Public Service Commission Act of Indiana (the PSC Act), which
provides for the issuance of such permits, also provides that if
the PSC Act is repealed, indeterminate permits will cease and a
utility will again come into possession of such franchises as were
surrendered at the time of the issue of the permit, but in no
event shall such reinstated franchise be terminated within less
than five years from the date of repeal of the PSC Act.
The electric utility business is affected by the various
seasonal weather patterns throughout the year and, therefore, the
operating revenues and associated operating expenses are not
generated evenly by months during the year.
IPL's electric system is directly interconnected with the
electric systems of Indiana Michigan Power Company, PSI Energy,
Inc., Southern Indiana Gas and Electric Company, Wabash Valley
Power Association and Hoosier Energy Rural Electric Cooperative,
Inc.
Also, IPL and 28 other electric utilities, known as the East
Central Area Reliability Group (the Group), are cooperating under
an agreement which provides for coordinated planning of generating
and transmission facilities and the operation of such facilities
to provide maximum reliability of bulk power supply in the nine-
state region served by the Group.
In 1993, approximately 99.7% of the total kilowatthours sold
by IPL were generated from coal, .2% from middle distillate fuel
oil and .1% from secondary steam purchased from the Indianapolis
Resource Recovery Project. In addition to use in oil-fired
generating units, fuel oil is used for start up and flame
stabilization in coal-fired generating units as well as for coal
thawing and coal handling.
IPL's long-term coal contracts provide for the supply of the
major portion of its burn requirements through the year 1999,
assuming environmental regulations can be met. The long-term coal
agreements are with six suppliers and the coal is produced
entirely in the State of Indiana (these six suppliers are located
in the following counties: Clay, Daviess, Greene, Knox, Pike,
Sullivan and Warrick, and are not affiliates of IPL). See
Exhibits listed under Part IV Item 14(a)3(21). It is presently
believed that all coal used by IPL will be mined by others. IPL
normally carries a 70-day supply of coal and fuel oil to offset
unforeseen occurrences such as labor disputes, equipment
breakdowns, power sales to other utilities, etc. When strikes are
anticipated in the coal industry, IPL increases its stockpile to
an approximate 103-day supply.
The combined cost of coal and fuel oil used in the generation
of electric energy for 1993 averaged 1.151 cents per kilowatthour
or $24.49 per equivalent ton of coal, compared with the 1992
average fuel cost for electric generation of 1.146 cents per
kilowatthour or $24.55 per equivalent ton of coal. Fuel costs are
expected to experience only moderate changes in the near future
due to increased supplier productivity, the stabilizing of coal
prices and a low dependency on oil. However, an acceleration of
inflation and/or changes in laws, regulations or ordinances which
impact the mining industry or place more restrictive environmental
controls on utilities could have a detrimental effect on such
prices.
IPL has a long-term contract to purchase steam for use in its
steam distribution system with Ogden Martin Systems of
Indianapolis, Inc. (Ogden Martin). Ogden Martin owns and operates
the Indianapolis Resource Recovery Project which is a waste-to-
energy facility located in Marion County, Indiana. During 1993,
IPL's steam system purchased 49.4% of its total therm requirement
from Ogden Martin. Additionally, 33.3% of its 1993 one-hour peak
load was met with steam purchased from Ogden Martin. IPL also
purchased 3.2 million secondary therms which represent Ogden
Martin send-out in excess of the IPL steam system requirements.
Such secondary steam is used to produce electricity at the IPL
Perry K and Perry W facilities.
CONSTRUCTION
The cost of IPL's construction program during 1993, 1992 and
1991 was $149.3 million, $115.3 million and $96.3 million,
respectively, including Allowances for Funds Used During
Construction (AFUDC) of $3.6 million, $3.2 million and $1.6
million, respectively.
IPL's construction program is reviewed periodically and is
updated to reflect among other things the changes in economic
conditions, revised load forecasts and cost escalations under
construction contracts. The most recent projections indicate that
IPL will need about 800 megawatts (MW) of additional energy
resources by the year 2000. IPL plans to meet this need through
the combination of the use of Demand Side Management, power
purchases, peaking turbines and base-load generation.
During 1992, IPL entered into a five-year firm power purchase
agreement with Indiana Michigan Power Company (IMP), which will
supply additional capacity for the near-term requirements. IPL
receives 200 MW of capacity. IPL can also elect to extend the
agreement through November 1999. See Item 7, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" under "Capital Requirements" for additional
information regarding the IMP agreement.
IPL's construction program for the five-year period 1994-
1998, is estimated to cost $1.0 billion including AFUDC. The
estimated cost of the program by year (in millions) is $234.4 in
1994; $191.9 in 1995; $116.6 in 1996; $221.4 in 1997; and $251.8
in 1998. It includes $113.7 million for four 80 MW combustion
turbines with in-service dates of 1994, 1995, 1998 and 1999,
respectively, and $217.2 million for base-load capacity with in-
service dates of 2000 and 2002, or beyond. The forecast also
includes $284.4 million for additions, improvements and extensions
to transmission and distribution lines, substations, power factor
and voltage regulating equipment, distribution transformers and
street lighting distribution. With respect to the expenditures
for pollution control facilities to comply with the Clean Air Act
and with respect to the regulatory authority of the IURC as it
relates to the integrated resource plan, see "REGULATORY MATTERS"
and Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS".
FINANCING
IPL's 1994-1998 long-term financing program anticipates sales
of debt and equity securities totaling $447.7 million. The timing
and amounts of such activities are contingent upon the timing and
cost of any new capacity, as well as market conditions and other
factors near the dates of the required financings. In addition to
the sale of new securities, IPL has authority from the IURC to
redeem and replace certain of its existing securities should
favorable market conditions arise. Such action, if considered,
may result in additional financing in the form of long-term debt.
(With respect to restrictions on the issuance of certain
securities, see Item 7, "LIQUIDITY AND CAPITAL RESOURCES".)
EMPLOYEE RELATIONS
As of December 31, 1993, IPL had 2,276 employees of whom
1,155 were represented by the International Brotherhood of
Electrical Workers, AFL-CIO (IBEW) and 411 were represented by the
Electric Utility Workers Union (EUWU), an unaffiliated labor
organization. In December 1993, the membership of the IBEW
ratified a new labor agreement which remains in effect until
December 16, 1996. The agreement provides for general pay
adjustments of 4% in 1993, 3.5% in both 1994 and 1995, and changes
in pension and health care coverage. In March, 1992, the
membership of the EUWU ratified a new labor agreement which
remains in effect until February 27, 1995. The agreement provides
for general pay adjustments of 4.5% in both 1992 and 1993, and 3%
in 1994, as well as changes in health care coverage.
REGULATORY MATTERS
IPL is subject to regulation by the IURC as to its services
and facilities, valuation of property, the construction, purchase
or lease of electric generating facilities, classification of
accounts, rates of depreciation, rates and charges, issuance of
securities (other than evidences of indebtedness payable less than
twelve months after the date of issue), the acquisition and sale
of public utility properties or securities, and certain other
matters.
In addition, IPL is subject to the jurisdiction of the
Federal Energy Regulatory Commission, in respect of short-term
borrowings not regulated by the IURC, the transmission of electric
energy in interstate commerce, the classification of its accounts
and the acquisition and sale of utility property in certain
circumstances as provided by the Federal Power Act.
IPL is also subject to federal, state, and local
environmental laws and regulations, particularly as to generating
station discharges affecting air and water quality. The impact of
such regulations on the capital and operating costs of IPL has
been and will continue to be substantial. IPL's 1994-1998
construction program includes $335 million in environmental costs,
including AFUDC, of which approximately $207 million pertains to
the Clean Air Act. Accordingly, IPL has developed a plan to
reduce sulfur dioxide and nitrogen oxide emissions from several
generating units. This plan has been approved by the IURC.
Annual costs for all air, solid waste, and water environmental
compliance measures are $106 million and $112 million in 1994 and
1995, respectively.
MID-AMERICA CAPITAL RESOURCES, INC. (Mid-America)
GENERAL
Mid-America, the holding company for the unregulated
activities of IPALCO, has as subsidiaries Indianapolis Campus
Energy, Inc. (ICE), Store Heat And Produce Energy, Inc. (SHAPE)
and Mid-America Energy Resources, Inc. (Energy Resources). Mid-
America also holds an investment in the Evergreen Media
Corporation (Evergreen) and manages other financial investments.
Energy Resources has as subsidiaries Cleveland Thermal Energy
Corporation (Cleveland Thermal) and Cleveland District Cooling
Corporation (Cleveland Cooling).
Energy Resources was formed on November 17, 1989, to
construct and operate a multi-phased district cooling system in
near downtown Indianapolis. The completion of phase I
construction and the commencement of operations occurred in mid-
1991. Phase II construction commenced in June 1992, and was
completed in November 1992. In 1991, Energy Resources acquired
Cleveland Thermal, which owns and operates the district steam
heating system in Cleveland, Ohio. During 1992, Energy Resources
formed Cleveland Cooling for the purpose of constructing and
operating a district cooling system in downtown Cleveland.
Operations commenced April 15, 1993. Both Cleveland Thermal and
Cleveland Cooling jointly conduct business under the name
Cleveland Energy Resources.
At December 31, 1993, Mid-America held 70 percent of the
common stock of SHAPE. SHAPE conducts research and development of
energy storage technology.
ICE was formed to construct, own, and operate energy systems
in campus settings such as industrial complexes or college
campuses. On August 3, 1993, ICE entered into a contractual
agreement with Eli Lilly and Company (Lilly) to provide cooling
capacity to the Lilly Technical Center. Construction of the
chilled water facility, located near Morris Street and Kentucky
Avenue in Indianapolis, will begin in mid-1994 with operations
scheduled to begin in March 1996.
Mid-America holds a $7.5 million investment in Evergreen,
representing approximately 5 percent equity ownership at December
31, 1993. Evergreen owns and operates eleven radio stations in
major markets across the United States.
During the next five years, 1994-1998, IPALCO may continue to
become involved in unregulated businesses through the formation of
one or more additional Mid-America subsidiaries. The cash assets
of Mid-America are invested in a variety of short-term financial
investments and marketable securities, pending investment in any
such business. The sources of capital to finance these
subsidiaries will be determined at the time they are established.
Opportunities for future diversification investments into other
businesses are continually being reviewed.
CONSTRUCTION AND FINANCING
During 1993, 1992 and 1991, the construction expenditures of
Mid-America and its subsidiaries totaled $8.8 million, $29.8
million and $14.0 million respectively. These costs were financed
with internal funds and a $9.5 million debt issue in 1991.
Construction requirements during the next five years are
estimated to be $18.8 million, $.4 million, $17.9 million, $9.3
million and $29.4 million for ICE, SHAPE, Energy Resources,
Cleveland Thermal and Cleveland Cooling, respectively. Such
expenditures are highly contingent upon the development of markets
for the products and services offered by the Mid-America family of
companies. The cash requirements of ICE, SHAPE, Energy Resources,
Cleveland Thermal and Cleveland Cooling are expected to be funded
by Mid-America from existing liquid assets, future cash flows from
operations and $46.3 million of project specific debt financing.
EMPLOYEES
As of December 31, 1993, Mid-America had 8 employees, Energy
Resources had 18 employees, Cleveland Thermal had 91 employees and
SHAPE had 4 employees. There were no labor organizations.
IPALCO ENTERPRISES, INC.
STATISTICAL INFORMATION - ELECTRIC
The following table of statistical information presents additional data on IPL's operation.
Year Ended December 31,
1993 1992 1991 1990 1989
Operating Revenues (In Thousands):
Residential $ 225,138 $ 212,757 $ 224,039 $ 207,734 $ 205,066
Small industrial and commercial 127,551 126,588 135,456 134,514 137,207
Large industrial and commercial 255,945 243,446 237,200 225,586 214,047
Public lighting 7,186 7,133 7,106 7,122 7,095
Miscellaneous 7,373 6,018 6,960 6,598 6,352
---------- ---------- ---------- ---------- ----------
Revenues - ultimate consumers 623,193 595,942 610,761 581,554 569,767
Sales for resale - REMC 897 861 900 759 825
Sales for resale - other 5,237 2,400 4,197 10,418 4,590
---------- ---------- ---------- ---------- ----------
Total electric revenues $ 629,327 $ 599,203 $ 615,858 $ 592,731 $ 575,182
========== ========== ========== ========== ==========
Kilowatthour Sales (In Millions):
Residential 4,014 3,675 3,960 3,585 3,585
Small industrial and commercial 2,202 2,171 2,331 2,322 2,399
Large industrial and commercial 6,169 5,843 5,612 5,399 5,178
Public lighting 62 64 64 65 65
---------- ---------- ---------- ---------- ----------
Sales - ultimate consumers 12,447 11,753 11,967 11,371 11,227
Sales for resale - REMC 24 23 23 20 21
Sales for resale - other 321 169 256 555 228
---------- ---------- ---------- ---------- ----------
Total kilowatthours sold 12,792 11,945 12,246 11,946 11,476
========== ========== ========== ========== ==========
Customers at End of Year:
Residential 356,015 352,139 347,718 344,094 339,004
Small industrial and commercial 38,359 38,171 38,011 37,863 37,619
Large industrial and commercial 3,342 3,163 2,952 2,714 2,440
Public lighting 252 239 229 212 197
---------- ---------- ---------- ---------- ----------
Total ultimate consumers 397,968 393,712 388,910 384,883 379,260
Sales for resale - REMC 1 1 1 1 1
---------- ---------- ---------- ---------- ----------
Total electric customers 397,969 393,713 388,911 384,884 379,261
========== ========== ========== ========== ==========
Miscellaneous Statistics:
Kilowatthour output (In Millions):
Generated (net after station use) 13,254 12,525 12,851 12,254 11,930
Purchased 325 126 160 300 331
---------- ---------- ---------- ---------- ----------
Total generated and purchased 13,579 12,651 13,011 12,554 12,261
Company use, line loss, etc. 787 706 765 608 785
---------- ---------- ---------- ---------- ----------
Energy sold 12,792 11,945 12,246 11,946 11,476
========== ========== ========== ========== ==========
Load factor (percent) 57.44 56.72 56.37 54.83 57.55
Average BTU per net kilowatthour 10,503 10,385 10,455 10,474 10,466
Cost of fuel per million BTU $ 1.096 $ 1.103 $ 1.113 $ 1.109 $ 1.103
Cost of fuel per ton (includes oil
stated in equivalent tons of coal) $ 24.488 $ 24.547 $ 24.804 $ 24.711 $ 24.459
Summer plant capability (megawatts)* 2,829 2,829 2,829 2,829 2,829
Maximum demand on IPL system (megawatts)* 2,635 2,505 2,583 2,498 2,387
Average use per residential
customer (kilowatthours) 11,345 10,515 11,460 10,514 10,668
Average revenue per residential customer $ 636.28 $ 608.68 $ 648.36 $ 609.29 $ 610.13
Average revenue per small industrial and
commercial customer $ 3,310.59 $ 3,305.94 $ 3,552.03 $ 3,566.13 $ 3,668.15
Average revenue per large industrial and
commercial customer $78,055.83 $79,324.43 $83,816.09 $87,065.08 $93,429.69
Average residential revenue per
kilowatthour (cents) 5.609 5.789 5.658 5.795 5.720
* All figures are net of station use.
Item 2. PROPERTIES
IPL
IPL owns and operates five primarily coal-fired generating
plants, three of which are used for total electric generation and
two of which are used for a combination of electric and steam
generation. In relation to electric generation, there exists a
total gross nameplate rating of 2,885 MW, a winter capability of
2,862 MW and a summer capability of 2,829 MW. All figures are net
of station use. In relation to steam generation, there exists a
gross capacity of 2,290 Mlbs. per hour.
Total Electric Stations:
H. T. Pritchard plant (Pritchard), 25 miles southwest of
Indianapolis (six units in service - one in 1949,
1950, 1951, two in 1953 and one in 1956) with 367 MW
nameplate rating and net winter and summer
capabilities of 344 MW and 341 MW, respectively.
E. W. Stout plant (Stout) located in southwest part of
Marion County (five units in service - one each in
1941, 1947, 1958, 1961 and 1973) with 771 MW nameplate
rating and net winter and summer capabilities of 798
MW and 767 MW, respectively.
Petersburg plant (Petersburg), located in Pike County,
Indiana (four units in service - one each in 1967,
1969, 1977 and 1986) with 1,716 MW nameplate rating
and net winter and summer capabilities of 1,690 MW and
1,690 MW, respectively.
Combination Electric and Steam Stations:
C.C. Perry Section K plant (Perry K), in the city of
Indianapolis with 20 MW nameplate rating (net winter
capability 20 MW, summer 19 MW) for electric and a
gross capacity of 1,990 Mlbs. per hour for steam.
C.C. Perry Section W plant (Perry W), in the city of
Indianapolis with 11 MW nameplate rating (net winter
capability 10 MW, summer 12 MW) for electric and a
gross capacity of 300 Mlbs. per hour for steam.
Net electrical generation during 1993, at the Petersburg,
Stout and Pritchard stations accounted for about 74.9%, 19.6% and
5.5%, respectively, of IPL's total net generation. All steam
generation by IPL for the steam system was produced by the Perry K
and Perry W stations.
Included in the above totals are three gas turbine units at
the Stout station added in 1973 with a combined nameplate rating
of 64 MW, one diesel unit each at Pritchard and Stout stations,
and three diesel units at Petersburg station, all added in 1967.
Each diesel unit has a nameplate rating of 3 MW.
IPL's transmission system includes 454 circuit miles of
345,000 volt lines, 353 circuit miles of 138,000 volt lines and
275 miles of 34,500 volt lines. Distribution facilities include
4,686 pole miles and 19,785 wire miles of overhead lines.
Underground distribution and service facilities include 436 miles
of conduit and 4,900 wire miles of conductor. Underground street
lighting facilities include 110 miles of conduit and 668 wire
miles of conductor. Also included in the system are 74 bulk power
substations and 85 distribution substations.
Steam distribution properties include 22 miles of mains with
286 services. Other properties include coal and other minerals,
underlying 798 acres in Sullivan County and coal underlying about
6,215 acres in Pike and Gibson Counties, Indiana. Additional
land, approximately 4,722 acres in Morgan County, and
approximately 884 acres in Switzerland County has been purchased
for future plant sites.
OTHER SUBSIDIARIES
Energy Resources owns and operates a district cooling
facility in near downtown Indianapolis, which is designed to
distribute chilled water to subscribers located downtown for their
air conditioning needs. The plant is equipped with four 5,000 ton
chillers powered by steam purchased from IPL.
Cleveland Thermal owns and operates two steam plants in
Cleveland, Ohio, with a total of nine boilers having a gross
capacity of 1,050 Mlbs. per hour. The distribution system
includes 20 miles of mains with 230 services.
Cleveland Cooling owns and operates a district cooling
facility in near downtown Cleveland, which is designed to
distribute chilled water to subscribers located downtown for their
air conditioning needs. The plant is equipped with two 5,000 ton
chillers.
Item 3. LEGAL PROCEEDINGS
On March 16, 1993, Smith Cogeneration of Indiana, Inc., and
its affiliates (Smith) filed a petition with the Indiana Utility
Regulatory Commission (IURC) requesting that IPL be ordered to
enter into a power sales agreement to purchase power from Smith's
proposed 240 megawatt plant. On September 24, 1993, IPL filed a
motion for summary adjudication of Smith's petition. This motion
is currently pending, has been fully briefed and no further
proceedings have been scheduled in this matter.
In June 1993, IPL received a Notice of Violation from the
Indianapolis Air Pollution Control Section (IAPCS) regarding
fugitive dust emissions at its Perry K Generating Station. IPL
met with IAPCS to discuss four alleged violations over a span of
15 months. Each violation was subject to a fine of up to $2,500.
IPL agreed to a settlement in the amount of $3,500 for all
violations, but settlement has not yet been finalized.
On August 18, 1993, the IURC entered an order in Cause No.
39437, approving IPL's Environmental Compliance Plan to comply
with the Clean Air Act Amendments of 1990. The estimated cost of
IPL's Environmental Compliance Plan is approximately $250 million
before including allowance for funds used during construction. A
primary part of IPL's Plan, scrubbing IPL's Petersburg 1 and 2
coal-fired units by 1996 to enable IPL to continue to burn high
sulfur coal, was opposed by the Office of Utility Consumer
Counselor (OUCC), the Citizens Action Coalition, and the
Industrial Intervenors Group (IIG). OUCC and IIG are in the
process of appealing the Commission's order to the Indiana Court
of Appeals.
In October 1993, IPL received a Findings of Violation from
EPA, Region V, regarding IPL's compliance with the thermal
limitations of the NPDES (water discharge) permit under which IPL
operates its Petersburg Generating Station. On February 20, 1992,
IPL filed an application for renewal of that permit but the
application has not been acted upon by the Indiana Department of
Environmental Management. Although unclear to IPL, EPA's action
seems to have resulted from its misinterpretation of data IPL
supplied to EPA in response to the latter's Clean Water Act
information request that preceded issuance of the Findings of
Violation. IPL believes it continues to be in compliance with the
requirements of the permit and has made continuing efforts to meet
with EPA to discuss the matter. If IPL is found to be in
violation of its permit, it could be subject to maximum fines of
$25,000 per day per violation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT AT FEBRUARY 22, 1994.
Name, age (at December 31, 1993), and positions and offices held
for the past five years:
From To
John R. Hodowal (48)
Chairman of the Board and
President of IPALCO May, 1989
Vice President and Treasurer
of IPALCO September, 1983 May, 1989
Chairman of the Board of IPL February, 1990
Chief Executive Officer of IPL May, 1989
Executive Vice President
of IPL April, 1987 May, 1989
Ramon L. Humke (61)
Vice Chairman of IPALCO May, 1991
President and Chief Operating
Officer of IPL February, 1990
President and Chief Executive
Officer of Ameritech Services
and Senior Vice President of
Ameritech Bell Group September, 1989 February, 1990
President and Chief Executive
Officer of Indiana Bell
Telephone Company October, 1983 September, 1989
John R. Brehm (40)
Vice President and Treasurer
of IPALCO May, 1989
Assistant Secretary and Assistant
Treasurer of IPALCO December, 1983 May, 1989
Senior Vice President -
Finance and Information
Services of IPL May, 1991
Senior Vice President - Financial
Services of IPL May, 1989 May, 1991
Treasurer of IPL August, 1987 May, 1989
Maurice O. Edmonds (62)
Vice President - Corporate
Affairs of IPALCO December, 1992
Vice President - Human
Resources of IPL May, 1989 December, 1992
Vice President - General
Services of IPL July, 1988 May, 1989
From To
N. Stuart Grauel (49)
Vice President - Public Affairs
of IPALCO May, 1991
Vice President - Public Affairs
of IPL May, 1989 May, 1991
Public Affairs Manager of IPL October, 1981 May, 1989
Joseph A. Gustin (46)
Vice President of SHAPE May, 1993
President of ICE April, 1993
President of Energy Resources May, 1991
Vice President of Mid-America May, 1991
Vice President of Energy
Resources January, 1990 May, 1991
Vice President - Steam Operations
of IPL May, 1989 May, 1991
Manager - Power Production of
IPL June, 1981 May, 1989
Robert W. Rawlings (52)
Senior Vice President -
Electric Production of IPL May, 1991
Vice President - Electric
Production of IPL May, 1989 May, 1991
Vice President - Engineering
and Construction of IPL April, 1986 May, 1989
Gerald D. Waltz (54)
Senior Vice President -
Business Development of IPL May, 1991
Senior Vice President -
Engineering and Operations
of IPL April, 1986 May, 1991
Max Califar (40)
Vice President - Human
Resources of IPL December, 1992
Assistant Treasurer of IPALCO May, 1989 December, 1992
Treasurer of IPL May, 1989 December, 1992
Assistant Controller of IPL July, 1987 May, 1989
Stephen J. Plunkett (45)
Controller of IPALCO
and IPL May, 1991
Assistant Controller of
IPL May, 1989 May, 1991
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
At December 31, 1993, Enterprises had 24,299 holders of common
stock (not including approximately 1,900 shareholders who hold shares
only through Enterprises' Automatic Dividend Reinvestment and Stock
Purchase Plan). Enterprises' common stock is principally traded on
the New York Stock Exchange and the Chicago Stock Exchange. The high
and low sales prices for Enterprises' common stock during 1993 and
1992 as reported on the Composite Tape in The Wall Street Journal,
were as follows:
1993 1992
High Low High Low
Sale Price Sale Price Sale Price Sale Price
----------------------- ----------------------
First Quarter $40 $34 3/8 $33 5/8 $31 1/2
Second Quarter 39 1/4 35 1/2 36 1/8 32 1/4
Third Quarter 38 3/4 35 3/4 36 7/8 34 1/8
Fourth Quarter 38 33 1/8 36 33 3/8
The high and low sales prices for Enterprises' common stock as
reported on the Composite Tape in The Wall Street Journal for the
period January 1, 1994, through February 22, 1994, were:
High - $35 3/8, Low - $31 3/4.
Quarterly dividends paid on the common stock during 1993 and 1992
were as follows:
1993 1992
First Quarter $ .49 $ .47
Second Quarter .51 .49
Third Quarter .51 .49
Fourth Quarter .51 .49
The Enterprises' Board of Directors at its meeting on
February 22, 1994, declared a regular quarterly dividend on common
stock of $.53 per share, payable April 15, 1994, to shareholders of
record on March 25, 1994.
Dividend Restrictions
The following restrictions pertain to IPL but to the extent that
the earnings of Enterprises depend upon IPL dividends it may have an
effect on Enterprises.
So long as any of the several series of bonds of IPL issued under
the Mortgage and Deed of Trust, dated as of May 1, 1940, as
supplemented and modified, executed by IPL to American National Bank
and Trust Company of Chicago, as Trustee, remain outstanding, IPL is
restricted in the declaration and payment of dividends, or other
distribution on shares of its capital stock of any class, or in the
purchase or redemption of such shares, to the aggregate of its net
income, as defined in Section 47 of such Mortgage, after December 31,
1939, available for dividends. The amount which these Mortgage
provisions would have permitted IPL to declare and pay as dividends at
December 31, 1993, exceeded retained earnings at that date. Such
restrictions do not apply to the declaration or payment of dividends
upon any shares of capital stock of any class to an amount in the
aggregate not in excess of $1,107,155, or to the application to
purchase or redemption of any shares of capital stock of any class of
amounts not to exceed in the aggregate the net proceeds received by
IPL from the sale of any shares of its capital stock of any class
subsequent to December 31, 1939.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
IPALCO Enterprises, Inc. (IPALCO) is a holding company
incorporated under the laws of the State of Indiana. Indianapolis
Power & Light Company (IPL) and Mid-America Capital Resources, Inc.
(Mid-America) are subsidiaries of IPALCO. Mid-America was formed as
a holding company for the unregulated activities of IPALCO.
LIQUIDITY AND CAPITAL RESOURCES
IPL
On a national basis, competition for wholesale and retail sales
within the electric utility industry has been increasing. In
Indiana, competition has been primarily focused on the wholesale
power markets. Existing Indiana law provides for public utilities to
have an exclusive permit at the retail level. The impact of
continuing competitive pressures on IPL's wholesale and retail
electric and steam markets cannot be determined at this time.
Rate Matters
Environmental Compliance Plan
IPL is subject to the new air quality provisions specified in the
federal Clean Air Act Amendments of 1990 and related regulations (the
Act). During 1993, IPL obtained an order from the Indiana Utility
Regulatory Commission (IURC) approving its environmental compliance
plan, together with the costs and expenses associated therewith,
which provides for the installation of sulfur dioxide and nitrogen
oxide emissions abatement equipment and the installation of
continuous emission monitoring systems to meet the requirements of
both Phase I and Phase II of the Act - See "Capital Requirements".
Certain intervenors in the hearing before the IURC have requested a
transcript preparatory to an appeal of that order which appeal has
not yet been perfected As required by the Act, IPL filed its
proposed compliance plan with the Environmental Protection Agency in
February 1993.
As provided in the Act, effective January 1, 1995, IPL is
scheduled to receive annual emission "allowances" for certain of its
generating units. Each allowance would permit the emission of one
ton of sulfur dioxide. IPL presently expects that annual sulfur
dioxide emissions will not exceed annual allowances provided to IPL
under the Act. Allowances not required in the operation of IPL
facilities may be reserved for future periods or sold. The value of
such unused allowances that may be available to IPL for use in future
periods or for sale is subject to a developing market and is unknown
at this time. The IURC Order provides for the deferral of net gains
and losses resulting from any sale of emission allowances for future
amortization to cost of service on a basis to be determined in the
next general retail electric rate proceeding.
Demand Side Management Program
On September 8, 1993, IPL obtained an order from the IURC
approving a Stipulation of Settlement Agreement between IPL, the
Office of Utility Consumer Counsel, Citizens Action Coalition of
Indiana, Inc., an industrial group, the Trustees of Indiana
University and the Indiana Alliance for Fair Competition relating to
IPL's Demand Side Management Program (DSM). The order provides for
the deferral and subsequent recovery in rates of certain approved DSM
costs. The order also provides for the recording of a return on
deferred costs until recognized in rates.
Postretirement Benefits
On December 30, 1992, the IURC issued an order authorizing
Indiana utilities to account for postretirement benefits on the basis
required by the Statement of Financial Accounting Standard No. 106 --
Accounting for Postretirement Benefits other than Pensions (SFAS
106). Generally, SFAS 106 requires the use of an accrual basis
accounting method for determining annual costs of postretirement
benefits. Prior to 1993, IPL used a pay-as-you-go method to account
for such costs. IPL was required to adopt SFAS 106 effective January
1, 1993. Additionally, the order authorized the deferral of SFAS 106
costs in excess of such costs determined on a pay-as-you-go and the
recording of a resulting regulatory asset. The order further
provides for the recovery in rates of such costs in a subsequent
general rate proceeding on an individual company basis in an amount
to be determined in each such proceeding. IPL is deferring as a
regulatory asset the non-construction related SFAS 106 costs
associated with its electric business. IPL is expensing its non-
construction related SFAS 106 costs associated with its steam
business.
Regulatory Asset Deferrals
Balance sheet deferrals of regulatory assets for DSM,
postretirement benefits, income taxes and other such costs amounted
to $33.1 million in 1993. Future deferrals for such items are
expected to increase due to SFAS 106, and DSM costs and related
carrying charges until IPL's next retail electric rate order.
Future Rate Relief
IPL presently anticipates that it will petition the IURC to
increase its electric rates and charges during 1994. A final IURC
order on such a request may not occur until 1995. IPL's last
authorized increase in electric rates and charges occurred in August,
1986.
Steam Rate Order
The IURC authorized IPL to increase its steam system rates and
charges over a six-year period beginning January 13, 1993.
Accordingly, IPL implemented new steam tariffs effective on that date
which were designed to produce estimated additional annual steam
operating revenues as follows:
Additional Cumulative
Annual Annual
Year Revenues Revenues
1994 $2,051,000 $3,983,000
1995 1,552,000 5,535,000
1996 1,625,000 7,160,000
1997 2,384,000 9,544,000
1998 370,000 9,914,000
Capital Requirements
The capital requirements of IPL are primarily driven by the need
for facilities to ensure customer service reliability and
environmental compliance and by the impact of maturing long-term
debt.
Forecasted Demand & Energy
From 1994 to 1998, annual peak demand is forecasted to experience
a compound 1.5% increase, while retail kilowatthour (KWH) sales are
anticipated to increase at a 2.0% compound growth rate. Both
compound growth rates are computed assuming normal weather conditions
and include the effects of DSM. IPL expects a reduction of about 120
megawatts (MW) of annual peak demand by the year 2000 as a result of
DSM programs.
Integrated Resource Plan
Sales growth projections indicate a need for about 800 MW of
additional capacity resources by the year 2000. These resource
requirements can be met in a variety of ways including, but not
limited to, a combination of the use of DSM, power purchases, peaking
turbines and base-load generation. IPL continues to review its
integrated resource plan to consider the appropriateness of all
resource options to meet capacity requirements over the decade of the
1990's and beyond.
IPL has a well-defined, near-term integrated resource plan and is
considering all reasonable options to meet its long-term capacity
requirements. The following discussion makes certain assumptions
regarding IPL's plans to meet these requirements.
In order to maintain adequate summer capacity reserve margins in
the near-term, IPL entered into a five-year firm power purchase
agreement with Indiana Michigan Power Company (IMP), which expires
March 31, 1997. Under this agreement, IPL is receiving 200 MW of
capacity. The agreement provides for monthly capacity payments by
IPL of $1.2 million through March 31, 1997. IPL can terminate the
agreement, should the ability to recover future demand charges
through rates be disallowed. IPL and IMP will also exchange 50 MW of
seasonal power over the 1995-1998 period.
IPL plans to add two 80 MW combustion turbines with in-service
dates in 1994 and 1995. Under Indiana law, IPL must obtain from the
IURC a certificate of "public convenience and necessity"
(Certificate) prior to purchasing or commencing construction of any
new electric generation facility. IPL received Certificates from the
IURC for construction of these combustion turbines during 1992.
IPL is considering a variety of options to meet its long-term
capacity requirements through the year 2000 including DSM, utility
and nonutility power purchases, additional peaking turbines and base-
load generating units. Presently, IPL plans to add two additional 80
MW combustion turbines with in-service dates in 1998 and 1999. IPL
also has options to extend the 200 MW firm power purchase agreement
with IMP through December 31, 1997 and subsequently through November
30, 1999, with capacity payments of $1.2 million per month and $1.55
million per month, respectively. Under a recent agreement, IPL has
an option to purchase up to 250 MW from PSI Energy over the 1996 to
2000 period. IPL is also evaluating the installation, on a joint
ownership basis, of two 426 MW base-load generating units to be
placed in service in 2000 and 2002, respectively, or beyond. Of the
total 852 MW, IPL proposes to own 400 MW, with other partners owning
the remaining 452 MW. There is no assurance that IPL will be able to
ultimately reach a joint ownership agreement with any other party.
IPL has not applied for Certificates for the additional combustion
turbines or the base load unit.
Environmental Compliance Construction Requests
IPL estimates that the capital cost of complying with the Act
through 1997 will be approximately $240 million, including Allowance
for Funds Used During Construction (AFUDC), of which $33.0 million
has been expended prior to 1994. IPL further estimates that,
subsequent to December 31, 1997, no significant capital expenditures
will be required to bring generating units into compliance with the
Act until the year 2010 or beyond.
Cost of Construction Program
The cost of IPL's construction program during 1993, 1992 and 1991
was $149.3 million, $115.3 million and $96.3 million, including AFUDC
of $3.6 million, $3.2 million and $1.6 million respectively.
IPL estimates the cost of the construction program for the five
years, 1994-1998, to be approximately $1.0 billion including AFUDC of
$73.1 million. This program is subject to continuing review and is
revised from time to time in light of changes in the actual customer
demand for electric energy, IPL's financial condition and
construction cost escalations. In addition to costs of environmental
compliance, the five-year construction program includes
$113.7 million for the four 80 MW combustion turbines and $217.2
million for the base-load capacity, mentioned above. Additional
expenditures will be incurred beyond 1998 for the capacity with in-
service dates subsequent to 1998. Transmission and substation
facilities relating to the planned base-load capacity amount to $29.0
million in the five-year construction program. Expenditures for the
new capacity are contingent upon the review of other long-term and
near-term options previously discussed and subsequent receipt of the
necessary Certificates.
Retirement of Long-term Debt and Equity Securities
During 1993, 1992 and 1991, IPL retired long-term debt, including
sinking fund payments, of $96.9 million, $75.0 million and $96.4
million, respectively, which required replacement with other debt
securities at a lower cost.
IPL will retire $7.5 million, $15.0 million, $11.25 million and
$18.75 million of maturing long-term debt during 1994, 1996, 1997 and
1998, respectively, which may require replacement in whole or in part
with other debt or equity securities. In addition, other existing
higher rate debt may be refinanced depending upon market conditions.
Financing
Financing Requirements
During the three-year period ended December 31, 1993, IPL's
permanent financing totaled $275.3 million in long-term debt. The
net proceeds of these securities were used, along with internal
funds, to retire existing long-term debt. All of IPL's construction
expenditures during this three-year period were funded with
internally generated cash and short-term debt.
IPL's permanent financing requirements for the five-year period,
1994-1998, are forecasted to include additional sales of debt and
equity securities totaling $447.7 million. This amount is highly
contingent on the timing and cost of any new capacity. The timing,
number and dollar amounts of such financings will depend on market
conditions and other factors, including required regulatory
approvals. In addition to the sale of new securities, IPL has
authority from the IURC to redeem and replace certain of its existing
securities, should favorable market conditions dictate.
Internally generated funds supplemented by temporary short-term
borrowings are forecasted to provide the remaining funds required for
the five-year construction program. Uncertainties which could affect
this forecast include the impact of inflation on operating expenses,
the actual degree of growth in KWH sales, the level of interchange
sales with other utilities and the receipt of Certificates required
for new electric generation facilities.
Mortgage Restrictions
IPL is limited in its ability to issue certain securities by
restrictions under its Mortgage and Deed of Trust (Mortgage) and its
Amended Articles of Incorporation (Articles). The restriction under
the Articles requires that the net income of IPL, as specified
therein, shall be at least one and one-half times the total interest
on the funded debt and the pro forma dividend requirements on the
outstanding preferred stock and on any preferred stock proposed to be
issued, before any additional preferred stock can be issued. The
Mortgage restriction requires that net earnings as calculated
thereunder be two and one-half times the annual interest requirements
before additional bonds can be authenticated on the basis of property
additions. Based on IPL's net earnings for the twelve months ended
December 31, 1993, the ratios under the Articles and the Mortgage are
3.28 and 7.33, respectively. IPL believes these requirements will
not restrict any anticipated future financings.
MID-AMERICA
Mid-America, the holding company for the unregulated activities
of IPALCO, has as subsidiaries Indianapolis Campus Energy, Inc.
(ICE), Store Heat And Produce Energy, Inc. (SHAPE) which is 70% owned
and Mid-America Energy Resources, Inc. (Energy Resources). Energy
Resources has as subsidiaries Cleveland Thermal Energy Corporation
(Cleveland Thermal) and Cleveland District Cooling Corporation
(Cleveland Cooling). Energy Resources has operated a district
cooling system in downtown Indianapolis, Indiana since 1991 and
Cleveland Cooling began operations of its district cooling system in
downtown Cleveland, Ohio during 1993. During 1993, ICE entered into
an agreement to provide chilled water to the Lilly Technical Center
in near downtown Indianapolis. Operations of this campus facility
are expected to begin in 1996. SHAPE became a majority owned
subsidiary of Mid-America during 1993.
Construction Program
During 1993, 1992 and 1991, the construction expenditures of Mid-
America and its subsidiaries totaled $8.8 million, $29.8 million and
$14.0 million, respectively. These costs were financed with internal
funds and a $9.5 million debt issue in 1991.
Construction requirements during the next five years are
estimated to be $18.8 million, $.4 million, $17.9 million, $9.3
million and $29.4 million, for ICE, SHAPE, Energy Resources,
Cleveland Thermal and Cleveland Cooling, respectively. Such
expenditures are highly contingent upon the development of markets
for the products and services offered by the Mid-America family of
companies. The cash requirements of Mid-America and its subsidiaries
are expected to be funded by Mid-America from existing liquid assets,
future cash flows from operations and $46.3 million of project
specific debt financing.
Projected Operations
SHAPE is projected to provide operating profits in 1995 and ICE
is projected to provide operating profits concurrent with
commencement of operations in 1996. The existing projects of Energy
Resources, Cleveland Thermal and Cleveland Cooling are currently
projected to begin contributing to operating profits in 1996. This
projection could be materially affected by the rate at which
customers are added and other factors. During the next five years,
1994-1998, IPALCO may continue to become involved in unregulated
businesses through the formation of one or more additional Mid-
America subsidiaries. The sources of capital to finance these
businesses will be determined at the time they are established. The
cash assets of Mid-America are invested in a variety of short-term
financial instruments and marketable securities, pending investment
in any such unregulated business.
IPALCO ENTERPRISES CONSOLIDATED
Additional information regarding IPALCO's historical cash flows
from operations, investing and financing for the past three years
including the capital expenditures of IPL are disclosed in the
Statements of Consolidated Cash Flows (See page II-15) and in the
Notes to Consolidated Financial Statements (pages II-18 - II-29).
RESULTS OF OPERATIONS
1993 vs. 1992
Earnings per share during 1993 were $2.00 or $.35 below the $2.35
attained in 1992. The following discussion highlights the factors
contributing to this result.
Operations
Utility operating income increased $8.1 million in 1993 compared
to 1992. Contributing to this increase was an increase in electric
operating revenues of $30.1 million, due to increases in retail sales
of $25.9 million, wholesale sales of $2.8 million and miscellaneous
electric revenue of $1.4 million. Retail electric sales were higher
due to increased retail KWH sales of $31.1 million and decreased fuel
cost recoveries of $5.2 million. The increase in retail KWH sales
this year resulted primarily from the return to normal weather
conditions in 1993 as compared to the abnormally mild summer weather
conditions in 1992. During 1992, cooling degree days were 26.5
percent below normal. Wholesale sales were higher as a result of
increased energy requirements of other utilities, who were also
affected by the mild summer during 1992. The continuing health of
the Indianapolis economy also contributed to the growth in KWH sales,
particularly in the large industrial class.
Fuel costs increased $3.3 million due to increases in fuel
consumption of $9.6 million, partially offset by decreased unit costs
of coal and oil of $.5 million and deferred fuel costs of
$5.8 million. Power purchased increased $11.6 million due to
increased capacity payments of $7.2 million to IMP in accordance with
a five-year power purchase agreement, and by increased purchases of
energy as a result of the near normal weather conditions in 1993 as
compared to 1992.
Maintenance expenses increased $4.9 million. This increase
reflects higher unit overhaul and outage expenses in 1993, partially
offset by decreased distribution maintenance expenses as a result of
a severe storm in 1992 that cost $3.9 million. Amortization of the
deferred return--rate phase-in plan, decreased due to the completion
in August 1992 of the five-year amortization period.
Taxes other than income taxes decreased $1.7 million as a result
of lower property assessments. Income taxes - net, increased
$4.3 million as a result of the increase in pretax utility operating
income and a one percentage point increase in the federal income tax
rate.
Other Income And Deductions
During 1993, IPALCO incurred a one-time charge against earnings
of $33.9 million before taxes ($21.1 million net of applicable income
taxes), for legal, financial and administrative costs pertaining to
IPALCO's effort to acquire PSI Resources, Inc. The charge resulted
in a decrease in earnings per share of 56 cents.
Other - net, which includes operations other than IPL, decreased
$2.4 million due to lower pretax income from nonutility investments
and operations of $4.0 million. The decreased investment income
reflects lower interest rates and decreased cash balances available
for investment as a result of the capital requirements of Mid-
America's subsidiaries, primarily for construction of district
cooling facilities. Operations other than IPL and excluding the one-
time charge against earnings, in total, experienced a net loss of
$3.1 million, or $.08 per share. This compares to a net loss of
$1.5 million during 1992, or $.04 per share.
Interest Charges
Interest on long-term debt decreased $1.3 million as a result of
refinancing six series of IPL's First Mortgage Bonds as follows: the
10 1/4% Series, First Mortgage Bonds in October 1993 (replaced with
the 5.50% Series, First Mortgage Bonds); the 5.80% Series, First
Mortgage Bonds in October, 1993 (replaced with the 5.40% Series,
First Mortgage Bonds); the 6.90% and the 6.60% Series, First Mortgage
Bonds (replaced with the 6.10% Series, First Mortgage Bonds); and the
9.30% and 9 1/2% Series, First Mortgage Bonds in September 1992
(replaced with the 7 3/8% Series, First Mortgage Bonds). The
allowance for borrowed funds used during construction increased due
primarily to an increased construction base. Other interest charges
increased $1.1 million due to higher notes payable balances carried
during 1993.
1992 vs. 1991
Earnings per share during 1992 were $2.35 or $.37 below the $2.72
attained in 1991. The following discussion highlights the factors
contributing to this result.
Operations
Utility operating income decreased $15.6 million in 1992 compared
to 1991. Contributing to this decrease were lower electric operating
revenues of $16.7 million, due to lower retail electric sales of
$13.9 million, lower wholesale sales of $1.8 million and lower
miscellaneous electric revenue of $1.0 million. Retail electric
sales were lower due to decreased retail KWH sales of $10.6 million
and decreased fuel cost recoveries of $3.3 million. The decrease in
retail KWH sales in 1992 resulted primarily from unusual weather
conditions in both 1992 and 1991. Abnormally mild summer weather
conditions in 1992 resulted in lower KWH sales, while the unusually
hot weather during the summer of 1991 significantly increased KWH
sales in that year. During 1992, cooling degree days were 48 percent
lower than 1991 and 26.5 percent below normal. Wholesale sales were
lower as a result of decreased energy requirements of other
utilities, who were also affected by the mild summer.
Fuel costs decreased $7.4 million due to decreases in fuel
consumption of $4.3 million, decreased unit costs of coal and oil of
$2.0 million and deferred fuel costs of $1.1 million. Other
operating expenses increased $2.9 million due primarily to an
increase in administrative and general expenses of $1.4 million
(primarily as a result of increased salaries and group insurance
costs), and a $2.0 million expense related to the FAC Agreement.
Power purchased increased $3.9 million due to capacity payments of
$5.4 million to IMP in accordance with a five-year power purchase
agreement, partially offset by decreased purchases of energy as a
result of the mild summer weather.
Maintenance expenses increased $2.0 million, reflecting
transmission and distribution system repair expenses as a result of a
severe storm in June that cost a total of $3.9 million. These
expenses were partially offset by decreased unit overhaul expenses in
1992, compared to 1991. Amortization of the deferred return--rate
phase-in plan, decreased due to the completion in August 1992, of the
five-year amortization period.
Taxes other than income taxes increased $2.7 million as a result
of increased property assessments and higher property tax rates.
Income taxes-net, decreased $3.0 million primarily due to the
decrease in pretax utility operating income.
Other Income And Deductions
Allowance for equity funds used during construction increased
$1.3 million due to an increased construction base in 1992.
Other - net, which includes operations other than IPL, decreased
$6.8 million due to lower pretax income from nonutility investments
and operations of $2.9 million, decreased interest and dividend
income earned by IPL of $2.4 million, and as a result of a $1.5
million contribution to customer energy assistance programs expensed
in 1992. The decreased investment income reflects lower interest
rates and decreased cash balances available for investment as a
result of the capital requirements of Mid-America's subsidiaries,
primarily for construction of district cooling facilities.
Operations other than IPL, in total, experienced a net loss of $1.5
million, or $.04 per share. This compares to net income of $1.3
million during 1991, or $.03 per share.
Income taxes - net, decreased $1.1 million as a result of
decreased pretax operating income of the unregulated subsidiaries,
decreased IPL interest and dividend income and the increased
contribution expense previously mentioned.
Interest Charges
Interest and other charges - net, decreased $6.4 million
primarily due to decreased interest on long-term debt of $3.8
million. This decrease is the result of refinancing four series of
IPL's First Mortgage Bonds as follows: the 12% Series, First
Mortgage Bonds in August 1991 (replaced with the long-term note at a
floating interest rate that approximates tax-exempt Commercial Paper
Rates); the 9 7/8% Series, First Mortgage Bonds in November 1991
(replaced with the 8% Series, First Mortgage Bonds); and the 9.30%
and 9 1/2% Series, First Mortgage Bonds in September 1992 (replaced
with the 7 3/8% Series, First Mortgage Bonds). The allowance for
borrowed funds used during construction increased due primarily to an
increased construction base. Other interest charges decreased $1.4
million due to lower interest rates during 1992.
1994
Factors having a bearing on 1994 earnings compared to 1993 will
include the one-time 1993 charge against earning for the costs of the
withdrawn tender offer, the impact of economic conditions, weather
conditions, an increased level of construction expenditures, an
increase in monthly capacity payments and the implementation of new
steam system tariff rates.
Authorized electric operating income for 1994 as determined by
the IURC is approximately $144.0 million. (IPL earned $141.2 million
during 1993 and $133.4 million during 1992.)
Affecting 1994 earnings will be the cost of the IMP purchases
mentioned previously. Annual capacity payments will increase by $1.8
million.
The overall effect these factors will have on 1994 earnings
cannot be accurately determined at this time.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
IPALCO Enterprises, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets and statements
of preferred stock and long-term debt of IPALCO Enterprises, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the related statements
of consolidated income, common shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1993. Our audits
also included the consolidated financial statement schedules listed in the
Index at Item 14(a). These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedules 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, such consolidated financial statements present fairly, in
all material respects, the financial position of IPALCO Enterprises, Inc.
and subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles. Also, in our opinion, such consolidated financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Notes 1 and 9 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and
postretirement benefits other than pensions effective January 1, 1993.
Deloitte & Touche
Indianapolis, Indiana
January 21, 1994
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
Statements of Consolidated Income
For the Years Ended December 31, 1993, 1992 and 1991
- ---------------------------------------------------------------------------------------------------
1993 1992 1991
- ---------------------------------------------------------------------------------------------------
(In Thousands Except Per Share Amounts)
UTILITY OPERATING REVENUES (Note 8):
Electric $ 629,327 $ 599,203 $ 615,858
Steam 34,976 34,000 32,015
---------- ---------- ----------
Total operating revenues 664,303 633,203 647,873
---------- ---------- ----------
UTILITY OPERATING EXPENSES:
Operation:
Fuel 158,390 155,072 162,466
Other 100,890 100,447 97,538
Power purchased 19,407 7,804 3,954
Purchased steam 8,051 7,612 7,599
Maintenance 67,326 62,446 60,491
Depreciation and amortization 78,372 74,829 72,344
Amortization of deferred return - rate phase-in plan - 3,786 6,282
Taxes other than income taxes 29,627 31,348 28,683
Income taxes - net (Note 7) 59,872 55,619 58,640
---------- ---------- ----------
Total operating expenses 521,935 498,963 497,997
---------- ---------- ----------
UTILITY OPERATING INCOME 142,368 134,240 149,876
---------- ---------- ----------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 2,010 1,985 686
Costs of withdrawn tender offer (Note 11) (33,948) -
Other - net (8,354) (5,958) 850
Income taxes - net (Note 7) 17,502 2,695 1,569
---------- ---------- ----------
Total other income and (deductions) - net (22,790) (1,278) 3,105
---------- ---------- ----------
INCOME BEFORE INTEREST AND OTHER CHARGES 119,578 132,962 152,981
---------- ---------- ----------
INTEREST AND OTHER CHARGES:
Interest on long-term debt 41,399 42,663 46,464
Allowance for borrowed funds used during construction (3,517) (3,096) (1,925)
Other interest 2,305 1,251 2,596
Amortization of redemption premiums and expenses on
debt and preferred stock - net 787 620 666
Preferred dividend requirements of subsidiary 3,182 3,182 3,182
---------- ---------- ----------
Total interest and other charges - net 44,156 44,620 50,983
---------- ---------- ----------
NET INCOME $ 75,422 $ 88,342 $ 101,998
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 37,668 37,597 37,549
========== ========== ==========
EARNINGS PER SHARE OF COMMON STOCK $ 2.00 $ 2.35 $ 2.72
========== ========== ==========
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1992
- --------------------------------------------------------------------------------------------
ASSETS 1993 1992
- --------------------------------------------------------------------------------------------
(In Thousands)
UTILITY PLANT:
Utility plant in service (Note 2) $ 2,300,682 $ 2,225,017
Less accumulated depreciation 876,054 818,319
------------ ------------
Utility plant in service - net 1,424,628 1,406,698
Construction work in progress 168,480 110,506
Property held for future use 15,763 15,760
------------ ------------
Utility plant - net 1,608,871 1,532,964
------------ ------------
OTHER PROPERTY:
Nonutility property 72,804 63,735
Less accumulated depreciation 3,482 1,810
------------ ------------
Nonutility property - net 69,322 61,925
Other investments 8,722 9,033
------------ ------------
Other property - net 78,044 70,958
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents 10,713 13,249
Marketable securities - 1,850
Financial investments 10,088 52,173
Accounts receivable (less allowance for doubtful
accounts - 1993, $672,000 and 1992, $688,000) 49,766 51,047
Fuel - at average cost 35,213 47,174
Materials and supplies - at average cost 57,567 54,268
Prepayments and other current assets 5,557 3,032
------------ ------------
Total current assets 168,904 222,793
------------ ------------
DEFERRED DEBITS:
Unamortized Petersburg Unit #4 carrying charges 30,587 28,661
Unamortized redemption premiums and expenses on debt and
preferred stock (Note 5) 25,674 24,123
Other regulatory assets 32,954 1,811
Miscellaneous 20,989 13,117
------------ ------------
Total deferred debits 110,204 67,712
------------ ------------
TOTAL $ 1,966,023 $ 1,894,427
============ ============
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1993 1992
- --------------------------------------------------------------------------------------------
(In Thousands)
CAPITALIZATION:
Common shareholders' equity (Note 4):
Common stock, no par, authorized - 145,000,000 shares
issued and outstanding - 37,692,966 shares in 1993,
37,662,966 shares in 1992 $ 379,460 $ 378,562
Premium on 4% cumulative preferred stock 1,363 1,363
Retained earnings 406,388 407,814
------------ ------------
Total common shareholders' equity 787,211 787,739
Cumulative preferred stock (see statement) 51,898 51,898
Long-term debt (see statement) 541,760 550,141
------------ ------------
Total capitalization 1,380,869 1,389,778
------------ ------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper (Note 6) 90,000 41,700
Current maturities and sinking fund requirements 8,729 1,706
Accounts payable 77,501 81,183
Dividends payable 20,299 19,518
Payrolls accrued 4,505 3,674
Taxes accrued 22,973 23,964
Interest accrued 11,208 11,533
Other current liabilities 5,316 8,201
------------ ------------
Total current liabilities 240,531 191,479
------------ ------------
DEFERRED CREDITS:
Accumulated deferred income taxes - net (Note 7) 268,849 251,860
Unamortized investment tax credit 57,029 60,297
Accrued postretirement benefits (Note 9) 17,840 -
Miscellaneous 905 1,013
------------ ------------
Total deferred credits 344,623 313,170
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 10)
TOTAL $ 1,966,023 $ 1,894,427
============ ============
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Cash Flows
For the Years Ended December 31, 1993, 1992 and 1991
- ---------------------------------------------------------------------------------------------------
1993 1992 1991
- ---------------------------------------------------------------------------------------------------
(In Thousands)
CASH FLOWS FROM OPERATIONS:
Net income before preferred dividend requirements
of subsidiary $ 78,604 $ 91,524 $ 105,180
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 82,026 77,517 72,875
Amortization of deferred return - rate phase-in plan - 3,786 6,282
Income from financial investments (2,159) (5,036) (5,922)
Deferred income taxes and investment tax
credit adjustments - net (1,370) 4 (945)
Allowance for funds used during construction (5,476) (5,081) (2,611)
Decrease (increase) in certain assets:
Accounts receivable 1,281 (5,799) (1,049)
Fuel, materials and supplies 8,662 (8,031) 1,544
Other current assets (2,525) (980) 5,958
Increase (decrease) in certain liabilities:
Accounts payable (3,682) 25,090 4,884
Taxes accrued (991) 684 3,739
Other current liabilities (2,484) 2,909 (1,606)
----------- ----------- -----------
Net cash provided by operating activities 151,886 176,587 188,329
----------- ----------- -----------
CASH FLOWS FROM INVESTING:
Purchase of marketable securities (1,408) (16,368) (28,898)
Proceeds from maturities of marketable securities 3,258 28,168 43,481
Withdrawals from financial investments 44,244 30,000 12,104
Purchase of financial investments - (35,000) -
Construction expenditures - utility (145,765) (112,037) (94,633)
Construction expenditures - nonutility (8,788) (29,842) (14,031)
Purchase of other property - - (8,980)
Other (12,200) (12,721) (299)
----------- ----------- -----------
Net cash used in investing activities (120,659) (147,800) (91,256)
----------- ----------- -----------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 96,500 80,000 108,300
Retirement of long-term debt - including premiums (98,978) (79,958) (101,372)
Short-term debt - net 48,300 38,700 (23,500)
Dividends paid (79,253) (76,076) (73,023)
Exercise of stock options including related tax benefit 898 3,301 -
Other (1,230) (1,202) (1,391)
----------- ----------- -----------
Net cash used in financing activities (33,763) (35,235) (90,986)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,536) (6,448) 6,087
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,249 19,697 13,610
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,713 $ 13,249 $ 19,697
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 42,679 $ 41,741 $ 50,472
=========== =========== ===========
Income taxes $ 46,846 $ 54,654 $ 57,070
=========== =========== ===========
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Preferred Stock and
December 31, 1993 and 1992
- ------------------------------------------------------------------------------------------------------------
1993 1992
- ------------------------------------------------------------------------------------------------------------
(In Thousands)
CUMULATIVE PREFERRED STOCK - IPL (Note 4):
Non-redeemable - $100 par value, authorized
2,000,000 shares Call Price at
December 31, 1993
-----------------
4% Series, 100,000 shares $118.00 $ 10,000 $ 10,000
4.20% Series, 39,000 shares 103.00 3,900 3,900
4.60% Series, 30,000 shares 103.00 3,000 3,000
4.80% Series, 50,000 shares 101.00 5,000 5,000
6% Series, 100,000 shares 102.00 10,000 10,000
8.20% Series, 199,985 shares 101.00 19,998 19,998
---------- ----------
Total cumulative preferred stock $ 51,898 $ 51,898
========== ==========
VARIABLE CLASS PREFERRED STOCK - IPL:
Par value undetermined, authorized
3,000,000 shares, none issued
LONG-TERM DEBT - IPL (Notes 2 and 5):
First mortgage bonds:
4 1/2% Series, due August 1994 $ 7,500 $ 7,500
5 1/8% Series, due April 1996 15,400 15,575
5 5/8% Series, due May 1997 11,629 11,629
7 1/8% Series, due May 1998 19,750 19,913
7.40% Series, due March 2002 33,200 33,579
7.65% Series, due March 2003 25,200 25,489
6.90% Series, due July 2006 - 19,650
8% Series, due October 2006 58,800 58,800
5.80% Series, due August 2007 - 25,000
7 3/8% Series, due August 2007 80,000 80,000
6.60% Series, due September 2008 - 22,200
9 5/8% Series, due September 2012 40,000 40,000
10 1/4% Series, due November 2013 - 30,000
10 5/8% Series, due December 2014 40,000 40,000
6.10% Series, due January 2016 41,850 -
5.40% Series, due August 2017 24,650 -
9 5/8% Series, due June 2019 50,000 50,000
7.45% Series, due August 2019 23,500 23,500
5.50% Series, due October 2023 30,000 -
Unamortized premium (discount) - net (490) (488)
---------- ----------
Total first mortgage bonds 500,989 502,347
Long-term note, due August 2021 40,000 40,000
Current maturities and sinking fund requirements (8,729) (1,706)
---------- ----------
Total long-term debt - IPL 532,260 540,641
LONG-TERM DEBT - ENERGY RESOURCES (Note 5):
7.25% long-term note, due December 2011 9,500 9,500
---------- ----------
Total long-term debt $ 541,760 $ 550,141
========== ==========
See notes to consolidated financial statements
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Common Shareholders' Equity
For the Years Ended December 31, 1993, 1992 and 1991
- -----------------------------------------------------------------------------------------------------------------
Premium on 4%
Common Stock Cumulative Retained
Shares Amount Preferred Stock Earnings Total
- -----------------------------------------------------------------------------------------------------------------
(In Thousands)
Balance at January 1, 1991 37,549 $ 375,261 $ 1,363 $ 361,757 $ 738,381
Net income 101,998 101,998
Cash dividends declared ($1.88 per share) (70,592) (70,592)
------ ---------- -------- ----------- ----------
Balance at December 31, 1991 37,549 375,261 1,363 393,163 769,787
Net income 88,342 88,342
Cash dividends declared ($1.96 per share) (73,691) (73,691)
Exercise of stock options 114 3,301 3,301
------ ---------- -------- ----------- ----------
Balance at December 31, 1992 37,663 378,562 1,363 407,814 787,739
Net income 75,422 75,422
Cash dividends declared ($2.04 per share) (76,848) (76,848)
Exercise of stock options 30 898 898
------ ---------- -------- ----------- ----------
Balance at December 31, 1993 37,693 $ 379,460 $ 1,363 $ 406,388 $ 787,211
====== ========== ======== =========== ==========
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1993, 1992 and 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--IPALCO Enterprises, Inc. (IPALCO) owns
all of the outstanding common stock of its subsidiaries (collectively
referred to as Enterprises). The consolidated financial statements include
the accounts of IPALCO, its utility subsidiary, Indianapolis Power & Light
Company (IPL) and its unregulated subsidiary, Mid-America Capital
Resources, Inc. (Mid-America). Mid-America conducts its businesses through
various wholly owned subsidiaries, including Mid-America Energy Resources,
Inc. (Energy Resources), and one 70 percent owned subsidiary.
The operating components of all subsidiaries other than IPL are
included under the captions OTHER INCOME AND (DEDUCTIONS), "Other-net" and
"Income Taxes-net" in the Statements of Consolidated Income. Revenues from
these operations were not significant. All significant intercompany items
have been eliminated in consolidation.
System of Accounts--The accounts of IPL are maintained in accordance
with the system of accounts prescribed by the Indiana Utility Regulatory
Commission (IURC), which system substantially conforms to that prescribed
by the Federal Energy Regulatory Commission.
Revenues--Utility operating revenues are recorded as billed to
customers on a monthly cycle billing basis. Revenue is not accrued for
energy delivered but unbilled at the end of the year. A fuel adjustment
charge provision, which is established after public hearing, is applicable
to substantially all the rate schedules of IPL, and permits the billing or
crediting of fuel costs above or below the levels included in such rate
schedules.
Under current IURC practice, future fuel adjustment revenues may be
temporarily reduced should actual operating expenses be less than or income
levels be above amounts authorized by the IURC.
Authorized Annual Operating Income--In an IURC order dated May 6,
1992, IPL's maximum authorized annual electric operating income, for
purposes of quarterly earnings tests, was established at approximately $147
million through July 31, 1992, declining ratably to approximately $144
million at July 31, 1993. This level will be maintained until IPL's next
general electric rate order. Additionally, through the date of IPL's next
general electric rate order, IPL is required to file upward and downward
adjustments in fuel cost credits and charges on a quarterly basis.
As provided in an order dated December 21, 1992, IPL's authorized
annual steam net operating income is $6.2 million, plus any cumulative
annual underearnings occurring during the five-year period subsequent to
the implementation of the new rate tariffs.
Deferred Fuel Expense--Fuel costs recoverable in subsequent periods
under the fuel adjustment charge provision are deferred.
Allowance For Funds Used During Construction (AFUDC)--In accordance
with the prescribed uniform system of accounts, IPL capitalizes an
allowance for the net cost of funds (interest on borrowed and a reasonable
rate on equity funds) used for construction purposes during the period of
construction with a corresponding credit to income. IPL capitalized
amounts using pre-tax composite rates of 8.0%, 9.5% and 9.6% during 1993,
1992 and 1991, respectively.
Utility Plant and Depreciation--Utility plant is stated at original
cost as defined for regulatory purposes. The cost of additions to utility
plant and replacements of retirement units of property, as distinct from
renewals of minor items which are charged to maintenance, are charged to
plant accounts. Units of property replaced or abandoned in the ordinary
course of business are retired from the plant accounts at cost; such
amounts plus removal costs, less salvage, are charged to accumulated
depreciation. AFUDC is capitalized and depreciated over the life of the
related facility. Depreciation was computed by the straight-line method
based on the functional rates and averaged 3.4% during each of the years
1993, 1992 and 1991.
Statements of Cash Flows - Cash Equivalents--Enterprises considers all
highly liquid investments purchased with original maturities of 90 days or
less to be cash equivalents.
Marketable Securities--Securities with original maturities of over 90
days are classified as marketable securities and are carried at the lower
of aggregate cost or market, determined at the balance sheet date.
Financial Investments--Financial investments represent investments in
limited partnerships and managed asset funds which are actively managed
stock and bond funds which value their investments at market. Enterprises
accounts for these investments on the equity method.
Unamortized Deferred Return - Rate Phase-in Plan--IPL deferred the pre-
tax debt and equity costs relating to its investment in plant which did not
earn a cash return during the first year of a two-year, two-step retail
electric rate phase-in plan authorized August 6, 1986. This deferred
return and the related income taxes were amortized to cost of service over
a five-year period commencing with the August 8, 1987 implementation of the
second step of the phase-in plan. The deferred return was fully amortized
in August, 1992.
Unamortized Petersburg Unit 4 Carrying Charges--IPL has deferred
certain post in-service date carrying charges of its investment in
Petersburg Unit 4 (Unit 4). These carrying charges include both AFUDC on
and depreciation of Unit 4 costs from the April 28, 1986 in-service date
through the August 6, 1986 IURC rate order date in which IPL's investment
in Unit 4 was included in rate base. Subsequent to April 28, 1986, IPL has
capitalized interest on these deferred carrying charges. In addition, IPL
has capitalized $7.0 million of additional allowance for earnings on
shareholders' investment for rate-making purposes but not for financial
reporting purposes. As provided in the rate order, the total amount of
deferred carrying charges will be included in IPL's next general electric
rate case.
Unamortized Redemption Premiums and Expenses on Debt and Preferred
Stock--In accordance with regulatory treatment, IPL defers non-sinking fund
debt redemption premiums and expenses, and amortizes such costs over the
life of the original debt or, in the case of preferred stock redemption
premiums, over twenty years.
Other Regulatory Assets--At December 31, 1993 and 1992, IPL has
deferred certain costs and expenses which are recoverable in future rates
as follows:
1993 1992
- -------------------------------------------------------------------
(In Thousands)
Postretirement benefit costs in excess of
cash payments and amounts capitalized $ 12,893 $ -
SFAS 109 15,091 -
Other 4,970 1,811
-------- -------
Total $ 32,954 $ 1,811
-------- -------
Income Taxes--Deferred taxes are provided for all significant timing
differences between book and taxable income. Such differences include the
use of accelerated depreciation methods for tax purposes, the use of
different book and tax depreciable lives, rates and in-service dates, and
the accelerated tax amortization of pollution control facilities.
Investment tax credits which reduced Federal income taxes in the years
they arose have been deferred and are being amortized to income over the
useful lives of the properties in accordance with regulatory treatment.
Effective January 1, 1993, Enterprises adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," on a
prospective basis. This statement requires the current recognition of
income tax expense for (a) the amount of income taxes payable or refundable
for the current year, and (b) for deferred tax liabilities and assets for
the future tax consequences of events that have been recognized in
Enterprises' financial statements or income tax returns. The effects of
income taxes are measured based on enacted laws and rates. Substantially
all of the adjustments required by SFAS 109 were recorded to deferred tax
balance sheet accounts, with the offsetting adjustments to regulatory
assets and liabilities. The adoption of this standard did not have a
material impact on Enterprises' cash flows or results of operations due to
the effect of rate regulation.
Employee Benefit Plans--Substantially all employees of IPALCO and IPL
and certain management employees of Mid-America are covered by a non-
contributory, defined benefit pension plan which is funded through two
trusts. Additionally, a select group of management employees of IPALCO,
IPL and Mid-America are covered under a funded supplemental retirement
plan. Collectively, these two plans are referred to as Plans. Benefits
are based on each individual employee's years of service and compensation.
IPL's funding policy is to contribute annually not less than the minimum
required by applicable law, nor more than the maximum amount which can be
deducted for Federal income tax purposes.
IPL also sponsors the Employees' Thrift Plan of Indianapolis Power &
Light Company (Thrift Plan), a defined contribution plan covering
substantially all employees of IPALCO and IPL and certain management
employees of Mid-America. Employees elect to make contributions to the
plan based on a percentage of their annual base compensation. IPL matches
each employee's contributions in amounts up to, but not exceeding four
percent of the employee's annual base compensation.
Substantially all non-management employees of Energy Resources and its
subsidiaries are covered by a contributory 401(k) plan.
Reclassification--Certain amounts from prior years' financial
statements have been reclassified to conform to the current year
presentation.
2. UTILITY PLANT IN SERVICE
The original cost of utility plant in service at December 31,
segregated by functional classifications, follows:
1993 1992
- ------------------------------------------------------------------
(In Thousands)
Production $1,387,239 $1,351,207
Transmission 218,369 210,699
Distribution:
Electric 551,217 528,233
Steam 42,205 40,092
General 101,652 94,786
---------- ----------
Total utility plant in service $2,300,682 $2,225,017
========== ==========
Substantially all of IPL's property is subject to the lien of the
indentures securing IPL's First Mortgage Bonds.
3. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments". The estimated
fair value amounts have been determined by Enterprises, using available
market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required in interpreting market data
to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that
Enterprises could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have an
effect on the estimated fair value amounts.
Cash, cash equivalents, marketable securities and notes payable--The
carrying amount approximates fair value due to the short maturity of these
instruments.
Other property - other long-term investments--Mid-America has an
investment in the publicly traded common stock of a company which owns and
operates radio stations. The fair value of this investment as determined
by the market value of its common stock at December 31, 1993, approximates
its carrying value of $7.5 million.
At December 31, 1992, it was not practical to estimate the fair value
of this investment because at that time the common stock of the company was
not publicly traded.
Long-term debt, including current maturities and sinking fund
requirements--Interest rates that are currently available to IPL and Energy
Resources for issuance of debt with similar terms and remaining maturities
are used to estimate fair value. At December 31, 1993 and 1992 the
consolidated carrying amount of Enterprises' long-term debt, including
current maturities and sinking fund requirements, and the approximate fair
value are as follows:
1993 1992
------------------------------------------------------
(In Thousands)
Carrying amount $550,489 $551,847
Approximate fair value 587,236 577,740
4. CAPITAL STOCK
Common Stock:
Enterprises has a Shareholder Rights Plan designed to protect
Enterprises' shareholders against unsolicited attempts to acquire control
of Enterprises that do not offer what the Board believes is a fair and
adequate price to all shareholders. The Board declared a dividend of one
Right for each share of common stock to shareholders of record on July 11,
1990. The Rights will expire July 11, 2000. At this time, no Rights have
been distributed. The Rights are not taxable to shareholders or to
Enterprises, and they do not affect reported earnings per share. Under the
Shareholder Rights Plan, Enterprises has authorized 40,000,000 shares for
issuance.
Enterprises' Automatic Dividend Reinvestment and Stock Purchase Plan
allows common shareholders to purchase shares of common stock by
reinvestment of dividends and limited additional cash investments. The
plan provides that such shares may be purchased on the open market or
directly from Enterprises at the option of Enterprises. Enterprises is
authorized to issue 643,038 additional shares as of December 31, 1993
pursuant to this plan.
Under the Thrift Plan, shares may be purchased either on the open
market or, if available, as original issue shares directly from
Enterprises.
Enterprises is authorized to issue 93,161 additional shares of common
stock pursuant to the Energy Resources 401(k) plan.
Enterprises has a stock option plan (1990 Plan) for key employees
under which options to acquire shares of common stock and stock
appreciation rights covering common shares may be granted. One million
shares of common stock have been authorized for issuance under the 1990
Plan. The maximum period for exercising an option may not exceed ten years
and one day after grant or ten years for incentive stock options. Upon the
first anniversary date after the grant, and each anniversary date
thereafter, these options are exercisable in proportion to the number of
years expired in a three-year period. At December 31, 1993, there were
43,500 shares available for future grants.
During 1991, the 1991 Directors' Stock Option Plan (1991 Plan) was
established. This plan provides to the non-employee Directors of
Enterprises options to acquire shares of common stock. These options are
exercisable for the period beginning on the six month anniversary of and
ending on the ten year anniversary of the grant date. Under the 1991 Plan,
250,000 shares of common stock have been authorized for issuance and
192,000 are available for future grants.
A summary of options issued under both plans is as follows:
Range of Option Number of
Price per Share Shares
- --------------------------------------------------------------------------
Outstanding, January 1, 1991 $ 25.25 395,000
Granted 27.875 - 31.437 594,000
Canceled 25.25 (6,000)
--------
Outstanding, December 31, 1991 25.25 - 31.4375 483,000
Granted 34.25 - 35.3125 85,000
Canceled 27.875 (10,000)
Exercised 25.25 - 28.125 (114,000)
--------
Outstanding, December 31, 1992 25.25 - 35.3125 444,000
Granted 38.00 - 38.0625 462,500
Canceled 25.25 - 35.3125 (6,000)
Exercised 25.25 - 28.125 (30,000)
--------
Outstanding, December 31, 1993 25.25 - 38.0625 870,500
========
The number of shares exercisable at December 31, 1993, 1992 and 1991
were 411,000, 227,000 and 148,000, respectively.
Restrictions on the payment of cash dividends or other distributions
on IPL common stock held by Enterprises and on the purchase or redemption
of such shares by IPL are contained in the indentures securing IPL's First
Mortgage Bonds. All of IPL's retained earnings at December 31, 1993, were
free of such restrictions. There are no other restrictions on the retained
earnings of Enterprises.
Cumulative Preferred Stock:
Preferred stock shareholders are entitled to two votes per share, and
if four full quarterly dividends are in default, they are entitled to elect
the smallest number of Directors to constitute a majority.
5. LONG-TERM DEBT
The 9 5/8% Series due 2012, 10 5/8% Series due 2014, 6.10% Series due
2016, 5.40% Series due 2017, and 5.50% Series due 2023 were each issued to
the City of Petersburg, Indiana (City) by IPL to secure the loan of
proceeds received from a like amount of tax-exempt Pollution Control
Revenue Bonds issued by the City for the purpose of financing pollution
control facilities at IPL's Petersburg Generating Station.
On August 6, 1992, IPL issued $80 million of First Mortgage Bonds,
7 3/8% Series, due 2007. The net proceeds from this issue were used to
redeem on September 1, 1992, IPL's First Mortgage Bonds, 9.3% Series, due
2006 and 9 1/2% Series, due 2016, at the prices of $104.17 and $107.13,
respectively, plus accrued interest.
On April 13, 1993, IPL issued a First Mortgage Bond, 6.10% Series, due
2016, in the principal amount of $41.85 million, in connection with the
issuance of the same amount of Pollution Control Refunding Revenue Bonds by
the City of Petersburg, Indiana. The net proceeds, along with other IPL
funds were used to redeem on June 1, 1993, IPL's $19.65 million First
Mortgage Bonds, 6.90% Series, due 2006, and IPL's $22.2 million First
Mortgage Bonds, 6.60% Series, due 2008, at the prices of $100 and $101,
respectively, plus accrued interest.
On October 14, 1993, IPL issued a First Mortgage Bond, 5.40% Series,
due 2017, in the principal amount of $24.65 million, in connection with the
issuance of the same amount of Pollution Control Refunding Revenue Bonds by
the City of Petersburg, Indiana. The net proceeds, along with other IPL
funds, were used to redeem on November 15, 1993, IPL's $24.65 million First
Mortgage Bonds, 5.80% Series, due 2007, at the price of $100 plus accrued
interest.
Also, on October 14, 1993, IPL issued a First Mortgage Bond, 5.50%
Series, due 2023, in the principal amount of $30.0 million, in connection
with the issuance of the same amount of Pollution Control Refunding Revenue
Bonds by the City of Petersburg, Indiana. The net proceeds, along with
other IPL funds, were used to redeem on November 15, 1993, IPL's
$30.0 million First Mortgage Bonds, 10 1/4% Series, due 2013, at the price
of $103 plus accrued interest.
IPL has a 30-year unsecured promissory note which was issued to the
City of Petersburg, Indiana, in connection with the issuance of $40 million
of Pollution Control Refunding Revenue Bonds, due 2021, by the City of
Petersburg. This note and the related bonds provide for a floating
interest rate that approximates tax-exempt Commercial Paper Rates. The
average interest rate on this note was 2.40% for 1993 and 3.00% for 1992.
At the option of IPL, the bonds can be converted to First Mortgage Bonds
which would bear interest at a fixed rate.
Energy Resources has a 20-year unsecured note which was issued to the
City of Indianapolis, Indiana, in connection with the issuance of $9.5
million of 7.25% Exempt Facility Revenue Bonds, due 2011, by the City of
Indianapolis. The net proceeds were used to finance costs incurred during
the construction of the district cooling system in near downtown
Indianapolis.
Maturities and sinking fund requirements on long-term debt for the
five years subsequent to December 31, 1993, are as follows:
Net Sinking Fund
Maturities Requirements Total
- --------------------------------------------------------------------------
(In Thousands)
1994 $ 7,500 $1,229 $ 8,729
1995 - 1,300 1,300
1996 15,000 1,100 16,100
1997 11,250 950 12,200
1998 18,750 700 19,450
6. LINES OF CREDIT
IPL has lines of credit with banks of $100 million at December 31,
1993, to provide loans for interim financing. These lines of credit, based
on separate formal and informal agreements, have expiration dates ranging
from January 31, 1994 to November 30, 1994, and require the payment of
commitment fees. At December 31, 1993, these credit lines were unused.
Lines of credit supporting commercial paper were $90 million at December
31, 1993.
Mid-America also has a line of credit of $2 million, which was unused
at December 31, 1993. The line of credit requires the payment of a
commitment fee and expires January 31, 1994.
7. INCOME TAXES
Federal and State income taxes charged to income are as follows:
1993 1992 1991
- ---------------------------------------------------------------------------------------
(In Thousands)
Utility Operating Expenses:
Current income taxes:
Federal $52,321 $48,504 $52,324
State 7,761 7,500 8,050
------- ------- -------
Total current taxes 60,082 56,004 60,374
------- ------- -------
Deferred income taxes, net--Federal and State:
Excess of tax depreciation over book
depreciation 7,109 5,254 5,939
Early retirement of bonds 592 1,965 1,415
Allowance for borrowed funds used during
construction (net of capitalized interest
for tax purposes) (1,214) (1,050) (1,157)
Amortization of deferred return - rate
phase-in plan (debt portion) - (676) (1,122)
Unbilled revenues (1,768) 436 (156)
Accrued pension expense (1,865) (1,965) (2,100)
Miscellaneous 204 (890) (1,411)
------- ------- -------
Total deferred taxes 3,058 3,074 1,408
------- ------- -------
Net amortization of investment credit (3,268) (3,459) (3,142)
------- ------- -------
Total charge to utility operating expenses 59,872 55,619 58,640
Net credit to other income and deductions (17,502) (2,695) (1,569)
------- ------- -------
Total Federal and State income tax provisions $42,370 $52,924 $57,071
======= ======= =======
The provision for Federal income taxes (including net investment tax
credit adjustments) is less than the amount computed by applying the
statutory tax rate to pre-tax income. The reasons for the difference,
stated as a percentage of pre-tax income, are as follows:
1993 1992 1991
- ------------------------------------------------------------------------------
Federal statutory tax rate 35.0% 34.0% 34.0%
Effect of State income taxes (1.5) (2.0) (1.8)
Amortization of investment tax credits (2.8) (2.4) (2.1)
Preferred dividends of subsidiary 0.9 0.8 0.7
Other - net 0.2 1.3 (0.2)
---- ---- ----
Effective tax rate 31.8% 31.7% 30.6%
==== ==== ====
The significant items comprising Enterprises' net deferred tax
liability recognized in the consolidated balance sheet as of December 31,
1993 are as follows:
- ------------------------------------------------------------------------------
(In Thousands)
Deferred tax liabilities:
Relating to utility property $335,824
Early retirement of bonds 7,377
Other 1,683
--------
Total deferred tax liabilities 344,884
--------
Deferred tax assets:
Unbilled revenue 10,148
Pension 9,033
Investment tax credit 34,842
Other 22,012
--------
Total deferred tax assets 76,035
--------
Net deferred tax liability $268,849
========
8. RATE MATTERS
Steam Rate Order
By an order dated January 13, 1993, the IURC authorized IPL to
increase its steam system rates and charges over a six-year period.
Accordingly, IPL implemented new steam tariffs designed to produce
estimated additional annual steam operating revenues as follows:
Additional Cumulative
Annual Annual
Year Revenues Revenues
---- ---------- ----------
January 13, 1993 $1,932,000 $1,932,000
January 13, 1994 2,051,000 3,983,000
January 13, 1995 1,552,000 5,535,000
January 13, 1996 1,625,000 7,160,000
January 13, 1997 2,384,000 9,544,000
January 13, 1998 370,000 9,914,000
Environmental Compliance Plan
On August 18, 1993, IPL obtained an Order from the IURC approving its
Environmental Compliance Plan, together with the costs and expenses
associated therewith, which provides for the installation of sulfur dioxide
and nitrogen oxide emissions abatement equipment and the installation of
continuous emission monitoring systems to meet the requirements of both Phase I
and Phase II of the Federal Clean Air Act Amendments of 1990. The order
provides for the deferral of net gains and losses resulting from any sale
of emission allowances for future amortization to cost of service on a
basis to be determined in the next general electric rate proceeding.
Demand Side Management Program
IPL obtained an Order from the IURC approving a Stipulation of
Settlement Agreement between IPL, the Office of Utility Consumer Counsel,
Citizens Action Coalition of Indiana, Inc., an industrial group, the
Trustees of Indiana University and the Indiana Alliance for Fair
Competition relating to the Company's Demand Side Management Program (DSM).
The order provides for the deferral and subsequent recovery in rates of
certain approved DSM costs. The order also provides for the recording of a
return on deferred costs until recognized in rates.
9. EMPLOYEE BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS
Enterprises' contributions to the Thrift Plan were $3.2 million, $3.1
million and $2.8 million in 1993, 1992 and 1991, respectively.
Net pension cost including amounts charged to construction is
comprised of the following components:
1993 1992 1991
- --------------------------------------------------------------------------------
(In Thousands)
Service cost--benefits earned during the period $ 6,355 $ 5,563 $ 4,890
Interest cost on projected benefit obligation 14,192 13,739 13,036
Actual return on plan assets (40,045) (18,865) (28,203)
Net amortization and deferral 25,689 5,366 16,318
------- ------- -------
Net periodic pension cost $ 6,191 $ 5,803 $ 6,041
======= ======= =======
A summary of the Plans' funding status, and the amount recognized in
the consolidated balance sheets at December 31, 1993 and 1992, follows:
1993 1992
- -----------------------------------------------------------------------------
(In Thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $(128,449) $(112,823)
Non-vested benefit obligation (28,532) (24,389)
--------- ---------
Accumulated benefit obligation $(156,981) $(137,212)
========= =========
Projected benefit obligation $(224,037) $(193,653)
Plan assets at fair value 218,312 185,752
--------- ---------
Funded status--plan assets less than projected
benefit obligation (5,725) (7,901)
Unrecognized net gain from past experience different
from that assumed (22,922) (14,909)
Unrecognized past service costs 22,932 23,219
Unrecognized net asset at January 1, 1987 being
amortized over 18.9 years (16,825) (18,238)
--------- ---------
Net accrued pension costs included in current
liabilities at December 31 $ (22,540) $ (17,829)
========= =========
As of the October 31, 1993 valuation date, approximately 10.5% of the
Plans' assets were in equity securities, with the remainder in fixed income
securities.
Enterprises also provides certain postretirement health care and life
insurance benefits for employees, other than Mid-America's subsidiaries'
employees, who retire from active service on or after attaining age 55 and
have rendered at least 10 years of service. On January 1, 1993,
Enterprises adopted the provisions of SFAS No. 106 -- Employers'
Accounting for Postretirement Benefits Other than Pensions (SFAS 106).
Generally, SFAS 106 requires the use of an accrual basis accounting method
for determining annual costs of postretirement benefits. The January 1,
1993 transition obligation of $122.8 million is being amortized over a 20
year period. Prior to 1993, the cost of such benefits was recognized when
incurred and amounted to $3.5 million and $2.8 million in 1992 and 1991,
respectively.
Net postretirement benefit cost, including amounts charged to
construction for 1993 is comprised of the following components:
- ------------------------------------------------------------------------------
(In Thousands)
Service cost -- benefits earned during the period $ 4,859
Interest cost on accumulated postretirement benefit obligation 10,838
Actual return on plan assets (297)
Net amortization and deferral 5,759
--------
Net periodic postretirement benefit cost $ 21,159
========
A summary of the retiree health care and life insurance plan's funding
status, and the amount recognized in the consolidated balance sheet at
December 31, 1993 follows:
- -----------------------------------------------------------------------------------
(In Thousands)
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees $ (60,110)
Fully eligible active plan participants (21,344)
Other active plan participants (74,453)
---------
Total (155,907)
Plan assets at fair value 10,135
---------
Funded status--accumulated postretirement benefit obligation in excess
of plan assets (145,772)
Unrecognized net gain from past experience different from that assumed 11,216
Unrecognized net obligation at January 1, 1993 being amortized over
20 years 116,716
---------
Net accrued postretirement benefit cost included in deferred
liabilities at December 31 $ (17,840)
=========
Enterprises is expensing its non-construction related SFAS 106 costs
associated with its unregulated and steam businesses. The SFAS 106 costs,
net of amounts paid and capitalized for construction, associated with IPL's
electric business are being deferred as a regulatory asset on the
consolidated balance sheet, as authorized by an order of the IURC on
December 30, 1992, which provided for deferral of SFAS 106 costs in excess
of such costs determined on a cash basis. A request for recovery in rates
of these costs will be included in IPL's next general electric rate
petition.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation is 12.6% for 1994, gradually
declining to 5.0% in 2003. A one-percentage point increase in the assumed
health care cost trend rate for each year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by approximately
$24.4 million and the combined service cost and interest cost for 1993 by
approximately $3.4 million.
Plan assets consist of the cash surrender value of life insurance
policies on certain retired IPL employees.
Assumptions used in determining the accumulated benefit obligation for
the pension plans for 1993, 1992 and 1991 and for the accumulated
postretirement benefit obligation for 1993 were:
1993 1992 1991
- ------------------------------------------------------------------------------
Discount rate - pension plans 7.0% 7.5% 8.0%
Discount rate - postretirement benefits 7.0% - -
Rate of increase in future compensation levels 6.1% 6.1% 6.1%
Expected long-term rate of return on assets 8.0% 8.0% 8.0%
10. COMMITMENTS AND CONTINGENCIES
In 1994, Enterprises anticipates the cost of its subsidiaries'
construction programs to be approximately $247 million.
IPL will comply with the provisions of "The Clean Air Act Amendments
of 1990" (the Act) through the installation of SO2 scrubbers and NOx
facilities. The cost of complying with the Act from 1994 through 1997,
including AFUDC, is estimated to be approximately $207 million, of which
$80 million is anticipated in 1994. During 1993, expenditures for
compliance with the Act were $13.7 million.
IPL has a five-year firm power purchase agreement with Indiana
Michigan Power Company (IMP) for 100 megawatts (MW) of capacity effective
April 1992, with the purchase of an additional 100 MW (for a total of 200
MW) beginning in April 1993. The agreement provides for monthly capacity
payments by IPL of $.6 million from April 1992 through March 1993,
increasing to a monthly amount of $1.2 million which began in April 1993
and continues through March 31, 1997. The agreement further provides that
IPL can elect to extend purchases through December 31, 1997, and
subsequently through November 30, 1999, with capacity payments of $1.2
million per month and $1.55 million per month, respectively. IPL can
terminate the agreement, should the ability to recover future demand
charges through rates be disallowed. Capacity payments in 1993 and 1992
under this agreement totaled $12.6 million and $5.4 million, respectively.
In October 1993, IPL received a Findings of Violation regarding
compliance with the thermal limits of the National Pollutant Discharge
Elimination System permit for its Petersburg Generating Station. IPL
expects to meet with the Environmental Protection Agency in early 1994 to
resolve this matter. IPL believes it has met all the requirements of its
permit, but if IPL's position is found erroneous, IPL could be subject to
fines of up to $25,000 per day of violation.
Enterprises is involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based upon advice of counsel, believes that the
final outcome will not have a material adverse effect on the consolidated
financial position and results of operations.
11. WITHDRAWN TENDER OFFER
During 1993, IPALCO incurred a one-time charge against earnings
of $33.9 million before taxes ($21.1 million net of applicable income
taxes), for legal, financial and administrative costs pertaining to
IPALCO's effort to acquire PSI Resources, Inc. The charge resulted
in a decrease in earnings per share of 56 cents.
12. QUARTERLY RESULTS (UNAUDITED)
Operating results for the years ended December 31, 1993 and 1992, by
quarter, are as follows (in thousands except per share amounts):
1993
------------------------------------------------------
March 31 June 30 September 30 December 31
Utility operating revenues $169,042 $153,127 $183,264 $158,870
Utility operating income 40,068 27,354 44,520 30,426
Net income 29,868 16,520 10,987 18,047
Earnings per share of
common stock $ .79 $ .44 $ .29 $ .48
1992
------------------------------------------------------
March 31 June 30 September 30 December 31
Utility operating revenues $159,974 $150,446 $166,153 $156,630
Utility operating income 37,829 25,915 39,262 31,234
Net income 27,239 13,513 27,615 19,975
Earnings per share of
common stock $ .73 $ .36 $ .73 $ .53
The quarterly figures reflect seasonal and weather-related
fluctuations which are normal to IPL's operations. Weather conditions in
1993 reflected near normal conditions, while weather conditions in 1992
were considerably moderate.
The quarter ended September 30, 1993, includes a $33.9 million expense
pertaining to the withdrawn tender offer. The quarter ended June 30, 1992,
includes a $3.9 million expense as a result of severe storm damage to IPL's
transmission and distribution systems, and a $2.8 million expense in
connection with the settlement of disputes regarding fuel adjustment
issues.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Items 10,
11, 12 IPALCO Enterprises, Inc. will file with the Securities and
and 13 Exchange Commission a definitive proxy statement pursuant
to Regulation 14A. This document will incorporate by
reference the information required by these items, except for
the information regarding executive officers which is set
forth in Part I, following Item 4 hereof under the heading
"EXECUTIVE OFFICERS OF THE REGISTRANT."
PART IV
Item 14 (a). DOCUMENT LIST
The Consolidated Financial Statements and Supplemental
Schedules under this Item 14(a). 1 and 2 filed in this Form
10-K are those of IPALCO Enterprises, Inc. and subsidiaries.
1. Consolidated Financial Statements
Included in Part II of this report:
Independent Auditors' Report
Statements of Consolidated Cash Flows
for the Years Ended December 31, 1993,
1992 and 1991
Statements of Consolidated Income for the Years Ended
December 31, 1993, 1992 and 1991
Consolidated Balance Sheets, December 31, 1993 and 1992
Statements of Consolidated Preferred Stock and
Long-Term Debt, December 31, 1993 and 1992
Statements of Consolidated Common Shareholders' Equity
for the Years Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
2. Supplementary Data and Consolidated Financial Statement
Schedules
Included in Part IV of this report:
For each of the years ended December 31, 1993, 1992
and 1991
Schedule V - Utility Property, Plant and Equipment
Schedule VI - Accumulated Depreciation of Utility
Property, Plant and Equipment
Schedule V - Nonutility Property, Plant and
Equipment
Schedule VI - Accumulated Depreciation of Nonutility
Property, Plant and Equipment
Schedule IX - Short-Term Borrowings
Schedule X - Supplemental Consolidated Income
Statement Information
The schedules, other than those listed above, are omitted
because of the absence of the conditions under which they
are required or because the information is furnished in
the consolidated financial statements or notes thereto.
3. Exhibits Required by Securities and Exchange Commission
Regulation S-K
Copies of the documents listed below which are
identified with an asterisk (*) are incorporated herein
by reference and made a part hereof and have heretofore
been classified as basic documents under Rule 24(b) of
the SEC Rules of Practice.
(3) Articles of Incorporation and By-Laws
* --Copy of Amended Articles of Incorporation of Enterprises
dated April 16, 1986 and Articles of Amendment dated
April 18, 1990. (Form 10-K for year ended 12-31-90.)
* --Copy of By-Laws of Enterprises as amended August 23,
1993. (Form 10-Q for quarter ended September 30, 1993.)
(10) Material Contracts
* --Certificate of the Resolution establishing the Unfunded
Deferred Compensation Plan for Enterprises' Directors
dated December 27, 1983. (Form 10-K for year ended
12-31-83.)
* --Copy of the Resolution amending the Unfunded Deferred
Compensation Plan for Enterprises' Directors effective
January 1, 1992. (Form 10-K for year ended 12-31-92.)
--Copy of the Resolution amending the Unfunded Deferred
Compensation Plan for Enterprises' Directors effective
January 1, 1994.
--Copy of the Resolution adopting the Unfunded Deferred
Compensation Plan for Enterprises' Officers effective
January 1, 1994.
--Directors' and Officers' Liability Insurance Policy No.
DO392B1A93 effective June 30, 1993, to June 1, 1994.
* --IPALCO Enterprises, Inc. Benefit Protection Fund and
Trust Agreement effective November 1, 1988. (Form 10-K
for year ended 12-31-88.)
--Exhibit A to IPALCO Enterprises, Inc. Benefit Protection
Fund and Trust Agreement dated February 23, 1993.
* --IPALCO Enterprises, Inc. Annual Incentive Plan and
Administrative Guidelines effective January 1, 1990.
(Form 10-K for year ended 12-31-89.)
* --IPALCO Enterprises, Inc. 1990 Long-Term Performance
Incentive Plan and Administrative Guidelines effective
January 1, 1990. (Form 10-K for year ended 12-31-89.)
Exhibits Required by Securities and Exchange Commission
Regulation S-K (Continued)
* --Copy of First Amendment to the IPALCO Enterprises, Inc.
1990 Long-Term Performance Incentive Plan and Revised
Administrative Guidelines, effective January 1, 1992.
(Form 10-K for year ended 12-31-92.)
(21) Other Documents or Statements to Security Holders
--Form 10-K of Indianapolis Power & Light Company for the
year ended December 31, 1993, and all documents listed at
Item 14 (a) 3 thereof.
(23) Consents of Experts and Counsel
--Independent Auditors' Consent
(99) Additional Exhibits
* --Agreement dated as of October 27, 1993, by and among
IPALCO Enterprises, Inc., Indianapolis Power & Light
Company, PSI Resources, Inc., PSI Energy, Inc., The
Cincinnati Gas & Electric Company, CINergy Corp., James
E. Rogers, John R. Hodowal and Ramon L. Humke. (Form
10-Q for quarter ended September 30, 1993.)
Item 14 (b). REPORTS ON FORM 8-K
A report on Form 8-K, dated October 26, 1993, reporting Item
5, "Other Events", and Item 7, "Exhibits", with respect to a
settlement agreement with PSI Resources, Inc. and Cincinnati
Gas & Electric Company, and the release of third quarter
earnings.
IPALCO ENTERPRISES, INC. SCHEDULE V
Utility Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT OTHER BALANCE AT
BEGINNING ADDITIONS RETIREMENTS CHANGES- CLOSE OF
CLASSIFICATION OF PERIOD AT COST OR SALES NOTE PERIOD
YEAR ENDED DECEMBER 31, 1993:
Utility plant:
Electric plant:
Production $1,286,423 $ 37,381 $ 6,400 $ 3 $1,317,407
Transmission 210,699 8,515 992 147 218,369
Distribution 528,233 28,750 5,331 (435) 551,217
General 94,786 8,627 1,761 - 101,652
Intangible 10,312 3,259 - - 13,571
---------- --------- ----------- --------- ----------
Total electric plant in service 2,130,453 86,532 14,484 (285) 2,202,216
Common plant - production 54,472 1,826 37 - 56,261
Steam plant - distribution 40,092 2,984 871 - 42,205
---------- --------- ----------- --------- ----------
Total utility plant in service 2,225,017 91,342 15,392 (285) 2,300,682
Construction in progress 110,506 57,974 - - 168,480
Property held for future use 15,760 - - 3 15,763
---------- --------- ----------- --------- ----------
Total utility plant $2,351,283 $ 149,316 $ 15,392 $ (282) $2,484,925
========== ========= =========== ========= ==========
YEAR ENDED DECEMBER 31, 1992:
Utility plant:
Electric plant:
Production $1,265,568 $ 21,788 $ 984 $ 51 $1,286,423
Transmission 205,234 6,643 962 (216) 210,699
Distribution 499,503 32,230 3,169 (331) 528,233
General 86,522 9,150 1,327 441 94,786
Intangible 6,552 3,760 - - 10,312
---------- --------- ----------- --------- ----------
Total electric plant in service 2,063,379 73,571 6,442 (55) 2,130,453
Common plant - production 50,454 5,370 1,354 2 54,472
Steam plant - distribution 30,493 10,763 1,125 (39) 40,092
---------- --------- ----------- --------- ----------
Total utility plant in service 2,144,326 89,704 8,921 (92) 2,225,017
Construction in progress 84,959 25,547 - - 110,506
Property held for future use 15,748 13 1 - 15,760
---------- --------- ----------- --------- ----------
Total utility plant $2,245,033 $ 115,264 $ 8,922 $ (92) $2,351,283
========== ========= =========== ========= ==========
YEAR ENDED DECEMBER 31, 1991:
Utility plant:
Electric plant:
Production $1,254,793 $ 16,162 $ 5,812 $ 425 $1,265,568
Transmission 200,438 7,108 1,860 (452) 205,234
Distribution 477,007 26,389 3,921 28 499,503
General 78,948 12,520 4,946 - 86,522
Intangible 5,452 1,100 - - 6,552
---------- --------- ----------- --------- ----------
Total electric plant in service 2,016,638 63,279 16,539 1 2,063,379
Common plant - production 48,627 2,024 468 271 50,454
Steam plant - distribution 29,217 2,533 986 (271) 30,493
---------- --------- ----------- --------- ----------
Total utility plant in service 2,094,482 67,836 17,993 1 2,144,326
Construction in progress 56,534 28,425 - - 84,959
Property held for future use 15,749 - - (1) 15,748
---------- --------- ----------- --------- ----------
Total utility plant $2,166,765 $ 96,261 $ 17,993 $ - $2,245,033
========== ========= =========== ========= ==========
Reclassifications of items during the year between utility plant and other property groups.
Represents the net change in unfinished construction.
See Notes to Consolidated Financial Statements for methods and rates of depreciation.
IPALCO ENTERPRISES, INC. SCHEDULE VI
Accumulated Depreciation of Utility Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
_______OTHER CHARGES_______
BALANCE AT ADDITIONS PROPERTY (DEDUCT) BALANCE AT
BEGINNING CHARGED TO RETIRED _______ADD_______ REMOVAL CLOSE OF
DESCRIPTION OF PERIOD EXPENSE(b) OR SOLD SALVAGE OTHER COSTS PERIOD
YEAR ENDED DECEMBER 31, 1993:
Depreciation utility plant:
Electric plant:
Production $ 433,705 $ 37,253 $ 6,400 $ 115 $ - $ (3,540) $ 461,133
Transmission 84,676 5,115 978 222 9 (421) 88,623
Distribution 248,477 27,320 5,313 2,220 (9) (3,898) 268,797
General 17,560 3,940 1,761 226 83 138 20,186
Intangible 2,936 1,653 - - - - 4,589
---------- ---------- -------- ------- --------- -------- ----------
Total depreciation of
electric plant 787,354 75,281 14,452 2,783 83 (7,721) 843,328
Common plant - production 24,215 1,489 37 - - (73) 25,594
Steam plant - distribution 6,750 1,602 871 - (83) (267) 7,131
---------- ---------- -------- ------- --------- -------- ----------
Total depreciation of
utility plant $ 818,319 $ 78,372 $ 15,360 $ 2,783 $ - $ (8,061) $ 876,053
========== ========== ======== ======= ========= ======== ==========
YEAR ENDED DECEMBER 31, 1992:
Depreciation utility plant:
Electric plant:
Production $ 401,888 $ 36,506 $ 985 $ 5 $ 8 $ (3,717) $ 433,705
Transmission 80,241 4,961 961 104 15 316 84,676
Distribution 226,402 26,051 3,119 1,088 (55) (1,890) 248,477
General 14,356 3,628 1,327 389 (28) 542 17,560
Intangible 1,985 951 - - - - 2,936
---------- ---------- -------- ------- --------- -------- ----------
Total depreciation of
electric plant 724,872 72,097 6,392 1,586 (60) (4,749) 787,354
Common plant - production 24,624 1,389 1,353 24 3 (472) 24,215
Steam plant - distribution 6,597 1,343 1,125 1 57 (123) 6,750
---------- ---------- -------- ------- --------- -------- ----------
Total depreciation of
utility plant $ 756,093 $ 74,829 $ 8,870 $ 1,611 $ - $ (5,344) $ 818,319
========== ========== ======== ======= ========= ======== ==========
YEAR ENDED DECEMBER 31, 1991:
Depreciation utility plant:
Electric plant:
Production $ 373,299 $ 36,091 $ 5,812 $ 12 $ 63 $ (1,765) $ 401,888
Transmission 76,057 4,875 1,860 1,525 (64) (292) 80,241
Distribution 207,009 24,773 3,921 1,160 1 (2,620) 226,402
General 15,432 3,364 4,946 522 - (16) 14,356
Intangible 1,195 790 - - - - 1,985
---------- ---------- -------- ------- --------- -------- ----------
Total depreciation of
electric plant 672,992 69,893 16,539 3,219 - (4,693) 724,872
Common plant - production 23,676 1,327 468 182 8 (101) 24,624
Steam plant - distribution 6,475 1,124 986 316 (8) (324) 6,597
---------- ---------- -------- ------- --------- -------- ----------
Total depreciation of
utility plant $ 703,143 $ 72,344 $ 17,993 $ 3,717 $ - $ (5,118) $ 756,093
========== ========== ======== ======= ========= ======== ==========
1993 1992 1991
Retirements, per Schedule V $ 15,392 $ 8,922 $17,993
Charged to other accounts 32 52 -
---------- -------- -------
Retirements, per above $ 15,360 $ 8,870 $17,993
See Notes to Consolidated Financial Statements for methods and rates of depreciation.
IPALCO ENTERPRISES, INC. SCHEDULE V
Nonutility Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT ADDITIONS OTHER BALANCE AT
BEGINNING AT COST RETIREMENTS CHANGES CLOSE OF
CLASSIFICATION OF PERIOD OR SALES PERIOD
YEAR ENDED DECEMBER 31, 1993:
Nonutility property $ 63,735 $ 8,791 $ 4 $ 282 $ 72,804
YEAR ENDED DECEMBER 31, 1992:
Nonutility property $ 33,809 $ 29,843 $ 9 $ 92 $ 63,735
YEAR ENDED DECEMBER 31, 1991:
Nonutility property $ 12,789 $ 21,057 $ 37 $ - $ 33,809
Reclassification during the year between utility and nonutility property.
Includes the net change in unfinished construction.
IPALCO ENTERPRISES, INC. SCHEDULE VI
Accumulated Depreciation of Nonutility Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT ADDITIONS PROPERTY BALANCE AT
BEGINNING CHARGED TO RETIRED OTHER CLOSE OF
DESCRIPTION OF PERIOD EXPENSE OR SOLD CHARGES PERIOD
YEAR ENDED DECEMBER 31, 1993:
Nonutility property $ 1,810 $ 1,672 $ - $ - $ 3,482
YEAR ENDED DECEMBER 31, 1992:
Nonutility property $ 600 $ 1,211 $ - $ (1) $ 1,810
YEAR ENDED DECEMBER 31, 1991:
Nonutility property $ 35 $ 557 $ - $ 8 $ 600
IPALCO ENTERPRISES, INC. SCHEDULE IX
Short-Term Borrowings
For the Years Ended December 31, 1993, 1992 and 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Weighted
Average Maximum Average Weighted
Category of Interest Amount Amount Average
Aggregate Balance Rate of Outstanding Outstanding Interest Rate
Short-Term At End of Year-End During the During the During the
Borrowings Period Balance Period Period Period
YEAR ENDED DECEMBER 31, 1993:
Commercial
Paper $90,000,000 3.37% $95,000,000 $ 57,000,000 3.20%
Bank Notes
Payable $ - - $13,200,000 $ 5,000,000 3.43%
YEAR ENDED DECEMBER 31, 1992:
Commercial
Paper $40,000,000 3.76% $41,000,000 $ 23,000,000 3.51%
Bank Notes
Payable $ 1,700,000 6.00% $10,000,000 $ 5,000,000 3.87%
YEAR ENDED DECEMBER 31, 1991:
Commercial
Paper $ 1,000,000 4.55% $37,000,000 $ 14,000,000 6.32%
Bank Notes
Payable $ 2,000,000 4.38% $10,000,000 $ 3,000,000 6.01%
Under provisions of the FERC Docket No. ES92-56-000, authority was
granted to IPL in 1992 to issue unsecured promissory notes not to exceed
$150,000,000 outstanding at any one time and maturing within one year after
the date of issue. Such notes can be in the form of commercial paper (which
cannot exceed 25% of IPL's gross operating revenues during the preceding
12 months) or commercial bank loans. At December 31, 1993, IPL had available
to it $110,000,000 under the terms of this FERC order. Under the authority
granted above, the final maturity date for all notes may not be later than
December 31, 1994.
The average amount outstanding during the period is based on the
average daily principal balance outstanding.
The weighted average interest rate is determined by dividing
interest expense on short-term borrowings during the period by average
short-term borrowings.
SCHEDULE X
IPALCO ENTERPRISES, INC.
Supplemental Consolidated Income Statement Information
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
COLUMN A COLUMN B
ITEM 1993 1992 1991
Taxes other than payroll and income taxes:
Real estate and personal
property tax $15,866 $17,593 $14,931
State tax on gross receipts 8,338 8,268 8,043
There are no other items requiring disclosure in this schedule, due to
the fact that they are either less than 1% of total utility operating
revenues or are disclosed in the Statements of Consolidated Income.
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.
IPALCO ENTERPRISES, INC.
By John R. Hodowal
-----------------------------------
(John R. Hodowal, Chairman of the
Board and President)
Date February 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
(i) Principal Executive Officer:
/s/ John R. Hodowal Chairman of the Board February 22, 1994
------------------------ and President
(John R. Hodowal)
(ii) Principal Financial Officer:
/s/ John R. Brehm Vice President February 22, 1994
------------------------ and Treasurer
(John R. Brehm)
(iii) Principal Accounting Officer:
/s/ Stephen J. Plunkett Controller February 22, 1994
------------------------
(Stephen J. Plunkett)
(iv) A majority of the Board of Directors of IPALCO Enterprises, Inc.:
/s/ Joseph D. Barnette, Jr. Director February 22, 1994
----------------------------
(Joseph D. Barnette, Jr.)
/s/ Robert A. Borns Director February 22, 1994
----------------------------
(Robert A. Borns)
SIGNATURES (Continued)
/s/ Mitchell E. Daniels, Jr. Director February 22, 1994
----------------------------
(Mitchell E. Daniels, Jr.)
/s/ Rexford C. Early Director February 22, 1994
----------------------------
(Rexford C. Early)
/s/ Otto N. Frenzel III Director February 22, 1994
----------------------------
(Otto N. Frenzel III)
/s/ Max L. Gibson Director February 22, 1994
----------------------------
(Max L. Gibson)
/s/ Edwin J. Goss Director February 22, 1994
----------------------------
(Edwin J. Goss)
/s/ Dr. Earl B. Herr, Jr. Director February 22, 1994
----------------------------
(Dr. Earl B. Herr, Jr.)
/s/ John R. Hodowal Director February 22, 1994
----------------------------
(John R. Hodowal)
/s/ Ramon L. Humke Director February 22, 1994
----------------------------
(Ramon L. Humke)
/s/ Sam H. Jones Director February 22, 1994
----------------------------
(Sam H. Jones)
/s/ Andre B. Lacy Director February 22, 1994
----------------------------
(Andre B. Lacy)
/s/ L. Ben Lytle Director February 22, 1994
----------------------------
(L. Ben Lytle)
/s/ Michael S. Maurer Director February 22, 1994
----------------------------
(Michael S. Maurer)
SIGNATURES (Continued)
/s/ Thomas M. Miller Director February 22, 1994
----------------------------
(Thomas M. Miller)
/s/ Sallie W. Rowland Director February 22, 1994
----------------------------
(Sallie W. Rowland)
/s/ Thomas H. Sams Director February 22, 1994
----------------------------
(Thomas H. Sams)
/s/ Zane G. Todd Director February 22, 1994
----------------------------
(Zane G. Todd)