SECURlTlES AND EXCHANGE COMMlSSlON
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, 1995 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.)
25 Monument Circle
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrants's telephone number, including area code: 317-261-8261
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
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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, 1995
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Common (Without Par Value) 17,206,630 Shares
INDIANAPOLIS POWER & LIGHT COMPANY
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INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
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Statements of Income -
Three Months Ended March 31, 1995 and 1994 2
Balance Sheets - March 31, 1995 and
December 31, 1994 3
Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 4
Notes to Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-7
PART II. OTHER INFORMATION 8-11
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-1-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
(In Thousands)
(Unaudited)
Three Months Ended
March 31
1995 1994
-------------- --------------
OPERATING REVENUES:
Electric $ 164,347 $ 168,902
Steam 11,171 12,276
-------------- --------------
Total operating revenues 175,518 181,178
-------------- --------------
OPERATING EXPENSES:
Operation:
Fuel 43,667 44,588
Other 27,415 26,630
Power purchased 3,879 5,168
Purchased steam 1,984 2,200
Maintenance 14,691 15,015
Depreciation and amortization 21,381 20,221
Taxes other than income taxes 8,635 7,987
Income taxes - net 15,588 17,849
-------------- --------------
Total operating expenses 137,240 139,658
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OPERATING INCOME 38,278 41,520
-------------- --------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 1,051 863
Other - net (379) (153)
Income taxes - net 185 319
-------------- --------------
Total other income - net 857 1,029
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INCOME BEFORE INTEREST CHARGES 39,135 42,549
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INTEREST CHARGES:
Interest 12,823 12,136
Allowance for borrowed funds used during construction (1,300) (1,150)
-------------- --------------
Total interest charges 11,523 10,986
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NET INCOME 27,612 31,563
PREFERRED DIVIDEND REQUIREMENTS 795 795
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INCOME APPLICABLE TO COMMON STOCK $ 26,817 $ 30,768
============== ==============
See notes to financial statements.
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INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
(In Thousands)
(Unaudited)
March 31 December 31
1995 1994
----------------- -----------------
ASSETS
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UTILITY PLANT:
Utility plant in service $ 2,456,732 $ 2,415,531
Less accumulated depreciation 935,177 916,943
----------------- -----------------
Utility plant in service - net 1,521,555 1,498,588
Construction work in progress 193,799 191,010
Property held for future use 22,174 22,174
----------------- -----------------
Utility plant - net 1,737,528 1,711,772
----------------- -----------------
OTHER PROPERTY -
At cost, less accumulated depreciation 4,123 2,898
----------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents 6,179 7,835
Accounts receivable (less allowance for doubtful
accounts 1995, $1,005 and 1994, $743) 46,536 47,978
Fuel - at average cost 39,058 37,161
Materials and supplies - at average cost 56,627 55,642
Prepayments and other current assets 1,814 8,176
----------------- -----------------
Total current assets 150,214 156,792
----------------- -----------------
DEFERRED DEBITS:
Unamortized Petersburg Unit 4 carrying charges 32,689 32,521
Unamortized redemption premiums and expenses on debt 28,159 27,577
Other regulatory assets 60,951 53,661
Miscellaneous 8,147 6,876
----------------- -----------------
Total deferred debits 129,946 120,635
----------------- -----------------
TOTAL $ 2,021,811 $ 1,992,097
================= =================
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 406,260 399,862
----------------- -----------------
Total common shareholder's equity 732,160 725,762
Cumulative preferred stock 51,898 51,898
Long-term debt (less current maturities ----------------- -----------------
and sinking fund requirements) 654,128 654,121
----------------- -----------------
Total capitalization 1,438,186 1,431,781
----------------- -----------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper 30,701 26,400
Current maturities and sinking fund requirements 350 350
Accounts payable and accrued expenses 93,372 95,957
Dividends payable 21,230 20,834
Payrolls accrued 4,160 4,475
Taxes accrued 36,882 16,787
Interest accrued 11,307 14,859
Other current liabilities 10,930 8,823
----------------- -----------------
Total current liabilities 208,932 188,485
----------------- -----------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net 288,586 282,062
Unamortized investment tax credit 52,945 53,762
Accrued postretirement benefits 31,516 34,517
Miscellaneous 1,646 1,490
----------------- -----------------
Total deferred credits and other long-term liabilities 374,693 371,831
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
TOTAL $ 2,021,811 $ 1,992,097
================= =================
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
1995 1994
-------------- --------------
CASH FLOWS FROM OPERATIONS:
Net income $ 27,612 $ 31,563
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,659 20,502
Deferred income taxes and investment tax
credit adjustments, net 2,342 (681)
Allowance for funds used during construction (2,352) (2,013)
Decrease (increase) in certain assets:
Accounts receivable 1,442 (789)
Fuel, materials and supplies (2,882) 2,609
Other current assets 6,362 (401)
Increase (decrease) in certain liabilities:
Accounts payable (2,585) (4,420)
Taxes accrued 20,095 20,813
Other current liabilities (1,207) 458
-------------- --------------
Net cash provided by operating activities 70,486 67,641
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CASH FLOWS FROM INVESTING:
Construction expenditures (44,387) (27,448)
Other (9,980) 273
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Net cash used in investing activities (54,367) (27,175)
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CASH FLOWS FROM FINANCING:
Issuance of long-term debt 40,000 180,000
Retirement of long-term debt - including premiums paid (40,800) (79,513)
Short-term debt - net 4,301 (90,000)
Dividends paid (21,215) (20,018)
Other (61) (2,094)
-------------- --------------
Net cash used in financing activities (17,775) (11,625)
-------------- --------------
Net increase (decrease) in cash and cash equivalents (1,656) 28,841
Cash and cash equivalents at beginning of period 7,835 8,349
-------------- --------------
Cash and cash equivalents at end of period $ 6,179 $ 37,190
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 15,271 $ 10,234
============== ==============
Income taxes $ (4,558) $ 1,390
============== ==============
See notes to financial statements.
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INDIANAPOLIS POWER & LIGHT COMPANY
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
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 1994 Annual Report on
Form 10-K.
3. LONG-TERM DEBT
On February 9, 1995, IPL issued First Mortgage Bonds, 6 5/8% Series,
due 2024, in the principal amount of $40 million. The net proceeds
were used to redeem on March 15, 1995, IPL's $40 million First Mortgage
Bonds, 10 5/8% Series, due 2014, at a redemption price of 102%.
Accrued interest was also paid at the time of redemption.
4. RATE MATTERS
In the retail electric rate case now pending before the Indiana Utility
Regulatory Commission (IURC), a prehearing conference was held on June
8, 1994, and an order was issued July 20, 1994, establishing a test
year ending June 30, 1994. IPL filed its case-in-chief on October 11,
1994. Hearings scheduled by the IURC on IPL's request were held from
February 7 through February 22, 1995. A procedural schedule has been
established with the last hearings scheduled to occur in August of
1995.
5. COMMITMENTS AND CONTINGENCIES (See Item 1. Legal Proceedings of Part II
-- Other Information)
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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 28, 1995, declared a quarterly dividend on common stock of
$20,419,652. The dividend was paid by IPL to IPALCO Enterprises, Inc. in
April, 1995.
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 1995.
On February 9, 1995, IPL issued First Mortgage Bonds in the principal
amount of $40 million to replace comparable bonds that were at a higher
rate.
Future Rate Relief
- ------------------
IPL has asked the Indiana Utility Regulatory Commission (IURC) to
approve increases in its electric rates. IPL is requesting approval of an
overall rate increase of about 13.9 percent to generate additional annual
revenues of $87.7 million. Under IPL's proposal, the percent of increase
will vary for different customer classes. Hearings scheduled by the IURC
on IPL's request were held from February 7 through February 22, 1995.
The Office of Utility Consumer Counselor (OUCC) filed its case-in-
chief in the proceeding with the IURC on April 21, 1995, recommending that
IPL's existing electric rates be decreased $33.7 million. IPL believes
that the OUCC's recommendation is based on errors of fact, miscalculations
and misapplications of principles, and, accordingly, believes that its
recommendation is not likely to be accepted. Other intervenors, including
a group of industrial customers, the Citizens Action Coalition, the City of
Indianapolis and the Department of Defense, also filed their case-in-chief
on April 21, 1995. IPL is scheduled to file rebuttal testimony in this
proceeding on May 26, 1995. Public hearings on the OUCC's and other
intervenors' case-in-chief and IPL's rebuttal testimony are scheduled to
commence in July of 1995.
IPL last received an order from the IURC authorizing an increase in
electric basic rates and charges in August, 1986.
New Indiana Regulation
- ----------------------
On April 26, 1995, changes to existing Indiana Utility Regulatory laws
were enacted which increase the period to be used in Indiana's quarterly
earnings test from one year to five years and allow the IURC to consider
alternate forms of regulation. The quarterly earnings test is applicable
to all Indiana electric and gas utilities. The extension of the test
period will allow utilities, which can be significantly affected by weather
conditions, to average high and low periods when computing the quarterly
earnings test.
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RESULTS OF OPERATIONS
Comparison of Quarters Ended March 31, 1995 and March 31, 1994
--------------------------------------------------------------
Income applicable to common stock decreased $4.0 million during the
first quarter of 1995 from the comparable 1994 period. The following
discussion highlights the factors contributing to this result.
Operations
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The decrease in electric operating revenues of $4.6 million was
primarily a result of the milder weather during this quarter compared to
the same period one year ago. Contributing to the decreased revenues was a
decrease in retail electric kilowatt-hour (KWH) sales of $4.0 million and a
decrease in sales for resale of $1.5 million, due to decreased energy sales
to neighboring utilities. These decreases were partially offset by
increases in fuel cost adjustment recoveries of $.6 million and
miscellaneous revenues of $.3 million. 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,
1995 1994 % Change
------- ------- --------
Residential 1,175.9 1,283.6 (8.4)%
Commercial 585.0 639.6 (8.5)
Industrial 1,534.2 1,504.0 2.0
Other 20.5 21.2 (3.3)
------- -------
Total Retail 3,315.6 3,448.4 (3.9)
======= =======
Power purchased decreased $1.3 million primarily due to decreased firm
peaking-energy payments and decreased non-displacement purchases for 1995.
Purchased steam decreased $.2 million due to a decrease in prices and
therms purchased from an independent resource recovery system located
within the City of Indianapolis.
Depreciation expense increased $1.2 million primarily due to an
increase in the utility plant balance.
Income taxes - net decreased $2.3 million primarily due to the
decrease in pretax utility operating income.
As a result of the foregoing, utility operating income decreased 7.8%
over last year, to $38.3 million.
Other Income and Deductions
- ---------------------------
Allowance for equity funds used during construction increased $.2
million due to an increased construction base.
Interest Charges
- ----------------
Allowance for borrowed funds used during construction increased $.2
million due to an increased construction base.
-7-
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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On August 18, 1993, the Indiana Utility Regulatory Commission ("IURC")
entered an order in Cause No. 39437, approving the Environmental Compliance
Plan of Indianapolis Power & Light Company ("IPL") to comply with the Clean
Air Act Amendments of 1990. The estimated cost of IPL's Environmental
Compliance Plan is approximately $250 million before including allowance
for funds used during construction. A primary part of IPL's Plan,
scrubbing IPL's Petersburg 1 and 2 coal-fired plants by 1996 to enable IPL
to continue to burn high sulfur coal, was opposed by the Office of Utility
Consumer Counselor ("OUCC"), the Citizens Action Coalition ("CAC"), and the
Industrial Intervenors Group ("IIG"). OUCC, CAC and IIG have appealed the
IURC's order to the Indiana Court of Appeals. The Attorney General on
behalf of the State of Indiana has filed an Amicus Brief in support of IPL.
The matter is fully briefed and is awaiting decision by the Court of
Appeals.
On April 8, 1994, IPL filed a petition with the IURC, Cause No. 39938,
for authority to increase its rates and charges for electric service, to
continue the capitalization of allowance for funds used during construction
and to defer depreciation expense on IPL's Stout Combustion Turbine Unit
No. 5, to add to the fair value of IPL's utility property environmental
compliance capital projects and qualified pollution control property under
construction and for revised depreciation rates. IPL prefiled its evidence
on October 11, 1994, and hearings on IPL's case-in-chief were held from
February 7 through February 22, 1995. A procedural schedule has been
established with the last hearings scheduled to occur in August of 1995. A
hearing for the public pursuant to Indiana Statute will be held between
April 21, 1995 and July 10, 1995 on a date later determined by the IURC.
On March 16, 1993, Smith Cogeneration of Indiana, Inc., and its
affiliated ("Smith") filed a petition with the IURC requesting that IPL be
ordered to enter into a power sales agreement to purchase power from
Smith's proposed 240 megawatt plant. On September 24, 1993, IPL filed a
motion for summary adjudication of Smith's petition. Thereafter, on
September 7, 1994, the IURC entered an Order dismissing Smith's petition.
No action has been taken in this matter since the entry of the Order and
IPL believes this matter is concluded.
In June, 1993, IPL received a Notice of Violation from the
Indianapolis Air Pollution Control Section ("IAPCS") regarding fugitive
dust emissions at its Perry K Generating Station. IPL met with IAPCS to
discuss four alleged violations over a span of 15 months. Each violation
was subject to a fine of up to $2,500. IPL agreed to a settlement in the
amount of $3,500 for all alleged violations, and the settlement was
finalized on August 31, 1994, and this matter is concluded.
-8-
Item 6. Exhibits and Reports on Form 8-K
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a) Exhibits. Copies of documents listed below which are identified
with an asterisk (*) are incorporated herein by reference and
made a part hereof.
3.1* Articles of Incorporation of Indianapolis Power & Light Company, as
amended. (Form 10-Q for quarter ended 3-31-91.)
3.2* Bylaws of Indianapolis Power & Light Company dated January 25, 1994.
(Form 10-Q for quarter ended 3-31-94.)
4.1* Mortgage and Deed of Trust, dates 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 33
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 the year ended December 31, 1985.)
4.2* Thirty-First Supplemental Indenture dated as of October 1, 1986.
(Form 10-K for year ended 12-31-86.)
4.3* Thirty-Second Supplemental Indenture dated as of June 1, 1989. (Form
10-K for year ended 12-31-89.)
4.4* Thirty-Third Supplemental Indenture dated as of August 1, 1989. (Form
10-K for year ended 12-31-89.)
4.5* Thirty-Fourth Supplemental Indenture dated as of October 15, 1991.
(Form 10-K for year ended 12-31-91.)
4.6* Thirty-Fifth Supplemental Indenture dated as of August 1, 1992. (Form
10-K for year ended 12-31-92.)
4.7* Thirty-Sixth Supplemental Indenture dated as of April 1, 1993. (Form
10-Q for year quarter ended 9-30-93.)
4.8* Thirty-Seventh Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.9* Thirty-Eighth Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.10* Thirty-Ninth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
4.11* Fortieth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
-9-
Item 6. Exhibits and Reports on Form 8-K - continued
- -----------------------------------------------------
4.12* Forty-First Supplemental Indenture dated as of January 15, 1995.
(Exhibit 4.12 to the Form 10-K dated 12-31-94.)
10.1 Coal Supply Agreement dated September 27, 1994, between Indianapolis
Power & Light Company and Black Diamond Coal Company, Inc.
(Confidential portions of this Contract have been omitted and filed
separately with the SEC pursuant to 17 CFR 240.24b-2.)
10.2 Coal Supply Agreement dated December 7, 1994, between Indianapolis
Power & Light Company and Triad Mining of Indiana, Inc. and Marine Coal
Sales Company. (Confidential portions of this Contract have been
omitted and filed separately with the SEC pursuant to 17 CFR 240.24b-2.)
27.1 Financial Data Schedule
b) Reports on Form 8-K.
A report on Form 8-K was filed on January 31, 1995, and
amended on February 15, 1995, reporting Item 5, other events,
with respect to IPL's earnings and earnings of its parent, IPALCO
Enterprises, Inc. for the year ended December 31, 1994. The Form
8-K included the 1994 audited financial reports of Indianapolis
Power & Light Company.
-10-
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 15, 1995 /s/ John R. Brehm
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John R. Brehm
Senior Vice President
Finance and Information Services
Date: May 15, 1995 /s/ Stephen J. Plunkett
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Stephen J. Plunkett
Controller
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