FORM 10-K
SECURlTlES AND EXCHANGE COMMlSSlON
WASHINGTON, D. C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended
December 31, 1999 Commission File Number 1-3132-2
INDIANAPOLIS POWER & LIGHT COMPANY
(Exact name of Registrant as specified in its charter)
Indiana 35-0413620
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Monument Circle
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317-261-8261
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
591,353 Shares of Cumulative Preferred Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )
As of January 31, 2000, there were 17,206,630 shares of the registrant's
common stock (without par value) issued and outstanding.
-------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Indianapolis Power & Light Company definitive Information
Statement for the Annual Meeting of Shareholders to be held on April 19, 2000
are incorporated by reference into Part III of this Report.
PART I
------
Item 1. BUSINESS
--------
ORGANIZATION
Indianapolis Power & Light Company (IPL) is an operating public utility
incorporated under the laws of the state of Indiana on October 27, 1926. IPL is
a wholly-owned subsidiary of IPALCO Enterprises, Inc. (IPALCO). IPALCO is a
holding company incorporated under the laws of the state of Indiana on September
14, 1983. All common stock of IPL is owned by IPALCO.
IPL has two business segments, electric and "all other." Steam operations
of IPL are in the "all other" segment (see Note 14 in the Notes to Financial
Statements for additional information about segments).
GENERAL
IPL is engaged primarily in generating, transmitting, distributing and
selling electric energy in the city of Indianapolis and neighboring cities,
towns, communities, and adjacent rural areas, all within the state of Indiana,
the most distant point being about 40 miles from Indianapolis. It also produces,
distributes and sells steam within a limited area in such city. There have been
no significant changes in the services rendered, or in the markets or methods of
distribution, since the beginning of the fiscal year. IPL intends to do business
of the same general character as that in which it is now engaged. Indiana law
authorizes electricity suppliers to have exclusive retail service areas.
IPL's business is not dependent on any single customer or group of a few
customers. IPL's electricity sales for 1995-1999 are depicted on page I-4.
The electric utility business is affected by seasonal weather patterns
throughout the year and, therefore, the operating revenues and associated
operating expenses are not generated evenly by month during the year.
IPL's generation, transmission and distribution facilities (electric
system) are described in Item 2, "PROPERTIES." IPL's electric system is directly
interconnected with the electric systems of Indiana Michigan Power Company, PSI
Energy, Inc., Southern Indiana Gas and Electric Company, Wabash Valley Power
Association, Hoosier Energy Rural Electric Cooperative, Inc. and the Indiana
Municipal Power Agency.
Also, IPL is a member of the East Central Area Reliability Group (ECAR),
and is cooperating under an agreement that provides for coordinated planning of
generation and transmission facilities and the operation of such facilities to
promote reliability of bulk power supply in the nine-state region served by
ECAR. Smaller electric utility systems, independent power producers and power
marketers participate as associate members.
REGULATION
IPL is subject to regulation by the Indiana Utility Regulatory Commission
(IURC) as to its services and facilities, valuation of property, the
construction, purchase or lease of electric generating facilities,
classification of accounts, rates of depreciation, rates and charges, issuance
of securities (other than evidences of indebtedness payable less than twelve
months after the date of issue), the acquisition and sale of public utility
properties or securities and certain other matters (see Note 10 in the Notes to
Financial Statements).
In addition, IPL is subject to the jurisdiction of the Federal Energy
Regulatory Commission (FERC), with respect to short-term borrowings not
regulated by the IURC, the sale and transmission of electric energy in
interstate commerce, the classification of its accounts and the acquisition and
sale of utility property in certain circumstances as provided by the Federal
Power Act.
IPL is also subject to federal, state and local environmental laws and
regulations, particularly as to generating station discharges affecting air and
water quality. The impact of compliance with such regulations on the capital and
operating costs of IPL has been and will continue to be substantial (see Item 7,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" under "Competition and Industry Changes").
.
RETAIL RATEMAKING
IPL's tariffs for electric and steam service to retail customers (basic
rates and charges) are set and approved by the IURC after public hearings. Such
proceedings, which have occurred at irregular intervals, involve IPL, the staff
of the IURC, the Office of the Indiana Utility Consumer Counselor, as well as
other interested consumer groups and customers. In Indiana, basic rates and
charges are determined after giving consideration, on a pro-forma basis, to all
allowable costs for ratemaking purposes including a fair return on the fair
value of the utility property used and useful in providing service to customers.
Once set, the basic rates and charges authorized do not assure the realization
of a fair return on the fair value of property. Pursuant to statute, the IURC
conducts a periodic review of the basic rates and charges of all utilities at
least once every four years. Other numerous factors including, but not limited
to, weather, inflation, customer growth and usage, the level of actual
maintenance and capital expenditures, fuel costs, generating unit availability
and purchased power costs and availability can affect the return realized.
During 1998, in an order resulting from an IPL initiated proceeding, the IURC
declined to exercise its jurisdiction in part over IPL customers who voluntarily
select service under IPL's Elect Plan option. Under two of these options, the
customer's prices are not adjusted for changes in fuel costs or other factors.
During 1999, the total revenue from customers choosing the Elect Plan options
was $68 million. The Elect Plan will expire in September 2001 unless a
subsequent plan is approved by the IURC. Substantially all other IPL customers
are served pursuant to retail tariffs that provide for the monthly billing or
crediting to customers of increases or decreases, respectively, in the actual
costs of fuel consumed from estimated fuel costs embedded in base tariffs,
subject to certain restrictions on the level of operating income. Additionally,
most such retail tariffs provide for billing of "lost revenue margins" on
estimated kilowatt-hour (kWh) sales reductions along with current and deferred
costs resulting from IPL's IURC-approved demand side management programs (DSM).
IPL maintains its books and records consistent with generally accepted
accounting principles reflecting the impact of regulation (see Note 1 in the
Notes to Consolidated Financial Statements and Item 7, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" under "Nature of
Operations and Regulatory Matters").
Future events, including the advent of retail competition within IPL's
service territory, could result in the deregulation of part of IPL's existing
regulated businesses (see "Competition and Industry Changes" in Item 7,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS"). Upon deregulation, adjustments to IPL's accounting records may be
required to eliminate the historical impact of regulatory accounting. Such
adjustments, as required by Statement of Financial Accounting Standards No. 101
(SFAS 101), "Regulated Enterprises - Accounting for the Discontinuation of
Application of FASB Statement No. 71," would eliminate the "effects of any
actions of regulators that have been recognized as assets and liabilities...."
Required adjustments could include expensing of any unamortized net regulatory
assets, elimination of certain tax liabilities and a write down of any impaired
utility plant balances. IPL does not expect to be required to adopt SFAS 101 in
the near term.
FUEL
In 1999, approximately 99% of the total kWh produced by IPL were
generated from coal. Natural gas, No. 2 fuel oil and purchased steam combined to
provide the remaining kWh generation. Natural gas is used in IPL's newer
combustion turbines. In addition to use in oil-fired generating units, fuel oil
is used for start up and flame stabilization in coal-fired generating units.
IPL's long-term coal contracts provide for the major portion of its burn
requirements through the year 2005. The long-term coal agreements are with four
suppliers and the coal is mined entirely in the state of Indiana. It is
presently believed that all coal used by IPL will be mined by others. IPL
normally carries fuel oil and a 60-day supply of coal to offset unforeseen
occurrences such as labor disputes, equipment breakdowns and power sales to
other utilities. IPL increases its stockpile to an approximate 80-day supply
when strikes are anticipated in the coal industry. In preparation for possible
supply problems with Year 2000 issues, IPL temporarily increased its stockpile
to an approximate 100-day supply at the end of 1999.
EMPLOYEE RELATIONS
As of December 31, 1999, IPL had 1,936 employees of whom 971 were
represented by the International Brotherhood of Electrical Workers, AFL-CIO
(IBEW) and 307 were represented by the Electric Utility Workers Union (EUWU), an
independent labor organization. In September 1999, the membership of the IBEW
ratified a new labor agreement that remains in effect until December 16, 2002.
The agreement provided for general pay adjustments of 4% in December 1999 and 2%
in both 2000 and 2001, and changes in pension and health care coverage. In
February of 1998, the membership of the EUWU ratified a new labor agreement that
remains in effect until February of 2001. The agreement provided for general pay
adjustments of 3% in both 1998 and 1999, as well as an adjustment of 2% in 2000.
The agreement also provides for increases in pension amounts.
INDIANAPOLIS POWER & LIGHT COMPANY
STATISTICAL INFORMATION - ELECTRIC
The following table of statistical information presents additional data on IPL's
operation.
Year Ended December 31,
------------------------------------------------------------------------------------
Operating Revenues (In 1999 (1) 1998 (1) 1997 (1) 1996 1995
Thousands):
------------ ------------ -------------- ------------- --------------
Residential $ 282,254 $ 269,351 $ 261,832 $ 261,819 $ 243,055
Small industrial and commercial 127,027 122,082 125,131 131,465 130,009
Large industrial and commercial 328,903 321,103 306,761 298,720 275,803
Public lighting 10,386 9,754 9,324 9,043 8,369
Miscellaneous 10,600 12,469 12,050 9,264 8,289
------------ ------------ -------------- ------------- --------------
Revenues - ultimate 759,170 734,759 715,098 710,311 665,525
consumers
Sales for resale - REMC 1,035 936 1,082 1,141 1,105
Sales for resale - other 40,132 50,140 21,954 13,312 6,758
------------ ------------ -------------- ------------- --------------
Total electric revenues $ 800,337 $ 785,835 $ 738,134 $ 724,764 $ 673,388
============ ============ ============== ============= ==============
Kilowatt-hour Sales (In
Millions):
Residential 4,510 4,359 4,276 4,367 4,277
Small industrial and commercial 1,928 1,888 1,969 2,117 2,197
Large industrial and commercial 7,187 7,138 6,857 6,772 6,509
Public lighting 73 71 69 71 73
------------ ------------ -------------- ------------- --------------
Sales - ultimate consumers 13,698 13,456 13,171 13,327 13,056
Sales for resale - REMC 33 31 29 29 28
Sales for resale - other 1,968 2,252 1,111 725 394
------------ ------------ -------------- ------------- --------------
Total kilowatt-hours sold 15,699 15,739 14,311 14,081 13,478
============ ============ ============== ============= ==============
Customers at End of Year:
Residential 385,799 379,943 374,686 370,029 365,163
Small industrial and commercial 42,610 42,230 41,137 40,393 39,772
Large industrial and commercial 4,107 4,036 3,960 3,657 3,557
Public lighting 509 445 357 313 290
------------ ------------ -------------- ------------- --------------
Total ultimate consumers 433,025 426,654 420,140 414,392 408,782
Sales for resale - REMC 1 1 1 1 1
------------ ------------ -------------- ------------- --------------
Total electric customers 433,026 426,655 420,141 414,393 408,783
============ ============ ============== ============= ==============
(1) Includes estimated electric operating revenue and kilowatt-hour sales for
services delivered but not billed during the period (see Notes 1 and 3 in the
Notes to Financial Statements).
Item 2. PROPERTIES
----------
IPL's executive offices are in the IPALCO Corporate Center located at One
Monument Circle, Indianapolis, Indiana. This facility also houses certain
administrative operations of certain other IPALCO subsidiaries.
IPL also owns two distribution service centers in Indianapolis at 1230
West Morris Street and 3600 North Arlington Avenue. IPL's customer service
center is located at 2102 North Illinois Street in Indianapolis.
IPL owns and operates three primarily coal-fired generating plants that
are used for electric generation. IPL also operates one coal and gas-fired
plant. For electric generation, the total gross nameplate rating is 3,024 MW,
winter capability is 3,036 MW and summer capability is 2,956 MW. For steam
generation, gross capacity is 1,990 Mlbs. (thousands of pounds) per hour.
Total Electric Stations:
H. T. Pritchard plant (Pritchard), located 25 miles southwest of
Indianapolis (seven units in service - one each in 1949, 1950, 1951, 1956 and
1967 and two in 1953) with 367 MW nameplate rating and net winter and summer
capabilities of 344 MW and 341 MW, respectively.
E. W. Stout plant (Stout) located in the southwest part of Marion County
(eleven units in service - one each in 1941, 1947, 1958, 1961, 1967, 1994 and
1995 and four in 1973) with 921 MW nameplate rating and net winter and summer
capabilities of 1,000 MW and 924 MW, respectively.
Petersburg plant (Petersburg), located in Pike County, Indiana (seven units
in service - four in 1967 and one each in 1969, 1977 and 1986) with 1,716 MW
nameplate rating and net winter and summer capabilities of 1,672 MW.
Combination Electric and Steam Station:
C.C.Perry Section K plant (Perry K), located in Indianapolis with 20 MW
nameplate rating (net winter capability 20 MW, summer 19 MW) for electric and a
gross winter and summer capacity of 1,990 Mlbs. per hour for steam.
Net electrical generation during 1999, at the Petersburg, Stout and
Pritchard stations accounted for about 69.0%, 23.3% and 7.7%, respectively, of
IPL's total net generation. Perry K produced all of the steam generated by IPL
for the steam system. In addition, IPL purchases steam from an independent
resource recovery system in Indianapolis.
Included in the above totals are three gas turbine units at the Stout
station added in 1973, one gas turbine added in 1994 and one gas turbine added
in 1995 with a combined nameplate rating of 214 MW. Also included is one diesel
unit each at Pritchard and Stout stations and three diesel units at Petersburg
station, all added in 1967. Each diesel unit has a nameplate rating of 3 MW.
During 1998, IPL announced plans to construct up to 200 megawatts of new
combustion turbines (CTs). The new turbines would be used during times of
highest or "peak" electric demand. One turbine is expected to be placed in
service by June 2000, and is included in the construction forecast. IPL filed a
petition with the IURC recommending that the IURC decline its jurisdiction over
IPL's planned construction and operation of the new CTs and adopt an alternative
procedure for dealing with the sale of power produced by the CTs to IPL's retail
customers. During 1999, the IURC agreed to decline to exercise its jurisdiction
over the construction of the CTs. The Commission also agreed to defer any
determinations regarding all ratemaking issues until a later proceeding.
IPL's transmission system includes 457 circuit miles of 345,000 volt
lines, 359 circuit miles of 138,000 volt lines and 269 miles of 34,500 volt
lines. Underground distribution and service facilities include 686 miles of
conduit and 6,487 wire miles of conductor. Underground street lighting
facilities include 108 miles of conduit and 760 wire miles of conductor. Also
included in the system are 73 bulk power substations and 69 distribution
substations.
Steam distribution properties include 22 miles of mains with 238 customer
connections. Other properties include coal and other minerals, underlying 798
acres in Sullivan County, Indiana, and coal underlying about 6,215 acres in Pike
and Gibson Counties, Indiana. IPL owns approximately 4,067 acres in Morgan
County, Indiana and approximately 884 acres in Switzerland County, Indiana, for
future plant sites.
All critical facilities owned by IPL are well maintained, in good
condition and meet the present needs of IPL.
The Mortgage and Deed of Trust of IPL, together with the Supplemental
Indentures thereto (the "Mortgage"), secure first mortgage bonds issued by IPL.
Pursuant to the terms of the Mortgage, substantially all property owned by IPL
is subject to a direct first mortgage lien.
Item 3. LEGAL PROCEEDINGS
-----------------
IPL is a party to State of Michigan et al v. U.S. EPA a proceeding
----------------------------------------
instituted in November, 1998, now pending in the U.S. Court of Appeals for
the District of Columbia Circuit. This is a petition for review of EPA's rule
promulgated October 27, 1998, requiring Indiana and 22 other jurisdictions to
impose more stringent limitations on emissions of nitrogen oxides (the "NOx SIP
Call"). Petitioners challenging the NOx SIP Call include seven states, about 60
investor-owned electric utility companies, numerous trade associations, serveral
municipal utilities, co-ops, and labor unions. Intervenor-respondents include
several environmental interest groups, Canada, eight states in the Northeast,
and several eastern electric utility companies.
EPA's NOx SIP Call would require operators of coal-fired electric utility
boilers in the affected states to limit NOx emissions to 0.15 pounds per million
BTUs of heat input as a system-wide average. That limit calls for a reduction of
about 85% from 1990 average emissions from coal-fired electric utility boilers,
and a reduction of about 57% from IPL's current emissions.
It is not possible to predict whether EPA's NOx SIP Call will ultimately
survive judicial review. Nor is it possible to predict accurately the costs of
compliance. IPL's preliminary estimates are that the NOx SIP Call would
necessitate capital expenditures of about $180 million.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
EXECUTIVE OFFICERS OF THE REGISTRANT AT FEBRUARY 29, 2000
Name, age (at December 31, 1999), and positions and offices held for the
past five years:
From To
---- --
John R. Hodowal (54)
Chairman of the Board February, 1990
Chief Executive Officer May, 1989
Ramon L. Humke (67)
President and Chief Operating
Officer February, 1990
John R. Brehm (46)
Senior Vice President - Finance May, 1998
Senior Vice President - Finance
and Information Services May, 1991 May, 1998
Ralph E. Canter (43)
Senior Vice President -
Customer Services May, 1998
Vice President-
Steam Operations May, 1995 May, 1998
Manager of Steam Operations October, 1990 May, 1995
Bryan G. Tabler (56)
Senior Vice President -
Secretary and General Counsel January, 1995
Stephen M. Powell (49)
Senior Vice President -
Energy Supply May, 1998
Manager of Engineering and
Production Services June, 1994 May, 1998
Paul S. Mannweiler (50)
Senior Vice President -
External Affairs January, 1997
Partner, Locke Reynolds Boyd and Weisell July, 1980 December, 1996
Max Califar (46)
Vice President - Human
Resources December, 1992
Michael G. Banta (49)
Vice President - Financial Strategy May, 1998
Vice President and Assistant General
Counsel of IPL July, 1995 May, 1998
Daniel L. Short (42)
Treasurer January, 2000
Treasurer - Mid-America
Capital Resources January, 1995
Stephen J. Plunkett (51)
Controller May, 1991
PART II
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Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
- --------------------------------------------------------------------------------
All common stock of IPL is owned by IPALCO and is not publicly traded on
any stock exchange.
Aggregate dividends paid on the common stock were $129.9 million and
$214.2 million during 1999 and 1998, respectively. Dividends were paid at
varying intervals as determined by the Board of Directors.
IPL's Board of Directors declared a dividend on common stock of $12.9
million on November 30, 1999, payable January 15, 2000.
Dividend Restrictions
- ---------------------
So long as any of the several series of bonds of IPL issued under the
Mortgage and Deed of Trust, dated as of May 1, 1940, as supplemented and
modified, executed by IPL to American National Bank and Trust Company of
Chicago, as Trustee, remain outstanding, IPL is restricted in the declaration
and payment of dividends, or other distribution on shares of its capital stock
of any class, or in the purchase or redemption of such shares, to the aggregate
of its net income, as defined in Section 47 of such Mortgage, after December 31,
1939. The amount which these Mortgage provisions would have permitted IPL to
declare and pay as dividends at December 31, 1999, exceeded retained earnings at
that date. Such restrictions do not apply to the declaration or payment of
dividends upon any shares of capital stock of any class to an amount in the
aggregate not in excess of $1,107,155, or to the application to the purchase or
redemption of any shares of capital stock of any class of amounts not to exceed
in the aggregate the net proceeds received by IPL from the sale of any shares of
its capital stock of any class subsequent to December 31, 1939. In addition,
pursuant to IPL's Articles of Incorporation, no dividends may be paid or accrued
and no other distribution may be made on IPL's common stock unless dividends on
all outstanding shares of IPL preferred stock have been paid or declared and set
apart for payment. The management of IPL believes these restrictions will not
materially restrict anticipated dividends.
Item 6. SELECTED FINANCIAL DATA
-----------------------
(In Thousands) 1999 1998 1997 1996 1995
- ---------------------------------------- --------------- --------------- --------------- --------------- ---------------
Total operating revenues (1) $ 834,652 $ 821,256 $ 776,427 $ 762,503 $ 709,206
Operating income 183,501 179,511 167,315 163,219 147,588
Allowance for funds used
during construction 2,201 2,300 4,407 9,321 11,370
Income before cumulative effect
of accounting change (1) 146,231 149,147 133,402 122,588 106,273
Cumulative effect of accounting change (1) - - 18,347 - -
Net income 146,231 149,147 151,749 122,588 106,273
Preferred dividend requirements 3,213 3,119 2,760 3,182 3,182
Income applicable to
common stock 143,018 146,028 148,989 119,406 103,091
Utility plant - net 1,750,412 1,748,460 1,766,383 1,787,969 1,792,007
Total assets 2,048,750 2,023,066 2,049,772 2,052,400 2,108,816
Construction expenditures 103,452 79,458 73,130 78,543 166,874
Common shareholder's equity 780,510 767,926 835,492 782,249 747,129
Nonredeemable cumulative
preferred stock 59,135 59,135 9,135 51,898 51,898
Long-term debt (less current
maturities and sinking
fund requirements) 627,951 627,893 627,840 627,791 669,000
See financial statements.
(1) In 1997, IPL adopted the unbilled revenue method of accounting for
electricity and steam delivered during the period. Revenues are accrued for
services provided but unbilled at the end of each month (see Notes 1 and 3
in the Notes to Financial Statements).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS (INCLUDING ITEM 7A)
-----------------------------------------
IPL has two business segments (electric and "all other"). Steam
operations are in the "all other" category (see Note 14 in the Notes to
Financial Statements).
FORWARD-LOOKING STATEMENTS
IPL hereby files cautionary statements identifying important factors that
could cause IPL's actual results to differ materially from those projected in
forward-looking statements of IPL. This Form 10-K, and particularly Management's
Discussion and Analysis, contains forward-looking statements. Forward-looking
statements express an expectation or belief and contain a projection, plan or
assumption with regard to, among other things, future revenues, income, earnings
per share or capital structure. Such statements of future events or performance
are not guarantees of future performance and involve estimates, assumptions and
uncertainties. The words "anticipate," "believe," "estimate," "expect,"
"forecast," "project," "objective," and similar expressions are intended to
identify forward-looking statements.
Some important factors that could cause IPL's actual results or outcomes
to differ materially from those discussed in the forward-looking statements
include, but are not limited to, fluctuations in customer growth and demand,
weather, fuel costs, generating unit availability, purchased power costs and
availability, regulatory action, environmental matters, federal and state
legislation, interest rates, labor strikes, maintenance and capital expenditures
and local economic conditions. In addition, IPL's ability to have available an
appropriate amount of production capacity in a timely manner can significantly
affect IPL's financial performance. The timing of deregulation and competition,
product development and technology changes are also important potential factors
All such factors are difficult to predict, contain uncertainties that may
materially affect actual results and are beyond the control of IPL.
LIQUIDITY AND CAPITAL RESOURCES
Nature of Operations and Regulatory Matters
-------------------------------------------
Regulation
- ----------
IPL is a regulated public utility and is principally engaged in providing
electric and steam service to the Indianapolis metropolitan area. As a regulated
entity, IPL is required to use certain accounting methods prescribed by
regulatory bodies which may differ from those accounting methods required to be
used by nonregulated entities (see Note 1 in the Notes to Financial Statements).
IPL is subject to extensive regulation at both the federal and state
level. IPL is substantially affected by the regulatory jurisdiction of the
Environmental Protection Agency and the Federal Energy Regulatory Commission at
the federal level and the Indiana Department of Environmental Management and the
Indiana Utility Regulatory Commission (IURC) at the state level. Other
significant regulatory agencies affecting IPL include but are not limited to the
U.S. Department of Labor and the Indiana Occupational Safety and Health
Administration. The regulatory power of the IURC over IPL is both comprehensive
and typical of the economic regulation generally imposed by state public utility
commissions over investor-owned utilities.
An inherent business risk facing any regulated public utility is that of
unexpected or adverse regulatory action. Regulatory discretion is reasonably
broad in Indiana, as elsewhere. Therefore, IPL attempts to work cooperatively
with regulators and those who participate in the regulatory process, while
remaining vigilant and steadfast in protecting IPL's legal rights in the
regulatory process. IPL takes an active role in addressing regulatory policy
issues in the current regulatory environment which is subject to rapid change in
large part because of the trend toward restructuring of the United States
electric utility industry and increased activity by environmental regulators.
Elect Plan
- ----------
In 1998, the IURC approved a plan that allows IPL to offer customers with
less than 2,000 kilowatts of demand an opportunity to choose from optional
payment or service plans. IPL's authority to offer these options will expire on
September 18, 2001, and any contracts entered into thereunder must terminate on
or before that date unless a subsequent plan is approved by the IURC.
Under the plan, eligible IPL customers may enter into written contracts
for:
Fixed Rate - Pay a guaranteed fixed rate per unit of consumption for one
or more years.
Green Power - Purchase environmentally friendly or "green"
power.
Additionally, residential customers may choose a "Sure Bill" option,
paying the same bill each month for 12 months, regardless of how much
electricity is used. Customers not choosing one of these options continue to
receive electric service under existing tariffs. (See Item 1, BUSINESS, under
the subheading "Retail Ratemaking.")
Authorized Annual Operating Income
- ----------------------------------
During quarterly fuel adjustment clause proceedings, the annual
jurisdictional operating income of IPL's electric business is subject to review.
IPL's steam business is subject to annual fuel adjustment clause proceedings.
Customer refunds could result if actual annual jurisdictional operating income
exceeds levels authorized by the IURC (see Note 1 in the Notes to Financial
Statements). IPL does not anticipate any customer refunds to result from such
reviews during 2000.
Competition and Industry Changes
--------------------------------
In recent years, various forms of proposed industry-restructuring
legislation and/or rulemakings have been introduced at the federal level and in
several states. Generally, the intent of these initiatives is to encourage an
increase in competition within the regulated electric utility industry. While
federal rulemaking to date has addressed only the electric wholesale market,
various state legislatures are considering or have enacted new laws impacting
the retail energy markets within their respective states. A discussion of the
legislative and regulatory initiatives most likely to affect IPL follows:
Wholesale Energy Market
- -----------------------
In April 1996, the Federal Energy Regulatory Commission (FERC) issued
Orders 888 and 889 concerning open access transmission service for wholesale
sales. These Orders require all utilities under FERC jurisdiction to: 1. file
open, nondiscriminatory transmission access tariffs with FERC; 2. offer
transmission to eligible customers comparable to service they provide
themselves; and 3. take service under the tariffs for their own wholesale sales
and purchases of electricity. IPL filed its open access transmission tariff on
January 6, 2000. Historically, FERC has issued an order making such tariffs
effective as of their date of filing. FERC Order 888 also provides for the
recovery of utility stranded costs which are defined as the difference between
revenues received by utilities under traditional ratemaking and market-based
prices.
In December 1999, FERC issued Order 2000, which provides for the
voluntary formation of regional transmission organizations (RTOs), entities
created to operate, plan and control utility transmission assets. Order 2000
also prescribes certain characteristics and functions of acceptable RTO
proposals. The rule requires all public utilities that own, operate or control
interstate transmission to individually file in October 2000, either a proposal
to join an RTO or the reasons for not participating in an RTO.
Retail Energy Market
- --------------------
The legislatures of several states have enacted, and many other states
are considering, new laws that would allow various forms of competition for
retail sales of electric energy. While each state proposal is different, most
provide for some recovery of a utility's stranded costs and require an extended
transition period before competition is fully effective. Additionally, a few
states have implemented pilot programs that experiment with allowing some form
of customer choice of electricity suppliers.
In Indiana, competition among electric energy providers for sales has
focused primarily on the sale of bulk power to other public and municipal
utilities. Indiana law provides for electricity suppliers to have exclusive
retail service areas.
In 1995, the Indiana General Assembly, anticipating increasing
competitive forces in the regulated public utility industry, enacted I.C.
8-1-2.5. This law enables the IURC to consider and approve, on an individual
utility basis, utility-initiated proposals wherein the IURC declines to exercise
jurisdiction over the whole or any part of the utility, or its retail energy
service or both. The IPL Elect Plan was approved by the IURC under this law.
During 1997, the Indiana General Assembly authorized a legislative study
committee to assess the issue of electric utility competition and restructuring.
A comprehensive restructuring bill was introduced in the Indiana Senate in 1998,
but failed to pass. Subsequently, comprehensive restructuring bills were
submitted in both 1999 and 2000 and also failed to pass. IPL continues to work
cooperatively with other electric utilities in Indiana regarding future
legislation. However, the outcome of such efforts is uncertain.
National Ambient Air Quality Standards
- --------------------------------------
On July 16, 1997, the United States Environmental Protection Agency (EPA)
promulgated final rules tightening the National Ambient Air Quality Standards
for ozone and creating new fine particulate matter standards. On October 29,
1999, after conducting a rehearing of its initial decision of May 14, 1999, the
United States Court of Appeals for the District of Columbia Circuit determined
that the new ozone standards were not issued lawfully, but left open the
question of future remedy. The Court also determined that the standards for fine
particulate matter were legally deficient in certain respects. EPA has
petitioned the Supreme Court to review the Court of Appeals' decision.
NOx SIP Call
- ------------
On October 27, 1998, EPA issued a final rule calling for Indiana, along
with 22 other jurisdictions in the eastern third of the United States, to impose
more stringent limits on nitrogen oxides (NOx) from fossil-fuel fired steam
electric generators, such as those operated by IPL. This rule (the NOx SIP Call)
was based in part on the new ozone standards that were later held unlawful in
the Court of Appeals' decision discussed above. In a separate decision on May
25, 1999, the Court of Appeals stayed the compliance deadlines in the NOx SIP
Call.
Because power plants emit nitrogen oxides, as well as certain air
pollutants that may contribute to formation of fine particulate matter, existing
IPL sources may be required to be retrofitted with additional air pollution
controls in the future, either as a result of EPA's 1997 and 1998 regulations or
due to future regulatory actions. IPL is a party to litigation concerning EPA's
1997 and 1998 final regulations, and that litigation is still in progress.
EPA's NOx SIP Call would require operators of coal-fired electric utility
boilers in the affected states to limit NOx emissions to 0.15 pounds per million
BTUs of heat input as a system-wide average. That limit calls for a reduction of
about 85% from 1990 average emissions from coal-fired electric utility boilers,
and a reduction of about 57% from IPL's current emissions.
It is not possible to predict whether EPA's NOx SIP Call will ultimately
survive judicial review. Nor is it possible at this time to predict accurately
the costs of compliance. IPL's preliminary estimates are that the NOx SIP Call
would necessitate capital expenditures of about $180 million.
The Indiana Department of Environmental Management has recently
circulated a draft rule calling for coal-fired electric utilities to meet an
emission limit of 0.25 pounds of NOx per million BTUs of heat input on a
company-wide basis. Preliminary estimates are that compliance with such a limit
would call for IPL to expend capital of approximately $81 million. It is not
possible to predict whether the draft rule will ever become effective.
As to timing, if either of the requirements discussed in the two
preceding paragraphs became effective, they would likely do so during the
2000-2001 period and would probably necessitate deployment of capital during the
period between 2002 and 2005. There can be no certainty about these estimates.
IPL expects to refine the above estimates as engineering studies progress
and when, as, and if such rules become effective.
Liquidity, Financing Requirements and Capital Market Access
-----------------------------------------------------------
Liquidity is the ability of an entity to meet its short-term and
long-term cash needs. IPL's liquidity is a function of its ability to generate
internal funds, its construction program, its mortgage covenants and loan
agreements and its access to external capital markets.
Sustaining investment grade debt ratings is also a key element for having
adequate liquidity and financial flexibility. As of December 31, 1999, IPL's
senior secured debt was rated AA- by Standard & Poor's, Aa2 by Moody's Investor
Services and AA by Duff & Phelps, and IPL's commercial paper was rated A-1+ by
Standard & Poor's, P-1 by Moody's Investor Services and D-1 by Duff & Phelps.
IPL expects to be able to maintain investment grade debt ratings into the
foreseeable future.
During 1999, IPL refinanced its $23.5 million 7.45% Series first mortgage
bonds with the use of proceeds from a $23.5 million unsecured note. The 1999
Series note has an interest rate based on tax-exempt auction rates and has a
maturity date of August 1, 2030 (see Note 7 in the Notes to Financial
Statements).
IPL has no long-term debt that matures during 2000. However, other
existing higher-rate debt may be refinanced depending upon market conditions.
During the next five years, IPL expects to meet its cash requirements
without any additional permanent financing. Cash flows from operations and
temporary short-term borrowings are projected to provide the funds required for
IPL's construction program. See the following section for discussion of the
construction program.
Future Performance
------------------
Traditionally, retail KWH sales, after adjustments for weather
variations, have grown in reasonable correlation with growth in service
territory economic activity. During the past 10 years, IPL's retail KWH sales
have grown at a compound annual rate of 2.0%, while the Indianapolis economy
grew at an annual rate of 2.5%. The Indianapolis economy is expected to grow at
an annual rate of 2.7% for 2000 through 2004, according to the Kelley School of
Business at Indiana University.
IPL's wholesale KWH sales decreased 12% in 1999 over the level achieved
in 1998 largely as a result of planned and unplanned generating unit outages. As
IPL's retail sales grow the amount of generating capacity available for
wholesale sales is more limited. The ability to sell power in the highly
competitive wholesale market is also highly dependent on market conditions and
the level and frequency of unplanned outages. IPL is unable to predict with any
degree of certainty the level of wholesale sales that may be achieved in 2000.
Operating and maintenance expenses were $425.0 million in 1999. These
expenses in 2000 will be influenced by the level of KWH generation, generating
unit availability and overhaul costs, cost control programs and inflation. IPL
depends on purchased power, in part, to meet its retail obligations. Purchased
power costs are highly volatile and, therefore, IPL is unable to predict with
any degree of certainty the level of those costs for 2000.
IPL's construction program for the three-year period 2000-2002 is
estimated to cost $294.0 million including AFUDC. The estimated cost of the
program by year (in millions) is $106.5 in 2000, $103.9 in 2001 and $83.6 in
2002. It includes $152.2 million for additions, improvements and extensions to
transmission and distribution lines, substations, power factor and voltage
regulating equipment, distribution transformers and street lighting facilities.
The construction program also includes $6.6 million for construction of a
100-megawatt combustion turbine expected to be in service by June 2000. These
projected amounts also include $20.7 million of costs associated with new
environmental standards proposed by the EPA which are currently under appeal in
the United States Court of Appeals (see "Competition and Industry Changes").
Other
-----
Cumulative Effect of Accounting Change
- --------------------------------------
On December 31, 1997, effective January 1, 1997, IPL adopted the unbilled
revenue method of accounting for all electric and steam sales to more closely
match revenues with expenses. Under this method, IPL accrues revenues for all
electric and steam energy delivered to customers during the period whether
billed or not. Previously, IPL recognized these revenues only as customers were
billed, with the service rendered after monthly meter reading dates through the
end of a calendar month recognized as operating revenues in the following month.
The cumulative effect of this change in accounting method as of January 1, 1997,
net of income taxes, was a one-time income increase of $18.3 million and was
reported as a separate component of net income for 1997. This accounting change
does not affect IPL's cash flow or liquidity (see Note 3 in the Notes to
Financial Statements).
Preferred Stock, Debt Issuance and Dividend Restrictions
- ------------------------------ -------------------------
Restrictions on IPL's ability to issue certain securities or pay cash
dividends are contained in its Mortgage and Deed of Trust (Mortgage) and its
Amended Articles of Incorporation (Articles). The Articles require that, so long
as any shares of preferred stock are outstanding, the net income of IPL, as
specified therein, be at least one and one-half times the total interest on the
funded debt and the pro forma dividend requirements on the outstanding, and any
proposed, preferred stock before any additional preferred stock is issued. The
Mortgage requires that net earnings as calculated thereunder be two and one-half
times the annual interest requirements before additional bonds can be
authenticated on the basis of property additions. Based on IPL's net earnings
for the 12 months ended December 31, 1999, the ratios under the Articles and the
Mortgage are 5.05 and 12.35, respectively.
So long as any of the several series of bonds of IPL issued under its
Mortgage remain outstanding, and subject to certain exceptions, IPL is
restricted in the declaration and payment of dividends, or other distribution on
shares of its capital stock of any class, or in the purchase or redemption of
such shares, to the aggregate of its net income, as defined in Section 47 of
such Mortgage, after December 31, 1939. The amount which these Mortgage
provisions would have permitted IPL to declare and pay as dividends at December
31, 1999, exceeded retained earnings at that date. In addition, pursuant to
IPL's Articles, no dividends may be paid or accrued and no other distribution
may be made on IPL's common stock unless dividends on all outstanding shares of
IPL preferred stock have been paid or declared and set apart for payment
IPL believes these requirements will not restrict any anticipated future
financings or cash dividend payments. At December 31, 1999, and considering all
existing restrictions, IPL had the capacity to issue approximately $1.2 billion
of additional long-term debt.
Market Risk Sensitive Instruments and Positions
- -----------------------------------------------
The primary market risk to which IPL is exposed is related to interest
rate risk. IPL uses long-term debt as a primary source of capital in its
business. A portion of this debt has an interest component that resets on a
periodic basis to reflect current market conditions. IPL had $455.3 million of
fixed rate and $173.5 million of variable rate long-term debt outstanding at
December 31, 1999. The weighted average interest rates of IPL's fixed rate and
variable rate long-term debt were 6.7% and 3.8%, respectively, at December 31,
1999. The fair values of the fixed rate and variable rate long-term debt were
$441.6 million and $173.5 million at December 31, 1999. IPL's $80 million 6.05%
Series first mortgage bond matures in February 2004.
To manage IPL's exposure to fluctuations in interest rates and to lower
funding costs, IPL has entered into an interest rate swap. Under this swap, IPL
agrees with counterparties to exchange, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated on an agreed
notional amount. This interest differential paid or received is recognized in
the statements of income as a component of interest expense. At December 31,
1999, IPL's interest rate swap agreement had a notional amount of $40 million,
and it expires in January 2023. IPL agrees to pay interest at a fixed rate of
5.21% to a swap counter party and receive a variable rate based on the
tax-exempt weekly rate. The fair value of this swap agreement was $0.4 million
at December 31, 1999.
Year 2000
- ---------
IPL has not discovered any significant problems associated with its
systems as a result of the year change from 1999 to 2000. It is unlikely that
any such problems will be encountered in the future. However, should such
problems occur, IPL has established a Year 2000 Committee which would act to
correct any problems as a result of the year changeover. It is not likely that
any such occurrences would have a material effect on the financial position or
results of operations of the Company.
Cash Flows
- ----------
Additional information regarding IPL's historical cash flows from
operations, investing and financing for the past three years, including the
capital expenditures of IPL, is disclosed in the Statements of Cash Flows and in
the Notes to Financial Statements.
RESULTS OF OPERATIONS
Income applicable to common stock decreased by $3.0 million in 1999
compared to 1998. Income applicable to common stock decreased by $3.0 million in
1998 compared to 1997. The following discussion highlights the factors
contributing to these decreases.
Utility Operating Revenues
- --------------------------
Operating revenues in 1999 and 1998 increased from the prior year by $13.4
million and $44.8 million, respectively. The increases in revenues resulted from
the following:
Increase (Decrease)
-------------------
1999 over 1998 1998 over 1997
-------------- --------------
(In Millions)
Electric:
Change in retail KWH sales - net of fuel $ 17.5 $ 14.5
Change in estimate for unbilled revenue 8.0 -
Fuel revenue (0.1) 3.5
Wholesale revenue (9.9) 28.0
DSM tracker revenue 0.8 1.3
Steam revenue (1.1) (2.9)
Other revenue (1.8) 0.4
------ ------
Total change in operating revenues $ 13.4 $ 44.8
====== ======
The increase in retail KWH sales in 1999 primarily was due to economic
growth in Indianapolis. The increase in 1998 also reflected economic growth in
Indianapolis, as well as an increase in cooling degree days during the summer
partially offset by a decrease in heating degree days. Actual and percentage
changes in electric customers and in heating and cooling degree days for these
periods are as follows:
Increase (Decrease)
-------------------
1999 over 1998 1998 over 1997
-------------- --------------
Electric Residential Customers 5,856 1.5% 5,257 1.4%
Commercial & Industrial Customers 451 1.0% 1,169 2.6%
Heating Degree Days 448 10.1% (1,261) (22.2)%
Cooling Degree Days (73) (5.8)% 381 43.8%
A change in the estimate for unbilled revenue was made during 1999. The
changes in fuel revenues in 1999 and 1998 from the prior year reflect
differences in fuel costs billed to customers. Wholesale sales were $41.2
million, $51.1 million and $23.1 million for 1999, 1998 and 1997, respectively.
The decrease in wholesale revenues in 1999 was a result of both planned and
unplanned generating unit outages during 1999. The increase in wholesale
revenues during 1998 reflected increased wholesale marketing efforts and energy
requirements of other utilities. The decrease in other revenues during 1999
reflects decreased service revenues.
Utility Operating Expenses
- --------------------------
Fuel expense decreased in 1999 by $7.2 million due primarily to a
decrease in deferred fuel cost and a 0.3% decrease in generation caused by
unscheduled unit outages. During 1998, fuel expense increased by $16.5 million
primarily as a result of increased total KWH sales.
Other operating expenses decreased $18.3 million in 1999 primarily due to
decreased administrative and general expenses of $10.5 million and increased
sales of emission allowances of $4.8 million (reduced operating expenses) as
well as other cost improvements. The decreased administrative and general
expenses were primarily due to decreased benefits expense as well as the
non-recurrence of a $2.2 million charge in 1998 for a voluntary early retirement
and separation program. During 1998, other operating expenses increased from the
prior year by $12.3 million. The increase in 1998 was partially due to increased
administrative and general expenses of $7.7 million. This increase was due to
the voluntary early retirement and separation program as well as increased
outside services and increased labor costs. Electric distribution expenses
increased $1.7 million and production expenses increased $1.5 million during
1998.
Power purchased increased by $22.6 million during 1999 as a result of the
combination of higher market prices for scheduled summer peaking power and a
$13.0 million increase in replacement power costs due to the unusually high
level of generating unit outages during peak electricity demand in the third
quarter of 1999. Power purchased decreased $0.7 million during 1998 due to
decreased demand charges partially offset by increased purchases of KWH.
Maintenance expenses increased by $4.1 million during 1999 and decreased
by $3.2 million during 1998. These variances primarily reflect the timing of
major generating unit overhauls.
Taxes other than income taxes decreased by $0.9 million during 1999
primarily due to decreased employment taxes. During 1998, taxes other than
income taxes increased $2.0 million from the prior period due to increased
property taxes, gross income taxes and employment taxes.
Income taxes - net increased in both 1999 and 1998 from the prior years by
$4.3 million and $6.9 million, respectively. These changes reflect increases in
pretax operating income.
Other Income And Deductions
- ---------------------------
Allowance for equity funds used during construction did not change during
1999 from the prior period. During 1998, allowance for equity funds used during
construction decreased $2.1 million. In mid-1997, the amortization of deferred
carrying charges on a plant asset ended, contributing to this decrease.
Other-net, which includes the pretax non-operating income from IPL,
increased by $2.3 million during 1999. This increase was primarily due to an
insurance recovery. Other-net decreased by $4.7 million during 1998, as compared
to the prior year. The decrease in 1998 was primarily related to the
non-recurring gain from the sale of a retired plant site in 1997.
During 1998, a gain from the liquidation and termination of an agreement
to purchase power was recognized by IPL in the amount of $12.5 million before
taxes.
Interest Charges
- ----------------
Interest on long-term debt decreased by $0.3 million and $0.4 million in
1999 and 1998, respectively, from the prior years. The decrease in 1999 was due
to decreased interest expense on floating debt due to lower average interest
rates. The decrease in 1998 was due to the redemption of $11.3 million 5 5/8%
Series in May 1997.
Other interest charges increased by $0.5 million during 1999 primarily
due to increased short-term debt borrowings. Other interest charges decreased by
$0.6 million during 1998 from the prior year as a result of decreased interest
on tax assessments and decreased interest on short-term debt borrowings.
Cumulative Effect of Accounting Change
- --------------------------------------
A cumulative effect of accounting change in the amount of $18.3 million,
net of taxes, was recorded during 1997. Effective January 1, 1997, IPL adopted
the unbilled revenue method of accounting for electricity and steam delivered
during the period. Revenues are accrued for services provided but unbilled at
the end of each month (see Notes 1 and 3 in the Notes to Financial Statements).
New Accounting Pronouncement
- ----------------------------
The Financial Accounting Standards Board issued Statement of Financial
Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities," in June 1998. SFAS 137 delayed the effective date of this standard
to all fiscal quarters of all fiscal years beginning after June 15, 2000 (see
Note 1 in the Notes to Financial Statements).
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
INDEPENDENT AUDITORS' REPORT
============================
To the Board of Directors of Indianapolis Power & Light Company:
We have audited the accompanying balance sheets of Indianapolis Power & Light
Company as of December 31, 1999 and 1998, and the related statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of IPL's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Indianapolis Power & Light Company as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
As discussed in Note 3 to the financial statements, in 1997 the Company
changed its method of accounting for unbilled revenue.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
January 20, 2000
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
(In Thousands)
OPERATING REVENUES (Notes 3 and 10):
Electric $ 800,337 $ 785,835 $ 738,134
Steam 34,315 35,421 38,293
------------ ------------ ------------
Total operating revenues 834,652 821,256 776,427
------------ ------------ ------------
OPERATING EXPENSES:
Operation:
Fuel 173,872 181,036 164,578
Other 137,348 155,610 143,311
Power purchased 29,769 7,170 7,833
Purchased steam 6,391 5,968 7,075
Maintenance 77,637 73,501 76,679
Depreciation and amortization 107,469 103,223 103,230
Taxes other than income taxes 34,190 35,047 33,071
Income taxes - net (Note 9) 84,475 80,190 73,335
------------ ------------ ------------
Total operating expenses 651,151 641,745 609,112
------------ ------------ ------------
OPERATING INCOME 183,501 179,511 167,315
------------ ------------ ------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 1,372 1,389 3,462
Other - net 2,130 (158) 4,507
Gain on termination of agreement (Note 13) - 12,500 -
Income taxes - net (Note 9) (581) (4,196) (1,105)
------------ ------------ ------------
Total other income - net 2,921 9,535 6,864
------------ ------------ ------------
INCOME BEFORE INTEREST CHARGES 186,422 189,046 174,179
------------ ------------ ------------
INTEREST CHARGES:
Interest on long-term debt 38,057 38,395 38,809
Other interest 1,141 675 1,243
Allowance for borrowed funds used during construction (829) (911) (945)
Amortization of redemption premiums and expenses on
debt - net 1,822 1,740 1,670
------------ ------------ ------------
Total interest charges 40,191 39,899 40,777
------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 146,231 149,147 133,402
------------ ------------ ------------
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 3) - - 18,347
------------ ------------ ------------
NET INCOME 146,231 149,147 151,749
------------ ------------ ------------
PREFERRED DIVIDEND REQUIREMENTS 3,213 3,119 2,760
------------ ------------ ------------
INCOME APPLICABLE TO COMMON STOCK $ 143,018 $ 146,028 $ 148,989
============ ============ ============
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
December 31, 1999 and 1998
- --------------------------------------------------------------------------------------------------------------
ASSETS 1999 1998
- --------------------------------------------------------------------------------------------------------------
(In Thousands)
UTILITY PLANT:
Utility plant in service (Note 2) $ 2,922,338 $ 2,859,899
Less accumulated depreciation 1,299,122 1,202,356
---------------- ----------------
Utility plant in service - net 1,623,216 1,657,543
Construction work in progress 116,478 80,198
Property held for future use 10,718 10,719
---------------- ----------------
Utility plant - net 1,750,412 1,748,460
---------------- ----------------
OTHER PROPERTY:
At cost, less accumulated depreciation 5,753 5,790
---------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 16,234 4,250
Accounts receivable and unbilled revenue (less allowance for
doubtful
accounts - 1999, $1,091,000 and 1998, $996,000) (Note 3) 49,599 36,692
Fuel - at average cost 50,985 38,968
Materials and supplies - at average cost 48,106 48,163
Tax refund receivable 3,549 7,643
Prepayments and other current assets 8,120 3,634
---------------- ----------------
Total current assets 176,593 139,350
---------------- ----------------
DEFERRED DEBITS:
Regulatory assets (Note 5) 107,948 116,801
Miscellaneous 8,044 12,665
---------------- ----------------
Total deferred debits 115,992 129,466
---------------- ----------------
TOTAL $ 2,048,750 $ 2,023,066
================ ================
See notes to financial statements.
- --------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1999 1998
- --------------------------------------------------------------------------------------------------------------
(In Thousands)
CAPITALIZATION (See Notes 6 and 7):
Common shareholder's equity
Common stock, no par, authorized - 20,000,000 shares, issued and outstanding
- 17,206,630 shares in 1999,
17,206,630 shares in 1998 $ 324,537 $ 324,537
Premium and net gain on preferred stock 2,642 2,642
Retained earnings 453,331 440,747
---------------- ---------------
Total common shareholder's equity 780,510 767,926
Cumulative preferred stock 59,135 59,135
Long-term debt (Note 2) 627,951 627,893
---------------- ---------------
Total capitalization 1,467,596 1,454,954
---------------- ---------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper (Note 8) 49,000 19,200
Accounts payable and accrued expenses 53,437 64,461
Dividends payable 13,668 13,158
Taxes accrued 22,078 18,283
Interest accrued 12,898 13,326
Other current liabilities 13,356 13,731
---------------- ---------------
Total current liabilities 164,437 142,159
---------------- ---------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Deferred income taxes - net (Note 9) 339,986 328,417
Unamortized investment tax credit 39,226 41,993
Accrued postretirement benefits (Note 11) 4,338 10,768
Accrued pension benefits (Note 11) 29,018 39,953
Miscellaneous 4,149 4,822
---------------- ---------------
Total deferred credits and other long-term liabilities 416,717 425,953
---------------- ---------------
COMMITMENTS AND CONTINGENCIES (Note 12)
TOTAL $ 2,048,750 $ 2,023,066
================ ===============
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
(In Thousands)
CASH FLOWS FROM OPERATIONS:
Net income $ 146,231 $ 149,147 $ 151,749
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 106,311 100,829 98,908
Amortization of regulatory assets 14,470 14,246 16,210
Deferred income taxes and investment tax credit adjustments - net 6,227 (2,483) 12,669
Allowance for funds used during construction (2,201) (2,300) (4,407)
Cumulative effect of accounting change - before taxes (Note 3) - - (29,915)
Change in certain assets and liabilities:
Accounts receivable - excluding cumulative effect
of accounting change (12,907) 6,361 (5,246)
Fuel, materials and supplies (11,960) (4,483) (500)
Accounts payable (11,024) 491 7,433
Taxes accrued 3,795 (391) (947)
Accrued pension benefits (10,935) 132 2,538
Other - net (3,148) (9,338) (6,200)
------------ ------------- -------------
Net cash provided by operating activities 224,859 252,211 242,292
------------ ------------- -------------
CASH FLOWS FROM INVESTING:
Construction expenditures (103,452) (79,458) (73,130)
Other (5,832) (1,102) (2,333)
------------ ------------- -------------
Net cash used in investing activities (109,284) (80,560) (75,463)
------------ ------------- -------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 23,500 - -
Issuance of preferred stock (Note 6) - 50,000 -
Retirement of long-term debt (23,500) - (11,250)
Preferred stock redemptions (Note 6) - - (41,814)
Short-term debt - net 29,800 (4,500) (10,300)
Dividends paid (133,137) (217,362) (107,384)
Other (254) (489) 29
------------ ------------- -------------
Net cash used in financing activities (103,591) (172,351) (170,719)
------------ ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,984 (700) (3,890)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,250 4,950 8,840
------------ ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,234 $ 4,250 $ 4,950
============ ============= =============
- -----------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 39,215 $ 38,644 $ 39,837
============ ============= =============
Income taxes $ 79,004 $ 90,467 $ 75,621
============ ============= =============
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Retained Earnings
For the Years Ended December 31, 1999, 1998 and 1997
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
RETAINED EARNINGS AT BEGINNING OF YEAR $ 440,747 $ 508,626 $ 456,349
NET INCOME 146,231 149,147 151,749
----------- ----------- -----------
Total 586,978 657,773 608,098
DEDUCT:
Cash dividends declared:
Cumulative preferred stock - at prescribed
rate of each series (See Note 6) 3,213 3,119 2,760
Common stock 130,434 213,417 96,712
Capital stock expense - 490 -
-------------- ------------- -------------
Total 133,647 217,026 99,472
-------------- ------------- -------------
RETAINED EARNINGS AT END OF YEAR $ 453,331 $ 440,747 $ 508,626
============== ============= =============
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
==================================
Notes to Financial Statements
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All the outstanding common stock of Indianapolis Power & Light Company
(IPL) is owned by IPALCO Enterprises, Inc. At December 31, 1999 and 1998, IPL
had a receivable, which is due on demand, for advances made to IPALCO.
Nature of Operations: IPL is engaged principally in providing electric and
steam service to the Indianapolis metropolitan area.
Concentrations of Risk: Substantially all of IPL's business activity is
with customers located within the Indianapolis area. In addition, approximately
66% of IPL's employees are covered by collective bargaining agreements.
Regulation: The retail utility operations of IPL are subject to the
jurisdiction of the Indiana Utility Regulatory Commission (IURC). IPL's
wholesale power transactions are subject to the jurisdiction of the Federal
Energy Regulatory Commission. These agencies regulate IPL's utility business
operations, tariffs, accounting, depreciation allowances, services, security
issues and the sale and acquisition of utility properties. The financial
statements of IPL are based on generally accepted accounting principles,
including the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation," which gives
recognition to the ratemaking and accounting practices of these agencies.
Revenues: Effective January 1, 1997, IPL adopted the unbilled revenue
method of accounting for electric and steam delivered during the period (see
Note 3). Revenues are accrued for services provided but unbilled at the end of
each month.
A fuel adjustment charge provision, which is established after public
hearing, is applicable to most of the rate schedules of IPL and permits the
billing or crediting of estimated fuel costs above or below the levels included
in such rate schedules. Actual fuel costs in excess of or under estimated fuel
costs billed are deferred or accrued, respectively.
On August 18, 1999, the IURC issued an order that allows for the recovery
of purchased power costs based on a benchmark. This benchmark will be determined
by the calculation of a utility's highest on-system fuel cost. If the cost per
Mwh of power purchases is not greater than the benchmark, then the purchased
power costs should be considered net energy costs that are presumed fuel costs
included in purchased power. If the average cost per Mwh of power purchases is
greater than the benchmark, then the costs are recoverable only through
demonstration of the reasonableness of those purchases to the IURC. The Indiana
Office of Utility Consumer Counselor has appealed that order and the eventual
outcome of this matter is unknown at this time.
Authorized Annual Operating Income: Indiana law requires electric
utilities under the jurisdiction of the IURC to meet operating expense and
income requirements as a condition for approval of requested changes in fuel
adjustment charges. Additionally, customer refunds may result if the utilities'
rolling 12-month operating income, determined at quarterly measurement dates,
exceeds the utilities' authorized annual operating income and cannot be offset
by applicable cumulative net operating income deficiencies. In such a
circumstance, the required customer refund for the quarterly measurement period
is calculated to be one-fourth of the excess annual operating income grossed up
for federal and state taxes as required under I. C.
8-1-2-42.5.
Effective July 1, 1996, IPL's authorized annual jurisdictional electric
net operating income, for purposes of quarterly operating income tests, is $163
million, as established in an IURC order dated August 24, 1995. This level will
be maintained until changed by an IURC order. During 1999, the Commission found
that IPL's rolling annual jurisdictional retail electric operating income was
less than the authorized annual operating income at each of the quarterly
measurement dates (January, April, July and October). At October 31, 1999, IPL's
most recent quarterly measurement date, IPL had a cumulative net operating
deficiency of $128.8 million, of which $10.6 million expires at varying amounts
during the period ending September 1, 2000. The operating deficiency is
calculated by summing the 20 most recent quarterly measurement period annual
results or from the date of the last rate order, whichever is longer. As a
consequence, IPL could, for a period of time, earn above $163 million of
electric jurisdictional retail net operating income without being required to
make a customer refund.
Through the date of IPL's next general electric rate order, IPL is
required to file upward and downward adjustments in fuel cost credits and
charges on a quarterly basis, based on changes in the cost of fuel, irrespective
of its level of earnings.
Pursuant to an order of the IURC, IPL's authorized annual steam net
operating income is $6.2 million, plus any cumulative annual underearnings
occurring during the five-year period subsequent to the implementation of the
new rate tariffs. During 1999, IPL's annual jurisdictional steam operating
income was less than the authorized annual operating income at the January 31,
1999 measurement date.
Allowance For Funds Used During Construction: In accordance with the
prescribed uniform system of accounts, IPL capitalizes an allowance for the net
cost of funds (interest on borrowed funds and a reasonable rate on equity funds)
used for construction purposes during the period of construction with a
corresponding credit to income. IPL capitalized amounts using pretax composite
rates of 9.4%, 9.7% and 9.1% during 1999, 1998 and 1997, respectively.
Utility Plant and Depreciation: Utility plant is stated at original cost
as defined for regulatory purposes. The cost of additions to utility plant and
replacements of retirement units of property, as distinct from renewals of minor
items that are charged to maintenance, are charged to plant accounts. Units of
property replaced or abandoned in the ordinary course of business are retired
from the plant accounts at cost; such amounts plus removal costs, less salvage,
are charged to accumulated depreciation. Depreciation is computed by the
straight-line method based on functional rates approved by the IURC and averaged
3.5% during 1999, 1998 and 1997.
Sale of Accounts Receivable: IPL has sold, on a revolving basis, an
undivided percentage interest in $50 million of its accounts receivable.
Regulatory Assets: Regulatory assets represent deferred costs that have
been included as allowable costs for ratemaking purposes. IPL has recorded
regulatory assets relating to certain costs as authorized by the IURC. Specific
regulatory assets are disclosed in Note 5. As of December 31, 1999, all
nontax-related regulatory assets have been included as allowable costs in orders
of the IURC (see Note 10). IPL is amortizing such regulatory assets to expense
over periods authorized by these orders. Tax-related regulatory assets represent
the net income tax costs to be considered in future regulatory proceedings
generally as the tax related amounts are paid .
In accordance with regulatory treatment, IPL deferred as a regulatory
asset certain post in-service date carrying charges and certain other costs
related to its investment in Petersburg Unit 4. As authorized in the 1995
Electric Rate Settlement, IPL, effective September 1, 1995, is amortizing this
deferral to expense over a life that generally approximates the useful life of
the related facility. Also in accordance with regulatory treatment, IPL defers
as regulatory assets non-sinking fund debt and preferred stock redemption
premiums and expenses, and amortizes such costs over the life of the original
debt, or, in the case of preferred stock redemption premiums, over 20 years.
Derivatives: IPL has only limited involvement with derivative financial
instruments and does not use them for trading purposes. IPL entered into an
interest rate swap agreement as a means of managing the interest rate exposure
on one of its debt facilities. This interest rate swap is accounted for under
the accrual method. Under this method, the differential to be paid or received
on the interest rate swap agreement is recognized over the life of the agreement
in interest expense. Changes in market value of the interest swap accounted for
under the accrual method are not reflected in the accompanying financial
statements.
Income Taxes: Deferred taxes are provided for all significant temporary
differences between book and taxable income. The effects of income taxes are
measured based on enacted laws and rates. Such differences include the use of
accelerated depreciation methods for tax purposes, the use of different book and
tax depreciable lives, rates and in-service dates and the accelerated tax
amortization of pollution control facilities. Deferred tax assets and
liabilities are recognized for the expected future tax consequences of existing
differences between the financial reporting and tax reporting basis of assets
and liabilities. IPL has recorded as regulatory assets and net deferred tax
liabilities, income taxes payable and includable in allowable costs for
ratemaking purposes in future years. Investment tax credits that reduced federal
income taxes in the years they arose have been deferred and are being amortized
to income over the useful lives of the properties in accordance with regulatory
treatment.
IPL participates in a tax sharing agreement with the consolidated IPALCO
group which allocates taxes as if each company had filed a return on a
stand-alone basis.
Cash and Cash Equivalents: IPL considers all highly liquid investments
purchased with original maturities of 90 days or less to be cash equivalents.
Employee Benefit Plans: Substantially all employees of IPL are covered by a
defined benefit pension plan, a defined contribution plan and a group benefits
plan.
The defined benefit pension plan is noncontributory and is funded through
two trusts. Additionally, a select group of management employees of IPL are
covered under a funded supplemental retirement plan. Collectively, these two
plans are referred to as the Plans. Benefits are based on each individual
employee's years of service and compensation. IPL's funding policy is to
contribute annually not less than the minimum required by applicable law, nor
more than the maximum amount that can be deducted for federal income tax
purposes.
The defined contribution plan is sponsored by IPL as the Employees'
Thrift Plan of Indianapolis Power & Light Company (Thrift Plan). Employees elect
to make contributions to the Thrift Plan based on a percentage of their annual
base compensation. Each employee's contribution is matched in amounts up to, but
not exceeding, 4% of the employee's annual base compensation. IPL's
contributions to the Thrift Plan, net of amounts allocated to related parties
were $3.5 million, $3.4 million and $3.3 million in 1999, 1998 and 1997,
respectively.
The group benefits plan is sponsored by IPL and provides certain
health-care and life insurance benefits to active employees and employees who
retire from active service on or after attaining age 55 and have rendered at
least 10 years of service. The postretirement benefit obligations of this plan
are funded through a Voluntary Employee Beneficiary Association (VEBA) Trust.
IPL's policy is to fund the annual actuarially determined postretirement benefit
cost.
New Accounting Pronouncement: Statement of Financial Accounting Standards
No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998. SFAS 137 delayed the effective date of
this standard to all fiscal quarters of all years beginning after June 15, 2000.
This statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
condition and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as a fair value hedge, a cash
flow hedge, or a hedge of a foreign currency exposure. The accounting for
changes in the fair value of a derivative (that is, gains and losses) depends on
the intended use of the derivative and the resulting designation. Management has
not yet quantified the effect of the new standard on the financial statements.
Use of Management Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported amounts of
revenues and expenses during the reporting period may also be affected by the
estimates and assumptions management is required to make. Actual results may
differ from those estimates. During 1999, IPL changed its estimate for unbilled
revenue which resulted in a $8.0 million increase to unbilled revenue.
Reclassifications: Certain amounts from prior years' financial statements
have been reclassified to conform to the current year presentation.
2. UTILITY PLANT IN SERVICE
The original cost of utility plant in service at December 31, segregated by
functional classifications, follows:
1999 1998
- --------------------------------------------------------------------------------
(In Thousands)
Production................................. $1,735,026 $1,716,786
Transmission............................... 239,976 238,453
Distribution............................... 802,543 761,296
General .................................. 144,793 143,364
----------- ------------
Total utility plant in service.... $2,922,338 $2,859,899
========== ==========
Substantially all of IPL's property is subject to the lien of the
indentures securing IPL's First Mortgage Bonds.
In 1997, IPL retired and sold its C.C. Perry W plant site, including land
and improvements, to the state of Indiana White River State Park Commission at
an approximate pretax net gain of $5.7 million included under the caption OTHER
INCOME AND (DEDUCTIONS), "Other - net."
3. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In December 1997, IPL changed its method of accounting (retroactive to
January 1, 1997) to record revenues of all electricity and steam delivered
during the period. Prior to 1997, IPL recognized revenues on a cycle basis as
meters were read. The new accounting method more accurately reports revenues in
the period in which electricity and steam is used by customers. The cumulative
effect of the change in accounting at January 1, 1997 was $18.3 million (net of
income taxes of $11.2 million and other taxes of $.4 million). The change had
the effect of decreasing 1997 income before cumulative effect of the accounting
change by $1.9 million (net of taxes).
4. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
IPL using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that IPL could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have an effect on the estimated fair value amounts.
Cash and Cash Equivalents and Notes Payable: The carrying amount
approximates fair value due to the short maturity of these instruments.
Long-Term Debt, Including Current Maturities and Sinking Fund
Requirements: Interest rates that are currently available to IPL for issuance of
debt with similar terms and remaining maturities are used to estimate fair
value. The variable rate debt has been included at the face amount for both
carrying amount and fair value. The fair value of the interest rate swap
agreement has been estimated at $.4 million and $(5.7) million, which represents
the amount that IPL would have to pay or receive to enter into an equivalent
agreement at December 31, 1999, and 1998, respectively, with a swap
counterparty. The fair value of the debt outstanding has been determined on the
basis of the specific securities issued and outstanding. Accordingly, the
purpose of this disclosure is not to approximate the value on the basis of how
the debt might be refinanced. At December 31, 1999, and 1998, the carrying
amount of IPL's long-term debt, including current maturities and sinking fund
requirements, and the approximate fair value are as follows:
1999 1998
-------------------------------------------------------------
(In Thousands)
Carrying amount $627,951 $627,893
Approximate fair value 615,071 667,035
5. REGULATORY ASSETS
The amounts of regulatory assets at December 31 are as follows:
1999 1998
- --------------------------------------------------------------------------------
(In Thousands)
Related to deferred taxes (Note 1) $ 49,398 $ 46,823
Postretirement benefit costs in excess of
cash payments and amounts capitalized (Note 11) 4,288 10,720
Unamortized reacquisition premium on debt (Note 1) 21,687 22,301
Unamortized Petersburg Unit 4 carrying charges
and certain other costs (Note 1) 28,119 29,174
Demand side management costs (Note 10) 4,456 7,783
--------- ---------
Total regulatory assets $ 107,948 $ 116,801
========= =========
6. CAPITAL STOCK
Common Stock: There were no changes in IPL common stock during 1999, 1998
and 1997.
Restrictions on the payment of cash dividends or other distributions on
common stock and on the purchase or redemption of such shares are contained in
the indentures securing IPL's First Mortgage Bonds. In addition, pursuant to
IPL's Articles of Incorporation, no dividends may be paid or accrued and no
other distribution may be made on the common stock unless dividends on all
outstanding shares of its preferred stock have been paid or declared and set
apart for payment. All of the retained earnings at December 31, 1999, were free
of such restrictions.
Cumulative Preferred Stock of Subsidiary: Preferred stock shareholders
are entitled to two votes per share for IPL matters, and if four full quarterly
dividends are in default on all shares of the preferred stock then outstanding,
they are entitled to elect the smallest number of IPL Directors to constitute a
majority. Preferred stock is redeemable solely at the option of IPL and can be
redeemed in whole or in part at any time at specific call prices.
On January 13, 1998, IPL issued the 5.65% Preferred Series which is
redeemable at par value, subject to certain restrictions, in whole or in part,
at any time on or after January 1, 2008, at the option of IPL.
At December 31, preferred stock consisted of the following:
December 31, 1999
Shares Call December 31
Outstanding Price 1999 1998
----------- ----- ------ ------
(In Thousands)
Cumulative $100 Par Value,
authorized 2,000,000 shares
4% Series..................... 47,611 $118.00 $4,761 $4,761
4.2% Series................... 19,331 103.00 1,933 1,933
4.6% Series................... 2,481 103.00 248 248
4.8% Series................... 21,930 101.00 2,193 2,193
5.65% Series.................. 500,000 - 50,000 50,000
------- ------- -------
Total cumulative preferred stock... 591,353 $59,135 $59,135
======= ======= =======
During 1999, 1998 and 1997, preferred stock dividends were $3.2 million,
$3.1 million and $2.8 million, respectively.
7. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
------------
1999 1998
---- ----
Series Due (In Thousands)
------ ---
First Mortgage Bonds:
6.05% February 2004............. $ 80,000 $ 80,000
8% October 2006.............. 58,800 58,800
7 3/8% August 2007............... 80,000 80,000
6.10% * January 2016.............. 41,850 41,850
5.40% * August 2017............... 24,650 24,650
7.45% August 2019............... - 23,500
5.50% * October 2023.............. 30,000 30,000
7.05% February 2024............. 100,000 100,000
6 5/8% * December 2024............. 40,000 40,000
Unamortized discount - net...................... (849) (907)
--------- ---------
Total first mortgage bonds.................. 454,451 477,893
IPL Variable Series Notes
1991* August 2021............... 40,000 40,000
1994A* December 2024............. 20,000 20,000
1995B* January 2023.............. 40,000 40,000
1995C* December 2029............. 30,000 30,000
1996* November 2029............. 20,000 20,000
1999 August 2030............... 23,500 -
--------- ---------
Total long-term debt ....................... $627,951 $627,893
========= =========
* Notes are issued to the city of Petersburg, Indiana, by IPL to secure the loan
of proceeds from various tax-exempt instruments issued by the city.
IPL redeemed the $23.5 million, 7.45% Series bond in October 1999 with
the proceeds from $23.5 million variable rate note issued September 1999.
The IPL Series 1991 note provides for an interest rate that varies with
the tax-exempt commercial paper rate. The IPL 1994A, 1995B, 1995C and 1996 notes
provide for an interest rate which varies with the tax-exempt weekly rate.
Additionally, these notes can be converted into long-term fixed interest rate
instruments by the issuance of an IPL First Mortgage Bond. The notes are
classified as long-term liabilities because IPL maintains a $150 million
long-term credit facility supporting these agreements, which were unused at
December 31, 1999. The IPL Series 1999 note provides for an interest rate which
varies based on tax-exempt auction rates. IPL, at its option, can change the
interest rate mode for these notes to be based on other short-term rates.
The year-end interest rates for the variable rate notes are as follows:
Interest Rate at
December 31
1999 1998
-----------------------------------------------------------------------------
Series 1991 3.14% 3.48%
Series 1994A 3.38% 3.56%
Series 1995B 5.21% 5.21%
Series 1995C 3.41% 3.54%
Series 1996 3.41% 3.54%
Series 1999 3.74% -
In conjunction with the issuance of the 1995B note, IPL entered into an
interest rate swap agreement. Pursuant to the swap agreement, IPL will pay
interest at a fixed rate of 5.21% to a swap counterparty and will receive a
variable rate of interest in return, which is identical to the variable rate
payment made on the 1995B note. The result is to effectively establish a fixed
rate of interest on the 1995B note of 5.21%. The interest rate swap agreement is
accounted for on a settlement basis. IPL is exposed to credit loss in the event
of nonperformance by the counterparty for the net interest differential when
floating rates exceed the fixed maximum rate. However, IPL does not anticipate
nonperformance by the counterparty.
8. LINES OF CREDIT
IPL has committed lines of credit with banks of $55 million used to
provide loans for interim financing. These lines require the payment of
commitment fees. At December 31, 1999, $9 million was outstanding, $40 million
was used to support commercial paper and $6 million was unused. These lines of
credit, based on separate agreements, have expiration dates ranging from
February 2000 to April 2000.
The weighted average interest rate on notes payable and commercial paper
outstanding was 6.12% and 6.13% at December 31, 1999, and 1998, respectively.
9. INCOME TAXES
Federal and state income taxes charged to income are as follows:
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
Operating Expenses: (In Thousands)
Current income taxes:
Federal..................................................... $68,093 $72,094 $64,553
State....................................................... 9,208 10,585 9,474
-------- -------- --------
Total current taxes....................................... 77,301 82,679 74,027
-------- -------- --------
Deferred federal income taxes............................... 8,117 (414) 1,444
Deferred state income taxes................................. 1,824 715 803
--------- ---------- ---------
Total deferred income taxes.............................. 9,941 301 2,247
--------- ---------- --------
Net amortization of investment credit......................... (2,767) (2,790) (2,939)
--------- --------- ---------
Total charge to operating expenses........................ 84,475 80,190 73,335
Net debit to other income and deductions...................... 581 4,196 1,105
--------- --------- ---------
85,056 84,386 74,440
Cumulative effect of change in accounting principle........... - - 11,209
--------- --------- ---------
Total federal and state income tax provisions............. $85,056 $84,386 $85,649
========= ========= =========
The provision for federal income taxes (including net investment tax
credit adjustments) is less than the amount computed by applying the statutory
tax rate to pretax income. The reasons for the difference, stated as a
percentage of pretax income, are as follows:
1999 1998 1997
- -----------------------------------------------------------------------------
Federal statutory tax rate................ 35.0% 35.0% 35.0%
Effect of state income taxes.............. (1.7) (1.8) (1.7)
Amortization of investment tax credits.... (1.2) (1.2) (1.2)
Other - net............................... (0.2) (1.0) (0.9)
----- ----- -----
Effective tax rate...................... 31.9% 31.0% 31.2%
==== ==== ====
The significant items comprising IPL's net deferred tax liability
recognized in the balance sheets as of December 31, 1999, and 1998, are as
follows:
1999 1998
- ------------------------------------------------------------------------------------------------------------
(In Thousands)
Deferred tax liabilities:
Relating to utility property.......................................... $422,907 $412,922
Other................................................................. 16,072 15,113
---------- ----------
Total deferred tax liabilities.................................... 438,979 428,035
---------- ----------
Deferred tax assets:
Relating to utility property.......................................... 48,417 44,444
Investment tax credit................................................. 23,856 25,547
Employee Benefit Plans................................................ 22,018 24,259
Other................................................................. 3,394 5,260
---------- ----------
Total deferred tax assets......................................... 97,685 99,510
---------- ----------
Net deferred tax liability................................................. 341,294 328,525
Current deferred tax liability........................................ 1,308 108
---------- ----------
Deferred income taxes - net................................................ $339,986 $328,417
========== ==========
10. RATE MATTERS
Demand Side Management (DSM) Program: In compliance with certain orders,
IPL is deferring certain approved DSM costs and carrying charges. In the
Settlement Agreement approved by the IURC on August 24, 1995, IPL was authorized
to amortize $5.3 million of such costs deferred prior to February 1995, over a
four-year period beginning September 1, 1995. On July 30, 1997, IPL received an
IURC order approving a settlement agreement authorizing IPL to recognize in
rates the existing regulatory asset (consisting of DSM costs deferred after
January 31, 1995), along with carrying charges, and also to approve changes to
IPL's DSM programs. On August 18, 1999, IPL received an IURC order approving a
settlement agreement authorizing IPL to extend its low income single family
residential DSM program through July 30, 2000.
Elect Plan: During 1998, the IURC approved a plan that allows IPL
customers with less than 2,000 kilowatts of demand, an opportunity to choose
optional service or payment plans. This includes a green power option, a fixed
rate per unit of consumption option and a fixed bill option. Customers not
choosing one of these options continue to receive electric service under
existing tariffs.
11. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Pension Benefits Other Benefits
--------------------- ----------------------
(In Thousands) 1999 1998 1999 1998
- -------------- ---- ---- ---- ----
Change in benefit obligation
Benefit obligation at beginning of year $276,638 $254,540 $148,895 $135,982
Service cost 5,845 5,535 3,735 3,503
Interest cost 18,899 18,021 9,989 9,932
Actuarial (gain) loss (11,765) 12,740 (17,263) 5,155
Amendments 764 (1,408) - -
Benefits paid (13,774) (12,790) (5,831) (5,677)
-------- -------- -------- --------
Benefit obligation at end of year 276,607 276,638 139,525 148,895
-------- -------- -------- --------
Change in plan assets
Fair value of plan assets
at beginning of year 290,770 262,126 83,008 68,006
Actual return on plan assets 30,417 37,179 14,820 1,643
Employer contribution 3,324 4,254 18,225 19,036
Benefits paid (13,774) (12,789) (5,831) (5,677)
-------- -------- -------- --------
Fair value of plan assets at end of year 310,737 290,770 110,222 83,008
-------- -------- -------- --------
34,130 14,132 (29,303) (65,887)
Funded status
Unrecognized net gain (70,048) (55,065) (54,405) (30,187)
Unrecognized prior service cost 15,241 15,871 - -
Unrecognized net transition (asset) obligation (8,341) (9,755) 79,370 85,306
Adjustment to recognize minimum liability - (5,136) - -
-------- -------- -------- --------
Accrued benefit cost $(29,018) $(39,953) $ (4,338) $(10,768)
======== ======== ======== ========
Weighted-average assumptions as of
December 31
Discount rate 7.50% 7.00% 7.50% 7.00%
The defined benefit pension plan had expected returns on plan assets of
9.0%, 8.0% and 8.0% for 1999, 1998 and 1997 respectively. The defined benefit
plan assumed compensation increases to be 5.10% during 1998 and 1997. During
1999, the defined benefit plan began using salary bands to determine future
benefit costs rather than rate of compensation increases. The supplemental
retirement pension plan used an expected return on plan assets of 8.0% for 1999,
1998 and 1997. The supplemental plan assumed compensation increases to be 6.0%
for 1999, 1998 and 1997.
Other benefits used expected rates of return on plan assets of 8.0% for
1999, 1998 and 1997. For measurement purposes, a 6.6% annual rate of increase in
the per capita cost of covered health care benefits was assumed for 2000. The
year in which the ultimate health care cost trend rate of 4.5% will be achieved
is assumed to be 2003.
Pension Benefits Other Benefits
---------------------------------- ----------------------------------
(In Thousands) 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Components of net periodic benefit cost
Service cost $ 8,451 $10,617 $ 6,584 $ 3,735 $ 3,503 $ 3,942
Interest cost 18,899 18,021 16,873 9,991 9,932 11,088
Expected return on plan assets (25,417) (20,426) (18,344) (6,482) (5,223) (3,734)
Amortization of transition (asset) obligation (1,414) (1,414) (1,414) 6,105 6,093 6,093
Amortization of prior service cost 1,394 1,124 1,159 - - -
Recognized actuarial gain (2,051) (1,545) (910) (1,551) (1,646) (548)
-------- -------- -------- -------- --------- --------
Periodic benefit cost (138) 6,377 3,948 11,798 12,659 16,841
Less: amounts to other parties (2) 65 60 - - -
-------- -------- -------- -------- --------- --------
Net periodic benefit cost (136) 6,312 3,888 11,798 12,659 16,841
Less: amounts capitalized (48) 339 621 1,888 1,924 2,930
-------- -------- -------- -------- --------- --------
Amount charged to expense $ (88) $ 5,973 $ 3,267 $ 9,910 $10,735 $13,911
======== ======== ======== ======== ========= ========
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one percentage-point change in
assumed health care cost trend rates would have the following effects:
One Percentage- One Percentage-
(In Thousands) Point Increase Point Decrease
-------------- --------------
Effect on total of service and
interest cost components $ 1,613 $ (1,613)
Effect on postretirement
benefit obligation 15,406 (15,406)
Also, during 1999, 1998 and 1997, IPL expensed postretirement regulatory
asset amortization of $6.4 million each year. The final period of amortization
is August 2000.
12. COMMITMENTS AND CONTINGENCIES
In 2000, IPL anticipates the cost of its construction program to be
approximately $107 million.
IPL is involved in litigation arising in the normal course of business.
While the results of such litigation cannot be predicted with certainty,
management, based upon advice of counsel, believes that the final outcome will
not have a material adverse effect on the financial statements.
With respect to environmental issues, IPL has ongoing discussions with
various regulatory authorities and continues to believe that IPL is in
compliance with its various permits.
13. GAIN ON TERMINATION OF AGREEMENT
During September 1998, a pretax gain of $12.5 million ($7.8 million
after-tax) resulted from the liquidation and termination of an agreement to
purchase up to 150 megawatts of power during the summer months through the year
2000.
14. SEGMENT INFORMATION
Operating segments are components of an enterprise for which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. IPL's reportable business segments are electric and "all other."
Steam operations of IPL are in the "all other" category. The accounting policies
of the identified segments are consistent with those policies and procedures
described in the summary of significant accounting policies (see Note 1).
Intersegment sales are generally based on prices that reflect the current market
conditions. The following tables provide information about IPL's business
segments:
1999 1998 1997
---- ---- ----
Electric All Other Total Electric All Other Total Electric All Other Total
-------- --------- ----- -------- --------- ----- -------- --------- -----
(In Millions)
Operating
Revenues $ 800 $ 35 $ 835 $ 786 $ 35 $ 821 $ 738 $ 38 $ 776
Depreciation and
Amortization 104 3 107 100 3 103 100 3 103
Pre-tax Operating
Income 263 5 268 255 5 260 233 8 241
Income Taxes 83 1 84 79 1 80 71 2 73
Property - net of
Depreciation 1,674 76 1,750 1,671 77 1,748 1,693 73 1,766
Capital
Expenditures 103 2 105 74 7 81 71 2 73
15. QUARTERLY RESULTS (UNAUDITED)
Operating results for the years ended December 31, 1999, and 1998, by
quarter, are as follows (in thousands):
1999
----------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Operating revenues......................... $200,831 $203,010 $228,515 $202,296
Operating income........................... 43,251 49,434 48,414 42,402
Net income................................. 33,820 39,630 38,869 33,913
1998
----------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Operating revenues......................... $190,321 $206,706 $222,028 $202,201
Operating income........................... 40,142 49,198 51,665 38,506
Net income................................. 30,205 39,815 50,147 28,980
The quarterly figures reflect seasonal and weather-related fluctuations
which are normal to IPL's operations.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Information relating to the directors of the registrant, set
forth in the Information Statement of Indianapolis Power &
Light Company dated March 20, 2000 (the registrant's
Information Statement), under "Directors and Nominees-Election
of 15 Directors" at pages 2-4 is incorporated herein by
reference. Information relating to the registrant's executive
officers is set forth at page I-7 of this Form 10-K under
"Executive Officers of the Registrant at February 29, 2000."
Item 11. EXECUTIVE COMPENSATION
----------------------
Information relating to executive compensation, set forth in
the registrant's Information Statement under "Compensation of
Executive Officers" at page 10, "Compensation of Directors" at
page 6, "Compensation Committee Interlocks and Insider
Participation" at page 5, "Pensions Plans" at page 15, and
"Employment Contracts and Termination of employment and Change
in Control Arrangements" at pages 16-17, is incorporated
herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Information relating to ownership of the registrant's common
stock by persons known by the registrant to be the beneficial
owners of more than 5% of the outstanding shares of common
stock and by management, set forth in the registrant's
Information Statement under "Voting Securities and Beneficial
Owners" at page 2 is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Information relating to certain relationships and related
transactions, set forth in the registrant's Information
Statement under "Certain Business Relationships" at page 6, is
incorporated herein by reference.
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------- ---------------------------------------------------------------
(a) The Financial Statements under this Item 14 (a) 1
filed in this Form 10-K are those of Indianapolis
Power & Light Company.
1. Financial Statements
--------------------
Included in Part II of this report:
Independent Auditors' Report
Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997
Balance Sheets, December 31, 1999 and 1998
Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997
Statements of Retained Earnings for the Years
Ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
2. Exhibits
--------
The Exhibit Index beginning on page IV-5 of
this Annual Report on Form 10-K lists the exhibits
that are filed as part of this report.
3. Financial Statement Schedules
-----------------------------
None
(b) Reports on Form 8-K
None
INDIANAPOLIS POWER & LIGHT COMPANY EXHIBIT 12.1
Ratio of Earnings to Fixed Charges
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997
-------------- -------------- -------------
(Thousands of Dollars)
Earnings, as defined:
Net income (1) $146,231 $149,147 $133,402
Income taxes 85,056 84,386 74,440
Fixed charges, as below 41,094 40,991 41,893
-------------- -------------- -------------
Total earnings, as defined $272,381 $274,524 $249,735
============== ============== =============
Fixed charges, as defined:
Interest charges $41,020 $40,810 $41,721
Rental interest factor 74 181 172
-------------- -------------- -------------
Total fixed charges, as defined $41,094 $40,991 $41,893
============== ============== =============
Ratio of earnings to fixed charges 6.63 6.70 5.96
============== ============== =============
(1) 1997 Net income excludes after-tax effect of cumulative effect
of accounting change
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INDIANAPOLIS POWER & LIGHT COMPANY
By /s/ John R. Hodowal
------------------------
(John R. Hodowal, Chairman
of the Board and President)
Date: February 29, 2000
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
(i) Principal Executive Officer:
/s/ John R. Hodowal Chairman of the Board February 29, 2000
------------------------------ and Chief Executive
(John R. Hodowal) Officer
(ii) Principal Financial Officer:
/s/ John R. Brehm Senior Vice President- February 29, 2000
------------------------------ Finance
(John R. Brehm)
(iii) Principal Accounting Officer:
/s/ Stephen J. Plunkett Controller February 29, 2000
------------------------------
(Stephen J. Plunkett)
(iv) A majority of the Board of Directors of Indianapolis Power & Light
Company:
/s/ Joseph D. Barnett, Jr. Director February 29, 2000
- ----------------------------
(Joseph D. Barnett, Jr.)
/s/ Daniel R. Coats Director February 29, 2000
- -----------------------------
(Daniel R. Coats)
/s/ Mitchell E. Daniels, Jr. Director February 29, 2000
- --------------------------------------
(Mitchell E. Daniels, Jr.)
/s/ Rexford C. Early Director February 29, 2000
- --------------------------------
(Rexford C. Early)
/s/ Otto N. Frenzel III Director February 29, 2000
- -------------------------------
(Otto N. Frenzel III)
/s/ Max L. Gibson Director February 29, 2000
- --------------------------------
(Max L. Gibson)
/s/ John R. Hodowal Director February 29, 2000
- -------------------------------
(John R. Hodowal)
/s/ Ramon L. Humke Director February 29, 2000
- ----------------------------
(Ramon L. Humke)
/s/ Andre B. Lacy Director February 29, 2000
- -------------------------------
(Andre B. Lacy)
/s/ L. Ben Lytle Director February 29, 2000
- ----------------------------------
(L. Ben Lytle)
/s/ Michael S. Maurer Director February 29, 2000
- ---------------------------------------
(Michael S. Maurer)
/s/ Sallie W. Rowland Director February 29, 2000
- -----------------------------
(Sallie W. Rowland)
/s/ Thomas H. Sams Director February 29, 2000
- ----------------------------
(Thomas H. Sams)
EXHIBIT INDEX
-------------
Copies of documents listed below which are identified with an asterisk (*)
are incorporated herein by reference and made a part hereof. The management
contracts or compensatory plans are marked with a double asterisk (**) after the
description of the contract or plan.
Exhibit
No. Description
--- -----------
3.1* Articles of Incorporation of Indianapolis Power & Light Company,
as amended. (Exhibit 3.1 to the Form 10-K dated 12-31-97.)
3.2* Bylaws of Indianapolis Power & Light Company, as amended. (Exhibit
3.2 to the Form 10-Q dated 3-31-99.)
4.1* Mortgage and Deed of Trust, dated as of May 1, 1940, between
Indianapolis Power & Light Company and American National Bank and
Trust Company of Chicago, Trustee, as supplemented and modified by 30
Supplemental Indentures.
Exhibits D in File No. 2-4396; B-1 in File No. 2-6210; 7-C File
No. 2-7944; 7-D in File No.2-72944; 7-E in File No. 2-8106; 7-F in
File No. 2-8749; 7-G in File No. 2-8749; 4-Q in File No.2-10052; 2-I
in File No. 2-12488; 2-J in File No. 2-13903; 2-K in File No. 2-22553;
2-L in File No.2-24581; 2-M in File No. 2-26156; 4-D in File
No. 2-26884; 2-D in File No. 2-38332; Exhibit A to Form 8-K for
October 1970; Exhibit 2-F in File No. 2-47162; 2-F in File
No. 2-50260; 2-G in File No. 2-50260; 2-F in File No. 2-53541;
2E in File No. 2-55154; 2E in File no. 2-60819; 2F in File
No. 2-60819; 2-G in File No. 2-60819; Exhibit A to Form 10-Q for the
quarter ended 9-30-78 File No. 1-3132; 13-4 in File No. 2-73213;
Exhibit 4 in File No. 2-93092. Twenty-eighth, Twenty-ninth and
Thirtieth Supplemental Indentures. (Form 10-K dated for year ended
12-31-85.)
4.2 Supplemental Indentures 32 through 42 as follows:
Thirty-Second Supplemental Indenture dated as of June 1, 1989.
Thirty-Third Supplemental Indenture dated as of August 1, 1989.
Thirty-Fourth Supplemental Indenture dated as of October 15, 1991.
Thirty-Fifth Supplemental Indenture dated as of August 1, 1992.
Thirty-Sixth Supplemental Indenture dated as of April 1, 1993.
Thirty-Seventh Supplemental Indenture dated as of October 1, 1993.
Thirty-Eighth Supplemental Indenture dated as of October 1, 1993.
Thirty-Ninth Supplemental Indenture dated as of February 1, 1994.
Fortieth Supplemental Indenture dated as of February 1, 1994.
Forty-First Supplemental Indenture dated as of January 15, 1995.
Forty-Second Supplemental Indenture dated as of October 1, 1995.
10.1* Interconnection Agreement, dated December 30, 1960, between
IPL and Indiana & Michigan Electric Company (nka Indiana
Michigan Power Company) as modified through Modification 17
and Addendum IV. (Exhibit 10.6 to the Form 10-K dated 12-31-95.)
10.2 Interconnection Agreement dated May 1, 1992, among Indianapolis Power
& Light Company, PSI Energy, Inc. and CINERGY Services, Inc. as
modified through Amendment Number 8.
10.3* Facilities Agreement effective in 1968 among Indianapolis Power &
Light Company, Public Service Company of Indiana, Inc. and Indiana
& Michigan Electric Company. (Exhibit 5-G in File No.2-28756.)
10.4 Facilities Agreement dated August 16, 1977, between Indianapolis
Power & Light Company and Public Service Company of Indiana, Inc.,
as modified through Amendment Number 3.
10.5* East Central Area Reliability Agreement dated August 1, 1967, between
Indianapolis Power & Light Company and 23 other electric utility
companies as supplemented. (Exhibit 10.10 to the Form 10-K dated
12-31-96.)
10.6* Interconnection Agreement dated December 2, 1969, between Indianapolis
Power & Light Company and Southern Indiana Gas and Electric Company as
modified through Modification Number 9. (Exhibit 10.11 to the Form
10-K dated 12-31-95).
10.7 Interconnection Agreement dated December 1, 1981, between Indianapolis
Power & Light Company and Hoosier Energy Rural Electric Cooperative,
Inc., as modified through Modification 5.
10.8* Interconnection Agreement, dated October 7, 1987, between Indianapolis
Power & Light Company and Wabash Valley Power Association, as modified
through Modification 1. (Exhibit 10.13 to the Form 10-K dated 12-31-95).
10.9* Interchange Agreement between Indianapolis Power & Light Company and
ENRON Power Marketing, Inc. dated August 1, 1995. (Exhibit 10.14 to
the Form 10-K dated 12-31-95).
10.10* Interconnection Agreement between Indianapolis Power & Light
Company and Indiana Municipal Power Agency as modified through
Modification 1. (Exhibit 10.15 to the Form 10-K dated
12-31-95).
10.11* Employment Agreement by and among IPALCO Enterprises, Inc. and
John R. Hodowal dated July 29, 1986. (Exhibit 10.32 to the Form 10-K
dated 12-31-94.) **
10.12* Directors' and Officers' Liability Insurance Policy No. DO392B1A97
effective June 1, 1998 to June 1, 1999. (Exhibit 10.1 to the Form 10-Q
dated 6-30-99) **
10.13* Unfunded Deferred Compensation Plan for IPALCO Enterprises, Inc.
and Indianapolis Power & Light Company Officers and Directors as
amended and restated effective January 1, 1999. (Exhibit 10.17
to the Form 10-K dated 12-31-98.) **
10.14 Indianapolis Power & Light Company Supplemental Retirement Plan and
Trust Agreement For a Select Group of Management Employees as modified
through Amendment No. 2. **
10.15* 1999 Management Incentive Program. (Exhibit 10.2 to the Form 10-Q dated
6-30-99) **
10.16 Form of Termination Benefits Agreement together with schedule
of parties to, and dates of, the Termination Benefits Agreements. **
10.17 Termination Benefits Agreement between IPALCO Enterprises, Inc. and
Ramon L. Humke. **
12.1 Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.