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, 1997 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:
518,985 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, 1998, 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 15, 1998
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 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.
GENERAL
IPL was incorporated under the laws of the state of Indiana in 1926 and
is a wholly owned subsidiary of IPALCO. 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. Existing Indiana law provides for
electric suppliers to have an exclusive retail service area.
IPL's business is not dependent on any single customer or group of a few
customers. IPL's historical retail sales to ultimate consumers for 1993-1997 are
depicted at page I-4.
The electric utility business is affected by the various seasonal weather
patterns throughout the year and, therefore, the operating revenues and
associated operating expenses are not generated evenly by months 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 which provides for coordinated planning of
generating 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), in respect of 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. IPL has
developed and implemented a plan to reduce sulfur dioxide and nitrogen oxide
emissions from several generating units. This plan was approved by the
Environmental Protection Agency (EPA) in 1994. Estimated new annual capital
expenditures for all other air, solid waste and water environmental compliance
measures are $10 million, $1 million and $.5 million in 1998, 1999 and 2000,
respectively.
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 IPL customers. In Indiana, basic rates and
charges are determined after giving consideration, on a proforma basis, to all
allowable costs for ratemaking purposes including a fair return on the fair
value of the utility property dedicated to 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. Other numerous factors including
weather, inflation, customer growth and usage, the level of actual maintenance
and capital expenditures and IURC restrictions on the level of operating income
can impact the return realized. Substantially all of IPL's retail tariffs
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. Additionally, all 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
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 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 all or part of IPL's
existing regulated businesses. 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 in
a position to be required to adopt SFAS 101 in the near term and accordingly has
not attempted to estimate the impact of adopting SFAS 101.
FUEL
In 1997, approximately 99.5% of the total KWH sold by IPL were generated
from coal, .2% from middle distillate fuel oil, .2% from gas and .1% from
purchased steam. In addition to use in oil-fired generating units, fuel oil is
used for start up and flame stabilization in coal-fired generating units as well
as for coal thawing and coal handling. Gas is used in IPL's newer combustion
turbines.
IPL's long-term coal contracts provide for the supply of the major
portion of its burn requirements through the year 1999, assuming environmental
regulations can be met. The long-term coal agreements are with three suppliers
and the coal is mined entirely in the state of Indiana. See Exhibits listed
under Part IV Item 14(a)2(10.1 to 10.5) for a list of coal contracts. 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.
EMPLOYEE RELATIONS
As of December 31, 1997, IPL had 2,095 employees of whom 1,050 were
represented by the International Brotherhood of Electrical Workers, AFL-CIO
(IBEW) and 350 were represented by the Electric Utility Workers Union (EUWU), an
independent labor organization. In December 1996, the membership of the IBEW
ratified a new labor agreement which remains in effect until December 13, 1999.
The agreement provided for general pay adjustments of 3.5% in 1996 and 3.0% in
both 1997 and 1998, and changes in pension and health care coverage. In March
1995, the membership of the EUWU ratified a new labor agreement which remains in
effect until February 23, 1998. Negotiations are currently underway with the
EUWU for a new contract. The old agreement provided for general pay adjustments
of 2% in 1995, 1996 and 1997; lump sum payments of $500 in both 1995 and 1996;
and changes in pension and health care coverage.
DISPOSITION OF ASSETS
In 1997, IPL retired and sold its CC Perry W Plant site, including land
and improvements, to the State of Indiana White River State Park Commission.
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 Thousands): 1997 (1) 1996 1995 1994 1993
- -------------------------------------------------- --------------- ---------------- --------------- ----------------
Residential $ 261,832 $ 261,819 $ 243,055 $ 230,805 $ 225,138
Small industrial and commercial 125,998 132,361 130,780 129,346 127,551
Large industrial and commercial 306,761 298,720 275,803 266,703 255,945
Public lighting 8,457 8,147 7,598 6,949 7,186
Miscellaneous 12,050 9,264 8,289 7,186 7,373
--------------- --------------- ---------------- --------------- ----------------
Revenues - ultimate consumers 715,098 710,311 665,525 640,989 623,193
Sales for resale - REMC 1,082 1,141 1,105 1,098 897
Sales for resale - other 21,954 13,312 6,758 7,680 5,237
--------------- --------------- ---------------- --------------- ----------------
Total electric revenues $ 738,134 $ 724,764 $ 673,388 $ 649,767 $ 629,327
=============== =============== ================ =============== ================
Kilowatt-hour Sales (In Millions):
Residential 4,255 4,367 4,277 4,077 4,014
Small industrial and commercial 1,972 2,130 2,209 2,207 2,202
Large industrial and commercial 6,834 6,772 6,509 6,306 6,169
Public lighting 57 58 61 64 62
--------------- --------------- ---------------- --------------- ----------------
Sales - ultimate consumers 13,118 13,327 13,056 12,654 12,447
Sales for resale - REMC 29 29 28 26 24
Sales for resale - other 1,111 725 394 456 321
--------------- --------------- ---------------- --------------- ----------------
Total kilowatt-hours sold 14,258 14,081 13,478 13,136 12,792
=============== =============== ================ =============== ================
Customers at End of Year:
Residential 374,686 370,029 365,163 360,347 356,015
Small industrial and commercial 41,148 40,403 39,781 38,849 38,359
Large industrial and commercial 3,960 3,657 3,557 3,525 3,342
Public lighting 346 303 281 266 252
--------------- --------------- ---------------- --------------- ----------------
Total ultimate consumers 420,140 414,392 408,782 402,987 397,968
Sales for resale - REMC 1 1 1 1 1
--------------- --------------- ---------------- --------------- ----------------
Total electric customers 420,141 414,393 408,783 402,988 397,969
=============== =============== ================ =============== ================
(1) 1997 includes estimated electric operating revenue and kilowatt-hour sales
for services delivered but not billed during the period (see Note 3 in the Notes
to Consolidated Financial Statements).
Item 2. PROPERTIES
----------
IPL's executive offices are in the IPALCO Corporate Center located at One
Monument Circle, Indianapolis, Indiana. This facility contains approximately
201,300 square feet of space and contains certain administrative operations of
IPALCO's subsidiaries.
IPL also owns two distribution service centers located at 1230 West
Morris Street and 3600 North Arlington Avenue, both in Indianapolis, Indiana.
IPL's customer service center is located at 2102 North Illinois Street in
Indianapolis.
IPL owns and operates four primarily coal-fired generating plants, three
of which are used for only electric generation and one which is used for a
combination of electric and steam generation. 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 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 the city of Indianapolis
with 20 MW nameplate rating (net winter capability 20 MW, summer 19 MW)
for electric and a gross capacity of 1,990 Mlbs. per hour for steam.
Net electrical generation during 1997, at the Petersburg, Stout and
Pritchard stations accounted for about 72.9%, 20.3% and 6.7%, respectively, of
IPL's total net generation. Perry K and Perry W produced .1% net electrical
generation and all of the steam generated by IPL for the steam system. In
addition, IPL purchases steam from an independent resource recovery system
located within the city of Indianapolis. During 1997, the C.C. Perry Section W
plant (Perry W), located in downtown Indianapolis with 11 MW nameplate rating
(net winter capability 10 MW, summer 12 MW) for electric and a gross capacity of
300 Mlbs. per hour for steam was retired in place and subsequently sold to the
State of Indiana White River State Park Commission.
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, 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.
IPL's transmission system includes 457 circuit miles of 345,000 volt
lines, 359 circuit miles of 138,000 volt lines and 268 miles of 34,500 volt
lines. Distribution facilities include 4,709 pole miles and 19,877 wire miles of
overhead lines. Underground distribution and service facilities include 505
miles of conduit and 5,520 wire miles of conductor. Underground street lighting
facilities include 109 miles of conduit and 686 wire miles of conductor. Also
included in the system are 73 bulk power substations and 76 distribution
substations.
Steam distribution properties include 22 miles of mains with 257
services. 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. Additional land, approximately 4,882 acres in Morgan
County, Indiana and approximately 876 acres in Switzerland County, Indiana has
been purchased for future plant sites.
All of the 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
-----------------
On August 18, 1997, Region V of the U. S. Environmental Protection
Agency issued to IPL a Notice of Violation (NOV) under the Clean Air Act. The
NOV alleged that particulate matter emissions from IPL's Perry K Units 11 and 12
exceeded applicable limits on three dates in 1995, that particulate matter
emissions from Perry K Units 15 and 16 exceeded applicable limits on a single
date in each of 1994 and 1995, and that sulfur dioxide emissions exceeded the
applicable limit on four days in the first quarter of 1997. IPL disagrees with
the Agency's interpretations of the applicable rules and believes that the Perry
K Plant has been in compliance with applicable limits. Representatives of IPL
met with the Agency on September 24, 1997, in an attempt to resolve the matter
and have subsequently provided the Agency with additional information on the
operation of the Plant. If IPL were adjudged to have violated applicable
emission limits, it could be subject to maximum penalties of $27,500 per day of
violation. While the results of this proceeding cannot be predicted with
certainty, management, based upon the advice of counsel, believes that the final
outcome will not have a material adverse effect on the consolidated financial
statements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
At a special meeting on October 9, 1997, an amendment to Article 6A of
the Company's Amended Articles of Incorporation was approved. This amendment
removed the limitation on the issuance of unsecured indebtedness. 17,206,630
shares of the Company's common stock were cast in favor of the amendment
representing 100% of the total common stock. Of the 518,985 shares outstanding
of the Company's cumulative preferred stock, 415,337 shares were cast for the
amendment, 2,716 votes were cast against the amendment and 364 shares abstained
from voting. Having received at least 2/3 approval of the holders of its
cumulative preferred stock, the amendment was duly adopted.
EXECUTIVE OFFICERS OF THE REGISTRANT AT FEBRUARY 24, 1998
Name, age (at December 31, 1997), and positions and offices held for the
past five years:
From To
John R. Hodowal (52)
Chairman of the Board February, 1990
Chief Executive Officer May, 1989
Ramon L. Humke (65)
President and Chief Operating
Officer February, 1990
John R. Brehm (44)
Senior Vice President - Finance
and Information Services May, 1991
Robert W. Rawlings (56)
Senior Vice President -
Electric Production May, 1991
Bryan G. Tabler (54)
Senior Vice President -
Secretary and General Counsel January, 1995
Partner, Barnes & Thornburg January, 1979 October, 1994
Gerald D. Waltz (58)
Senior Vice President -
Electric Delivery May, 1996
Senior Vice President -
Business Development May, 1991 May, 1996
Paul S. Mannweiler (48)
Senior Vice President -
External Affairs January, 1997
Partner, Locke Reynolds Boyd
and Weisell July, 1980 December, 1996
Max Califar (44)
Vice President - Human
Resources December, 1992
Steven L. Meyer (39)
Treasurer December, 1992
Stephen J. Plunkett (49)
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 $93.5 million and $83.6
million during 1997 and 1996, respectively. Dividends were paid on a quarterly
basis during 1996 and on a monthly basis during 1997.
IPL's Board of Directors declared dividends on common stock of
$25 million on January 27, 1998, and $16 million on February 24, 1998, payable
February 1, 1998 and March 1, 1998,respectively.
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, 1996, 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) 1997 1996 1995 1994 1993
- --------------------------------------------- --------------- -------------- --------------- --------------- ---------------
Total operating revenues (1) $ 776,427 $ 762,503 $ 709,206 $ 686,076 $ 664,303
Operating income 167,315 163,219 147,588 143,310 142,368
Allowance for funds used
during construction 4,407 9,321 11,370 9,381 5,527
Income before cumulative effect
of accounting change (1) 133,402 122,588 106,273 103,823 102,766
Cumulative effect of accounting change (1) 18,347 - - - -
Net income 151,749 122,588 106,273 103,823 102,766
Preferred dividend requirements 2,760 3,182 3,182 3,182 3,182
Income applicable to
common stock 148,989 119,406 103,091 100,641 99,584
Utility plant - net 1,766,383 1,787,969 1,792,007 1,711,772 1,608,871
Total assets 2,049,772 2,052,400 2,108,816 2,000,380 1,870,306
Construction expenditures 73,130 78,543 166,874 178,295 145,765
Common shareholder's equity 835,492 782,249 747,129 725,762 705,149
Nonredeemable cumulative
preferred stock 9,135 51,898 51,898 51,898 51,898
Long-term debt (less current
maturities and sinking
fund requirements) 627,840 627,791 669,000 654,121 532,260
See financial statements.
(1) In 1997, IPL adopted the unbilled revenues 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 Note 3 in the
Notes to Financial Statements).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the Reform Act), IPL is hereby filing 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, and many of these statements are contained in this
Item 7 under the section, "Future Performance." The Reform Act defines
forward-looking statements as statements that 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 and are
qualified in their entirety by reference to, and are accompanied by, the
following important factors that could cause IPL's actual results to differ
materially from those contained in forward-looking statements made by or on
behalf of IPL. 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 and availability, regulatory action, 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
impact IPL's financial performance. The timing of deregulation and competition,
product development and introductions of technology changes are also important
potential factors.
All such factors are difficult to predict, contain uncertainties which
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).
Electric Rate Settlement Agreement
- ----------------------------------
On August 24, 1995, the Indiana Utility Regulatory Commission (IURC)
issued an order approving, without amendment, a Stipulation and Settlement
Agreement (Settlement Agreement) resolving all issues in IPL's then pending
electric general rate proceeding. The Settlement Agreement authorized IPL to
increase its basic rates and charges for electric service in two steps, to begin
the amortization of certain regulatory assets and approved IPL's plan to expense
and to fund its annual postretirement benefits. These issues are discussed
further in Notes 1, 5, 10 and 12 in the Notes to Financial Statements.
Demand Side Management Agreement
- --------------------------------
On July 30, 1997, the IURC issued an order approving, without amendment,
a new settlement agreement for IPL's DSM program. The new agreement resulted in
a reduction in required DSM expenditures, authorization to amortize certain
deferred DSM regulatory assets and the recovery of certain additional DSM costs
through a tracker (see Note 10 in the Notes to Financial Statements).
Authorized Annual Operating Income
- ----------------------------------
During quarterly fuel adjustment clause proceedings, the annual operating
income of IPL's electric and steam businesses is subject to review. Customer
refunds could result if actual annual 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 1998.
Optional Pricing and Service Plan
- ---------------------------------
During 1997, IPL filed with the IURC a plan that, if approved, will allow
IPL to offer customers with less than 2,000 kilowatts of demand an opportunity
to choose from three new payment options. This plan would allow eligible IPL
customers to enter into written agreements for:
Fixed Rate - Pay a guaranteed fixed rate per unit of consumption for up to
three years.
Green Power - Purchase environmentally friendly or "green" power.
Additionally, residential customers may choose a "Sure Bill" option, paying the
same bill amount each month for 12 months regardless of how much electricity is
used. All customers may also opt to continue paying for electricity in the same
way as in the past.
In January, 1998, a Settlement Agreement between IPL and the parties
intervening in this filing was reached, and subsequently filed with the IURC. If
approved by the IURC, IPL can begin to offer the option programs.
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 by
some 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 impact 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. FERC order 888 also provides for the recovery of
utility stranded costs. Stranded cost is defined by FERC as the difference
between revenues received by utilities under traditional ratemaking and
market-based prices.
IPL requested and was initially denied a waiver from compliance with
orders 888 and 889. On October 11, 1996, IPL was granted a stay by FERC pending
disposition of its request for rehearing. IPL requested a waiver because, among
other reasons, the estimated costs of compliance are expected to exceed revenue
derived from its transmission service for others.
Retail Energy Market
- --------------------
The legislatures of a few states have enacted, and many other states are
considering, new laws that would allow various forms of competition, at the
retail level, for the energy requirements of electric consumers within their
respective states. While each state proposal is different, most provide for some
recovery of a utility's stranded costs and require an extended transition period
before the intended full competition is fully effective. Additionally, a few
states have implemented pilot "limited direct access" programs that experiment
with allowing some form of customer choice of electricity suppliers.
In Indiana, competition among electric energy providers for sales has
primarily focused on the wholesale power markets or the sale of bulk power to
other public and municipal utilities. Existing Indiana law provides for
electricity suppliers to have an exclusive retail service area.
In 1995, the Indiana General Assembly, anticipating increasing
competitive forces in the regulated public utility industry, enacted into law
legislation codified at I.C. 8-1-2.5 and commonly referred to as "Senate Bill
637." This new law enables the IURC to consider and approve, on an individual
utility basis, utility company initiated proposals providing nontraditional
forms of determining customer tariffs. The IPL "Optional Pricing and Service
Plan" presently under consideration by the IURC was filed 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 was subsequently amended to deal only with authorizing Indiana utilities to
participate in a transmission independent system operator organization. This
bill failed to pass the Senate.
IPL's Position on Industry Deregulation
- ---------------------------------------
In general, the foregoing FERC wholesale and state-by-state retail
initiatives are inconsistent with IPL beliefs. IPL favors federal legislation to
deregulate the industry for all companies and all customers across the country
at the same time. IPL believes that customers, particularly residential and
small businesses, are best served by the creation of large, diverse markets.
Such markets enable the development of residential aggregators who can deliver
the same benefits of volume purchasing to residential customers as are enjoyed
by large industrial customers. IPL advocates a single, nondistance based
transmission access price over wide geographic areas to maximize competition;
turning over transmission system operation to an independent system operator to
avoid gamesmanship by incumbents who own both transmission and generation
assets; rejecting the piecemeal opening of markets in favor of national access
to all markets and rejecting recovery of "stranded costs" due to competition
because such recovery would subsidize certain high-cost generators to the
detriment of competition. Absent a comprehensive national approach, IPL believes
state policy makers must recognize and make allowances for the distorted markets
that will inevitably be created by state-by-state approaches.
There can be no assurance as to the outcome of the debate on electric
utility industry restructuring. IPL intends to remain competitive in the face of
increasing competition through maintaining its low cost structure and continuing
to serve existing customers well, while accessing the wholesale market as it
continues to open.
New Environmental Standards
- ---------------------------
On July 16, 1997, the United States Environmental Protection Agency
promulgated final regulations which amended the National Ambient Air Quality
Standards by introducing standards for fine particulate matter and creating new
ozone standards. Existing sources that cause or contribute to nonattainment
regions will likely be subject to additional regulatory requirements, including
possible emission reductions. New facilities in nonattainment areas may also be
subject to additional control requirements and may be required to offset their
emissions. Because power plants emit certain air pollutants that could
contribute to the formation of ambient ozone and fine particulate matter, there
is a possibility that existing IPL sources will be required to be retrofitted
with additional air pollution controls in the future. Congressional intervention
and/or litigation regarding the standards are probable. Due to these
uncertainties, it is not presently possible to predict the potential impacts
associated with implementation of these standards on IPL's facilities.
Year 2000 System Requirements
- -----------------------------
IPL is performing an analysis of its systems and is working with
suppliers and service organizations with whom we interact electronically in
order to determine the impact of year 2000 issues. Management is unable to
predict at this time the full impact year 2000 issues will have on IPL's
operations or future financial condition. Management presently estimates that
the total cost of required changes to systems owned or controlled by IPL to
allow for year 2000 issues should not exceed $3 million.
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, 1997, 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 and P-1 by Moody's Investor Services. IPL expects to be able
to maintain investment grade debt ratings into the foreseeable future.
IPL has no long-term debt which matures during 1998. However, other
existing higher-rate debt may be refinanced depending upon market conditions.
See the following section for discussion of the construction program.
IPALCO purchased shares of IPL's preferred stock on October 17, 1997,
pursuant to the terms of a tender offer concluded October 8, 1997. Such shares
were subsequently purchased from IPALCO by IPL at cost and canceled. On October
28, 1997, the Board of Directors of IPL called for redemption of all remaining
shares of IPL's 6.0% and 8.2% Cumulative Preferred Stock issued and outstanding
on December 15, 1997, at a price per share, payable to shareholders of record of
$102 and $101, respectively, together with dividends accrued through the date of
redemption.
On January 13, 1998, IPL issued $50 million of Cumulative Preferred Stock
with a rate of 5.65%. The stock will be 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.
During the next five years, IPL is forecasted to meet its cash
requirements without any additional permanent financing. Cash flows from
operations and temporary short-term borrowings are forecasted to provide the
funds required for IPL's construction program and the retirement of maturing
long-term debt.
Future Performance
------------------
IPL expects operating revenue growth based on a projected five-year 2.3%
forecasted compound annual increase in retail KWH sales and increasing sales
opportunities in the wholesale power market.
The 2.3% annual KWH sales growth estimate compares to growth rates IPL
actually achieved of 2.2% and 2.2% for the periods 1992 through 1997 and 1987
through 1997, respectively, weather adjusted. The Indianapolis economy grew at
annual rates of 2.7% and 2.6% for those same periods and is expected to grow
2.4% from 1997 through 2002.
Operating and maintenance expenses were $399.5 million in 1997.
These expenses in 1998 will be influenced by inflation, as well as ongoing
cost controls. .
IPL's construction program for the three-year period 1998-2000 is
estimated to cost $237.2 million including AFUDC. The estimated cost of the
program by year (in millions) is $102.2 in 1998, $69.4 in 1999 and $65.6 in
2000. It includes $149.1 million for additions, improvements and extensions to
transmission and distribution lines, substations, power factor and voltage
regulating equipment, distribution transformers and street lighting
distribution. At December 31, 1997, IPL had completed installation of all of its
Environmental Compliance Plan facilities.
IPL will amortize approximately $35.4 million of its nontax-regulatory
assets at December 31, 1997, over the next three years.
Other
-----
Cumulative Effect of Accounting Change
- --------------------------------------
On December 31, 1997, effective January 1, 1997, IPL adopted the unbilled
revenues 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, is a one-time income increase of $18.3 million and is
reported as a separate component of net income for 1997. This accounting change
does not impact IPL's cash flow or liquidity (see Note 3 of Notes to financial
statements for additional information concerning this accounting change).
Preferred Stock, Debt Issuance and Dividend Restrictions
- ---------------------------------------------------------
IPL is limited in its ability to issue certain securities by restrictions
under its Mortgage and Deed of Trust (Mortgage) and its Amended Articles of
Incorporation (Articles). The restriction under the Articles requires that the
net income of IPL, as specified therein, shall be at least one and one-half
times the total interest on the funded debt and the pro forma dividend
requirements on the outstanding preferred stock and on any preferred stock
proposed to be issued, before any additional preferred stock can be issued. The
Mortgage restriction 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, 1997, the ratios under the Articles and the
Mortgage are 5.03 and 10.68, respectively. IPL believes these requirements will
not restrict any anticipated future financings (see Note 6 in the Notes to
Financial Statements). At December 31, 1997, and considering all existing
restrictions, IPL had the capacity to issue approximately $1.1 billion of
additional long-term debt.
RESULTS OF OPERATIONS
Income applicable to common stock increased by $29.6 million in 1997
compared to 1996. Income applicable to common stock increased by $16.3 million
in 1996 compared to 1995. The following discussion highlights the factors
contributing to these increases.
The 1997 income applicable to common stock includes a one-time cumulative
effect adjustment of $18.3 million, net of taxes, resulting from IPL's change to
the unbilled revenue method of accounting. The 1997 income applicable to common
stock also includes a $5.7 million ($3.5 million, net of taxes) gain from the
sale of a retired plant site (see Notes 2 and 3 in the Notes to Financial
Statements).
Operating Revenues
- ------------------
Operating revenues in 1997 and 1996 increased from the prior
year by $13.9 million and by $53.3 million, respectively. The increases in
revenues resulted from the following:
Increase (Decrease)
-------------------
1997 over 1996 1996 over 1995
-------------- --------------
(Millions of Dollars)
Electric:
Increase in retail basic rates $ 12.7 $ 40.8
Change in retail KWH sales - net of fuel (7.4) 9.3
Fuel revenue (4.7) (8.7)
Wholesale revenue 8.6 6.6
DSM tracker revenue 1.3 2.4
Steam revenue .6 1.9
Other revenue 2.8 1.0
------- -------
Total change in operating revenues $ 13.9 $ 53.3
======= =======
The increase in retail basic rates is the result of new tariffs,
effective July 1, 1996, and September 1, 1995, designed to produce additional
annual base revenues of $25 million and $35 million, respectively. The decrease
in retail KWH sales in 1997 reflects a decrease in cooling and heating degree
days in 1997, compared to 1996, due to milder weather. During 1996, retail KWH
sales increased as a result of customer growth and the net impact of weather. In
both years, total KWH sales, including wholesale KWH sales, increased. Actual
and percentage changes in electric customers and in heating and cooling degree
days for these periods are as follows:
Increase (Decrease)
-------------------
1997 over 1996 1996 over 1995
-------------- --------------
Electric Residential Customers 4,657 1.3% 4,866 1.3%
Commercial & Industrial Customers 1,048 2.4% 722 1.7%
Heating Degree Days (203) (3.4)% 315 5.7%
Cooling Degree Days (121) (12.2)% (223) (18.4)%
The changes in fuel revenues in 1997 and 1996 from the prior year reflect
decreases in fuel costs billed customers. The changes in wholesale revenues in
1997 and 1996 reflect increased wholesale marketing efforts and energy
requirements of other utilities in those years. The changes in other revenues
represent increased service revenues.
Utility Operating Expenses
- --------------------------
Fuel expense increased slightly in 1997 while decreasing in 1996 by $4.9
million from the prior years. The 1997 increase was due to increased total KWH
sales. The decrease in 1996 was due to decreased unit costs of coal and oil of
$9.7 million and decreased deferred fuel expense of $2.5 million, partially
offset by increased fuel consumption of $7.3 million.
Other operating expenses in 1997 and 1996 increased from the prior year
by $6.1 million and by $20.8 million, respectively. The increase in 1997 was
primarily due to increased administrative and general expense of $6.0 million
resulting from increased outside services and labor costs. Also contributing to
the 1997 increase was increased amortization of Demand Side Management (DSM)
program expenses of $2.3 million partially offset by decreased expense at the
production plants. The increase during 1996 was due to increased administrative
and general expenses of $13.5 million resulting from postretirement benefit
expenses recognized since the 1995 electric rate order. Other factors
contributing to increased other operating expenses in 1996 were increased
electric plant operations of $4.0 million, increased amortization of DSM program
expenses of $1.2 million, increased uncollectible expenses of $1.3 million and
increased electric distribution operating expense of $1.2 million, partially
offset by $2.0 million of gain from the sale of emission allowances.
Power purchased decreased in 1997 compared to 1996 by $10.5 million. This
decrease was primarily due to reduced demand charges as a result of a new power
purchase contract that became effective in May 1997.
Maintenance expenses increased by $8.9 million during 1997 and by $4.8
million during 1996. The increase in 1997 was primarily due to an overhaul of
Unit 3 at Petersburg, as well as repairs to Unit 7 at the Stout plant. The
increase for 1996 maintenance expenses was mostly due to increased planned
outage expenses of $4.6 million for Unit 3 at IPL's Petersburg generating plant.
Depreciation and amortization expense increased in 1997 and 1996 from the
prior year by $.5 million and by $1.8 million, respectively. These changes
resulted primarily from increases in the depreciable utility plant balances, the
1995 electric rate order and adjustments to spare parts inventory in 1997 and
1996. Depreciable utility plant reflects the addition of new SO2 removal
facilities at IPL's Petersburg generating plant in June 1996. Adjustments of $.6
million and $4.5 million were made in 1997 and 1996, respectively, to spare
parts inventory resulting from the recognition of impairment in value of excess
spare parts.
Taxes other than income taxes decreased $.3 million in 1997 due to
decreased property and gross income taxes. During 1996, these other taxes
increased $1.7 million due primarily to an increase in property and gross income
taxes.
Income taxes - net, increased in both 1997 and 1996 from the prior
years by $5.1 million and $13.7 million, respectively. These changes
reflect increases in pretax operating income.
Other Income And Deductions
- ---------------------------
Allowance for equity funds used during construction decreased by $2.5
million in 1997, while remaining unchanged in 1996. In 1997, the amortization of
deferred carrying charges on a plant asset ended, and carrying charges on other
regulatory assets decreased $1.2 million.
Other - net, which includes the non-operating income from IPL, increased
by $7.0 million and decreased by $0.5 million from the prior year during 1997
and 1996, respectively. The change during 1997 was due to a $5.7 million pretax
gain from the sale of a retired plant site. Also contributing to the increase in
other - net in 1997 was an increase in net revenues for contract work by IPL.
The decrease in 1996 was due to decreased non-operating income at IPL.
Interest Charges
- ----------------
Interest on long-term debt decreased by $4.6 million in 1997 and
decreased by $2.2 million in 1996 from the prior year. The decrease in interest
expense for 1997 was due to the redemption of $15 million 5 1/8% Series in
April, 1996, $50 million 9 5/8% Series in December, 1996 and $11.3 million 5
5/8% Series in May, 1997, partially offset by the issuance of $20 variable rate
notes in November 1996. Partially offsetting the decreased interest from these
redemptions was the issuance of $20 million variable rate bonds. The decrease in
1996 was due to the refinancing of two of the higher rate First Mortgage Bonds,
10 5/8% Series and 9 5/8% Series in 1995, with debt instruments carrying lower
interest rates.
Other interest charges decreased by $2.4 million during 1997 from the
prior year and decreased by $1.1 million during 1996 from the prior year. The
decreases during 1997 and 1996 were primarily due to decreased short-term debt
borrowings.
Also contributing to the 1996 decrease were decreased interest rates.
As compared to the prior year, the allowance for borrowed funds used
during construction decreased in 1997 and 1996 by $2.4 million and by $2.0
million, respectively. These decreases reflect a comparable change in the
construction base in those years, as well as decreased carrying charges on
regulatory assets in 1996.
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 revenues 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 Note 3 in the Notes to Financial Statements).
New Accounting Pronouncements
- -----------------------------
The Financial Accounting Standards Board has issued Statements 130
and 131 that IPL will be required to adopt in future periods (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, 1997 and 1996, and the related statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Indianapolis Power & Light Company as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 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 23, 1998
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
For the Years Ended December 31, 1997, 1996 and 1995
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In Thousands)
OPERATING REVENUES (Note 10):
Electric $ 738,134 $ 724,764 $ 673,388
Steam 38,293 37,739 35,818
------------- ------------- -------------
Total operating revenues 776,427 762,503 709,206
------------- ------------- -------------
OPERATING EXPENSES:
Operation:
Fuel 164,578 164,339 169,206
Other 143,311 137,192 116,428
Power purchased 7,833 18,365 19,102
Purchased steam 7,075 7,240 6,680
Maintenance 76,679 67,768 63,013
Depreciation and amortization 103,230 102,769 100,984
Taxes other than income taxes 33,071 33,363 31,706
Income taxes - net (Note 9) 73,335 68,248 54,499
------------- ------------- -------------
Total operating expenses 609,112 599,284 561,618
------------- ------------- -------------
OPERATING INCOME 167,315 163,219 147,588
------------- ------------- -------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 3,462 5,967 6,003
Other - net 4,507 (2,527) (2,020)
Income taxes - net (Note 9) (1,105) 982 931
------------- ------------- -------------
Total other income - net 6,864 4,422 4,914
------------- ------------- -------------
INCOME BEFORE INTEREST CHARGES 174,179 167,641 152,502
------------- ------------- -------------
INTEREST CHARGES:
Interest on long-term debt 38,809 43,425 45,656
Other interest 1,243 3,638 4,728
Allowance for borrowed funds used during construction (945) (3,354) (5,367)
Amortization of redemption premiums and expenses on
debt - net 1,670 1,344 1,212
------------- ------------- -------------
Total interest charges 40,777 45,053 46,229
------------- ------------- -------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 133,402 122,588 106,273
------------- ------------- -------------
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 3) 18,347 - -
------------- ------------- -------------
NET INCOME 151,749 122,588 106,273
------------- ------------- -------------
PREFERRED DIVIDEND REQUIREMENTS 2,760 3,182 3,182
------------- ------------- -------------
INCOME APPLICABLE TO COMMON STOCK $ 148,989 $ 119,406 $ 103,091
============= ============= =============
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
December 31, 1997 and 1996
- ----------------------------------------------------------------------------------------------------------------------
ASSETS 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
(In Thousands)
UTILITY PLANT:
Utility plant in service (Note 2) $ 2,800,446 $ 2,763,305
Less accumulated depreciation 1,121,317 1,048,492
------------------ -----------------
Utility plant in service - net 1,679,129 1,714,813
Construction work in progress 77,030 63,243
Property held for future use 10,224 9,913
------------------ -----------------
Utility plant - net 1,766,383 1,787,969
------------------ -----------------
OTHER PROPERTY -
At cost, less accumulated depreciation 5,171 5,799
------------------ -----------------
CURRENT ASSETS:
Cash and cash equivalents 4,950 8,840
Accounts receivable and unbilled revenue (less allowance for doubtful
accounts - 1997, $1,005,000 and 1996, $907,000) (Note 3) 43,053 6,710
Receivable from parent - 1,182
Fuel - at average cost 35,000 30,121
Materials and supplies - at average cost 47,648 52,027
Prepayments and other current assets 8,486 9,612
------------------ -----------------
Total current assets 139,137 108,492
------------------ -----------------
DEFERRED DEBITS:
Regulatory assets (Note 5) 126,784 137,974
Miscellaneous 12,297 12,166
------------------ -----------------
Total deferred debits 139,081 150,140
------------------ -----------------
TOTAL $ 2,049,772 $ 2,052,400
================== =================
See notes to financial statements.
- -------------------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
(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 1997, 17,206,630 shares in 1996
$ 324,537 $ 324,537
Premium and net gain on preferred stock 2,329 1,363
Retained earnings 508,626 456,349
------------------ ------------------
Total common shareholder's equity 835,492 782,249
Cumulative preferred stock (Note 6) 9,135 51,898
Long-term debt (Note 7) 627,840 627,791
------------------ ------------------
Total capitalization 1,472,467 1,461,938
------------------ ------------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper (Note 8) 23,700 34,000
Current maturities and sinking fund requirements (Note 7) - 11,250
Accounts payable and accrued expenses 63,970 56,537
Dividends payable 13,290 21,910
Taxes accrued 18,674 19,621
Interest accrued 13,258 13,301
Other current liabilities 12,556 14,519
------------------ ------------------
Total current liabilities 145,448 171,138
------------------ ------------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Deferred income taxes - net (Note 9) 325,386 304,854
Unamortized investment tax credit 44,783 47,722
Accrued postretirement benefits (Note 12) 17,144 23,635
Accrued pension benefits (Note 11) 39,821 37,283
Miscellaneous 4,723 5,830
------------------ ------------------
Total deferred credits and other long-term liabilities 431,857 419,324
------------------ ------------------
COMMITMENTS AND CONTINGENCIES (Note 14)
TOTAL $ 2,049,772 $ 2,052,400
================== ==================
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
(In Thousands)
CASH FLOWS FROM OPERATIONS:
Net income $ 151,749 $ 122,588 $ 106,273
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 98,908 97,313 99,300
Amortization of regulatory assets 15,405 17,680 6,748
Deferred income taxes and investment tax credit adjustments - net 12,669 3,195 (4,564)
Allowance for funds used during construction (4,407) (9,321) (11,370)
Cumulative effect of accounting change - before taxes (Note 3) (29,915) - -
Premiums on redemptions of debt - (3,128) (2,506)
Change in certain assets and liabilities:
Accounts receivable - excluding cumulative effect
of accounting change (5,246) 49,260 (9,174)
Fuel, materials and supplies (500) 4,293 6,362
Accounts payable 7,433 (16,516) 4,199
Taxes accrued (947) 598 2,236
Accrued pension benefits 2,538 5,449 4,731
Other - net (17,337) (17,177) 3,978
------------- -------------- -------------
Net cash provided by operating activities 230,350 254,234 206,213
------------- -------------- -------------
CASH FLOWS FROM INVESTING:
Construction expenditures (73,130) (78,543) (166,874)
Other (1,528) (13,488) (20,307)
------------- -------------- -------------
Net cash used in investing activities (74,658) (92,031) (187,181)
------------- -------------- -------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt - 20,000 110,000
Retirement of long-term debt (11,250) (65,150) (80,350)
Preferred stock redemptions (Note 6) (41,814) - -
Short-term debt - net (10,300) (31,022) 38,622
Dividends paid (96,247) (86,811) (84,471)
Other 29 (365) (683)
------------- -------------- -------------
Net cash used in financing activities (159,582) (163,348) (16,882)
------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,890) (1,145) 2,150
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,840 9,985 7,835
------------- -------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,950 $ 8,840 $ 9,985
============= ============== =============
- -----------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information: Cash paid during the year for:
Interest (net of amount capitalized) $ 39,837 $ 45,339 $ 46,792
============= ============== =============
Income taxes $ 75,621 $ 67,979 $ 53,049
============= ============== =============
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Retained Earnings
For the Years Ended December 31, 1997, 1996 and 1995
- --------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
RETAINED EARNINGS AT BEGINNING OF YEAR $ 456,349 $ 421,229 $ 399,862
NET INCOME 151,749 122,588 106,273
----------- ----------- -----------
Total 608,098 543,817 506,135
DEDUCT:
Cash dividends declared:
Cumulative preferred stock - at prescribed
rate of each series (See Note 6) 2,760 3,182 3,182
Common stock 96,712 84,286 81,724
------------- -------------- -------------
Total 99,472 87,468 84,906
------------- -------------- -------------
RETAINED EARNINGS AT END OF YEAR $ 508,626 $ 456,349 $ 421,229
============= ============== =============
See notes to financial statements.
INDIANAPOLIS POWER & LIGHT COMPANY
==================================
Notes to Financial Statements
For the Years Ended December 31, 1997, 1996 and 1995
- --------------------------------------------------------------------------------
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, 1997 and 1996, 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
67% of IPL's employees are covered by collective bargaining agreements. On
February 23, 1998, the contract of approximately 25% of those employees covered
by collective bargaining agreements will expire.
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 revenues
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.
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.
Effective July 1, 1996, IPL's authorized annual electric 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 1997, IPL's rolling annual
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, 1997, IPL's most recent quarterly measurement date, IPL had a
cumulative net operating deficiency of $78.9 million, of which $39.9 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 results. As a consequence, IPL could, for a period of time,
earn above $163 million of electric 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.
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 9.1%, 7.3% and 8.5% during 1997, 1996 and 1995, 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 which 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 1997, 3.4% during 1996 and 3.5% during 1995. Depreciation expense
for 1997 and 1996 includes adjustments to spare parts inventory of $0.6 million
and $4.5 million, respectively, resulting from recognition of the impairment in
value of excess spare parts. Depreciation expense for 1995 includes adjustments
to property held for future use of approximately $12.3 million. The adjustments
in 1995 reflect incurred costs of expired regulatory permits and for designing
and engineering a future generating station in Patriot, Indiana.
Sale of Accounts Receivable: At December 31, 1997, IPL had 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, or that are expected to be, 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, 1997, 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 (see Note 10), IPL, effective September 1, 1995, is
amortizing this deferral to expense over a life which generally approximates the
useful life of the related facility.
Also in accordance with regulatory treatment, IPL defers as regulatory
assets nonsinking 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 which 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.
Statements of Cash Flows - 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 which 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. IPL matches each employee's contributions in amounts up to,
but not exceeding, 4% of the employee's annual base compensation.
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 Pronouncements: In 1997, IPL adopted Statement of
Financial Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" which
established standards for asset and liability recognition when transfers occur.
Adoption of SFAS 125 had no impact on IPL's financial position or results of
operations.
In June 1997, SFAS 130, "Comprehensive Income," was issued and becomes
effective in 1998 and requires reclassification of earlier financial statements
for comparative purposes. SFAS 130 requires that changes in the amounts of
certain items, including foreign currency translation adjustments and gains and
losses on certain securities be shown in the financial statements. SFAS 130 does
not require a specific format for the financial statement in which comprehensive
income is reported, but does require that an amount representing total
comprehensive income be reported in that statement. IPL anticipates adopting
this statement on January 1, 1998, and does not expect that it will have a
material impact on its financial statements.
Also in 1997, SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. The statement will change the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the material
countries in which it holds assets and reports revenues, and its major
customers. SFAS 131 is effective for fiscal years beginning after December 15,
1997. However, interim reporting of segments is not required until 1999.
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.
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:
1997 1996
- --------------------------------------------------------------------------------
(In Thousands)
Production......................... $1,687,190 $1,684,705
Transmission....................... 237,547 235,218
Distribution....................... 743,251 712,391
General .......................... 132,458 130,991
----------- -----------
Total utility plant in service.. $2,800,446 $2,763,305
=========== ===========
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 CC 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 in 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).
If this method had been applied retroactively, net income would have
been $120.4 million and $107.7 million for the years ended December 31, 1996,
and 1995, respectively.
4. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts of financial instruments have 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, 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 $3.3 million and $1.2 million, which represents
the amount that IPL would have to pay to enter into an equivalent agreement at
December 31, 1997, and 1996, respectively, with a swap counter party. 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, 1997, and 1996, the carrying amount of IPL's
long-term debt, including current maturities and sinking fund requirements, and
the approximate fair value are as follows:
1997 1996
- ----------------------------------------------------------------------
(In Thousands)
Carrying amount $627,840 $639,041
Approximate fair value $651,620 $644,988
5. REGULATORY ASSETS
The amounts of regulatory assets at December 31, 1997, and 1996, are as
follows:
1997 1996
- ------------------------------------------------------------------------------------------
(In Thousands)
Related to deferred taxes (Note 1) $ 44,099 $ 39,175
Postretirement benefit costs in excess of cash payments
and amounts capitalized (Note 12) 17,152 23,584
Unamortized reacquisition premium on debt (Note 1) 23,751 25,151
Unamortized Petersburg Unit 4 carrying charges
and certain other costs (Note 1) 30,228 34,005
Demand side management costs (Note 10) 10,308 13,841
Other 1,246 2,218
----------- ------------
Total regulatory assets $ 126,784 $ 137,974
=========== ============
6. CAPITAL STOCK
Common Stock: There were no changes in IPL common stock during 1997,
1996 and 1995.
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 indenture 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, 1996, 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.
IPALCO purchased shares of IPL's preferred stock on October 17, 1997,
pursuant to the terms of a self-tender offer concluded on October 8, 1997. The
following table shows the number of shares purchased on October 17, 1997, for
each class of preferred stock:
Amount
Class Shares Rate (In Thousands)
- ---------------------------------------------------------------------------
4% Series............. 52,389 $71.38 $ 3,740
4.2% Series........... 19,669 77.72 1,529
4.6% Series........... 27,519 85.12 2,342
4.8% Series........... 28,070 88.82 2,493
6% Series............. 59,200 103.00 6,098
8.2% Series........... 65,828 102.00 6,714
------ -------
Shares purchased 252,675 $22,916
======= =======
All tendered shares subsequently were purchased from IPALCO by IPL at
cost and canceled.
On October 28, 1997, the Board of Directors of IPL authorized the
redemption of the remaining 40,800 shares of its 6.0% and remaining 134,157
shares of its 8.2% Cumulative Preferred Stock issued and outstanding on December
15, 1997, at a price per share, payable to shareholders of record of $102 and
$101, respectively, together with dividends accrued through the date of
redemption. IPL recorded a net gain of $1.7 million, included in "Premium and
net gain on preferred stock" at December 31, 1997, with the redemption of the
preferred stock.
At December 31, preferred stock consisted of the following:
December 31, 1997
-----------------
Shares Call December 31
Outstanding Price 1997 1996
----------- ----------- ------- ------
(In Thousands)
Cumulative $100 Par Value,
authorized 2,000,000 shares
4% Series..................... 47,611 $118.00 $4,761 $10,000
4.2% Series................... 19,331 103.00 1,933 3,900
4.6% Series................... 2,481 103.00 248 3,000
4.8% Series................... 21,930 101.00 2,193 5,000
6% Series..................... - 102.00 - 10,000
8.2% Series................... - 101.00 - 19,998
------- ------ -------
Total cumulative preferred stock 91,353 $9,135 $51,898
======= ====== =======
During 1997, 1996 and 1995, preferred stock dividends were $2.8 million,
$3.2 million and $3.2 million, respectively.
On January 13, 1998, Indianapolis Power & Light Company issued
$50,000,000 of Cumulative Preferred Stock with a rate of 5.65% 500,000 shares
were issued at $100 par value each. The stock will be redeemable, subject to
certain restrictions, in whole or in part, at any time on or after January 1,
2008, at the option of IPL.
7. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
------------
1997 1996
---- ----
Series Due (In Thousands)
------ ---
First Mortgage Bonds:
5 5/8% May 1997....................... $ - $ 11,250
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 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......................... (960) (1,009)
--------- ---------
Total first mortgage bonds....................... 477,840 489,041
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
Current maturities and sinking fund requirements... - (11,250)
--------- ---------
Total long-term debt ............................ $ 627,840 $ 627,791
========= =========
* 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 $15 million, 5 1/8% Series in May 1996 and the $50
million, 9 5/8% Series in December 1996.
The Series 1991 note provides for an interest rate which varies with the
tax-exempt commercial paper rate. The 1994A, 1995B, 1995C and 1996 notes provide
for an interest rate which varies with the tax-exempt weekly rate. IPL, at its
option, can change the interest rate mode for these notes to be based on other
short-term rates. Additionally, the variable rate 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 long-term credit facilities supporting these agreements which were
unused at December 31, 1997.
The year-end interest rates for the variable rate notes are as follows:
Interest Rate at
December 31
1997 1996
- ------------------------------------------------------------
Series 1991 3.78% 3.47%
Series 1994A 3.75% 4.10%
Series 1995B 5.21% 5.21%
Series 1995C 3.75% 4.10%
Series 1996 3.75% 4.05%
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 counter party 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.
There are no maturities or sinking fund requirements on long-term debt
for the five years subsequent to December 31, 1997.
8. LINES OF CREDIT
IPL has committed lines of credit with banks of $75 million at December
31, 1997, to provide loans for interim financing and also require the payment of
commitment fees. These lines of credit, based on separate formal and informal
agreements, have expiration dates ranging from February 1, 1998, to December 31,
1998. Lines of credit used to support commercial paper were $10 million at
December 31, 1997. IPL has a Liquidity facility in the amount of $150 million to
support certain floating rate tax-exempt facilities (see Note 7). IPL has an
uncommitted line of credit with a bank in the amount of $25 million which does
not require the payment of a commitment fee. At December 31, 1997, $11.3 million
was unused. The weighted average interest rate on notes payable and commercial
paper outstanding was 6.69% and 6.16% at December 31, 1997, and 1996,
respectively.
9. INCOME TAXES
Federal and state income taxes charged to income are as follows:
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
Operating Expenses: (In Thousands)
Current income taxes:
Federal..................................................... $ 64,553 $ 56,676 $ 51,331
State....................................................... 9,474 8,378 7,732
-------- -------- --------
Total current taxes....................................... 74,027 65,054 59,063
-------- -------- --------
Deferred federal income taxes............................... 1,444 6,507 (1,748)
Deferred state income taxes................................. 803 (398) 309
-------- --------- --------
Total deferred income taxes.............................. 2,247 6,109 (1,439)
-------- --------- --------
Net amortization of investment credit......................... (2,939) (2,915) (3,125)
-------- -------- --------
Total charge to operating expenses........................ 73,335 68,248 54,499
Net credit to other income and deductions..................... 1,105 (982) (931)
-------- -------- --------
74,440 67,266 53,568
Cumulative effect of change in accounting principle........... 11,209 - -
-------- -------- --------
Total federal and state income tax provisions............. $ 85,649 $ 67,266 $ 53,568
======== ======== ========
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:
1997 1996 1995
- ------------------------------------------------------------------------------
Federal statutory tax rate.................. 35.0% 35.0% 35.0%
Effect of state income taxes................ (1.7) (1.5) (1.8)
Amortization of investment tax credits...... (1.2) (1.5) (2.0)
Removal cost adjustments.................... - - (1.7)
Other - net................................. (0.9) (0.7) (1.0)
----- ----- -----
Effective tax rate........................ 31.2% 31.3% 28.5%
===== ===== =====
The significant items comprising IPL's net deferred tax liability
recognized in the balance sheets as of December 31, 1997, and 1996, are as
follows:
1997 1996
- ----------------------------------------------------------------------------
(In Thousands)
Deferred tax liabilities:
Relating to utility property............ $405,164 $376,121
Other................................... 15,546 19,200
-------- --------
Total deferred tax liabilities...... 420,710 395,321
-------- --------
Deferred tax assets:
Relating to utility property............ 40,731 28,298
Investment tax credit................... 27,251 29,156
Employee Benefit Plans.................. 22,019 15,396
Unbilled revenue........................ - 10,517
Other................................... 5,143 7,100
-------- --------
Total deferred tax assets........... 95,144 90,467
-------- --------
Net deferred tax liability................... 325,566 304,854
Current deferred tax liability.......... 180 -
-------- --------
Deferred income taxes - net.................. $325,386 $304,854
======== ========
10. RATE MATTERS
Electric Rate Settlement Agreement: On August 24, 1995, the IURC issued
an order approving without amendment a Stipulation and Settlement Agreement
(Settlement Agreement) resolving all issues in IPL's then pending electric
general rate proceeding.
As provided for by the Settlement Agreement, IPL increased its basic
rates and charges for retail electric service in two steps designed to provide
the following additional annual revenues:
Step 1 - $35 million on September 1, 1995
Step 2 - $25 million on July 1, 1996
Effective with the implementation of new tariffs in Step 1, IPL was
authorized to begin amortization of certain regulatory assets. Additionally,
IPL's existing depreciation rates were reapproved.
IPL has agreed not to file a request to build any large, base-load
generating capacity before January 1, 2000. This provision can be waived in
extreme circumstances. In addition, the parties agreed to, and subsequently
resolved, pending litigation involving IPL's Clean Air Act compliance plan.
Steam Rate Order: By an order dated January 13, 1993, the IURC authorized IPL to
increase its steam system rates and charges over a six-year period. The final
increase associated with this order took effect on January 13, 1998. The amount
of additional annual revenues from the January 13, 1998, increase is estimated
to be $370,000.
Demand Side Management 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 December 19, 1996, IPL filed a
petition with the IURC requesting review, modification and/or termination of,
and related regulatory treatment for, DSM programs approved in the order dated
September 8, 1993. 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.
11. EMPLOYEE PENSION BENEFIT PLANS
Pension expense includes the following components:
1997 1996 1995
- ------------------------------------------------------------------------------------------
(In Thousands)
Service cost--benefits earned during the period..... $ 6,584 $ 6,482 $ 6,375
Interest cost on projected benefit obligation....... 16,873 16,335 15,348
Actual return on plan assets........................ (37,813) (23,307) (29,529)
Net amortization and deferral....................... 18,304 5,758 13,499
-------- -------- --------
Net periodic pension cost......................... 3,948 5,268 5,693
Less:
Amount allocated to related parties............. 60 121 98
-------- -------- --------
IPL net periodic pension cost....................... 3,888 5,147 5,595
Less amount capitalized........................... 621 1,061 1,199
-------- -------- --------
Amount charged to expense........................... $ 3,267 $ 4,086 $ 4,396
======== ======== ========
A summary of the Plans' funding status at their October 31, 1997, plan
year-end, evaluation date and the amount recognized in the balance sheets at
December 31, 1997 and 1996, follows:
1997 1996
- -------------------------------------------------------------------------------------------------------------
(In Thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation.............................................. $(194,352) $(173,654)
Nonvested benefit obligation........................................... (35,293) (32,705)
--------- ---------
Accumulated benefit obligation............................................. (229,645) (206,359)
========= =========
Projected benefit obligation........................................... (254,540) (229,937)
Plan assets at fair value.............................................. 262,126 235,250
--------- ---------
Funded status.............................................................. 7,586 5,313
Unrecognized net gain from past experience different
from that assumed.................................................. (46,671) (36,126)
Unrecognized past service costs........................................ 12,477 8,132
Unrecognized net asset at January 1, 1987, being
amortized over an original life of 18.9 years...................... (11,169) (12,583)
Adjustment required to recognize minimum liability..................... (2,044) (2,019)
--------- ---------
Net accrued pension benefits included in other long-term
liabilities at December 31............................................. $ (39,821) $ (37,283)
========= =========
Approximately 45.2% of the Plans' assets were in equity securities at
October 31, 1997, with the remainder in fixed income securities.
Assumptions used in determining this information were:
1997 1996 1995
- -------------------------------------------------------------------------------
Discount rate...................................... 7.25% 7.50% 7.50%
Rate of increase in future compensation levels..... 5.10% 5.10% 5.10%
Expected long-term rate of return on assets........ 8.00% 8.00% 8.00%
12. EMPLOYEE POSTRETIREMENT BENEFITS
Postretirement benefit expense includes the following components:
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
(In Thousands)
Service cost -- benefits earned during the period...................... $ 3,942 $ 3,891 $ 3,855
Interest cost on accumulated postretirement benefit obligation......... 11,088 10,450 10,796
Actual (return) loss on plan assets.................................... 314 1,280 (319)
Net amortization and deferral.......................................... 1,497 2,233 4,661
--------- --------- --------
Net periodic postretirement benefit cost............................. 16,841 17,854 18,993
Less:
Amount capitalized................................................. 2,930 3,511 3,891
Regulatory asset deferral.......................................... - - 6,978
--------- --------- --------
Amount charged to expense.............................................. $ 13,911 $ 14,343 $ 8,124
========= ========= ========
Also, during 1997 and 1996, IPL expensed postretirement regulatory asset
amortization of $6.4 million each year.
A summary of the retiree health-care and life insurance plan's funding
status, and the amount recognized in the balance sheets at December 31, 1997 and
1996, follows:
1997 1996
- ---------------------------------------------------------------------------------------------------------------
Actuarial present value of accumulated postretirement (In Thousands)
benefit obligation:
Retirees............................................................... $ (59,125) $ (62,856)
Fully eligible active plan participants................................ (18,944) (21,314)
Other active plan participants......................................... (57,913) (61,879)
--------- ---------
Total...................................................................... (135,982) (146,049)
Plan assets at fair value ............................................. 68,006 49,274
--------- ---------
Funded status.............................................................. (67,976) (96,775)
Unrecognized net gain from past experience different from that assumed. (40,568) (24,354)
Unrecognized net obligation at January 1, 1993, being amortized over
an original life of 20 years....................................... 91,400 97,494
--------- ---------
Net accrued postretirement benefit cost included in deferred liabilities at
December 31............................................................ $ (17,144) $ (23,635)
========= =========
IPL has expensed its non-construction related postretirement benefits
costs associated with its regulated steam business and, subsequent to August
1995, with its regulated electric business. IPL's electric business
postretirement benefit costs incurred prior to September 1, 1995, net of amounts
capitalized for construction and benefits paid to participants, were deferred as
a regulatory asset on the balance sheets. The Settlement Agreement approved the
amortization to operating expense of this regulatory asset over five years
beginning September 1, 1995. The annual amortization is $6.4 million. IPL funds
its annual postretirement benefit costs in excess of actual benefits paid to
participants to an irrevocable VEBA Trust. Annual funding is discretionary and
is based on the projected cost over time of benefits to be provided to covered
persons consistent with acceptable actuarial methods. The VEBA Trust provides
for full funding of IPL's accumulated postretirement benefit obligation in the
event of certain change of control transactions. During 1997 and 1996, IPL
contributed $19.0 million and $20.8 million, respectively, of these costs to the
VEBA.
Plan assets consist of life insurance policies on certain active and
retired employees.
The assumed health-care cost trend rate used in measuring the accumulated
postretirement benefit obligation is 8.1% for 1998, gradually declining to 4.5%
in 2003. A 1% increase in the assumed health care cost trend rate for each year
would increase the accumulated postretirement benefit obligation, as of December
31, 1997, by approximately $19.4 million and the combined service cost and
interest cost for 1997 by approximately $2.4 million.
Assumptions used in determining the information above were:
1997 1996 1995
- ------------------------------------------------------------------------------
Discount rate................................... 7.25% 7.50% 7.25%
Rate of increase in future compensation levels.. 5.10% 5.10% 5.10%
Expected long-term rate of return on assets..... 8.00% 8.00% 8.00%
13. OTHER EMPLOYEE BENEFIT PLANS
IPL's contributions to the Thrift Plan, net of amounts allocated to
related parties were $3.3 million, $3.4 million and $3.2 million in 1997, 1996
and 1995, respectively.
14. COMMITMENTS AND CONTINGENCIES
In 1998, IPL anticipates the cost of its construction program to be
approximately $102 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 position and results of
operations.
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.
15. QUARTERLY RESULTS (UNAUDITED)
Operating results for the years ended December 31, 1997, and 1996 by
quarter, are as follows (in thousands):
1997
----
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Operating revenues......................... $ 195,299 $ 183,777 $ 203,872 $ 193,479
Operating income........................... $ 44,534 $ 39,092 $ 48,820 $ 34,869
Income before cumulative effect
of accounting change.................... $ 34,766 $ 30,130 $ 39,507 $ 28,999
Cumulative effect of
accounting change....................... $ 18,347 - - -
Net income................................. $ 53,113 $ 30,130 $ 39,507 $ 28,999
Net income (as originally reported)........ $ 37,826 $ 27,025 $ 43,605 -
1996
----
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Operating revenues......................... $ 196,446 $ 177,621 $ 205,672 $ 182,764
Operating income........................... $ 44,844 $ 36,122 $ 51,163 $ 31,090
Net income................................. $ 35,880 $ 26,980 $ 39,632 $ 20,096
The 1997 results have been restated for the change in accounting method
to the unbilled revenues method. The change in method was made on December 31,
1997, but each quarter's results have been restated to reflect the results as if
the change had occurred on January 1, 1997, in accordance with generally
accepted accounting principles (see Note 3 regarding the change in accounting
method).
The quarterly figures reflect seasonal and weather-related fluctuations
which are normal to IPL's operations (see Note 10 regarding rate increases).
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 9, 1998 (the registrant's
Information Statement), under "Proposal 1-Election of 14
Directors" at pages 3-5 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 24, 1998."
Item 11. EXECUTIVE COMPENSATION
----------------------
Information relating to executive compensation, set forth in
the registrant's Information Statement under "Compensation of
Executive Officers" at pages 12-15, "Compensation of
Directors" at page 7, "Compensation Committee Interlocks and
Insider Participation" at page 6, "Pensions Plans" at pages
17-18, and "Employment Contracts and Termination of Employment
and Change in Control Arrangements" at pages 18-19, 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 Informaiton
Statement under "Certain Business Relationships" at page 7,
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, 1997, 1996 and 1995
Balance Sheets, December 31, 1997 and 1996
Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995
Statements of Retained Earnings for the Years
Ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
2. Exhibits
--------
The Exhibit Index beginning on page IV-6 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
-------------------
A report 8-K was filed on November 12, 1997. The Form
8-K reported IPL's notice of redemption for its 6.0%
Series and 8.2% Series of Cumulative Preferred Stock.
INDIANAPOLIS POWER & LIGHT COMPANY EXHIBIT 12.1
Ratio of Earnings to Fixed Charges
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
---------- ----------- ----------
(Thousands of Dollars)
Earnings, as defined:
Net income (1) $133,402 $122,588 $106,273
Income taxes 74,440 67,266 53,568
Fixed charges, as below 41,893 48,570 51,778
-------- -------- --------
Total earnings, as defined $249,735 $238,424 $211,619
======== ======== ========
Fixed charges, as defined:
Interest charges $41,721 $ 48,406 $ 51,596
Rental interest factor 172 164 182
-------- -------- --------
Total fixed charges, as defined $41,893 $ 48,570 $ 51,778
======== ======== ========
Ratio of earnings to fixed charges 5.96 4.91 4.09
======== ======== ========
(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 Chief Executive Officer)
Date: February 24, 1998
-----------------
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 and February 24, 1998
----------------------- Chief Executive Officer
(John R. Hodowal)
(ii) Principal Financial Officer:
/s/ John R. Brehm Senior Vice President - February 24, 1998
------------------------ Financial and Information
(John R. Brehm) Services
(iii) Principal Accounting Officer:
/s/ Stephen J. Plunkett Controller February 24, 1998
-------------------------
(Stephen J. Plunkett)
(iv) A majority of the Board of Directors of Indianapolis Power & Light
Company:
/s/ Joseph D. Barnette, Jr. Director February 24, 1998
- ----------------------------
(Joseph D. Barnette, Jr.)
/s/ Robert A. Borns Director February 24, 1998
- ----------------------------
(Robert A. Borns)
/s/ Rexford C. Early Director February 24, 1998
- -----------------------------
(Rexford C. Early)
/s/ Otto N. Frenzel III Director February 24, 1998
- -----------------------------
(Otto N. Frenzel III)
/s/ Max L. Gibson Director February 24, 1998
- -----------------------------
(Max L. Gibson)
/s/ Dr. Earl B. Herr, Jr. Director February 24, 1998
- ------------------------------
(Dr. Earl B. Herr, Jr.)
/s/ John R. Hodowal Director February 24, 1998
- ------------------------------
(John R. Hodowal)
/s/ Ramon L. Humke Director February 24, 1998
- ------------------------------
(Ramon L. Humke)
/s/ Sam H. Jones Director February 24, 1998
- ------------------------------
(Sam H. Jones)
/s/ L. Ben Lytle Director February 24, 1998
- -------------------------------
(L. Ben Lytle)
/s/ Sallie W. Rowland Director February 24, 1998
- --------------------------------
(Sallie W. Rowland)
/s/ Thomas H. Sams Director February 24, 1998
- --------------------------------
(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.
3.2* Bylaws of Indianapolis Power & Light Company, as amended (Exhibit
3.2 to the Form 10-Q for the quarter ended 3-31-97.)
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* Thirty-Second Supplemental Indenture dated as of June 1, 1989.
(Form 10-K for year ended 12-31-89.)
4.3* Thirty-Third Supplemental Indenture dated as of August 1, 1989.
(Form 10-K for year ended 12-31-89.)
4.4* Thirty-Fourth Supplemental Indenture dated as of October 15, 1991.
(Form 10-K for year ended 12-31-91.)
4.5* Thirty-Fifth Supplemental Indenture dated as of August 1, 1992.
(Form 10-K for year ended 12-31-92.)
4.6* Thirty-Sixth Supplemental Indenture dated as of April 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.7* Thirty-Seventh Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.8* Thirty-Eighth Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.9* Thirty-Ninth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
4.10* Fortieth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
4.11* Forty-First Supplemental Indenture dated as of January 15, 1995.
(Exhibit 4.12 to the Form 10-K dated 12-31-94.)
4.12* Forty-Second Supplemental Indenture dated as of October 1, 1995.
(Exhibit 4.12 to the Form 10-K dated 12-31-95.)
10.1* Coal Supply Agreement between Indianapolis Power & Light Company
and Peabody Coal Company effective as of January 1, 1992 and dated
April 7, 1993. Confidential portions of this Contract have been
omitted and filed separately with the SEC pursuant to 17 CFR 240.24b-2.
(Form 10-Q for quarter ended 3-31-93.)
10.2* Amendment to Coal Supply Agreement dated July 5, 1985, between
Indianapolis Power & Light Company and Black Beauty Coal Company, Inc.
(Form 10-K for year ended 12-31-86.)
10.3* Amendment to Coal Supply Agreement dated February 27, 1987,
between Indianapolis Power & Light Company and Black Beauty Coal
Company, Inc. (Form 10-K for year ended 12-31-87.)
10.4* Transportation Contract dated September 28, 1987, between
Indianapolis Power & Light Company and Consolidated Rail Corporation,
together with Amendment Number 1, 2, 3 and 4. (Exhibit 10.4 to the
Form 10-K dated 12-31-95.)
10.5* Coal Supply Agreement between Indianapolis Power & Light Company
and Triad Mining of Indiana, Inc. and Marine Coal Sales Company dated
December 7, 1994. Confidential portions of this Contract have been
omitted and filed separately with the SEC pursuant to 17 CFR 240.24b-2.
(Exhibit 10.2 to the Form 10-Q dated 3-31-95.)
10.6* 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.)
10.7 Interconnection Agreement dated May 1, 1992, among Indianapolis Power &
Light Company, PSI Energy, Inc. and CINERGY Services, Inc. as modified
through Amendment Number 6.
10.8* 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.)
10.9* Facilities Agreement dated August 16, 1977, between Indianapolis Power
& Light Company and Public Service Company of Indiana, Inc., together
with Amendment Number 1 and 2. (Exhibit 10.9 to the Form 10-K dated
12-31-95.)
10.10* 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.)
10.11* Interconnection Agreement dated December 2, 1969, between Indianapolis
Power & Light Company and Southern Indiana Gas and Electric Company as
modified through Modification Number 9.
10.12* Interconnection Agreement dated December 1, 1981, between
Indianapolis Power & Light Company and Hoosier Energy Rural Electric
Cooperative, Inc., as modified through Modification 4.
10.13* Interconnection Agreement, dated October 7, 1987, between Indianapolis
Power & Light Company and Wabash Valley Power Association, as modified
through Modification 1.
10.14* Interchange Agreement between Indianapolis Power & Light Company
and ENRON Power Marketing, Inc. dated August 1, 1995.
10.15* Interconnection Agreement between Indianapolis Power & Light Company
and Indiana Municipal Power Agency as modified through Modification 1.
10.16* Employment Agreement between Indianapolis Power & Light Company and
Ramon L. Humke dated January 1, 1997. (Exhibit 10.1 to the Form 10-Q
dated 3-31-97.) **
10.17* Employment Agreement by and among IPALCO Enterprises, Inc.,
Indianapolis Power & Light Company and John R. Hodowal dated
July 29, 1986. (Exhibit 10.32 to the Form 10-K dated 12-31-94.) **
10.18 Directors' and Officers' Liability Insurance Policy No. DO392B1A97
effective June 1, 1997 to June 1, 1998. **
10.19* Unfunded Deferred Compensation Plan for Indianapolis Power & Light
Company Directors dated February 22, 1983, as amended. (Exhibit 10.34
to the Form 10-K dated 12-31-94.) **
10.20* Unfunded Deferred Compensation Plan for Indianapolis Power & Light
Company Officers effective January 1, 1994 as amended December 1, 1996.
(Exhibit 10.20 to the Form 10-K dated 12-31-96.) **
10.21* Indianapolis Power & Light Company Supplemental Retirement Plan
and Trust Agreement For a Select Group of Management Employees
(As Amended and Restated Effective March 1, 1996.) (Exhibit 10.21 to
the Form 10-K dated 12-31-95.) **
10.22 1997 Management Incentive Program. **
10.23 Form of Termination Benefits Agreement together with schedule of
parties to, and dates of, the Termination Benefits Agreements. **
12.1 Ratio of Earnings to Fixed Charges.
18.1 Letter regarding change in accounting principle.
21.1* Subsidiaries of the Registrant. (Exhibit 21.1 to the Form 10-K
dated 12-31-96.)
27.1 Financial Data Schedule.
99.1* Agreement, dated as of October 27, 1993, by and among IPALCO
Enterprises, Inc., Indianapolis Power & Light Company, PSI Resources,
Inc., PSI Energy, Inc., The Cincinnati Gas & Electric Company, CINergy
Corp., James E. Rogers, John R. Hodowal and Ramon L. Humke.
(Form 10-Q for quarterly period ended 9-30-93.)
99.2* Amendment to Agreement dated October 27, 1994, by and among IPALCO
Enterprises, Inc., Indianapolis Power & Light Company, PSI Resources,
Inc., PSI Energy, Inc., The Cincinnati Gas & Electric Company,
CINergy Corp., James E. Rogers, John R. Hodowal and Ramon L. Humke.
(Exhibit 99.2 to the Form 10-K dated 12-31-94.)