EXHIBIT 1
Media: Marni Lemons
317-261-8219
email: mlemons@ipalco.com
Investor: Jennifer Kent
317-261-8259
email: jkent@ipalco.com
Stephen J. Plunkett
317-261-8013
IPALCO Board Approves New Financial Strategy
--Will Repurchase 12 Million Shares of Common Stock
and Reduce Quarterly Dividend--
- --Shareholders Will Have the Option to Sell Shares at a Premium--
- --Action Will Have No Effect on Indianapolis Power & Light Customers--
INDIANAPOLIS, February 25, 1997 -- IPALCO Enterprises, Inc., (NYSE:IPL)
announced today that its Board of Directors approved a new financial
strategy designed to maximize shareholder value and position IPALCO for an
increasingly competitive business environment.
The plan includes:
* A recapitalization of IPALCO to employ a higher degree of leverage in
its capital structure while the electric utility industry is in a
transition period between regulation and competition. The leveraged
recapitalization will be accomplished through a self tender offer to
purchase up to 12 million shares, or 21 percent, of IPALCO's
outstanding common stock. The tender, which is scheduled to commence on
February 28, 1997, will be effected through a "Dutch auction" at a
price of not less than $29.00 nor more than $34.00 per share. The
potential $410 million transaction will be financed with a 5-year bank
debt facility. The recapitalization is being effected by the parent
company, IPALCO Enterprises, Inc., and will not affect the
capitalization of Indianapolis Power & Light Company, its wholly owned
subsidiary.
* A reduction in the quarterly dividend to $0.25 per share ($1.00
annually) from the previous $0.37 per share ($1.48 annually), effective
with the payment of the next quarterly dividend. That dividend is
payable on April 15, 1997 to shareholders of record on March 21, 1997,
regardless of whether or when such shares are tendered. Future dividend
action will be guided by, among other factors, a policy of paying out
45 to 50 percent of the prior year's earnings.
* A target consolidated debt-to-capital ratio of 45 percent which IPALCO
believes can be achieved within the next five years.
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John R. Hodowal, IPALCO Chairman and President, said: "Eighteen months ago
IPALCO embraced a strategy of pushing for genuine effective competition in
the electric utility industry. Since then we have worked not only to
influence the national debate over how competition in our industry should be
achieved, but also to transform IPALCO from a regulated to a competitive
enterprise. Our new financial strategy represents another important step in
that progression. With our strong cash flow, IPALCO intends to create
additional shareholder value and provide the financial resources to implement
our growth strategy.
"By purchasing common stock at a premium to its recent market value we will
accelerate and increase the cash received by our shareholders. In fact, the
payment of cash through a $410 million repurchase equals nearly five years of
dividends based on the previous dividend rate. Reducing the dividend rate
improves the Company's financial flexibility going forward. A dividend payout
ratio of 45 to 50 percent of prior year earnings is more consistent with
companies operating today in a competitive environment compared to the
traditional utility payout ratio of 70% or more," he said.
"Moreover, with our solid underlying earnings prospects, combined with the
effect of reduced shares outstanding, IPALCO is positioned to achieve strong
growth in earnings per share in 1997. This will be further enhanced in 1998
and beyond as our cash flow enables the transaction debt to be repaid and
interest expense to decline.
"By targeting a constant payout ratio, dividend growth in 1998 and subsequent
years is positioned to be equally strong," he said.
While recognizing that the Company's dividend action was a break with its
historical pattern of increases, Hodowal noted several significant
shareholder advantages to receiving cash through a stock purchase
rather than exclusively through dividends.
"We are positioning IPALCO's stock for market value growth and slightly less
income orientation than in the past. This recognizes that for most individual
investors, current laws tax capital gains at rates lower than dividend
income," Hodowal said.
"We believe the price range established for our tender offer will allow those
shareholders who desire a more income-oriented investment to exit their
investment in IPALCO on favorable terms. However, we believe that
shareholders who choose not to tender their shares also will benefit from
this transaction. They will own a 26.7 percent greater interest in a highly
competitive company with a stronger earnings per share growth rate," he said.
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Hodowal also elaborated on the Company's target debt-to-capital ratio: "We
believe that in a competitive environment a consolidated debt-to-total
capital ratio of 45 percent is appropriate. However, given the expectation
that effective competition will not occur until competitive transition
periods have expired, it makes sense to employ more leverage today to
distribute cash to shareholders.
"We are confident that by the time effective competition becomes a reality,
we will have achieved our target debt-to-capital ratio," he said.
John Brehm, IPALCO's Vice President and Treasurer, summarized the goals of
the financial strategy by saying that they "will provide IPALCO with
sufficient funds to replace existing assets and undertake investments in new
growth, while maintaining a prudent balance between debt and equity in our
capital structure. This action also will preserve the financial flexibility
necessary to accommodate unexpected future cash needs."
Hodowal added: "Our financial strategy commits IPALCO to a course of action
that is consistent with both our long-term business plan and the best
interest of our shareholders. The increased use of debt is a tangible
expression of the Board's and management's confidence in the Company and
provides greater assurance to shareholders that strategic undertakings will
be value-enhancing."
Under the terms of the self tender offer that is scheduled to commence on
Friday, February 28, 1997, the Company will offer to purchase up to 12
million shares at a price of not less than $29.00, nor more than $34.00 per
share. IPALCO has been advised that officers and directors will not
participate in the tender offer.
Shareholders who wish to participate must decide how many shares they will
tender, if any, and the price within the stated range at which they will
offer their shares for purchase. The offer, the proration period and
withdrawal rights will expire at 12:00 Midnight, Eastern Standard Time on
March 27, 1997, unless the offer is extended by the Company.
Following the expiration of the offer, IPALCO will set the final share price
for the tendered shares which will be the lowest price within the stated
range that will permit IPALCO to purchase 12 million shares, or such lesser
number as is tendered. All shareholders whose shares are purchased will
receive the same price per share. All shares properly tendered at or below
the final purchase price will be purchased at the final purchase price,
subject to the conditions of the offer, including the terms of the proration.
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The Dealer Manager for the offer is Dillon, Read & Co. Inc. The Information
Agent is D.F. King & Co., Inc. Copies of the Offer to Purchase and related
materials, dated February 28, 1997, will be sent to all IPALCO shareholders.
The terms of the offer and procedures for tendering are explained in detail
in these materials. Shareholders are urged to carefully read these materials
prior to making any decision with respect to the offer. Additional copies of
these materials may be obtained from the Information Agent by calling
1-800-848-2998.
IPALCO Enterprises, Inc. is a multi-state energy company providing a variety
of energy related products and services. Its principal subsidiary,
Indianapolis Power & Light Company, provides retail electric service to
approximately 410,000 commercial, industrial and residential customers in
Indianapolis and other parts of Central Indiana.
# # #
Statements contained in this Press Release regarding the future earnings
prospects, growth in earnings per share, dividend growth and debt-to-capital
ratio of IPALCO Enterprises, Inc. ("IPALCO") are not historical facts and
are forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Each of these
items is dependent on the earnings of IPALCO. Some of the most important
factors which will impact IPALCO's earnings, and could cause actual results
to differ materially from those discussed in the forward looking statements,
primarily through its wholly-owned subsidiary, Indianapolis Power & Light
Company ("IPL"), 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, and technology changes are also important potential factors.