EXHIBIT 99.1
Item 1. BUSINESS
SIGCORP and SIGECO
This discussion includes forward looking statements based on information
currently available to management. Such statements are subject to certain risks
and uncertainties. These statements typically contain, but are not limited to,
the terms "anticipate", "expect", "potential", "estimate" and similar words, and
actual results may differ materially due to the speed and nature of increased
competition and deregulation in the electric and gas utility industry, economic
or weather conditions affecting future sales and margins, changes in markets for
energy services, changing energy market prices, legislative and regulatory
changes including revised environmental requirements, impacts of Year 2000
issues, availability and cost of capital, the pending merger with Indiana
Energy, Inc. and other similar factors.
ORGANIZATION
SIGCORP, Inc. (SIGCORP) is a holding company incorporated October 19, 1994
under the laws of the State of Indiana. SIGCORP has eleven wholly-owned
subsidiaries: Southern Indiana Gas and Electric Company (SIGECO), a gas and
electric utility, and ten nonregulated subsidiaries.
On December 20, 1994, SIGECO's Board of Directors authorized the steps
required for a corporate reorganization in which a holding company would become
the parent of SIGECO. SIGECO's shareholders approved the reorganization at
SIGECO's March 28, 1995 annual meeting, and approval by the Federal Energy
Regulatory Commission and the Securities and Exchange Commission was granted
November 7, 1995 and December 14, 1995, respectively.
Effective January 1, 1996, the new holding company, SIGCORP, became the
parent of SIGECO, which accounts for over 80% of SIGCORP's net income, and four
of SIGECO's former wholly-owned nonregulated subsidiaries: Energy Systems Group,
Inc., Southern Indiana Minerals, Inc., Southern Indiana Properties, Inc. and
ComSource, Inc. All of the shares of SIGECO's common stock were exchanged on a
one-for-one basis for shares of SIGCORP, while all of SIGECO's debt securities
and all of its outstanding shares of preferred stock remained securities of
SIGECO and were unaffected. (See "Nonregulated Subsidiaries - General" and Note
1 of the Notes to Consolidated Financial Statements, page 48, for further
discussion.)
The reorganization was in response to the changes created in the electric
industry by the Energy Policy Act of 1992 and the need to respond quickly to the
more competitive business environment. The new structure buffers SIGECO and its
customers from the effects of pursuing nonregulated opportunities while allowing
SIGCORP to engage in closely related, but historically nonregulated, businesses.
Providing gas and electric utility service to customers through SIGECO remains
the core business and primary focus of SIGCORP.
On June 14, 1999, SIGCORP announced an agreement to merge with Indiana
Energy, Inc. (IEI) in an all-stock pooling transaction through which a new
holding company, Vectren Corporation, would be formed. (See "Pending Merger" in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND
FINANCIAL CONDITION, Page 18, and Note 1 of the Notes to Consolidated Financial
Statements, page 48, for further discussion.)
SIGECO - GENERAL
SIGECO is an operating public utility incorporated June 10, 1912, under the
laws of the State of Indiana, engaged in the generation, transmission,
distribution and sale of electric energy and the purchase of natural gas and its
transportation, distribution and sale in a service area which covers ten
counties in southwestern Indiana.
Electric service is supplied directly to Evansville and 74 other cities,
towns and communities, and adjacent rural areas. Wholesale electric service is
supplied to an additional eight communities. At December 31, 1999, SIGECO served
126,605 electric customers and was also obligated to provide for firm power
commitments to the City of Jasper, Indiana and to maintain spinning reserve
margin requirements under an agreement with the East Central Area Reliability
Group (ECAR).
At December 31, 1999, SIGECO supplied gas service to 109,388 customers
in Evansville and 64 other nearby communities and their environs. Since 1986,
SIGECO has purchased its natural gas supply requirements from numerous
suppliers. During 1999, thirty-two suppliers were used.
The principal industries served by SIGECO include polycarbonate resin
(Lexan) and plastic products, aluminum smelting and recycling, aluminum sheet
products, automotive assembly, steel finishing, appliance manufacturing,
pharmaceutical and nutritional products, automotive glass, gasoline and oil
products and coal mining.
The only property SIGECO owns outside of Indiana is approximately eight
miles of a 138,000 volt electric transmission line which is located in Kentucky
and which interconnects with Louisville Gas and Electric Company's transmission
system at Cloverport, Kentucky. The original cost of the property is less than
$425,000. SIGECO does not distribute any electric energy in Kentucky.
SIGECO - LINES OF BUSINESS
The percentages of operating revenues and operating income before income
taxes attributable to the electric and gas operations of SIGECO for the five
years ended December 31, 1999, were as follows:
Year Ended December 31,
1995 1996 1997 1998 1999
Operating Revenues:
Electric 81.3% 74.2% 76.1% 81.7% 81.8%
Gas 18.7 25.8 23.9 18.3 18.2
Operating Income Before Income
Taxes:
Electric 96.4% 89.0% 87.1% 90.8% 91.7%
Gas 3.6 11.0 12.9 9.2 8.3
Reference is made to Note 9 of the Notes to Consolidated Financial
Statements, page 48, for Segments of Business data.
SIGECO - ELECTRIC BUSINESS
SIGECO supplies electric service to 126,605 customers, including 110,064
residential, 16,344 commercial, 173 industrial, 19 public street and highway
lighting, and five municipal customers.
SIGECO's installed generating capacity as of December 31, 1999 was rated at
1,256,000 kilowatts (Kw). Coal-fired generating units provide 1,041,000 Kw of
capacity and gas or oil-fired turbines used for peaking or emergency conditions
provide 215,000 Kw.
In addition, SIGECO has interconnections with Louisville Gas and Electric
Company, Cinergy Services, Inc., Indianapolis Power & Light Company, Hoosier
Energy Rural Electric Cooperative, Inc., Big Rivers Electric Corporation, Wabash
Valley Power Association, and the City of Jasper, providing an ability to
simultaneously interchange approximately 750,000 Kw.
Record-breaking peak conditions occurred on July 6, 1999, when SIGECO's
system summer peak load reached 1,140,800 Kw. SIGECO's total load, including its
firm power commitments to the City of Jasper, Indiana, for each of the years
1995 through 1999 at the time of the system summer peak, and the related reserve
margin, are presented below.
Date of Summer 8-17-95 8-21-96 7-14-97 7-21-98 7-6-99
Peak Load
Company System
Peak Load (Kw)
1,021,000 999,800 1,022,700 1,082,500 1,140,800
Firm Power
Commitments at
Peak 60,800 53,500 63,700 46,800 58,700
Total at Peak 1,081,800 1,053,300 1,086,400 1,129,300 1,199,500
Total Generating
Capability (Kw) 1,236,000 1,236,000 1,236,000 1,256,000 1,256,000
Reserve Margin at
Peak 14% 17% 14% 11% 5%
The winter peak load of the 1998-1999 season of 834,200 Kw occurred on January
5, 1999 and was 9.3% higher than the previous winter peak load of 763,200 Kw
which occurred on March 11, 1998.
SIGECO, primarily as agent of Alcoa Generating Corporation (AGC), operates
the Warrick Generating Station, a coal-fired steam electric plant which
interconnects with SIGECO's system and provides power for the Aluminum Company
of America's Warrick Operations, which includes aluminum smelting and
fabricating facilities. Of the four turbine generators at the plant, Warrick
Units 1, 2 and 3, with a capacity of 144,000 Kw each, are owned by AGC. Warrick
Unit 4, with a rated capacity of 270,000 Kw, is owned by SIGECO and AGC as
tenants in common, each having shared equally in the cost of construction and
sharing equally in the cost of operation and in the output.
SIGECO (a summer peaking utility) has an agreement with Hoosier Energy
Rural Electric Cooperative, Inc. (Hoosier Energy) for the sale of firm peaking
power to Hoosier Energy during the annual winter heating season (November
15-March 15). The contract made available 222 Mw during the 1999- 2000 winter
season, and was terminated March 15, 2000.
Electric generation for 1999 was fueled by coal (98.8%) and natural gas
(1.2%). Oil was used only for testing of gas/oil-fired peaking units.
Historically, coal for SIGECO's coal-fired generating stations has been
purchased from operators of nearby Indiana strip mines pursuant to long-term
contracts. Over the past several years, SIGECO has been actively involved in
intensive contract negotiations and legal actions to reduce coal costs and
thereby lower electric rates. The initial long-term coal contracts to be
renegotiated and eventually bought out were those supplying SIGECO's Culley
Generating Station and Warrick Unit 4. Net savings from these actions, estimated
to total approximately $59 million, were passed back to SIGECO's electric
customers through the fuel adjustment clause. The coal used in these plants is
blended, when necessary, to meet specifications set in conformance with the
requirements of the Indiana State Implementation Plan for sulfur dioxide issued
under federal laws regulating air quality (Clean Air Act). Approximately
1,615,000 tons of coal were used during 1999 in the generation of electricity at
the Culley Station and Warrick Unit 4 with the majority of the coal used at the
Culley Station supplied by SIGCORP's subsidiary, SIGCORP Fuels, Inc (see
"Nonregulated Subsidiaries - General", page 8). Culley Units 2 and 3 were
equipped with flue gas desulfurization equipment as part of the Clean Air Act
Compliance Plan. (See "Environmental Matters", page 11, for further discussion.)
SIGECO's remaining long-term contract coal supplier supplied the A. B. Brown
Generating Station. On April 10, 1995, SIGECO reached an agreement with this
coal supplier, effective July 16, 1995, to buy out the remainder of SIGECO's
contractual obligations, enabling it to acquire lower-priced spot market coal.
SIGECO estimates the total savings in coal costs resulting from the buyout, net
of total buyout costs, approximated $58 million through December 31, 1998, the
term of the original contract. The net savings from this coal contract
renegotiation have been passed back to SIGECO's retail and firm wholesale
electric customers through the fuel adjustment clause. The amount of coal burned
at A. B. Brown Generating Station during 1999 was approximately 1,372,000 tons.
Both units at the generating station are equipped with flue gas desulfurization
equipment so that coal with a higher sulfur content can be used. There are
substantial coal reserves in the southern Indiana area. The average cost
(including contract buyout costs) of all coal consumed in generating electrical
energy for the years 1995 through 1999 was as follows:
Average Cost
Average Cost Average Cost Per Kwh
Year Per Ton Per MMBTU (In Mills)
1995 30.02 1.33 14.10
1996 26.01 1.16 12.40
1997 20.75 0.91 9.80
1998 21.34 0.94 9.97
1999 21.88 0.96 10.13
The Broadway Turbine Units 1 and 2, Northeast Gas Turbines and A. B. Brown
Gas Turbine, when used for peaking, reserve or emergency purposes, use natural
gas for fuel. Number 2 fuel oil can also be used in the Broadway Turbine Units
and the Brown Gas Turbine.
All metered electric rates contain a provision for adjustment in charges
for electric energy to reflect changes in the cost of fuel and the net energy
cost of purchased power through the operation of a fuel adjustment clause unless
certain criteria contained in the regulations are not met. Effective April 26,
1995, the principal restriction to recovery of fuel cost increases is that such
recovery is not allowed to the extent that total operating income for the
60-month period including the twelve-month period provided in the fuel cost
adjustment filing exceeds the total operating income authorized by the Indiana
Utility Regulatory Commission (IURC) during the same 60-month period. Prior to
April 26, 1995, the operating income test period was the twelve-month period
provided in the fuel cost adjustment filing. During 1997-1999, neither
restriction affected SIGECO. As prescribed by order of the IURC, the adjustment
factor is calculated based on the estimated cost of fuel and the net energy cost
of purchased power in a designated future quarter. The order also provides that
any over- or underrecovery caused by variances between estimated and actual cost
in a given quarter will be included in the second succeeding quarter's
adjustment factor. This continuous reconciliation of estimated incremental fuel
costs billed with actual incremental fuel costs incurred closely matches
revenues to expenses. On August 18, 1999, the IURC issued a generic order
establishing new guidelines for the recovery of the net energy cost of purchased
power through fuel adjustment clauses. The order requires each utility to
establish a benchmark which is the utility's highest on-system fuel cost per
kilowatt-hour during the most recent annual period. If the utility's weekly
average purchased power costs were less than the benchmark cost of fuel, those
costs would be recoverable through the fuel clause as "fuel costs included in
purchased power". If the utility's weekly average purchased power costs exceeded
the "benchmark", the utility would be required to provide evidence supporting
the reasonableness of the costs incurred. SIGECO does not anticipate any
limitation of recoverability of its purchased power costs under this generic
order. The Office of the Utility Consumer Counselor has appealed the generic
order to the Indiana Court of Appeals.
SIGECO participates in research and development in which the primary goal
is cost savings through the use of new technologies. This is accomplished, in
part, through the efforts of the Electric Power Research Institute (EPRI). In
1999, SIGECO paid $1,014,000 to EPRI to help fund research and development
programs such as advanced clean coal burning technology.
SIGECO is participating with 14 other electric utility companies through
Ohio Valley Electric Corporation (OVEC) in arrangements with the United States
Department of Energy (DOE), to supply the power requirements of the DOE plant
near Portsmouth, Ohio. The sponsoring companies are entitled to receive from
OVEC, and are obligated to pay for, any available power in excess of the DOE
contract demand. The proceeds from the sale of power by OVEC are designed to be
sufficient to meet all of its costs and to provide for a return on its common
stock. During 1999, SIGECO's participation in the OVEC arrangements was 1.5%.
SIGECO participates with seven other utilities and 31 other affiliated
groups located in eight states comprising the east central area of the United
States, in the East Central Area Reliability group, the purpose of which is to
strengthen the area's electric power supply reliability. Additionally, SIGECO is
one of 14 owners of the Midwest Independent System Operator (MISO) which is an
organization recently established to ensure the dependable and efficient
transmission of electric energy between its owner utilities located in the
midwestern United States. The MISO anticipates an in-service date of June 2001
for its control center and systems.
SIGECO - GAS BUSINESS
SIGECO supplies natural gas service to 109,388 customers, including 99,596
residential, 9,576 commercial and 216 industrial customers, through 2,921 miles
of gas transmission and distribution lines.
SIGECO owns and operates three underground gas storage fields with an
estimated ready delivery from storage of 3.9 million Dth of gas. Natural gas
purchased from SIGECO's suppliers is injected into these storage fields during
periods of light demand which are typically periods of lower prices. The
injected gas is then available to supplement the contracted volumes during
periods of peak requirements. It is estimated that approximately 119,000 Dth of
gas per day can be withdrawn from the three storage fields during peak demand
periods on the system.
In 1999, a total of 32 suppliers sold gas to SIGECO. In total, SIGECO
purchased 12,574,927 Dth in 1999. During 1999, sixty-one of SIGECO's major gas
customers utilized SIGECO's gas transportation program to procure a portion of
their gas supply needs from suppliers other than SIGECO. A total of 19,580,081
Dth, 61% of total gas throughput, was transported for these major customers in
1999 compared to 17,349,036 Dth transported in 1998. SIGECO receives fees for
the use of its facilities in transporting such gas.
The all-time record send out occurred during the 1993-1994 winter season on
January 18, 1994, when 247,449 Dth of gas were delivered to SIGECO's customers.
Of this amount, 97,946 Dth was purchased, 106,558 Dth was taken out of SIGECO's
three underground storage fields, and 42,945 Dth was transported to customers
under transportation agreements. The 1998-1999 winter season peak day send out
was 215,284 Dth on January 14, 1999.
The average cost per Dth of gas purchased by SIGECO during the past five
calendar years was as follows: 1995, $2.48; 1996, $3.47; 1997, $3.25; 1998,
$3.22; and 1999, $3.10.
The State of Indiana has established procedures which result in SIGECO
passing on to its customers the changes in the cost of gas sold unless certain
criteria contained in the regulations are not met. Effective April 26, 1995, the
principal restriction to recovery of gas cost increases is that such recovery is
not allowed to the extent that total operating income for the 60-month period
including the twelve-month period provided in the gas cost adjustment filing
exceeds the total operating income authorized by the IURC during the same
60-month period. Prior to April 26, 1995, the operating income test period was
the twelve-month period provided in the gas cost adjustment filing. During
1997-1999, neither restriction affected SIGECO. Additionally, these procedures
provide for scheduled quarterly filings and IURC hearings to establish the
amount of price adjustments for a designated future quarter. The procedures also
provide for inclusion in a later quarter of any variances between estimated and
actual costs of gas sold in a given quarter. This reconciliation process with
regard to changes in the cost of gas sold closely matches revenues to expenses.
SIGECO's rate structure does not include a weather normalization-type clause
whereby a utility would be authorized to recover the gross margin on sales
established in its last general rate case, regardless of actual weather
patterns.
Natural gas research is supported by SIGECO through the Gas Research
Institute in cooperation with the American Gas Association. Since passage of the
Natural Gas Act of 1978, a major effort has gone into promoting gas exploration
by both conventional and unconventional sources. Efforts continue through
various projects to extract gas from tight gas sands, shale and coal. Research
is also directed toward the areas of conservation, safety and the environment.
SIGCORP
NONREGULATED SUBSIDIARIES - GENERAL
In addition to its wholly-owned utility subsidiary,SIGECO, SIGCORP has ten
wholly-owned nonutility subsidiaries, of which nine were active at December
1999. Southern Indiana Properties, Inc., formed in 1986, invests in leveraged
leases of real estate and equipment, real estate partnerships and joint ventures
and private placement subordinated debt instruments. Energy Systems Group, Inc.,
incorporated in April 1994, has a one-third ownership in Energy Systems Group,
LLC, an energy-related performance contracting firm serving industrial and
commercial customers. Southern Indiana Minerals, Inc., incorporated in May 1994,
processes and markets coal combustion by-products. SIGCORP Energy Services,
Inc., incorporated in October 1996, was established to market energy and related
services and currently provides natural gas, pipeline management, storage
service and other natural gas-related services to SIGECO and other customers.
SIGCORP Capital, Inc., also incorporated in October 1996, is the primary
financing vehicle for SIGCORP's nonregulated subsidiaries. SIGCORP Fuels, Inc.,
incorporated in December 1996, was formed to own and operate coal mining
properties and to provide coal and related services to SIGECO and other
customers. SIGCORP Power Marketing, Inc., also incorporated in December 1996,
but not yet active, was formed to procure electric power supplies for SIGECO and
other customers, and will market SIGECO's excess electric generation capacity.
SIGCORP Communications Services, Inc., incorporated in August 1997, was formed
to undertake telecommunications-related strategic initiatives. SIGECO Advanced
Communications, Inc. (Advanced Communications), incorporated in April 1998,
holds SIGCORP's investment in Utilicom Holdings, LLC, the newly formed holding
company for Utilicom Networks, Inc., and in SIGECOM Holdings, Inc., the newly
formed holding company of SIGECOM, LLC. Advanced Communications and Utilicom
Networks, Inc. are partners in SIGECOM, LLC, an integrated communications
provider serving the Evansville, Indiana market with an 860-mile fiber-optic
based network. (See Note 12 of the Notes to Consolidated Financial Statements,
page 48, for discussion of the restructured investment at Advanced
Communications.) SIGCORP Environmental Services, Inc., incorporated in November
1998, holds SIGCORP's investment in Air Quality Services, a joint venture
created to provide air quality monitoring and testing services to industry and
utilities. (See "SIGECO Advanced Communications, Inc." in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page
18, and Note 1 of the Notes to Consolidated Financial Statements, page 48, for
further discussion.)
SIGCORP and SIGECO
PERSONNEL
The holding company, SIGCORP, had one employee as of December 31, 1999.
SIGECO's network of gas and electric operations directly involves 775
employees with an additional 146 employed at Alcoa's Warrick Power Plant. Alcoa
reimburses SIGECO for the entire cost of the payroll and associated benefits at
the Warrick Plant, with the exception of one-half of the payroll costs and
benefits allocated to Warrick Unit 4, which is jointly owned by SIGECO and
Alcoa. The total payroll and benefits for SIGECO employees in 1999 (including
all Warrick Plant employees) were $62.7 million. In 1998, total payroll and
benefits were $55.8 million.
On July 1, 1998, SIGECO signed a new two-year contract with Local 702 of
the International Brotherhood of Electrical Workers. The contract provides for
annual wage increases of 3.5% and 3.0%. Improvements in healthcare coverage
costs and pension plan benefits are also included. On October 4, 1999, SIGECO's
Hoosier Division signed a new two-year labor contract, ending September 23,
2001, with Local 135 of the Teamsters, Chauffeurs, Warehousemen and Helpers. The
contract provides for annual wage increases of 3% and improvements in health
care coverage costs and pension and other benefits.
As of December 31, 1999, Southern Indiana Properties, Inc. had 2 employees;
Southern Indiana Minerals, Inc. had 7 employees; SIGCORP Energy Services, Inc.
had 21 employees; SIGCORP Communications, Inc. had 28 employees; SIGCORP Fuels,
Inc. had 3 employees; and Sigeco Advanced Communications, Inc. had 1 employee.
Energy Systems Group, Inc., SIGCORP Capital, Inc., SIGCORP Environmental
Services, Inc. and SIGCORP Power Marketing, Inc. had no employees as of December
31, 1999. There were no labor organizations representing employees of the
nonregulated entities.
CONSTRUCTION PROGRAM AND FINANCING
SIGCORP's demand for capital is primarily related to SIGECO's construction
of utility plant and equipment necessary to meet customers' electric and gas
energy needs, as well as environmental compliance requirements. Additionally,
SIGCORP may periodically make capital investments in its nonregulated
operations. See "Liquidity and Capital Resources" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page
18, for discussion of construction expenditures and financing during 1999.
For 2000, SIGECO's construction expenditures are presently estimated to be
$52.0 million. Expenditures in the power production area are expected to total
$18.8 million. The balance of the 2000 construction program consists of $17.0
million for additions and improvements to other electric system facilities, $8.9
million for additions and improvements to the gas system and $7.3 million to
complete several strategic information systems and for common utility equipment.
In keeping with SIGECO's objective to bring new facilities on line as
needed, the construction program and amount of scheduled expenditures are
reviewed periodically to factor in load growth projections, system planning
requirements, environmental compliance and other considerations. As a result of
this program of periodic review, construction expenditures may change in the
future from the program as presented herein.
Currently it is estimated that SIGECO's construction expenditures will
total about $357 million, including allowance for funds used during
construction, for the years 2000-2004 as follows: 2000 - $52 million; 2001 - $87
million; 2002 - $113 million; 2003 - $62 million; and 2004 - $43 million. This
construction program includes $97 million for construction expenditures during
2000-2003 that SIGECO estimates as the maximum amount if it is required to
comply with new United States Environmental Protection Agency (USEPA) air
quality standards discussed under "Environmental Matters," and $32 million for
the construction of a gas- fired electric generation peaking unit in 2002.
Because SIGECO plans to lease the proposed cogeneration facility discussed in
"Rate and Regulatory Matters" in Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page 18, its cost is not included
in the projected five-year construction requirements. While SIGCORP expects the
majority of SIGECO's construction and other capital requirements to be provided
by internally generated funds, external financing requirements of $50-70 million
of medium term debt are anticipated and will be used primarily to retire a
similar amount of short-term debt.
REGULATION
Because of its ownership of SIGECO, SIGCORP is a "Holding Company" as
defined by the Public Utility Holding Company Act of 1935 (PUHCA). Furthermore,
SIGECO is also a "Holding Company" as defined by PUHCA due to SIGECO's ownership
of 33% of Community Natural Gas Company. Both SIGCORP and SIGECO are exempt from
regulation under the PUHCA except for the provisions of Section 9(A)(2), which
pertain to acquisitions of other utilities.
Operating as a public utility under the laws of Indiana, SIGECO is subject
to regulation by the Indiana Utility Regulatory Commission (IURC) as to its
rates, services, accounts, depreciation, issuance of securities, acquisitions
and sale of utility properties or securities, and in other respects as provided
by the laws of Indiana. See subsequent discussion under "Competition" regarding
the restructuring of the electric utility industry and possible deregulation of
certain segments or functions of electric utility service.
In addition, SIGECO is subject to regulation by the Federal Energy
Regulatory Commission (FERC) with respect to the sale and transmission of
electric energy in interstate commerce, its rates for sales for resale,
interconnection agreements with other utilities, the classification of its
accounts and the acquisition and sale of utility property in certain
circumstances as provided by the Federal Power Act.
See "SIGECO-Electric Business", page 5 and "SIGECO-Gas Business", page 7
for further discussion regarding regulatory matters.
SIGECO is subject to regulations issued pursuant to federal and state laws,
pertaining to air and water pollution control. The economic impact of compliance
with these laws and regulations is substantial, as discussed in detail under
"Environmental Matters." SIGECO is also subject to multiple regulations issued
by both federal and state commissions under the Federal Public Utility
Regulatory Policies Act of 1978.
COMPETITION
As part of its efforts to develop a national energy strategy, Congress
amended PUHCA and the Federal Power Act by enacting the National Energy Policy
Act of 1992 (NEPA), which will affect the traditional structure of the electric
utility industry. As a result of changes brought about by NEPA, SIGECO competes
with other utilities and wholesale generators for sales of electricity to
existing wholesale customers of SIGECO and other potential wholesale customers.
SIGECO currently competes with other utilities in connection with intersystem
bulk power sales. SIGECO does not presently compete for retail electric or gas
customers with the other utilities within its assigned service areas. However,
various federal and state legislators, including members of the Indiana General
Assembly, have introduced proposed legislation addressing retail wheeling and
other related issues. Under the proposed legislation, the electric generation
function (and the marketing function under some proposals) would be subject to
competition and deregulated, while other functions such as transmitting and
distributing power, would continue to be regulated. See "Competition" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION, page 18, for discussion of the major changes effected by NEPA; the
status of related Indiana legislation; and further discussion of the
deregulation of the electric industry and possible further deregulation of the
natural gas industry.
Some of SIGECO's gas customers have, or in the future could acquire, access
to energy sources other than those available through SIGECO. (See "SIGECO-Gas
Business", page 7, for discussion of gas transportation.) Although federal
policy allows bypass of a local distribution company, Indiana law disallows
bypass in most cases. SIGECO is currently litigating two such attempts in the
Indiana regulatory arena and before the FERC. (See "Competition" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION, page 18 for discussion of the bypass attempts and related
litigation.)
There continues to be interest in research on the development of sources of
energy other than those in general use. Such competition from other energy
sources has not been a material factor to SIGECO in the past. SIGECO is unable,
however, to predict the extent of this competition in the future or its
potential effect on SIGECO's operations.
ENVIRONMENTAL MATTERS
SIGECO is subject to federal, state and local regulations with respect to
environmental matters, principally air, solid waste and water quality. Pursuant
to environmental regulations, SIGECO is required to obtain operating permits for
the electric generating plants which it owns or operates and construction
permits for any new plants which it might propose to build. Regulations
concerning air quality establish standards with respect to both ambient air
quality and emissions from SIGECO's facilities, including particulate matter,
sulfur dioxide and nitrogen oxides. Regulations concerning water quality
establish standards relating to intake and discharge of water from SIGECO's
facilities, including water used for cooling purposes in electric generating
facilities. Because of the scope and complexity of these regulations, SIGECO is
unable to predict the ultimate effect of such regulations on its future
operations, nor is it possible to predict what other regulations may be adopted
in the future. SIGECO intends to comply with all applicable valid governmental
regulations, but will contest any regulation it deems to be unreasonable or
impossible to comply with or which is otherwise invalid.
The implementation of federal and state regulations designed to protect the
environment, including those hereinafter referred to, involves or may involve
review, certification or issuance of permits by federal and state agencies.
Compliance with such regulations may limit or prevent certain operations or
substantially increase the cost of operation of existing and future generating
installations, as well as seriously delay or increase the cost of future
construction. Such compliance may also require investments above those amounts
stated under "Construction Program and Financing", page 9.
All existing SIGECO electric generation facilities have operating permits
from the Indiana Department of Environmental Management or other agencies having
jurisdiction. In order to secure approval for these permits, SIGECO had
installed electrostatic precipitators on all coal-fired units and is operating
flue gas desulfurization (FGD) units to remove sulfur dioxide from the flue gas
at its A. B. Brown Units 1 and 2 generating facilities. The FGD units at the
Brown Station remove most of the sulfur dioxide from the flue gas emissions by
way of a scrubbing process, thereby allowing SIGECO to burn high sulfur southern
Indiana coal at the station.
In October 1990, the U.S. Congress adopted major revisions to the Federal
Clean Air Act. The revisions require reduction in emissions of sulfur dioxide
(SO2) and nitrogen oxide (NOX) from coal-burning electric generating facilities,
including those owned and operated by SIGECO. Two of SIGECO's principal
coal-fired facilities (A. B. Brown Units 1 and 2, totaling 500 megawatts of
capacity) were equipped with sulfur dioxide removal equipment (scrubbers) and
were not severely affected by the new legislation. However, 523 megawatts of
SIGECO's coal-fired generating capacity were significantly impacted by the lower
emission requirements. SIGECO was required to reduce total emissions from Culley
Unit 3, Warrick Unit 4 and Culley Unit 2 by approximately 50% to 2.5 lb/MMBTU by
January 1995 (Phase I) and to 1.2 lb/MMBTU by January 2000 (Phase II). SIGECO
met all of the Phase I emission requirements and some of the Phase II
requirements by January 1995 with the implementation of its Clean Air Act
Compliance Plan which includes equipping Culley Units 2 and 3 with a sulfur
dioxide scrubber, among other provisions. Unit 1 at Culley Station (46
megawatts) was also subject to the 1.2 lb/MMBTU restriction by January 2000.
With the addition of the scrubber at the Culley generating station, SIGECO is
surpassing the minimum compliance requirements of Phase I and is using
"overcompliance allowances" and fuel blending (with low sulfur coal) strategies
to help meet the stricter Phase II requirements effective January 2000. SIGECO
is purchasing additional allowances to fully meet Phase II requirements. No
material capital expenditures are anticipated to meet Phase II requirements, and
thus, none are reflected in the projected construction requirements for the
years 2000-2004 discussed in "Construction Program and Financing" or in
"Liquidity and Capital Resources" in Item 7, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page 18.
Current regulatory policy allows for the recovery through rates of all
authorized and approved pollution control expenditures. Refer to "Environmental
Matters" in Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 18, for further discussion of SIGECO's
Clean Air Act Compliance Plan, and the associated costs. SIGECO filed Title V
(of the 1990 Amendments to the Federal Clean Air Act) permit applications for
all of its applicable generation facilities during the fourth quarter of 1996.
The applications have been approved for completeness and are being processed by
the Indiana Department of Environmental Management.
Warrick
Unit 4 (50% owned by SIGECO) is covered by Title V permit applications
filed by Alcoa Generating Corporation, majority owner of the Warrick Generating
Station.
In December 1996 and January 1997, the USEPA issued proposed regulations
regarding new national ambient air quality standards for regional ozone and
particulate matter concentration levels. In July 1997, the USEPA issued its
final rule which revised the national ambient air quality standard for ozone by
setting a lower concentration limit and changing the averaging period from one
hour to eight hours. There remains much uncertainty as to the extent that SIGECO
would be affected by this ruling. Refer to "Environmental Matters" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION, page 18, for discussion of this new ruling and related issues and the
estimated possible costs to comply with reductions if ultimately required.
Refer to Item 3, LEGAL PROCEEDINGS, Page 14, and to "Environmental Matters"
in Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 18 for discussion of the USEPA's lawsuit against
SIGECO for alleged violations of the Clean Air Act.
In connection with the use of sulfur dioxide removal equipment at the A. B.
Brown Generating Station, SIGECO operates a solid waste landfill for the
disposal of approximately 200,000 tons of residue per year from the scrubbing
process. Application for renewal of the landfill operating permit was filed with
the Indiana Department of Environmental Management (IDEM) in August 1996, which
has not yet been acted upon. The existing permit will remain in effect until
action is taken by IDEM on the renewal application. SIGECO also has a solid
waste landfill available for the disposal of the gypsum by-product being
produced by the new sulfur dioxide scrubber at the Culley Generating Station.
SIGECO was granted a five-year operating permit for the landfill in June 1995,
but anticipates using this landfill only when the gypsum by- product does not
meet contract specifications for its sale to a wallboard manufacturer. Such
utilization has not been necessary, to date.
Under the Federal Water Pollution Control Act of 1972 and Indiana law and
regulations, SIGECO is required to obtain permits to discharge effluents from
its existing generating stations into the navigable waterways of the United
States. The State of Indiana has received authorization from the USEPA to
administer the federal discharge permits program in Indiana. Variances from
effluent limitations may be granted by permit on a plant-by- plant basis where
the utility can establish the limitations are not necessary to assure the
protection of aquatic life and wildlife in and on the body of water into which
the discharge is to be made. SIGECO has been granted National Pollution
Discharge Elimination System (NPDES) permits covering miscellaneous waste water
and thermal discharges for all its generating facilities to which the NPDES is
applicable, namely the Culley Station, A. B. Brown Station and Broadway Station
(gas turbines). As majority owner of Warrick Generating Station, Alcoa
Generating Corporation has been granted an NPDES permit for that facility,
including Warrick Unit 4. Such discharge permits are limited in time and must be
renewed at five-year intervals. During 1994, SIGECO submitted renewal
applications for these permits, which are currently pending, as they are for
most industries. The existing permits will remain in effect until action is
taken by IDEM on the renewal applications. SIGECO anticipates renewal of the
permits by IDEM. At present, there are no known enforcement proceedings
concerning water quality pending or threatened against SIGECO.
Age at
Name 12/31/99 Positions Held During Past Dates
Five Years
R. G. Reherman 64 Chairman of the Board of
Directors,
and Chief Executive May 1999 -
Officer of SIGCORP Present
Chairman of the Board of
Directors,
President and Chief Executive
Officer of SIGCORP Jan 1996 -
April 1999
Chairman of the Board of
Directors of SIGECO Sept 1997 -
Present
Chairman of the Board
of Directors,
President and Chief Executive
Officer of SIGECO *- Sept 1997
A. E. Goebel 52 President and Chief Operating
Officer of SIGCORP;
Chief Executive
Officer of SIGECO May 1999- Present
Executive Vice President Sept 1997 -
of SIGCORP April 1999
Secretary and Treasurer Jan 1996 -
of SIGCORP Sept 1997
President and Chief
Executive Officer Sept 1997-
of SIGECO April 1999
Senior Vice President, Chief
Financial Officer Oct 1996 -
and Secretary of SIGECO Sept 1997
Senior Vice President, Chief
Financial Officer,
Secretary and Treasurer of * - Oct 1996
SIGECO
J. G. Hurst 56 President and Chief Operating May 1999 -
Officer of SIGECO Present
Executive Vice President and
Chief Operating Sept 1997 -
Officer of SIGECO April 1999
Senior Vice President and
General Manager
of Operations of SIGECO * - Sept 1997
R. G. Lynch 48 Senior Vice President of
Human Resources Mar 1999 -
and Administration of SIGCORP Present
J. L. Davis 44 Vice President Support Jan 1999 -
Services of SIGECO Present
Vice President of Marketing
and Customer
Service of SIGECO * - Dec 1998
W. S. Doty 49 Vice President Energy Jan 1999 -
Delivery of SIGECO Present
Director of Gas Operations * - Dec 1998
of SIGECO
R. G. Jochum 52 Vice President Power Supply Jan 1999 -
of SIGECO Present
Vice President and Director
of Power
Production of SIGECO * - Dec 1998
G. M. McManus 52 Vice President and Director
of Governmental
Relations of SIGECO * - Present
* Indicates positions held at least since 1995.
Item 2. PROPERTIES
SIGCORP and SIGECO
SIGCORP has no significant properties other than common stock of
affiliates.
SIGECO's installed generating capacity as of December 31, 1999 was rated at
1,256,000 Kw. SIGECO's coal-fired generating facilities are: the Brown Station
with 500,000 Kw of capacity, located in Posey County about eight miles east of
Mt. Vernon, Indiana; the Culley Station with 406,000 Kw of capacity, and Warrick
Unit 4 with 135,000 Kw of capacity. Both the Culley and Warrick Stations are
located in Warrick County near Yankeetown, Indiana. SIGECO's gas- fired turbine
peaking units are: the 80,000 Kw Brown Gas Turbine located at the Brown Station;
two Broadway Gas Turbines located in Evansville, Vanderburgh County, Indiana,
with a combined capacity of 115,000 Kw; and two Northeast Gas Turbines located
northeast of Evansville in Vanderburgh County, Indiana with a combined capacity
of 20,000 Kw. The Brown and Broadway turbines are also equipped to burn oil.
Total capacity of SIGECO's five gas turbines is 215,000 Kw and they are
generally used only for reserve, peaking or emergency purposes due to the higher
per unit cost of generation.
SIGECO's transmission system consists of 820 circuit miles of 138,000 and
69,000 volt lines. The transmission system also includes 27 substations with an
installed capacity of 4,013,590 kilovolt amperes (Kva). The electric
distribution system includes 3,195 pole miles of lower voltage overhead lines
and 225 trench miles of conduit containing 1,345 miles of underground
distribution cable. The distribution system also includes 93 distribution
substations with an installed capacity of 1,833,855 Kva and 49,501 distribution
transformers with an installed capacity of 2,223,537 Kva.
SIGECO owns and operates three underground gas storage fields with an
estimated ready delivery from storage capability of 3.9 million Dth of gas. The
Oliver Field, in service since 1954, is located in Posey County, Indiana, about
13 miles west of Evansville. The Midway Field is located in Spencer County,
Indiana, about 20 miles east of Evansville near Richland, Indiana, and was
placed in service in December 1966. The third field is the Monroe City Field,
located in Knox County, about 10 miles east of Vincennes, Indiana. The field was
placed in service in 1958.
SIGECO's gas transmission system includes 359 miles of transmission mains,
and the gas distribution system includes 2,562 miles of distribution mains.
SIGECO's properties are subject to the lien of the First Mortgage Indenture
dated as of April 1, 1932 between SIGECO and Bankers Trust Company, New York, as
Trustee, as supplemented by various supplemental indentures, all of which are
exhibits to this report and collectively referred to as the "Mortgage".
Subsidiaries other than SIGECO have no significant properties other than
the ownership and operation of coal mining property and investments in real
estate partnerships, leveraged leases, and private placement subordinated debt
instruments.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANTS
(a) Identification of Directors
John M. Dunn, 61, President and Chief Executive Officer of Dunn
Hospitality Group, Evansville, Indiana, hotel development and
management company. He is also a director of Old National Bank of
Evansville. He has been a director of SIGECO and SIGCORP since 1996.
John D. Engelbrecht, 48, President and Chief Executive Officer of
South Central Communications, Evansville, Indiana, owner and operator
of radio and television stations in Indiana, Kentucky and Tennessee
and MUZAK franchises in 14 U.S. cities. He is also a director of
Fifth Third Bank, Indiana; Evansville, Indiana. He has been a
director of SIGECO and SIGCORP since 1996.
Andrew E. Goebel, 52, President of SIGCORP since April 1999;
Executive Vice President of SIGCORP 1997-1999; Secretary and
Treasurer of SIGCORP 1996-1997; Chief Executive Officer of SIGECO
since April 1999; President and Chief Executive Officer of SIGECO
1997- 1999; Senior Vice President, Chief Financial Officer and
Secretary of SIGECO 1996-1997; Senior Vice President, Chief Financial
Officer, Secretary & Treasurer of SIGECO 1989-1996; and Vice
President, Secretary and Treasurer of SIGECO 1984-1989. He is also a
director of Old National Bank of Evansville. He has been a director
of SIGCORP and SIGECO since September 1997.
Robert L. Koch II, 61, President and Chief Executive Officer of Koch
Enterprises, Inc., Evansville, Indiana, holding company comprised of
manufacturers of aluminum die castings, industrial painting systems
and wholesale distributors of heating and air conditioning equipment.
He is a director of Fifth Third Bancorp, Cincinnati, Ohio and Bindley
Western Industries, Inc. of Indianapolis, Indiana. He has been a
director of SIGECO since 1986 and a director of SIGCORP since 1996.
Donald A. Rausch, 69, Chairman of the Board, President and Chief
Executive Officer 1990-1995, of UF Bancorp, Inc., Evansville,
Indiana; Chairman of the Board and President, 1985-1995, of Union
Federal Savings Bank, Evansville, Indiana. He has been a director of
SIGECO since 1982 and a director of SIGCORP since 1996.
Officer of SIGECO 1988-1990; Executive Vice President and General
Manager of SIGECO 1985-1988. He is also a director of Ohio Valley
Electric Corp., Indiana- Kentucky Electric Corp., National City
Bancshares and the National City Bank of Evansville. He has been a
director of SIGECO since 1985 and a director of SIGCORP since 1996.
Richard W. Shymanski, 63, Chairman of the Board 1995- 1999, and
President 1983-1995, of Harding Shymanski & Company, Professional
Corporation, Certif ied Public Accountants, Evansville, Indiana. He
has been a director of SIGECO since 1989 and a director of SIGCORP
since 1996. Retired December 31, 1999 from Harding Shymanski &
Company
*Donald E. Smith, 73, President and Chief Executive Officer of First
Financial Corporation, Terre Haute, Indiana; Chairman and director
of Terre Haute First National Bank, Terre Haute, Indiana; President
and director of Terre Haute Oil Corp., Chairman and director of
Princeton Mining Co., Inc., Chairman and director of Deep Vein Coal
Company and Chairman and director of R.J. Oil Co., all of Terre
Haute, Indiana; and a director of Blackhawk Coal Corporation. He has
been a director of SIGECO since 1964 and a director of SIGCORP since
1996. *Retired as a director of SIGECO and SIGCORP effective
December 31, 1999.
James S. Vinson, 58, President and Professor of Physics at the
University of Evansville in Evansville, Indiana since 1987. Vice
President of Academic Affairs and Professor of Physics at Trinity
University of San Antonio, Texas 1983-1987. He has been a director of
SIGECO since 1989 and a director of SIGCORP since 1996.
(b) Identification of Executive Officers
The information required by this item is included in Part I, Item 1.
- BUSINESS on page 13, to which reference is hereby made.
Item 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
General. The following three tables set forth compensation paid by
SIGCORP and SIGECO to the five highest paid executive officers of
SIGCORP or SIGECO during the past three years whose total cash
compensation for the calendar year 1999 exceeded $100,000. The tables
include a Summary Compensation Table (Table 1); a table showing Option
Grants in Last Fiscal Year (Table 2), and a table showing Aggregate
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
(Table 3).
TABLE 1
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------------------- ------------
Awards:
-------
Shares
Name and Principal Underlying
Position at SIGCORP Options All Other
or SIGECO Year Salary Bonus(1) (#) Compensation
Ronald G. Reherman 1999 $ 409,801 $ 159,100 54,529 None
Chairman and Chief
Executive Officer 1998 363,467 150,500 None None
of SIGCORP and
Chairman of the 1997 346,875 67,000 52,955 None
Board of SIGECO
Andrew E. Goebel 1999 275,014 80,156 37,489 None
President of SIGCORP
and 1998 220,436 65,625 7,007 None
Chief Executive
Officer of SIGECO 1997 190,208 35,000 20,993 None
J. Gordon Hurst 1999 217,048 62,500 25,049 None
President and Chief
Operating Officer 1998 196,637 59,375 1,974 None
of SIGECO 1997 177,083 32,800 19,858 None
Ronald G. Jochum 1999 140,563 19,500 4,601 None
Vice President 1998 128,127 18,750 4,055 None
Power Supply of 1997 123,958 18,000 4,728 None
SIGECO
Jeffrey L. Davis 1999 123,650 16,500 4,090 None
Vice President 1998 107,213 15,000 3,431 None
Support Services of
SIGECO 1997 98,125 13,650 3,783 None
(1) These amounts are cash awards under the Corporate Performance Plan based on
performance for the prior plan year.
TABLE 2
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
% of
Total
Number of Options
Shares Granted Exercise Potential Realizable
Under- to of Base Value at Assumed
lying Employees Price (2) Annual Rates of Stock
Options in (Per Expira- Price Appreciation
Granted(1) Fiscal Share) tion for Option Term
Name (#) Year ($) Date ($)
5%(3) 10%(3)
R.G. Reherman 54,529 26.65 27.0000 7/19/2009 925,911 2,346,440
A.E. Goebel 37,489 18.32 27.0000 7/19/2009 636,569 1,613,191
J.G. Hurst 25,049 12.24 27.0000 7/19/2009 425,336 1,077,885
R.G. Jochum 4,601 2.25 27.0000 7/19/2009 78,126 197,986
J.L. Davis 4,090 2.00 27.0000 7/19/2009 69,449 175,997
(1) The options were granted July 19, 1999. For Messrs. Reherman, Goebel and
Hurst, options vest one-half of the total each year after the date of grant
with total vesting occurring at the two-year anniversary. For Messrs.
Jochum and Davis, options vest one year after the date of grant.
(2) Equal to market price on grant date.
(3) These values are not a prediction of what SIGCORP believes the market value
of its common stock will be in the next 10 years. They are merely assumed
values required to be calculated in accordance with SEC Rules.
TABLE 3
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR 1999
AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Year-End(2 Year-End (3)
(#) ($)
Shares Underlying
Acquired Unexercised
on Value
Exercise Realized(1) Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
R.G. Reherman - - 136,691/54,529 $ 362,853/0
A.E. Goebel 4,000 37,833 63,097/37,489 152,085/0
J.G. Hurst - - 57,509/25,049 154,599/0
R.G. Jochum - - 23,802/4,601 31,447/0
J.L. Davis - - 16,519/4,090 15,278/0
(1) Market value of underlying securities at time of exercise minus the
exercise price.
(2) Options granted in 1996 are restated to reflect 3 for 2 common stock split
on March 27, 1997.
(3) Market value of underlying securities at fiscal year-end (December 31,
1999) of $22.75 per share minus the exercise price.
Change of Control Agreements. In order to insure SIGCORP and SIGECO
continuity of management and operations in the event of a change of control of
SIGCORP or SIGECO, agreements have been entered into between SIGCORP, SIGECO and
Messrs. Reherman, Goebel, Hurst, Jochum and Davis. The agreements provide that
in the event of a change of control of SIGCORP or SIGECO, the salary of the
named officers will continue for the lesser of a period of three years, or until
retirement age, at their existing compensation levels (unless a lesser amount is
the maximum amount deductible by SIGCORP for United States Federal income tax
purposes, in which case the continued salary would be at such lesser amount).
Retirement Plans. All officers participate in SIGECO's trusteed,
noncontributory tax qualified Pension Plan for Salaried Employees (the "Pension
Plan'). Retirement income, as defined in the Pension Plan, is based on an
employee's average monthly earnings during the highest paid five consecutive
years in the Pension Plan of the employee's final 10 years of continuous service
prior to retirement or other termination of employment and is calculated in two
increments: 1.52 percent of such average monthly earnings for each year of
accredited service or part thereof up to a maximum of 30 years; plus .69 percent
of such average monthly earnings for each year of accredited service or part
thereof in excess of 30 years to a maximum of 10 years. Amounts payable under
the Pension Plan are not subject to social security or other offset.
The years of service in the Pension Plan credited to officers named in the
compensation table above are R.G. Reherman-36 years, 6 months; A.E. Goebel-27
years, 1 month; J.G. Hurst-30 years; R.G. Jochum-5 years, 3 months; and J.L.
Davis-19 years, 3 months.
The following table illustrates the estimated retirement income payable
under the Pension Plan, based on the specific remuneration levels and years of
service classification shown.
Pension Plan Table
Years of Service
Covered
Remuneration 15 20 25 30 35
$100,000 $22,800 $30,400 $38,000 $45,600 $49,050
125,000 28,500 38,000 47,500 57,000 61,300
170,000(1) 38,760 51,680 64,600 77,520 83,380
and above
(1) As of January 1, 2000, the OMNIBUS Budget Reconciliation Act of 1993 (OBRA
'93) limited annual compensation to $170,000 for purposes of pension
calculations under tax qualified pension plans.
SIGECO has a non-qualified Supplemental Retirement Plan (the "Supplemental
Plan") covering certain senior officers of SIGECO who qualify under the
applicable length of service and other eligibility provisions. It is presently
anticipated that Messrs. Goebel, Hurst, Jochum and Davis will qualify for
benefits under the Supplemental Plan. The Supplemental Plan provides for
supplemental retirement income to be paid such that, when combined with benefits
receivable under SIGECO's Pension Plan, total retirement benefits paid will be
equal to 50 percent of the average of the senior officer's final three years
base salary excluding bonuses. In the case of death, survivor benefits are
payable to surviving spouse, if any, at an actuarially adjusted level. SIGECO
has entered into an agreement with Mr. Reherman that is similar to the
Supplemental Plan except that the retirement income paid is equal to 70 percent
of his highest annualized salary as Chief Executive Officer or Chairman of
SIGECO. SIGECO has purchased life insurance on the participants sufficient in
amount to fund actuarially all of SIGECO's future liabilities under the
Supplemental Plan and the Agreement.
Death Benefits Plan. SIGECO has a Supplemental Post- Retirement Death
Benefits Plan for officers and other senior executives to provide retired
participants with the equivalent of 25-35 percent of the pre-retirement group
life insurance benefit under SIGECO's group insurance plan for salaried
employees. SIGECO has purchased insurance on the lives of the participants,
which is projected to allow SIGECO to recover the entire cost of this plan.
Stock Option Plan. The 1994 Stock Option Plan was adopted by the Board of
Directors at its meeting held December 21, 1993, and by SIGECO's shareholders at
their meeting held March 22, 1994. Pursuant to the exchange whereby SIGECO
common stockholders became stockholders of SIGCORP, SIGECO's common
stockholders, by agreeing to the exchange, also agreed to the amendment of the
1994 Stock Option Plan to provide for the issuance of SIGCORP shares. The 1994
Stock Option Plan authorizes the granting of options to officers and key
employees of SIGCORP and SIGECO to purchase up to 750,000 shares of SIGCORP
Common Stock (adjusted for 3 for 2 stock split on March 27, 1997). Options
granted under the 1994 Stock Option Plan may constitute incentive stock options
(within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended), or nonqualified stock options (collectively, "options"). To date, a
total of 750,000 options have been granted.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of December 31, 1999, each of the following stockholders was known to
the management to be the beneficial owner of more than five percent of the
outstanding shares of any class of voting securities as set forth below.
Amount and
Nature of
Name and Address of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
$100 Par Preferred IDS Certificate 75,000 Shares 40.3%
Stock of SIGECO Company Registered Owner
%IDS Financial
Services, Inc.
3000 IDS Tower 10
Minneapolis, MN 55440
Common Stock of SIGCORP, Inc. 15,754,826 Shares 100%
SIGECO 20 N.W. Fourth Street Registered Owner
P.O. Box 3606
Evansville, IN 47735
Security Ownership of Directors and Executive Officers
The following table shows the beneficial ownership, as of December 31,
1999, of SIGCORP Common Stock, by each director, the Chief Executive Officer,
and each of the other executive officers named in the Compensation Table found
under "Executive Compensation". Also shown is the total ownership for such
persons and other executive officers as a group. No member of the group is the
beneficial owner of any of SIGECO's Preferred Stock.
Amount and Nature of
Beneficial Ownership(2)
Percent
Name of Beneficial Owner(1) Direct Indirect Total of Class
John M. Dunn 3,169 - 3,169 .02
John D. Engelbrecht 3,260 - 3,260 .02
Robert L. Koch II 3,627 - 3,627 .02
Donald A. Rausch 12,762 - 12,762 .06
Ronald G. Reherman 12,290 559 12,849 .06
Richard W. Shymanski 2,475 8,464 10,939 .04
Donald E. Smith(3) 17,128 555 17,683 .08
James S. Vinson 997 - 997 -
Andrew E. Goebel 11,098 - 11,098 .05
J. Gordon Hurst 1,944 - 1,944 .01
Ronald G. Jochum 400 - 400 -
Jeffrey L. Davis 168 - 168 -
All of the above and other
executive officers
as a group (14) 83,902 .36
(1) Beneficial ownership includes those shares over which an individual has
sole or shared voting, or investment powers, such as shares in which the
spouse, minor children or other relatives living in the home of the named
person have a beneficial interest, and shares held in SIGCORP's Dividend
Reinvestment Plan and other trust accounts.
(2) Includes shares held jointly or in other capacities, as to which in some
cases beneficial ownership is disclaimed. Does not include shares which the
named individual has the right to acquire under the 1994 Stock Option Plan.
See Table 3 for the number of shares that can currently be acquired.
(3) Donald E. Smith is a director and President of Princeton Mining Company,
which owns 360,186 shares of Common Stock; director and President of R.J.
Oil and Refining Co., Inc., which owns 129,331 shares of Common Stock;
director of Blackhawk Coal Corporation, which owns 188,599 shares of Common
Stock; Chairman, CEO, President and director of Terre Haute First National
Bank, which holds 28,931 shares of Common Stock as trustee; and President
and director of Terre Haute Oil Corporation, which owns 3,199 shares of
Common Stock. The aggregate number of such shares represents 3.01 percent
of Common Stock outstanding.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 3) Exhibits:
SIGCORP and SIGECO
EX-2(a) Agreement and Plan of Exchange, of common stock between
Southern Indiana Gas and Electric Company and SIGCORP, Inc.,
dated February 23, 1995. (Physically filed and designated as
Exhibit 2(a) in Amendment No. 1 to Form S- 4 Registration
Statement filed January 20, 1995, File No. 33-57381.)
SIGCORP
EX-2(a) Agreement and Plan of Merger by and among Indiana Energy, Inc.,
SIGCORP, Inc. and Vectren Corporation, dated as of June 11,
1999. (Physically filed and designated as Exhibit 2 to Form 8-K
filed June 15, 1999, File No. 01-11603.)
EX-3(a) Restated Articles of Incorporation of SIGCORP, Inc. (Physically
filed and designated as Exhibit 3(a) in Amendment No. 1 to Form
S-4 Registration Statement, filed February 23, 1995, File No.
33-57381.)
EX-3(b) By-Laws of SIGCORP, Inc. . (Physically filed and designated as
Exhibit 3(b) in Amendment No. 1 to Form S- 4 Registration
Statement, filed February 23, 1995, File No. 33-57381.)
EX-4(a) Rights Agreement, between SIGCORP, Inc. and Continental Stock
Transfer & Trust Company, Rights Agent, dated as of December
31, 1995. (Physically filed and designated as Exhibit 4.1 in
Form 8-B Registration Statement filed December 15, 1995, File
No. 1-11603.)
EX-4(b) Stock Option Agreement, between SIGCORP, Inc. and Indiana
Energy, Inc., dated as of June 11, 1999. (Physically filed and
designated as Exhibit 4-1 to Form 8-K filed June 15, File No.
01-11603.)
SIGECO
EX-3(a) Amended Articles of Incorporation as amended March 26, 1985.
(Physically filed and designated in Form 10-K, for the fiscal
year 1985, File No. 1-3553, as Exhibit 3- A.) Articles of
Amendment of the Amended Articles of Incorporation, dated March
24, 1987. (Physically filed and designated in Form 10-K for the
fiscal year 1987, File No. 1-3553, as Exhibit 3-A.) Articles of
Amendment of the Amended Articles of Incorporation, dated
November 27, 1992. (Physically filed and designated in Form
10-K for the fiscal year 1992, File No. 1-3553, as Exhibit 3-
A).
EX-3(b) By-Laws as amended through December 18, 1990. (Physically filed
in Form 10-K for the fiscal year 1990, File No. 1-3553, as
Exhibit 3-B.) By-Laws as amended through September 22, 1993.
(Physically filed and designated in Form 10-K for the fiscal
year 1993, File No. 1-3553, as EX-3 (b).) By-Laws as amended
through January 1, 1995. (Physically filed and designated in
Form 10-K for the fiscal year 1995, File No. 1-3553, as
EX-3(b).)
EX-4(a)* Mortgage and Deed of Trust dated as of April 1, 1932 between
Southern Indiana Gas and Electric Company and Bankers Trust
Company, as Trustee, and Supplemental Indentures thereto dated
August 31, 1936, October 1, 1937, March 22, 1939, July 1,
1948, June 1, 1949, October 1, 1949, January 1, 1951, April 1,
1954, March 1, 1957, October 1, 1965, September 1, 1966,
August 1, 1968, May 1, 1970, August 1, 1971, April 1, 1972,
October 1, 1973, April 1, 1975, January 15, 1977, April 1,
1978, June 4, 1981, January 20, 1983, November 1, 1983, March
1, 1984, June 1, 1984, November 1, 1984, July 1, 1985,
November 1, 1985, June 1, 1986. (Physically filed and
designated in Registration No. 2- 2536 as Exhibits B-1 and
B-2; in Post-effective Amendment No. 1 to Registration No.
2-62032 as Exhibit (b)(4)(ii), in Registration No. 2-88923 as
Exhibit 4(b)(2), in Form 8-K, File No. 1-3553, dated June 1,
1984 as Exhibit (4), File No. 1-3553, dated March 24, 1986 as
Exhibit 4-A, in Form 8-K, File No. 1-3553, dated June 3, 1986
as Exhibit (4).) July 1, 1985 and November 1, 1985 (Physically
filed and designated in Form 10-K, for the fiscal year 1985,
File No. 1-3553, as Exhibit 4-A.) November 15, 1986 and
January 15, 1987. (Physically filed and designated in Form
10-K, for the fiscal year 1986, File No. 1-3553, as Exhibit
4-A.) December 15, 1987. (Physically filed and designated in
Form 10-K, for the fiscal year 1987, File No. 1-3553, as
Exhibit 4-A.) December 13, 1990. (Physically filed and
designated in Form 10-K, for the fiscal year 1990, File No. 1-
3553, as Exhibit 4-A.) April 1, 1993. (Physically filed and
designated in Form 8-K, dated April 13, 1993, File 1-3553, as
Exhibit 4.) June 1, 1993 (Physically filed and designated in
Form 8-K, dated June 14, 1993, File 1-3553, as Exhibit 4.) May
1, 1993. (Physically filed and designated in Form 10-K, for
the fiscal year 1993, File No. 1-3553, as Exhibit 4(a).) July
1, 1999. (Physically filed and designated in Form 10-Q, dated
August 16, 1999, File 1- 3553, as Exhibit 4(a).)
* Pursuant to paragraph (b)(4)(iii)(a) of Item 601 of
Regulation S-K, SIGECO agrees to furnish to the Commission on
request any instrument with respect to long-term debt if the
total amount of securities authorized thereunder does not
exceed 10% of the total assets of SIGECO, and has therefore not
filed such documents as exhibits to this Form 10-K.
EX-10.1 Agreement, dated, January 30, 1968, for Unit No. 4 at the
Warrick Power Plant of Alcoa Generating Corporation ("Alcoa"),
between Alcoa and Southern Indiana Gas and Electric Company.
(Physically filed and designated in Registration No. 2-29653 as
Exhibit 4(d)-A.)
EX-10.2 Letter of Agreement, dated June 1, 1971, and Letter Agreement,
dated June 26, 1969, between Alcoa and Southern Indiana Gas and
Electric Company. (Physically filed and designated in
Registration No. 2-41209 as Exhibit 4(e)-2.)
EX-10.3 Letter Agreement, dated April 9, 1973, and Agreement dated
April 30, 1973, between Alcoa and Southern Indiana Gas and
Electric Company. (Physically filed and designated in
Registration No. 2-53005 as Exhibit 4(e)-4.)
EX-10.4 Electric Power Agreement (the "Power Agreement"), dated May 28,
1971, between Alcoa and Southern Indiana Gas and Electric
Company. (Physically filed and designated in Registration No.
2-41209 as Exhibit 4(e)- 1.)
EX-10.5 Second Supplement, dated as of July 10, 1975, to the Power
Agreement and Letter Agreement dated April 30, 1973 - First
Supplement. (Physically filed and designated in Form 12-K for
the fiscal year 1975, File No. 1-3553, as Exhibit 1(e).)
EX-10.6 Third Supplement, dated as of May 26, 1978, to the Power
Agreement. (Physically filed and designated in Form 10-K for
the fiscal year 1978 as Exhibit A-1.)
EX-10.7 Letter Agreement dated August 22, 1978 between Southern Indiana
Gas and Electric Company and Alcoa, which amends Agreement for
Sale in an Emergency of Electrical Power and Energy Generation
by Alcoa and Southern Indiana Gas and Electric Company dated
June 26, 1979. (Physically filed and designated in Form 10-K
for the fiscal year 1978, File No. 1-3553, as Exhibit A-2.)
EX-10.8 Fifth Supplement, dated as of December 13, 1978, to the Power
Agreement. (Physically filed and designated in Form 10-K for
the fiscal year 1979, File No. 1- 3553, as Exhibit A-3.)
EX-10.9 Sixth Supplement, dated as of July 1, 1979, to the Power
Agreement. (Physically filed and designated in Form 10-K for
the fiscal year 1979, File No. 1-3553, as Exhibit A-5.)
EX-10.10 Seventh Supplement, dated as of October 1, 1979, to the Power
Agreement. (Physically filed and designated in Form 10-K for
the fiscal year 1979, File No. 1- 3553, as Exhibit A-6.)
EX-10.11 Eighth Supplement, dated as of June 1, 1980 to the Electric
Power Agreement, dated May 28, 1971, between Alcoa and Southern
Indiana Gas and Electric Company. (Physically filed and
designated in Form 10-K for the fiscal year 1980, File No.
1-3553, as Exhibit (20)-1.)
EX-10.13**Agreement dated July 22, 1986 between Southern Indiana Gas and
Electric Company and A. E. Goebel regarding continuation of
employment. (Physically filed and designated in Form 10-K for
the fiscal year 1992, File No. 1-3553, as Exhibit 10-A-13.)
EX-10.14**Agreement dated July 25, 1986 between Southern Indiana Gas and
Electric Company and Ronald G. Reherman regarding continuation
of employment. (Physically filed and designated in Form 10-K
for the fiscal year 1992, File No. 1-3553, as Exhibit 10-A-14.)
EX-10.15**Agreement dated July 22, 1986 between Southern Indiana Gas and
Electric Company and James A. Van Meter regarding continuation
of employment. (Physically filed and designated in Form 10-K
for the fiscal year 1992, File No. 1-3553, as Exhibit 10-A-15.)
EX-10.16**Agreement dated February 22, 1989 between Southern Indiana Gas
and Electric Company and J. Gordon Hurst regarding continuation
of employment. (Physically filed and designated in Form 10-K
for the fiscal year 1992, File No. 1-3553 as Exhibit 10-A-16.)
EX-10.17**Summary description of Southern Indiana Gas and Electric
Company's nonqualified Supplemental Retirement Plan (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553, as Exhibit 10-A-17.)
EX-10.18**Supplemental Post Retirement Death Benefits Plan, dated October
10, 1984. (Physically filed and designated in Form 10-K for the
fiscal year 1992, File No. 1-3553, as Exhibit 10-A-18.)
EX-10.19**Summary description of Southern Indiana Gas and Electric
Company's Corporate Performance Incentive Plan. (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553, as Exhibit 10-A-19.)
EX-10.20**Southern Indiana Gas and Electric Company's Corporate
Performance Incentive Plan as amended for the plan year
beginning January 1, 1994. (Physically filed and designated in
Form 10-K for the fiscal year 1993, File No. 1-3553, as Exhibit
10-A-20.)
EX-10.21**Southern Indiana Gas and Electric Company 1994 Stock Option
Plan (Physically filed and designated in Southern Indiana Gas
and Electric Company's Proxy Statement dated February 22, 1994,
File No. 1-3553, as Exhibit A.)
EX-10.22**Summary description of Southern Indiana Gas and Electric
Company's Corporate Performance Incentive Plan as amended for
the plan year beginning January 1, 1997. (Physically filed and
designated in the SIGCORP, Inc. and Southern Indiana Gas and
Electric Company's Joint Proxy Statement dated March 23, 1998,
File No. 1-11603 and File No. 1- 3553, under "Compensation
Committee Report On Executive Compensation", page 9.)
EX-10.23**Agreement dated September 1, 1997 between Southern Indiana Gas
and Electric Company and Andrew E. Goebel regarding
continuation of employment, which supercedes such agreement
dated July 22, 1986. (Physically filed and designated in Form
10-K for the fiscal year 1997, File No. 1-3553, as Exhibit
10.23.)
EX-10.24**Agreement dated September 1, 1997 between Southern Indiana Gas
and Electric Company and J. Gordon Hurst regarding continuation
of employment, which supercedes such agreement dated February
22, 1989. (Physically filed and designated in Form 10-K for the
fiscal year 1997, File No. 1-3553, as Exhibit 10.24.)
EX-10.25**Agreement dated January 10, 1997 between Ronald G. Jochum and
Southern Indiana Gas and Electric Company regarding
continuation of employment. (Physically filed and designated in
Form 10-K for the fiscal year 1997, File No. 1-3553, as Exhibit
10.25.)
EX-10.26**Agreement dated January 10, 1997 between Southern Indiana Gas
and Electric Company and Ronald G. Reherman regarding
continuation of employment, which supercedes such agreement
dated May 6, 1991. (Physically filed and designated in Form
10-K for the fiscal year 1997, File No. 1-3553, as Exhibit
10.26.)
EX-10.27**Agreement dated April 16, 1997 between Southern Indiana Gas and
Electric Company and Ronald G. Reherman regarding supplemental
pension and disability benefits, which supercedes such
agreement dated February 1, 1995. (Physically filed and
designated in Form 10-K for the fiscal year 1997, File No.
1-3553, as Exhibit 10.27.)
EX-10.28**Agreement dated January 10, 1997 between Southern Indiana Gas
and Electric Company and Jeffrey L. Davis regarding
continuation of employment. (Physically filed and designated in
Form 10-K for the fiscal year 1997, File No. 1-3553, as Exhibit
10.28.)
EX-10.29**Southern Indiana Gas and Electric Company's nonqualified
Supplemental Retirement Plan as amended, effective April 16,
1997. (Physically filed and designated in Form 10-K for the
fiscal year 1997, File No. 1-3553, as Exhibit 10.29.)
** Filed pursuant to paragraph (b)(10)(iii)(A) of Item 601 of
Regulation S-K.
SIGECO
EX-12 Computation of Ratio of Earnings to Fixed Charges
SIGCORP
EX-21 Subsidiaries of the Registrant
SIGCORP and SIGECO
EX-24 Power of Attorney
SIGCORP and SIGECO
EX-27 Financial Data Schedule
Exhibit 21
SIGCORP, INC.
Subsidiaries of the Registrant
Southern Indiana Gas and Electric Company
Southern Indiana Properties, Incorporated in Indiana
Energy Systems Group, Incorporated in Indiana
Southern Indiana Minerals, Incorporated in Indiana
SIGCORP Energy Services, Incorporated in Indiana
SIGCORP Capital, Incorporated in Indiana
SIGCORP Fuels, Incorporated in Indiana
SIGCORP Power Marketing, Incorporated in Indiana
SIGCORP Communications Services, Incorporated in Indiana
SIGECO Advanced Communications, Incorporated in Indiana
SIGCORP Environmental Services, Incorporated in Indiana