Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
N/A | N/A | N/A |
Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | ||||||||||
☐ | ☑ | ☐ | ☐ |
Item No. | Page No. | |||||||
DEFINED TERMS | ||||||||
FORWARD-LOOKING STATEMENTS | ||||||||
PART I - FINANCIAL INFORMATION | ||||||||
1. | Financial Statements | |||||||
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended | ||||||||
September 30, 2020 and 2019 | ||||||||
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine | ||||||||
Months Ended September 30, 2020 and 2019 | ||||||||
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 | ||||||||
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended | ||||||||
September 30, 2020 and 2019 | ||||||||
Unaudited Condensed Consolidated Statements of Common Shareholders' Equity and | ||||||||
Noncontrolling Interest for the Three and Nine Months Ended September 30, 2020 and 2019 | ||||||||
Notes to Unaudited Condensed Consolidated Financial Statements | ||||||||
Note 1 - Overview and Summary of Significant Accounting Policies | ||||||||
Note 2 - Regulatory Matters | ||||||||
Note 3 - Fair Value | ||||||||
Note 4 - Derivative Instruments and Hedging Activities | ||||||||
Note 5 - Debt | ||||||||
Note 6 - Income Taxes | ||||||||
Note 7 - Benefit Plans | ||||||||
Note 8 - Commitments and Contingencies | ||||||||
Note 9 - Business Segment Information | ||||||||
Note 10 - Revenue | ||||||||
Note 11 - Leases | ||||||||
Note 12 - Risks and Uncertainties | ||||||||
2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
3. | Quantitative and Qualitative Disclosure About Market Risk | |||||||
4. | Controls and Procedures | |||||||
PART II - OTHER INFORMATION | ||||||||
1. | Legal Proceedings | |||||||
1A. | Risk Factors | |||||||
2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
3. | Defaults Upon Senior Securities | |||||||
4. | Mine Safety Disclosures | |||||||
5. | Other Information | |||||||
6. | Exhibits | |||||||
SIGNATURES |
Item No. | Page No. | |
DEFINED TERMS | ||
FORWARD-LOOKING STATEMENTS | ||
PART I - FINANCIAL INFORMATION | ||
1. | Financial Statements | |
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended | ||
March 31, 2020 and 2019 | ||
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three | ||
Months Ended March 31, 2020 and 2019 | ||
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 | ||
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended | ||
March 31, 2020 and 2019 | ||
Unaudited Condensed Consolidated Statements of Common Shareholders' Equity (Deficit) and | ||
Noncontrolling Interest for the Three Months Ended March 31, 2020 and 2019 | ||
Notes to Unaudited Condensed Consolidated Financial Statements | ||
Note 1 - Overview and Summary of Significant Accounting Policies | ||
Note 2 - Regulatory Matters | ||
Note 3 - Fair Value | ||
Note 4 - Derivative Instruments and Hedging Activities | ||
Note 5 - Debt | ||
Note 6 - Income Taxes | ||
Note 7 - Benefit Plans | ||
Note 8 - Commitments and Contingencies | ||
Note 9 - Business Segment Information | ||
Note 10 - Revenue | ||
Note 11 - Leases | ||
Note 12 - Risks and Uncertainties | ||
2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
3. | Quantitative and Qualitative Disclosure About Market Risk | |
4. | Controls and Procedures | |
PART II - OTHER INFORMATION | ||
1. | Legal Proceedings | |
1A. | Risk Factors | |
2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
3. | Defaults Upon Senior Securities | |
4. | Mine Safety Disclosures | |
5. | Other Information | |
6. | Exhibits | |
SIGNATURES |
DEFINED TERMS | |||||
The following is a list of frequently used abbreviations or acronyms that are found in this Form 10-Q: | |||||
2018 Base Rate Order | The order issued in October 2018 by the IURC authorizing IPL to, among other things, increase its basic rates and charges by $43.9 million annually | ||||
2019 Form 10-K | IPALCO’s Annual Report on Form 10-K for the year ended December 31, 2019, as amended | ||||
2020 IPALCO Notes | $405 million of 3.45% Senior Secured Notes due July 15, 2020 | ||||
2024 IPALCO Notes | $405 million of 3.70% Senior Secured Notes due September 1, 2024 | ||||
2030 IPALCO Notes | $475 million of 4.25% Senior Secured Notes due May 1, 2030 | ||||
AES | The AES Corporation | ||||
AES U.S. Investments | AES U.S. Investments, Inc. | ||||
AOCI | Accumulated Other Comprehensive Income | ||||
AOCL | Accumulated Other Comprehensive Loss | ||||
Accounting Standards Codification | |||||
ASU | Accounting Standards Update | ||||
CAA | U.S. Clean Air Act | ||||
CCGT | Combined Cycle Gas Turbine | ||||
CCR | Coal Combustion Residuals | ||||
CDPQ | CDP Infrastructures Fund G.P., a wholly-owned subsidiary of La Caisse de dépôt et placement du Québec | ||||
CECL | Current Expected Credit Loss | ||||
CO2 | Carbon Dioxide | ||||
COVID-19 | The disease caused by the novel coronavirus that caused a global pandemic in | ||||
CPP | Clean Power Plan | ||||
Credit Agreement | $250 million IPL Revolving Credit Facilities Amended and Restated Credit Agreement, dated as of June 19, 2019 | ||||
Cross-State Air Pollution Rule | |||||
Cumulative Deficiencies | Cumulative Net Operating Income Deficiencies. The Cumulative Deficiencies calculation provides that only five years' worth of historical earnings deficiencies or surpluses are included, unless it has been greater than five years since the most recent rate case. | ||||
CWA | U.S. Clean Water Act | ||||
U.S. Department of Justice | |||||
ECCRA | Environmental Compliance Cost Recovery Adjustment | ||||
EPA | U.S. Environmental Protection Agency | ||||
FAC | Fuel Adjustment Clause | ||||
FERC | Federal Energy Regulatory Commission | ||||
Financial Statements | Unaudited Condensed Consolidated Financial Statements of IPALCO in “Item 1. Financial Statements” included in Part I – Financial Information of this Form 10-Q | ||||
FTRs | Financial Transmission Rights | ||||
GAAP | Generally Accepted Accounting Principles in the United States | ||||
GHG | Greenhouse Gas | ||||
Indiana Department of Environmental Management | |||||
IPALCO | IPALCO Enterprises, Inc. | ||||
IPL | Indianapolis Power & Light Company | ||||
IRP | Integrated Resource Plan | ||||
IURC | Indiana Utility Regulatory Commission | ||||
kWh | Kilowatt hours | ||||
LIBOR | London Interbank Offered Rate | ||||
MISO | Midcontinent Independent System Operator, Inc. | ||||
MW | Megawatts | ||||
MWh | Megawatt hours | ||||
NAAQS | National Ambient Air Quality Standards | ||||
NOV | Notice of Violation | ||||
NOx | Nitrogen Oxide |
NSR | New Source Review | ||||
NWP 12 | Nationwide Permit 12 | ||||
OUCC | Indiana Office of Utility Consumer Counselor | ||||
Pension Plans | Employees’ Retirement Plan of Indianapolis Power & Light Company and Supplemental Retirement Plan of Indianapolis Power & Light Company | ||||
PSD | Prevention of Significant Deterioration | ||||
SEC | United States Securities and Exchange Commission | ||||
SIP | State Implementation Plan | ||||
SO2 | Sulfur Dioxide |
T&D | Transmission & Distribution | ||||
Term Loan | $65 million IPALCO Term Loan Facility Credit Agreement, dated as of October 31, 2018 | ||||
TDSIC | Transmission, Distribution, and Storage System Improvement Charge | ||||
U.S. | United States of America | ||||
USD | United States Dollars | ||||
VEBA | Voluntary Employees' Beneficiary Association | ||||
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | |||||||||||||||||
Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||||
(In Thousands) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
REVENUES | $ | 356,088 | $ | 398,456 | $ | 1,024,973 | $ | 1,121,634 | |||||||||
OPERATING COSTS AND EXPENSES: | |||||||||||||||||
Fuel | 73,901 | 93,217 | 186,040 | 254,233 | |||||||||||||
Power purchased | 26,987 | 31,840 | 105,536 | 101,483 | |||||||||||||
Operation and maintenance | 100,455 | 105,975 | 300,703 | 321,782 | |||||||||||||
Depreciation and amortization | 62,359 | 60,373 | 184,166 | 179,939 | |||||||||||||
Taxes other than income taxes | 10,399 | 12,943 | 34,063 | 33,909 | |||||||||||||
Total operating costs and expenses | 274,101 | 304,348 | 810,508 | 891,346 | |||||||||||||
OPERATING INCOME | 81,987 | 94,108 | 214,465 | 230,288 | |||||||||||||
OTHER INCOME / (EXPENSE), NET: | |||||||||||||||||
Allowance for equity funds used during construction | 1,099 | 810 | 3,116 | 2,538 | |||||||||||||
Interest expense | (32,741) | (30,620) | (96,757) | (91,393) | |||||||||||||
Loss on early extinguishment of debt | 0 | 0 | (2,415) | 0 | |||||||||||||
Other income / (expense), net | 935 | (2,704) | 2,914 | (7,977) | |||||||||||||
Total other income / (expense), net | (30,707) | (32,514) | (93,142) | (96,832) | |||||||||||||
EARNINGS FROM OPERATIONS BEFORE INCOME TAX | 51,280 | 61,594 | 121,323 | 133,456 | |||||||||||||
Less: Income tax expense | 10,981 | 13,088 | 25,918 | 28,252 | |||||||||||||
NET INCOME | 40,299 | 48,506 | 95,405 | 105,204 | |||||||||||||
Less: Dividends on preferred stock | 803 | 803 | 2,410 | 2,410 | |||||||||||||
NET INCOME APPLICABLE TO COMMON STOCK | $ | 39,496 | $ | 47,703 | $ | 92,995 | $ | 102,794 | |||||||||
See notes to unaudited condensed consolidated financial statements. |
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | ||||||
Unaudited Condensed Consolidated Statements of Operations | ||||||
(In Thousands) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2020 | 2019 | |||||
REVENUES | $ | 357,382 | $ | 382,309 | ||
OPERATING COSTS AND EXPENSES: | ||||||
Fuel | 68,788 | 88,799 | ||||
Power purchased | 35,467 | 32,924 | ||||
Operation and maintenance | 105,590 | 102,146 | ||||
Depreciation and amortization | 60,708 | 59,669 | ||||
Taxes other than income taxes | 12,057 | 13,983 | ||||
Total operating costs and expenses | 282,610 | 297,521 | ||||
OPERATING INCOME | 74,772 | 84,788 | ||||
OTHER INCOME / (EXPENSE), NET: | ||||||
Allowance for equity funds used during construction | 857 | 911 | ||||
Interest expense | (30,081 | ) | (30,482 | ) | ||
Other income / (expense), net | 207 | (3,228 | ) | |||
Total other income / (expense), net | (29,017 | ) | (32,799 | ) | ||
EARNINGS FROM OPERATIONS BEFORE INCOME TAX | 45,755 | 51,989 | ||||
Less: Income tax expense | 9,772 | 10,204 | ||||
NET INCOME | 35,983 | 41,785 | ||||
Less: Dividends on preferred stock | 803 | 803 | ||||
NET INCOME APPLICABLE TO COMMON STOCK | $ | 35,180 | $ | 40,982 | ||
See notes to unaudited condensed consolidated financial statements. |
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | IPALCO ENTERPRISES, INC. and SUBSIDIARIES | IPALCO ENTERPRISES, INC. and SUBSIDIARIES | |||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss) | Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss) | Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss) | |||||||||||||||||||||
(In Thousands) | (In Thousands) | (In Thousands) | |||||||||||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
March 31, | September 30, | September 30, | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||
Net income applicable to common stock | $ | 35,180 | $ | 40,982 | Net income applicable to common stock | $ | 39,496 | $ | 47,703 | $ | 92,995 | $ | 102,794 | ||||||||||
Derivative activity: | Derivative activity: | ||||||||||||||||||||||
Change in derivative fair value, net of income tax benefit of $12,522 and $1,890, for each respective period | (36,313 | ) | (5,539 | ) | |||||||||||||||||||
Change in derivative fair value, net of income tax (charge)/benefit of $(1,278), $4,322, $12,632 and $10,188, for each respective period | Change in derivative fair value, net of income tax (charge)/benefit of $(1,278), $4,322, $12,632 and $10,188, for each respective period | 3,707 | (12,534) | (36,632) | (29,722) | ||||||||||||||||||
Reclassification to earnings, net of income tax benefit of $463, $0, $926 and $0, for each respective period | Reclassification to earnings, net of income tax benefit of $463, $0, $926 and $0, for each respective period | 1,344 | 0 | 2,688 | 0 | ||||||||||||||||||
Net change in fair value of derivatives | (36,313 | ) | (5,539 | ) | Net change in fair value of derivatives | 5,051 | (12,534) | (33,944) | (29,722) | ||||||||||||||
Other comprehensive loss | (36,313 | ) | (5,539 | ) | |||||||||||||||||||
Other comprehensive income / (loss) | Other comprehensive income / (loss) | 5,051 | (12,534) | (33,944) | (29,722) | ||||||||||||||||||
Net comprehensive income | $ | (1,133 | ) | $ | 35,443 | Net comprehensive income | $ | 44,547 | $ | 35,169 | $ | 59,051 | $ | 73,072 | |||||||||
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | ||||||
Unaudited Condensed Consolidated Balance Sheets | ||||||
(In Thousands) | ||||||
March 31, | December 31, | |||||
2020 | 2019 | |||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 45,351 | $ | 48,152 | ||
Restricted cash | 10,140 | 400 | ||||
Accounts receivable, net of allowance for credit losses of $1,049 and $921, respectively | 156,435 | 161,090 | ||||
Inventories | 90,305 | 83,569 | ||||
Regulatory assets, current | 39,438 | 37,398 | ||||
Taxes receivable | 15,817 | 23,670 | ||||
Prepayments and other current assets | 22,753 | 17,264 | ||||
Total current assets | 380,239 | 371,543 | ||||
NON-CURRENT ASSETS: | ||||||
Property, plant and equipment | 6,427,163 | 6,398,612 | ||||
Less: Accumulated depreciation | 2,453,606 | 2,414,652 | ||||
3,973,557 | 3,983,960 | |||||
Construction work in progress | 139,945 | 130,609 | ||||
Total net property, plant and equipment | 4,113,502 | 4,114,569 | ||||
OTHER NON-CURRENT ASSETS: | ||||||
Intangible assets - net | 62,659 | 64,861 | ||||
Regulatory assets, non-current | 350,436 | 355,614 | ||||
Other non-current assets | 18,517 | 22,082 | ||||
Total other non-current assets | 431,612 | 442,557 | ||||
TOTAL ASSETS | $ | 4,925,353 | $ | 4,928,669 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Short-term debt and current portion of long-term debt (Note 5) | $ | 89,915 | $ | 559,199 | ||
Accounts payable | 113,294 | 128,521 | ||||
Accrued taxes | 29,541 | 22,012 | ||||
Accrued interest | 37,933 | 35,334 | ||||
Customer deposits | 34,218 | 34,635 | ||||
Regulatory liabilities, current | 52,361 | 52,654 | ||||
Derivative liabilities, current | 75,395 | 26,560 | ||||
Accrued and other current liabilities | 21,133 | 23,300 | ||||
Total current liabilities | 453,790 | 882,215 | ||||
NON-CURRENT LIABILITIES: | ||||||
Long-term debt (Note 5) | 2,562,458 | 2,092,430 | ||||
Deferred income tax liabilities | 265,119 | 272,861 | ||||
Taxes payable | 4,658 | 4,658 | ||||
Regulatory liabilities, non-current | 838,131 | 846,430 | ||||
Accrued pension and other postretirement benefits | 17,618 | 19,344 | ||||
Asset retirement obligations | 204,750 | 204,219 | ||||
Other non-current liabilities | 284 | 252 | ||||
Total non-current liabilities | 3,893,018 | 3,440,194 | ||||
Total liabilities | 4,346,808 | 4,322,409 | ||||
COMMITMENTS AND CONTINGENCIES (Note 8) | ||||||
SHAREHOLDERS' EQUITY: | ||||||
Paid in capital | 590,833 | 590,784 | ||||
Accumulated other comprehensive loss | (56,063 | ) | (19,750 | ) | ||
Accumulated deficit | (16,009 | ) | (24,558 | ) | ||
Total common shareholders' equity | 518,761 | 546,476 | ||||
Preferred stock of subsidiary | 59,784 | 59,784 | ||||
Total shareholders' equity | 578,545 | 606,260 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 4,925,353 | $ | 4,928,669 | ||
See notes to unaudited condensed consolidated financial statements. |
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | ||||||||
Unaudited Condensed Consolidated Balance Sheets | ||||||||
(In Thousands) | ||||||||
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 38,815 | $ | 48,152 | ||||
Restricted cash | 20,513 | 400 | ||||||
Accounts receivable, net of allowance for credit losses of $3,520 and $921, respectively | 158,560 | 161,090 | ||||||
Inventories | 95,652 | 83,569 | ||||||
Regulatory assets, current | 41,663 | 37,398 | ||||||
Taxes receivable | 22,203 | 23,670 | ||||||
Prepayments and other current assets | 23,424 | 17,264 | ||||||
Total current assets | 400,830 | 371,543 | ||||||
NON-CURRENT ASSETS: | ||||||||
Property, plant and equipment | 6,490,135 | 6,398,612 | ||||||
Less: Accumulated depreciation | 2,533,889 | 2,414,652 | ||||||
3,956,246 | 3,983,960 | |||||||
Construction work in progress | 179,330 | 130,609 | ||||||
Total net property, plant and equipment | 4,135,576 | 4,114,569 | ||||||
OTHER NON-CURRENT ASSETS: | ||||||||
Intangible assets - net | 58,099 | 64,861 | ||||||
Regulatory assets, non-current | 341,066 | 355,614 | ||||||
Other non-current assets | 22,729 | 22,082 | ||||||
Total other non-current assets | 421,894 | 442,557 | ||||||
TOTAL ASSETS | $ | 4,958,300 | $ | 4,928,669 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Short-term debt and current portion of long-term debt (Note 5) | $ | 234,853 | $ | 559,199 | ||||
Accounts payable | 118,392 | 128,521 | ||||||
Accrued taxes | 27,231 | 22,012 | ||||||
Accrued interest | 44,195 | 35,334 | ||||||
Customer deposits | 27,747 | 34,635 | ||||||
Regulatory liabilities, current | 46,871 | 52,654 | ||||||
Derivative liabilities, current | 0 | 26,560 | ||||||
Accrued and other current liabilities | 19,989 | 23,300 | ||||||
Total current liabilities | 519,278 | 882,215 | ||||||
NON-CURRENT LIABILITIES: | ||||||||
Long-term debt (Note 5) | 2,467,139 | 2,092,430 | ||||||
Deferred income tax liabilities | 266,243 | 272,861 | ||||||
Taxes payable | 7,875 | 4,658 | ||||||
Regulatory liabilities, non-current | 836,976 | 846,430 | ||||||
Accrued pension and other postretirement benefits | 14,166 | 19,344 | ||||||
Asset retirement obligations | 199,130 | 204,219 | ||||||
Derivative liabilities, non-current | 75,824 | 0 | ||||||
Other non-current liabilities | 226 | 252 | ||||||
Total non-current liabilities | 3,867,579 | 3,440,194 | ||||||
Total liabilities | 4,386,857 | 4,322,409 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 8) | ||||||||
SHAREHOLDERS' EQUITY: | ||||||||
Paid in capital | 589,911 | 590,784 | ||||||
Accumulated other comprehensive loss | (53,694) | (19,750) | ||||||
Accumulated deficit | (24,558) | (24,558) | ||||||
Total common shareholders' equity | 511,659 | 546,476 | ||||||
Preferred stock of subsidiary | 59,784 | 59,784 | ||||||
Total shareholders' equity | 571,443 | 606,260 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 4,958,300 | $ | 4,928,669 | ||||
See notes to unaudited condensed consolidated financial statements. |
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | ||||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||
(In Thousands) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2020 | 2019 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 35,983 | $ | 41,785 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 60,708 | 59,669 | ||||
Amortization of deferred financing costs and debt premium | 1,100 | 1,020 | ||||
Deferred income taxes and investment tax credit adjustments - net | 2,467 | 17,982 | ||||
Allowance for equity funds used during construction | (857 | ) | (911 | ) | ||
Change in certain assets and liabilities: | ||||||
Accounts receivable | 4,655 | (2,974 | ) | |||
Inventories | (8,265 | ) | 1,724 | |||
Accounts payable | (7,940 | ) | (14,360 | ) | ||
Accrued and other current liabilities | (2,514 | ) | 2,318 | |||
Accrued taxes payable/receivable | 15,382 | (2,141 | ) | |||
Accrued interest | 2,599 | 2,641 | ||||
Pension and other postretirement benefit expenses | (1,726 | ) | 1,361 | |||
Short-term and long-term regulatory assets and liabilities | (3,226 | ) | 1,572 | |||
Prepayments and other current assets | (5,488 | ) | (1,120 | ) | ||
Other - net | 4,698 | (1,106 | ) | |||
Net cash provided by operating activities | 97,576 | 107,460 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Capital expenditures | (54,490 | ) | (70,929 | ) | ||
Project development costs | (751 | ) | (574 | ) | ||
Cost of removal and regulatory recoverable ARO payments | (7,962 | ) | (6,315 | ) | ||
Other | — | 278 | ||||
Net cash used in investing activities | (63,203 | ) | (77,540 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Distributions to shareholders | (26,631 | ) | (31,590 | ) | ||
Preferred dividends of subsidiary | (803 | ) | (803 | ) | ||
Payments for financed capital expenditures | — | (5,224 | ) | |||
Other | — | (152 | ) | |||
Net cash used in financing activities | (27,434 | ) | (37,769 | ) | ||
Net change in cash, cash equivalents and restricted cash | 6,939 | (7,849 | ) | |||
Cash, cash equivalents and restricted cash at beginning of period | 48,552 | 33,599 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 55,491 | $ | 25,750 | ||
Supplemental disclosures of cash flow information: | ||||||
Cash paid during the period for: | ||||||
Interest (net of amount capitalized) | $ | 26,438 | $ | 26,682 | ||
Non-cash investing activities: | ||||||
Accruals for capital expenditures | $ | 28,184 | $ | 45,403 | ||
See notes to unaudited condensed consolidated financial statements. |
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | ||||||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
(In Thousands) | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 95,405 | $ | 105,204 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 184,166 | 179,939 | ||||||
Amortization of deferred financing costs and debt discounts | 3,006 | 3,081 | ||||||
Deferred income taxes and investment tax credit adjustments - net | (2,001) | 15,109 | ||||||
Allowance for equity funds used during construction | (3,116) | (2,538) | ||||||
Loss on early extinguishment of debt | 2,415 | 0 | ||||||
Change in certain assets and liabilities: | ||||||||
Accounts receivable | 2,530 | (5,117) | ||||||
Inventories | (16,652) | 7,688 | ||||||
Accounts payable | (24,228) | (46,063) | ||||||
Accrued and other current liabilities | (9,041) | 3,560 | ||||||
Accrued taxes payable/receivable | 9,904 | (9,670) | ||||||
Accrued interest | 8,861 | 2,965 | ||||||
Pension and other postretirement benefit expenses | (5,179) | 4,082 | ||||||
Short-term and long-term regulatory assets and liabilities | 828 | 2,213 | ||||||
Prepayments and other current assets | (6,159) | (3,576) | ||||||
Other - net | 421 | 2,895 | ||||||
Net cash provided by operating activities | 241,160 | 259,772 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Capital expenditures | (149,369) | (126,066) | ||||||
Project development costs | (1,848) | (1,268) | ||||||
Cost of removal and regulatory recoverable ARO payments | (29,483) | (14,067) | ||||||
Other | 119 | 278 | ||||||
Net cash used in investing activities | (180,581) | (141,123) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Borrowings under revolving credit facilities | 80,000 | 10,000 | ||||||
Repayments under revolving credit facilities | (30,000) | (10,000) | ||||||
Long-term borrowings, net of discount | 474,568 | 0 | ||||||
Retirement of long-term debt, including early payment premium | (472,135) | 0 | ||||||
Distributions to shareholders | (93,993) | (94,699) | ||||||
Preferred dividends of subsidiary | (2,410) | (2,410) | ||||||
Deferred financing costs paid | (5,664) | 0 | ||||||
Payments for financed capital expenditures | (51) | (5,616) | ||||||
Other | (118) | (710) | ||||||
Net cash used in financing activities | (49,803) | (103,435) | ||||||
Net change in cash, cash equivalents and restricted cash | 10,776 | 15,214 | ||||||
Cash, cash equivalents and restricted cash at beginning of period | 48,552 | 33,599 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 59,328 | $ | 48,813 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest (net of amount capitalized) | $ | 81,073 | $ | 85,602 | ||||
Income taxes | 27,000 | 23,600 | ||||||
Non-cash investing activities: | ||||||||
Accruals for capital expenditures | $ | 49,569 | $ | 13,115 | ||||
See notes to unaudited condensed consolidated financial statements. |
IPALCO ENTERPRISES, INC. and SUBSIDIARIES | IPALCO ENTERPRISES, INC. and SUBSIDIARIES | IPALCO ENTERPRISES, INC. and SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Common Shareholders' Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Common Shareholders' Equity | Unaudited Condensed Consolidated Statements of Common Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||
and Noncontrolling Interest | and Noncontrolling Interest | and Noncontrolling Interest | ||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, 2020 and 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three and Nine Months Ended September 30, 2020 and 2019 | For the Three and Nine Months Ended September 30, 2020 and 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||
(In Thousands) | (In Thousands) | (In Thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Paid in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Common Shareholders' Equity | Cumulative Preferred Stock of Subsidiary | ||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning Balance | Beginning Balance | $ | 590,784 | $ | (19,750) | $ | (24,558) | $ | 546,476 | $ | 59,784 | |||||||||||||||||||||||||||||||||||||||||
Net comprehensive loss | Net comprehensive loss | — | (36,313) | 35,180 | (1,133) | 803 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | Preferred stock dividends | — | — | — | — | (803) | ||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | Distributions to shareholders | — | — | (26,631) | (26,631) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Other | Other | 49 | — | — | 49 | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | Balance at March 31, 2020 | 590,833 | (56,063) | (16,009) | 518,761 | 59,784 | ||||||||||||||||||||||||||||||||||||||||||||||
Net comprehensive income | Net comprehensive income | — | (2,682) | 18,319 | 15,637 | 804 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | Preferred stock dividends | — | — | — | — | (804) | ||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | Distributions to shareholders | — | — | (26,596) | (26,596) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Other | Other | 37 | — | — | 37 | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | Balance at June 30, 2020 | $ | 590,870 | $ | (58,745) | $ | (24,286) | $ | 507,839 | $ | 59,784 | |||||||||||||||||||||||||||||||||||||||||
Net comprehensive income | Net comprehensive income | — | 5,051 | 39,496 | 44,547 | 803 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | Preferred stock dividends | — | — | — | — | (803) | ||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders(1) | Distributions to shareholders(1) | (998) | — | (39,768) | (40,766) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Other | Other | 39 | — | — | 39 | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | Balance at September 30, 2020 | $ | 589,911 | $ | (53,694) | $ | (24,558) | $ | 511,659 | $ | 59,784 | |||||||||||||||||||||||||||||||||||||||||
Paid in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Common Shareholders' Equity | Cumulative Preferred Stock of Subsidiary | ||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning Balance | $ | 597,824 | $ | — | $ | (24,558 | ) | $ | 573,266 | $ | 59,784 | Beginning Balance | $ | 597,824 | $ | 0 | $ | (24,558) | $ | 573,266 | $ | 59,784 | ||||||||||||||||||||||||||||||
Net comprehensive income | — | (5,539 | ) | 40,982 | 35,443 | 803 | Net comprehensive income | — | (5,539) | 40,982 | 35,443 | 803 | ||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | (803 | ) | Preferred stock dividends | — | — | — | — | (803) | ||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | — | — | (31,590 | ) | (31,590 | ) | — | Distributions to shareholders | — | — | (31,590) | (31,590) | — | |||||||||||||||||||||||||||||||||||||||
Other | 34 | — | — | 34 | — | Other | 34 | — | — | 34 | — | |||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | 597,858 | $ | (5,539 | ) | $ | (15,166 | ) | $ | 577,153 | $ | 59,784 | Balance at March 31, 2019 | 597,858 | (5,539) | (15,166) | 577,153 | 59,784 | ||||||||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning Balance | $ | 590,784 | $ | (19,750 | ) | $ | (24,558 | ) | $ | 546,476 | $ | 59,784 | ||||||||||||||||||||||||||||||||||||||||
Net comprehensive income | — | (36,313 | ) | 35,180 | (1,133 | ) | 803 | Net comprehensive income | — | (11,649) | 14,109 | 2,460 | 804 | |||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | (803 | ) | Preferred stock dividends | — | — | — | — | (804) | ||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | — | — | (26,631 | ) | (26,631 | ) | — | Distributions to shareholders | — | — | (28,345) | (28,345) | — | |||||||||||||||||||||||||||||||||||||||
Other | 49 | — | — | 49 | — | Other | 59 | — | — | 59 | — | |||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | $ | 590,833 | $ | (56,063 | ) | $ | (16,009 | ) | $ | 518,761 | $ | 59,784 | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | Balance at June 30, 2019 | $ | 597,917 | $ | (17,188) | $ | (29,402) | $ | 551,327 | $ | 59,784 | |||||||||||||||||||||||||||||||||||||||||
Net comprehensive income | Net comprehensive income | — | (12,534) | 47,703 | 35,169 | 803 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | Preferred stock dividends | — | — | — | — | (803) | ||||||||||||||||||||||||||||||||||||||||||||||
Distributions to shareholders | Distributions to shareholders | — | — | (34,764) | (34,764) | — | ||||||||||||||||||||||||||||||||||||||||||||||
Other | Other | 54 | — | — | 54 | — | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | Balance at September 30, 2019 | $ | 597,971 | $ | (29,722) | $ | (16,463) | $ | 551,786 | $ | 59,784 | |||||||||||||||||||||||||||||||||||||||||
1) I (1) IPALCO made return of capital payments of $1.0 million during the three months ended September 30, 2020 for the portion of current year distributions to shareholders in excess of current year net income. | 1) I (1) IPALCO made return of capital payments of $1.0 million during the three months ended September 30, 2020 for the portion of current year distributions to shareholders in excess of current year net income. |
September 30, | December 31, | |||||||||||||
2020 | 2019 | |||||||||||||
(In Thousands) | ||||||||||||||
Cash, cash equivalents and restricted cash | ||||||||||||||
Cash and cash equivalents | $ | 38,815 | $ | 48,152 | ||||||||||
Restricted cash | 20,513 | 400 | ||||||||||||
Total cash, cash equivalents and restricted cash | $ | 59,328 | $ | 48,552 | ||||||||||
March 31, | December 31, | |||||||
2020 | 2019 | |||||||
(In Thousands) | ||||||||
Cash, cash equivalents and restricted cash | ||||||||
Cash and cash equivalents | $ | 45,351 | $ | 48,152 | ||||
Restricted cash | 10,140 | 400 | ||||||
Total cash, cash equivalents and restricted cash | $ | 55,491 | $ | 48,552 | ||||
September 30, | December 31, | |||||||||||||
2020 | 2019 | |||||||||||||
(In Thousands) | ||||||||||||||
Accounts receivable, net | ||||||||||||||
Customer receivables | $ | 97,018 | $ | 90,747 | ||||||||||
Unbilled revenue | 54,829 | 65,822 | ||||||||||||
Amounts due from related parties | 5,645 | 2,717 | ||||||||||||
Other | 4,588 | 2,725 | ||||||||||||
Allowance for credit losses | (3,520) | (921) | ||||||||||||
Total accounts receivable, net | $ | 158,560 | $ | 161,090 | ||||||||||
March 31, | December 31, | |||||||
2020 | 2019 | |||||||
(In Thousands) | ||||||||
Accounts receivable, net | ||||||||
Customer receivables | $ | 88,989 | $ | 90,747 | ||||
Unbilled revenue | 59,959 | 65,822 | ||||||
Amounts due from related parties | 4,473 | 2,717 | ||||||
Other | 4,063 | 2,725 | ||||||
Allowance for credit losses | (1,049 | ) | (921 | ) | ||||
Total accounts receivable, net | $ | 156,435 | $ | 161,090 | ||||
Beginning Allowance Balance at January 1, 2020 | Current Period Provision | Write-offs Charged Against Allowances | Recoveries Collected | Ending Allowance Balance at September 30, 2020 | ||||||||||||||||||||||||||||
Allowance for credit losses | $ | 921 | $ | 4,365 | $ | (5,124) | $ | 3,358 | $ | 3,520 | ||||||||||||||||||||||
Beginning Allowance Balance at January 1, 2020 | Current Period Provision | Write-offs Charged Against Allowances | Ending Allowance Balance at March 31, 2020 | |||||||||||||
Allowance for credit losses | $ | 921 | $ | 773 | $ | (645 | ) | $ | 1,049 | |||||||
March 31, | December 31, | September 30, | December 31, | |||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||
Inventories | Inventories | |||||||||||||||||||||
Fuel | $ | 33,028 | $ | 26,907 | Fuel | $ | 36,154 | $ | 26,907 | |||||||||||||
Materials and supplies | 57,277 | 56,662 | Materials and supplies | 59,498 | 56,662 | |||||||||||||||||
Total inventories | $ | 90,305 | $ | 83,569 | Total inventories | $ | 95,652 | $ | 83,569 | |||||||||||||
Details about Accumulated Other Comprehensive Loss components | Affected line item in the Condensed Consolidated Statements of Operations | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Gains and losses on cash flow hedges (Note 4): | Interest expense | $ | (1,807) | $ | 0 | $ | (3,614) | $ | 0 | |||||||||||
Income tax expense | $ | 463 | $ | 0 | $ | 926 | $ | 0 | ||||||||||||
Total reclassifications for the period, net of income taxes | $ | (1,344) | $ | 0 | $ | (2,688) | $ | 0 | ||||||||||||
Gains and losses on cash flow hedges (Note 4): | Nine Months Ended September 30, | |||||||
Balance at January 1 | $ | (19,750) | ||||||
Other comprehensive loss before reclassifications | $ | (36,632) | ||||||
Amounts reclassified from AOCI to earnings | $ | 2,688 | ||||||
Balance at September 30 | $ | (53,694) | ||||||
Three Months Ended March 31, | |||||||
Gains and losses on cash flow hedges (Note 4): | 2020 | 2019 | |||||
Balance at January 1 | $ | (19,750 | ) | $ | — | ||
Other comprehensive loss | (36,313 | ) | (5,539 | ) | |||
Balance at March 31 | $ | (56,063 | ) | $ | (5,539 | ) | |
New Accounting Standards Adopted | |||||||||||
ASU Number and Name | Description | Date of Adoption | Effect on the Financial Statements upon adoption | ||||||||
2016-13, 2018-19, 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, 2020-03, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | See discussion of the ASU below. | January 1, 2020 | See impact upon adoption of the standard below. |
New Accounting Standards Issued But Not Yet Effective | |||||||||||
ASU Number and Name | Description | Date of Adoption | Effect on the Financial Statements upon adoption | ||||||||
2020-04, Reference Rate Form (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting | The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference to LIBOR or another reference rate expected to be discontinued by reference rate reform. This standard is effective for a limited period of time (March 12, 2020 - December 21, 2022). | The Company is currently evaluating the impact of adopting the standard on the Financial Statements. | |||||||||
Assets and Liabilities at Fair Value | ||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||
Fair value at September 30, 2020 | Based on quoted market prices in active markets | Other observable inputs | Unobservable inputs | |||||||||||
(In Thousands) | ||||||||||||||
Financial assets: | ||||||||||||||
VEBA investments: | ||||||||||||||
Money market funds | $ | 20 | $ | 20 | $ | 0 | $ | 0 | ||||||
Mutual funds | 3,069 | 0 | 3,069 | 0 | ||||||||||
Total VEBA investments | 3,089 | 20 | 3,069 | 0 | ||||||||||
Financial transmission rights | 1,132 | 0 | 0 | 1,132 | ||||||||||
Total financial assets measured at fair value | $ | 4,221 | $ | 20 | $ | 3,069 | $ | 1,132 | ||||||
Financial liabilities: | ||||||||||||||
Interest rate hedges | $ | 75,824 | $ | 0 | $ | 75,824 | $ | 0 | ||||||
Total financial liabilities measured at fair value | $ | 75,824 | $ | 0 | $ | 75,824 | $ | 0 |
Assets and Liabilities at Fair Value | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Fair value at March 31, 2020 | Based on quoted market prices in active markets | Other observable inputs | Unobservable inputs | |||||||||
(In Thousands) | ||||||||||||
Financial assets: | ||||||||||||
VEBA investments: | ||||||||||||
Money market funds | $ | 21 | $ | 21 | $ | — | $ | — | ||||
Mutual funds | 2,776 | — | 2,776 | — | ||||||||
Total VEBA investments | 2,797 | 21 | 2,776 | — | ||||||||
Financial transmission rights | 83 | — | — | 83 | ||||||||
Total financial assets measured at fair value | $ | 2,880 | $ | 21 | $ | 2,776 | $ | 83 | ||||
Financial liabilities: | ||||||||||||
Interest rate hedges | $ | 75,395 | $ | — | $ | 75,395 | $ | — | ||||
Total financial liabilities measured at fair value | $ | 75,395 | $ | — | $ | 75,395 | $ | — |
Assets and Liabilities at Fair Value | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Fair value at December 31, 2019 | Based on quoted market prices in active markets | Other observable inputs | Unobservable inputs | |||||||||
(In Thousands) | ||||||||||||
Financial assets: | ||||||||||||
VEBA investments: | ||||||||||||
Money market funds | $ | 25 | $ | 25 | $ | — | $ | — | ||||
Mutual funds | 2,854 | — | 2,854 | — | ||||||||
Total VEBA investments | 2,879 | 25 | 2,854 | — | ||||||||
Financial transmission rights | 864 | — | — | 864 | ||||||||
Total financial assets measured at fair value | $ | 3,743 | $ | 25 | $ | 2,854 | $ | 864 | ||||
Financial liabilities: | ||||||||||||
Interest rate hedges | $ | 26,560 | $ | — | $ | 26,560 | $ | — | ||||
Total financial liabilities measured at fair value | $ | 26,560 | $ | — | $ | 26,560 | $ | — |
Assets and Liabilities at Fair Value | ||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||
Fair value at December 31, 2019 | Based on quoted market prices in active markets | Other observable inputs | Unobservable inputs | |||||||||||
(In Thousands) | ||||||||||||||
Financial assets: | ||||||||||||||
VEBA investments: | ||||||||||||||
Money market funds | $ | 25 | $ | 25 | $ | 0 | $ | 0 | ||||||
Mutual funds | 2,854 | 0 | 2,854 | 0 | ||||||||||
Total VEBA investments | 2,879 | 25 | 2,854 | 0 | ||||||||||
Financial transmission rights | 864 | 0 | 0 | 864 | ||||||||||
Total financial assets measured at fair value | $ | 3,743 | $ | 25 | $ | 2,854 | $ | 864 | ||||||
Financial liabilities: | ||||||||||||||
Interest rate hedges | $ | 26,560 | $ | 0 | $ | 26,560 | $ | 0 | ||||||
Total financial liabilities measured at fair value | $ | 26,560 | $ | 0 | $ | 26,560 | $ | 0 |
March 31, 2020 | December 31, 2019 | |||||||||||
Face Value | Fair Value | Face Value | Fair Value | |||||||||
(In Thousands) | ||||||||||||
Fixed-rate | $ | 2,523,800 | $ | 2,879,494 | $ | 2,523,800 | $ | 2,876,140 | ||||
Variable-rate | 155,000 | 155,000 | 155,000 | 155,000 | ||||||||
Total indebtedness | $ | 2,678,800 | $ | 3,034,494 | $ | 2,678,800 | $ | 3,031,140 |
September 30, 2020 | December 31, 2019 | |||||||||||||
Face Value | Fair Value | Face Value | Fair Value | |||||||||||
(In Thousands) | ||||||||||||||
Fixed-rate | $ | 2,593,800 | $ | 3,187,023 | $ | 2,523,800 | $ | 2,876,140 | ||||||
Variable-rate | 140,000 | 140,000 | 155,000 | 155,000 | ||||||||||
Total indebtedness | $ | 2,733,800 | $ | 3,327,023 | $ | 2,678,800 | $ | 3,031,140 |
Commodity | Accounting Treatment (a) | Unit | Purchases (in thousands) | Sales (in thousands) | Net Purchases/(Sales) (in thousands) | |||||||||||||||||||||||||||
Interest rate hedges | Designated | USD | $ | 400,000 | $ | 0 | $ | 400,000 | ||||||||||||||||||||||||
FTRs | Not Designated | MWh | 5,135 | 0 | 5,135 |
Commodity | Accounting Treatment (a) | Unit | Purchases (in thousands) | Sales (in thousands) | Net Purchases/(Sales) (in thousands) | |||||||||||
Interest rate hedges | Designated | USD | $ | 400,000 | $ | — | $ | 400,000 | ||||||||
FTRs | Not Designated | MWh | 2,194 | — | 2,194 |
Interest Rate Hedges for the Three Months Ended March 31, | |||||||
$ in thousands (net of tax) | 2020 | 2019 | |||||
Beginning accumulated derivative gain / (loss) in AOCL | $ | (19,750 | ) | $ | — | ||
Net losses associated with current period hedging transactions | (36,313 | ) | (5,539 | ) | |||
Ending accumulated derivative loss in AOCL | $ | (56,063 | ) | $ | (5,539 | ) | |
Loss expected to be reclassified to earnings in the next twelve months | $ | (7,356 | ) | $ | — | ||
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months) | 54 | 16 |
Interest Rate Hedges for the Three Months Ended September 30, | |||||||||||
$ in thousands (net of tax) | 2020 | 2019 | |||||||||
Beginning accumulated derivative loss in AOCL | $ | (58,745) | $ | (17,188) | |||||||
Net gains / (losses) associated with current period hedging transactions | 3,707 | (12,534) | |||||||||
Net losses reclassified to interest expense, net of tax | 1,344 | — | |||||||||
Ending accumulated derivative loss in AOCL | $ | (53,694) | $ | (29,722) | |||||||
Interest Rate Hedges for the Nine Months Ended September 30, | |||||||||||
$ in thousands (net of tax) | 2020 | 2019 | |||||||||
Beginning accumulated derivative loss in AOCL | $ | (19,750) | $ | 0 | |||||||
Net losses associated with current period hedging transactions | (36,632) | (29,722) | |||||||||
Net losses reclassified to interest expense, net of tax | 2,688 | — | |||||||||
Ending accumulated derivative loss in AOCL | $ | (53,694) | $ | (29,722) | |||||||
Loss expected to be reclassified to earnings in the next twelve months | $ | (5,375) | |||||||||
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months) | 48 |
Commodity | Hedging Designation | Balance sheet classification | September 30, 2020 | December 31, 2019 | |||||||||||||||||||
Financial transmission rights | Not a Cash Flow Hedge | Prepayments and other current assets | $ | 1,132 | $ | 864 | |||||||||||||||||
Interest rate hedges | Cash Flow Hedge | Derivative liabilities, current | $ | 0 | $ | 26,560 | |||||||||||||||||
Interest rate hedges | Cash Flow Hedge | Derivative liabilities, non-current | $ | 75,824 | $ | 0 |
Commodity | Hedging Designation | Balance sheet classification | March 31, 2020 | December 31, 2019 | |||||||
Financial transmission rights | Not a Cash Flow Hedge | Prepayments and other current assets | $ | 83 | $ | 864 | |||||
Interest rate hedges | Cash Flow Hedge | Accrued and other current liabilities | $ | 75,395 | $ | 26,560 |
September 30, | December 31, | ||||||||||
Series | Due | 2020 | 2019 | ||||||||
(In Thousands) | |||||||||||
IPL first mortgage bonds: | |||||||||||
3.875% (1) | August 2021 | $ | 55,000 | $ | 55,000 | ||||||
3.875% (1) | August 2021 | 40,000 | 40,000 | ||||||||
3.125% (1) | December 2024 | 40,000 | 40,000 | ||||||||
6.60% | January 2034 | 100,000 | 100,000 | ||||||||
6.05% | October 2036 | 158,800 | 158,800 | ||||||||
6.60% | June 2037 | 165,000 | 165,000 | ||||||||
4.875% | November 2041 | 140,000 | 140,000 | ||||||||
4.65% | June 2043 | 170,000 | 170,000 | ||||||||
4.50% | June 2044 | 130,000 | 130,000 | ||||||||
4.70% | September 2045 | 260,000 | 260,000 | ||||||||
4.05% | May 2046 | 350,000 | 350,000 | ||||||||
4.875% | November 2048 | 105,000 | 105,000 | ||||||||
Unamortized discount – net | (6,042) | (6,156) | |||||||||
Deferred financing costs | (16,186) | (16,629) | |||||||||
Total IPL first mortgage bonds | 1,691,572 | 1,691,015 | |||||||||
IPL unsecured debt: | |||||||||||
Variable - 1.047% (2) | December 2020 | 30,000 | 30,000 | ||||||||
Variable - 1.047% (2) | December 2020 | 60,000 | 60,000 | ||||||||
Deferred financing costs | (28) | (114) | |||||||||
Total IPL unsecured debt | 89,972 | 89,886 | |||||||||
Total Long-term Debt – IPL | 1,781,544 | 1,780,901 | |||||||||
Long-term Debt – IPALCO: | |||||||||||
Term Loan | July 2020 | 0 | 65,000 | ||||||||
3.45% Senior Secured Notes | July 2020 | 0 | 405,000 | ||||||||
3.70% Senior Secured Notes | September 2024 | 405,000 | 405,000 | ||||||||
4.25% Senior Secured Notes | May 2030 | 475,000 | 0 | ||||||||
Unamortized discount – net | (649) | (313) | |||||||||
Deferred financing costs | (8,903) | (3,959) | |||||||||
Total Long-term Debt – IPALCO | 870,448 | 870,728 | |||||||||
Total Consolidated IPALCO Long-term Debt | 2,651,992 | 2,651,629 | |||||||||
Less: Current Portion of Long-term Debt | 184,853 | 559,199 | |||||||||
Net Consolidated IPALCO Long-term Debt | $ | 2,467,139 | $ | 2,092,430 | |||||||
March 31, | December 31, | ||||||
Series | Due | 2020 | 2019 | ||||
(In Thousands) | |||||||
IPL first mortgage bonds: | |||||||
3.875% (1) | August 2021 | $ | 55,000 | $ | 55,000 | ||
3.875% (1) | August 2021 | 40,000 | 40,000 | ||||
3.125% (1) | December 2024 | 40,000 | 40,000 | ||||
6.60% | January 2034 | 100,000 | 100,000 | ||||
6.05% | October 2036 | 158,800 | 158,800 | ||||
6.60% | June 2037 | 165,000 | 165,000 | ||||
4.875% | November 2041 | 140,000 | 140,000 | ||||
4.65% | June 2043 | 170,000 | 170,000 | ||||
4.50% | June 2044 | 130,000 | 130,000 | ||||
4.70% | September 2045 | 260,000 | 260,000 | ||||
4.05% | May 2046 | 350,000 | 350,000 | ||||
4.875% | November 2048 | 105,000 | 105,000 | ||||
Unamortized discount – net | (6,114 | ) | (6,156 | ) | |||
Deferred financing costs | (16,481 | ) | (16,629 | ) | |||
Total IPL first mortgage bonds | 1,691,205 | 1,691,015 | |||||
IPL unsecured debt: | |||||||
Variable (2) | December 2020 | 30,000 | 30,000 | ||||
Variable (2) | December 2020 | 60,000 | 60,000 | ||||
Deferred financing costs | (85 | ) | (114 | ) | |||
Total IPL unsecured debt | 89,915 | 89,886 | |||||
Total Long-term Debt – IPL | 1,781,120 | 1,780,901 | |||||
Long-term Debt – IPALCO: | |||||||
Term Loan | July 2020 | 65,000 | 65,000 | ||||
3.45% Senior Secured Notes | July 2020 | 405,000 | 405,000 | ||||
3.70% Senior Secured Notes | September 2024 | 405,000 | 405,000 | ||||
Unamortized discount – net | (282 | ) | (313 | ) | |||
Deferred financing costs | (3,465 | ) | (3,959 | ) | |||
Total Long-term Debt – IPALCO | 871,253 | 870,728 | |||||
Total Consolidated IPALCO Long-term Debt | 2,652,373 | 2,651,629 | |||||
Less: Current Portion of Long-term Debt | 89,915 | 559,199 | |||||
Net Consolidated IPALCO Long-term Debt | $ | 2,562,458 | $ | 2,092,430 | |||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
(In Thousands) | (In Thousands) | |||||||||||||
Components of net periodic benefit cost: | ||||||||||||||
Service cost | $ | 2,068 | $ | 1,853 | $ | 6,204 | $ | 5,558 | ||||||
Interest cost | 5,538 | 6,836 | 16,614 | 20,508 | ||||||||||
Expected return on plan assets | (9,445) | (7,477) | (28,335) | (22,431) | ||||||||||
Amortization of prior service cost | 920 | 956 | 2,758 | 2,869 | ||||||||||
Amortization of actuarial loss | 2,029 | 2,770 | 6,086 | 8,311 | ||||||||||
Net periodic benefit cost | $ | 1,110 | $ | 4,938 | $ | 3,327 | $ | 14,815 | ||||||
For the Three Months Ended | ||||||
March 31, | ||||||
2020 | 2019 | |||||
(In Thousands) | ||||||
Components of net periodic benefit cost: | ||||||
Service cost | $ | 2,068 | $ | 1,853 | ||
Interest cost | 5,538 | 6,836 | ||||
Expected return on plan assets | (9,445 | ) | (7,477 | ) | ||
Amortization of prior service cost | 919 | 956 | ||||
Amortization of actuarial loss | 2,029 | 2,771 | ||||
Net periodic benefit cost | $ | 1,109 | $ | 4,939 | ||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
March 31, 2020 | March 30, 2019 | |||||||||||||||||||||||
Utility | All Other | Total | Utility | All Other | Total | |||||||||||||||||||
Revenues | $ | 357,382 | $ | — | $ | 357,382 | $ | 382,309 | $ | — | $ | 382,309 | ||||||||||||
Depreciation and amortization | $ | 60,708 | $ | — | $ | 60,708 | $ | 59,669 | $ | — | $ | 59,669 | ||||||||||||
Interest expense | $ | 21,920 | $ | 8,161 | $ | 30,081 | $ | 22,260 | $ | 8,222 | $ | 30,482 | ||||||||||||
Earnings/(loss) from operations before income tax | $ | 54,967 | $ | (9,212 | ) | $ | 45,755 | $ | 60,228 | $ | (8,239 | ) | $ | 51,989 | ||||||||||
Capital expenditures(1) | $ | 54,490 | $ | — | $ | 54,490 | $ | 76,153 | $ | — | $ | 76,153 | ||||||||||||
As of March 31, 2020 | As of December 31, 2019 | |||||||||||||||||||||||
Utility | All Other | Total | Utility | All Other | Total | |||||||||||||||||||
Total assets | $ | 4,913,875 | $ | 11,478 | $ | 4,925,353 | $ | 4,918,408 | $ | 10,261 | $ | 4,928,669 | ||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||||||||||||||
Utility | All Other | Total | Utility | All Other | Total | |||||||||||||||||||||||||||||||||
Revenues | $ | 356,088 | $ | 0 | $ | 356,088 | $ | 398,456 | $ | 0 | $ | 398,456 | ||||||||||||||||||||||||||
Depreciation and amortization | $ | 62,359 | $ | 0 | $ | 62,359 | $ | 60,373 | $ | 0 | $ | 60,373 | ||||||||||||||||||||||||||
Interest expense | $ | 21,725 | $ | 11,016 | $ | 32,741 | $ | 22,244 | $ | 8,376 | $ | 30,620 | ||||||||||||||||||||||||||
Earnings/(loss) from operations before income tax | $ | 62,098 | $ | (10,818) | $ | 51,280 | $ | 69,881 | $ | (8,287) | $ | 61,594 | ||||||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||||||||||||||
Utility | All Other | Total | Utility | All Other | Total | |||||||||||||||||||||||||||||||||
Revenues | $ | 1,024,973 | $ | 0 | $ | 1,024,973 | $ | 1,121,634 | $ | 0 | $ | 1,121,634 | ||||||||||||||||||||||||||
Depreciation and amortization | $ | 184,166 | $ | 0 | $ | 184,166 | $ | 179,939 | $ | 0 | $ | 179,939 | ||||||||||||||||||||||||||
Interest expense | $ | 65,527 | $ | 31,230 | $ | 96,757 | $ | 66,757 | $ | 24,636 | $ | 91,393 | ||||||||||||||||||||||||||
Earnings/(loss) from operations before income tax | $ | 155,835 | $ | (34,512) | $ | 121,323 | $ | 158,153 | $ | (24,697) | $ | 133,456 | ||||||||||||||||||||||||||
Capital expenditures(1) | $ | 149,420 | $ | 0 | $ | 149,420 | $ | 131,682 | $ | 0 | $ | 131,682 | ||||||||||||||||||||||||||
As of September 30, 2020 | As of December 31, 2019 | |||||||||||||||||||||||||||||||||||||
Utility | All Other | Total | Utility | All Other | Total | |||||||||||||||||||||||||||||||||
Total assets | $ | 4,942,923 | $ | 15,377 | $ | 4,958,300 | $ | 4,918,408 | $ | 10,261 | $ | 4,928,669 | ||||||||||||||||||||||||||
For the Three Months Ended | For the Three Months Ended | |||||||
September 30, 2020 | September 30, 2019 | |||||||
Retail Revenues | ||||||||
Retail revenue from contracts with customers: | ||||||||
Residential | $ | 145,407 | $ | 155,670 | ||||
Small commercial and industrial | 50,023 | 56,192 | ||||||
Large commercial and industrial | 127,884 | 151,816 | ||||||
Public lighting | 2,268 | 2,403 | ||||||
Other (1) | 3,875 | 3,864 | ||||||
Total retail revenue from contracts with customers | 329,457 | 369,945 | ||||||
Alternative revenue programs | 5,225 | 6,478 | ||||||
Wholesale Revenues | ||||||||
Wholesale revenue from contracts with customers: | 17,667 | 18,426 | ||||||
Miscellaneous Revenues | ||||||||
Transmission and other revenue from contracts with customers | 3,331 | 3,091 | ||||||
Other miscellaneous revenues (2) | 408 | 516 | ||||||
Total Revenues | $ | 356,088 | $ | 398,456 | ||||
For the Three Months Ended | For the Three Months Ended | |||||
March 31, 2020 | March 31, 2019 | |||||
Retail Revenues | ||||||
Retail revenue from contracts with customers | $ | 337,892 | $ | 366,502 | ||
Other retail revenues (1) | 4,896 | 4,894 | ||||
Wholesale Revenues | 11,308 | 7,101 | ||||
Miscellaneous Revenues | ||||||
Transmission and other revenue from contracts with customers | 2,732 | 2,485 | ||||
Other miscellaneous revenues (2) | 554 | 1,327 | ||||
Total Revenues | $ | 357,382 | $ | 382,309 | ||
For the Nine Months Ended | For the Nine Months Ended | |||||||
September 30, 2020 | September 30, 2019 | |||||||
Retail Revenues | ||||||||
Retail revenue from contracts with customers: | ||||||||
Residential | $ | 428,568 | $ | 450,864 | ||||
Small commercial and industrial | 147,678 | 165,961 | ||||||
Large commercial and industrial | 369,224 | 424,348 | ||||||
Public lighting | 6,881 | 4,893 | ||||||
Other (1) | 10,568 | 10,372 | ||||||
Total retail revenue from contracts with customers | 962,919 | 1,056,438 | ||||||
Alternative revenue programs | 18,910 | 19,069 | ||||||
Wholesale Revenues | ||||||||
Wholesale revenue from contracts with customers: | 33,476 | 35,533 | ||||||
Miscellaneous Revenues | ||||||||
Transmission and other revenue from contracts with customers | 8,392 | 8,474 | ||||||
Other miscellaneous revenues (2) | 1,276 | 2,120 | ||||||
Total Revenues | $ | 1,024,973 | $ | 1,121,634 | ||||
Operating Leases | |||||
2020 | $ | 222 | |||
2021 | 886 | ||||
2022 | 906 | ||||
2023 | 906 | ||||
2024 | 786 | ||||
Thereafter | 2,628 | ||||
Total | $ | 6,334 |
Operating Leases | |||
2020 | $ | 687 | |
2021 | 886 | ||
2022 | 906 | ||
2023 | 906 | ||
2024 | 786 | ||
Thereafter | 2,628 | ||
Total | $ | 6,799 |
Customer class | For the three months ended September 30, 2020 compared to the same period in 2019 | For the six months ended September 30, 2020 compared to the same period in 2019(1) | For the nine months ended September 30, 2020 compared to the same period in 2019 | ||||||||
Residential | 3.9 | % | 5.1 | % | 3.7 | % | |||||
Small commercial and industrial | (4.2) | % | (7.0) | % | (5.1) | % | |||||
Large commercial and industrial | (7.9) | % | (9.3) | % | (7.3) | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
REVENUES | $ | 356,088 | $ | 398,456 | $ | 1,024,973 | $ | 1,121,634 | |||||||||
OPERATING COSTS AND EXPENSES: | |||||||||||||||||
Fuel | 73,901 | 93,217 | 186,040 | 254,233 | |||||||||||||
Power purchased | 26,987 | 31,840 | 105,536 | 101,483 | |||||||||||||
Operation and maintenance | 100,455 | 105,975 | 300,703 | 321,782 | |||||||||||||
Depreciation and amortization | 62,359 | 60,373 | 184,166 | 179,939 | |||||||||||||
Taxes other than income taxes | 10,399 | 12,943 | 34,063 | 33,909 | |||||||||||||
Total operating costs and expenses | 274,101 | 304,348 | 810,508 | 891,346 | |||||||||||||
OPERATING INCOME | 81,987 | 94,108 | 214,465 | 230,288 | |||||||||||||
OTHER INCOME / (EXPENSE), NET: | |||||||||||||||||
Allowance for equity funds used during construction | 1,099 | 810 | 3,116 | 2,538 | |||||||||||||
Interest expense | (32,741) | (30,620) | (96,757) | (91,393) | |||||||||||||
Loss on early extinguishment of debt | — | — | (2,415) | — | |||||||||||||
Other income / (expense), net | 935 | (2,704) | 2,914 | (7,977) | |||||||||||||
Total other income / (expense), net | (30,707) | (32,514) | (93,142) | (96,832) | |||||||||||||
EARNINGS FROM OPERATIONS BEFORE INCOME TAX | 51,280 | 61,594 | 121,323 | 133,456 | |||||||||||||
Less: Income tax expense | 10,981 | 13,088 | 25,918 | 28,252 | |||||||||||||
NET INCOME | 40,299 | 48,506 | 95,405 | 105,204 | |||||||||||||
Less: Dividends on preferred stock | 803 | 803 | 2,410 | 2,410 | |||||||||||||
NET INCOME APPLICABLE TO COMMON STOCK | $ | 39,496 | $ | 47,703 | $ | 92,995 | $ | 102,794 | |||||||||
Three Months Ended | ||||||
March 31, | ||||||
2020 | 2019 | |||||
REVENUES | $ | 357,382 | $ | 382,309 | ||
OPERATING COSTS AND EXPENSES: | ||||||
Fuel | 68,788 | 88,799 | ||||
Power purchased | 35,467 | 32,924 | ||||
Operation and maintenance | 105,590 | 102,146 | ||||
Depreciation and amortization | 60,708 | 59,669 | ||||
Taxes other than income taxes | 12,057 | 13,983 | ||||
Total operating costs and expenses | 282,610 | 297,521 | ||||
OPERATING INCOME | 74,772 | 84,788 | ||||
OTHER INCOME / (EXPENSE), NET: | ||||||
Allowance for equity funds used during construction | 857 | 911 | ||||
Interest expense | (30,081 | ) | (30,482 | ) | ||
Other income / (expense), net | 207 | (3,228 | ) | |||
Total other income / (expense), net | (29,017 | ) | (32,799 | ) | ||
EARNINGS FROM OPERATIONS BEFORE INCOME TAX | 45,755 | 51,989 | ||||
Less: Income tax expense | 9,772 | 10,204 | ||||
NET INCOME | 35,983 | 41,785 | ||||
Less: Dividends on preferred stock | 803 | 803 | ||||
NET INCOME APPLICABLE TO COMMON STOCK | $ | 35,180 | $ | 40,982 | ||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||
March 31, | Percentage | September 30, | Percentage | |||||||||||||||||||||||||
2020 | 2019 | Change | Change | 2020 | 2019 | Change | ||||||||||||||||||||||
Revenues: | Revenues: | |||||||||||||||||||||||||||
Retail revenues | $ | 342,788 | $ | 371,396 | $ | (28,608 | ) | (7.7)% | Retail revenues | 334,681 | 376,423 | $ | (41,742) | (11.1)% | ||||||||||||||
Wholesale revenues | 11,308 | 7,101 | 4,207 | 59.2% | Wholesale revenues | 17,668 | 18,426 | (758) | (4.1)% | |||||||||||||||||||
Miscellaneous revenues | 3,286 | 3,812 | (526 | ) | (13.8)% | Miscellaneous revenues | 3,739 | 3,607 | 132 | 3.7% | ||||||||||||||||||
Total revenues | $ | 357,382 | $ | 382,309 | $ | (24,927 | ) | (6.5)% | Total revenues | $ | 356,088 | $ | 398,456 | $ | (42,368) | (10.6)% | ||||||||||||
Heating degree days: | Heating degree days: | |||||||||||||||||||||||||||
Actual | 2,434 | 2,849 | (415 | ) | (14.6)% | Actual | 45 | — | 45 | 100.0% | ||||||||||||||||||
30-year average | 2,780 | 2,773 | 30-year average | 70 | 68 | |||||||||||||||||||||||
Cooling degree days: | Cooling degree days: | |||||||||||||||||||||||||||
Actual | Actual | 827 | 969 | (142) | (14.7)% | |||||||||||||||||||||||
30-year average | 30-year average | 752 | 752 |
Volume: | |||
Net decrease in the volume of kWh sold, primarily due to milder weather in our service territory versus the comparable period and, to a lesser extent, lower demand | $ | (24.3 | ) |
Price: | |||
Net decrease in the weighted average price of retail kWh sold, primarily due to lower fuel revenues, partially offset by favorable block rate(1) and other retail rate variances | (5.4 | ) | |
Other | 1.1 | ||
Net decrease in retail revenues | $ | (28.6 | ) |
Volume: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net decrease in the volume of kWh sold primarily due to unfavorable weather in our service territory versus the comparable period and lower demand resulting from impacts of COVID-19 | $ | (21.2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Price: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net decrease in the weighted average price of retail kWh sold primarily due to lower fuel revenues, partially offset by favorable block rate(1) and other retail rate variances
(1)Block rate variances are primarily attributable to our declining block rate structure, which generally provides for residential and commercial customers to be charged a higher per kWh rate at lower consumption levels. Therefore, as volumes decrease, the weighted average price per kWh increases and vice versa. Wholesale Revenues The 29 Operating Costs and Expenses The following table illustrates our changes in Operating costs and expenses during the three months ended
Fuel The decrease in fuel costs of Power Purchased The Operation and Maintenance The decrease in Operation and maintenance of $5.5 million was mostly attributed to (i) decreased maintenance expenses of $12.4 million primarily due to decreased outage costs, partially offset by (ii) higher transmission related expenses of $3.3 million and (iii) higher DSM program costs of $2.6 million (these program costs are recoverable through customer rates and are offset by an increase in DSM revenues). 30 Other Income / (Expense), Net The following table illustrates our changes in Other income / (expense), net during the three months ended September 30, 2020 compared to the same period in 2019 (in thousands):
Interest Expense The increase in Interest expense of $2.1 million was primarily due to amortization of unrealized losses on interest rate hedges of $1.8 million beginning in April 2020. Other Income/(Expense), Net The increase in Other income/(expense), net of $3.6 million was primarily due to a decrease in defined benefit plan costs of $4.0 million due to a higher expected return on plan assets compared to prior year. Income Tax Expense - Net The following table illustrates our changes in income tax expense - net during the three months ended September 30, 2020 compared to the same period in 2019 (in thousands):
The decrease in Income tax expense - net of $2.1 million was primarily due to lower pretax income versus the comparable period. 31 Comparison of nine months ended September 30, 2020 and nine months ended September 30, 2019 Revenues Revenues during the nine months ended September 30, 2020 decreased $96.7 million compared to the same period in 2019, which resulted from the following changes (dollars in thousands):
Retail Revenues The decrease in retail revenues of $93.7 million was primarily due to the following (in millions):
(1)Block rate variances are primarily attributable to our declining block rate structure, which generally provides for residential and commercial customers to be charged a higher per kWh rate at lower consumption levels. Therefore, as volumes decrease, the weighted average price per kWh increases and vice versa. Wholesale Revenues The decrease in wholesale revenues of $2.1 million was primarily due to a $1.9 million decrease in the weighted average price per kWh sold and a $0.2 million volume decrease. We sold 1,351.7 million kWh in the wholesale market during the first nine months of 2020 compared to 1,360.0 million kWh during the first nine months of 2019. Our ability to be dispatched in the MISO market is primarily driven by the locational marginal price of electricity and variable generation costs. The amount of electricity available for wholesale sales is impacted by our retail load requirements, generation capacity and unit availability. 32 Operating Costs and Expenses The following table illustrates our changes in Operating costs and expenses during the nine months ended September 30, 2020 compared to the same period in 2019 (in thousands):
Fuel The decrease in fuel costs of $68.2 million was primarily due to (i) a $37.3 million decrease due to the lower price of natural gas consumed versus the comparable period driven by decreased market prices, (ii) a $16.7 million decrease in the quantity of fuel consumed versus the comparable period, and (ii) a $9.5 million decrease due to the lower price of coal consumed versus the comparable period and (iv) a $4.3 million decrease from deferred fuel costs. We are generally permitted to recover underestimated fuel and purchased power costs to serve our retail customers in future rates through quarterly FAC proceedings. These variances are deferred when incurred and amortized into expense in the same period that our rates are adjusted to reflect these variances. For further discussion, please see Note 2, "Regulatory Matters - FAC and Authorized Annual Jurisdictional Net Operating Income” to the Financial Statements of this Form 10-Q. Additionally, fuel and purchased power costs incurred for wholesale energy sales are considered in the Off System Sales Margin rider. Power Purchased The increase in purchased power costs of $4.1 million was primarily due to (i) a 55% increase in the volume of power purchased during the period ($45.5 million), partially offset by (ii) a Operation and Maintenance The 33 Other Income / (Expense), Net The following table illustrates our changes in Other income / (expense), net during the
Interest Expense The increase in Interest expense of $5.4 million was primarily due to (i) amortization of unrealized losses on interest rate hedges of $3.6 million beginning in April 2020 and (ii) higher interest expense on long-term debt of $2.1 million due to higher rates and a higher average debt balance. Loss on Early Extinguishment of Debt The increase in Loss on Early Extinguishment of Debt of $2.4 million was primarily due to a make-whole premium and write-off of deferred financing costs due to the redemption of $405 million of 2020 IPALCO Notes and $65 million IPALCO Term Loan in the second quarter of 2020. Other Income/(Expense), Net The increase in Other income/(expense), net of Income Tax Expense - Net The following table illustrates our changes in income tax expense - net during the
The decrease in Income tax expense - net of 34 KEY TRENDS AND UNCERTAINTIES During the remainder of 2020 and beyond, we expect that our financial results will be driven primarily by retail demand, weather and maintenance costs. In addition, our financial results will likely be driven by many other factors including, but not limited to: •regulatory outcomes and impacts; •the passage of new legislation, implementation of regulations or other changes in regulation; and •timely recovery of capital expenditures. If favorable outcomes related to these factors do not occur, or if the challenges described below and elsewhere in this Quarterly Report impact us more significantly than we currently anticipate, then these adverse factors, or other adverse factors unknown to us, may impact our operating margin, net income and cash flows. We continue to monitor our operations and address challenges as they arise. For a discussion of the risks related to our business, see “Item 1. Business” and “Item 1A. Risk Factors” as described in IPALCO’s 2019 Form 10-K and "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q. COVID-19 Pandemic In addition to Business Continuity - As the COVID-19 pandemic progresses, we are taking a variety of measures to ensure our ability to generate, transmit, distribute and sell electric energy, to ensure the health and safety of our employees, contractors, customers and communities and to provide essential services to the communities in which we operate. We continue to respond to this global crisis through comprehensive measures to protect our employees and others while fulfilling our vital role in providing our customers with electric energy. While Demand - The economic impact of the COVID-19 pandemic Liquidity - 35 Credit Exposures - We continue to monitor and manage our credit exposures in a prudent manner. Supply Chain - Our supply chain management has remained robust during this challenging time and we continue to closely manage and monitor developments. Capital Projects - During the COVID-19 pandemic, our construction projects are proceeding without material delays. For further discussion of our capital requirements, see "Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity" of this Form 10-Q. CARES Act - The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by the U.S. Congress and signed into law on March 27, 2020. While we currently expect a limited impact from this legislation on our business, certain elements, primarily the deferral of payroll taxes, may provide some cash benefits in the near term. See Note 12, "Risks and Uncertainties" to the Financial Statements and "Part II - Item 1A. Risk Factors" of this Form 10-Q for more information. Operational As part of IPL's December 2019 Integrated Resource Plan filing, it was determined that 630 MW of coal-fired generation would be retired at Petersburg Units 1 and 2. IPL issued an all-source request for proposal to competitively procure replacement capacity by June 1, 2023, which is the first year IPL is expected to have a capacity shortfall. Proposals were received through February 28, 2020 and are currently being evaluated. For further discussion, see Note 2, "Regulatory Matters - IRP Filing" in IPALCO’s 2019 Form 10-K. Regulatory and Environmental Please see Note 2, "Regulatory Matters” to the Financial Statements of this Form 10-Q and Note 2, “Regulatory Matters” to IPALCO’s 2019 Form 10-K for a discussion of regulatory matters. We also are subject to numerous environmental laws and regulations in the jurisdictions in which we operate. We face certain risks and uncertainties related to these environmental laws and regulations, including existing and potential GHG legislation or regulations, and actual or potential laws and regulations pertaining to water discharges, waste management (including disposal or beneficial reuse of CCR) and certain air emissions, such as SO2, NOx, particulate matter and mercury. Such risks and uncertainties could result in increased capital expenditures or other compliance costs which could have a material adverse effect on our consolidated results of operations. Please see Note 8, “Commitments and Contingencies” to the Financial Statements of this Form 10-Q for a description of certain environmental matters. In addition, the following discussion of the impact of environmental laws and regulations on the Company updates the discussion provided in “Item 1. Business - Regulatory Matters” and “Item 1. Business - Environmental Matters” in IPALCO’s 2019 Form 10-K. TDSIC On March 4, 2020, the IURC issued an order approving the projects in IPL's TDSIC Plan. On June 18, 2020, IPL filed its first annual TDSIC rate adjustment for a return on and of investments through March 31, 2020. On October 14, 2020, the IURC issued an order approving this TDSIC rate adjustment. For further discussion, please see Note 2, "Regulatory 36 Waste Management and CCR The EPA's final CCR rule became effective in October closure of ash ponds. In addition, on February 20, 2020, the US EPA published a proposed rule to establish a federal CCR permit program that would operate in states without approved CCR permit programs. On August 28, 2020, EPA published final amendments to the CCR Rule titled "A Holistic Approach to Closure Part A: Deadline to Initiate Closure," which amends certain regulatory provisions that govern coal combustion residuals. The CCR Climate Change Legislation and Regulation On August 31, 2018, the EPA published in the Federal Register proposed Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units, known as the ACE Rule. On July 8, 2019, the EPA published the final ACE Rule along with associated revisions to implementing regulations. The final ACE Rule replaces the CPP and determines that heat rate improvement measures are the Best System of Emissions Reductions for existing coal-fired electric generating units. The final rule requires the State of Indiana to develop a State Plan to establish CO2 emission limits for designated facilities, including IPL Petersburg's coal-fired electric generating units. States have three years to develop their plans under the rule. On February 19, 2020, Indiana published a First Notice for the Indiana ACE Rule indicating that IDEM intends to determine the best system of emissions reductions and CO2 standards for affected units. Impacts remain largely uncertain because Indiana's State Plan has not yet been developed. CSAPR CSAPR, which became effective in January 2015, addresses the "good neighbor" provision of the CAA, which prohibits sources within each state from emitting any air pollutant in an amount which will contribute significantly to any other state’s nonattainment, or interference with maintenance of, any NAAQS. The CSAPR is implemented, in part, through a market-based program under which compliance may be achievable through the acquisition and use of emissions allowances created by the EPA. In October 2016, the EPA published a final rule to update the CSAPR to address the 2008 ozone NAAQS (“CSAPR Update Rule”). The CSAPR Update Rule found that NOx ozone season emissions in 22 states (including Indiana) affect the ability of downwind states to attain and maintain the 2008 ozone NAAQS, and accordingly, the EPA issued federal implementation plans that both generally provide updated CSAPR NOx ozone season emission budgets for electric generating units within these states and that implement these budgets through modifications to the CSAPR NOx ozone season allowance trading program. Implementation began in the 2017 ozone season (May through September 2017). Affected facilities receive fewer ozone season NOx allowances in 2017 and later, possibly resulting in the need to purchase additional allowances. Additionally, on September 13, 2019, the D.C. Circuit remanded a portion of the October 2016 CSAPR Update Rule to the EPA. In December 2018, EPA determined that the 2016 CSAPR Update Rule fully satisfied 20 states (including Indiana) good neighbor obligations with respect to the 2008 Ozone NAAQS (“CSAPR Close-Out Rule”), obviating the need for EPA to promulgate Federal Implementation Plans (FIPs) in these states. In October 2019, the D.C. Circuit vacated and remanded the CSAPR Close-Out Rule. On July 28, 2020, the D.C. Circuit ordered EPA to issue FIPs addressing seven states’ (including Indiana) outstanding 2008 NAAQS “good neighbor” obligations by March 15, 2021. On October 15, 2020, EPA released a pre-publication proposed rule addressing 21 states', including Indiana's, outstanding "good neighbor" obligations with respect to the 2008 ozone NAAQS and we are currently reviewing the proposed rule. 37 At this time we cannot predict what the impact of these standards and requirements will be in future years, or if there will be an impact resulting from future rulemakings or legal outcomes, but any such impact could be material to our business, financial condition or results of operation. NAAQS SO2. In 2010, a new one-hour SO2 primary NAAQS became effective. In 2013, the EPA published in the Federal Register its final On August 15, 2018, the EPA proposed to approve Indiana's State Implementation Plan (SIP) addressing attainment of the 2010 SO2 standard for certain locations including those of IPL's Harding Street and Petersburg Generating Stations. On March 22, 2019, the EPA finalized approval of Indiana's attainment plan for the area that includes Based on these current and potential national ambient air quality standards, the state of Indiana is required to determine whether certain areas within the state meet the NAAQS. With respect to Marion, Morgan and Pike Counties, as well as any other areas determined to be in "nonattainment," the state of Indiana will be required to modify its State Implementation Plan to detail how the state will regain its attainment status. As part of this process, it is possible that the IDEM or the EPA may require reductions of emissions from our generating stations to reach attainment status for ozone, fine particulate matter or SO2. At this time, we cannot predict what the impact will be to IPL with respect to these new ambient standards, but it could be material. In March 2018, the state of New York submitted a petition to the EPA pursuant to Section 126 of the CAA requesting new limitations on NOx emissions from dozens of upwind generating stations, including IPL's Petersburg, Harding Street, and Eagle Valley stations on the basis that they are contributing significantly to New York’s ability to meet the 2008 ozone NAAQS. On October 18, 2019, the EPA published final denial of the petition. On July 14, 2020, the D.C. Circuit Court vacated and remanded EPA’s denial of the petition. EPA must now issue a new decision based on the Court’s decision. If the Section 126 petition is ultimately granted, our units could be subject to additional requirements, which could be material. We would seek recovery of any resulting capital expenditures; however, there is no guarantee we would be successful. CWA - Regulation of Water Discharge IPL and other utilities at times apply the Nationwide Permit 12 (NWP 12) issued by the U.S. Army Corps of Engineers (Corps) in completing transmission and distribution projects that may involve waters of the U.S. NWP 12 is the nationwide permit for Utility Line Activities, specifically activities required for construction and maintenance, provided the activity does not result in the loss of greater than ½-acre of waters of the U.S. for each single and complete project. On April 15, 2020, in a proceeding involving the construction of the Keystone XL pipeline, the U.S. District Court for the District of Montana (Montana District Court) vacated NWP 12 and enjoined its application. On April 27, 2020, the Corps moved for the Montana District Court to stay pending appeal those portions of the April 15, 2020 order that vacate NWP 12 and enjoin its application. In the alternative, the Corps stay its vacatur and injunction as they relate to anything other than the Keystone XL pipeline. 38 Engineers, filed an application with the U.S. Supreme Court asking the Court to On April 23, 2020, the U.S. Supreme Court issued a decision in the Hawaii Wildlife Fund v. County of Maui case related to whether a CWA permit is required when pollutants originate from a point source but are conveyed to navigable waters through a nonpoint source such as groundwater. The Court held that discharges to groundwater require a permit if the addition of the pollutants through groundwater is the functional equivalent of a direct discharge from the point source into navigable waters. In November 2015, the EPA published its final effluent limitations guidelines (ELG) rule to reduce toxic pollutants discharged into waterways by steam-electric power plants through technology-based ELG applications. Wastewater treatment technologies installed and operated at Petersburg meet the requirements of the final ELG rule. That rule was subject to legal challenge and the agency received two petitions for administrative reconsideration. In response, EPA reconsidered the ELGs for flue gas desulfurization wastewater (FGD WW) and bottom ash transport water (BATW). On October 13, 2020, EPA published a final rule title “Steam Electric Reconsideration Rule” revising the 2015 ELG guidelines for flue gas desulfurization wastewater and bottom ash transport water. IPL facilities do not discharge flue gas desulfurization wastewater and bottom ash transport water.However, it is too early to determine whether any outcome of litigation or future revisions to the 2015 ELG rule or the Steam Electric Reconsideration Rule might have a material impact on our business, financial condition and results of operations. Macroeconomic and Political Reference Rate Reform As discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties" of IPALCO's 2019 Form 10-K, in July 2017, the UK Financial Conduct Authority announced that it intends to phase out LIBOR by the end of 2021. In the U.S., the Alternative Reference Rate Committee at the Federal Reserve identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative rate for LIBOR; alternative reference rates in other key markets are under development. While IPALCO maintains financial instruments referencing LIBOR as an interest rate benchmark, we have not yet executed any technical amendments or other contractual alternatives to address this matter. Although the full impact of the reform remains unknown, we have begun to engage with IPALCO and IPL counterparties to discuss specific action items to be undertaken in order to prepare for amendments when such contracts become due. CAPITAL RESOURCES AND LIQUIDITY Overview As of 39 We believe that existing cash balances, cash generated from operating activities, and borrowing capacity on our committed Credit Agreement will be adequate for the foreseeable future to meet anticipated operating expenses, interest expense on outstanding indebtedness, recurring capital expenditures, and to pay dividends to AES U.S. Investments and CDPQ. Sources for principal payments on outstanding indebtedness and nonrecurring capital expenditures are expected to be obtained from: (i) existing cash balances; (ii) cash generated from operating activities; (iii) borrowing capacity on our committed Credit Agreement; (iv) additional debt financing; and (v) equity capital contributions. From time to time, we may elect to repurchase our outstanding debt through cash purchases, privately negotiated transactions or otherwise when management believes such repurchases are favorable to make. The amounts involved in any such repurchases may be material. IPL First Mortgage Bonds IPL has $95 million of 3.875% IPL first mortgage bonds that are due August 1, 2021. For further discussion, please see Note 5, “Debt - IPL First Mortgage Bonds.” IPL Unsecured Notes IPL has $90 million of unsecured notes due December 22, 2020. For further discussion, please see Note 5, “Debt - IPL Unsecured Notes.” IPALCO’s Senior Secured Notes and Term Loan In April 2020, IPALCO completed the sale of the $475 million 2030 IPALCO Notes priced at 4.25%, with the net proceeds from this offering used to retire the Term Loan on April 14, 2020. The remaining net proceeds, together with cash on hand, 40 Cash Flows The following table provides a summary of our cash flows (in thousands):
Operating Activities The following table summarizes the key components of our consolidated operating cash flows (in thousands):
The net change in operating assets and liabilities for the
Investing Activities Net cash used in investing activities
41
Financing Activities Net cash used in financing activities decreased
Capital Requirements Capital Expenditures Our capital expenditure program, including development and permitting costs, for the three-year period from 2020 through 2022 (including amounts already expended in the first
Additionally, estimated capital expenditure spending on environmental compliance costs for the three-year period from 2020 through 2022 includes the following (amounts in millions):
Please see “Item 1. Business - Environmental Matters" in IPALCO’s 2019 Form 10-K for additional details on each of these projects. The amounts described in the capital expenditure program above include spending under IPL's TDSIC plan approved by the IURC on March 4, 2020 for eligible transmission, distribution and storage system improvements totaling $1.2 billion from 2020 through 2027. Credit Ratings Our ability to borrow money or to refinance existing indebtedness and the interest rates at which we can borrow money or refinance existing indebtedness are affected by our credit ratings. In addition, the applicable interest rates on IPL’s Credit Agreement and other unsecured notes (and the amount of certain other fees in the Credit 42 Agreement) are dependent upon the credit ratings of IPL. Downgrades in the credit ratings of AES could result in IPL’s and/or IPALCO’s credit ratings being downgraded. Any reduction in our debt or credit ratings may adversely affect the trading price of our outstanding debt securities. The following table presents the debt ratings and credit ratings (issuer/corporate rating) and outlook for IPALCO and IPL, along with the dates each rating was effective or affirmed.
We cannot predict whether our current debt and credit ratings or the debt and credit ratings of IPL will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency. A security rating is not a recommendation to buy, sell or hold securities. Such ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. Dividend Distributions All of IPALCO’s outstanding common stock is held by AES U.S. Investments and CDPQ. During the first ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There have been no material changes to our quantitative and qualitative disclosure about market risk as previously disclosed in the 2019 Form 10-K. ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures — The Company, under the supervision and with the participation of its management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of its “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of Changes in Internal Controls over Financial Reporting — There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the 43 COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness. PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In the normal course of business, we are subject to various lawsuits, actions, claims, and other proceedings. We are also from time to time involved in other reviews, investigations and proceedings by governmental and regulatory agencies regarding our business, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. We have accrued in our Financial Statements for litigation and claims where it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We believe the amounts provided in our Financial Statements, as prescribed by GAAP, for these matters are adequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims and other matters (including those matters noted below), and to comply with applicable laws and regulations will not exceed the amounts reflected in our Financial Statements. As such, costs, if any, that may be incurred in excess of those amounts provided for in our Financial Statements cannot be reasonably determined, but could be material. Our Form 10-K for the fiscal year ended December 31, 2019 and the Notes to IPALCO's Consolidated Financial Statements included therein contain descriptions of certain legal proceedings in which we are or were involved. The information in or incorporated by reference into this Item 1 to Part II is limited to certain recent developments concerning our legal proceedings and new legal proceedings, since the filing of such Form 10-K, and should be read in conjunction with such Form 10-K. The following information is incorporated by reference into this Item: information about the legal proceedings contained in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part I, Item 1, Note 2, "Regulatory Matters" ITEM 1A. RISK FACTORS A listing of the risk factors that we consider to be the most significant to a decision to invest in our securities is provided in our Form 10-K for the fiscal year ended December 31, The risks and uncertainties described in our risk factors are not the only ones we face. In addition, new risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our business or financial performance. Our risk factors should be read in conjunction with the other detailed information concerning the Company set forth in the Notes to the Company’s Financial Statements found in Part I, Item 1, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections included in our filings. As part of the filing of this Quarterly Report Form on Form 10-Q, we are further revising, clarifying and supplementing our risk The current outbreak of the novel coronavirus, or COVID-19, has adversely affected, and it or the future outbreak of any other highly infectious or contagious diseases could materially and adversely affect, our generation facilities, transmission and distribution systems, results of operations, financial condition and cash flows. Further, the spread of the COVID-19 outbreak has caused severe disruptions in the U.S. and global economy and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration. 44 In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 150 countries, including every state in the The outbreak of COVID-19 has severely impacted global economic activity, caused significant volatility and negative pressure in financial markets and reduced the demand for energy in our service territory. In addition to reduced revenues and lower margins resulting from decreased energy demand within our service territory, we also will incur expenses relating to COVID-19, and such expenses may include those that relate to events outside of our control. The global impact of the outbreak has been rapidly evolving and many countries, including the •further decline in customer demand as a result of general decline in business activity; •further destabilization of the markets and decline in business activity negatively impacting our customer growth or the number of customers in our service territory as well as our customers’ ability to pay for our services when due (or at all); •delay or inability in obtaining regulatory actions and outcomes that could be material to our business, including for recovery of COVID-19 related expenses and losses, such as uncollectible customer amounts, and the review and approval of our applications, rates and charges by the IURC; •difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deteriorations in credit and financing conditions which could affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; •negative impacts on the health of our essential personnel, especially if a significant number of them are affected, and on our operations as a result of implementing stay-at-home, quarantine and other social distancing measures; •a deterioration in our ability to ensure business continuity during a disruption, including increased cybersecurity attacks related to the work-from-home environment; •delays or inability to access, transport and deliver fuel or other materials to our •the inability to hedge the entire exposure of our operations from availability and cost of fuel and other commodities that experience significant volatility; •delays or inability to access equipment or the availability of personnel to perform planned and unplanned maintenance, which can, in turn, lead to disruption in operations; •delays or inability in achieving our financial goals, growth strategy and digital transformation; and We will continue to review and modify our plans as conditions change. Despite our efforts to manage and remedy these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of this outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty which could materially and adversely affect our generation facilities, transmission and distribution systems, results of operations, financial condition and cash flows. 45 To the extent COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this ‘‘Risk Factors’’ section, such as those relating to our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS
SIGNATURES Pursuant to the requirements 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.
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