Back to GetFilings.com
SECURlTlES AND EXCHANGE COMMlSSlON
WASHINGTON, D. C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Fee Required)
For the fiscal year ended
December 31, 1994 Commission File Number 1-8644
IPALCO ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
Indiana 35-1575582
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
25 Monument Circle
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrants's telephone number, including area code: 317-261-8261
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each 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 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
-------- ---------
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. ( )
As of January 31, 1995, the aggregate market value of the voting stock
held by non-affiliates of the registrant was: $1,103,855,002. As of
January 31, 1995, there were 37,755,966 shares of the registrant's
common stock (without par value) outstanding.
-----------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the IPALCO Enterprises, Inc. definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on April 19, 1995
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 significant 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. Smaller electric utility
systems, Independent Power Producers, and Power Marketers
participate as associate members.
In 1994, approximately 99.6% of the total kilowatthours sold
by IPL were generated from coal, .3% 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. Gas fuel is used in IPL's newer
combustion turbines.
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 four suppliers and the coal is produced
entirely in the state of Indiana. These four suppliers are
located in Daviess, Greene, Knox and Warrick counties, and are
not affiliates of IPL. See Exhibits listed under Part IV
Item 14(a)3(20.1). 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 and power sales to other
utilities. When strikes are anticipated in the coal industry,
IPL increases its stockpile to an approximate 92-day supply.
The combined cost of coal and fuel oil used in the generation
of electric energy for 1994 averaged 1.162 cents per kilowatthour
or $24.95 per equivalent ton of coal, compared with the 1993
average fuel cost for electric generation of 1.151 cents per
kilowatthour or $24.49 per equivalent ton of coal.
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 1994,
IPL's steam system purchased 51.1% of its total therm requirement
from Ogden Martin. Additionally, 30.2% of its 1994 one-hour peak
load was met with steam purchased from Ogden Martin. IPL also
purchased 4.9 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 1994, 1993 and
1992 was $185.6 million, $149.3 million and $115.3 million,
respectively, including Allowances for Funds Used During
Construction (AFUDC) of $7.3 million, $3.6 million and $3.2
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 600 megawatts (MW) of additional capacity
resources by the year 2000. IPL plans to meet this need through
the combination of the use of Demand Side Management, power
purchases and peaking turbines.
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 1995-
1999, is estimated to cost $608.9 million including AFUDC. The
estimated cost of the program by year (in millions) is $213.6 in
1995; $93.6 in 1996; $87.8 in 1997; $99.1 in 1998; and $114.8 in
1999. It includes $73.6 million for two 80 MW combustion turbines
with in-service dates of 1999 and 2000, respectively. The
forecast also includes $253.1 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
Long-term debt, internally generated funds and
temporary short-term borrowings are forecasted to provide the
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 and the level of interchange sales with other utilities.
Additionally, IPL has authority from the IURC to redeem and
replace certain of its existing securities.
EMPLOYEE RELATIONS
As of December 31, 1994, IPL had 2,238 employees of whom
1,129 were represented by the International Brotherhood of
Electrical Workers, AFL-CIO (IBEW) and 398 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 provided for general pay
adjustments of 4% in 1993 and 3.5% in 1994, and provides for a
3.5% adjustment in 1995, and changes in pension and health care
coverage. In March 1992, the membership of the EUWU ratified a
new labor agreement which was in effect until February 27, 1995.
IPL and the EUWU are currently negotiating a new agreement, and
the current agreement has been extended through March 13, 1995.
The agreement provided 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. For a description of the current rate proceeding, see
Item 3, "LEGAL PROCEEDINGS."
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 1995-1999
construction program includes $176 million in environmental costs,
including AFUDC, of which approximately $142 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.
Estimated annual costs for all air, solid waste, and water
environmental compliance measures are $131 million and $27 million
in 1995 and 1996, respectively. See also Item 3, "LEGAL
PROCEEDINGS."
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). 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
located near downtown Indianapolis. Operations commenced in mid-
1991. On November 1, 1994, Energy Resources announced that its
Indianapolis, Indiana district cooling system with a cooling
capacity of 20,000 tons had become fully subscribed. 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, 1994, Mid-America held 70% 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. During 1993, ICE entered into a contractual agreement
with Eli Lilly and Company (Lilly) to provide cooling capacity to
the Lilly Technical Center, in Indianapolis, Indiana, commencing
in 1996. Construction of the chilled water facility, located near
Morris Street and Kentucky Avenue in Indianapolis, began in late-
1994 with operations scheduled to begin in early 1996.
Mid-America holds a $7.4 million investment in Evergreen,
representing approximately 4% equity ownership at December 31, 1994.
Evergreen owns and operates eleven radio stations in major markets
across the United States.
During the next five years, 1995-1999, 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 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 1994, 1993 and 1992, the construction expenditures of
Mid-America and its subsidiaries totaled $8.6 million, $8.7
million and $29.9 million respectively. These costs were financed
with internal funds and a $9.5 million debt issue in 1991, and
a $2.4 million construction loan in 1994.
Construction requirements during the next five years are
estimated to be $15.3 million, $.5 million, $21.3 million, $22.0
million and $33.2 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 $53.3 million of project specific debt financing.
EMPLOYEES
As of December 31, 1994, Mid-America had 10 employees, Energy
Resources had 20 employees, Cleveland Thermal had 83 employees,
Cleveland Cooling had 8 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,
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990
-------------- -------------- -------------- -------------- --------------
Operating Revenues (In Thousands):
Residential $ 230,805 $ 225,138 $ 212,757 $ 224,039 $ 207,734
Small industrial and commercial 129,346 127,551 126,588 135,456 134,514
Large industrial and commercial 266,703 255,945 243,446 237,200 225,586
Public lighting 6,949 7,186 7,133 7,106 7,122
Miscellaneous 7,186 7,373 6,018 6,960 6,598
-------------- -------------- -------------- -------------- --------------
Revenues - ultimate consumers 640,989 623,193 595,942 610,761 581,554
Sales for resale - REMC 1,098 897 861 900 759
Sales for resale - other 7,680 5,237 2,400 4,197 10,418
-------------- -------------- -------------- -------------- --------------
Total electric revenues $ 649,767 $ 629,327 $ 599,203 $ 615,858 $ 592,731
============== ============== ============== ============== ==============
Kilowatthour Sales (In Millions):
Residential 4,077 4,014 3,675 3,960 3,585
Small industrial and commercial 2,207 2,202 2,171 2,331 2,322
Large industrial and commercial 6,306 6,169 5,843 5,612 5,399
Public lighting 64 62 64 64 65
-------------- -------------- -------------- -------------- --------------
Sales - ultimate consumers 12,654 12,447 11,753 11,967 11,371
Sales for resale - REMC 26 24 23 23 20
Sales for resale - other 456 321 169 256 555
-------------- -------------- -------------- -------------- --------------
Total kilowatthours sold 13,136 12,792 11,945 12,246 11,946
============== ============== ============== ============== ==============
Customers at End of Year:
Residential 360,347 356,015 352,139 347,718 344,094
Small industrial and commercial 38,849 38,359 38,171 38,011 37,863
Large industrial and commercial 3,525 3,342 3,163 2,952 2,714
Public lighting 266 252 239 229 212
-------------- -------------- -------------- -------------- --------------
Total ultimate consumers 402,987 397,968 393,712 388,910 384,883
Sales for resale - REMC 1 1 1 1 1
-------------- -------------- -------------- -------------- --------------
Total electric customers 402,988 397,969 393,713 388,911 384,884
============== ============== ============== ============== ==============
Miscellaneous Statistics:
Kilowatthour output (In Millions):
Generated (net after station use) 13,580 13,254 12,525 12,851 12,254
Purchased 206 325 126 160 300
-------------- -------------- -------------- -------------- --------------
Total generated and purchased 13,786 13,579 12,651 13,011 12,554
Company use, line loss, etc. 650 787 706 765 608
-------------- -------------- -------------- -------------- --------------
Energy sold 13,136 12,792 11,945 12,246 11,946
============== ============== ============== ============== ==============
Load factor (percent) 57.64 57.44 56.72 56.37 54.83
Average BTU per net kilowatthour 10,445 10,503 10,385 10,455 10,474
Cost of fuel per million BTU $ 1.112 $ 1.096 $ 1.103 $ 1.113 $ 1.109
Cost of fuel per ton (includes oil
stated in equivalent tons of coal) $ 24.946 $ 24.488 $ 24.547 $ 24.804 $ 24.711
Summer plant capability (megawatts)* 2,907 2,829 2,829 2,829 2,829
Maximum demand on IPL system (megawatts)* 2,640 2,635 2,505 2,583 2,498
Average use per residential
customer (kilowatthours) 11,393 11,345 10,515 11,460 10,514
Average revenue per residential customer $ 645.02 $ 636.28 $ 608.68 $ 648.36 $ 609.29
Average revenue per small industrial and
commercial customer $ 3,327.04 $ 3,310.59 $ 3,305.94 $ 3,552.03 $ 3,566.13
Average revenue per large industrial and
commercial customer $ 77,960.62 $ 78,055.83 $ 79,324.43 $ 83,816.09 $ 87,065.08
Average residential revenue per
kilowatthour (cents) 5.662 5.609 5.789 5.658 5.795
* All figures are net of station use.
Item 2. PROPERTIES
IPL
IPL's executive offices are located at 25 Monument Circle,
Indianapolis, Indiana. This facility contains approximately
201,300 square feet of space and contains certain administrative
operations of IPALCO's subsidiaries.
IPL also owns two service centers located at 1230 West Morris
Street and 3600 North Arlington Avenue, both in Indianapolis,
Indiana. IPL's customer service center is located at 2102 North
Illinois Street in Indianapolis.
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 2,960 MW, a winter capability of
2,962 MW and a summer capability of 2,907 MW. All figures are net
of station use. In relation to steam generation, there exists a
gross capacity of 2,290 Mlbs. (thousands of pounds) 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 846 MW nameplate rating and net
winter and summer capabilities of 898 MW and 845 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 1994, at the Petersburg,
Stout and Pritchard stations accounted for about 74.9%, 21.1% and
4.0%, 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 and one gas turbine added in 1994
with a combined nameplate rating of 139 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, 360 circuit miles of 138,000 volt lines and
274 miles of 34,500 volt lines. Distribution facilities include
4,689 pole miles and 19,807 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 107 miles of conduit and 670 wire
miles of conductor. Also included in the system are 76 bulk
power substations and 84 distribution substations.
Steam distribution properties include 24 miles of mains with
276 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, Indiana and
approximately 884 acres in Switzerland County, Indiana has been
purchased for future plant sites.
All of the facilities owned by IPL are well-maintained, in
good condition and adequate to meet the present needs of IPL.
The Mortgage and Deed of Trust of IPL, together with the
Supplemental Indentures thereto (the "Mortgage"), secure first
mortgage bonds issued by IPL. Pursuant to the terms of the
Mortgage, substantially all property owned by IPALCO and its
subsidiaries is subject to a direct first mortgage lien.
OTHER SUBSIDIARIES
Energy Resources owns and operates a district cooling
facility located 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 located 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 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 (CAC) and the
Industrial Intervenors Group (IIG). OUCC, CAC and IIG appealed
the Commission's order to the Indiana Court of Appeals. On June
17, 1994, the OUCC, CAC and IIG filed their respective appellants'
briefs. IPL filed its appellee's brief on September 6, 1994 and
the state of Indiana filed an amicus brief on October 3, 1994 in
support of the constitutionality of the Indiana law that governs
the Environmental Compliance proceedings before the IURC. On
October 24, 1994 appellants filed their reply briefs, and a
decision is anticipated during 1995.
In the retail electric rate case now pending before the IURC,
a prehearing conference was held on June 8, 1994, and an order was
issued July 20, 1994, establishing a test year ending June 30,
1994. Pursuant to the order, IPL prefiled its case-in-chief on
October 11, 1994, and hearings on IPL's case-in-chief commenced on
February 7, 1995. The order further established the following
procedural schedule: April 21, 1995, the OUCC and intervenors
prefile their respective cases-in-chief; May 26, 1995, IPL
prefiles its Supplemental testimony and rebuttal case; June 16,
1995, OUCC and intervenors file cross answering and surrebuttal
testimony; July 10, 1995, hearings commence on OUCC and
intervenors cases-in-chief and all Supplemental and rebuttal
testimony. A hearing for the public pursuant to Indiana Statute
will be held between April 21, 1995 and July 10, 1995 on a date
later to be determined by the IURC. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
1994 Rate Proceeding" for additional information regarding the
rate proceeding.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF THE REGISTRANT AT FEBRUARY 28, 1995.
Name, age (at December 31, 1994), and positions and offices held for
the past five years:
From To
John R. Hodowal (49)
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 (62)
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 (41)
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 (63)
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
N. Stuart Grauel (50)
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
From To
Joseph A. Gustin (47)
President of Mid-America December, 1994
Vice President of SHAPE May, 1993
President of ICE April, 1993
President of Energy Resources May, 1991
Vice President of Mid-America May, 1991 December, 1994
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 (53)
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
Bryan G. Tabler (51)
Vice President -
Secretary and General Counsel of IPALCO January, 1995
Senior Vice President -
Secretary and General Counsel of IPL January, 1995
Partner, Barnes & Thornburg January, 1979 October, 1994
Gerald D. Waltz (55)
Senior Vice President -
Business Development of IPL May, 1991
Senior Vice President -
Engineering and Operations of IPL April, 1986 May, 1991
Max Califar (41)
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
Steven L. Meyer (36)
Assistant Treasurer of IPALCO May, 1993
Treasurer of IPL December, 1992
Stephen J. Plunkett (46)
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, 1994, IPALCO had 25,682 holders of common
stock (including approximately 2,578 shareholders who hold shares
only through IPALCO's Automatic Dividend Reinvestment and Stock
Purchase Plan). IPALCO's common stock is principally traded on
the New York Stock Exchange and the Chicago Stock Exchange. The
high and low sale prices for IPALCO's common stock during 1994
and 1993 as reported on the Composite Tape in The Wall Street
Journal, were as follows:
1994 1993
High Low High Low
Sale Price Sale Price Sale Price Sale Price
---------------------- ---------------------
First Quarter $35 3/8 $31 5/8 $40 $34 3/8
Second Quarter 32 3/8 28 1/4 39 1/4 35 1/2
Third Quarter 31 3/8 28 1/2 38 3/4 35 3/4
Fourth Quarter 31 3/8 28 1/2 38 33 1/8
The high and low sale prices for IPALCO's common stock as
reported on the Composite Tape in The Wall Street Journal for the
period January 1, 1995, through February 28, 1995, were:
High - $33 7/8, Low - $29 7/8.
Quarterly dividends paid on the common stock during 1994 and
1993 were as follows:
1994 1993
---- ----
First Quarter $.51 $.49
Second Quarter .53 .51
Third Quarter .53 .51
Fourth Quarter .53 .51
The IPALCO's Board of Directors at its meeting on February 28,
1995, declared a regular quarterly dividend on common stock of $.54
per share, payable April 15, 1995, to shareholders of record on
March 24, 1995.
Dividend Restrictions
The following restrictions pertain to IPL but, to the extent
that the dividends of IPALCO depend upon IPL earnings, may have
an effect on IPALCO.
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. The amount which these
Mortgage provisions would have permitted IPL to declare and pay
as dividends at December 31, 1994, 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. IPL believes these restrictions will not restrict
anticipated dividends.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
(In Thousands Except Per Share Amounts 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------
Total utility operating revenues $ 686,076 $ 664,303 $ 633,203 $ 647,873 $ 621,578
Utility operating income 143,310 142,368 134,240 149,876 143,906
Allowance for funds used during
construction 9,381 5,527 5,081 2,611 2,044
Net income 92,994 75,422 88,342 101,998 96,939
Utility plant - net 1,711,772 1,608,871 1,532,964 1,488,940 1,463,622
Total assets 2,091,078 1,966,023 1,894,427 1,804,012 1,779,072
Utility construction expenditures 178,295 145,765 112,037 94,633 89,536
Nonutility construction expenditures 9,402 8,788 29,842 14,031 12,358
Common shareholders' equity 801,945 787,211 787,739 769,787 738,381
Nonredeemable cumulative
preferred stock 51,898 51,898 51,898 51,898 51,898
Long-term debt (less current
maturities and sinking
fund requirements) 665,971 541,760 550,141 547,218 536,580
Earnings per share of common stock
(based on weighted average number
of shares outstanding) 2.46 2.00 2.35 2.72 2.58
Dividends declared per share of
common stock 2.12 2.04 1.96 1.88 1.80
See consolidated financial statements.
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
1994 Rate Proceeding
IPL has asked the Indiana Utility Regulatory Commission
(IURC) to approve a new schedule of electric rates. The overall
rate increase amounts to about 13.9% and is estimated to
generate additional annual revenues of $87.7 million. Under
IPL's proposal, the percent of increase will vary for different
customer classes. Hearings on IPL's request began on February
7, 1995. IPL anticipates an IURC order in this proceeding
before 1996. There is no assurance that IPL's request will be
granted, or if granted, how much revenue will be produced. IPL
last received an order from the IURC authorizing an increase in
electric basic rates and charges in August 1986.
Environmental Compliance Plan
IPL is subject to the 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 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 appealed
that order. Briefs on this appeal have been filed by all
parties, and a decision is anticipated during 1995. As required
by the Act, IPL filed its proposed compliance plan with the
Environmental Protection Agency (EPA) in February 1993 and
subsequently received all required EPA permits pursuant to its
plan during 1994.
Effective January 1, 1995, IPL received annual emission
"allowances" for certain of its generating units. Each
allowance permits 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. The order further provides for the amortization of
such deferrals, as an expense reduction or as an expense, to be
included in the ordinary, necessary and reasonable expenses for
ratemaking purposes, on a basis to be determined in a future
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 Counselor, 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 (DSM) Program. The
order provides for the deferral, as regulatory assets, and
subsequent recognition as ordinary, necessary and reasonable
expenses for ratemaking purposes of certain approved DSM costs.
The order also provides for the recording of a carrying charge
on deferred costs until recognized in the future for ratemaking
purposes. IPL has requested costs deferred through January 31,
1995, be recognized in its current electric rate proceeding.
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
Standards 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 as a regulatory asset of SFAS 106
costs in excess of such costs determined on a pay-as-you-go
basis. The order further provides for the recognition as
ordinary, necessary and reasonable expenses for ratemaking
purposes 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 nonconstruction related SFAS 106 costs associated with its
electric business. IPL is expensing its nonconstruction related
SFAS 106 costs associated with its steam business. IPL has
requested recognition as ordinary, necessary and reasonable
expenses for ratemaking purposes of its electric SFAS 106 cost,
including amortization of deferred amounts, in its current
general electric rate proceeding.
Voluntary Employee Beneficiary Association (VEBA) Trust Agreement
On August 30, 1994, the Board of Directors of IPALCO adopted
a VEBA Trust for the funding of postretirement health and life
insurance benefits for retirees and their eligible dependents
and beneficiaries of IPALCO, IPL and Mid-America. Annual
funding is discretionary and is based on the projected cost over
time of benefits to be provided to covered persons consistent
with accepted actuarial methods. To the extent these
postretirement benefits are funded, the benefits will not be
shown as a liability on IPALCO's consolidated financial
statements. The VEBA Trust Agreement provides for full funding
of the accumulated postretirement benefit obligation in the
event of certain change of control transactions.
Regulatory Asset Deferrals
Balance sheet deferrals of regulatory assets for DSM,
postretirement benefits, income taxes, Petersburg Unit 4 costs
and other such costs amounted to $86.2 million at December 31,
1994. Deferrals for such items are expected to increase during
1995 due to SFAS 106 and DSM costs and related carrying charges
until an order in IPL's current retail electric rate proceeding
becomes effective.
Future Rate Relief
IPL may petition the IURC to increase its electric rates and
charges during 1995. A final IURC order on such a request may
not occur until 1996 or 1997.
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 will implement new steam tariffs in 1995 and
later, designed to produce estimated additional annual steam
operating revenues as follows:
Additional Cumulative
Annual Annual
Year Revenues Revenues
---- ---------- ----------
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 1999, annual peak demand is forecasted to
experience a compound 1.3% increase, while retail kilowatthour
(KWH) sales are anticipated to increase at a 1.8% 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 133 megawatts (MW) of annual peak
demand by the year 1999 as a result of DSM programs.
Integrated Resource Plan
Sales growth projections indicate a need for about 600 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 and
peaking turbines. 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
1990s 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 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 recognition of these demand
charges as ordinary, necessary and reasonable expenses for
ratemaking purposes be disallowed. IPL and IMP will also
exchange 50 MW of seasonal power over the 1995-1999 period.
IPL placed in-service two 80 MW combustion turbines, the
first on April 20, 1994, and the second on January 13, 1995.
Presently, IPL plans to add two additional 80 MW combustion
turbines with in-service dates in 1999 and 2000. 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 1993 agreement,
IPL has an option to purchase from PSI Energy, Inc. up to 100 MW
of limited reserve power during April 1996 through March 1997
and up to 250 MW during April 1997 through March 2001.
Environmental Compliance Construction Requests
The estimated capital cost of complying with the Act, as
approved by the IURC, is approximately $260 million, including
Allowance for Funds Used During Construction (AFUDC) of which
$92.4 million has been expended prior to 1995. 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 1994, 1993 and
1992 was $185.6 million, $149.3 million and $115.3 million,
including AFUDC of $7.3 million, $3.6 million and $3.2 million,
respectively.
IPL estimates the cost of the construction program for the
five years, 1995-1999, to be approximately $608.9 million,
including AFUDC of $33.3 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 $73.6 million for the two 80 MW
combustion turbines mentioned above. Additional expenditures
will be incurred beyond 1999 for the capacity with in-service
dates subsequent to 1999. Expenditures for the new capacity are
contingent upon the review of other long-term and near-term
options previously discussed.
Retirement of Long-term Debt and Equity Securities
During 1994, 1993 and 1992, IPL retired long-term debt,
including sinking fund payments, of $86.5 million, $96.9 million
and $75.0 million, respectively, which required replacement in
part with other debt securities at a lower cost.
IPL will retire $15.0 million and $11.3 million of maturing
long-term debt during 1996 and 1997, 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, 1994, IPL's
permanent financing totaled $376.5 million in long-term debt.
The net proceeds of these securities were used to retire
existing long-term debt of $266.2 million, including premiums, and
to partially fund IPL's construction expenditures. The remaining
cash requirements during this three-year period were funded with
internally generated funds and short-term debt.
Long-term debt, internally generated funds and temporary
short-term borrowings are forecasted to provide the 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
and the level of interchange sales with other utilities.
Additionally, IPL has authority from the IURC to redeem and
replace certain of its existing securities.
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, 1994, the ratios under the Articles and the
Mortgage are 3.12 and 6.55, 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, in addition to its own
operations, has as subsidiaries Cleveland Thermal Energy
Corporation (Cleveland Thermal) and Cleveland District Cooling
Corporation (Cleveland Cooling), which jointly do business as
Cleveland Energy Resources. Energy Resources has operated a
district cooling system in downtown Indianapolis, Indiana since
1991. On November 1, 1994, Energy Resources announced that its
Indianapolis, Indiana district cooling system with a cooling
capacity of 20,000 tons had become fully subscribed, although
plans are underway to expand the system to allow for additional
customers. Cleveland Thermal operates a district heating system
in downtown Cleveland, Ohio and was acquired by Energy Resources
in July, 1991. Cleveland Cooling began operations of its
district cooling system in downtown Cleveland, Ohio during 1993.
Also during 1993, ICE entered into an agreement to provide
chilled water to the Lilly Technical Center located 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.
On December 14, 1994, Mid-America's Board of Directors
approved a Long-Term Incentive Plan (the Incentive Plan) that
covers key executives of Mid-America and certain officers of
IPALCO effective January 1, 1995.
Pursuant to the Incentive Plan, whole or fractions of eight
shares of an award pool are available to be granted. The value
of such shares is zero at the inception of the Incentive Plan
and can grow in value during the performance period (January 1,
1995 - December 31, 1999). The pool to be distributed to the
holders of such shares on December 31, 1999, will be determined
based upon the increase in the valuation of the respective Mid-
America businesses during the performance period and can amount
to .85% up to 15% of the total increase during the performance
period. A minimum increase in value above $34 million is
required before any reward is payable.
Participation in the Incentive Plan will be reviewed on an
annual basis and during the performance period as necessary.
The Compensation Committee of IPALCO's Board of Directors may
add or delete participants from the Incentive Plan and may make
modifications to the distribution of shares during the
performance period.
Construction Program
During 1994, 1993 and 1992, the construction expenditures of
Mid-America and its subsidiaries totaled $8.6 million,
$8.7 million and $29.9 million, respectively. These costs were
financed with internal funds and a $9.5 million debt issue in
1991, and a $2.4 million construction loan in 1994.
Construction requirements during the next five years are
estimated to be $15.3 million, $.5 million, $21.3 million, $22.0
million and $33.2 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
subsidiaries are expected to be funded by Mid-America from
existing liquid assets, future cash flows from operations and
from project-specific debt financing.
Projected Operations
SHAPE, Cleveland Cooling and ICE are projected to provide
operating profits in 1996. The existing projects of Energy
Resources and Cleveland Thermal are currently projected to begin
contributing to operating profits in 1995. This projection
could be materially affected by the rate at which customers are
added and other factors.
During the next five years, 1995-1999, 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.
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 (page II-
16) and in the Notes to Consolidated Financial Statements (pages
II-19 - II-32).
RESULTS OF OPERATIONS
1994 vs. 1993
Earnings per share during 1994 were $2.46 or $.46 above the
$2.00 attained in 1993. The following discussion highlights the
factors contributing to this result.
Operations
Utility operating income increased $.9 million in 1994
compared to 1993. Contributing to this increase were higher
electric operating revenues of $20.4 million, due to increases
in retail sales of $18.0 million and wholesale sales of
$2.6 million, partially offset by a decrease in miscellaneous
electric revenue of $.2 million. Retail electric sales were
higher due to increased retail KWH sales of $11.4 million and
increased fuel cost recoveries of $6.6 million. The increase in
retail KWH sales in this year, as compared to 1993, resulted
primarily from increased industrial and residential sales
resulting from an improved economy and increased residential
customers, partially offset by slightly milder heating season
weather. Wholesale sales were higher as a result of increased
energy requirements of other utilities.
Fuel costs increased $11.4 million due to increases in
deferred fuel costs of $6.7 million, increased unit costs of
coal and oil of $2.7 million and increased fuel consumption of
$2.0 million. Other operating expenses increased $3.4 million
primarily due to an increase in administrative and general
expenses of $1.7 million, an increase in miscellaneous power
station operating expenses at the Petersburg plant of $1.2
million, and an increase in other production expenses of $.5
million.
Maintenance expenses increased $1.2 million, reflecting
increased overhead distribution expenses of $3.1 million and
increased transmission and other distribution expenses of $.7
million. These expenses were partially offset by decreased unit
overhaul expenses in 1994, compared to 1993. Depreciation
expense increased $8.7 million primarily due to an adjustment to
property held for future use and as a result of an increase in
the depreciable utility plant balance.
Taxes other than income taxes increased $1.3 million as a
result of an increase in revenues subject to Indiana gross
receipts tax. Income taxes - net, decreased $4.3 million as a
result of a decrease in pretax utility operating income.
Other Income And Deductions
Allowance for equity funds used during construction
increased $2.7 million due to an increased construction base in
1994.
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. There was no such charge in 1994.
Other - net, which includes the pretax operations other than
IPL, decreased $4.2 million due to lower pretax income from
nonutility investments and operations of $3.6 million. The
lower investment income reflects decreased cash balances
available for investment at IPALCO and at Mid-America, 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 $7.6 million. This compares to a net loss of
$3.1 million during 1993.
Interest Charges
Interest on long-term debt increased $4.7 million due
primarily to the issuance of $180 million long-term debt on
February 3, 1994, (6.05% Series, First Mortgage Bonds and 7.05%
Series, First Mortgage Bonds). The interest on long-term debt
was partially offset by the refinancing of three series of IPL's
First Mortgage Bonds in March 1994 as follows: the 7.4% Series,
First Mortgage Bonds; the 7 1/8% Series, First Mortgage Bonds;
and the 7.65% Series, First Mortgage Bonds; all of which were
replaced with the 6.05% Series, First Mortgage Bonds. The
allowance for borrowed funds used during construction increased
$1.2 million due to an increased construction base.
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 in 1993 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% below normal.
Wholesale sales were higher as a result of increased energy
requirements of other utilities, which 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.
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 $2.1 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. This compares to a net loss of $1.5 million
during 1992.
Interest Charges
Interest on long-term debt decreased $1.2 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
$1.3 million due to higher notes payable balances carried during
1993.
1995
Factors having a bearing on 1995 earnings compared to 1994
will include the impact of economic conditions, weather
conditions, an increased level of construction expenditures, and
the implementation of new electric system tariff rates.
Authorized electric operating income for 1995 as determined
by the IURC is approximately $144.0 million. (IPL earned $140.4
million during 1994 and $141.2 million during 1993.)
The overall effect these factors will have on 1995 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 consolidated preferred stock and long-term debt of
IPALCO Enterprises, Inc. and its subsidiaries as of December 31, 1994
and 1993, 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, 1994. Our audits also included the
consolidated financial statement schedule listed in the Index at Item
14(a.)2. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and financial statement schedule 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 its subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles. Also, in
our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
Deloitte & Touche LLP
Indianapolis, Indiana
January 27, 1995
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
Statements of Consolidated Income
For the Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992
--------------- --------------- ---------------
(In Thousands Except Per Share Amounts)
UTILITY OPERATING REVENUES (Note 9):
Electric $ 649,767 $ 629,327 $ 599,203
Steam 36,309 34,976 34,000
--------------- --------------- ---------------
Total operating revenues 686,076 664,303 633,203
--------------- --------------- ---------------
UTILITY OPERATING EXPENSES:
Operation:
Fuel 169,756 158,390 155,072
Other 104,273 100,890 100,447
Power purchased 19,060 19,407 7,804
Purchased steam 7,653 8,051 7,612
Maintenance 68,562 67,326 62,446
Depreciation and amortization 87,028 78,372 78,615
Taxes other than income taxes 30,891 29,627 31,348
Income taxes - net (Note 8) 55,543 59,872 55,619
--------------- --------------- ---------------
Total operating expenses 542,766 521,935 498,963
--------------- --------------- ---------------
UTILITY OPERATING INCOME 143,310 142,368 134,240
--------------- --------------- ---------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 4,672 2,010 1,985
Costs of withdrawn tender offer (Note 12) - (33,948) -
Other - net (12,010) (7,832) (5,776)
Income taxes - net (Note 8) 4,536 17,502 2,695
--------------- --------------- ---------------
Total other deductions - net (2,802) (22,268) (1,096)
--------------- --------------- ---------------
INCOME BEFORE INTEREST AND OTHER CHARGES 140,508 120,100 133,144
--------------- --------------- ---------------
INTEREST AND OTHER CHARGES:
Interest on long-term debt 46,248 41,589 42,793
Allowance for borrowed funds used during construction (4,709) (3,517) (3,096)
Other interest 1,680 2,625 1,291
Amortization of redemption premiums and expenses on
debt - net 1,113 799 632
Preferred dividend requirements of subsidiary 3,182 3,182 3,182
--------------- --------------- ---------------
Total interest and other charges - net 47,514 44,678 44,802
--------------- --------------- ---------------
NET INCOME $ 92,994 $ 75,422 $ 88,342
=============== =============== ===============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 37,741 37,668 37,597
=============== =============== ===============
EARNINGS PER SHARE OF COMMON STOCK $ 2.46 $ 2.00 $ 2.35
=============== =============== ===============
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
- ---------------------------------------------------------------------------------------------------------
ASSETS 1994 1993
- ---------------------------------------------------------------------------------------------------------
(In Thousands)
UTILITY PLANT:
Utility plant in service (Note 2) $ 2,415,531 $ 2,300,682
Less accumulated depreciation 916,943 876,054
----------------- -----------------
Utility plant in service - net 1,498,588 1,424,628
Construction work in progress 191,010 168,480
Property held for future use 22,174 15,763
----------------- -----------------
Utility plant - net 1,711,772 1,608,871
----------------- -----------------
OTHER ASSETS:
Nonutility property 82,480 72,804
Less accumulated depreciation 5,809 3,482
----------------- -----------------
Nonutility property - net 76,671 69,322
Other investments 9,637 8,722
----------------- -----------------
Other assets - net 86,308 78,044
----------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents 8,148 10,713
Financial investments 7,025 10,088
Accounts receivable (less allowance for doubtful
accounts - 1994, $855,000 and 1993, $672,000) 48,659 49,766
Fuel - at average cost 37,749 36,253
Materials and supplies - at average cost 57,236 56,527
Prepayments and other current assets 9,132 5,557
----------------- -----------------
Total current assets 167,949 168,904
----------------- -----------------
DEFERRED DEBITS:
Unamortized Petersburg Unit 4 carrying charges 32,521 30,587
Unamortized redemption premiums and expenses on debt (Note 6) 27,787 25,674
Other regulatory assets (Note 4) 53,661 32,954
Miscellaneous 11,080 20,989
----------------- -----------------
Total deferred debits 125,049 110,204
----------------- -----------------
TOTAL $ 2,091,078 $ 1,966,023
================= =================
See notes to consolidated financial statements.
- ---------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1994 1993
- ---------------------------------------------------------------------------------------------------------
(In Thousands)
CAPITALIZATION:
Common shareholders' equity (Note 5):
Common stock, no par, authorized - 145,000,000 shares,
issued and outstanding - 37,755,966 shares in 1994,
37,692,966 shares in 1993 $ 381,228 $ 379,460
Premium on 4% cumulative preferred stock 1,363 1,363
Retained earnings 419,354 406,388
----------------- -----------------
Total common shareholders' equity 801,945 787,211
Cumulative preferred stock (See Statements) 51,898 51,898
Long-term debt (See Statements) 665,971 541,760
----------------- -----------------
Total capitalization 1,519,814 1,380,869
----------------- -----------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper (Note 7) 29,753 90,000
Current maturities and sinking fund requirements 350 8,729
Accounts payable and accrued expenses 102,360 77,501
Dividends payable 21,096 20,299
Payrolls accrued 4,475 4,505
Taxes accrued 18,569 23,053
Interest accrued 14,933 11,208
Other current liabilities 8,823 5,316
----------------- -----------------
Total current liabilities 200,359 240,611
----------------- -----------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net (Note 8) 280,684 268,769
Unamortized investment tax credit 53,762 57,029
Accrued postretirement benefits (Note 10) 34,854 17,840
Miscellaneous 1,605 905
----------------- -----------------
Total deferred credits and other long-term liabilities 370,905 344,543
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (Note 11)
TOTAL $ 2,091,078 $ 1,966,023
================= =================
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Cash Flows
For the Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992
--------------- --------------- ---------------
(In Thousands)
CASH FLOWS FROM OPERATIONS:
Net income before preferred dividend requirements
of subsidiary $ 96,176 $ 78,604 $ 91,524
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 91,713 82,026 81,303
Income from financial investments (737) (2,159) (5,036)
Deferred income taxes and investment tax
credit adjustments - net 2,685 (1,450) 4
Allowance for funds used during construction (9,381) (5,476) (5,081)
Decrease (increase) in certain assets:
Accounts receivable 1,107 1,281 (5,799)
Fuel, materials and supplies (2,205) 8,662 (8,031)
Other current assets (3,575) (2,525) (980)
Increase (decrease) in certain liabilities:
Accounts payable 24,859 (3,682) 25,090
Taxes accrued (4,484) (911) 684
Other current liabilities 7,910 (2,484) 2,909
--------------- --------------- ---------------
Net cash provided by operating activities 204,068 151,886 176,587
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING:
Purchase of marketable securities - (1,408) (16,368)
Proceeds from maturities of marketable securities - 3,258 28,168
Withdrawals from financial investments 3,800 44,244 30,000
Purchase of financial investments - - (35,000)
Construction expenditures - utility (178,295) (145,765) (112,037)
Construction expenditures - nonutility (9,402) (8,788) (29,842)
Other 5,557 (12,200) (12,721)
--------------- --------------- ---------------
Net cash used in investing activities (178,340) (120,659) (147,800)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 202,350 96,500 80,000
Retirement of long-term debt - including premiums (87,291) (98,978) (79,958)
Short-term debt - net (60,247) 48,300 38,700
Dividends paid (82,421) (79,253) (76,076)
Exercise of stock options including related tax benefit 1,768 898 3,301
Other (2,452) (1,230) (1,202)
--------------- --------------- ---------------
Net cash used in financing activities (28,293) (33,763) (35,235)
--------------- --------------- ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,565) (2,536) (6,448)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,713 13,249 19,697
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,148 $ 10,713 $ 13,249
=============== =============== ===============
- -------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 41,442 $ 42,695 $ 41,741
=============== =============== ===============
Income taxes $ 54,103 $ 46,846 $ 54,654
=============== =============== ===============
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Preferred Stock and Long-Term Debt
December 31, 1994 and 1993
1994 1993
-------------- --------------
(In Thousands)
CUMULATIVE PREFERRED STOCK - IPL (Note 5):
Nonredeemable - $100 par value, authorized
2,000,000 shares Call Price at
December 31, 1994
-----------------
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 6):
First mortgage bonds:
4 1/2% Series, due August 1994 $ - $ 7,500
5 1/8% Series, due April 1996 15,200 15,400
5 5/8% Series, due May 1997 11,550 11,629
7 1/8% Series, due May 1998 - 19,750
7.40% Series, due March 2002 - 33,200
7.65% Series, due March 2003 - 25,200
6.05% Series, due February 2004 80,000 -
8% Series, due October 2006 58,800 58,800
7 3/8% Series, due August 2007 80,000 80,000
9 5/8% Series, due September 2012 40,000 40,000
10 5/8% Series, due December 2014 40,000 40,000
6.10% Series, due January 2016 41,850 41,850
5.40% Series, due August 2017 24,650 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 30,000
7.05% Series, due February 2024 100,000 -
Unamortized discount - net (1,079) (490)
-------------- --------------
Total first mortgage bonds 594,471 500,989
Long-term note, variable rate, Series 1991, due August 2021 40,000 40,000
Long-term note, variable rate, Series 1994A, due December 2024 20,000 -
Current maturities and sinking fund requirements (350) (8,729)
-------------- --------------
Total long-term debt - IPL 654,121 532,260
LONG-TERM DEBT - OTHER (Note 6):
Energy Resources - 7.25% long-term note, due December 2011 9,500 9,500
Indianapolis Campus Energy, Inc. - project loan 2,350 -
-------------- --------------
Total long-term debt $ 665,971 $ 541,760
============== ==============
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Common Shareholders' Equity
For the Years Ended December 31, 1994, 1993 and 1992
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Premium on 4%
--------------------- Cumulative Retained
Shares Amount Preferred Stock Earnings Total
- ---------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Balance at January 1, 1992 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
Net income 92,994 92,994
Cash dividends declared ($2.12 per share) (80,028) (80,028)
Exercise of stock options 63 1,768 1,768
------- -------------- ------------- -------------- --------------
Balance at December 31, 1994 37,756 $ 381,228 $ 1,363 $ 419,354 $ 801,945
======= ============== ============= ============== ==============
See notes to consolidated financial statements.
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1994, 1993 and 1992
- ----------------------------------------------------------------------------
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), Indianapolis Campus Energy, Inc. (ICE), and one
70% 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" and INTEREST AND OTHER CHARGES 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 an order has
been issued in IPL's pending general electric rate proceeding.
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 funds 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 pretax composite rates of 9.5%, 8.0% and 9.5%
during 1994, 1993 and 1992, 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. Depreciation was computed by the straight-line method based
on the functional rates and averaged 3.5% during 1994 and 3.4% during 1993
and 1992. Depreciation expense for 1994 includes an adjustment to property
held for future use of approximately $3.9 million.
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.
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 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 August 6, 1986, IPL has
capitalized interest on the AFUDC portion of these deferred carrying
charges. In addition, IPL has capitalized $8.1 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 deferred carrying charges are included in IPL's currently pending
electric rate case.
Unamortized Redemption Premiums and Expenses on Debt and Preferred
Stock--In accordance with regulatory treatment, IPL defers nonsinking 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 20 years.
Income Taxes--Deferred taxes are provided for all significant
temporary 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" (SFAS
109), 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.
The adjustments required by SFAS 109 were recorded to deferred tax balance
sheet accounts, with substantially all of the offsetting adjustments to
regulatory assets and liabilities. The adoption of this standard did not
have a material impact on Enterprises' cash flows or due to the effect of
rate regulation on the results of operations.
Employee Benefit Plans--Substantially all employees of IPALCO and IPL
and certain management employees of Mid-America are covered by a
noncontributory, defined benefit pension plan (the 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
Thrift Plan based on a percentage of their annual base compensation. IPL
matches each employee's contributions in amounts up to, but not exceeding
4% 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:
1994 1993
- ----------------------------------------------------------------
(In Thousands)
Production $1,434,041 $1,387,239
Transmission 227,988 218,369
Distribution:
Electric 600,288 551,217
Steam 44,492 42,205
General 108,722 101,652
---------- ----------
Total utility plant in service $2,415,531 $2,300,682
========== ==========
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 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, 1994 and 1993,
approximates its carrying value of $7.4 million and $7.5 million,
respectively.
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, 1994 and 1993 the
consolidated carrying amount of Enterprises' long-term debt, including
current maturities and sinking fund requirements, and the approximate fair
value are as follows:
1994 1993
------------------------------------------------
(In Thousands)
Carrying amount $666,321 $550,489
Approximate fair value $624,225 $587,236
4. OTHER REGULATORY ASSETS
At December 31, 1994 and 1993, IPL has deferred certain costs and
expenses which will be included as ordinary, necessary and reasonable
expenses for ratemaking purposes in future rate proceedings as follows:
1994 1993
- -------------------------------------------------------------------
(In Thousands)
Postretirement benefit costs in excess of
cash payments and amounts capitalized $ 25,182 $ 12,893
SFAS 109 21,054 15,091
Demand Side Management Costs 4,504 1,814
Other 2,921 3,156
-------- --------
Total $ 53,661 $ 32,954
======== ========
5. 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, 1994,
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 88,066 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. As approved by the Board of
Directors on October 25, 1994, and subject to shareholder approval at the
April 19, 1995, Annual Meeting, the 1990 Plan is amended and restated
effective January 1, 1995, as the IPALCO Enterprises, Inc. Long-Term
Performance and Restricted Stock Incentive Plan (1995 Plan) described
below.
During 1991, the 1991 Directors' Stock Option Plan (1991 Plan) was
established. This plan provides to the nonemployee 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
172,000 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, 1992 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
Granted 31.9375 20,000
Canceled 25.25 (10,000)
Exercised 31.75 - 33.25 (63,000)
--------
Outstanding, December 31, 1994 25.25 - 38.0625 817,500
========
The number of shares exercisable at December 31, 1994, 1993 and 1992
were 521,169, 411,000 and 227,000, respectively.
Pursuant to the 1995 Plan, 400,000 shares of common stock of IPALCO
have been authorized for issuance and initial awards of 58,205 shares of
restricted common stock were made to participating employees on January 1,
1995. Under the 1995 Plan, shares of restricted common stock with value
equal to a stated percentage of participants' base salary are initially
awarded at the beginning of a three-year performance period, subject to
adjustment to reflect the participants' actual base salary for the first
year of each performance period (except for the first performance period
for which the average of the three years is used). The shares remain
restricted and nontransferable throughout each three-year performance
period, vesting in one-third increments on July 1 of each of the three
years following the end of the performance period. The first performance
period is from January 1, 1995, to December 31, 1997, with subsequent three-
year performance periods commencing annually on January 1 of each year from
1998 to 2004. At the end of a performance period, awards are subject to
adjustment to reflect Company performance compared to peer companies under
two performance criteria, cost-effective service and total return to
shareholders. Depending on Company performance under these criteria, final
awards may range from 200% of the initial awards to zero.
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, 1994, 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 for
IPL matters, and if four full quarterly dividends are in default, they are
entitled to elect the smallest number of Directors to constitute a
majority.
6. 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 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.
On February 3, 1994, IPL issued First Mortgage Bonds, 6.05% Series,
due 2004, in the principal amount of $80 million. The net proceeds and
other funds were used to redeem on March 1, 1994, IPL's $33.2 million First
Mortgage Bonds, 7.40% Series, due 2002, at a redemption price of 101.79%,
and to redeem on March 15, 1994, IPL's $19.75 million First Mortgage Bonds,
7 1/8% Series, due 1998, at a redemption price of 101.20% and IPL's $25.2
million First Mortgage Bonds, 7.65% Series, due 2003, at a redemption price
of 102.11%. Accrued interest was also paid at the time of redemption.
Also, on February 3, 1994, IPL issued First Mortgage Bonds, 7.05%
Series, due 2024, in the principal amount of $100 million. The net
proceeds were used in part to repay outstanding unsecured promissory notes
and for construction costs.
On August 1, 1994, IPL retired First Mortgage Bond, 4.50% Series, due
August 1, 1994, in the principal amount of $7.5 million.
On December 29, 1994, IPL issued a 30-year unsecured promissory note
which was issued to the city of Petersburg, Indiana, in connection with the
issuance of $20 million of Solid Waste Disposal Revenue Bonds, due 2024, by
the city of Petersburg. This note and the related bonds provide for a
floating interest rate that will bear interest at a tax-exempt weekly rate.
The net proceeds from this issue will provide funds to pay costs of certain
facilities and equipment to be used for solid waste disposal purposes. At
the option of IPL, the bonds can be converted to First Mortgage Bonds which
would bear interest at a fixed rate.
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 2.98% for 1994 and 2.40% for 1993.
The interest rate at the end of the year was 3.85% for 1994 and 2.39% for
1993. At the option of IPL, the bonds can be converted to First Mortgage
Bonds which would bear interest at a fixed rate.
IPL has a $60 million long-term revolving credit facility which
provides liquidity, if necessary, for the two 30-year unsecured promissory
notes. The revolving credit was unused at December 31, 1994.
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.
On October 7, 1994, ICE entered into an $18 million project loan which
can be converted to a $10.8 million fully amortizing 15-year secured term
loan once the project becomes operational; the net proceeds from the
project loan will provide funds to construct a chilled water facility.
Upon completion, the project will be leased to a customer under a long-term
capital lease.
Maturities and sinking fund requirements on long-term debt for the
five years subsequent to December 31, 1994, are as follows:
Net Sinking Fund
Maturities Requirements Total
- --------------------------------------------------------------
(In Thousands)
1995 $ - $ 350 $ 350
1996 15,000 150 15,150
1997 11,250 - 11,250
1998 - - -
1999 - - -
The Company has filed a Preliminary Official Statement with the
relevant regulatory authorities involving the sale of $40 million Pollution
Control Refunding Bonds by the city of Petersburg and the issuance by the
Company of its First Mortgage Bond in the like amount. It is anticipated
that this transaction will close in early February, 1995. The proceeds
will be used to refund the 10 5/8% Series, due December, 2014.
7. LINES OF CREDIT
IPALCO has a line of credit of $2 million, of which $.05 million was
unused at December 31, 1994. The line of credit requires the payment of a
commitment fee and expires June 29, 1995.
IPL has lines of credit with banks of $100 million at December 31,
1994, to provide loans for interim financing. These lines of credit, based
on separate formal and informal agreements, have expiration dates ranging
from January 31, 1995, to November 30, 1995, and require the payment of
commitment fees. At December 31, 1994, $95 million of these credit lines
were unused. Lines of credit supporting commercial paper were $21.4
million at December 31, 1994.
Mid-America also has a line of credit of $2 million, of which $.6 was
unused at December 31, 1994.
The weighted average interest rates on notes payable and commercial
paper outstanding were 6.30% and 3.36% at December 31, 1994 and 1993,
respectively.
8. INCOME TAXES
Federal and state income taxes charged to income are as follows:
1994 1993 1992
- -------------------------------------------------------------------------------
(In Thousands)
Utility Operating Expenses:
Current income taxes:
Federal $45,919 $52,321 $48,504
State 6,919 7,761 7,500
------- ------- -------
Total current taxes 52,838 60,082 56,004
------- ------- -------
Deferred income taxes, net--federal and state:
Excess of tax depreciation over book
depreciation 6,615 7,109 5,254
Early retirement of bonds 271 592 1,965
Allowance for borrowed funds used during
construction (net of capitalized interest
for tax purposes) (1,187) (1,214) (1,050)
Amortization of deferred return - rate
phase-in plan (debt portion) - - (676)
Unbilled revenues 609 (1,768) 436
Accrued pension expense (1,651) (1,865) (1,965)
Miscellaneous 1,316 204 (890)
------- ------- -------
Total deferred taxes 5,973 3,058 3,074
------- ------- -------
Net amortization of investment credit (3,268) (3,268) (3,459)
------- ------- -------
Total charge to utility operating expenses 55,543 59,872 55,619
Net credit to other income and deductions (4,536) (17,502) (2,695)
------- ------- -------
Total federal and state income tax provisions $51,007 $42,370 $52,924
======= ======= =======
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 pretax income. The reasons for the difference,
stated as a percentage of pretax income, are as follows:
1994 1993 1992
- -------------------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 34.0%
Effect of state income taxes (1.9) (1.5) (2.0)
Amortization of investment tax credits (2.2) (2.8) (2.4)
Preferred dividends of subsidiary 0.8 0.9 0.8
Other - net (2.4) 0.2 1.3
---- ---- ----
Effective tax rate 29.3% 31.8% 31.7%
==== ==== ====
The significant items comprising Enterprises' net deferred tax
liability recognized in the consolidated balance sheets as of December 31,
1994 and 1993 are as follows:
1994 1993
- ---------------------------------------------------------------------
(In Thousands)
Deferred tax liabilities:
Relating to utility property $349,461 $335,824
Early retirement of bonds 7,697 7,377
Other 5,497 1,603
-------- --------
Total deferred tax liabilities 362,655 344,804
-------- --------
Deferred tax assets:
Unbilled revenue 9,538 10,148
Pension 10,865 9,033
Investment tax credit 32,846 34,842
Other 28,722 22,012
-------- --------
Total deferred tax assets 81,971 76,035
-------- --------
Net deferred tax liability $280,684 $268,769
======== ========
9. RATE MATTERS
Electric Rate Case
In the retail electric rate case now pending before the IURC, a
prehearing conference was held on June 8, 1994, and an order was issued
July 20, 1994, establishing a test year ending June 30, 1994. IPL filed
its case-in-chief on October 11, 1994. The IURC has scheduled hearings on
IPL's request to begin on February 7, 1995.
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
Act). The order provides for the deferral of net gains and losses
resulting from any sale of emission allowances. The order further provides
for the amortization of such deferrals, as an expense reduction or as an
expense, to be included in the ordinary, necessary and reasonable expenses
for ratemaking purposes, on a basis to be determined in a future general
electric rate proceeding.
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
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 Counselor, 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 recognition as ordinary, necessary and reasonable expenses for
ratemaking purposes of certain approved DSM costs. The order also provides
for the recording of a return on deferred costs until recognized in the
future for ratemaking purposes.
10. EMPLOYEE BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS
Enterprises' contributions to the Thrift Plan were $3.3 million, $3.2
million and $3.1 million in 1994, 1993 and 1992, respectively.
Net pension cost for the Plan including amounts charged to
construction is comprised of the following components:
1994 1993 1992
- ---------------------------------------------------------------------------------
(In Thousands)
Service cost--benefits earned during the period $ 7,832 $ 6,355 $ 5,563
Interest cost on projected benefit obligation 15,358 14,192 13,739
Actual return on plan assets 10,366 (40,045) (18,865)
Net amortization and deferral (27,297) 25,689 5,366
------- ------- -------
Net periodic pension cost $ 6,259 $ 6,191 $ 5,803
======= ======= =======
A summary of the Plans' funding status, and the amount recognized in
the consolidated balance sheets at December 31, 1994 and 1993, follows:
1994 1993
- -------------------------------------------------------------------------------
(In Thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $(123,306) $(128,449)
Nonvested benefit obligation (26,394) (28,532)
--------- ---------
Accumulated benefit obligation $(149,700) $(156,981)
========= =========
Projected benefit obligation $(201,345) $(224,037)
Plan assets at fair value 199,522 218,312
--------- ---------
Funded status--plan assets less than projected
benefit obligation (1,823) (5,725)
Unrecognized net gain from past experience different
from that assumed (31,058) (22,922)
Unrecognized past service costs 21,188 22,932
Unrecognized net asset at January 1, 1987 being
amortized over an original life of 18.9 years (15,410) (16,825)
--------- ---------
Net accrued pension costs included in current
liabilities at December 31 $ (27,103) $ (22,540)
========= =========
Approximately 19.5% 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 in 1992.
Net postretirement benefit cost, including amounts charged to
construction for 1994 and 1993 is comprised of the following components:
1994 1993
- --------------------------------------------------------------------------------------
(In Thousands)
Service cost -- benefits earned during the period $ 5,144 $ 4,859
Interest cost on accumulated postretirement benefit obligation 11,097 10,838
Actual return on plan assets (435) (297)
Net amortization and deferral 5,767 5,759
-------- --------
Net periodic postretirement benefit cost $ 21,573 $ 21,159
======== ========
A summary of the retiree health care and life insurance plan's funding
status, and the amount recognized in the consolidated balance sheets at
December 31, 1994 and 1993 follows:
1994 1993
- -------------------------------------------------------------------------------------------------
(In Thousands)
Actuarial present value of accumulated postretirement
benefit obligation:
Retirees $ (55,462) $ (60,110)
Fully eligible active plan participants (19,531) (21,344)
Other active plan participants (59,073) (74,453)
--------- ---------
Total (134,066) (155,907)
Plan assets at fair value 10,570 10,135
--------- ---------
Funded status--accumulated postretirement benefit obligation in excess
of plan assets (123,496) (145,772)
Unrecognized net gain from past experience different from that assumed (21,931) 11,216
Unrecognized net obligation at January 1, 1993 being amortized over
an original life of 20 years 110,573 116,716
--------- ---------
Net accrued postretirement benefit cost included in deferred
liabilities at December 31 $ (34,854) $ (17,840)
========= =========
Enterprises is expensing its nonconstruction 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 sheets, 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 inclusion of these
costs as ordinary, necessary and reasonable expenses for ratemaking
purposes has been made in IPL's pending general electric rate petition.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation is 11.7% for 1995, gradually
declining to 5.0% in 2003. A 1% increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement
benefit obligation as of December 31, 1994, by approximately $20.5 million
and the combined service cost and interest cost for 1994 by approximately
$3.0 million.
Plan assets consist of the cash surrender value of life insurance
policies on certain retired IPL employees.
Assumptions used in determining the information above were:
1994 1993 1992
- -------------------------------------------------------------------------------------
Discount rate - pension plans 8.0% 7.0% 7.5%
Discount rate - postretirement benefits 8.0% 7.0% -
Rate of increase in future compensation levels 6.1% 6.1% 6.1%
Expected long-term rate of return on assets - pension plans 8.0% 8.0% 8.0%
On August 30, 1994, the Board of Directors adopted a Voluntary
Employee Beneficiary Association (VEBA) Trust Agreement for the funding of
postretirement health and life insurance benefits for retirees and their
eligible dependents and beneficiaries. Annual funding is discretionary and
is based on the projected cost over time of benefits to be provided to
covered persons consistent with acceptable actuarial methods. To the
extent these postretirement benefits are funded, the benefits will not be
shown as a liability on Enterprises' financial statements. The VEBA Trust
Agreement provides for full funding of Enterprises' accumulated
postretirement benefit obligation in the event of certain change of control
transactions.
On December 14, 1994, Mid-America's Board of Directors approved a Long-
Term Incentive Plan (the Incentive Plan) that covers key executives of Mid-
America and certain officers of IPALCO effective January 1, 1995.
Pursuant to the Incentive Plan, whole or fractions of eight shares of
an award pool are available to be granted. The value of such shares is
zero at the inception of the Incentive Plan and can grow in value during
the performance period (January 1, 1995 - December 31, 1999). The reward
pool to be distributed to the holders of such shares on December 31, 1999,
will be determined based upon the increase in the valuation of the
respective Mid-America businesses during the performance period and can
amount to .85% up to 15% of the total increase during the performance
period. A minimum increase in value above $34 million is required before
any reward is payable.
Participation in the Incentive Plan will be reviewed on an annual
basis and during the performance period as necessary. The Compensation
Committee of IPALCO's Board of Directors may add or delete participants
from the Incentive Plan and may make modifications to the distribution of
shares during the performance period.
11. COMMITMENTS AND CONTINGENCIES
In 1995, Enterprises anticipates the cost of its subsidiaries'
construction programs to be approximately $257 million.
IPL will comply with the provisions of the Act through the
installation of SO2 scrubbers and NOx facilities. The cost of complying
with the Act from 1995 through 1997, including AFUDC, is estimated to be
approximately $142 million, of which $125 million is anticipated in 1995.
During 1994, 1993, and 1992, expenditures for compliance with the Act were
$59.4 million, $13.7 million, and $20.0 million, respectively.
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 include future demand
charges in ordinary, necessary and reasonable expenses for ratemaking
purposes be disallowed. Capacity payments during 1994, 1993 and 1992 under
this agreement totaled $14.4 million, $12.6 million and $5.4 million,
respectively.
Enterprises is involved in litigation and environmental claims 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.
With respect to environmental issues, IPL has ongoing discussions with
various regulatory authorities, and continues to believe that IPL is in
compliance with its various permits, but if IPL's position is found to be
erroneous, they could be subject to fines.
12. WITHDRAWN TENDER OFFER
During the third quarter of 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.
13. QUARTERLY RESULTS (UNAUDITED)
Operating results for the years ended December 31, 1994 and 1993, by
quarter, are as follows (in thousands except per share amounts):
1994
-----------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
Utility operating revenues $181,178 $161,137 $183,666 $160,095
Utility operating income 41,520 29,440 42,832 29,518
Net income 30,365 16,138 28,900 17,591
Earnings per share of
common stock $ .81 $ .43 $ .77 $ .47
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
The quarterly figures reflect seasonal and weather-related
fluctuations which are normal to IPL's operations. Colder weather was
experienced in the first quarter of 1994 and warmer weather was experienced
in the second quarter of 1994, while weather conditions in 1993 reflected
near normal conditions. In addition, during the third quarter of 1994, IPL
expensed approximately $3.1 million of property held for future use. See
also Note 12.
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not
equal the total for the year.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors of the registrant, set
forth in the Proxy Statement of IPALCO Enterprises, Inc.
dated March 6, 1995 (the registrant's Proxy Statement), under
"Election of Six Directors" at pages 4-8 is incorporated
herein by reference. Information relating to the
registrant's executive officers is set forth at pages I-10 -
I-12 of this Form 10-K under "Executive Officers of the
Registrant at February 28, 1995."
Item 11. EXECUTIVE COMPENSATION
Information relating to executive compensation, set forth in
the registrant's Proxy Statement under "Compensation of
Executive Officers" at pages 11-15, "Compensation of
Directors - Standard Arrangements" at page 15, "Compensation
Committee Interlocks and Insider Participation" at page 18,
"Pensions Plans" at page 20, and "Employment Contracts and
Termination of Employment and Change in Control Arrangements"
at pages 21-22, is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to ownership of the registrant's common
stock by persons known by the registrant to be the beneficial
owners of more than 5% of the outstanding shares of common
stock and by management, set forth in the registrant's Proxy
Statement under "Voting Securities and Beneficial Owners" at
pages 2-3 is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related
transactions, set forth in the registrant's Proxy Statement
under "Compensation of Directors - Certain Business
Relationships" at page 15, is incorporated herein by
reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The Consolidated Financial Statements and Supplemental
Schedule 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, 1994,
1993 and 1992
Statements of Consolidated Income for the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets, December 31, 1994 and 1993
Statements of Consolidated Preferred Stock and
Long-Term Debt, December 31, 1994 and 1993
Statements of Consolidated Common Shareholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(a) 2. Consolidated Financial Statement Schedules
Included in Part IV of this report:
For each of the years ended December 31, 1994, 1993
and 1992
Schedule VIII - Valuation and Qualifying Accounts
(a) 3. Exhibits
The Exhibit Index beginning on page IV-6 of this
Annual Report on Form 10-K lists the exhibits that are
filed as part of this report.
(b) Reports on Form 8-K
IPALCO Enterprises, Inc. filed a report on Form 8-K, dated
September 27, 1994, reporting Item 5, "Other Event", and Item
7, "Exhibits", with respect to the announced delay of IPL's
proposed Patriot electric generating unit.
IPALCO ENTERPRISES, INC. SCHEDULE VIII
Valuation and Qualifying Accounts
For the Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
- ---------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS DEDUCTIONS
---------------------- FOR PURPOSES
CHARGED TO CHARGED FOR WHICH
BALANCE AT COSTS AND TO OTHER RESERVES BALANCE AT
DESCRIPTION JANUARY 1 EXPENSES ACCOUNTS WERE CREATED DECEMBER 31
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994:
RESERVES DEDUCTED IN CONSOLIDATED BALANCE
SHEET FROM ASSETS TO WHICH THEY APPLY:
Reserve for depreciation of utility property $ 876,054 $ 87,028 $ 0 $ 46,139 $ 916,943
Reserve for depreciation of nonutility property $ 3,482 $ 2,338 $ 0 $ 11 $ 5,809
Reserve for receivables $ 672 $ 1,894 $ 21 $ 1,732 $ 855
YEAR ENDED DECEMBER 31, 1993:
RESERVES DEDUCTED IN CONSOLIDATED BALANCE
SHEET FROM ASSETS TO WHICH THEY APPLY:
Reserve for depreciation of utility property $ 818,319 $ 78,372 $ 0 $ 20,637 $ 876,054
Reserve for depreciation of nonutility property $ 1,810 $ 1,665 $ 7 $ 0 $ 3,482
Reserve for receivables $ 688 $ 1,994 $ (11) $ 1,999 $ 672
YEAR ENDED DECEMBER 31, 1992:
RESERVES DEDUCTED IN CONSOLIDATED BALANCE
SHEET FROM ASSETS TO WHICH THEY APPLY:
Reserve for depreciation of utility property $ 756,093 $ 74,829 $ 0 $ 12,603 $ 818,319
Reserve for depreciation of nonutility property $ 600 $ 1,211 $ 0 $ 1 $ 1,810
Reserve for receivables $ 734 $ 1,986 $ 60 $ 2,092 $ 688
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 /s/ John R.Hodowal
---------------------------------
(John R. Hodowal, Chairman of the
Board and President)
Date February 28, 1995
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant 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 28, 1995
---------------------- and President
(John R. Hodowal)
(ii) Principal Financial Officer:
/s/ John R. Brehm Vice President February 28, 1995
---------------------- and Treasurer
(John R. Brehm)
(iii) Principal Accounting Officer:
/s/ Stephen J. Plunkett Controller February 28, 1995
-----------------------
(Stephen J. Plunkett)
(iv) A majority of the Board of Directors of IPALCO Enterprises, Inc.:
/s/ Joseph D. Barnette, Jr. Director February 28, 1995
---------------------------
(Joseph D. Barnette, Jr.)
SIGNATURES (Continued)
/s/ Robert A. Borns Director February 28, 1995
---------------------------
(Robert A. Borns)
/s/ Mitchell E. Daniels, Jr. Director February 28, 1995
----------------------------
(Mitchell E. Daniels, Jr.)
/s/ Rexford C. Early Director February 28, 1995
---------------------------
(Rexford C. Early)
/s/ Otto N. Frenzel III Director February 28, 1995
---------------------------
(Otto N. Frenzel III)
/s/ Max L. Gibson Director February 28, 1995
---------------------------
(Max L. Gibson)
/s/ Edwin J. Goss Director February 28, 1995
---------------------------
(Edwin J. Goss)
/s/ Dr. Earl B. Herr, Jr. Director February 28, 1995
---------------------------
(Dr. Earl B. Herr, Jr.)
/s/ John R. Hodowal Director February 28, 1995
---------------------------
(John R. Hodowal)
/s/ Ramon L. Humke Director February 28, 1995
---------------------------
(Ramon L. Humke)
/s/ Sam H. Jones Director February 28, 1995
---------------------------
(Sam H. Jones)
/s/ Andre B. Lacy Director February 28, 1995
---------------------------
(Andre B. Lacy)
SIGNATURES (Continued)
/s/ L. Ben Lytle Director February 28, 1995
---------------------------
(L. Ben Lytle)
/s/ Thomas M. Miller Director February 28, 1995
---------------------------
(Thomas M. Miller)
/s/ Sallie W. Rowland Director February 28, 1995
---------------------------
(Sallie W. Rowland)
/s/ Thomas H. Sams Director February 28, 1995
---------------------------
(Thomas H. Sams)
EXHIBIT INDEX
Copies of documents listed below which are identified with an
asterisk (*) are incorporated herein by reference and made a part
hereof. The management contracts or compensatory plans are marked
with a double asterisk (**) after the description of the contract or
plan.
Exhibit
No. Description
------- -----------------------------------------------------------
3.1* Articles of Incorporation of IPALCO Enterprises, Inc.,
as amended. (Form 10-K for year ended 12-31-90.)
3.2* Bylaws of IPALCO Enterprises, Inc. dated April 26, 1994.
(Form 10-Q for quarter ended 6-30-94.)
4.1 IPALCO Enterprises, Inc. Automatic Dividend Reinvestment and
Stock Purchase Plan.
4.2 IPALCO Enterprises, Inc. and First Chicago Trust Company of
New York (Rights Agent) - Rights Agreement.
10.1 IPALCO Enterprises, Inc. Unfunded Deferred Compensation Plan
for Directors dated December 27, 1983, as amended. **
10.2 IPALCO Enterprises, Inc. Unfunded Deferred Compensation Plan
for Officers effective January 1, 1994. **
10.3 Directors' and Officers' Liability Insurance Policy No.
DO392B1A94 effective June 1, 1994 to June 1, 1995. **
10.4* IPALCO Enterprises, Inc. Benefit Protection Fund and Trust
Agreement effective November 1, 1988. (Form 10-K for year
ended 12-31-88.) **
10.5* Exhibit A to IPALCO Enterprises, Inc. Benefit Protection
Fund and Trust Agreement dated February 23, 1993. (Form 10-
K for year ended 12-31-93.) **
10.6* IPALCO Enterprises, Inc. Annual Incentive Plan and
Administrative Guidelines effective January 1, 1990. (Form
10-K for year ended 12-31-89.) **
10.7 IPALCO Enterprises, Inc. Long-Term Performance and
Restricted Stock Incentive Plan (as amended and restated
effective January 1, 1995). **
10.8 IPALCO Enterprises, Inc. 1990 Stock Option Plan **
10.9 IPALCO Enterprises, Inc. 1991 Directors' Stock Option Plan **
10.10 Form of Termination Benefits Agreement together with schedule
of parties to, and dates of, the Termination Benefits
Agreements **
10.11 Employment Agreement between IPALCO Enterprises, Inc.,
Indianapolis Power & Light Company and John R. Hodowal dated
July 29, 1986 **
Exhibit
No. Description
------- -------------------------------------------------------------
10.12 Voluntary Employee Beneficiary Association (VEBA) Trust
Agreement **
11.1 Computation of Per Share Earnings
20.1* Form 10-K of Indianapolis Power & Light Company for the year
ended December 31, 1994, and all exhibits thereto.
21.1 Subsidiaries of the Registrant
23.1 Independent Auditors' Consent
27.1 Financial Data Schedule
99.1* 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 9-
30-93.)
99.2 Amendment to Agreement, dated October 27, 1994, 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.