SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
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Commission file number 1-3132-2
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INDIANAPOLIS POWER & LIGHT COMPANY
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(Exact name of Registrant as specified in its charter)
Indiana 35-0413620
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
25 Monument Circle, P. O. Box 1595, Indianapolis, Indiana 46206
(Address of principal executive offices) (Zip Code)
317-261-8261
(Registrant's telephone number, including area code)
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
such filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding At March 31, 1994
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Common (Without Par Value) 17,206,630 Shares
INDIANAPOLIS POWER & LIGHT COMPANY
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Statements of Income -
Three Months Ended March 31, 1994 and 1993 2
Balance Sheets - March 31, 1994 and
December 31, 1993 3
Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993 4
Notes to Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-7
PART II. OTHER INFORMATION 8-9
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
(In Thousands)
(Unaudited)
Three Months Ended
March 31
1994 1993
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OPERATING REVENUES:
Electric $ 168,902 $ 157,867
Steam 12,276 11,175
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Total operating revenues 181,178 169,042
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OPERATING EXPENSES:
Operation:
Fuel 44,588 40,547
Other 26,630 24,763
Power purchased 5,168 3,157
Purchased steam 2,200 2,358
Maintenance 15,015 13,593
Depreciation and amortization 20,221 19,369
Taxes other than income taxes 7,987 7,811
Income taxes - net 17,849 17,376
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Total operating expenses 139,658 128,974
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OPERATING INCOME 41,520 40,068
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OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 863 366
Other - net (153) (484)
Income taxes - net 319 170
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Total other income and (deductions) - net 1,029 52
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INCOME BEFORE INTEREST CHARGES 42,549 40,120
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INTEREST CHARGES:
Interest 12,136 10,822
Allowance for borrowed funds used during construction (1,150) (740)
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Total interest charges 10,986 10,082
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NET INCOME 31,563 30,038
PREFERRED DIVIDEND REQUIREMENTS 795 795
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INCOME APPLICABLE TO COMMON STOCK $ 30,768 $ 29,243
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See notes to financial statements.
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INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
(In Thousands)
(Unaudited)
March 31 December 31
1994 1993
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ASSETS
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UTILITY PLANT:
Utility plant in service $ 2,322,171 $ 2,300,682
Less accumulated depreciation 889,852 876,054
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Net plant in service 1,432,319 1,424,628
Construction work in progress 170,079 168,480
Property held for future use 15,762 15,763
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Utility plant - net 1,618,160 1,608,871
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OTHER PROPERTY -
At cost, less accumulated depreciation 1,875 1,873
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CURRENT ASSETS:
Cash and cash equivalents 37,190 8,349
Accounts receivable (less allowance for doubtful
accounts 1994, $893 and 1993, $626) 53,636 52,847
Fuel - at average cost 32,847 35,213
Materials and supplies - at average cost 54,604 54,847
Prepayments and other current assets 3,641 3,240
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Total current assets 181,918 154,496
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DEFERRED DEBITS:
Unamortized Petersburg Unit #4 carrying charges 31,062 30,587
Unamortized redemption premiums and expenses on
debt and preferred stock 28,014 25,453
Other regulatory assets 36,077 32,954
Miscellaneous 16,223 16,072
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Total deferred debits 111,376 105,066
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TOTAL $ 1,913,329 $ 1,870,306
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CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholder's equity:
Common stock $ 324,537 $ 324,537
Premium on 4% cumulative preferred stock 1,363 1,363
Retained earnings 390,036 379,249
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Total common shareholder's equity 715,936 705,149
Cumulative preferred stock 51,898 51,898
Long-term debt (less current maturities
and sinking fund requirements) 634,452 532,260
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Total capitalization 1,402,286 1,289,307
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CURRENT LIABILITIES:
Notes payable - banks and commercial paper - 90,000
Current maturities and sinking fund requirements 7,779 8,729
Accounts payable 69,767 74,187
Dividends payable 20,783 20,024
Payrolls accrued 3,736 4,505
Taxes accrued 42,190 21,377
Interest accrued 12,116 11,150
Other current liabilities 5,603 5,316
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Total current liabilities 161,974 235,288
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DEFERRED CREDITS:
Accumulated deferred income taxes - net 270,318 270,182
Unamortized investment tax credit 56,212 57,029
Accrued postretirement benefits 21,734 17,668
Miscellaneous 805 832
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Total deferred credits 349,069 345,711
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TOTAL $ 1,913,329 $ 1,870,306
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See notes to financial statements.
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INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31
1994 1993
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CASH FLOWS FROM OPERATIONS:
Net income $ 31,563 $ 30,038
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 20,502 19,555
Deferred income taxes and investment tax
credit adjustments, net (681) (799)
Allowance for funds used during construction (2,013) (1,106)
Decrease (increase) in certain assets:
Accounts receivable (789) 3,217
Fuel, materials and supplies 2,609 4,693
Other current assets (401) 139
Increase (decrease) in certain liabilities:
Accounts payable (4,420) 814
Taxes accrued 20,813 17,976
Other liabilities 458 (727)
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Net cash provided by operating activities 67,641 73,800
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CASH FLOWS FROM INVESTING:
Construction expenditures (27,448) (28,151)
Other 273 (3,808)
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Net cash used in investing activities (27,175) (31,959)
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CASH FLOWS FROM FINANCING:
Issuance of long-term debt 180,000 -
Retirement of long-term debt - including premiums (79,513) (843)
Short-term debt - net (90,000) (25,000)
Dividends paid (20,018) (19,240)
Other (2,094) -
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Net cash used in financing activities (11,625) (45,083)
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Net increase (decrease) in cash and cash equivalents 28,841 (3,242)
Cash and cash equivalents at beginning of period 8,349 10,581
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Cash and cash equivalents at end of period $ 37,190 $ 7,339
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 10,234 $ 10,522
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Income taxes $ 1,390 $ 4,164
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See notes to financial statements.
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INDIANAPOLIS POWER & LIGHT COMPANY
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NOTES TO FINANCIAL STATEMENTS
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1. Indianapolis Power & Light Company is a subsidiary of IPALCO
Enterprises, Inc.
2. In the opinion of management these statements reflect all adjustments,
consisting of only normal recurring accruals, which are necessary to a
fair statement of the results for the interim periods covered by such
statements. Due to the seasonal nature of the electric utility
business, the annual results are not generated evenly by quarter during
the year. Certain amounts from prior year financial statements have
been reclassified to conform to the current year presentation. These
financial statements and notes should be read in conjunction with the
audited financial statements included in IPL's 1993 Annual Report on
Form 10-K.
3. LONG-TERM DEBT
On February 3, 1994, IPL issued First Mortgage Bonds, 6.05% Series, due
2004, in the principal amount of $80 million. The net proceeds were
used to redeem on March 1, 1994, IPL's $33.2 million First Mortgage
Bonds, 7.40% Series, due 2002, at a redemption price of 101.79%, and to
redeem on March 15, 1994, IPL's $19.75 million First Mortgage Bonds, 7
1/8% Series, due 1998, at a redemption price of 101.2% and IPL's
$25.2 million First Mortgage Bonds, 7.65% Series, due 2003, at a
redemption price of 102.11%. Accrued interest was also paid at the
time of redemption.
Also, on February 3, 1994, IPL issued First Mortgage Bonds, 7.05%
Series, due 2024, in the principal amount of $100 million. The net
proceeds were used in part to repay outstanding unsecured promissory
notes, and the remaining amount will be used to finance future
construction costs.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Overview
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The Board of Directors of Indianapolis Power & Light Company (IPL) on
February 22, 1994, declared a quarterly dividend on common stock of
$19,979,922. The dividend was paid by IPL to IPALCO Enterprises, Inc. in
April, 1994.
Internally generated cash provided by IPL's operations and the
issuance of long-term debt were used primarily for construction
expenditures and the repayment of short-term and long-term debt during the
first three months of 1994.
On February 3, 1994, IPL issued First Mortgage Bonds, 6.05% Series,
due 2004, in the principal amount of $80 million. The net proceeds were
used to redeem on March 1, 1994, IPL's $33.2 million First Mortgage Bonds,
7.40% Series, due 2002, at a redemption price of 101.79%, and to redeem on
March 15, 1994, IPL's $19.75 million First Mortgage Bonds, 7 1/8% Series,
due 1998, at a redemption price of 101.2% and IPL's $25.2 million First
Mortgage Bonds, 7.65% Series, due 2003, at a redemption price of 102.11%.
Accrued interest was also paid at the time of redemption.
Also, on February 3, 1994, IPL issued First Mortgage Bonds, 7.05%
Series, due 2024, in the principal amount of $100 million. The net
proceeds were used in part to repay outstanding unsecured promissory notes,
and the remaining amount will be used to finance future construction costs.
Future Rate Relief
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IPL filed a petition with the Indiana Utility Regulatory Commission on
April 8, 1994, seeking approval to increase IPL's electric rates. The
specific amount of the requested rate increase will not be determined until
"test year" data is prepared. It is estimated, however, that the overall
request will probably range from 12 to 16 percent. IPL last received an
order from the IURC authorizing an increase in electric basic rates and
charges in August, 1986. A number of expenditures and investments are now
needed to supply electricity to the growing Central Indiana economy and to
meet an increasing number of federal and state laws and regulations. Among
these are: two new peaking combustion turbines, a power purchase agreement
with Indiana Michigan Power Company (IMP), new Demand Side Management
Programs, and new sulfur dioxide emission control equipment. A complete
description of these projects is included in the Management's Discussion
and Analysis of IPL's 1993 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Comparison of Quarters Ended March 31, 1994 and March 31, 1993
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Income applicable to common stock increased $1.5 million during the
first quarter of 1994 from the comparable 1993 period. The following
discussion highlights the factors contributing to this result.
Operations
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The increase in electric operating revenues of $11.0 million was
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primarily a result of the colder weather during this quarter compared to
the same period one year ago. Contributing to the higher revenues was an
increase in retail electric kilowatthour (KWH) sales of $9.1 million,
partially offset by lower fuel cost adjustment recoveries of $.3 million.
Sales for resale also increased $2.2 million, due to increased energy sales
to neighboring utilities. The following table is a summary of KWH sales to
each customer class:
Retail KWH Sales By Customer Class
In Millions of KWHs
Three Months Ended March 31,
1994 1993 % Change
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Residential 1,283.6 1,170.3 9.7%
Commercial 639.6 597.3 7.1
Industrial 1,504.0 1,442.8 4.2
Other 21.2 20.7 2.4
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Total Retail 3,448.4 3,231.1 6.7
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Fuel costs increased $4.0 million due to an increase in fuel
consumption of $3.1 million -- as a result of the colder weather -- as well
as increased prices of $.7 million and increased deferred fuel costs of $.2
million. Other operating expenses increased $1.9 million primarily due to
increased administrative and general expenses of $1.3 million, increased
marketing expenses of $.3 million and increased distribution expenses of
$.2 million. Power purchased increased $2.0 million due to increased
capacity payments to IMP of $1.8 million and increased purchases of short-
term energy from other utilities.
Maintenance expenses increased $1.4 million, reflecting increased
expenditures for unit overhaul costs at the Petersburg plant of $2.7
million. These expenses were partially offset by decreased expenditures at
the Stout plant of $1.4 million, for which a unit overhaul was performed
during early 1993.
As a result of the foregoing, utility operating income increased 3.6%
over last year, to $41.5 million.
Other Income and Deductions
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Allowance for equity funds used during construction increased $.5
million due to an increased construction base.
Interest and Other Charges
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Interest expense increased $1.3 million primarily due to the issuance
of $100 million long-term debt on February 3, 1994, as previously discussed
under "Liquidity and Capital Resources". The increase in interest expense
for the first quarter of 1994 was partially offset by decreased expense as
a result of refinancing certain first mortgage bonds during 1993 with more
favorable terms.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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There were no changes to "Item 3. Legal Proceedings" as set forth in
IPL's Form 10-K for the year ended December 31, 1993, except as follows:
On August 18, 1993, the Indiana Utility Regulatory Commission (IURC)
entered an order in Cause No. 39437, approving IPL's Environmental
Compliance Plan required by the Clean Air Act Amendments of 1990. The
estimated cost of IPL's Environmental Compliance Plan is approximately $250
million before including allowance for funds used during construction. A
primary part of IPL's Plan, scrubbing IPL's Petersburg 1 and 2 coal-fired
units by 1996 to enable IPL to continue to burn high sulfur coal, was
opposed by the Office of Utility Consumer Counselor (OUCC), the Citizens
Action Coalition (CAC), and the Industrial Intervenors Group (IIG). On
April 4, 1994, the OUCC and IIG each perfected its appeal of the
Commission's order to the Indiana Court of Appeals; thereafter, CAC joined
in their appeal.
In October, 1993, IPL received a Findings of Violation from EPA,
Region V, regarding IPL's compliance with the thermal limitations of the
NPDES (water discharge) permit under which IPL operates its Petersburg
Generating Station. At a meeting held March 8, 1994, EPA acknowledged it
had misinterpreted the data IPL supplied to EPA in response to the latter's
Clean Water Act information request that preceded issuance of the Findings
of Violation. EPA continues to be concerned about the accuracy of the
river monitoring equipment operated and maintained by the United States
Geological Survey (USGS) with whom IPL contracts for such operation and
maintenance. IPL is pursing the matter with USGS and will provide EPA with
an update regarding expected improvements. IPL believes it continues to be
in compliance with the requirements of the permit. If IPL is found to be
in violation of its permit, it could be subject to maximum fines of $25,000
per day per violation.
On April 8, 1994, IPL filed a petition with the IURC for an increase
in its retail electric rates and charges. A prehearing conference to
establish a test year, and to schedule the filing of testimony, the conduct
of hearings and other related matters will be scheduled by the IURC in the
near future.
Item 6. Exhibits and Reports on Form 8-K
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a) Exhibits
(3) Articles of Incorporation and By-Laws
By-Laws as last amended January 25, 1994.
b) Reports on Form 8-K
A report on Form 8-K, dated January 25, 1994, reporting Item 5,
"Other Events", and Item 7, "Exhibits", with respect to the
issuance of $180 million First Mortgage Bonds.
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Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
INDIANAPOLIS POWER & LIGHT COMPANY
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(Registrant)
Date: May 12, 1994 /s/ John R. Brehm
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John R. Brehm
Senior Vice President
Finance and Information Services
Date: May 12, 1994 /s/ Stephen J. Plunkett
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Stephen J. Plunkett
Controller
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