Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to_________
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
___________ __________________________________ __________________
1-10628 CIPSCO INCORPORATED 37-1260920
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Class on Which Registered
_______________ _____________________
CIPSCO INCORPORATED
Common Stock, without par value New York Stock Exchange
Chicago Stock Exchange
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
None
Securities registered pursuant to Section 12(g) of the Act:
CIPSCO INCORPORATED, None
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY,
Cumulative Preferred Stock, par value $100 per share
Depositary Shares, each representing one-fourth of a share
of 6.625% Cumulative Preferred Stock, Par Value $100 Per
Share
Indicate by check mark whether the Registrants (1) have
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrants were
required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
Yes X No
___ ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Aggregate market value at February 1, 1996 of the voting
stock held by non-affiliates of CIPSCO Incorporated (CIPSCO) -
$1,365,052,700 - Common Stock, without par value. Number of
shares outstanding of each of CIPSCO's classes of common stock
at February 1, 1996: 34,069,542 shares of Common Stock, without
par value.
Aggregate market value at February 1, 1996 of the voting
stock held by non-affiliates of Central Illinois Public Service
Company (CIPS) - $20,396,800 - Cumulative Preferred Stock (par
value $100 per share) [Note: Excludes value of 400,000 shares of
Cumulative Preferred Stock for which CIPS has been unable to
determine market value.] Number of shares outstanding of each of
CIPS' classes of common stock at February 1, 1996: 25,452,373
shares of Common Stock, without par value (all owned by CIPSCO).
Documents Incorporated By Reference:
A portion of CIPSCO's Proxy Statement relating to its 1996
Annual Meeting of Shareholders is incorporated by reference in
Part III hereof.
A portion of CIPS' Proxy Statement relating to its 1996
Annual Meeting of Shareholders is incorporated by reference in
Part III hereof.
=================================================================
CIPSCO INCORPORATED
AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business
CIPSCO Incorporated and its Subsidiaries. . . . . . . 5
General . . . . . . . . . . . . . . . . . . . . . . 5
Merger . . . . . . . . . . . . . . . . . . . . . . 5
Non-Utility Subsidiary - CIPSCO Investment Company. . 6
General . . . . . . . . . . . . . . . . . . . . . . 6
Utility Subsidiary - Central Illinois Public
Service Company . . . . . . . . . . . . . . . . . 6
General . . . . . . . . . . . . . . . . . . . . . . 6
Revenues. . . . . . . . . . . . . . . . . . . . . . 7
Competition -- General. . . . . . . . . . . . . . . 9
Competition -- Electric Business. . . . . . . . . . 9
Competition -- Gas Business . . . . . . . . . . . . 12
Utility Industry. . . . . . . . . . . . . . . . . . 12
Construction Program and Financing. . . . . . . . . 12
Rate Matters. . . . . . . . . . . . . . . . . . . . 14
Electric Operations . . . . . . . . . . . . . . . . 16
Electric Power Sales/Participation Agreements . . . 17
Gas Operations. . . . . . . . . . . . . . . . . . . 18
Fuel. . . . . . . . . . . . . . . . . . . . . . . . 20
Regulation. . . . . . . . . . . . . . . . . . . . . 21
Environmental Matters . . . . . . . . . . . . . . . 21
Employees . . . . . . . . . . . . . . . . . . . . . 23
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . 23
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 25
Item 4. Submission of Matters to a Vote of Security Holders. . . 25
Executive Officers of the Registrants. . . . . . . . . . 25
PART II
Item 5. Market for Registrants' Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . 28
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . 29
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 30
Item 8. Financial Statements and Supplementary Data. . . . . . . 41
CIPSCO Consolidated Financial Statements . . . . . . . . 41
Report of Independent Public Accountants . . . . . . . . 45
Notes to Consolidated Financial Statements . . . . . . . 46
CIPS Financial Statements. . . . . . . . . . . . . . . . 69
Report of Independent Public Accountants . . . . . . . . 73
Notes to Financial Statements . . . . . . . . . . . . . 74
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . 80
PART III
Item 10. Directors and Executive Officers of the Registrants. . . 80
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . 81
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . 81
Item 13. Certain Relationships and Related Transactions . . . . . 82
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. . . . . . . . . . . . . . . . . . 82
Signatures . . . . . . . . . . . . . . . . . . . . . . . 95
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 97
PART I
Item 1. Business
CIPSCO INCORPORATED AND ITS SUBSIDIARIES
________________________________________
GENERAL. CIPSCO Incorporated (CIPSCO) was incorporated in
the State of Illinois on July 11, 1986. CIPSCO has two first-
tier subsidiaries: CIPSCO Investment Company (CIC), an
investment subsidiary, and Central Illinois Public Service
Company (CIPS), an electric and gas public utility engaged in the
sale of electricity and natural gas in portions of central and
southern Illinois. CIPSCO and Subsidiaries are sometimes
referred to as the "Company."
Effective October 1, 1990, CIPSCO became the parent holding
company of CIPS. CIPSCO owns 100% of the outstanding common
stock of CIPS representing in excess of 96% of the voting
securities of CIPS.
CIPSCO's business is conducted through properties and
employees of CIPS and CIPSCO reimburses CIPS for their use. Each
of CIPSCO's officers is also an officer of CIPS. CIPSCO's
principal executive office is located in Springfield, Illinois.
CIPSCO is a public-utility holding company as defined in the
Public Utility Holding Company Act of 1935 (the "Holding Company
Act"), but is exempt, by virtue of an order issued September 18,
1990, from all the provisions of the Holding Company Act except
provisions relating to the acquisition of securities of public
utility companies. CIPSCO is not subject to regulation as a
utility under the Illinois Public Utilities Act or the Federal
Power Act.
The ability of CIPSCO to pay dividends on its common stock
is dependent upon distributions made to it by CIPS and on amounts
earned by CIPSCO on its other investments.
MERGER. On August 11, 1995, CIPSCO entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Union
Electric Company ("UE"), of St. Louis, Missouri. As a result of
the proposed business combination, a new public utility holding
company - Ameren Corporation ("Ameren") - will become the parent
of CIPS, UE and the other direct subsidiaries of CIPSCO. Ameren
will be a registered holding company under the Holding Company
Act. When the Merger is completed, each outstanding share of
common stock of CIPSCO will be converted into 1.03 shares of
Ameren common stock and each outstanding share of common stock of
UE will be converted into one share of Ameren common stock. The
transaction is expected to be tax-free to shareholders for
federal income tax purposes and to be accounted for as a "pooling
of interests." Shareholders of both companies approved the
Merger Agreement on December 20, 1995. Under the Merger
Agreement, approximately 63,900 electric and 18,200 natural gas
customers of UE located in Illinois would become customers of
CIPS (assuming regulatory approval is obtained). Following
certain regulatory and governmental approvals, the merger is
expected to be effective early in 1997.
Additional information relating to the merger can be found
in Management's Discussion and Analysis of Financial Condition
and Results of Operations - Ameren Corporation and in Note 2 of
the Notes to Consolidated Financial Statements included under
Item 8 of this report.
UE serves about 1,130,000 electric customers and 121,000 gas
customers in Missouri and Illinois. At December 31, 1995 it had
assets of $6.8 billion. For 1995, UE had electric revenues of
about $2.014 billion, gas revenues of $88 million and net income
of $314.1 million. Further information concerning UE is
contained in its Annual Report on Form 10-K for the year ended
December 31, 1995 and other reports to be filed with the
Securities and Exchange Commission. See "Unaudited Pro Forma
Combined Condensed Financial Information of CIPSCO and Union
Electric" contained under Item 14 of this report for selected
historical and unaudited pro forma combined condensed financial
information of CIPSCO and UE.
NON-UTILITY SUBSIDIARY - CIPSCO INVESTMENT COMPANY
__________________________________________________
GENERAL. CIPSCO Investment Company (CIC), an Illinois
corporation and the non-utility subsidiary of CIPSCO, was
incorporated on October 2, 1990. CIC was formed for the purpose
of managing non-utility investments and providing investment
management services to CIPSCO and its affiliates. CIC's
investment portfolio includes money-market investments, common
stocks, mutual funds, hedged preferred stocks, hedged common
stocks, and equity interests in lease transactions and energy
related projects. Investments are held in the four subsidiaries
of CIC: CIPSCO Securities Company, CIPSCO Leasing Company,
CIPSCO Energy Company and CIPSCO Venture Company. CIPSCO
Securities Company invests in marketable securities, CIPSCO
Leasing Company makes long-term investments in leveraged lease
transactions, CIPSCO Energy Company makes investments in energy-
related projects and CIPSCO Venture Company makes investments
within the CIPS utility service territory.
UTILITY SUBSIDIARY - CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
____________________________________________________________
GENERAL. Central Illinois Public Service Company (CIPS), an
Illinois corporation, was organized in 1902. CIPS is a public
utility operating company engaged in the sale of electricity and
natural gas in portions of central and southern Illinois. CIPS
generates, transmits and distributes electricity and, through
interchange agreements with other utility systems, purchases and
sells power on a firm basis, in emergency situations or when
economical to do so. CIPS sells and distributes natural gas
which it purchases from natural gas producers and other suppliers
and transports natural gas purchased by end-users directly from
suppliers. The principal executive offices of CIPS are located
in Springfield, Illinois.
CIPS furnishes electric service to about 321,000 retail
customers in 557 incorporated and unincorporated communities and
adjacent suburban and rural areas. See Business - Electric
Operations and - Electric Power Sales/Participation Agreements
regarding certain electric power arrangements with other utility
systems.
CIPS also furnishes natural gas service to about 167,000
retail customers in 267 incorporated and unincorporated
communities and adjacent suburban and rural areas and provides
gas transportation service to about 330 end-users. CIPS
furnishes both electric and natural gas service in 236 of the
communities served by it.
The territory served by CIPS, located in 66 counties in
Illinois, has an estimated population of 820,000 and is devoted
principally to agriculture and diversified industrial operations.
Key industries include petroleum and petrochemical industries,
food processing, metal fabrication and coal mining.
The electric and gas utility business of CIPS is expected to
provide the major portion of CIPSCO's assets and earnings for the
foreseeable future.
REVENUES. The total operating revenues of CIPS for the year
1995 were $833,119,000 of which about 84% was derived from the
sale of electricity and about 16% from the sale of natural gas.
The retail electric revenues were derived approximately as
follows (percentage of total electric operating revenue): 33%
from residential customers, 26% from commercial customers, 16%
from industrial customers and 3% from public authorities and
other. The electric revenues from sales for resale were derived
approximately as follows (percentage of total electric operating
revenue): 10% from power supply agreements, 9% from interchange
sales (economy/emergency) and 3% from cooperatives and municipal
customers. Sales of power to the petroleum, related
petrochemical industries and to the coal mining industry
contributed about 6% of total electric revenues. Sales to these
three industries accounted for approximately 33% of the 1995
electric revenue derived from the industrial customer group.
Revenues from the coal mining industry may decline in the future
as a result of declining consumption of Illinois coal, as many
industrial coal customers shift to lower sulfur coal or other
fuels as a means of complying with the Clean Air Act Amendments
of 1990. The natural gas revenues for the year 1995 were derived
approximately as follows: 66% from residential customers, 22%
from commercial customers, 6% from industrial customers and 6%
from transportation service customers and miscellaneous.
The sources of the operating revenues of CIPS for the years
indicated were as follows:
Electric 1995 1994 1993
________ ____ ____ ____
(in thousands)
Residential . . . . . . . . . . . $230,103 $213,377 $219,510
Commercial. . . . . . . . . . . . 180,831 178,723 176,154
Industrial. . . . . . . . . . . . 116,030 118,917 112,382
Public authorities and other. . . 19,828 13,799 15,144
________ ________ ________
Total retail revenues . . . . 546,792 524,816 523,190
________ ________ ________
Power supply agreements . . . . . 70,333 78,613 69,668
Interchange sales (economy/
emergency). . . . . . . . . . . 64,188 71,779 74,644
Cooperatives and municipals . . . 22,196 22,250 21,347
________ ________ ________
Total sales for resale . . . . 156,717 172,642 165,659
________ ________ ________
Total electric revenues. . . . $703,509 $697,458 $688,849
======== ======== ========
Natural Gas 1995 1994 1993
___________ ____ ____ ____
(in thousands)
Residential . . . . . . . . . . . $ 85,202 $ 86,919 $ 92,213
Commercial. . . . . . . . . . . . 28,234 30,577 32,023
Industrial. . . . . . . . . . . . 8,464 12,897 12,139
Transportation service. . . . . . 7,335 7,586 8,915
Miscellaneous . . . . . . . . . . 375 445 417
________ ________ ________
Total gas revenues. . . . . . . $129,610 $138,424 $145,707
======== ======== ========
The portions of operating income of CIPS, before income
taxes, attributable to electric operations were approximately
$137,379,000 (92%) in 1995, $147,070,000 (93%) in 1994 and
$154,779,000 (95%) in 1993. The portions of operating income,
before income taxes, attributable to gas operations were
approximately $12,192,000 (8%) in 1995, $11,528,000 (7%) in 1994,
and $7,621,000 (5%) in 1993.
Identifiable assets relating to electric and gas operations
were as follows:
1995 1994 1993
____ ____ ____
(in thousands)
Electric operations . . . . . . $1,495,433 $1,469,601 $1,459,073
Gas operations. . . . . . . . . 181,677 176,788 177,857
Other . . . . . . . . . . . . . 37,695 32,261 31,532
__________ __________ __________
Total assets. . . . . . . . . $1,714,805 $1,678,650 $1,668,462
========== ========== ==========
COMPETITION -- GENERAL. In order to assess the various
opportunities emerging in the electric and natural gas energy
marketplace and to implement strategies which take advantage of
those opportunities, effective January 1, 1995, CIPS established
a new marketing function. The efforts of this new function are
being directed at product and service development programs,
customer retention and economic development. As a result of the
marketing efforts emphasized during this past year, CIPS has
introduced consumer products related to lighting and home safety,
provided added customer service options and technical energy and
industrial process service assistance.
During 1995, CIPS continued its "business process re-engineering"
program focusing on two major areas: field operations (including
general office departments directly supporting field operations)
and power generation (including general office departments
directly supporting the power stations). In February 1995,
multi-disciplined teams were formed to study each of these areas,
with the objective of significantly reducing costs, improving
customer satisfaction, and achieving the Company's strategic
goals. Late in 1995 a pilot program in each area was initiated
to confirm the effectiveness of various recommendations submitted
by the teams. Further implementation of the teams'
recommendations will occur in 1996.
Early in 1995, CIPS instituted a voluntary separation program.
Under the program, eligible employees could leave CIPS and
receive a package of benefits. Of the employees eligible to
participate, 151 accepted the offer which was made available
through February 25, 1995. The costs related to the program were
approximately $5.8 million, which had the effect of reducing the
Company's 1995 earnings per share by 10 cents. (See Note 15 of
the Notes to Consolidated Financial Statements included herein.)
COMPETITION -- ELECTRIC BUSINESS. Competition among
suppliers of electric energy is increasing. In particular,
competition for interchange sales, which is based primarily on
price and availability of energy, has become much more intense in
recent years.
CIPS is responding to overall increased competition for
retail sales in a number of ways designed to lower its costs and
increase sales to existing customers and to expand to new
customers. Since instituting an economic development incentive
rate in 1985 as described below, the CIPS economic development
program has been expanded to include new customer and community
development initiatives. The Key Account Program is an ongoing
program in which senior management plays a critical role in
communicating CIPS' competitive advantages to its largest
industrial customers. Additional services to customers have
included energy technology assistance and market development
programs. CIPS works in partnership with communities throughout
the service area to implement projects to respond to growth
opportunities. This, in combination with the ongoing business
development initiatives including industrial site location
assistance, community profiles and technical development
services, is designed to maximize economic development throughout
the CIPS territory. In addition to a general program of
controlling costs, in 1987 CIPS initiated a major program of
renegotiating long-term coal supply contracts. Savings from
these renegotiation efforts continued during 1995. Further
renegotiation is expected in 1996. This program has helped and
will continue to help CIPS control its fuel costs.
In January 1985, CIPS first received approval from the
Illinois Commerce Commission (the "Illinois commission") for an
economic development rate. The rate is designed to encourage
industrial expansion and stimulate job creation in the service
territory of CIPS. Under the economic development rate, each
qualifying electric customer receives lower incentive rates for incremental
load for a maximum period of five years. In June 1986, CIPS received
further approval which grants flexibility to negotiate agreements
to fit the specific needs of certain industrial prospects.
Effective June 13, 1994 the Illinois commission granted CIPS
approval to offer qualifying customers the economic development
rate through January 1, 2000. The scope of the rate was
broadened to include those customers who receive service under
the commercial time of use rate classification. In addition, the
minimum incremental load necessary to qualify for the special
contract provision was lowered to 500 KW from 2,000 KW. Since
the rate was instituted in 1985, about 175 new or existing
business expansions have led to the creation of over 10,450 new
jobs in the CIPS service territory. In addition, on July 10,
1995, CIPS filed a tariff rider with the Illinois commission
applicable to existing electric service customers billed on
certain commercial and industrial rates. This rider allows CIPS
to negotiate contractual rates with customers at rates equal to
or greater than the incremental costs of serving that customer.
Such contracts are intended for customers having the potential to
utilize an energy source other than CIPS' electric service and/or
where the total or partial loss of customer load is imminent.
This will allow CIPS to maintain a positive contribution to fixed
costs and avoid permanent loss of revenue. Recent court
challenges threaten the confidentiality of negotiated contracts
with large customers. Illinois utilities are currently seeking
legislation which would allow special contracts to be kept
confidential.
CIPS faces competition from non-utility generators of power
such as cogenerators, independent power producers and exempt
wholesale generators. The National Energy Policy Act of 1992
("NEPA"), among other things, creates exempt wholesale generators
who are largely exempt from traditional utility regulation.
Under NEPA these producers may gain access to utility
transmission lines. These and other developments will enhance
competition over time and will give customers and CIPS
opportunities to take advantage of competitive markets. At the
retail level, large customers may decide to install cogeneration
or other facilities and supply their own electricity which will
increase pressures on CIPS to be a low cost provider.
Additional competition may result from action by the
Illinois General Assembly in naming a special legislative
committee and charging it with developing a proposal to introduce
competition into retail electric markets in Illinois. The
legislative committee submitted a preliminary report to the
General Assembly in December 1995. The committee continues to
encourage participation by all interested parties in
deliberations of the Technical Assistance Group, of which CIPS is
a member, as a final legislative proposal is developed. The
special committee must submit a proposal to the General Assembly
by November 1996.
CIPS has developed a proposal on competition and
restructuring of the electric utility industry for Illinois.
CIPS' proposal centers around a two-step process. The first step
would involve a three-year initial phase in which, beginning
January 1, 1999, new retail electric customers with load of 5,000
kilowatts or greater, or customers with incremental additions to
retail load of 5,000 kilowatts or greater, would be allowed
direct access to Illinois suppliers of electricity other than
their own local utility company, on a reciprocal basis. The
second step of the proposal would allow, beginning January 1,
2002, any existing retail customer with electric load of 5,000
kilowatts or greater to have direct access to any other suppliers
on the same basis, regardless of the suppliers location.
Two Illinois electric utilities recently filed with the
Illinois commission proposed "open access" programs which would
establish a pilot program under which certain customers within
the authorized service area of each such utility would have the
opportunity to obtain electric power from a supplier other than
such utility. CIPS is monitoring the Illinois commission
proceedings in which these proposals are being considered. These
pilot programs differ from the regulatory reform process in that
they are temporary in nature and are filed pursuant to the
existing Illinois Public Utilities Act.
During 1995, CIPS had generating capacity sales agreements
with other utility systems which represented approximately 515
megawatts or 18% of CIPS' total generating capacity. Effective
January 1, 1995, one utility system reduced its participation by
115 megawatts as a result of a scheduled contract reduction.
(See Business - Utility Subsidiary - Central Illinois Public
Service Company - Electric Power Sales/Participation Agreements.)
Additional information relating to competition can be found
in Management's Discussion and Analysis of Financial Condition
and Results of Operations - Consolidated Results of Operations
(1993-1995) - Regulation and Competition.
COMPETITION -- GAS BUSINESS. Competition in the natural gas
industry is increasing. For a number of years, CIPS customers
have had the ability to purchase natural gas from producers or
other suppliers and transport that gas through the interstate
pipelines and the CIPS system. CIPS collects a rate for
transportation through its system. Recent policies of the
Federal Energy Regulatory Commission ("FERC") such as Order 636
(see Gas Operations below) have increased the competitive nature
of the gas business. In certain cases customers have the ability
to receive their gas supply directly from pipelines and bypass
the CIPS system. Illinois utilities, under special rate
provisions authorized by the Illinois commission, are authorized
to negotiate special contractual sales arrangements with their
larger natural gas customers as a means of retaining such
customers. CIPS has negotiated or is currently negotiating with
a number of its larger industrial gas customers regarding
flexible rates to address the more competitive environment in
which CIPS is operating. While CIPS has had to provide lower
rates to retain some customers, CIPS has used this same
flexibility to obtain some new loads.
UTILITY INDUSTRY. CIPS is experiencing some of the problems
common to electric and gas utility companies, namely, increased
competition for customers, increased construction costs, delays
and uncertainties in the regulatory process and costs of
compliance with environmental and other laws and regulations.
CONSTRUCTION PROGRAM AND FINANCING. Total construction
expenditures for CIPS for 1996 through 2000 are estimated at $510
million. For 1996, anticipated construction expenditures are $98
million for replacements and improvements and consist of about
$23 million for electric production facilities, $7 million for
electric transmission facilities, $57 million for electric
distribution and general facilities, and $11 million for gas
utility facilities. Included in the projected 5-year amounts is
about $76 million for environmental compliance, including
compliance with regulations under the Clean Air Act
Amendments of 1990. In addition to construction funds, projected
capital requirements for the 1996-2000 period include $133
million for scheduled debt retirements. While capital
requirements for the 1996-2000 period are expected to be met
primarily through internally generated funds, external financing
will be required to fund scheduled debt retirements. In
addition, up to $100 million of external financing is expected to
be required to fund the construction program. CIPS is evaluating
alternatives for reducing fuel costs and other expenses while
maintaining environmental compliance. Depending on the
alternative selected, construction expenditures could increase
the five-year forecast by as much as $50 million over the 1996-
2000 period. In addition, adoption of certain alternatives in
fuel and/or environmental strategies could result in substantial
increases in other capital requirements in the 1996-2000 period
from the amounts shown above. External financing to fund such
additional capital requirements would be required. (See
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Central Illinois Public Service Company -
Capital and Financing Requirements and - Consolidated Results of
Operations (1993-1995) - Clean Air Act and - Fuel Strategies.)
CIPS continuously reviews its construction program, which
may be affected by numerous factors, including availability and
cost of capital, the rate of load growth, escalation of
construction costs, fuel strategies, changes in governmental and
environmental regulations, customers' patterns of consumption and
conservation of energy and, the adequacy of rate relief. Load
growth projections are subject to a number of uncertainties due
to various influences on customer consumption, economic
conditions and the effect of rates on consumption and peak load
demand.
CIPS has no electric generating units under construction.
On June 30, 1995, CIPS filed its current "least cost resource"
plan with the Illinois commission. The plan includes the 20-year
generating unit plan of the utility. As demonstrated by the
plan, CIPS is not expected to require additional generating
capacity or demand-side resources during the 1996-2016 planning
period. Pursuant to the plan, CIPS will engage in several
demand-side management activities intended to enhance its
capability to deliver demand-side management resources in the
future.
For a discussion of the funds requirements for the period
1996-2000 and the assumptions as to the sources of funds to meet
those requirements, see Management's Discussion and Analysis of
Financial Condition and Results of Operations - Central Illinois
Public Service Company - Capital and Financing Requirements.
Under an effective shelf registration statement placed on
file with the Securities and Exchange Commission in October 1994,
CIPS has remaining authority to issue an aggregate of up to $29
million of first mortgage bonds, medium-term notes and/or
preferred stock through December 31, 1996. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Central Illinois Public Service Company -- Capital
and Financing Requirements.
The issuance by CIPS of first mortgage bonds, medium-term
notes and/or other secured debt securities, common stock,
preferred stock and certain unsecured debt securities is subject
to the receipt of necessary regulatory approvals. See Business -
Utility Subsidiary - Central Illinois Public Service Company -
Regulation.
The Mortgage Indenture of CIPS, as presently operative,
permits the issuance of additional first mortgage bonds up to 60%
of available net expenditures for bondable property, provided the
"net earnings" of CIPS (determined after deducting income taxes
and otherwise as provided in the Mortgage Indenture) for a recent
12-month period equal at least twice the annual interest
requirements on all first mortgage bonds outstanding (and on all
equally secured and prior lien indebtedness) and on the bonds
then to be issued. At December 31, 1995, the more restrictive of
these requirements was the "net earnings" test. The "net
earnings" of CIPS for the year ended December 31, 1995, so
computed, were equal to 5.10 times the interest for one year on
the aggregate amount of bonds outstanding under the Mortgage
Indenture at December 31, 1995. Based on the "net earnings" of
CIPS (so computed) for the year ended December 31, 1995, and the
bonds outstanding under the Mortgage Indenture at December 31,
1995, CIPS could have issued about $461 million of additional
first mortgage bonds under the foregoing interest coverage
provision (assuming an annual interest rate of 6.90% on such
bonds).
The Articles of Incorporation of CIPS provide, in effect,
that so long as any CIPS preferred stock is outstanding, CIPS
shall not, without the requisite vote of the holders of preferred
stock, unless the retirement of such stock is provided for, (a)
issue any preferred or equal ranking stock (except to retire or
in exchange for an equal amount thereof) unless the "gross income
available for interest" of CIPS for a recent 12-month period is
at least one and one-half (1-1/2) times the sum of (i) one year's
interest on all funded debt and notes maturing more than 12
months after the date of issuance of such shares and (ii) one
year's dividend requirement on all preferred stock to be
outstanding after such issue, or (b) issue or assume any
unsecured debt securities maturing less than two years from the
date of issuance or assumption (except for certain refunding or
retirement purposes) if immediately after such issuance or
assumption the total amount of all such unsecured debt securities
would exceed 20% of the sum of all secured debt securities and
the capital and surplus of CIPS. For the year ended December 31,
1995, the "gross income available for interest" of CIPS equalled
2.83 times the sum of the annual interest charges and dividend
requirements on all such funded debt, notes and preferred stock
outstanding at December 31, 1995. Such "gross income available
for interest" was sufficient under the test to support the
issuance of additional preferred stock (assuming an annual
dividend rate on such preferred stock of 6.35%) in an amount in
excess of the maximum amount ($185 million) of authorized and
unissued preferred stock under the Articles.
RATE MATTERS. The most recent CIPS retail rate case before
the Illinois commission resulted in electric and natural gas rate
increases which became effective March 20, 1992. In its
decision, the Illinois commission allowed a return on net
original cost rate base of 9.77% (electric) and 9.88% (natural
gas) reflecting a return on common equity of 12.28% (electric)
and 12.50% (natural gas).
In April 1993 billing to customers, CIPS began recovering
amounts under environmental adjustment clause riders for the
cleanup and restoration of former manufactured gas plant sites
(environmental remediation sites). A total of $2.9 million was
collected from customers through December 31, 1993 under the
riders and no amounts have been collected since January 1994.
The Illinois commission has initiated reconciliation proceedings
to determine whether the costs incurred by CIPS for environmental
remediation activities in 1993 and 1994 were prudently incurred
costs and whether revenues collected under the riders can be
reconciled with the level of prudent costs incurred for
environmental remediation activities. The Illinois commission
can order refunds to customers if it determines that costs
incurred for environmental remediation activities were not
prudently incurred or revenues collected under the riders were in
excess of costs properly recoverable under the riders.
Management believes that any costs incurred in connection with
the sites that are not recovered from others will be recovered
through the environmental rate riders. Accordingly, management
believes that costs incurred in connection with these sites will
not have a material adverse effect on financial position, results
of operations or liquidity of the Company or CIPS. See Note 4 to
Consolidated Financial Statements.
The Illinois commission conducts annual proceedings to
determine whether the electric fuel and purchased gas charges
collected by CIPS in each year pursuant to the applicable fuel
adjustment and purchased gas adjustment clauses reflect the
actual costs of electric fuel and natural gas prudently purchased
in that year and to reconcile revenues collected under the
clauses during the year with actual costs incurred. The Illinois
commission can order refunds to customers if it determines that
actual costs of fuel or purchased gas were less than the amounts
charged to customers pursuant to the clauses or if it finds that
CIPS was imprudent in its purchases of fuel or gas. The Illinois
commission has completed its review of fuel adjustment and
purchased gas adjustment charges for all years prior to 1994. No
significant refunds or adjustments were required for those years.
Fuel reconciliation proceedings for the years 1994 and 1995 have
commenced. In October 1995, the Illinois commission implemented
changes in the method of operation of the purchased gas
adjustment clause mechanism. However, these changes do not
affect the ability of CIPS to recover gas costs on a pass through
basis. (See Business - Utility Subsidiary - Central Illinois
Public Service Company - Fuel.)
The most recent general rate increase of CIPS approved by
the FERC became effective in 1984. There are currently no rate
proceedings pending at the FERC, and CIPS has no plans for any
such rate increase filings. All of CIPS' requirements sales to
cooperatives and municipals for resale are through negotiated
service agreements.
As a result of the retail rate increase granted to CIPS in
1992 referred to above, a corresponding rate adjustment was
granted by the FERC for certain customers who purchase power from
CIPS for resale. This rate adjustment was provided for in the
service agreements between CIPS and these customers.
ELECTRIC OPERATIONS. Since late 1977 CIPS has been a net
off-system seller of electricity and during 1995 it generated
114% of its system requirements.
The maximum gross system load to date on the CIPS electrical
system, on a one-hour integrated basis, occurred on August 14,
1995, and was 2,319,000 kilowatts. Gross system load includes
sales to electric cooperative and municipal customers (but
excludes emergency and interchange sales). The 1995 maximum
gross system load of 2,319,000 kilowatts was 5.7% greater than
the historical maximum gross system load of 2,194,000 which
occurred in 1994.
CIPS, Illinois Power Company and Union Electric Company are
parties to an Interconnection Agreement providing for the
coordination and interconnected operation of their respective
electric systems and the interchange of power and energy at rates
and under conditions set forth therein, including the maintenance
by the parties of minimum reserve capacity positions. The
Agreement provides that CIPS will maintain a minimum 15% system
reserve capacity. CIPS, Illinois Power and Union Electric are
parties to an Interconnection Agreement with Tennessee Valley
Authority (TVA) providing for the interconnection of the TVA
system with the systems of the three companies to exchange
economy and emergency power and for other working arrangements.
In addition, CIPS has interconnection agreements with various
other neighboring utilities, including Central Illinois Light
Company, Commonwealth Edison Company, Indiana Michigan Power
Company, Public Service Company of Indiana, Inc., Iowa Electric
Light and Power Company and Northern Indiana Public Service
Company. These agreements provide for various interchanges,
emergency services and other working arrangements.
CIPS owns 20%, Union Electric owns 40% (and two other
utilities own the remaining 40%) of the common stock of Electric
Energy, Inc. (EEI). The owners, including CIPS, are entitled to
receive from EEI varying amounts of power. Electric Energy, Inc.
owns and operates a 1,015,000 kilowatt coal-fired power station
located in Joppa, Illinois.
CIPS is a member of the Mid-America Interconnected Network
reliability council made up of utilities, public power
generators, power marketers and others, which has as its purpose
the promotion of maximum coordination of planning, construction
and utilization of generation and transmission facilities on a
regional basis in order to assure the reliability of electric
bulk power supply in the area served.
One municipal agency, one cooperative agency and one
cooperative are engaged in the generation of electricity within,
or in close proximity to, portions of the territory served by
CIPS.
Electric and magnetic fields (sometimes referred to as EMF)
surround electric wires or conductors of electricity, such as
electrical tools, household wiring and appliances and electric
transmission and distribution lines, such as those owned by CIPS.
A number of statistical and laboratory studies have investigated
whether EMF pose human health risks. The United States
Environmental Protection Agency (USEPA) stated in its December
1992 brochure "Questions and Answers about Electric and Magnetic
Fields" that "Some epidemiological evidence is suggestive of an
association between surrogate measurements of magnetic field
exposure and certain cancer outcomes. Though the body of
evidence cannot be dismissed, it is not complete enough at this
time to draw meaningful conclusions." The nation's electric
utilities, including CIPS, have participated in the sponsorship
of millions of dollars of EMF research. CIPS has also agreed to
participate in the National EMF Research and Public Information
Dissemination Program, a 5-year $65 million effort headed by the
United States Department of Energy aimed at furthering EMF
research. Through its participation with Electric Power Research
Institute, CIPS will continue its investigation and research with
regard to the possible health effects posed by exposure to EMF.
ELECTRIC POWER SALES/PARTICIPATION AGREEMENTS. As shown in
the table below, CIPS currently has contracts with Norris
Electric Cooperative, City of Newton, Village of Greenup and Mt.
Carmel Public Utility Company for the sale of electric power.
These contracts provide for firm full requirements service which
obligates CIPS to maintain adequate system reserves to support
the contracts, or to supply the requirements with off-system
purchases.
1995
Peak Contract
Demand Expiration
Contract (Megawatts) Date
________ ___________
Norris Electric Cooperative. . . . . . 61 MW 2007
City of Newton . . . . . . . . . . . . 8 MW 1999
Village of Greenup . . . . . . . . . . 3 MW 1999
Mt. Carmel Public Utility Co. . . . . 40 MW 2001
Since 1990, CIPS has entered into three successive
agreements with Central Illinois Light Company ("CILCO") to sell
to CILCO, Limited Term Power. These agreements provide for
contract delivery periods and amounts as shown in the following
table:
Contract
Delivery Amount
Period (MW)
________ ________
June 1994 - May 1996 70
June 1996 - May 1997 80
June 1997 - May 1998 90
June 1998 - May 2002 150
June 2002 - May 2009 50
In addition, CIPS sells electric power to three power
pooling agencies through negotiated capacity participation
agreements identified in the following table. These agencies
include Soyland Power Cooperative (Soyland), Illinois Municipal
Electric Agency (IMEA) and Wabash Valley Power Association
(WVPA).
Maximum
Capability Contract
Entitlement Expiration
Contract (Megawatts) Date
________ ___________ __________
Soyland . . . . . . . . . 102 MW 1999
IMEA. . . . . . . . . . . 122 MW 2014
WVPA. . . . . . . . . . . 65 MW 2011
GAS OPERATIONS. CIPS distributes and sells natural gas to
267 incorporated and unincorporated communities located in 41
counties of central and southern Illinois. The CIPS service
territory is predominantly made up of small towns and rural
areas. Of the communities served, only 5 have populations
greater than 15,000. CIPS operates 4,572 miles of transmission
and distribution mains, and its customer density is approximately
37 customers per mile of main.
Six interstate pipelines pass through various portions of
the CIPS service area: Panhandle Eastern Pipe Line Company,
Texas Eastern Transmission Corporation, Natural Gas Pipeline
Company, Texas Gas Transmission Company, Midwestern Gas
Transmission Company and Trunkline Gas Company. CIPS has
multiple interconnections with each of these pipelines, with the
total of all such interconnections being 46. Most of the CIPS
system is integrated by virtue of CIPS owned pipelines, or by
transportation agreements with interstate pipelines.
CIPS owns and operates four underground storage fields which
provide a total peak day capacity of 42,500 thousand cubic feet
per day (mcf/day). CIPS also operates one propane-air peak
shaving facility which has a peak day capacity rating of 10,000
mcf/day.
The peak day firm demand recorded by CIPS in 1995 was
269,761 mcf which was reached on December 9, 1995. This demand
level is 15.4% less than the all-time peak demand of 319,033 mcf
which occurred on December 24, 1983. During 1995, the CIPS
throughput (total of sales and transportation) was 37.2 billion
cubic feet (bcf) compared to 36.5 bcf experienced in 1972, the
year of highest historical throughput prior to 1995. In 1995,
CIPS transported 14.5 bcf of customer-owned gas which represented
39% of the total system throughput. Volumes of customer-owned
gas transported in 1994 and 1993 were 12.0 bcf and 10.8 bcf,
respectively. The average cost per mcf of natural gas purchased
from all suppliers was about $3.04 in 1995, $3.41 in 1994 and
$3.66 in 1993.
The rate schedules of CIPS applicable to all of its gas
sales include a uniform purchased gas adjustment clause, which
permits CIPS to adjust its rates to its customers to reflect
substantially all changes in the cost of purchased gas. (See
Note 1 of Notes to Consolidated Financial Statements included
under Item 8 of this report. See Business - Utility Subsidiary -
Central Illinois Public Service Company - Rate Matters.)
In 1992, the FERC issued orders (together called Order 636)
which address pipeline service restructuring. Order 636 required
interstate pipelines to "unbundle" their sales service, and offer
separately the components of that service (i.e., gas supply,
transportation and storage). Order 636 essentially precludes
interstate pipelines from selling natural gas. However, many
pipelines have established separate unregulated marketing
affiliates which function as gas merchants in competition with
producers and other sellers of gas. The Illinois commission
order permitting CIPS to collect transition costs from customers
was upheld on appeal.
Each of the six pipelines providing service to CIPS have
made restructured services filings at FERC to comply with Order
636. The last such filing was effective December 1, 1993.
Full implementation of Order 636 has resulted in several
changes in CIPS' gas supply portfolio. Pipeline sales service
contracts have been replaced by direct purchase gas supply
contracts coupled with gas transportation contracts with various
pipelines and storage contracts with pipelines or other
independent storage service providers. In some cases CIPS has
also contracted for so-called "no-notice" services with
interstate pipelines. Under such contracts, the pipeline company
combines and manages a number of independent transportation and
storage contracts in order to provide flexibility in the amount
of gas actually delivered to CIPS on any day. Such flexibility,
which was formerly provided by the pipeline sales service, is
needed for CIPS to economically meet the highly weather sensitive
needs of its firm service customers.
In addition to its diversified portfolio of gas supply,
transportation, leased storage and no-notice service contracts,
CIPS' owned storage and propane-air facilities provide additional
reliability and flexibility to meet peak day and peak season
requirements. In recent years CIPS has made investments to
construct additional pipeline interconnections, increase CIPS
owned storage capacity, improve reliability of existing storage
facilities, modernize propane-air facilities and improve data
acquisition capabilities. At the same time CIPS has reorganized
and enhanced its gas supply planning and procurement functions.
FUEL. Over 99% of the net kilowatthour generation of CIPS
in 1995 was provided by coal-fired generating units and the
remainder by an oil-fired unit.
The average costs of fuel consumed by CIPS, per ton and per
million Btu, for the periods shown were as follows:
1995 1994 1993
____ ____ ____
Per ton ($) . . . . . . . . . . . . 37.69 35.44 36.62
Per million Btu ($) . . . . . . . . 1.76 1.65 1.67
In 1995, approximately 20.9% of the coal purchased for
electric generation was purchased on a spot basis at average
delivered costs of $30.30 per ton and $1.39 per million Btu.
The retail fuel adjustment clause (FAC) of CIPS is
consistent with the uniform FAC mandated by the Illinois
commission for all electric utilities as applicable to retail
electric sales in Illinois. The FAC provides for the recovery of
changes in electric fuel costs, including certain transportation
costs of coal, in billings to retail customers. CIPS adjusts
fuel expense to recognize over- or under-recoveries of allowable
fuel costs. The cumulative effect is deferred on the Balance
Sheet as a Current Asset or Current Liability, pending automatic
reflection in future billings to customers. In 1992, CIPS
received Illinois commission approval to include certain coal
transportation costs in the FAC in accordance with the August
1991 modifications to the Illinois Public Utilities Act.
CIPS also has contractual arrangements with certain other
utility system customers which contain a fuel adjustment clause
or provide for a sharing of fuel costs which permit CIPS to
adjust its rates to such customers to reflect substantially all
changes in the cost of fuel (including all transportation costs)
used to supply those customers.
The amount of coal supplies on hand at the generating
stations of CIPS varies from time to time. CIPS generally
attempts to maintain a 65-day supply. Approximately 80% of the
annual coal requirements of the generating facilities of CIPS are
being met by long-term coal contracts expiring at various dates
from 1997 to 2010. As contracts approach their expiration, or
when appropriate, CIPS evaluates alternative supply arrangements
based on then current and expected market conditions for coal.
CIPS believes there are adequate reserves reasonably available to
supply its existing generating units with the quantity and
quality of coal required for the foreseeable future.
See Management's Discussion and Analysis of Financial
Condition and Results of Operations - Central Illinois Public
Service Company - Capital and Financing Requirements and -
Consolidated Results of Operations (1993-1995) - Clean Air Act
and - Fuel Strategies.
REGULATION. CIPS is subject to regulation by the Illinois
commission as to rates, accounting practices, issuance of certain
securities and in other respects as provided by Illinois law.
The Electric Supplier Act of Illinois permits utilities and
electric cooperatives to delineate their respective service
areas, subject to the approval of the Illinois commission, and
gives the Illinois commission power to determine, pursuant to
guidelines provided in the Act, whether a prospective electric
customer will be furnished service by a public utility or by a
cooperative.
The FERC has jurisdiction under the Federal Power Act over
certain of the electric utility facilities and operations,
accounting practices, issuance or acquisition of certain
securities and electric rates of CIPS for resale and interchange
customers. CIPS has been classified as a "public utility" within
the meaning of that Act. CIPS has been declared exempt from the
federal Natural Gas Act.
CIPS is presently exempt from all the provisions of the
Public Utility Holding Company Act of 1935, except provisions
thereof relating to the acquisition of securities of other public
utility companies, until further action by the Securities and
Exchange Commission, by virtue of an annual exemption statement
filed by CIPS with the Commission pursuant to Rule 2 under the
Act. See Business - CIPSCO Incorporated and Its Subsidiaries -
Merger.
ENVIRONMENTAL MATTERS. CIPS is subject to regulation with
respect to air and water quality standards, standards relating to
the discharge and disposal of solid and hazardous wastes and
other environmental matters by various federal, state and local
authorities. The Illinois Pollution Control Board (the "Board")
has jurisdiction over all phases of environmental control by the
State of Illinois and has authority to grant variances from
environmental requirements. The Illinois Environmental
Protection Agency (the "Agency") has authority to issue permits,
investigate violations and recommend enforcement cases. The
Illinois Attorney General has the authority to prosecute
enforcement cases. The USEPA has jurisdiction to promulgate and
enforce air and water quality standards in addition to those
standards which relate to the discharge and disposal of solid and
hazardous wastes.
Air pollution control regulations promulgated by the Board
impose restrictions on emissions of particulate, sulfur dioxide,
nitrogen oxides and other air pollutants and require that CIPS
obtain permits from the Agency for the construction and operation
of its generating facilities in compliance with these
regulations. CIPS has secured all necessary operating permits
for all of its existing generating facilities and is in
substantial compliance with the provisions contained therein.
Future construction projects may require additional construction
permits.
Current compliance strategy regarding the sulfur dioxide
emission requirements of Phase I (effective in 1995) and Phase II
(effective in 2000) of the Clean Air Act Amendments of 1990 is to
switch to lower sulfur coal at some generating units along with
increased scrubbing at Newton Unit 1. In addition, CIPS is
evaluating various alternatives to determine if the compliance
strategy should change to place more reliance on fuel switching.
(See Management's Discussion and Analysis of Financial Condition
and Results of Operations - Consolidated Results of Operations
(1993-1995) - Clean Air Act and - Fuel Strategies.) Under the
Clean Air Act Amendments each utility must have, beginning in
1995, sufficient emission allowances, which are granted by the
USEPA, to cover the amount of sulfur dioxide to be emitted each
year from its generating stations. Any emission allowances in
excess of a utility's needs for a year can be retained by it for
future use or sold. Based upon CIPS' current compliance program,
CIPS expects to have available allowances (after consideration of
allowances sold) in excess of its requirements.
Water pollution control regulations promulgated by the Board
impose restrictions on effluent discharges, set water quality
standards and require CIPS to obtain construction permits for
certain facilities and National Pollutant Discharge Elimination
System ("NPDES") permits for discharges into public waters. CIPS
has secured all necessary NPDES permits for all of its generating
units and is in substantial compliance with the currently
effective provisions contained therein, except as noted in the
following paragraph.
On December 1, 1995 and January 10, 1996, the Agency issued
Pre-Enforcement Conference letters concerning apparent
exceedances of certain effluent and groundwater standards at the
Hutsonville station. The Company has extensively discussed these
issues with the Agency and believes the matter can be resolved
without any material expenditures or any material impact on
operations.
Pollution control regulations promulgated by the Board
impose restrictions on the discharge and disposal of solid and
hazardous waste, and determine design standards to prevent
contamination of groundwater. CIPS has secured all necessary
permits and authorizations for disposal and is in substantial
compliance with the provisions contained therein. Future
construction projects may require additional authorizations or
permits.
See the subcaption "Environmental Remediation Costs" under
Note 4 of the Notes to Consolidated Financial Statements,
included under Item 8 of this report, for information relating to
costs incurred and to be incurred in connection with the
remediation of certain sites where gas had been manufactured from
coal and which contain potentially harmful materials.
EMPLOYEES. The business of CIPSCO is conducted through the
use of employees of CIPS and CIPSCO reimburses CIPS for the cost
of using those employees.
The composition of the work force of CIPS at the payroll
period nearest year-end 1995 and 1994 was as follows:
Number of Employees
___________________
Employee Group 1995 1994
______________ ____ ____
Salaried. . . . . . . . . . . . . . . . . 1,053 1,201
IBEW - 702. . . . . . . . . . . . . . . . 922 919
IUOE - 148. . . . . . . . . . . . . . . . 453 475
_____ _____
Total . . . . . . . . . . . . . . . . . . 2,428 2,595
===== =====
Contracts with IBEW - 702 and IUOE - 148 extend through June
30, 1996. See Management's Discussion and Analysis of Financial
Condition and Results of Operations - Consolidated Results of
Operations (1993-1995) -- Labor Issues and Note 4 of the Notes to
Consolidated Financial Statements under the subcaption "Labor
Issues" for a discussion of matters involving those employees
represented by labor unions.
Item 2. Properties.
Currently, CIPSCO principally conducts its business through
the use of the properties of CIPS. CIC leases office space
pursuant to a lease expiring August 31, 1996. CIPSCO has no
other material properties.
The electric generating facilities of CIPS consist of the
following:
Estimated
1996 Summer
Year Capability
Station and Unit Fuel Installed (KW)
________________ ____ _________ ___________
Newton
Unit 1 . . . . . . . . . Coal 1977 555,000
Unit 2 . . . . . . . . . Coal 1982 555,000
Coffeen
Unit 1 . . . . . . . . . Coal 1965 325,000
Unit 2 . . . . . . . . . Coal 1972 560,000
Grand Tower
Unit 3 . . . . . . . . . Coal 1951 82,000
Unit 4 . . . . . . . . . Coal 1958 104,000
Hutsonville
Unit 3 . . . . . . . . . Coal 1953 76,000
Unit 4 . . . . . . . . . Coal 1954 77,000
Diesel Unit. . . . . . . Oil 1968 3,000
Meredosia
Unit 1 . . . . . . . . . Coal 1948 62,000
Unit 2 . . . . . . . . . Coal 1949 62,000
Unit 3 . . . . . . . . . Coal 1960 215,000
Unit 4 . . . . . . . . . Oil 1975 168,000
Total . . . . . . . . 2,844,000
=========
All of the generating stations are located in Illinois on
land owned in fee by CIPS.
At December 31, 1995, CIPS owned 13,035 pole miles of
overhead electric lines and 941 miles of underground electric
lines. At that date, CIPS also owned 4,572 miles of natural gas
transmission and distribution mains, four underground gas storage
fields and one propane-air gas plant used to supplement the
available pipeline supply of natural gas during periods of
abnormally high demands.
Substantially all of the permanent fixed utility property of
CIPS is subject to the lien of the Mortgage Indenture securing
CIPS first mortgage bonds.
Item 3. Legal Proceedings.
CIPSCO is not involved in any material legal proceedings.
With regard to CIPS, on December 22, 1995, a complaint was
filed in the Circuit Court for the Seventh Judicial Circuit,
Sangamon County, Illinois against CIPS and several other
defendants. The complaint alleges that, as a result of exposure
to carcinogens contained in coal tar at the CIPS Taylorville gas
plant site, plaintiffs' children had suffered from a rare form of
childhood cancer known as "neuroblastoma." The plaintiffs in
this complaint are the plaintiffs who on October 5, 1995
voluntarily dismissed claims in a similar complaint in the
Circuit Court for the Fourth Judicial Circuit, Christian County,
Illinois. CIPS will vigorously defend the action and believes it
has meritorious defenses. Management believes that final
disposition of this matter will not have a material adverse
effect on financial position, results of operations or liquidity
of the Company or CIPS.
See Item 1. Business - Utility Subsidiary - Central
Illinois Public Service Company - Rate Matters, - Gas Operations
and - Environmental Matters with respect to certain matters
involving CIPS. See also Note 4 of Notes to Consolidated
Financial Statements included under Item 8 of this report.
Item 4. Submission of Matters to a Vote of Security Holders.
At a Special Meeting of Shareholders of CIPSCO held December
20, 1995, the following proposal was acted upon and approved.
Shares Shares
Voted Voted Shares
In Favor Against Abstaining
__________ _________ __________
To approve an Agreement 26,049,589 369,181 568,800
and Plan of Merger with
Union Electric Company.
Executive Officers of CIPSCO (ages at December 31, 1995).
Name Age Positions Held
____ ___ ______________
C. L. Greenwalt 62 President and Chief Executive Officer
of CIPSCO*
President and Chief Executive
Officer of CIPS and Chairman of the
Board of CIC
Name Age Positions Held
____ ___ ______________
W. A. Koertner 46 Vice President, Secretary and Chief
Financial Officer of CIPSCO;
Vice President Finance and
Secretary of CIPS; President and
Chief Executive Officer of CIC
L. E. Marlett 40 Controller, Chief Accounting Officer
and Assistant Treasurer of CIPSCO
and Controller of CIPS
C. D. Nelson 42 Treasurer, Assistant Secretary and
Assistant Controller of CIPSCO and
Treasurer and Assistant Secretary of
CIPS
______________________
* Mr. Greenwalt is a director of CIPSCO.
The present term of office of the above executive officers
extends to the first meeting of CIPSCO's Board of Directors after
the next annual election of Directors, scheduled to be held on
April 24, 1996. There is no family relationship between any
executive officer and any other executive officer or any
director.
Each of the officers named above has been employed by CIPSCO
and/or CIPS for more than the past five years in various
executive capacities.
Executive Officers of CIPS (ages at December 31, 1995).
Name Age Positions Held
____ ___ ______________
C. L. Greenwalt 62 President and Chief Executive Officer*
W. A. Koertner 46 Vice President Finance and Secretary*
J. G. Bachman 47 Vice President Marketing
J. T. Birkett 58 Vice President Power Generation
D. R. Patterson 59 Vice President Corporate Services
G. W. Moorman 52 Vice President Power Supply
W. R. Morgan 59 Vice President Division Operations
W. R. Voisin 60 Vice President Public Relations
L. E. Marlett 40 Controller (Principal Accounting
Officer)*
C. D. Nelson 42 Treasurer and Assistant Secretary*
______________________
* Mr. Greenwalt is a director of CIPS and is also an officer and
director of CIPSCO. Mr. Koertner, Mrs. Marlett and Mr. Nelson
are also officers of CIPSCO.
The present term of office of the above executive officers
extends to the first meeting of the Board of Directors of CIPS
after the next annual election of Directors, scheduled to be held
on April 24, 1996. There is no family relationship between any
executive officer and any other executive officer or any
director.
All of the officers named above have been employed by CIPS
in their present positions for more than the past five years
except as indicated below:
Mr. Koertner served as Vice President Financial Services
from August 1, 1989 to April 1, 1993, and as Vice President
Corporate Services from April 1, 1993 to July 1, 1995 when he was
named Vice President Finance and Secretary.
Mr. Bachman served as Vice President Corporate Planning from
August 1, 1989 to January 1, 1995, when he was named Vice
President Marketing.
Mr. Birkett served as Manager of Purchasing and Stores from
March 1, 1985 to July 1, 1995 when he was named Vice President
Power Generation.
Mr. Patterson served as Western Division Manager from March
1, 1985 to July 1, 1995 when he was named Vice President
Corporate Services.
Mrs. Marlett served as income tax supervisor in the Treasury
Department from August 28, 1989 to February 1, 1992 and as
Assistant Treasurer and Assistant Secretary in the Treasury
Department from February 1, 1992 to August 1, 1995 when she was
named Controller.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
CIPSCO
CIPSCO's common stock is publicly held and traded on both
the New York Stock Exchange and the Chicago Stock Exchange. The
table below sets forth, for the periods indicated, the dividends
per share of common stock of CIPSCO and the high and low sales
prices of the CIPSCO common stock as reported in New York Stock
Exchange Composite listings.
Quarter
_______
1995 First Second Third Fourth
____ _____ ______ _____ ______
Price Range
High $29 1/2 $30 3/4 $34 1/2 $39
Low 27 28 1/2 28 3/4 34 3/8
Close 28 5/8 29 7/8 34 3/8 39
______ ______ ______ _______
Cash dividends
declared (cents) $ .50 $ .51 $ .51 $ .51
====== ====== ====== ======
1994
____
Price Range
High $30 5/8 $30 1/4 $28 1/2 $28 3/8
Low 27 7/8 25 1/4 25 1/2 26 1/4
Close 28 1/8 25 1/2 27 1/8 27
______ ______ ______
Cash dividends
declared (cents) $ .49 $ .50 $ .50 $ .50
====== ====== ====== ======
The approximate number of CIPSCO common shareholders of
record as of December 31, 1995, was 38,032.
The market price for CIPSCO Common Stock increased in the
third and fourth quarter of 1995 partially in response to the
announcement of the Merger Agreement with UE. CIPSCO expects its
Common Stock to continue to trade at a value reflective of the
1.03 shares of Ameren common stock to be received for each CIPSCO
share pursuant to the Merger Agreement. See Item 1. Business -
CIPSCO Incorporated and its Subsidiaries - Merger. Consummation
of the merger is subject to the receipt of all necessary
regulatory approvals.
CIPS
All the common stock of CIPS is owned by CIPSCO and is not
publicly traded. The following table sets forth the cash
distributions on common stock paid to CIPSCO by CIPS:
1995 1994
____ ____
First Quarter . . . . . . $17,500,000 $17,000,000
Second Quarter . . . . . . $17,500,000 $17,200,000
Third Quarter . . . . . . $17,500,000 $17,200,000
Fourth Quarter . . . . . . $18,500,000 $17,200,000
DIVIDEND RESTRICTIONS
CIPSCO and CIPS are subject to restrictions on the use of
retained earnings for cash dividends on common stock as described
in Note 8 of Notes to Consolidated Financial Statements included
under Item 8 of this report. The ability of CIPSCO to pay
dividends on its common stock is dependent upon distributions
made to it by CIPS and on amounts earned by CIPSCO on its other
investments.
Item 6. Selected Financial Data.
CIPSCO
For the Years Ended
December 31, 1995 1994 1993 1992 1991
____ ____ ____ ____ ____
(in thousands, except per share data)
Operating Revenues $ 842,262 $ 844,615 $ 844,760 $ 739,877 $ 722,081
Operating Income 156,742 165,345 170,735 142,986 154,820
Net Income 72,015 83,954 85,498 72,499 72,065
Earnings per common
share 2.11 2.46 2.51 2.13 2.11
Dividends declared
per common share 2.03 1.99 1.95 1.91 1.87
As of December 31,
Total Assets $1,827,911 $1,777,357 $1,757,750 $1,725,456 $1,751,574
Long-Term Debt 478,926 474,619 494,323 503,700 496,420
CIPS
For the Years Ended
December 31, 1995 1994 1993 1992 1991
____ ____ ____ ____ ____
(in thousands)
Operating Revenues $ 833,119 $ 835,882 $ 834,556 $ 729,402 $ 710,205
Operating Income 106,029 110,678 113,651 97,372 104,039
Net Income 70,631 81,913 84,011 72,601 75,683
Preferred Dividends 3,850 3,510 3,718 4,549 5,396
Earnings for Common
Stock 66,781 78,403 80,293 68,052 70,287
As of December 31,
Total Assets $1,714,805 $1,678,650 $1,668,462 $1,645,059 $1,691,843
Long-Term Debt 478,926 474,619 494,323 503,700 496,420
Preferred Stock
subject to mandatory
redemption - - - - 18,245
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS
____________________________________
CIPSCO Incorporated is a holding company incorporated under
the laws of Illinois. Its principal subsidiary is Central
Illinois Public Service Company (CIPS), an electric and natural
gas utility. Another subsidiary, CIPSCO Investment Company
(CIC), has subsidiaries engaged in non-utility investing
activities. Material changes in the consolidated financial
condition and results of operations are primarily attributable to
CIPS operations, except where noted.
AMEREN CORPORATION
On August 11, 1995, CIPSCO entered into an Agreement and Plan of
Merger providing for a business combination with Union Electric
Company (UE) of St. Louis, Missouri, subject to the approval of
shareholders of both companies and various regulatory agencies.
As a result of the proposed business combination, a newly formed
holding company - Ameren Corporation - will become the parent of
CIPS, UE, and CIC. The holding company will be registered under
the Public Utility Holding Company Act. When the merger is
completed, each outstanding share of CIPSCO common stock will be
converted into 1.03 shares of Ameren common stock and each
outstanding share of UE common stock will be converted into one
share of Ameren common stock. The transaction is expected to be
tax-free to shareholders for federal income tax purposes and to
be accounted for as a "pooling of interests." Shareholders of
both companies approved the merger agreement on December 20,
1995. Following regulatory approvals, the merger is expected to
be effective early in 1997. (See Notes 2 and 3 to Consolidated
Financial Statements.)
CIPSCO Incorporated
The fundamental financial position of CIPSCO and its subsidiaries
remained strong in 1995. CIPSCO's business activities are
conducted by CIPS and CIC. A discussion of the financial
condition of CIPS and CIC follows in the sections below.
CIPSCO may become involved in additional businesses or
investments directly, through a subsidiary or through the
formation of one or more additional subsidiaries. The sources of
capital to finance these activities will depend on the nature of
the investment and market conditions.
The total number of shares of common stock authorized under
CIPSCO's articles is 100 million. At year-end 1995, a total of
34,069,542 shares of common stock was outstanding which was
unchanged from year-end 1994. No underwritten offerings of
common stock are planned.
Dividends paid to common stock shareholders for the 12
months ended December 31, 1995 resulted in payout ratios of 96
percent of consolidated earnings and 47 percent of net cash
provided by operating activities.
CIPSCO is authorized to issue 4.6 million shares of
preferred stock, none of which has been issued. There are no
constraints in the CIPSCO articles of incorporation as to the
amount of debt which may be issued. However, CIPSCO has no debt
outstanding.
At year-end 1995, CIPSCO had $3.0 million of temporary
investments and no short-term borrowings.
CIPSCO Investment Company
At year-end 1995 there were $111 million of non-utility
investments managed by CIC and its subsidiaries.
One of those subsidiaries, CIPSCO Securities Company,
manages marketable securities. At year end it had invested
approximately $47 million in hedged portfolios of preferred and
common stocks and other marketable securities.
Another subsidiary, CIPSCO Leasing Company, invests in long-
term leveraged lease transactions. At year end, $34 million was
invested in leased assets consisting of a commercial jet
aircraft, an interest in a natural gas liquids plant, natural gas
processing equipment and retail department store properties.
A third subsidiary, CIPSCO Energy Company (CEC), seeks
energy-related investment opportunities. Through 1995, it had
purchased existing leases, or interests in such leases, for nine
combustion turbine generating units leased to five investor-owned
utilities in the United States. In 1995 CEC purchased a 24.75
percent interest in Appomattox Cogeneration Limited Partnership,
which owns a power sales agreement for electricity produced at a
40-megawatt cogeneration plant at Hopewell, Virginia. At year-
end 1995 CEC had a total of $25 million invested.
A fourth subsidiary, CIPSCO Venture Company (CVC), was
established primarily to invest within the CIPS service
territory. CVC's initial investment in 1994 consisted of $.6
million for the construction of a building which is leased to a
manufacturing firm. CVC made no additional investments in 1995.
The long-term goal of CIC's investment policy is to earn
returns that exceed the allowed return in the regulated utility
business. CIC may become involved in additional non-utility
activities directly, through a subsidiary or through the
formation of one or more additional subsidiaries. The sources of
capital to finance these activities will depend on the nature of
the investment and market conditions.
At year-end 1995, CIC had $4 million of temporary
investments and no short-term borrowings.
Central Illinois Public Service Company
FINANCIAL CONDITION. The utility's financial position
remained fundamentally strong during 1995.
In recent years a strong capital structure and ample cash
flows have minimized the need to access capital markets, other
than for refinancings. Neither CIPSCO nor CIPS has had to raise
additional capital through the sale of common stock to the
general public since 1980.
The long-range financial objectives for the capital
structure of the utility subsidiary are: a debt ratio of no more
than 45 percent, a common equity ratio of no less than 45
percent, and a preferred equity ratio of no more than 10 percent.
At December 31, 1995, the capitalization at CIPS consisted of 42
percent long-term debt, 51 percent common equity and 7 percent
preferred stock.
At year end, 25,452,373 shares of CIPS common stock were
outstanding, all of which were held by CIPSCO Incorporated.
CAPITAL AND FINANCING REQUIREMENTS. Construction
expenditures were $103 million in 1995. Of that amount, $90
million and $13 million related to improvements and replacements
to the electric and natural gas systems, respectively. For the
12 months ended December 31, 1995, 73 percent of CIPS' total
capital requirements was provided from internal sources.
Construction expenditures are expected to be about $98
million in 1996. Of that amount, $87 million is scheduled for
electric facilities, while gas system expenditures are estimated
at $11 million.
For the five-year period 1996-2000, construction
expenditures are estimated at $510 million. This is $2 million
less than was spent in the preceding five years. The projected
five-year amounts include about $76 million for environmental
compliance including compliance with the Clean Air Act Amendments
of 1990.
In addition to construction funds, projected capital
requirements for the 1996-2000 period include $133 million for
scheduled debt retirements.
Capital requirements for the 1996-2000 period are expected
to be met primarily through internally generated funds. External
financing to fund scheduled debt retirements will be required.
In addition, up to $100 million of external financing is expected
to be required to fund the construction program. Such financing
could consist of funds from the parent, including the issuance of
CIPS common stock to the parent, the issuance of short-term debt,
long-term debt or preferred stock, or any combination of the
four. Refinancings to lower the costs of capital may also occur,
depending on market conditions.
CIPS currently has authority from the Illinois Commerce
Commission to issue up to $29 million of first mortgage bonds,
medium-term notes and/or preferred stock through December 31,
1996.
In 1995 CIPS issued $20 million of First Mortgage Bonds,
Medium-Term Note Series 1995-1, 6.49% due June 1, 2005. The
proceeds of this issue, together with other funds, were used for
general corporate purposes and to replace funds used to retire
maturing debt.
Capital and financing requirements may be affected by such
factors as availability and cost of capital, load growth, changes
in construction expenditures, fuel strategies, regulatory
developments, changes in environmental regulations and other
governmental activities.
CIPS is evaluating alternatives for reducing fuel costs and
other expenses while maintaining environmental compliance.
Depending on the alternative selected, construction expenditures
could increase the five-year forecast by as much as $50 million
over the 1996-2000 period. In addition, adoption of certain
alternatives in fuel and/or environmental strategies could result
in substantial increases in other capital requirements in the
1996-2000 period from the amounts shown above. These potential
additional capital requirements would also need to be financed
with external sources of funds. (See Fuel Strategies below.)
FINANCING FLEXIBILITY AND LIQUIDITY. The utility's ability
to finance the construction program at reasonable cost and to
provide for other capital needs is dependent upon its ability to
earn a fair return on capital. Financing flexibility is enhanced
by providing a high percentage of total capital requirements from
internal sources and having the ability, if necessary, to issue
long-term securities and to obtain short-term credit.
Flexibility also is provided by the parent corporation which is
capable of providing additional capital if circumstances warrant.
Security issues by the utility are subject to regulatory
approvals.
The utility's mortgage indenture limits the amount of first
mortgage bonds which may be issued. At December 31, 1995, CIPS
could have issued about $461 million of additional first mortgage
bonds under the indenture, assuming an annual interest rate of
6.90 percent.
CIPS' articles of incorporation limit amounts of preferred
stock which may be issued. Assuming a preferred dividend rate of
6.35 percent, the utility could have issued all $185 million of
authorized but unissued preferred stock remaining as of year end.
At year-end 1995, CIPS had no temporary investments and
$47.9 million of short-term borrowings.
CONSOLIDATED RESULTS OF OPERATIONS
__________________________________
(1993-1995)
EARNINGS. Net income and earnings per share declined 14
percent in 1995 to $72 million and $2.11, respectively, following
declines of 1.8 percent in 1994. The return on average common
equity for 1995 was 11.1% compared with 13.1% in 1994 and 13.7%
in 1993.
The declines in net income, earnings per share and return on
average common equity in 1995 resulted from costs related to a
workforce reduction and merger-related expenses, which reduced
earnings 34 cents per common share in 1995. The declines in net
income, earnings per share and return on average common equity in
1994 were in line with expectations, since increases in 1993 were
primarily attributable to unusually high interchange sales by
CIPS to other utilities caused by hot weather, a coal miners'
strike and Midwest flooding. Contributing to the declines in
1994 were higher operating expenses primarily attributable to
labor settlement costs and higher maintenance costs.
INVESTMENT REVENUES. Investment revenues are comprised of
income from temporary investments, long-term marketable
securities, leveraged leases and partnership income. Investment
revenues increased in 1995 due to additional investments and
increased earnings from marketable securities.
Investment revenues declined $1.5 million in 1994 due
principally to reduced revenue from leasing investment
transactions.
ELECTRIC OPERATIONS. Retail electric kilowatthour sales
increased 3 percent in 1995. Cooling degree days for 1995 were
13 percent higher than in 1994 and 4 percent above average.
Total electric kilowatthour sales declined 2 percent in 1995 due
principally to a decline in wholesale kilowatthour sales and two
industrial customers who ceased operations. The capacity
participation agreement with one of CIPS' wholesale customers
called for a 115-megawatt reduction for the customer starting in
1995. This scheduled contract reduction reduced wholesale power
supply participation revenues for CIPS by $8.7 million in 1995.
Electric kilowatthour sales, including interchange sales,
declined 3 percent in 1994. Cooling degree days for 1994 were 11
percent lower than in 1993 and 9 percent lower than average.
The electric margins for the three years ended December 31,
were:
ELECTRIC MARGIN (in millions) 1995 1994 1993
____ ____ ____
Electric Revenues $704 $697 $689
Less: Revenue taxes (25) (24) (24)
Fuel (189) (196) (187)
Purchased power (59) (55) (60)
____ ____ ____
Electric Margin $431 $422 $418
==== ==== ====
The 1995 electric margin improved primarily because hotter
weather during July and August increased residential and
commercial sales and provided opportunities for interchange
sales. The 1994 electric margin was favorably impacted by sales
growth to commercial and industrial customers and by higher
margins on interchange sales to other utilities. Fuel costs were
$1.76 per million Btu in 1995, $1.65 per million Btu in 1994 and
$1.67 per million Btu in 1993. Purchased power amounts
fluctuated between years according to system requirements and
sales opportunities.
GAS OPERATIONS. Therm sold and transported increased 4
percent in 1995 due principally to colder weather in 1995
compared with 1994. Heating degree days for 1995 were 6 percent
higher than in 1994 and 2 percent above average.
The gas margins for the three years ended December 31, were:
GAS MARGIN (in millions) 1995 1994 1993
____ ____ ____
Gas Revenues $130 $138 $145
Less: Revenue taxes (7) (7) (7)
Gas costs (74) (85) (90)
____ ____ ____
Gas Margin $ 49 $ 46 $ 48
==== ==== ====
The 1995 gas margin was favorably impacted by colder weather
in 1995. The 1994 gas margin was negatively impacted by mild
weather as heating degree days were 4 percent below average in
1994. Gas costs fluctuated according to system requirements in
each year. The average price paid for gas from suppliers
declined more than three and one-half cents per therm in 1995 and
two and one-half cents per therm in 1994.
OPERATING EXPENSES. Other operation expenses increased 11
percent in 1995 over 1994 primarily due to unusual charges
related to the voluntary separation program of $5.8 million (See
Note 15 to Consolidated Financial Statements) and merger-related
write-offs of $5.7 million involving previously deferred system
development costs.
The following table shows other operation expenses for the
years ended December 31, adjusted for the unusual items.
OTHER OPERATION (in millions) 1995 1994 1993
____ ____ ____
Other operation $155 $140 $143
Voluntary separation costs (6) - -
Write-off of system costs (6) - -
____ ____ ____
Other operation adjusted $143 $140 $143
==== ==== ====
Other operation expenses declined 2 percent in 1994, due
principally to a reduction in post-retirement medical costs and
deferral of certain litigation expenses involved with an
environmental matter. Consistent with the ratemaking treatment
for environmental remediation site costs, $1.9 million expensed
in 1993 was credited to expense and deferred in 1994.
Maintenance expense changes between years are due to normal
planning and scheduling of major power plant maintenance outages.
Depreciation and amortization expense increases are
primarily due to property additions.
Taxes other than income taxes change in relation to changes
in retail revenues.
Interest on long-term debt decreased from 1993 levels due to
retirement of debt in 1994 and refinancing of long-term debt in
1993 at lower interest rates.
Miscellaneous, net, reflects $4.7 million of merger
transaction costs in 1995. Such costs are not tax deductible.
Income tax expense reflects the changes in pre-tax income
between years.
CHANGES IN CONSOLIDATED BALANCE SHEET ACCOUNTS. Significant
changes in the balance sheet accounts at December 31, 1995,
compared to balances at December 31, 1994 are: fuel for electric
generation, at average cost, increased 41 percent during 1995 due
primarily to the additional purchase of coal to cover anticipated
contract shortages which did not occur; gas stored underground,
at average cost, declined 26 percent in 1995 due to both lower
prices and net volumes of gas injected into storage; other
current assets increased due principally to higher required
deposits for self-insured programs; leveraged leases and energy
investments increased 18 percent in 1995 primarily due to
additional energy-related investments made during the year; and,
short-term borrowings increased primarily due to increases in
construction expenditures and in fuel for electric generation,
together with the 1995 decline in earnings.
CLEAN AIR ACT. CIPS' current compliance strategy for Phases
I and II of the Clean Air Act Amendments of 1990 is to switch to
lower sulfur coal at some generating units along with increased
scrubbing at Newton Unit 1. The estimated capital costs of
compliance based on the current strategy are included in the
five-year construction forecast.
FUEL STRATEGIES. In order to reduce fuel costs and other
expenses while remaining in compliance with environmental
requirements, CIPS is evaluating various alternatives. These
alternatives involve one or more of the following: renegotiation
of existing fuel contracts; buyout, buydown, replacement or
termination of fuel contracts; switching to other coal suppliers;
switching to lower sulfur coal; discontinuance of, or renovation
and continued operation of, the scrubber at Newton Unit 1.
Certain of the alternatives would require increased expenditures
for capital improvements such as for modifications to
precipitators, new coal-handling equipment and purchase of rail
cars. In addition to increased construction expenditures,
adoption of certain alternatives, and the rate making treatment
of such actions, could have a significant effect on operation and
maintenance expense, fuel expense and financing needs. The study
of these alternatives is not complete and no decision has been
made as to whether the fuel and environmental compliance
strategies will change. (See Capital and Financing Requirements
above and Note 4 to Consolidated Financial Statements.)
REGULATION AND COMPETITION. The electric utility industry
is becoming more competitive due to market forces and a changing
regulatory and legislative environment. To maintain market
position in this environment and to take advantage of
opportunities presented through increased competition, CIPS may,
from time to time, consider various business strategies including
the restructuring of wholesale and retail business operations.
Due to competition, certain future sales may be at lower than
historical margins.
The National Energy Policy Act of 1992 (NEPA) contains
provisions designed to promote competition in the wholesale and
generation segments of the electric utility industry. Among
other provisions, NEPA gave the Federal Energy Regulatory
Commission (FERC) the authority to order electric utilities to
provide wholesale transmission line access (wholesale wheeling)
to independent power producers and to other utilities. Although
NEPA prohibits FERC from ordering retail wheeling (the use of a
utility's transmission and distribution facilities by others to
deliver power to retail customers), it does not prevent state
public utility commissions from doing so. Public utilities not
voluntarily providing access to their transmission systems at
agreed upon rates may be ordered to deliver power at rates to be
established by FERC.
In July 1995, legislation was passed in Illinois authorizing
the Illinois Commerce Commission (Illinois commission), after
hearings, to approve a public utility's petition to operate under
alternative forms of regulation. The Illinois commission can now
consider, on a trial basis, alternatives to rate of return
regulation which could reward or penalize utilities based on
performance. CIPS plans to make an alternative regulation filing
after completing the merger with UE, to establish a mechanism for
sharing merger-related and other savings between ratepayers and
shareholders.
Also in 1995, as a result of legislative debate on
competition and retail wheeling, the Illinois General Assembly
formed the Joint Committee on Electric Utility Reform (Joint
Committee). The Joint Committee is to submit a final legislative
recommendation to the Illinois General Assembly by November 1996.
CIPS has presented a proposal to an advisory group of the Joint
Committee that would introduce greater competition in Illinois in
two phases beginning January 1, 1999.
Although the final design or impact of the federal and state
regulatory policies relating to wholesale and retail wheeling are
not known, CIPS is actively planning the transition to a
competitive environment.
Increased competition could also force utilities to change
accounting methods. Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for Effects of Certain Types of
Regulation," applies to regulated entities whose rates are
designed to recover costs of providing service to customers
through the ratemaking process. Changes in regulation or in the
competitive environment for regulated services could cause a
utility to no longer be eligible to apply SFAS No. 71 to
established regulatory assets. CIPS has evaluated the
possibility that SFAS No. 71 would no longer apply to it and
currently believes that there would be no material adverse effect
on financial position, results of operations or liquidity of the
Company or CIPS. (See Note 3 to Consolidated Financial
Statements.)
SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," is not
expected to have a material impact on the financial position,
results of operations or liquidity of the Company or CIPS. (See
Note 14 to Consolidated Financial Statements.)
ENVIRONMENTAL REMEDIATION COSTS. The utility has identified
13 former manufactured gas plant sites (environmental remediation
sites) which contain potentially harmful materials. In 1990, one
site was added to the United States Environmental Protection
Agency (USEPA) Superfund list. The utility is implementing an
approved long-term remedial plan for the site. Costs and
associated legal expenses related to studies and remediation work
have been incurred and estimated at other sites.
Since 1987, the estimated incurred costs related to studies
and remediation at these sites and associated legal expenses and
certain carrying charges are being accrued and deferred rather
than expensed currently, pending recovery either from rates, from
insurance carriers or from other parties.
Costs prudently incurred in connection with the sites that
have not been or are not recovered from insurance carriers or
other parties will be recovered through approved environmental
rate riders. Accordingly, management believes that costs
incurred in connection with these sites will not have a material
adverse effect on financial position, results of operations or
liquidity of the Company or CIPS. (See Note 4 to Consolidated
Financial Statements.)
LABOR ISSUES. CIPS' collective bargaining agreements,
covering approximately 57 percent of its workforce, will expire
on June 30, 1996. Discussions to reach new labor agreements are
under way.
The International Union of Operating Engineers Local 148 and
the International Brotherhood of Electrical Workers Local 702
each filed unfair labor practice charges in 1993 with the
National Labor Relations Board (NLRB) relating to the legality of
a lockout by CIPS of both unions during 1993. The Peoria
Regional Office of the NLRB has issued complaints against CIPS
concerning its lockout of both unions. The unions seek, among
other things, back pay and other benefits for the period of the
lockout. CIPS estimates the amount of back pay and other
benefits for both unions to be less than $12 million. Management
believes the lockout was both lawful and reasonable and that the
final resolution of the disputes will not have a material adverse
effect on the financial position, results of operations or
liquidity of the Company or CIPS. (See Note 4 to Consolidated
Financial Statements.)
FERC ORDER 636. During 1992, FERC issued Order No. 636.
This and successor orders have resulted in substantial
restructuring of the service obligations of interstate pipeline
suppliers. (See Note 4 to Consolidated Financial Statements.)
OTHER MATTERS. Customer usage of electricity and natural
gas varies with weather conditions, general business conditions,
the state of the economy and the cost of energy services. The
level of sales also is impacted by conditions in the interchange
market. Further, certain large gas customers can purchase gas
from alternative suppliers or bypass the utility system by
switching to other fuels or by connecting directly to pipelines.
Rates for retail electric and gas service are regulated by
the Illinois commission. Non-retail electric rates are regulated
by FERC.
The utility's rates are designed to recover operating costs
including depreciation and capital costs on utility plant
investment. Changes in the cost of fuel for electric generation
and gas costs generally are reflected in billings to customers on
a timely basis through fuel and purchased gas adjustment clauses.
Inflation continues to be a factor affecting operations,
earnings, shareholders' equity and financial performance.
GRAPHIC MATERIAL APPENDIX
[graph]
This bar graph displays the six-year (1990-1995) comparison of
the rate of return on average common equity and would relate to
the Financial Condition portion of the preceding Management's
Discussion and Analysis.
Rate of Return on Average Common Equity
(in percent)
11.0% 11.9% 11.8% 13.7% 13.1% 11.1%
Year '90 '91 '92 '93 '94 '95
[graph]
This bar graph displays the six-year (1990-1995) comparison of
CIPSCO capitalization (total dollar amount for each year is
either slightly above or slightly below $1.2 billion (rounded))
and would relate to the Financial Condition portion of the
preceding Management's Discussion and Analysis.
CIPSCO CAPITALIZATION
(in billions of dollars and percent)
Long-Term Debt 42% 42% 42% 41% 39% 39%
Preferred Stock 7 7 6 7 7 7
Common Equity 51 51 52 52 54 54
Year '90 '91 '92 '93 '94 '95
[graph]
This bar graph displays the six-year (1990-1995) comparison of
market value to book value and would relate to the Capital and
Financing Requirements portion of the preceding Management's
Discussion and Analysis.
(in dollars per common share at year end)
Market Value 21.75 27.88 30.25 30.75 27.00 39.00
Book Value 17.63 17.86 18.08 18.60 19.01 19.12
Year '90 '91 '92 '93 '94 '95
[graph]
This bar graph displays the six-year (1990-1995) comparison of
system generating capability at the time of peak to gross system
peak and would relate to the Capital and Financing Requirements
portion of the preceding Management's Discussion and Analysis.
(in megawatts)
System Generating
Capability at
Time of Peak 2,647 2,679 2,707 2,727 2,844 2,844
Gross System Peak 2,027 2,093 1,930 2,157 2,194 2,319
Year '90 '91 '92 '93 '94 '95
[graph]
This bar graph displays the six-year (1990-1995) comparison of
heating and cooling degree days matched against normal
temperatures and would relate to the Electric Operations and Gas
Operations portions of the preceding Management's Discussion and
Analysis.
(Degree days based on average daily temperature of 65 degrees)
Heating Degree Days 4,681 5,013 5,030 5,702 5,222 5,502
Compared to Normal 5,441 5,441 5,441 5,441 5,441 5,441
Cooling Degree Days 1,178 1,543 884 1,213 1,078 1,223
Compared to Normal 1,182 1,182 1,182 1,182 1,182 1,182
Year '90 '91 '92 '93 '94 '95
Item 8. Financial Statements and Supplementary Data.
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands, except per share data)
Operating Revenues:
Electric $ 703,483 $ 697,427 $ 688,820
Gas 129,606 138,418 145,702
Investment 9,173 8,770 10,238
__________ __________ __________
Total operating revenues 842,262 844,615 844,760
__________ __________ __________
Operating Expenses:
Fuel for electric generation 188,731 196,324 186,938
Purchased power 59,495 55,543 60,181
Gas costs 74,054 85,043 90,097
Other operation 155,368 140,068 142,716
Maintenance 67,996 65,176 61,218
Depreciation and amortization 83,263 81,099 78,062
Taxes other than income taxes 56,613 56,017 54,813
__________ __________ __________
Total operating expenses 685,520 679,270 674,025
__________ __________ __________
Operating Income 156,742 165,345 170,735
__________ __________ __________
Interest and Other Charges:
Interest on long-term debt
of subsidiary 32,871 32,842 34,421
Other interest charges 898 378 603
Allowance for funds used
during construction (962) (919) (2,259)
Preferred stock dividends
of subsidiary 3,850 3,510 3,718
Miscellaneous, net 2,298 (3,502) (3,107)
__________ __________ __________
Total interest and other charges 38,955 32,309 33,376
__________ __________ __________
Income Before Income Taxes $ 117,787 $ 133,036 $ 137,359
__________ __________ __________
Income taxes 45,772 49,082 51,861
__________ __________ __________
Net Income $ 72,015 $ 83,954 $ 85,498
========== ========== ==========
Average Shares of
Common Stock Outstanding 34,070 34,107 34,108
Earnings Per Average Share
of Common Stock $2.11 $2.46 $2.51
The accompanying notes to consolidated financial statements are
an integral part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
____________
1995 1994
____ ____
(in thousands)
ASSETS
Utility Plant, at original cost:
Electric $2,296,402 $2,264,930
Gas 229,118 220,347
__________ __________
2,525,520 2,485,277
Less--Accumulated depreciation 1,132,355 1,077,533
__________ __________
1,393,165 1,407,744
Construction work in progress 72,490 31,816
__________ __________
1,465,655 1,439,560
__________ __________
Current Assets:
Cash 1,088 1,963
Temporary investments, at cost which
approximates market 7,147 3,283
Accounts receivable, net 65,267 67,579
Accrued unbilled revenues 27,234 30,484
Materials and supplies, at average cost 40,246 39,817
Fuel for electric generation, at
average cost 42,634 30,305
Gas stored underground, at average cost 9,774 13,167
Prepayments 10,649 10,925
Other current assets 8,197 2,592
__________ __________
212,236 200,115
__________ __________
Investments and Other Assets:
Marketable securities 45,967 43,929
Leveraged leases and energy investments 59,114 49,933
Other 44,939 43,820
__________ __________
150,020 137,682
__________ __________
$1,827,911 $1,777,357
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity:
Common stock, no par value,
authorized shares, 100,000,000;
outstanding 34,069,542 shares $ 356,812 $ 356,812
Retained earnings 294,720 290,801
__________ __________
651,532 647,613
Preferred stock of subsidiary 80,000 80,000
Long-term debt of subsidiary 478,926 459,619
__________ __________
1,210,458 1,187,232
__________ __________
Current Liabilities:
Long-term debt of subsidiary due
within one year - 15,000
Short-term borrowings 47,921 14,985
Accounts payable 60,603 54,021
Accrued wages 9,335 9,833
Accrued taxes 11,266 12,629
Accrued interest 9,525 9,408
Other 33,265 31,488
__________ __________
171,915 147,364
__________ __________
Deferred Credits:
Accumulated deferred income taxes 325,181 313,072
Investment tax credits 52,234 55,595
Regulatory liabilities, net 68,123 74,094
__________ __________
445,538 442,761
__________ __________
$1,827,911 $1,777,357
========== ==========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands)
OPERATING ACTIVITIES:
Net income $ 72,015 $ 83,954 $ 85,498
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 83,263 81,099 78,062
Allowance for equity funds used during
construction (AFUDC) (889) (630) (1,459)
Deferred income taxes, net 10,577 19,891 7,900
Investment tax credit amortization (3,361) (3,367) (3,366)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues 5,562 2,156 (15,603)
Fuel for electric generation (12,329) (4,259) 8,336
Other inventories 2,964 2,175 (4,450)
Prepayments 276 (783) 5,502
Other assets (6,724) 5,955 19,075
Accounts payable and other 8,359 (5,433) 6,009
Accrued wages, taxes and interest (1,744) (3,082) 5,867
Other (9,581) 626 4,400
__________ __________ __________
Net cash provided by
operating activities 148,388 178,302 195,771
__________ __________ __________
INVESTING ACTIVITIES:
Utility construction expenditures,
excluding AFUDC (102,820) (95,682) (85,453)
Allowance for borrowed funds used during
construction (73) (289) (800)
Changes in temporary investments (3,864) (489) (2,793)
Long-term marketable securities (866) (2,843) (2,790)
Long-term leveraged leases and energy
investments (9,181) (7,717) (10,832)
__________ __________ __________
Net cash used in investing activities (116,804) (107,020) (102,668)
__________ __________ __________
FINANCING ACTIVITIES:
Common stock dividends paid (69,161) (67,874) (66,510)
Proceeds from issuance of long-term debt
of subsidiary 20,000 - 195,000
Repayment of long-term debt of subsidiary (16,000) (20,000) (205,000)
Retirement of common stock - (1,020) -
Redemption of preferred stock of subsidiary - - (27,500)
Proceeds from issuance of preferred stock
of subsidiary - - 42,500
Proceeds from issuance of (repayment of)
short-term borrowings 32,936 14,985 (21,393)
Issuance expense, discount and premium (234) (40) (7,104)
__________ __________ __________
Net cash used in financing activities (32,459) (73,949) (90,007)
__________ __________ __________
Net increase (decrease) in cash (875) (2,667) 3,096
Cash at beginning of year 1,963 4,630 1,534
__________ __________ __________
Cash at end of year $ 1,088 $ 1,963 $ 4,630
========== ========== ==========
Supplemental disclosures of cash flow
information:
Cash payments during the year:
Interest, net of amounts capitalized $ 31,490 $ 30,714 $ 31,058
Income taxes $ 40,147 $ 34,264 $ 36,718
The accompanying notes to consolidated financial statements are
an integral part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands)
Balance, beginning of year $ 290,801 $ 277,040 $ 259,338
Add (deduct):
Net income 72,015 83,954 85,498
Common stock dividends ($2.03, $1.99
and $1.95 per share, respectively) (69,161) (67,874) (66,510)
Other 1,065 (2,319) (1,286)
__________ __________ __________
Balance, end of year $ 294,720 $ 290,801 $ 277,040
========== ========== ==========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CIPSCO Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
CIPSCO Incorporated (an Illinois corporation) and subsidiaries as
of December 31, 1995 and 1994, and the related consolidated
statements of income, retained earnings and cash flows for each
of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of CIPSCO Incorporated and subsidiaries as of December 31, 1995
and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 26, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial
statements include the accounts of CIPSCO Incorporated, a holding
company, Central Illinois Public Service Company (CIPS), a
combination electric and gas utility, and CIPSCO Investment
Company (CIC) engaged in non-utility investing activities. All
significant intercompany balances and transactions have been
eliminated from the consolidated financial statements. Certain
items previously reported for years prior to 1995 have been
reclassified to conform with the current-year presentation.
The operating revenues of all investment activities are
included under the caption Operating Revenues, "Investment."
Operating expenses are included under the appropriate captions as
shown on the Consolidated Statements of Income.
Concentration of Credit Risk. CIPS is engaged principally in the
production, purchase, transmission, distribution and sale of
electricity to a diversified retail base of about 321,000
residential, commercial and industrial customers in 557
communities. CIPS also is engaged in the purchase, transport,
distribution and sale of natural gas to a diversified retail base
of approximately 167,000 residential, commercial and industrial
customers in 267 communities. The combined electric and gas
service territory has an area of approximately 20,000 square
miles in central and southern Illinois and has an estimated
population of approximately 820,000. Credit risk is spread over
the diversified retail base of electric and gas customers from
which approximately four-fifths of total operating revenues were
derived in 1995. Furthermore, CIPS has wholesale power supply
agreements and power service agreements with seven other
utilities, cooperatives, municipal associations and
municipalities, and engages in the purchase and sale of
interchange power with about 30 other utilities and utility power
brokers, from which approximately one-fifth of total operating
revenues were derived in 1995.
See Note 5 to Consolidated Financial Statements for a
discussion of receivables related to the leveraged lease
investments.
Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Regulation. CIPS is a public utility subject to regulation by
the Illinois Commerce Commission (Illinois commission) and the
Federal Energy Regulatory Commission (FERC). The utility
maintains its accounts in accordance with the Uniform System of
Accounts as defined by these agencies. Its accounting policies
conform to generally accepted accounting principles applicable to
rate-regulated enterprises and reflect the effects of the
ratemaking process. (See Note 3 to Consolidated Financial
Statements.)
Operating Revenues. CIPS accrues an estimate of electric and gas
revenues for service rendered but unbilled at the end of each
accounting period.
Investment revenues are comprised of interest on temporary
investments and income from long-term marketable securities,
leveraged leases and partnership income.
Utility Plant. Utility plant in service is stated at original
cost. Substantially all of the utility plant of CIPS is subject
to the lien of its first mortgage bond indenture. Additions to
utility plant include the cost of contracted services, material,
labor, overheads and an allowance for funds used during
construction. Maintenance and repair of property and replacement
of minor items of property are charged to operating expenses.
Property retired is removed from utility plant accounts and
charged to accumulated depreciation.
Allowance for Funds Used During Construction (AFUDC). AFUDC is
included in Construction Work in Progress (CWIP) and represents
the cost of financing that construction. AFUDC does not
represent a current source of cash funds. The inclusion of AFUDC
in CWIP affords the opportunity to earn a return on the cost of
construction capital after the related asset is placed in service
and included in the rate base.
The AFUDC rate, based on a formula prescribed by FERC, on a
before-tax basis, was 9% for the years 1993 through 1995.
Depreciation. Depreciation expense is based on remaining life
straight-line rates (composite, approximately 3.3% in 1995 and
3.4% in 1994 and 1993) applied to the various classes of
depreciable property.
Fuel and Gas Costs. CIPS adjusts fuel expense to recognize over-
or under-recoveries from customers of allowable fuel costs
through the uniform fuel adjustment clause (FAC). The FAC
provides for the current recovery of changes in the cost of fuel
for electric generation in billings to customers. Monthly, the
difference between revenues recorded through application of the
FAC and recoverable fuel costs is recorded as a current asset or
liability, pending reflection in future billings to customers,
with a corresponding decrease or increase in cost of fuel for
electric generation.
The uniform purchased gas adjustment clause (PGA) provides a
matching of gas costs with revenues. Monthly, the difference
between revenues recorded through application of the PGA and
recoverable gas costs is recorded as a current asset or liability
with a corresponding decrease or increase in the gas cost. The
cumulative difference for the calendar year is collected from, or
refunded to, customers over a one-year period beginning in the
following April.
The Illinois commission conducts annual reconciliation
proceedings with respect to each year's FAC and PGA revenues and
has completed its review for all years prior to 1994.
Reconciliation proceedings for 1994 and 1995 have commenced.
Income Taxes and Investment Tax Credits. Deferred income taxes
are recorded which result from the use of accelerated
depreciation methods, rapid amortization, repair allowance and
certain other temporary differences in recognition of income and
expense for tax and financial statement purposes. CIPSCO and its
subsidiaries file a consolidated federal income tax return.
Income taxes are allocated to the individual companies, based on
their respective taxable income or loss. Investment tax credits
are being amortized over the estimated average useful lives of
the related properties.
The Company uses the liability method of accounting for
deferred income taxes. The liability method requires the
establishment of deferred tax liabilities and assets for all
temporary differences between the tax basis of assets and
liabilities and the amounts reported in the financial statements.
(See Note 12 to Consolidated Financial Statements.)
Cash and Temporary Investments. Temporary investments
principally consist of U.S. Treasury obligations. For purposes
of Consolidated Statements of Cash Flows, temporary investments
are not considered cash equivalents.
Marketable Securities. CIC holds a portfolio consisting
primarily of common and preferred stocks that are substantially
hedged with futures and options. (See Note 13 to Consolidated
Financial Statements.) All securities are publicly traded. The
investments and related hedging instruments are managed by
professional investment managers in an overall managed portfolio
strategy. Common stocks consist of investments that are
representative of the Standard & Poor's 100 Index. Preferred
stocks consist of perpetual and sinking fund issues primarily of
public utilities, utility holding companies, commercial banks and
bank holding companies. The portfolio also includes investments
in limited partnerships which pool money from multiple investors
to invest in a variety of investment vehicles, principally
marketable securities.
The investments in common and preferred stocks and the
options and futures used to hedge these investments are measured
at market value on the Consolidated Balance Sheets with the
change in value reflected in shareholders' equity in conformity
with SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities." The net unrealized investment losses
included in shareholders' equity (Retained Earnings - Other) at
December 31, 1995 and 1994 were $.4 million and $1.6 million,
respectively. Gains and losses on marketable securities are
recognized when realized for Income Statement purposes. Gains
and losses on purchased hedges are deferred until the gains or
losses on the underlying securities are realized and recognized.
For hedged investments, the investment and related hedging
instrument have been combined on the Consolidated Balance Sheets.
2. MERGER AGREEMENT
On August 11, 1995, the Company entered into an Agreement and
Plan of Merger (the Merger Agreement) with Union Electric Company
(UE), and Ameren Corporation (Ameren), a newly formed, jointly
owned entity, pursuant to which among other things, the Company
will be merged with Ameren (the Merger). Subsequent to the
Merger, CIPS, UE and CIC will be wholly owned operating
subsidiaries of Ameren. As a result of the Merger, each
outstanding share of the Company's common stock will be converted
into 1.03 shares of common stock of Ameren (Ameren Common Stock),
or cash in lieu of fractional shares. Each outstanding share of
UE's common stock will be converted into one share of Ameren
Common Stock. The preferred stock of CIPS and UE will remain
outstanding and unchanged. The Merger is expected to be tax-free
for federal income tax purposes and will be accounted for under
the "pooling of interests" method of accounting.
With the execution and delivery of the Merger Agreement, the
Company and UE entered into stock option agreements, pursuant to
one of which the Company granted UE the right, upon the terms and
subject to the conditions set forth therein, to purchase up to
6,779,838 shares of the Company's Common Stock at a price of
$37.02 per share. Pursuant to the other stock option agreement,
UE granted the Company the right, upon the terms and subject to
the conditions set forth therein, to purchase up to 6,983,233
shares of UE's Common Stock at a price of $35.94 per share.
These options will expire upon consummation of the Merger.
After the Merger, Ameren will become a registered public
utility holding company under the Public Utility Holding Company
Act of 1935. In December 1995, the Merger was approved by the
shareholders of CIPSCO and UE. The Merger is conditioned upon,
among other things, receipt of certain regulatory and
governmental approvals. (See Note 3 to Consolidated Financial
Statements.)
The following unaudited pro forma financial information
reflects the effects of combining CIPSCO and UE into Ameren under
the pooling of interests method of accounting.
(unaudited)
(in thousands, except per share data)
1995 1994 1993
____ ____ ____
Total Revenues $3,127,316 $3,146,101 $3,138,944
Net Income 372,872 391,459 368,571
Earnings per Share $ 2.72 $ 2.85 $ 2.69
The pro forma financial information consolidates the
financial results of Electric Energy, Inc. (EEI), which will be
60% owned by Ameren subsequent to the Merger as a result of the
current ownership interest in EEI by CIPS and UE.
3. REGULATORY MATTERS.
CIPS and UE filed a joint application for approval of the Merger
with the Illinois commission and FERC. UE has filed an
application for approval of the transaction with the Missouri
Public Service Commission. In those applications, CIPS and UE
are requesting a sharing between ratepayers and shareholders,
over the 10-year period following the merger, of merger savings,
net of merger costs. A merger filing will be made with the
Securities and Exchange Commission at a later date.
Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for Effects of Certain Types of Regulation," applies
to regulated entities whose rates are designed to recover the
cost of providing service to customers through the ratemaking
process. SFAS No. 71 allows certain costs that would normally be
reflected in net income to be deferred on the balance sheet as
regulatory assets. These costs are then amortized as the related
amounts are reflected in rates. Under current accounting
pronouncements, if a loss becomes probable, any unamortized
balance, net of tax, would reduce net income.
The Company continually reviews regulatory assets and
liabilities. As shown below, CIPS is in a net regulatory
liability position at December 31, 1995, and currently believes
that there would be no material adverse impact on results of
operations, financial position or liquidity if CIPS were to
discontinue application of SFAS No. 71.
The components of regulatory assets and liabilities at
December 31, are:
1995 1994
____ ____
(in thousands)
Regulatory Assets:
Deferred environmental remediation costs $ 5,018 $ 1,028
Take-or-pay costs 1,436 2,750
Unamortized costs related to reacquired debt 13,397 14,578
________ ________
Total Regulatory Assets - in Other Assets
on Consolidated Balance Sheets $ 19,851 $ 18,356
======== ========
Regulatory Liabilities:
Clean Air Act allowances, net $ 454 $ 4,152
SFAS 109 - Income Taxes, net 67,669 69,942
________ ________
Total Regulatory Liabilities, net $ 68,123 $ 74,094
======== ========
Regulatory Liabilities Net of Regulatory
Assets $ 48,272 $ 55,738
======== ========
4. COMMITMENTS AND CONTINGENCIES
Environmental Remediation Costs. The utility and certain of its
predecessors and other affiliates previously operated facilities
that manufactured gas from coal. In connection with the
manufacturing of gas, various by-products were produced, some of
which remain on sites where the facilities were located. The
utility has identified 13 of these former manufactured gas plant
sites which contain potentially harmful materials. One site was
added to the United States Environmental Protection Agency
(USEPA) Superfund list on August 30, 1990. On September 30, 1992
the Illinois Environmental Protection Agency (IEPA), in
consultation with the USEPA, decided that the long-term remedial
plan for this Superfund site should consist of a ground-water
pump-and-treat program. The IEPA and CIPS entered into an
agreement, which received required court approval on March 14,
1994, for CIPS to carry out such remedial action with IEPA
oversight.
Over the past several years CIPS has received cash
settlements from certain of its insurance carriers arising from
litigation instituted by CIPS (which is now concluded) seeking
indemnification for, among other things, costs incurred by CIPS
in connection with the sites. Effective with April 1993 billings
to customers, CIPS began recovery of cleanup costs associated
with the sites through environmental adjustment clause rate
riders. As required by the Illinois commission, the riders
provided for (1) recovery of cleanup costs and a return to
ratepayers of any reimbursement of cleanup costs received from
insurance carriers or other parties and (2) a prudence review of
cleanup expenditures. The Illinois Supreme Court has ruled that
cleanup costs are recoverable in rates and that the use of a
rider mechanism to recover such costs is appropriate. Through
December 31, 1993, CIPS collected $2.9 million under the riders.
No amounts have been collected since January 1994.
The estimated incurred costs relating to studies and
remediation at the 13 sites and associated legal expenses are
being accrued and deferred rather than expensed currently,
pending recovery through rates or from other parties. Through
December 31, 1995, $42.5 million had been deferred representing
costs incurred and estimates for costs of completing studies at
various sites and an estimate of future remediation costs to be
incurred at the Superfund and other sites. The total of the
costs deferred, net of recoveries from insurers and through the
rate riders described above, was $5.0 million at December 31,
1995.
The Illinois commission has initiated reconciliation
proceedings to review CIPS' environmental remediation activities
in 1993 and 1994 and to determine whether the revenues collected
under the riders in 1993 were consistent with the amount of
remediation costs prudently incurred. Amounts found to have been
incorrectly included under the riders would be subject to refund.
Management believes that any costs incurred in connection
with the sites that are not recovered from others will be
recovered through environmental rate riders. Accordingly,
management believes that costs incurred in connection with these
sites will not have a material adverse effect on financial
position, results of operations or liquidity of the Company or
CIPS.
FERC Order 636. During 1992, FERC issued Order No. 636. This
and successor orders have resulted in substantial restructuring
of the service obligations of interstate pipeline suppliers.
Order No. 636 provided mechanisms for pipelines to recover
transition costs associated with the restructuring. CIPS has
paid substantially all direct transition costs associated with
the pipeline restructuring and is currently recovering all
transition costs in its rate riders. Any future transition costs
identified and billed from pipeline suppliers are expected to be
recoverable from customers of CIPS.
FERC Proposed Rulemaking to Create Open Access Transmission
Service. In March 1995, the FERC issued a notice of proposed
rulemaking (NOPR) through which the FERC intends to require all
utilities subject to its jurisdiction to provide electric
transmission service on a non-discriminatory basis to all
interested parties. Under the NOPR as currently proposed the
"open access" tariffs which are likely to be required are tariffs
designed to provide transmission access to other utility systems
on a basis comparable to the way a utility utilizes its own
electric system. The proposed rules are designed to increase
competition in bulk power markets. CIPS cannot predict when FERC
will take final action on the NOPR or whether it will be adopted
in its present form. In connection with the Merger, CIPS and UE
have filed combined open access comparable service transmission
tariffs designed to comply with the tariffs currently proposed in
the NOPR. The filing of such tariffs is a condition to approval
of the Merger by FERC. The filed tariffs would become effective
only upon completion of the Merger. CIPS does not anticipate
that operating revenues or expenses will change materially as a
result of the open access, comparable service tariffs.
Accordingly, management believes that such tariffs will not have
a material adverse effect on financial position, results of
operations or liquidity of the Company or CIPS.
Clean Air Act. CIPS' current compliance strategy to meet Phases
I and II of the sulfur dioxide emission reduction requirements of
the Clean Air Act Amendments of 1990 (Amendments) is to switch to
a lower sulfur coal at some of its units along with increased
scrubbing with its existing scrubber at Newton Unit 1. The
estimated capital costs of compliance based on the current
strategy are included in the five-year construction forecast.
The forecast has an estimate of $76 million for environmental
compliance including compliance with regulations under the Clean
Air Act. However, capital costs and certain expenses, as well as
financing needs, may increase if fuel strategy studies being
undertaken by CIPS indicate that CIPS should change its
compliance strategy to place more reliance on fuel switching.
Labor Issues. The International Union of Operating Engineers
Local 148 and the International Brotherhood of Electrical Workers
Local 702 have both filed unfair labor practice charges with the
National Labor Relations Board (NLRB) relating to the legality of
the lockout by CIPS of both unions during 1993.
The Peoria Regional Office of the NLRB has issued complaints
against CIPS concerning its lockout of both unions. Both unions
seek, among other things, back pay and other benefits for the
period of the lockout. CIPS estimates the amount of back pay and
other benefits for both unions to be less than $12 million. A
hearing before an administrative law judge of the NLRB was
completed on April 25, 1995. Management believes the lockout was
both lawful and reasonable and that the final resolution of the
disputes will not have a material adverse effect on financial
position, results of operations or liquidity of the Company or
CIPS.
Other Issues. CIPS is involved in other legal and administrative
proceedings before various courts and agencies with respect to
rates, taxes, gas and electric fuel cost reconciliations, service
area disputes, environmental torts and other matters. Although
unable to predict the outcome of these matters, management
believes that appropriate liabilities have been established and
that final disposition of these actions will not have a material
adverse effect on financial position, results of operations or
liquidity of the Company or CIPS.
5. LEVERAGED LEASES
CIC and its subsidiaries are the lessors in several leveraged
lease arrangements involving interests in a natural gas liquids
plant, natural gas processing equipment, a commercial jet
aircraft, retail department store properties and combustion
turbine generating units. These leases expire in various years
beginning in 1999 through 2013.
The aggregate residual values are estimated to be 42 percent
of the aggregate cost. CIC's aggregate equity investment
represents 22 percent of the aggregate purchase price of the
properties. The remaining 78 percent was financed by nonrecourse
debt provided by lenders who have been granted, as their sole
remedy in the event of default by the lessees, an assignment of
rentals due under the leases and a security interest in the
leased properties.
The following is a summary of the components of CIC's net
investment in leveraged leases at December 31:
1995 1994 1993
____ ____ ____
(in thousands)
Rentals receivable
(net of nonrecourse debt) $ 23,282 $ 24,894 $ 25,776
Estimated residual value of
leased property 64,598 64,599 53,671
Less - Unearned and deferred
income (34,870) (39,560) (37,231)
________ ________ ________
Investment in leveraged leases 53,010 49,933 42,216
Less - Deferred taxes (30,771) (25,817) (19,777)
________ ________ ________
Net investment $ 22,239 $ 24,116 $ 22,439
======== ======== ========
The following is a summary of the components of income from
leveraged leases for the years ended December 31:
1995 1994 1993
____ ____ ____
(in thousands)
Income before income taxes $ 4,677 $ 4,664 $ 4,702
Income tax expense (1,868) (1,874) (2,037)
________ ________ ________
Income from leveraged leases $ 2,809 $ 2,790 $ 2,665
======== ======== ========
6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
CIPS sponsors a defined benefit pension plan covering
substantially all of its employees. The benefits are based on
years of service and employees' final average pay. Pension costs
are accrued on a current basis in accordance with actuarial
determinations. The pension plan is funded in compliance with
income tax regulations and federal funding requirements. CIPS
uses a September 30 measurement date for its valuation of pension
plan assets and liabilities. The utility also provides certain
employees with pension benefits which exceed the qualified plan
limits imposed by federal tax law.
Funded Status of Pension Plan
(in thousands)
1995 1994 1993
____ ____ ____
Fair value of plan assets* $221,013 $188,449 $177,824
_______ _______ _______
Accumulated benefit obligations:**
Vested benefits 121,181 120,032 125,641
Nonvested benefits 20,989 3,644 559
Effect of projected future
compensation levels (based on 4.5%
annual increases in 1995, 4.8% in
1994 and 4.3% in 1993) 38,830 38,974 41,214
________ ________ ________
Total projected benefit
obligation 181,000 162,650 167,414
________ ________ ________
Plan assets in excess of projected
benefit obligation $ 40,013 $ 25,799 $ 10,410
======== ======== ========
________________________
* Plan assets are invested in common and preferred stocks,
bonds, money market instruments, guaranteed income
contracts and real estate.
** The assumed weighted average discount rate was 7.50% for 1995,
7.75% for 1994 and 6.50% for 1993.
Pension Plan Assets in Excess of Projected Benefit Obligation
(in thousands)
1995 1994 1993
____ ____ ____
Plan assets in excess of projected
benefit obligation $ 40,013 $ 25,799 $ 10,410
Unrecognized transition asset (being
amortized over 18.2 years) (3,936) (4,399) (4,862)
Unrecognized net gain (33,690) (23,146) (5,188)
Unrecognized prior service cost 5,167 5,679 760
________ ________ ________
Prepaid pension costs at
September 30 7,554 3,933 1,120
Expense, net of funding October
to December 207 (80) 1,944
________ ________ ________
Prepaid pension costs at
December 31 $ 7,761 $ 3,853 $ 3,064
======== ======== ========
Components of Net Pension Expense
(in thousands)
1995 1994 1993
____ ____ ____
Service cost (present value of benefits
earned during the year) $ 6,873 $ 8,053 $ 6,398
Interest cost on projected benefit
obligation 12,497 10,846 10,193
Actual return on plan assets (expected
long-term rate of return was 8%) (34,364) (6,795) (21,101)
Deferred investment gains (losses) 20,658 (6,242) 10,071
Amortization of the unrecognized prior
service cost 372 61 118
Amortization of the transition amount (463) (463) (463)
________ ________ ________
Net pension expense $ 5,573 $ 5,460 $ 5,216
======== ======== ========
Effective January 1, 1993, CIPS adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". The
standard requires companies to recognize the cost of providing
postretirement medical and life insurance benefits over the
employees' service period. CIPS is funding the medical benefits
under two Voluntary Employee Beneficiary Association trusts
(VEBA), and a 401(h) account established within the CIPS
retirement income trust.
CIPS sponsors postretirement plans providing medical and
life benefits for certain of its retirees and their eligible
dependents. The medical plan pays percentages of eligible
medical expenses incurred by covered retirees after a deductible
has been met, and after taking into account payment by Medicare
or other providers. Currently, participants become eligible for
coverage if they retire from CIPS after meeting age and years of
service eligibility requirements. The life insurance plan
continues for all retirees who have been in the plan as employees
for 10 years or more. CIPS uses a September 30 measurement date
for its valuation of postretirement assets and liabilities.
Funded Status of Postretirement Benefit Plans
(in thousands)
1995 1994 1993
____ ____ ____
Fair value of plan assets* $ 49,385 $ 26,874 $ 13,302
_______ _______ _______
Accumulated benefit obligations:
Retirees 50,030 47,494 47,269
Fully eligible active employees 17,577 15,407 15,006
Other active employees 75,595 64,188 67,007
________ ________ ________
Total accumulated benefit
obligations 143,202 127,089 129,282
________ ________ ________
Accumulated benefit obligations
in excess of plan assets (93,817) (100,215) (115,980)
Unrecognized prior service costs 191 - -
Unrecognized transition obligation
(being amortized over 20 years) 98,878 104,695 110,511
Unrecognized net gain (including
changes in assumptions) (23,855) (21,307) (11,185)
________ ________ ________
Accrued postretirement benefit
cost at September 30 (18,603) (16,827) (16,654)
Expense, net of funding, October
to December 14,711 14,906 14,912
________ ________ ________
Accrued postretirement benefit
cost at December 31 $ (3,892) $ (1,921) $ (1,742)
======== ======== ========
* Plan assets are invested in common and preferred stocks, bonds,
money market instruments, guaranteed income contracts and real estate.
Components of Postretirement Benefit Cost
(in thousands)
1995 1994 1993
____ ____ ____
Service costs on benefits earned $ 3,809 $ 4,108 $ 4,215
Interest costs on accumulated benefit
obligations 10,307 8,918 9,948
Actual return on plan assets (8,390) (212) (1,038)
Deferred investment gains (losses) 5,304 (1,601) 397
Amortization of transition amounts 5,816 5,816 5,816
________ ________ ________
Postretirement benefit cost $ 16,846 $ 17,029 $ 19,338
======== ======== ========
For purposes of calculating the postretirement benefit obligation
it is assumed that health-care costs will increase by 10.6% in
1996, and that the rate of increase thereafter (the health-care
cost trend rate) will decline to 4% in 2007 and subsequent years.
The health-care cost trend rate has a significant effect on the
amounts reported for costs each year as well as on the
accumulated postretirement benefit obligation. To illustrate,
increasing the assumed health-care cost trend rate by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of September 30, 1995 by
$23.2 million and the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost $2.5
million annually. The weighted-average discount rate used to
determine the accumulated postretirement benefit obligation was
7.5% in 1995, 8.25% in 1994 and 7% in 1993. The expected long-
term rate of return on plan assets was 8% in all three years.
7. PREFERRED STOCK OF SUBSIDIARY
The CIPS preferred stock is generally redeemable at the option of
CIPS, on 30 days notice at the redemption prices shown below.
At December 31, 1995 and 1994 the preferred stock authorized and
outstanding was:
1995 1994
Current Amount Amount
Shares Par Redemption Shares (in (in
Authorized Value Series Price(a) Issued thousands) thousands)
__________ _____ ______ __________ ______ __________ __________
CIPSCO 4,600,000(b) - - - - - -
CIPS
Cumulative 2,000,000(b) $100 4.00% $101.00 150,000 $ 15,000 $ 15,000
100 4.25% 102.00 50,000 5,000 5,000
100 4.90% 102.00 75,000 7,500 7,500
100 4.92% 103.50 50,000 5,000 5,000
100 5.16% 102.00 50,000 5,000 5,000
100 1993 Auction(c) 100.00 300,000 30,000 30,000
100 6.625% 100.00(d) 125,000 12,500 12,500
_______ _______ _______
800,000 80,000 80,000
CIPS
No par(e) 2,600,000(b) - - - - - -
_______ _______ _______
800,000 $ 80,000 $ 80,000
======= ======= =======
_________________________
(a) Accrued dividends, if any, would be added to the current
redemption price.
(b) The Board of Directors has the authority to fix and
determine the relative rights and preferences of the
authorized and unissued shares.
(c) Dividend rate for each dividend period (currently every 49
days) is set at a then current market rate according to
an auction procedure. The rate at December 31, 1995 was 4.248%.
(d) Not redeemable prior to October 1, 1998.
(e) Aggregate stated value cannot exceed $65,000,000.
8. COMMON SHAREHOLDERS' EQUITY
Common Stock. In December 1994, CIPSCO purchased 38,164 shares
from shareholders who held less than 100 shares. The repurchase
reduced common stock and retained earnings.
Retained Earnings. CIPSCO is subject to restrictions on the use
of retained earnings for cash dividends on common stock
applicable to all corporations under the Illinois Business
Corporation Act. CIPS is subject to the same restrictions, as
well as those contained in its mortgage indenture and articles of
incorporation. At December 31, 1995, 1994 and 1993, no amount of
retained earnings was restricted.
9. LINES OF CREDIT AND SHORT-TERM BORROWINGS
External financing needs may be met from the sale of commercial
paper or short-term borrowings from banks. CIPSCO and CIC have
joint bank lines of credit of $30 million. The banks are
compensated for these lines of credit.
CIPS has arrangements for bank lines of credit which totaled
$65 million at December 31, 1995. CIPS compensates banks for
these lines of credit. The bank lines of credit are for
corporate purposes including the support of any commercial paper
borrowings. At December 31, 1995 there were no short-term
borrowings from the lines of credit by CIPSCO, CIC, or CIPS;
however, CIPS did have $47.9 million in commercial paper
outstanding.
10. LONG-TERM DEBT OF SUBSIDIARY
Maturities and sinking fund requirements of CIPS' long-term debt
through 2000 are as follows:
Sinking Fund
Maturities Requirements Total
__________ ____________ _____
(in thousands)
1996 $ - $150 $ 150
1997 58,000 - 58,000
1998 - - -
1999 50,000 - 50,000
2000 25,000 - 25,000
In 1995 and 1994 the sinking fund requirements were satisfied by
the application of net expenditures for bondable property in an
amount equal to 166-2/3 percent of the annual requirement. The
utility expects to meet the 1996 requirement in the same manner.
Long-term debt outstanding at December 31, was:
1995 1994
Amount Amount
______ ______
(in thousands)
First mortgage bonds:
Series K, 4 5/8% due 6/1/1995 $ - $15,000
Series L, 5 7/8% due 5/1/1997 15,000 15,000
Series 6 5/8% due 8/1/2009
(for Newton pollution control) - 1,000
Series W, 7 1/8% due 5/15/1999 50,000 50,000
Series W, 8 1/2% due 5/15/2022 33,000 33,000
Series X, 6 1/8% due 7/1/1997 43,000 43,000
Series X, 7 1/2% due 7/1/2007 50,000 50,000
Series Y, 6 3/4% due 9/15/2002 23,000 23,000
Series Z, 6% due 4/1/2000 25,000 25,000
Series Z, 6 3/8% due 4/1/2003 40,000 40,000
Series 1995-1, 6.49% due 6/1/2005 20,000 -
_______ _______
299,000 295,000
_______ _______
Pollution control loan obligations:
1990 Series A, 7.60% due 3/1/2014 20,000 20,000
1990 Series B, 7.60% due 9/1/2013 32,000 32,000
1993 Series A, 6 3/8% due 1/1/2028 35,000 35,000
1993 Series B-1, 4 3/8% due 6/1/2028 17,500 17,500
1993 Series B-2, 5.90% due 6/1/2028 17,500 17,500
1993 Series C-1, 4.20% due 8/15/2026 35,000 35,000
1993 Series C-2, 5.70% due 8/15/2026 25,000 25,000
_______ _______
182,000 182,000
_______ _______
Unamortized net debt premium
and discount (2,074) (2,381)
_______ _______
478,926 474,619
Maturities due within one year - (15,000)
_______ _______
$478,926 $459,619
======= =======
Interest rates on the 1993 Series B-1 and 1993 Series C-1 bonds will be
adjusted to a then current market rate on June 1, 1998 and August 15, 1998,
respectively. Interest rates on the 1993 Series B-2 and 1993 Series C-2
bonds are subject to redetermination at the option of CIPS commencing
June 1, 2003 and August 15, 2003, respectively.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value at December 31, 1995 and 1994 of each class of
financial instruments for which it is practicable to make such estimates.
Cash and Temporary Investments. The carrying amounts approximate
fair value because of the short-term maturity of these instruments.
Marketable Securities. The fair value is based on quoted market
prices obtained from dealers or investment managers.
Financial Derivatives. The fair value was estimated using market
values of options, calls and futures contracts on organized
exchanges.
Short-term Borrowings. The carrying amounts approximate fair
value due to their short-term maturities.
Preferred Stock of Subsidiary. The fair value was estimated
using market values provided by independent pricing services.
Long-term Debt of Subsidiary. The fair value was estimated using
market values provided by independent pricing services.
The estimated fair values of the Company's financial
instruments as of December 31, are shown below:
1995 1994
_________________ _________________
Carrying Fair Carrying Fair
Value Value Value Value
________ ________ ________ _______
(in thousands)
Marketable Securities $ 45,950 $ 45,950 $43,131 $ 43,131
Financial Derivatives 17 17 798 798
Preferred Stock 80,000 66,108 80,000 52,684
Long-term Debt 478,926 501,826 459,619 447,323
12. INCOME TAXES
The Company uses the liability method of accounting for deferred
income taxes. Income tax expense includes provisions for
deferred taxes to reflect the effect of temporary differences
between the time certain costs are recorded for financial
reporting and when they are deducted for income tax return
purposes. As temporary differences reverse, the related
accumulated deferred income taxes and a portion of the regulatory
assets and liabilities are also reversed. Investment tax credits
have been deferred and will continue to be credited to income
over the lives of the related property.
The components of federal and state income tax provisions
and investment tax credits at December 31, were:
1995 1994 1993
____ ____ ____
(in thousands)
Current - - Federal $ 31,676 $ 29,048 $ 34,340
- - State 6,020 4,534 6,980
________ ________ ________
37,696 33,582 41,320
________ ________ ________
Deferred - - Federal 8,500 14,738 12,315
- - State 2,937 4,129 1,592
________ ________ ________
11,437 18,867 13,907
________ ________ ________
Amortization of investment
tax credits (3,361) (3,367) (3,366)
________ ________ ________
Total income tax expense $ 45,772 $ 49,082 $ 51,861
======== ======== ========
Reconciliations with statutory federal income tax rates at
December 31, were:
1995 1994 1993
____ ____ ____
Effective income tax rate 37.6% 35.9% 36.8%
Amortization of investment
tax credits 2.8 2.5 2.4
Tax exempt interest and dividends 1.6 1.6 1.5
State income tax rate, net of federal
income tax benefits (4.8) (4.0) (3.9)
Non-deductible merger expenses (1.4) - -
Other, net (.8) (1.0) (1.8)
______ ______ ______
Statutory federal income tax rate 35.0% 35.0% 35.0%
====== ====== ======
The accumulated deferred income taxes as set forth below and
in the Consolidated Balance Sheets arise from the following
temporary differences at December 31:
1995 1994
____________ ____________
(in thousands)
Accumulated deferred income tax
liabilities related to:
Depreciable property $320,677 $315,364
Investment tax credits (20,831) (22,164)
Regulatory liabilities, net (26,843) (27,742)
Leveraged leases 30,771 25,817
Other 21,407 21,797
________ ________
Accumulated deferred income
taxes per Consolidated Balance
Sheets $325,181 $313,072
======== ========
Deferred tax assets
(included in prepayments) $ 6,787 $ 7,048
======== ========
13. DERIVATIVE FINANCIAL INSTRUMENTS
CIC has limited involvement with derivative financial instruments
which include futures contracts, purchased options and written
options in combination with purchased options. These instruments
are used to hedge the market risk associated with CIC's common
and preferred stock investments. (See Note 1 to Consolidated
Financial Statements.) CIC does not hold or issue these
instruments for trading purposes.
Financial futures contracts are for U.S. Treasury
obligations and options contracts are for S & P Indexes and U.S.
Treasury obligations. Futures and options contracts have terms
that are one year or less and have little credit risk as these
instruments are traded on organized exchanges.
CIC bears the risk of unfavorable price changes associated
with futures and options which are intended to hedge the opposite
change in the market value of the common and preferred stocks.
Gains and losses on purchased hedges of the equity
securities are deferred as an adjustment to the carrying amount
of the hedged equity securities until the gains or losses on the
underlying securities are recognized. The amount of deferred
hedge loss at December 31, 1995 and 1994 was approximately $3.1
million and $.2 million, respectively.
14. SFAS NO. 121
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" was issued in March 1995 and
became effective on January 1, 1996. SFAS No. 121 requires that
regulatory assets which are no longer probable of recovery
through future revenues be charged to earnings. SFAS No. 121 is
not expected to have an impact on the financial position, results
of operations or liquidity of the Company or CIPS upon adoption.
15. VOLUNTARY SEPARATION PROGRAM
Early in 1995, the Company offered a voluntary separation program
to most of its salaried employees, which was accepted by and
granted to 151 employees in February 1995. The Company recorded
a $5.8 million charge in 1995 for the cost of separation benefits
provided under the program. The detailed costs of the program
consisted of separation payments of $5.4 million, educational
benefits of $.1 million, and medical benefits of $.3 million.
The separation payments were dependent upon ending salary and
number of years employed, and ranged from 6 months to a maximum
of 12 months pay per individual. The voluntary separation
program reduced 1995 earnings by 10 cents per share. The cost of
the program is expected to be recovered through lower payroll
expenses by the end of 1996.
16. SEGMENTS OF BUSINESS
CIPSCO's primary subsidiary, CIPS, is a public utility engaged in
the sale of electricity which it generates, transmits and
distributes. CIPS also sells natural gas, which it purchases
from producers and suppliers and distributes through its system,
and transports customer-owned natural gas. The investments of
CIPSCO and subsidiaries include temporary investments and long-
term investments including marketable securities, leveraged
leases and energy investments.
The following is a summary of operations:
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands)
OPERATING INFORMATION
Electric operations:
Operating revenues $ 703,483 $ 697,427 $ 688,820
Operating expenses, excluding
provision for income taxes 566,130 550,386 534,071
_________ _________ _________
Pretax operating income 137,353 147,041 154,749
_________ _________ _________
Gas operations:
Operating revenues 129,606 138,418 145,702
Operating expenses, excluding
provision for income taxes 117,418 126,896 138,086
_________ _________ _________
Pretax operating income 12,188 11,522 7,616
_________ _________ _________
Investments:
Operating revenues 9,173 8,770 10,238
Operating expenses, excluding
provision for income taxes 1,972 1,988 1,868
_________ ________ ________
Pretax investment income 7,201 6,782 8,370
_________ ________ ________
Total 156,742 165,345 170,735
_________ ________ ________
Less interest expense and
other charges 38,955 32,309 33,376
Less income taxes 45,772 49,082 51,861
_________ _________ ________
Net income per Consolidated
Statements of Income $ 72,015 $ 83,954 $ 85,498
========= ========= ==========
Depreciation and amortization
expense:
Electric $ 75,869 $ 74,496 $ 71,876
Gas 6,803 6,100 5,771
Corporate 591 503 415
_________ _________ _________
Total $ 83,263 $ 81,099 $ 78,062
========= ========= ==========
INVESTMENT INFORMATION
Identifiable assets:
Electric $1,495,433 $1,469,601 $1,459,073
Gas 181,677 176,788 177,857
Temporary investments 7,147 5,875 5,527
Marketable securities 45,967 43,929 42,703
Leveraged leases and
energy investments 59,114 49,933 42,216
Corporate 38,573 31,231 30,374
_________ _________ _________
Total $1,827,911 $1,777,357 $1,757,750
========= ========= =========
Construction expenditures:
Electric $ 90,151 $ 82,673 $ 76,956
Gas 13,631 13,928 10,756
_________ _________ _________
Total $ 103,782 $ 96,601 $ 87,712
========= ========= =========
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The fluctuations in the quarterly results are due to the
seasonal nature of the utility business of CIPS.
Cash
Earnings Dividends Book
Total Total Per Per Value
Operating Operating Net Common Common (end of
Quarters Revenues Income Income Share * Share period)
_________ _________ __________ ________ _________ _______
(in thousands, except per share data)
1995
First $210,462 $ 28,252 $ 12,568 (1) $0.37 (1) $0.50 $18.90
Second 183,944 29,158 12,886 0.38 0.51 18.80
Third 243,863 77,089 41,731 1.22 0.51 19.52
Fourth 203,993 22,243 4,830 (2) 0.14 (2) 0.51 19.12
1994
First $225,622 $ 30,291 $ 13,759 $0.40 $0.49 $18.51
Second 202,505 39,499 19,545 0.57 0.50 18.56
Third 216,270 64,004 34,256 1.00 0.50 19.06
Fourth 200,218 31,551 16,394 0.48 0.50 19.01
* The quarterly earnings per common share may not add to the
total earnings per share for the year due to rounding.
(1) Includes $5.8 million of voluntary separation program
expenses which reduced net income by $3.5 million and
earnings by 10 cents per share.
(2) Includes $10.4 million of merger-related transaction expenses
and write-off of system development expenses which reduced
net income by $8.2 million and earnings by 24 cents per
share.
Item 8. Financial Statements and Supplementary Data.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENTS OF INCOME
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands)
Operating Revenues:
Electric $ 703,509 $ 697,458 $ 688,849
Gas 129,610 138,424 145,707
__________ __________ __________
Total operating revenues 833,119 835,882 834,556
__________ __________ __________
Operating Expenses:
Fuel for electric generation 188,731 196,324 186,938
Purchased power 59,495 55,543 60,181
Gas costs 74,054 85,043 90,097
Other operation 154,014 138,622 141,310
Maintenance 67,994 65,172 61,216
Depreciation and amortization 82,672 80,596 77,647
Taxes other than income taxes 56,588 55,984 54,767
Income taxes 43,542 47,920 48,749
__________ __________ __________
Total operating expenses 727,090 725,204 720,905
__________ __________ __________
Operating Income 106,029 110,678 113,651
__________ __________ __________
Other Income and Deductions:
Allowance for equity funds
used during construction 889 630 1,459
Nonoperating income taxes (941) (603) (631)
Miscellaneous, net (1,695) 4,119 3,632
__________ __________ __________
Total other income
and deductions (1,747) 4,146 4,460
__________ __________ __________
Income Before Interest Charges 104,282 114,824 118,111
__________ __________ __________
Interest Charges:
Interest on long-term debt 32,871 32,842 34,421
Other interest charges 853 358 479
Allowance for borrowed funds
used during construction (73) (289) (800)
__________ __________ __________
Total interest charges 33,651 32,911 34,100
__________ __________ __________
Net Income 70,631 81,913 84,011
Preferred stock dividends 3,850 3,510 3,718
__________ __________ __________
Earnings for Common Stock $ 66,781 $ 78,403 $ 80,293
========== ========== ==========
The accompanying notes to financial statements are an integral
part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEETS
December 31,
____________
1995 1994
____ ____
(in thousands)
ASSETS
Utility Plant, at original cost:
Electric $2,296,402 $2,264,930
Gas 229,118 220,347
__________ __________
2,525,520 2,485,277
Less--Accumulated depreciation 1,132,355 1,077,533
__________ __________
1,393,165 1,407,744
Construction work in progress 72,490 31,816
__________ __________
1,465,655 1,439,560
__________ __________
Current Assets:
Cash 1,006 1,320
Accounts receivable, net 65,574 67,686
Accrued unbilled revenues 27,234 30,484
Materials and supplies, at average
cost 40,246 39,817
Fuel for electric generation, at
average cost 42,634 30,305
Gas stored underground, at average
cost 9,774 13,167
Prepayments 10,268 10,839
Other current assets 8,226 2,593
__________ __________
204,962 196,211
__________ __________
Other Assets 44,188 42,879
__________ __________
$1,714,805 $1,678,650
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity:
Common stock, no par value,
authorized 45,000,000 shares;
outstanding 25,452,373 shares $ 121,282 $ 121,282
Retained earnings 449,137 453,463
__________ __________
570,419 574,745
Preferred stock 80,000 80,000
Long-term debt 478,926 459,619
__________ __________
1,129,345 1,114,364
__________ __________
Current Liabilities:
Long-term debt due within one year - 15,000
Short-term borrowings 47,921 14,985
Accounts payable 60,791 53,900
Accrued wages 9,320 9,833
Accrued taxes 11,155 12,963
Accrued interest 9,525 9,408
Other 33,264 31,488
__________ __________
171,976 147,577
__________ __________
Deferred Credits:
Accumulated deferred income taxes 293,127 287,020
Investment tax credits 52,234 55,595
Regulatory liabilities, net 68,123 74,094
__________ __________
413,484 416,709
__________ __________
$1,714,805 $1,678,650
========== ==========
The accompanying notes to financial statements are an integral
part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENTS OF CASH FLOW
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands)
OPERATING ACTIVITIES:
Net income $ 70,631 $ 81,913 $ 84,011
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 82,672 80,596 77,647
Allowance for equity funds used during
construction (AFUDC) (889) (630) (1,459)
Deferred income taxes, net 4,575 14,146 7
Investment tax credit amortization (3,361) (3,367) (3,366)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues 5,362 2,195 (15,270)
Fuel for electric generation (12,329) (4,259) 8,336
Other inventories 2,964 2,175 (4,450)
Prepayments 571 (992) 3,305
Other assets (6,942) 6,061 13,877
Accounts payable and other liabilities 8,667 (5,438) 6,106
Accrued wages, taxes and interest (2,204) (3,111) 6,217
Other (8,884) 1,129 4,815
__________ __________ __________
Net cash provided by operating
activities 140,833 170,418 179,776
__________ __________ __________
INVESTING ACTIVITIES:
Construction expenditures, excluding
AFUDC (102,820) (95,682) (85,453)
Allowance for borrowed funds used during
construction (73) (289) (800)
__________ __________ __________
Net cash used in investing activities (102,893) (95,971) (86,253)
__________ __________ __________
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 20,000 - 195,000
Repayment of long-term debt (16,000) (20,000) (205,000)
Proceeds from issuance of preferred stock - - 42,500
Redemption of preferred stock - - (27,500)
Retirement of common stock - - (33,250)
Proceeds from issuance of (repayment of)
short-term borrowings 32,936 14,985 (17,393)
Dividends paid:
Preferred stock (3,956) (3,510) (3,718)
Common stock (71,000) (68,600) (33,500)
Issuance expense, discount and premium (234) (40) (7,104)
__________ __________ __________
Net cash used in financing activities (38,254) (77,165) (89,965)
__________ __________ __________
Net increase (decrease) in cash (314) (2,718) 3,558
Cash at beginning of year 1,320 4,038 480
__________ __________ __________
Cash at end of year $ 1,006 $ 1,320 $ 4,038
========== ========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest, net of amounts capitalized $ 31,490 $ 30,693 $ 30,909
Income taxes $ 45,550 $ 39,829 $ 48,367
The accompanying notes to financial statements are an integral
part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENTS OF RETAINED EARNINGS
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands)
Balance, beginning of year $ 453,463 $ 443,741 $ 398,235
Add (deduct);
Net income 70,631 81,913 84,011
Dividends:
Preferred stock (3,850) (3,510) (3,718)
Common stock (71,000) (68,600) (33,500)
Other (107) (81) (1,287)
__________ __________ _________
Balance, end of year $ 449,137 $ 453,463 $ 443,741
========== ========== ==========
The accompanying notes to financial statements are an integral
part of these statements.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Central Illinois Public
Service Company:
We have audited the accompanying balance sheets of Central
Illinois Public Service Company (an Illinois corporation and a
wholly owned subsidiary of CIPSCO Incorporated) as of December
31, 1995 and 1994, and the related statements of income, retained
earnings and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Central Illinois Public Service Company as of December 31,
1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 26, 1996
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The information contained in Note 1 of Notes to Consolidated
Financial Statements beginning on page 46 is incorporated herein
by reference (except for the caption "Principles of
Consolidation", the second paragraph under the caption
"Concentration of Credit Risk", the second paragraph under the
caption "Operating Revenues" and the caption "Marketable
Securities" which are not included herein).
2. MERGER AGREEMENT
The information contained in Note 2 of Notes to Consolidated
Financial Statements beginning on page 49 is incorporated herein
by reference.
3. REGULATORY MATTERS
The information contained in Note 3 of Notes to Consolidated
Financial Statements beginning on page 50 is incorporated herein
by reference.
4. COMMITMENTS AND CONTINGENCIES
The information contained in Note 4 of Notes to Consolidated
Financial Statements beginning on page 52 is incorporated herein
by reference.
5. LEVERAGED LEASES
Not applicable.
6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The information contained in Note 6 of Notes to Consolidated
Financial Statements beginning on page 56 is incorporated herein
by reference.
7. PREFERRED STOCK
The information contained in Note 7 of Notes to Consolidated
Financial Statements beginning on page 60 is incorporated herein
by reference.
8. COMMON SHAREHOLDERS' EQUITY
Common Stock. The authorized common stock, no par value, for
CIPS was 45,000,000 shares as of December 31, 1995, 1994 and
1993. All outstanding shares were exchanged with CIPS
shareholders for CIPSCO Incorporated stock on October 1, 1990.
During the three year period ended December 31, 1995, CIPSCO
Incorporated which holds all CIPS common shares, retired CIPS
shares as detailed in the table below:
Number of Shares Outstanding Amounts (in thousands)
____________________________ ________________________
1995 1994 1993 1995 1994 1993
____ ____ ____ ____ ____ ____
Balance, beginning of year 25,452,373 25,452,373 26,336,718 $121,282 $121,282 $154,532
Common stock retired - - (884,345) - - (33,250)
Other - - - - - -
__________ __________ __________ ________ ________ ________
Balance, end of year 25,452,373 25,452,373 25,452,373 $121,282 $121,282 $121,282
========== ========== ========== ======= ======= ========
Retained Earnings. CIPS is subject to restrictions on the use of
retained earnings for cash dividends on common stock applicable
to all corporations under the Illinois Business Corporation Act,
as well as those contained in its mortgage indenture and articles
of incorporation. At December 31, 1995, 1994 and 1993, no amount
of retained earnings was restricted.
9. LINES OF CREDIT AND SHORT-TERM BORROWINGS
CIPS has arrangements for bank lines of credit which totaled $65
million at December 31, 1995. CIPS compensates banks for these
lines of credit. The bank lines of credit are for corporate
purposes including the support of any commercial paper
borrowings. At December 31, 1995 there were no short-term
borrowings from the lines of credit at CIPS, however, CIPS did
have $47.9 million in commercial paper outstanding.
10. LONG-TERM DEBT
The information contained in Note 10 of Notes to Consolidated
Financial Statements beginning on page 61 is incorporated herein
by reference.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value at December 31, 1995 and 1994 of each class of
financial instruments for which it is practicable to make such
estimates.
Short-Term Borrowings. The carrying amounts approximate fair
value due to their short-term maturities.
Preferred Stock. The fair value was estimated using market
values provided by independent pricing services.
Long-Term Debt. The fair value was estimated using market values
provided by independent pricing services.
The estimated fair value of CIPS' financial instruments as
of December 31, are shown below:
1995 1994
____ ____
Carrying Fair Carrying Fair
Value Value Value Value
________ ________ ________ ________
(in thousands)
Preferred Stock $ 80,000 $ 66,108 $ 80,000 $ 52,684
Long-Term Debt 478,926 501,826 459,619 447,323
12. INCOME TAXES
CIPS uses the liability method of accounting for deferred income
taxes. Income tax expense includes provisions for deferred taxes
to reflect the effect of temporary differences between the time
certain costs are recorded for financial reporting and when they
are deducted for income tax return purposes. As temporary
differences reverse, the related accumulated deferred income
taxes and a portion of the regulatory assets and liabilities are
also reversed. Investment tax credits have been deferred and will
continue to be credited to income over the lives of the related property.
The components of federal and state income tax provisions and
investment tax credits at December 31, were:
1995 1994 1993
____ ____ ____
(in thousands)
Current - - Federal $ 34,384 $ 32,826 $ 42,422
- - State 6,892 5,271 8,019
_______ _______ _______
41,276 38,097 50,441
_______ _______ _______
Deferred - - Federal 3,813 10,084 1,483
- - State 1,814 3,106 191
_______ _______ _______
5,627 13,190 1,674
_______ _______ _______
Amortization of invest-
ment tax credits (3,361) (3,367) (3,366)
_______ _______ _______
Total 43,542 47,920 48,749
_______ _______ _______
Nonoperating income taxes:
Current 1,420 687 1,119
Deferred (479) (84) (488)
_______ _______ _______
941 603 631
_______ _______ _______
Total income taxes $ 44,483 $ 48,523 $ 49,380
======= ======= ========
Reconciliations with statutory federal income tax rates at
December 31, were:
1995 1994 1993
____ ____ ____
Effective income tax rate 38.6% 37.2% 37.0%
Amortization of investment tax credits 2.9 2.6 2.5
Tax exempt interest and dividends .7 .7 .7
State income tax rate, net of federal
income tax benefits (4.9) (4.2) (4.0)
UE/CIPS merger expense (1.5) - -
Other, net (.8) (1.3) (1.2)
____ ____ ____
Statutory federal income tax rate 35.0% 35.0% 35.0%
==== ==== ====
The accumulated deferred income taxes as set forth below and
in the Balance Sheets arise from the following temporary
differences at December 31:
1995 1994
____ ____
(in thousands)
Accumulated deferred income tax
liabilities related to:
Depreciable property $320,677 $315,364
Investment tax credits (20,831) (22,164)
Regulatory liabilities, net (26,843) (27,742)
Other 20,124 21,562
_______ _______
Accumulated deferred income taxes
per Balance Sheets $293,127 $287,020
======= =======
Deferred tax assets (included in
prepayments) $ 6,444 $ 7,016
======= =======
13. DERIVATIVE FINANCIAL INSTRUMENTS
Not applicable.
14. SFAS NO. 121
The information contained in Note 14 of Notes to Consolidated
Financial Statements beginning on page 65 is incorporated herein
by reference.
15. VOLUNTARY SEPARATION PROGRAM
The information contained in Note 15 of Notes to Consolidated
Financial Statements beginning on page 65 is incorporated herein
by reference.
16. SEGMENTS OF BUSINESS
CIPS is a public utility engaged in the sale of electricity
which it generates, transmits and distributes. CIPS also sells
natural gas, which it purchases from producers and suppliers and
distributes through its system, and transports customer-owned
natural gas. The following is a summary of operations:
Years Ended December 31,
________________________
1995 1994 1993
____ ____ ____
(in thousands)
OPERATING INFORMATION
Electric operations:
Operating revenues $ 703,509 $ 697,458 $ 688,849
Operating expenses, excluding
provision for income taxes 566,130 550,388 534,070
_________ _________ _________
Pretax operating income 137,379 147,070 154,779
_________ _________ _________
Gas operations:
Operating revenues 129,610 138,424 145,707
Operating expenses, excluding
provision for income taxes 117,418 126,896 138,086
_________ _________ _________
Pretax operating income 12,192 11,528 7,621
_________ _________ _________
Total 149,571 158,598 162,400
_________ _________ __________
Plus other income and deductions (1,747) 4,146 4,460
Less interest charges 33,651 32,911 34,100
Less income taxes 43,542 47,920 48,749
Less preferred dividends 3,850 3,510 3,718
_________ _________ ________
Earnings for common stock $ 66,781 $ 78,403 $ 80,293
========= ========= =========
Depreciation expense:
Electric $ 75,869 $ 74,496 $ 71,876
Gas 6,803 6,100 5,771
_________ _________ _________
Total $ 82,672 $ 80,596 $ 77,647
========= ========= =========
INVESTMENT INFORMATION
Identifiable assets:
Electric $1,495,433 $1,469,601 $1,459,073
Gas 181,677 176,788 177,857
Corporate 37,695 32,261 31,532
_________ _________ _________
Total $1,714,805 $1,678,650 $1,668,462
========= ========= =========
Construction expenditures:
Electric $ 90,151 $ 82,673 $ 76,956
Gas 13,631 13,928 10,756
_________ _________ _________
Total $ 103,782 $ 96,601 $ 87,712
========= ========= =========
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The fluctuations in the quarterly results are due to the
seasonal nature of the electric and gas utility business.
Total Total Earnings
Operating Operating for
Quarters Revenues Income Common Stock
________ _________ _________ ____________
(in thousands)
1995
First $208,883 $ 20,869 $ 11,803 (1)
Second 182,110 19,873 11,653
Third 241,449 49,227 40,368
Fourth 200,677 16,060 2,957 (2)
1994
First $223,436 $ 20,665 $ 12,544
Second 200,406 26,288 18,307
Third 213,922 40,996 33,013
Fourth 198,118 22,729 14,539
(1) Includes $5.8 million of voluntary separation program
expenses which reduced earnings for common stock by $3.5
million.
(2) Includes $10.4 million of merger-related transaction expenses
and write-off of system development expenses which reduced
earnings for common stock by $8.2 million.
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.
None for CIPSCO or CIPS.
PART III
Item 10. Directors and Executive Officers of the Registrants.
CIPSCO
The information required by Item 10 relating to each person
who is a nominee for election as director at CIPSCO's 1996 Annual
Meeting of Shareholders is to be set forth in CIPSCO's definitive
proxy statement (the "CIPSCO Proxy Statement") to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 in connection with
CIPSCO's 1996 Annual Meeting of Shareholders. Such information
is incorporated herein by reference to the material appearing
under the caption "Election of Directors -- Director Information"
in the CIPSCO Proxy Statement. Information required by Item 10
relating to executive officers of CIPSCO is set forth under a
separate caption "Executive Officers of CIPSCO" in Part I hereof.
CIPS
The information required by Item 10 relating to each person
who is a nominee for election as director at CIPS' 1996 Annual
Meeting of Shareholders is to be set forth in CIPS' definitive
proxy statement (the "CIPS Proxy Statement") to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 in connection with
CIPS' 1996 Annual Meeting of Shareholders. Such information is
incorporated herein by reference to the material appearing under
the caption "Election of Directors -- Director Information" in
the CIPS Proxy Statement. Information required by Item 10
relating to executive officers of CIPS is set forth under a
separate caption "Executive Officers of CIPS" in Part I hereof.
Item 11. Executive Compensation.
CIPSCO
The information required by Item 11 is to be set forth in
the CIPSCO Proxy Statement. Such information is incorporated
herein by reference to the material appearing under the caption
"Election of Directors -- Executive Compensation" and --
"Directors' Compensation" appearing in the CIPSCO Proxy
Statement; provided, however, that no part of the information
appearing under the portion of the CIPSCO Proxy Statement
entitled "Election of Directors -- Compensation Committee Report
on Executive Compensation" or -- "Performance Graph" is deemed to
be filed as part of this Form 10-K Annual Report.
CIPS
The information required by Item 11 is to be set forth in
the CIPS Proxy Statement. Such information is incorporated
herein by reference to the material appearing under the caption
"Election of Directors -- Executive Compensation" and --
"Directors' Compensation" appearing in the CIPS Proxy Statement;
provided, however, that no part of the information appearing
under the portion of the CIPS Proxy Statement entitled "Election
of Directors -- Compensation Committee Report on Executive
Compensation" or -- "Performance Graph" is deemed to be filed as
part of this Form 10-K Annual Report.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
CIPSCO
The information required by Item 12 is to be set forth in
the CIPSCO Proxy Statement. Such information is incorporated
herein by reference to the material appearing under the captions
"Voting Securities Beneficially Owned by Principal Holders,
Directors, Nominees and Executive Officers" and "Election of
Directors -- Director Information" appearing in the CIPSCO Proxy
Statement.
CIPS
The information required by Item 12 is to be set forth in
the CIPS Proxy Statement. Such information is incorporated
herein by reference to the material appearing under the captions
"Voting Securities Beneficially Owned by Principal Holders,
Directors, Nominees and Executive Officers" and "Election of
Directors -- Director Information" appearing in the CIPS Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
CIPSCO AND CIPS
CIPSCO is the parent company of CIPS. At December 31, 1995,
CIPSCO owned 100% of the common stock of CIPS (representing 96%
of the voting shares of CIPS). There are situations where CIPS
interacts with its affiliated companies through the use of shared
facilities, common employees and other business relationships.
In these situations, CIPS receives payment in accordance with
regulatory requirements for the services provided to affiliated
companies.
Each individual who is a member of the Board of Directors of
CIPSCO is also a member of the Board of Directors of CIPS. Each
of the officers of CIPSCO is also an officer of CIPS.
PART IV
CIPSCO AND CIPS
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
Page of this report
on Form 10-K
___________________
Pro
CIPSCO CIPS Forma
______ ____ _____
(a) 1. Financial statements
Statements of Income for the years ended
December 31, 1995, 1994 and 1993. . . . . . . . 41 69 -
Balance Sheets - December 31, 1995 and 1994 . . 42 70 -
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993. . . . . . . . 43 71 -
Statements of Retained Earnings for the years
ended December 31, 1995, 1994 and 1993. . . . . 44 72 -
Report of Independent Public Accountants. . . . 45 73 -
Notes to Financial Statements . . . . . . . . . 46 74 -
(a) 2. Schedules supporting financial statements . . . - - -
All Financial Statement Schedules have been
omitted as not applicable or not required
or because the information required to be
shown therein is included in the financial
statements or notes thereto.
(a) 3. Unaudited Pro Forma Combined Condensed Financial
Information of CIPSCO And Union Electric
Balance Sheet - December 31, 1995 . . . . . . - - 89
Statements of Income for the years ended
December 31, 1995, 1994 and 1993. . . . . . - - 90
Notes to Unaudited Pro Forma Combined
Condensed Financial Statements. . . . . . . - - 93
Applicable to
Form 10-K of
_____________
CIPSCO CIPS
______ ____
(a) 4. Exhibits
2.01 Agreement and Plan of Merger, dated as of
August 11, 1995, by and among CIPSCO
Incorporated, Union Electric Company, Ameren
Corporation and Arch Merger Inc. (Exhibit 2(a)
filed with CIPSCO's and CIPS' Form 10-Q/A
(Amendment No. 1) for the quarter ended June
30, 1995.) Incorporated by Reference. . . . . . . X X
3.01 Amended and Restated Articles of Incorporation
of CIPSCO. (Exhibit 3.01 filed with CIPSCO's
1990 Annual Report on Form 10-K.) Incorporated
by Reference . . . . . . . . . . . . . . . . . . . X
3.02 Restated Articles of Incorporation of CIPS.
(Exhibit 3(b) filed with CIPS' Form 10-Q for
the quarter ended March 31, 1994.) Incorporated
by Reference . . . . . . . . . . . . . . . . . . . X
3.03 Bylaws of CIPSCO (Exhibit 3.02 filed with CIPSCO's
1993 Annual Report on Form 10-K.) Incorporated by
Reference. . . . . . . . . . . . . . . . . . . . . X
3.04 Bylaws of CIPS (Exhibit 3(c) filed with CIPS'
Form 10-Q for the quarter ended March 31, 1994.)
Incorporated by Reference. . . . . . . . . . . . . X
Applicable to
Form 10-K of
______________
Exhibits (Continued) CIPSCO CIPS
______ ____
4 Indenture of Mortgage or Deed of Trust dated October
1, 1941, from CIPS to Continental Illinois
National Bank and Trust Company of Chicago and
Edmond B. Stofft, as Trustees. (Exhibit 2.01 in
File No. 2-60232.) Supplemental Indentures dated,
respectively September 1, 1947, January 1, 1949,
February 1, 1952, September 1, 1952, June 1, 1954,
February 1, 1958, January 1, 1959, May 1, 1963,
May 1, 1964, June 1, 1965, May 1, 1967, April 1,
1970, April 1, 1971, September 1, 1971, May 1,
1972, December 1, 1973, March 1, 1974, April 1,
1975, October 1, 1976, November 1, 1976, October
1, 1978, August 1, 1979, February 1, 1980,
February 1, 1986, May 15, 1992, July 1, 1992,
September 15, 1992, April 1, 1993, and June 1, 1995
between CIPS and the Trustees under the Indenture
of Mortgage or Deed of Trust referred to above
(Amended Exhibit 7(b) in File No. 2-7341;
Second Amended Exhibit 7.03 in File No. 2-7795;
Second Amended Exhibit 4.07 in File No. 2-9353;
Amended Exhibit 4.05 in file No. 2-9802; Amended
Exhibit 4.02 in File No. 2-10944; Amended Exhibit
2.02 in File No. 2-13866; Amended Exhibit 2.02
in File No. 2-14656; Amended Exhibit 2.02 in File
No. 2-21345; Amended Exhibit 2.02 in File No.
2-22326; Amended Exhibit 2.02 in File No. 2-23569;
Amended Exhibit 2.02 in File No. 2-26284; Amended
Exhibit 2.02 in File No. 2-36388; Amended Exhibit
2.02 in File No. 2-39587; Amended Exhibit 2.02
in File No. 2-41468; Amended Exhibit 2.02 in File
No. 2-43912; Exhibit 2.03 in File No. 2-60232;
Amended Exhibit 2.02 in File No. 2-50146; Amended
Exhibit 2.02 in File No. 2-52886; Second Amended
Exhibit 2.04 in File No. 2-57141; Amended Exhibit
2.04 in File No. 2-57557; Amended Exhibit 2.06 in
File No. 2-62564; Exhibit 2.02(a) in File No.
2-65914; Amended Exhibit 2.02(a) in File No.
2-66380; and Amended Exhibit 4.02 in File No.
33-3188; Exhibit 4.02 to Form 8-K dated May 15,
1992; Exhibit 4.02 to Form 8-K dated July 1, 1992;
Exhibit 4.02 to Form 8-K dated September 15,
1992; Exhibit 4.02 to Form 8-K dated March 30,
1993; Exhibit 4.03 to Form 8-K dated June 5, 1995.)
Incorporated by Reference. . . . . . . . . . . . . . . X X
Applicable to
Form 10-K of
_____________
CIPSCO CIPS Page(s)
______ ____ _______
Exhibits (Continued)
10.01 Form of Deferred Compensation Agreement for
Directors (Exhibit 10.01 filed with
CIPSCO's and CIPS' 1990 Annual Report on
Form 10-K) Incorporated by Reference. . . . . . X X -
10.02 Amended Form of Deferred Compensation
Agreement for Directors (Exhibit 10.02
filed with CIPSCO's and CIPS' 1993
Annual Report on Form 10-K) Incorporated
by Reference. . . . . . . . . . . . . . . . . . X X -
10.03 Form of Management Continuity Agreement
(Exhibit 10.05 filed with CIPSCO's and
CIPS' 1994 Annual Report on Form 10-K.)
Incorporated by Reference . . . . . . . . . . . X X -
10.04 Form of Director's Retirement Income Plan
(Exhibit 10.06 filed with CIPSCO's and
CIPS' 1990 Annual Report on Form 10-K)
Incorporated by Reference . . . . . . . . . . . X X -
10.05 Form of Management Incentive Plan (Exhibit
10.09 filed with CIPSCO's and CIPS' 1990
Annual Report on Form 10-K) Incorporated
by Reference . . . . . . . . . . . . . . . . . . X X -
10.06 Form of Excess Benefit Plan
(Exhibit 10.10 filed with CIPSCO's and
CIPS' 1994 Annual Report on Form 10-K.)
Incorporated by Reference . . . . . . . . . . . X X -
10.07 Amendment to Form of Excess Benefit Plan. . . . X X 97
10.08 Form of Special Executive Retirement Plan
(Exhibit 10.11 filed with CIPSCO's and
CIPS' 1994 Annual Report on Form 10-K.)
Incorporated by Reference . . . . . . . . . . . X X -
10.09 Amendment to Form of Special Executive
Retirement Plan . . . . . . . . . . . . . . . . X X 98
10.10 Stock Option Agreement, dated as of August
11, 1995, by and between CIPSCO Incorporated
and Union Electric Company. (Exhibit
10(a) filed with CIPSCO's and CIPS' Form
10-Q for the quarter ended June 30, 1995.)
Incorporated by Reference . . . . . . . . . . . X X -
10.11 Stock Option Agreement, dated as of August
11, 1995, by and between Union Electric
Company and CIPSCO Incorporated. (Exhibit
10(b) filed with CIPSCO's and CIPS' Form
10-Q for the quarter ended June 30, 1995.)
Incorporated by Reference . . . . . . . . . . . X X -
Applicable to
Form 10-K of
_____________
CIPSCO CIPS Page(s)
______ ____ _______
Exhibits (Continued)
12.01 Computation of Ratio of Earnings to Fixed
Charges - CIPSCO. . . . . . . . . . . . . . . . X 99
12.02 Computation of Ratio of Earnings to Fixed
Charges - CIPS. . . . . . . . . . . . . . . . . X 100
21 Subsidiaries of CIPSCO and CIPS . . . . . . . . X X 101
23.01 Consent of Independent Public Accountants -
CIPSCO. . . . . . . . . . . . . . . . . . . . . X 102
23.02 Consent of Independent Public Accountants -
CIPS. . . . . . . . . . . . . . . . . . . . . . X 103
24.01 Powers of Attorney - CIPSCO . . . . . . . . . . X 104-111
24.02 Powers of Attorney - CIPS . . . . . . . . . . . X 112-119
27.1 Financial Data Schedule of CIPSCO*. . . . . . . X -
27.2 Financial Data Schedule of CIPS*. . . . . . . . X -
99.01 Description of Capital Stock - CIPSCO . . . . . X 120-122
99.02 Description of Capital Stock - CIPS . . . . . . X 123-124
Exhibits 10.01 through 10.11 are management contracts or
compensatory plans or arrangements required to be filed as
exhibits pursuant to Item 14(c) hereof.
* Included in electronic filing only.
The following instruments defining the rights of holders of
certain unregistered long-term debt of CIPS have not been filed
with the Securities and Exchange Commission but will be furnished
upon request.
1. Loan Agreement dated as of March 1, 1990, between CIPS
and the Illinois Development Finance Authority (IDFA) in
connection with the IDFA's $20,000,000 Pollution Control
Revenue Refunding Bonds, 1990 Series A due March 1, 2014
and $32,000,000 Pollution Control Revenue Refunding Bonds,
1990 Series B due September 1, 2013.
2. Loan Agreement dated January 1, 1993, between CIPS and
IDFA in connection with IDFA's $35,000,000, 6-3/8%
Pollution Control Revenue Refunding Bonds (Central
Illinois Public Service Company Project) 1993 Series A,
due January 1, 2028.
3. Loan Agreement dated June 1, 1993, between CIPS and IDFA
in connection with IDFA's $17,500,000 Pollution Control
Revenue Refunding Bonds, 1993 Series B-1 due June 1, 2028
and $17,500,000 Pollution Control Revenue Refunding Bonds,
1993 Series B-2 due June 1, 2028.
4. Loan Agreement dated August 15, 1993, between CIPS and
IDFA in connection with IDFA's $35,000,000 Pollution
Control Revenue Refunding Bonds, 1993 Series C-1 due
August 15, 2026 and $25,000,000 Pollution Control Revenue
Refunding Bonds, 1993 Series C-2 due August 15, 2026.
5. CIPS Credit Agreements with various banks providing
unsecured lines of credit. As of December 31, 1995, the
lines of credit totaled $65,000,000.
(b) Reports on Form 8-K
CIPSCO
None.
CIPS
None.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
OF CIPSCO AND UNION ELECTRIC
The following unaudited pro forma financial information combines
the historical balance sheets and statements of income of CIPSCO
and Union Electric, including their respective subsidiaries,
after giving effect to the Merger. The unaudited pro forma
combined condensed balance sheet at December 31, 1995 gives
effect to the Merger as if it had occurred at December 31, 1995.
The unaudited pro forma combined condensed statements of income
for each of the three years ended December 31, 1995, 1994 and
1993 give effect to the Merger as if it had occurred at the
beginning of the periods presented. These statements are
prepared on the basis of accounting for the Merger as a pooling
of interests and are based on the assumptions set forth in the
notes thereto. In addition, the pro forma financial information
does not give effect to the expected synergies of the
transaction.
The following pro forma financial information has been prepared
from, and should be read in conjunction with, the historical
financial statements and related notes thereto of CIPSCO and
Union Electric. The following information is not necessarily
indicative of the financial position or operating results that
would have occurred had the Merger been consummated on the date,
or at the beginning of the periods, for which the Merger is being
given effect nor is it necessarily indicative of future operating
results or financial position.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
AT DECEMBER 31, 1995
(Thousands of Dollars)
As Reported (Note 1) Pro Forma
_______________________ Adjustments Pro Forma
UE CIPSCO (Notes 2, 9) Combined
ASSETS ___________ __________ ____________ ___________
Property and plant
Electric $8,473,501 $2,296,402 $ 375,024 $11,144,927
Gas 174,231 229,118 - 403,349
Other 35,033 - - 35,033
__________ __________ __________ ___________
8,682,765 2,525,520 375,024 11,583,309
Less accumulated depreciation and amortization 3,494,722 1,132,355 250,686 4,877,763
__________ __________ __________ ___________
5,188,043 1,393,165 124,338 6,705,546
Construction work in progress:
Nuclear fuel in process 121,460 - - 121,460
Other 125,934 72,490 1,176 199,600
__________ __________ __________ ___________
Total property and plant, net 5,435,437 1,465,655 125,514 7,026,606
Regulatory asset - deferred income taxes (Note 6) 732,580 45,083 - 777,663
Other assets:
Unamortized debt expense 44,496 16,474 657 61,627
Nuclear decommissioning trust fund 73,838 - - 73,838
Investments in nonregulated activities - 105,081 - 105,081
Other 20,101 28,465 (1,156) 47,410
__________ __________ __________ ___________
Total other assets 138,435 150,020 (499) 287,956
Current assets:
Cash and temporary investments 1,025 8,235 265 9,525
Accounts receivable, net 191,520 65,267 17,222 274,009
Unbilled revenue 82,098 27,234 - 109,332
Materials and supplies, at average cost -
Fossil fuel 46,381 52,408 8,577 107,366
Other 92,921 40,246 5,949 139,116
Other 34,072 18,846 3,560 56,478
__________ __________ __________ ___________
Total current assets 448,017 212,236 35,573 695,826
__________ __________ __________ ___________
Total Assets $6,754,469 $1,872,994 $ 160,588 $ 8,788,051
========== ========== ========== ===========
CAPITAL AND LIABILITIES
Capitalization:
Common stock (Note 2) $ 510,619 $ 356,812 $ (866,059) $ 1,372
Other stockholders' equity (Note 2) 1,808,578 294,720 866,059 2,969,357
__________ __________ __________ ___________
Total common stockholders' equity 2,319,197 651,532 - 2,970,729
Preferred stock of subsidiary 219,147 80,000 - 299,147
Long-term debt 1,763,613 478,926 130,000 2,372,539
__________ __________ __________ ___________
Total capitalization 4,301,957 1,210,458 130,000 5,642,415
Minority interest in consolidated subsidiary - - 3,534 3,534
Accumulated deferred income taxes 1,357,689 325,181 (5,724) 1,677,146
Accumulated deferred investment tax credits 166,524 52,234 - 218,758
Regulatory liability 216,502 113,206 - 329,708
Accumulated provision for nuclear decommissioning 75,511 - - 75,511
Other deferred credits and liabilities 150,600 - 5,511 156,111
Current liabilities:
Current maturity of long-term debt 69,462 - - 69,462
Short-term debt 19,600 47,921 10,000 77,521
Accounts payable 169,012 60,603 14,160 243,775
Wages payable 36,605 9,335 - 45,940
Taxes accrued 75,142 11,266 9 86,417
Interest accrued 46,244 9,525 527 56,296
Other 69,621 33,265 2,571 105,457
__________ __________ __________ ___________
Total current liabilities 485,686 171,915 27,267 684,868
__________ __________ __________ ___________
Total Capital and Liabilities $6,754,469 $1,872,994 $ 160,588 $ 8,788,051
========== ========== ========== ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,4,10) (Notes 1,3,4) (Notes 2,9) Combined
_____________ _____________ ____________ ____________
OPERATING REVENUES:
Electric $ 2,014,452 $ 703,483 $ 181,985 $ 2,899,920
Gas 87,814 129,606 - 217,420
Other 441 9,173 362 9,976
___________ ___________ ___________ ___________
Total operating revenues 2,102,707 842,262 182,347 3,127,316
OPERATING EXPENSES:
Operations
Fuel and purchased power 365,158 248,226 97,664 711,048
Gas Costs 51,251 74,054 - 125,305
Other 367,870 155,368 19,148 542,386
___________ ___________ ___________ ___________
784,279 477,648 116,812 1,378,739
Maintenance 221,609 67,996 17,941 307,546
Depreciation and amortization 233,237 83,263 15,747 332,247
Income taxes (Note 7) 209,541 45,772 8,090 263,403
Other taxes 212,145 56,613 1,911 270,669
___________ ___________ ___________ ___________
Total operating expenses 1,660,811 731,292 160,501 2,552,604
OPERATING INCOME 441,896 110,970 21,846 574,712
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 6,827 889 - 7,716
Minority interest in consolidated subsidiary - - (4,558) (4,558)
Miscellaneous, net (5,981) (2,298) (6,972) (15,251)
___________ ___________ ___________ ___________
Total other income and deductions, net 846 (1,409) (11,530) (12,093)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 442,742 109,561 10,316 562,619
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 134,741 33,769 10,316 178,826
Allowance for borrowed funds used during
construction (6,106) (73) - (6,179)
Preferred dividends of subsidiaries (Note 8) 13,250 3,850 - 17,100
___________ ___________ ___________ ___________
Net interest charges and preferred dividends 141,885 37,546 10,316 189,747
NET INCOME $ 300,857 $ 72,015 $ - $ 372,872
=========== =========== =========== ===========
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $2.95 $2.11 $2.72
===== ===== =====
AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462
=========== =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Note 1) (Note 1) (Notes 2,9) Combined
_____________ _____________ ____________ ____________
OPERATING REVENUES:
Electric $ 1,969,533 $ 697,427 $ 245,189 $ 2,912,149
Gas 86,109 138,418 - 224,527
Other 474 8,770 181 9,425
____________ ___________ __________ ____________
Total operating revenues 2,056,116 844,615 245,370 3,146,101
OPERATING EXPENSES:
Operations
Fuel and purchased power 329,562 251,867 157,618 739,047
Gas Costs 60,096 85,043 - 145,139
Other 375,570 140,068 19,952 535,590
____________ ___________ __________ ____________
765,228 476,978 177,570 1,419,776
Maintenance 197,760 65,176 19,076 282,012
Depreciation and amortization 226,045 81,099 13,776 320,920
Income taxes (Note 7) 206,421 49,082 9,739 265,242
Other taxes 210,476 56,017 1,929 268,422
____________ ___________ __________ ____________
Total operating expenses 1,605,930 728,352 222,090 2,556,372
OPERATING INCOME 450,186 116,263 23,280 589,729
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 5,767 630 - 6,397
Minority interest in consolidated subsidiary - - (5,554) (5,554)
Miscellaneous, net 403 3,502 (8,297) (4,392)
____________ ___________ __________ ____________
Total other income and deductions, net 6,170 4,132 (13,851) (3,549)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 456,356 120,395 9,429 586,180
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 141,112 33,220 9,429 183,761
Allowance for borrowed funds used during
construction (5,513) (289) - (5,802)
Preferred dividends of subsidiaries (Note 8) 13,252 3,510 - 16,762
____________ ___________ __________ ____________
Net interest charges and preferred dividends 148,851 36,441 9,429 194,721
NET INCOME $ 307,505 $ 83,954 $ - $ 391,459
============ =========== ========== ============
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $3.01 $2.46 $2.85
===== ===== =====
AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,106,585 1,023,198 137,253,617
============ =========== ========== ============
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
YEAR ENDED DECEMBER 30, 1993
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Note 1) (Note 1) (Notes 2,9) Combined
_____________ _____________ ____________ ____________
OPERATING REVENUES:
Electric $ 1,965,980 $ 688,820 $ 228,178 $ 2,882,978
Gas 99,552 145,702 - 245,254
Other 472 10,238 2 10,712
____________ ___________ __________ ____________
Total operating revenues 2,066,004 844,760 228,180 3,138,944
OPERATING EXPENSES:
Operations
Fuel and purchased power 413,054 247,119 136,332 796,505
Gas Costs 66,718 90,097 - 156,815
Other 378,817 142,716 37,981 559,514
____________ ___________ __________ ____________
858,589 479,932 174,313 1,512,834
Maintenance 190,097 61,218 18,378 269,693
Depreciation and amortization 219,633 78,062 7,094 304,789
Income taxes (Note 7) 179,475 51,861 8,315 239,651
Other taxes 206,913 54,813 1,770 263,496
____________ ___________ __________ ____________
Total operating expenses 1,654,707 725,886 209,870 2,590,463
OPERATING INCOME 411,297 118,874 18,310 548,481
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 6,418 1,459 - 7,877
Minority interest in consolidated subsidiary - - (5,204) (5,204)
Miscellaneous, net 3,919 3,107 (7,089) (63)
____________ ___________ __________ ____________
Total other income and deductions, net 10,337 4,566 (12,293) 2,610
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 421,634 123,440 6,017 551,091
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 129,600 35,024 6,017 170,641
Allowance for borrowed funds used during
construction (5,126) (800) - (5,926)
Preferred dividends of subsidiaries (Note 8) 14,087 3,718 - 17,805
____________ ___________ __________ ____________
Net interest charges and preferred dividends 138,561 37,942 6,017 182,520
NET INCOME $ 283,073 $ 85,498 $ - $ 368,571
============ =========== ========== ============
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $2.77 $2.51 $2.69
===== ===== =====
AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,107,706 1,023,231 137,254,771
============ =========== ========== ============
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements.
AMEREN CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. Reclassifications have been made to certain "as reported" account
balances reflected in CIPSCO's and Union Electric's financial
statements to conform to this reporting presentation (See Notes 6,
7 and 8). All other financial statement presentation and
accounting policy differences are immaterial and have not been
adjusted in the pro forma combined condensed financial statements.
2. The pro forma combined condensed financial statements reflect the
conversion of each share of Union Electric Common Stock ($5 par
value) outstanding into one share of Ameren Common Stock ($.01
par value) and the conversion of each share of CIPSCO Common Stock
(no par value) outstanding into 1.03 shares of Ameren Common
Stock, as provided in the Merger Agreement. The pro forma combined
condensed financial statements are presented as if the companies
were combined during all periods included therein.
3. CIPSCO's net income for the year ended December 31, 1995 includes
pre-tax charges of $5.8 million for the voluntary separation
program, and a pretax charge of $5.7 million for merger-related
write-offs involving previously deferred system development costs.
4. The allocation between Union Electric and CIPSCO and their
customers of the estimated cost savings resulting from the Mergers,
net of the costs incurred to achieve such savings, will be subject
to regulatory review and approval. Transaction costs are currently
estimated to be approximately $22 million (including fees for
financial advisors, attorneys, accountants, consultants, filings
and printing). None of these estimated cost savings or the costs
to achieve such savings have been reflected in the pro forma
combined condensed financial statements. However, net income for
the year ended December 31, 1995 includes $9 million of merger
transaction costs for Union Electric, and $4.7 million of merger
transaction costs for CIPSCO which are not tax deductible by either
company.
5. Intercompany transactions (including purchased and exchanged power
transactions) between Union Electric and CIPSCO during the periods
presented were not material and, accordingly, no pro forma
adjustments were made to eliminate such transactions.
6. CIPSCO's regulatory asset related to deferred income taxes was
reclassified from the regulatory liability account balance to
conform to this reporting presentation.
7. CIPSCO's income taxes are reflected as operating expenses to
conform to this reporting presentation.
8. Currently, the Union Electric Preferred Stock is not issued by a
subsidiary; subsequent to the Merger, the Union Electric Preferred
Stock will be issued by a subsidiary of Ameren. As a result,
Union Electric's preferred dividend requirements have been
reclassified to conform to this reporting presentation.
9. Pro forma adjustments have been made to consolidate the financial
results of Electric Energy, Inc. (EEI), which will, in substance,
be a 60% owned subsidiary of Ameren subsequent to the Merger.
Union Electric and CIPSCO hold 40% and 20% ownership interests,
respectively, in EEI and account for these investments under the
equity method of accounting. All intercompany transactions between
Union Electric, CIPSCO and EEI have been eliminated.
10. Net income for the year ended December 31, 1995 includes a one-time
credit to Missouri electric customers which reduced revenues and
pre-tax income of Union Electric by $30 million.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CIPSCO Incorporated
(Registrant)
By /s/ C. L. GREENWALT
_____________________________________
C. L. Greenwalt
President and Chief Executive Officer
Date: March 4, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities and on the date indicated.
Signature Title
Principal Executive Officer:
/s/ C. L. GREENWALT
____________________
C. L. GREENWALT President and Chief Executive Officer
and Director
Principal Financial Officer:
/s/ W. A. KOERTNER
___________________
W. A. KOERTNER Vice President, Chief Financial Officer,
Secretary, and as Attorney-in-Fact*
Principal Accounting Officer:
/s/ L. E. MARLETT
__________________
L. E. MARLETT Controller, Chief Accounting Officer
and Assistant Treasurer
WILLIAM J. ALLEY* Director
JOHN L. HEATH* Director
ROBERT W. JACKSON* Director
GORDON R. LOHMAN* Director
RICHARD A. LUMPKIN* Director
HANNE M. MERRIMAN* Director
THOMAS L. SHADE* Director
JAMES W. WOGSLAND* Director
Date: March 4, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Registrant)
By /s/ C. L. GREENWALT
_____________________________________
C. L. Greenwalt
President and Chief Executive Officer
Date: March 4, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities and on the date indicated.
Signature Title
Principal Executive Officer:
/s/ C. L. GREENWALT
____________________
C. L. GREENWALT President and Chief Executive Officer
and Director
Principal Financial Officer:
/s/ W. A. KOERTNER
___________________
W. A. KOERTNER Vice President and Secretary, and as
Attorney-in-Fact*
Principal Accounting Officer:
/s/ L. E. MARLETT
__________________
L. E. MARLETT Controller
WILLIAM J. ALLEY* Director
JOHN L. HEATH* Director
ROBERT W. JACKSON* Director
GORDON R. LOHMAN* Director
RICHARD A. LUMPKIN* Director
HANNE M. MERRIMAN* Director
THOMAS L. SHADE* Director
JAMES W. WOGSLAND* Director
Date: March 4, 1996