SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________
to ________________________________
Commission File Number 1-3553
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Indiana 35-0672570 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) |
20 N.W. Fourth Street, Evansville, Indiana 47741-0001
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (812)
465-5300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on Title of each class which registered Common Stock, Without Par Value New York Stock Exchange Rights to Purchase Preferred Stock, No Par Value, Series 1986 New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock, $100 Par Value
(Title of Class)
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]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Yes [X] No [ ]
State the aggregate market value of the voting stock held by non-affiliates of the registrant: $471,341,191 at February 28, 1994, including 185,895 shares of Preferred Stock, $100 Par Value.
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest
practicable date:
Outstanding as of
Class February 28, 1994
Common Stock, Without Par Value 15,705,427
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Documents incorporated by reference (to the extent indicated
herein):
Part of Form 10-K into which
Document document is incorporated
Proxy Statement dated February 22, 1994 relating to the 1994 Annual Meeting of Stockholders Part III
PART 1
Item 1. BUSINESS
GENERAL
Southern Indiana Gas and Electric Company (Company) 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. The Company has a wholly-owned nonutility investment subsidiary, Southern Indiana Properties, Inc. (refer to Note 3 of the Notes To Consolidated Financial Statements, page 35, for further discussion).
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 nine communities. At December 31, 1993, the Company served 118,163 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, 1993, the Company supplied gas service to 100,398 customers in Evansville and 63 other nearby communities and their environs. Since 1986, the Company has purchased its natural gas supply requirements from numerous suppliers. During 1993, twenty-five suppliers were used; however, Texas Gas Transmission Corporation (TGTC) remained the Company's primary contract supplier. In November 1993, TGTC restructured its services so that its gas supplies are sold separately from its interstate transportation services. TGTC ceased to be a supplier of natural gas to the Company, and the Company assumed full responsibility for the purchase of all its natural gas supplies. (See subsequent reference under "Gas Business" to the restructuring of interstate pipelines.) During 1993, eighteen of the Company's major gas customers took advantage of the Company's gas transportation program to procure a portion of their gas supply needs from suppliers other than the Company.
The principal industries served by the Company include aluminum smelting and recycling, aluminum sheet products, polycarbonate resin (Lexan) and plastic products, appliance manufacturing, pharmacuetical and nutritional products, automotive glass, gasoline and oil products, and coal mining.
The only property the Company owns outside of Indiana is approximately eight miles of 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. The Company does not distribute any electric energy in Kentucky.
LINES OF BUSINESS
The percentages of operating revenues and operating
income before income taxes attributable to the electric and
gas operations of the Company for five years ended December
31, 1993, were as follows:
Year Ended December 31,
1989 1990 1991 1992 1993
Operating Revenues:
Electric 79.6% 80.6% 81.8% 79.5% 78.7%
Gas 20.4 19.4 18.2 20.5 21.3
Operating Income Before Income Taxes:
Electric 98.6% 93.0% 97.4% 99.0% 99.4%
Gas 1.4 7.0 2.6 1.0 .6
Reference is made to Note 12 of the Notes To
Consolidated Financial Statements, page 38, for Segments of
Business data.
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ELECTRIC BUSINESS
The Company supplies electric service to 118,163 customers, including 103,318 residential, 14,645 commercial, 177 industrial, 19 public street and highway lighting and four municipal customers.
The Company's installed generating capacity as of December 31, 1993 was rated at 1,238,000 kilowatts (Kw). Coal-fired generating units provide 1,023,000 Kw of capacity and gas or oil-fired turbines used for peaking or emergency conditions provide 215,000 Kw.
In addition, the Company has interconnections with Louisville Gas and Electric Company, Public Service Company of Indiana, Inc., Indianapolis Power & Light Company, Hoosier Energy Rural Electric Cooperative, Inc., Big Rivers Electric Corporation, and the City of Jasper, providing an ability to simultaneously interchange approximately 750,000 Kw.
Record-breaking peak conditions occurred on July 28, 1993, when the Company's system summer peak load of 1,012,700 Kw was 6.5% greater than the previous record system summer peak load of 951,200 Kw established August 17, 1988. The Company's total load obligation for each of the years 1989 through 1993 at the time of the system summer peak, and the related capacity margin, are presented below. The Company's other load obligations at the time of the peak included firm power commitments to Alcoa Generating Corporation (AGC) except as noted, the City of Jasper, Indiana, and the Company's reserve margin requirements under the ECAR agreement.
Date of Summer Peak Load
08-28-89 07-09-90 07-22-91 07-13-92 07-28-93
Company System Peak Load (Kw)
884,900 942,700 948,400 916,700 1,012,700
Other Load Obligations at Peak (Kw)
84,100 70,800<F1> 77,480<F1> 75,190<F1> 87,340<F1>
Total Load Obligations at Peak (Kw)
969,000 1,013,500 1,025,880 991,890 1,100,040
Total Generating Capability (Kw)
1,167,000 1,163,000 1,238,000<F2> 1,238,000<F2> 1,238,000<F2>
Capacity Margin at Peak
17% 13% 17% 20% 11%
<F1> Effective February 1, 1990, the Company had no firm
power commitments to AGC.
<F2> Includes 80,000 Kw gas-fired turbine placed in service
May 31, 1991.
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The all-time record system winter peak load of 771,900 Kw occurred during the 1989-1990 season on December 22, 1989, and was 10.8% greater than the 1992-1993 winter season system peak (the second highest winter peak) reached on February 18, 1993 at 696,800 Kw.
The Company, primarily as agent of AGC, operates the Warrick Generating Station, a coal-fired steam electric plant which interconnects with the Company'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 the Company 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.
The Company (a summer peaking utility) has an agreement with Hoosier Energy Rural Electric Cooperative, Inc. (Hoosier Energy) for the sale of firm power to Hoosier Energy during the annual winter heating season (November 15- March 15). The contract made available 100 Mw during the 1993-1994 winter season, and allows for a possible increase to 250 Mw by November 15, 1998. The contract will terminate March 15, 2000.
Electric generation for 1993 was fueled by coal (99.8%) and natural gas (.2%). Oil was used only to light fires and stabilize flames in the coal-fired boilers and for testing of gas/oil fired peaking units.
Historically, coal for the Company's Culley Generating Station and Warrick Unit 4 has been purchased from operators of nearby Indiana strip mines pursuant to long-term contracts. During 1991, the Company pursued negotiations for new contracts with these mine operators and while doing so, purchased coal from the respective operators under interim agreements. In October 1992, the Company finalized a new supply agreement effective through 1995 and retroactive to 1991, with one of the operators under which coal is supplied to both locations. Included in the agreement was a provision whereby the contract could be
reopened by the Company for modification of certain coal
specifications. In early 1993, the Company reopened the
contract for such modifications. Effective July 1, 1993,
the Company bought out the remainder of its contractual
obligations with the supplier, enabling the Company to
acquire lower priced spot market coal. The Company
estimates the savings in coal costs during the 1991-1995
period, net of the total buyout costs, will approximate $56
million. The net savings are being passed back to the
Company's electric customers through the fuel adjustment
clause. The coal supplier retained the right of first
refusal to supply Warrick Unit 4 and the Culley plant during
the years 1996-2000. (See "Rate and Regulatory Matters" of
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 15, for further
discussion of the contract buyout.) The Indiana coal used
in these plants is blended by the vendor and delivered to
the plants to meet quality specifications set in conformance
with the requirements of the Indiana State Implementation
Plan for sulfur dioxide. Approximately 1,572,000 tons of
coal were used during 1993 in the generation of electricity
at the Culley Station and Warrick Unit 4. (See discussion
under "Environmental Matters", page 7.) For supplying the
A. B. Brown Generating Station, the Company has a contested
agreement, possibly extending to 1998, with an area
producer. (See Item 3, LEGAL PROCEEDINGS, page 10 for
discussion of litigation with this producer regarding the
coal supply agreement.) The amount of coal burned at A. B.
Brown Generating Station during 1993 was approximately
862,000 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 of coal consumed in generating electrical
energy for the years 1989 through 1993 was as follows:
Average Cost
Average Cost Average Cost Per Kwh
Year Per Ton Per MMBTU (In Mills)
1989 $32.13 $1.44 15.36
1990 34.71 1.54 16.55
1991 33.01 1.46 15.87
1992 32.04 1.42 15.30
1993 32.56 1.46 15.66
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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. The principal restriction to recovery of fuel cost increases is that such recovery is not allowed to the extent that operating income for the twelve month period provided in the fuel cost adjustment filing exceeds the operating income authorized by the Indiana Utility Regulatory Commission (IURC) in the latest general rate case of the Company. During 1991-1993, this restriction did not affect the Company. 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.
The Company's primary goal in the area of research and development 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 1993, the Company paid $893,000 to EPRI to help fund research and development programs such as advanced clean coal burning technology.
The Company 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 the right to receive, 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 1993, the Company's participation in the OVEC arrangements was 1.5%.
The Company participates with 32 other utilities, 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.
GAS BUSINESS
The Company supplies natural gas service to 100,398 customers, including 91,476 residential, 8,682 commercial, 236 industrial and four public authority customers, through 2,520 miles of gas transmission and distribution lines.
The Company 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 the Company'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 normal contract volume from the pipeline 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.
The gas procurement practices of the Company and several of its major customers have been altered significantly during the past eight years as a result of changes in the natural gas industry. In 1985 and prior years, the Company purchased nearly its entire gas requirements from Texas Gas Transmission Corporation (TGTC) compared to 1993 when a total of 25 suppliers sold gas to the Company. In total, the Company purchased 17,270,415 Dth in 1993. Of this amount, 5,046,509 Dth, or 29%, was purchased from TGTC, which continued to be the Company's largest supplier and its major pipeline. In November 1993, TGTC restructured its services so that its gas supplies are sold separately from its interstate transportation services. TGTC ceased to be a supplier of natural gas to the Company, and the Company assumed full responsibility for the purchase of all its natural gas supplies. (See subsequent reference under "Gas Business" to the restructuring of interstate pipelines.) During 1993, eighteen of the Company's major gas customers took advantage of the Company's gas transportation program to procure a portion of their gas supply needs from suppliers other than the Company. A total of 11,370,542 Dth was transported for these major customers in 1993 compared to 9,497,059 Dth transported in 1992. The Company received fees for the use of its facilities in transporting such gas, allowing it to offset a portion of the loss of its customary sales margin with respect to these customers.
(See "Rate and Regulatory Matters" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 15 of this report,
for discussion of the Company's general adjustment in gas
rates and for discussion of the FERC Order No. 636 which
requires interstate pipelines to restructure their services
so that gas supplies will be sold separately from interstate
transportation services.)
The all-time record send out occurred during the 1989- 1990 winter season on December 22, 1989, when 223,489 Dth of gas was delivered to the Company's customers. Of this amount, 89,614 Dth was purchased, 104,358 Dth was taken out of the Company's three underground storage fields, and 29,517 Dth was transported to customers under transportation agreements. The 1992-1993 winter season peak day send out was 189,717 Dth on February 17, 1993.
The average cost per Dth of gas purchased by the
Company during the past five calendar years was as follows:
1989, $2.84; 1990, $2.84; 1991, $2.71; 1992, $2.77; and 1993
$2.85.
The State of Indiana has established procedures which result in the Company passing on to its customers the changes in the cost of gas sold unless certain criteria contained in the regulations are not met. The principal restriction to recovery of gas cost increases is that such recovery is not allowed to the extent that operating income for the twelve month period provided in the gas cost adjustment filing exceeds the operating income authorized by the IURC in the latest general rate case of the Company. During 1991-1993, this restriction did not affect the Company. 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. The Company'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 the Company 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.
On December 23, 1993, the Company entered into a definitive agreement to acquire Lincoln Natural Gas Company, Inc., a small gas distribution company of approximately 1,300 customers contiguous to the eastern boundary of the Company's gas service territory. The acquisition is expected to be completed by mid-1994, subject to necessary regulatory and shareholder approvals.
NONUTILITY SUBSIDIARY
During 1986, the Company formed a wholly-owned subsidiary, Southern Indiana Properties, Inc., which owns and/or operates certain nonutility assets. Currently included in the holdings of the subsidiary are an industrial park, investments in several leveraged-lease financing arrangements, investments in several tax oriented limited partnerships, a portfolio of financial investments (principally adjustable rate preferred stocks and municipal bonds), and other nonutility property. (See Note 3 of the Notes To Consolidated Financial Statements, page 35, for further discussion of Southern Indiana Properties, Inc.)
PERSONNEL
The Company's network of gas and electric operations directly involves 774 employees with an additional 190 employed at Alcoa's Warrick Power Plant. Alcoa reimburses the Company 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 the Company and Alcoa. The total payroll and benefits for Company employees in 1993 (including all Warrick Plant employees) were $46.1 million, including $4.1 million of accrued postretirement benefits other than pensions which the Company is deferring as a regulatory asset until inclusion in rates. (See Note 1 of the Notes To Consolidated Financial Statements, page 29, for further discussion of the new financial accounting standard requiring recognition of these costs effective January 1, 1993 and related regulatory treatment.) In 1992, total payroll and benefits were $40.1 million.
On July 3, 1991, the Company signed a new three-year contract with Local 702 of the International Brotherhood of Electric Workers. The contract provided for a 4% general wage increase each of the three years of the contract. Certain cost-containment measures related to health care coverage were adopted. Improvements in productivity, work practices and the pension plan are also provided. Additionally, the Company's Hoosier Division signed a three- year labor contract with Local 135 of the Teamsters, Chauffeurs, Warehousemen and Helpers effective January 14, 1992. The contract provided for a 4% general wage increase each of the first and second years of the contract and a 3.75% general wage increase the third year of the contract. Also provided are improvements in health care coverage costs, pension benefits, sick pay, work practices and productivity.
CONSTRUCTION PROGRAM AND FINANCING
A total of $80,109,000 was spent in 1993 on the
Company's construction program, of which $68,840,000 was for
the electric system, $5,772,000 for the gas system, $967,000
for common utility plant facilities, and $4,530,000 for the
Demand Side Management (DSM) Program. (See "Demand Side
Management" in Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, page 19.)
Major construction project expenditures in 1993 included
$49.2 million of the originally projected $115 million
(including Allowance for Funds Used During Construction)
Culley Unit 2 and 3 scrubber project which is scheduled to
be completed by 1995. (See "Clean Air Act" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, page 18.)
On May 11, 1993, the Company issued two series of
adjustable rate first mortgage bonds totaling $45.0 million
in connection with the sale of Warrick County, Indiana
environmental improvement revenue bonds. The proceeds of
the revenue bonds have been placed in trust are being used
to finance a portion of the Culley scrubber project. (See
"Liquidity and Capital Resources" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, page 20 for further discussion of this
financing and discussion of the issuance of $110 million of
first mortgage bonds used to refinance existing long-term
debt.) No other securities were issued by the Company
during 1993 for the purpose of funding its construction
program.
For 1994, construction expenditures are presently estimated to be $92.2 million which includes $8.7 million for DSM programs. Expenditures in the power production area are expected to total $55.8 million and include $41.7 million for the construction of the Culley scrubber project. The balance of the 1994 construction program consists of $14.9 million for additions and improvements to other electric system facilities, $8.1 million of additions and improvements to the gas system and $4.7 million for the final phase of the $27 million Norman P. Wagner operations complex and miscellaneous common utility plant buildings, fixtures and equipment.
In keeping with the Company'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 balance 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.
For the five-year period of 1994-1998, it is estimated that construction expenditures will total about $270 million as follows: 1994 - $92 million; 1995 - $41 million; 1996 - $44 million; 1997 - $48 million; and 1998 - $45 million. This construction program reflects approximately $51 million for the Company's DSM programs and $44 million to meet the Phase I requirements of the Clean Air Act Amendments of 1990. While the Company expects the majority of the construction requirements and an estimated $48 million in debt security redemptions and other long-term obligations to be provided by internally generated funds, external financing requirements of $50-70 million are anticipated.
The aforementioned amounts relating to the Company's construction program are in all cases inclusive of Allowance for Funds Used During Construction.
REGULATION
Operating as a public utility under the laws of Indiana, the Company is subject to regulation by the Indiana Utility Regulatory Commission 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.
In addition, the Company is subject to regulation by the Federal Energy Regulatory Commission with respect to the classification of accounts, rates for its sales for resale, interconnection agreements with other utilities, and acquisitions and sale of certain utility properties as provided by the laws of the United States.
See "Electric Business" and "Gas Business" for further discussion regarding regulatory matters.
The Company 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." The Company is also subject to multiple regulations issued by both federal and state commissions under the Federal Public Utility Regulatory Policies Act of 1978.
As a result of the Company's ownership of 33% of Community Natural Gas Company, the Company is a "Holding Company" as such term is defined under the Public Utility Holding Company Act of 1935 (the 1935 Act). The Company is exempt from all provisions of the 1935 Act except for the provisions of Section 9(A)(2), which pertains to acquisitions of other utilities.
COMPETITION
The Company does not presently compete for electric or gas customers with the other utilities within its assigned service areas. As a result of changes brought about by the National Energy Policy Act of 1992, the Company may be required to compete (or have the opportunity to compete) with other utilities and wholesale generators for sales of electricity to existing wholesale customers of the Company and other potential wholesale customers. (See subsequent reference to discussion of this recent legislation.) The Company currently competes with other utilities in connection with intersystem bulk power rates.
Some of the Company's customers have, or in the future could acquire, access to energy sources other than those available through the Company. (See "Gas Business", page 4, for discussion of gas transportation.) Although federal statute allows for bypass of a local distribution (gas utility) company, Indiana law disallows bypass in most cases
and the Company would likely litigate such an attempt in the Indiana courts. Additionally, the Company's geographical location in the corner of the state, surrounded on two sides by rivers, limits customers' ability to bypass the Company (by running long pipelines). There is also increasing 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 the Company in the past. The Company is unable, however, to predict the extent of competition in the future or its potential effect on the Company's operations.
As part of its efforts to develop a National Energy
Strategy, Congress has amended the Public Utility Holding
Company Act and the Federal Power Act by enacting the
National Energy Policy Act of 1992 (the Act), which will
affect the traditional structure of the electric utility
industry. (Refer to "National Energy Policy Act of 1992" in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 18 of this report,
for discussion of the major changes in the electric industry
effected by the Act.)
ENVIRONMENTAL MATTERS
The Company is currently investigating the possible existence of facilities once owned and operated by the Company, its predecessors, previous landowners, or former affiliates of the Company utilized for the manufacture of gas. Refer to "Environmental Matters" in Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page 17 of this report, for discussion of the Company's actions regarding the investigation.
The Company is subject to federal, state and local regulations with respect to environmental matters, principally air, solid waste and water quality. Pursuant to environmental regulations, the Company 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 the Company's facilities, including particulate matter, sulfur dioxide and nitrogen oxides. Regulations concerning water quality establish standards relating to intake and discharge of water from the Company's facilities, including water used for cooling purposes in electric generating facilities. Because of the scope and complexity of these regulations, the Company 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. The Company 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 substantial investments above those amounts stated under "Construction Program and Financing", page 5.
All existing Company facilities have operating permits from the Indiana Air Board. In order to secure approval for these permits, the Company has 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 the Company to burn high sulfur southern Indiana coal at the station.
Under the Federal Clean Air Act (the Act), states are authorized to adopt implementation plans to fulfill the requirements of the Act. These state plans are subject to approval by the U. S. Environmental Protection Agency (EPA). In 1972, Indiana adopted stringent regulations which comprise the State Implementation Plan (SIP) for attaining ambient air standards for particulates, sulfur dioxide and nitrogen oxides. The EPA approved that part of the SIP which sets forth emission standards, fixes time schedules for compliance with such standards and designates air quality regions for the State. The SIP was revised in 1979 to reflect revision of the Act and the State submitted the revised plan to the EPA for approval. On August 10, 1986, the Sierra Club filed a lawsuit against the EPA under Civil No. NA86-194-C seeking declaratory and injunctive relief to compel the EPA to take action pursuant to the Act to reduce sulfur dioxide emissions from power plants in Indiana including the Company's Warrick Unit 4 and Culley Generating Station. In settlement of this suit, the EPA agreed that there would be a SIP for the State by November 1988. The EPA gave final approval on December 16, 1988 to the Warrick County sulfur dioxide emission limits which had been
approved by the Indiana Air Pollution Control Board. The ruling provided for the reduction of sulfur dioxide emissions from the two Warrick County generating stations, Warrick and Culley, to take place in two phases. The first reduction, required by December 31, 1989, provided that sulfur dioxide emissions from all units at both stations be reduced to 5.41 lb/MMBTU from 6.00 lb/MMBTU. Under the second phase, which was effective August 1, 1991, sulfur dioxide emissions from Culley Units 1 and 2 had to be decreased to 2.79 lb/MMBTU, Culley Unit 3 was allowed to remain at 5.41 lb/MMBTU, and emissions from all units at the Warrick Generating Station had to be reduced to 5.11 lb/MMBTU. The Company is currently in compliance with these provisions.
In October 1990, the U.S. Congress adopted major revisions to the Act. The revisions impose significant restrictions on future emissions of sulfur dioxide (SO2) and nitrogen oxide (NOX) from coal-burning electric generating facilities, including those owned and operated by the Company. The legislation severely affects electric utilities, especially those in the Midwest. Two of the Company's principal coal-fired facilities (A. B. Brown Units 1 and 2, totaling 500 megawatts of capacity) are presently equipped with sulfur dioxide removal equipment (scrubbers) and are not expected to be severely affected by the new legislation. However, 523 megawatts of the Company's coal- fired generating capacity will be significantly impacted by the lower emission requirements. The Company will be required to reduce total emissions from Culley Unit 3 (250 megawatts), Warrick Unit 4 (135 megawatts) and Culley Unit 2 (92 megawatts) by approximately 50% to 2.5 lb/MMBTU by January 1995 (Phase I) and to 1.2 lb/MMBTU by January 2000 (Phase II). In addition, Unit 1 at Culley Station (46 megawatts) is also subject to the 1.2 lb/MMBTU restriction by January 2000. The legislation includes various incentives to promote the installation of scrubbers on units affected by the 1995 deadline. Current regulatory policy allows for the recovery through rates of all authorized and approved pollution control expenditures.
(Refer to "Clean Air Act" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 18 of this report, for discussion
of the Company's Clean Air Act Compliance Plan, which was
filed with the IURC on January 3, 1992 and approved October
14, 1992, and the associated estimated costs.)
In connection with the use of sulfur dioxide removal equipment at the A. B. Brown Generating Station, the Company operates a solid waste landfill for the disposal of approximately 200,000 tons of residue per year from the scrubbing process. Renewal of the landfill operating permit was granted in March 1992 by the Indiana Department of Environmental Management (IDEM). The permit expires in January 1997. Additionally, IDEM granted the Company's request for modification (expansion) of the landfill, issuing the construction permit in March 1992.
Under the Federal Water Pollution Control Act of 1972 and Indiana law and regulations, the Company 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 EPA 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. The Company 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 Warrick Unit 4. Such discharge permits are limited in time and must be renewed at five-year intervals. During 1989, the Company was granted renewed five-year permits for effluent discharge for such generating facilities, which are required to be renewed again in 1994. At present there are no known enforcement proceedings concerning water quality pending or threatened against the Company.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are elected at
the annual organization meeting of the Board of Directors,
held immediately after the annual meeting of stockholders,
and serve until the next such organization meeting, unless
the Board of Directors shall otherwise determine, or unless
a resignation is submitted.
Age at Positions Held During
Name 12/31/93 Past Five Years Dates
R. G. Reherman 58 Chairman of the Board of Directors,
President and Chief Executive
Officer 03-24-92 - Present
President, Chief Executive Officer
and Director 04-01-90 - 03-24-92
President, Chief Operating Officer
and Director * - 04-01-90
A.E.Goebel 46 Senior Vice President, Chief Financial
Officer, Secretary and Treasurer 02-21-89 - Present
Vice President, Secretary and
Treasurer * - 02-21-89
J.G.Hurst 50 Senior Vice President and General Manager
of Operations 03-01-92 - Present
Vice President, Gas and Warrick
Operations 01-01-89 - 03-01-92
G.M.McManus 46 Vice President and Director of Governmental
and Public Relations 03-01-92 - Present
Director of Governmental Affairs 12-01-89 - 03-01-92
J.W.Picking 62 Vice President and Director of Gas
Operations 03-01-92 - Present
Director of Gas Operations 01-01-89 - 03-01-92
* Indicates positions held at least since 1989.
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Item 2. PROPERTIES
The Company's installed generating capacity as of
December 31, 1993 was rated at 1,238,000 Kw. The Company'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 388,000 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. The Company'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
the Company's five gas turbines is 215,000 Kw and are
generally used only for reserve, peaking or emergency
purposes due to the higher per unit cost of generation.
The Company's transmission system consists of 871
circuit miles of 138,000, 69,000 and 36,000 volt lines. The
transmission system also includes 26 substations with an
installed capacity of 3,874,724 kilovolt amperes (Kva). The
electric distribution system includes 3,177 pole miles of
lower voltage overhead lines and 180 trench miles of conduit
containing 987 miles of underground distribution cable. The
distribution system also includes 86 distribution
substations with an installed capacity of 1,306,508 Kva and
45,057 distribution transformers with an installed capacity
of 1,771,152 Kva.
The Company 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.
The Company's gas transmission system includes 324 miles of transmission mains, and the gas distribution system includes 2,196 miles of distribution mains.
The Company's properties, but not those of its subsidiary, are subject to the lien of the First Mortgage Indenture dated as of April 1, 1932 between the Company 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".
Item 3. LEGAL PROCEEDINGS.
On January 27, 1993, a coal supplier filed a complaint in the Federal District Court for the Southern District of Indiana alleging that the Company breached a coal supply contract between the Company and that supplier. The Company had notified the supplier that it would not require any delivery of coal under the contract for at least some part of 1993. The supplier claims that this action violates certain minimum purchase requirements imposed by the contract, and asked the court to require specific performance of the contract by the Company and for unspecified monetary damages. The complaint alleges that the Company is obligated to purchase coal at a minimum rate of 50,000 tons per month under the contract and at any event to purchase all of the coal consumed at the Company's A. B. Brown generating plant below 1,000,000 tons per year. The contested contract may run until December 31, 1998. The Company filed counterclaims and disputes that its actions have violated the terms of the contract. On March 26, 1993, the Company and the coal supplier agreed to resume coal shipments but with the invoiced price per ton substantially lower than the contract price and subject to final outcome of the litigation. (Refer to "Rate and Regulatory Matters" in Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page 15 of this report, for discussion of the pricing of this coal to inventory and the associated ratemaking treatment.) On June 6, 1993, the coal supplier won a summary judgement to require the Company to take a minimum of 600,000 tons annually, more or less in equal weekly shipments. The decision cannot be appealed until resolution of other contract provisions still before the court.
There are no other pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the registrant is a party.
No material legal proceedings were terminated during the fourth quarter of 1993.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
The principal market on which the registrant's common stock (Common Stock) is traded is the New York Stock Exchange, Inc. where the Common Stock is listed. The high and low sales prices for the stock as reported in the consolidated transaction reporting system for each quarterly period during the two most recent fiscal years are:
QUARTERLY PERIOD
1 2 3 4
High Low High Low High Low High Low
1993 $34-3/4 $32-3/4 $34-7/8 $32-3/8 $34-3/8 $33 $35-1/2 $31-7/8
1992<F1> $33.84 $30.47 $32-1/8 $30-3/8 $32-3/4 $31-1/8 $34-1/8 $31-3/4
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As of February 4, 1994 there were 9,445 holders of record of Common Stock.
Dividends declared and paid per share of Common Stock during the past two years were:
QUARTERLY PERIOD
1 2 3 4
1993 $0.4025 $0.4025 $0.4025 $0.4025
1992 <F1> $0.39 $0.39 $0.39 $0.39
<F1> Stock prices and dividends per share for the first
quarter of 1992 have been restated to reflect the four-for-
three stock split effective March 30, 1992.
The quarterly dividend on Common Stock was increased to
41-1/4 cents per share in January 1994, payable March 21, 1994.
The payment of cash dividends on Common Stock is, in
effect, restricted by the Mortgage to accumulated surplus,
available for distribution to the Common Stock, earned
subsequent to December 31, 1947, subject to reduction if
amounts deducted from earnings for current repairs and
maintenance and provisions for renewals, replacements and
depreciation of all the property of the Company are less
than amounts specified in the Mortgage. See Section 1.02 of
the Supplemental Indenture dated as of July 1, 1948, as
supplemented. No amount was restricted against cash
dividends on Common Stock as of December 31, 1993, under
this restriction.
The payment of cash dividends on Common Stock is, in
effect, restricted by the Amended Articles of Incorporation
to accumulated surplus, available for distribution to the
Common Stock, earned subsequent to December 31, 1935. The
Amended Articles of Incorporation require that, immediately
after such dividends, there shall remain to the credit of
earned surplus an amount at least equal to two times the
annual dividend requirements on all then outstanding
Preferred Stock, No Par Value. See Art. VI, Terms of
Capital Stock, General Provisions (B). The amount
restricted against cash dividends on Common Stock at
December 31, 1993 under this restriction was $2,209,642,
leaving $201,848,514 unrestricted for the payment of
dividends. In addition, the Amended Articles of
Incorporation provide that surplus otherwise available for
the payment of dividends on Common Stock shall be restricted
to the extent that such surplus is included in a calculation
required to permit the Company to issue, sell or dispose of
preferred stock or other stock senior to the Common Stock
(Art. VI, Terms of Capital Stock, General Provisions (E)).
An order of the Securities and Exchange Commission
dated October 12, 1944 under the Public Utility Holding
Company Act of 1935 in effect restricts the payment of cash
dividends on Common Stock to 75% of net income available for
distribution to the Common Stock, earned subsequent to
December 31, 1943, if the percentage of Common Stock equity
to total capitalization and surplus, as defined, is less
than 25%. At December 31, 1993, such ratio amounted to
approximately 47%.
Item 6. SELECTED FINANCIAL DATA
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For The Years Ended December 31,
1993 1992 1991 1990 1989
(in thousands except per share data)
Operating Revenues $328,521 $305,947 $322,582 $322,520 $311,542
Operating Income $ 51,642 $ 50,919 $ 53,156 $ 51,934 $ 51,600
Net Income $ 39,653 $ 36,767 $ 38,513 $ 37,691 $ 36,216
Net Income Applicable
to Common Stock $ 38,548 $ 35,500 $ 37,232 $ 36,409 $ 34,931
Average Common Shares
Outstanding 15,705 15,705 15,705 16,096 16,588
Earnings Per Share
of Common Stock $ 2.45 $ 2.26 $ 2.37 $ 2.26 $ 2.11
Dividends Per Share
of Common Stock $ 1.61 $ 1.56 $ 1.50 $ 1.43 $ 1.35
Total Assets $860,023 $761,281 $747,445 $738,803 $721,059
Redeemable Preferred
Stock $ 8,515 $ 8,515 $ 1,100 $ 1,110 $ 1,110
Long-Term Obligations $274,884 $213,026 $236,844 $257,022 $219,682
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
Earnings per share of $2.45 in 1993 were the highest in Company history, following 1992 earnings of $2.26. The record 1993 earnings exceeded the previous all-time high of $2.37 in 1991 by 3%.
The 1993 earnings were favorably impacted by higher operating revenues due to weather-related increases in retail gas and electric sales. Greater maintenance and nonfuel-related operating expenses and fewer sales to wholesale electric customers partially offset the impact of the higher retail sales. Increased allowance for funds used during construction resulting from the Company's expanded construction program also contributed to the higher earnings.
For the thirty-fifth consecutive year, the Board of Directors declared a dividend increase to common shareholders at its January 1994 meeting. Payable in March 1994, the Company's new quarterly dividend is 41-1/4cents per share, increasing the indicated annual rate to $1.65 per share.
ELECTRIC OPERATIONS.
The table below compares changes in operating revenues, operating expenses, and electric sales between 1993 and 1992, and between 1992 and 1991, in summary form.
Increase
CHANGES IN ELECTRIC OPERATING INCOME (Decrease)
1993 1992
in thousands)
Operating Revenues - System $17,586 $(12,909)
- Nonsystem (2,258) (7,901)
15,328 (20,810)
Operating Expenses:
Fuel for electric generation (159) (8,815)
Purchased electric energy 6,434 (2,739)
Other operation 2,274 (1,180)
Maintenance 3,967 (4,538)
Depreciation and amortization 695 (793)
Federal and state income taxes 1,921 (1,824)
Property and other taxes (707) 1,236
_______ ________
14,425 (18,653)
Changes in electric operating income $ 903 $ (2,157)
CHANGES IN ELECTRIC SALES - MWh:
System 319,114 (133,795)
Nonsystem (82,600) 369,189)
________ _________
236,514 (502,984)
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Higher weather-related sales to the Company's retail customers was the primary reason for the 6.3% ($15.3 million) rise in electric operating revenues. Effective October 1, 1993, the Company implemented the first step (about 1% overall) of a three-step increase in its base electric rates to recover the cost of complying with the Clean Air Act Amendments of 1990 (see "Rate and Regulatory Matters"), however, the rate increase had little impact on electric revenues during 1993. In 1992, operating revenues declined 7.9% ($20.8 million) due to fewer sales to retail and wholesale customers.
Cooler winter weather and much warmer summer temperatures, when cooling degree days were 30% greater than the prior year and about 17% above normal, were responsible for the 12.1% and 6.3% increases in residential and commercial sales, respectively. Following flat sales in 1992, industrial sales rose 5.7% during the current year due to increased manufacturing activity. Total system sales were up 7.6% over 1992. The Company experienced a 3.1% overall decline in system sales in 1992 when cooling degree days were down 30%.
During 1993, the Company's electric customer base grew by 1,276, or 1%, totaling 118,163 at year end.
In addition to greater system sales, 1993 system revenues increased approximately $2.7 million due to the recovery of higher unit fuel costs (see subsequent discussion of changes in the cost of fuel for electric generation), following a $4.7 million reduction in electric revenues in 1992 due to lower unit costs. Changes in the cost of fuel for electric generation and purchased power are reflected in customer rates through commission approved fuel cost adjustments.
Because of the current worldwide oversupply of primary aluminum and softening demand for rolled can sheet aluminum in the United States, the Aluminum Company of America (Alcoa) shut down several older potlines at various manufacturing facilities. Alcoa Generating Corporation (AGC), a wholly-owned subsidiary of Alcoa, provides the energy requirements for five potlines at Alcoa's Warrick County, Indiana facility from its Warrick Generating Station. Since 1987, the Company has provided electric energy to AGC (a wholesale customer) for a sixth potline. On July 20,1993, Alcoa shut down the oldest of the six potlines at the Warrick County manufacturing operation. The Company estimates that the decline in electric sales related to the potline for 1993 represented approximately $4.8 million in nonsystem revenues and approximately $.8 million in operating income compared to the prior year. Greater sales to other nonsystem customers, due in part to the region's warmer summer temperatures, partially offset the decline in sales to AGC. Total nonsystem sales by the Company declined 8.3% during the year. On an annual basis, the decline in revenue related to the reduced sales to AGC is estimated at $14.4 million with a corresponding $2.4 million decline in operating income. The Company anticipates that a portion of the decline in operating income will be offset in the future by increases in sales to other nonsystem customers made possible by the reduced commitment to AGC. Most sales to nonsystem customers, including AGC, are on an "as available" basis under interchange agreements which provide for significantly lower margins than sales to system customers.
Due to the much warmer summer temperatures, and to the increased demand by industrial customers, a new all-time peak load obligation of 1,100 megawatts was reached on July 28, 1993. The previous record peak, 1,054 megawatts, was set in 1988. The 1992 peak of 992 megawatts was held down by the unseasonably cool summer weather. The Company's total generating capacity at the time of the 1993 peak was 1,238 megawatts, representing an 11% capacity margin.
Fuel for electric generation, the most significant electric operating cost, was comparable to 1992. Slightly (2.8%) higher costs of coal per MMBtu consumed due to less favorable volume-related pricing, higher average per unit mine production costs, and the amortized cost of the buyout of one of the Company's long-term coal contracts (see "Rate and Regulatory Matters"), were offset by a decline in generation. The Company continues to pursue further reductions in coal prices as a key component of its strategy to remain a low-cost provider of electricity. The decline in 1992 fuel cost reflected a 6.2% decrease in generation and a lower average cost of coal consumed.
The greater energy requirements of the Company's customers and favorably priced power were the primary reasons for the increased purchases of electricity from other utilities, up substantially (220%) during 1993. Purchased electric energy costs decreased 48% in 1992 due to fewer purchases and lower average rates paid for such power.
After a 4.1% decrease in 1992, other operation expenditures rose 8.2% ($2.3 million) during the current year chiefly due to increased provisions for injuries and damages, consulting and legal expenditures related to a coal contract buyout (see "Rate and Regulatory Matters") and ongoing coal contract negotiations and litigation, and increases in various administrative and general costs.
Greater production plant maintenance activity was the primary reason for the 20% ($4 million) increase in electric maintenance expense. The Company performed a scheduled major turbine generator overhaul on A.B. Brown Unit 2 during the year and completed a major overhaul on the Culley Unit 1 turbine generator begun in late 1992. The Culley Unit 1 turbine generator overhaul was the only major maintenance project during 1992, when electric maintenance expenditures were down $4.5 million.
Depreciation and amortization expense increased slightly in 1993 reflecting normal additions to utility plant and the completion of the warehouse and operations building at the Company's new Norman P. Wagner Operations Center. A decline in depreciation and amortization occurred in 1992 when amortization provisions related to the deferred return on the phasein of A. B. Brown Unit 2 expired.
While inflation has a significant impact on the replacement cost of the Company's facilities, under the rate-making principles followed by the Indiana Utility Regulatory Commission (IURC), under whose regulatory jurisdiction the Company is subject, only the historical cost of electric and gas plant investment is recoverable in revenues as
depreciation. With the exception of adjustments for changes in fuel and gas costs and margin on sales lost under the Company's demand side management programs (see "Demand Side Management"), the Company's electric and gas rates remain unchanged until a rate application is filed and a general rate order is issued by the IURC.
In addition to the impact of higher 1993 pretax income on income tax expense, the Company provided approximately $.5 million of additional federal income tax expense to reflect the higher tax rates enacted under the Omnibus Budget Reconciliation Act of 1993. (See Note1 of the Notes to Consolidated Financial Statements for further discussion.) Decreased income tax expense in 1992 was chiefly attributable to lower pretax income. The decrease in taxes other than income taxes during the current year resulted from a 1992 increase in property tax expense reflecting the general reassessment of the Company's property.
GAS OPERATIONS.
The following table compares changes in operating revenues, operating expenses, and gas sold and transported between 1993 and 1992, and between 1992 and 1991, in summary form.
Increase
CHANGES IN GAS OPERATING INCOME (Decrease)
1993 1992
(in thousands)
Operating Revenues - Sales $7,068 $4,621
- Transportation 178 (446)
7,246
4,175
Operating Expenses:
Cost of gas sold 4,482 5,369
Other operation 2,314 (146)
Maintenance 741 (632)
Depreciation 31 211
Federal and state income taxes (86) (1,083)
Property and other taxes (56) 536
7,426 4,255
Changes in gas operating income $ (180) $ (80)
CHANGES IN GAS SOLD AND TRANSPORTED - MDth:
Sold 889 818
Transported 1,874 26
______ ______
2,763 844
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Greater sales of natural gas and higher gas costs recovered through retail rates led to an 11.5% ($7.2 million) increase in gas operating revenues. Effective August 1, the Company implemented the first step (about 4% overall) of a two-step increase in its base gas rates (see "Rate and Regulatory Matters"), however, the impact on gas revenues during 1993 was not significant.
A 5.6% rise in the Company's gas sales in 1993 reflected increased sales to residential and commercial customers, up 12.8% and 10.2%, respectively. Although heating degree days during the period were about normal, they were 10% greater than those recorded in 1992. Deliveries to industrial customers under the Company's sales and transportation tariffs were up 7.6%, reflecting the increased manufacturing activity of several of the Company's largest industrial customers. In 1992, residential sales were flat and commercial sales were up only 3.1% due to milder winter weather; industrial sales and transportation volumes increased 6.7% during the same period.
During 1993, 1,402 new gas customers were added to the Company's system, raising the year end total 1.4% to 100,398.
On December 23, 1993, the Company entered into a definitive agreement to acquire Lincoln Natural Gas, a small gas distribution company of approximately 1,300 customers contiguous to the eastern boundary of the Company's gas
service territory. The acquisition is expected to be completed by mid-1994, subject to necessary regulatory and shareholder approvals.
The recovery of higher unit gas costs, up 6.1%, through retail rates in 1993 raised revenues $2.7 million following a $1.3 million increase in revenues related to the recovery of higher unit costs in the prior year. During the past two years, the market for purchase of natural gas supply has been very volatile with the average price ranging from a low of $1.34 per Dth in February 1992 to the peak of $2.58 per Dth in May 1993. Prices have declined somewhat since May but remain above the February low reflecting a general tightening of the balance between available supply and demand after several years of excess supply. Changes in the cost of gas sold are passed on to customers through IURC approved gas cost adjustments.
Cost of gas sold, the major component of gas operating expenses, was up 9.7% ($4.5 million) in 1993, following a 13.2% ($5.4 million) increase in 1992. The higher costs in both 1993 and 1992 reflected the increased deliveries to customers and higher unit costs.
Although the Company's primary pipeline supplier, Texas Gas Transmission Corporation (TGTC), implemented revised tariffs November 1, 1993 to reflect certain changes required by Federal Energy Regulatory Commission (FERC) Order 636, the Company's 1993 purchased gas costs were relatively unaffected by the new tariffs. As of November 1,1993, TGTC ceased to be a supplier of natural gas to the Company, and the Company assumed full responsibility for the purchase of all its natural gas supplies. (See "Rate and Regulatory Matters" for further discussion of FERC Order No. 636 and of the impact on future purchased gas costs and procurement practices of the Company.)
Other operation and maintenance expenses were 31% ($3.1 million) greater than the prior year due to increased provisions for injuries and damages (see "Environmental Matters" for discussion of the Company's investigation of the possible existence of facilities utilized for the manufacture of gas), abnormally low distribution maintenance expenses in 1992, and increases in various administrative and general costs.
Depreciation expense for 1993 and 1992 reflected increased gas plant additions during the past several years due to new business requirements and various improvements made to the distribution system. Partially offsetting the impact of increased gas plant additions were lower depreciation rates implemented during 1993 as a result of the Company's recent gas rate case.
Income tax expense for the current year was comparable to 1992, following a substantial decrease in income tax expense in 1992 resulting from lower pretax operating income.
OTHER INCOME AND INTEREST CHARGES.
Other income was $2.5million greater during 1993 due to increased allowance for equity funds used during construction, resulting primarily from the construction of the Company's new sulfur dioxide scrubber. (See "Clean Air Act" for further discussion.) Following a significant increase in nonutility income in 1991, nonutility income declined in 1992. The decline was largely due to lower fees from AGC for operation of its Warrick Generating Station.
Interest expense during the current year was relatively unchanged. The impact of an additional $45 million of long- term debt issued during the second quarter was offset by savings from refinancing $105 million of long-term debt in the second quarter, which reduced annual interest expense by $1 million, and by additional interest capitalized due to the increased construction program.
RATE AND REGULATORY MATTERS.
In November 1992, the Company petitioned the IURC requesting a general increase in gas rates, the first such adjustment since 1982. On July 21,1993, the IURC approved an overall increase of approximately 8%, or $5.5 million in revenues, in the Company's base gas rates. The increase is to be implemented in two equal steps. The first step of the rate adjustment, approximately 4%, took place August 1, 1993; the second step will become effective August 1, 1994.
In addition to seeking relief for rising operating and maintenance costs and substantial investment in utility plant over the past decade, the Company sought to restructure its tariffs, make available additional services, and "unbundle" existing services to better serve its gas customers and strategically position itself to address the changes brought about by the continued deregulation of the natural gas industry. (See subsequent discussion of FERC Order No. 636 in this section.)
On May 24, 1993, the Company petitioned the IURC for an adjustment in its base electric rates representing the first step in the recovery of the financing costs on its investment through March 31, 1993 in the Clean Air Act Compliance project presently being constructed at the Culley Generating Station. The majority of the costs are for the installation of a sulfur dioxide scrubber on Culley Units 2 and 3. (See "Clean Air Act" for further discussion of the project and previous approval of ratemaking treatment of the incurred costs.) On September 15,1993, the IURC granted the Company's request for a 1% revenue increase, approximately $1.8 million on an annual basis, which took effect October 1, 1993. The Company anticipates petitioning the IURC in February 1994 for a 2-3% increase for financing costs related to the project construction expenditures incurred since April 1,1993, with implementation of the new rates effective mid-1994.
On December 22, 1993, the Company filed a request with the IURC for the third of the three planned general electric rate increases. This final adjustment, expected to occur in early 1995, is estimated to be 6-9% and is necessary to recover financing costs related to the balance of the project construction expenditures, costs related to the operation of the scrubber, and certain nonscrubber-related costs such as additional costs incurred for postretirement benefits other than pensions beginning in 1993 and the recovery of demand side management program expenditures (see "Demand Side Management").
Over the past several years, the Company has been actively involved in intensive contract negotiations and legal actions to reduce its coal costs and thereby lower its electric rates. During 1992, the Company was successful in negotiating a new coal supply contract with one of its major coal suppliers. The new agreement, effective through 1995, was retroactive to 1991. Included in the agreement was a provision whereby the contract could be reopened by the Company for modification of certain coal specifications. In early 1993, the Company reopened the contract for such modifications. In response, the coal supplier elected to terminate the contract enabling the Company to buy out the remainder of its contractual obligations and acquire lower priced spot market coal. The cost of the contract buyout in 1993, which was based on estimated tons of coal to be consumed during the agreement period, and related legal and consulting services, totaled approximately $18 million. The Company anticipates that $2 million in additional buyout costs for actual tons of coal consumed above the previously estimated amount may be incurred during the 1994-1995 period. On September 22, 1993, the IURC approved the Company's request to amortize all buyout costs to coal inventory during the period July 1,1993 through December 31, 1995 and to recover such costs through the fuel adjustment clause beginning February 1994.
The Company estimates the savings in coal costs during the 1991-1995 period, net of the total buyout costs, will approximate $56 million. The net savings are being passed back to the Company's electric customers through the fuel adjustment clause.
The Company is currently in litigation with another coal supplier in an attempt to restructure an existing contract. Under the terms of the original contract, the Company was allegedly obligated to take 600,000 tons of coal annually. In early 1993, the Company informed the supplier that it would not require shipments under the contract until later in 1993. On March 26, 1993, the Company and the supplier agreed to resume coal shipments under the terms of their original contract except the invoiced price per ton would be substantially lower than the contract price. As approved by the IURC, the Company has charged the full contract price to coal inventory for subsequent recovery through the fuel adjustment clause. The difference between the contract price and the invoice price has been deposited in an escrow account with an offsetting accrued liability which will be paid either to the Company's ratepayers or its coal supplier upon settlement of the litigation. The escrowed amount was $8,749,000 at December 31, 1993. This litigation is scheduled for trial in June of 1994. Since the litigation arose due to the Company's efforts to reduce fuel costs, management believes that any related costs should be recoverable through the regulatory ratemaking process.
In late 1993, in a further effort to reduce coal costs, the Company and the supplier entered into a letter agreement, effective January 1, 1994, and until the litigation is settled, whereby the Company will purchase an additional 50,000 tons monthly above the alleged base requirements at a price lower than the original contract price for tons over 50,000 per month.
In April 1992, the Federal Energy Regulatory Commission (FERC) issued Order No. 636 (the Order) which required interstate pipelines to restructure their services. In August 1992, the FERC issued Order No. 636-A which
substantially reaffirmed the content of the original Order. Under the Order, the stated purpose of which is to improve the competitive structure of the natural gas pipeline industry, existing pipeline sales service was "unbundled" so that gas supplies are sold separately from interstate transportation services. This restructuring has occurred through tariff filings by pipelines after negotiations with their customers. Customers, such as the Company and ultimately its gas customers, could benefit from enhanced access to competitively priced gas supplies as well as from more flexible transportation services. Conversely, customer costs will rise because the Order requires pipelines to implement new rate design methods which shift additional demand-related costs to firm customers; additionally, the FERC has authorized the pipelines to seek recovery of certain "transition" costs associated with restructuring from their customers.
On November 2, 1992, the Company's major pipeline supplier, Texas Gas Transmission Corporation (TGTC), filed a recovery implementation plan with the FERC as part of its revised compliance filing regarding the Order. On October 1, 1993, the FERC accepted, subject to certain conditions, the TGTC recovery implementation plan (the Plan). The Plan, which addresses numerous issues related to the implementation of the requirements of the Order, became effective November 1, 1993. Under new TGTC transportation tariffs, which reflect the Plan's provisions, the Company will incur additional annual demand-related charges of approximately $1.9 million. Savings from lower volume-related transportation costs will partially offset the additional charges. TGTC has not yet determined the Company's allocation of transition costs, however, an estimate of such costs and implementation of revised TGTC tariffs to recover such costs are expected during the first quarter of 1994. Due to the anticipated regulatory treatment at the state level, the Company does not expect the Order to have a detrimental effect on its financial condition or results of operations.
ENVIRONMENTAL MATTERS.
The Company is currently investigating the possible existence of facilities once owned and operated by the Company, its predecessors, previous landowners, or former affiliates of the Company utilized for the manufacture of gas.
These facilities, if they existed, would have been operated from the 1850's through the early 1950's under industry standards then in effect. Operations at these facilities would have ceased many years ago. However, due to current environmental regulations, the Company and other responsible parties may be required to take remedial action if certain materials are found at the sites of these former facilities.
The Company has just recently initiated its investigation, and preliminary assessments have not yet been performed on any sites. However, based on its research, the Company has identified the existence and general location of four sites at which contamination may be present. The Company intends to perform preliminary assessments of all four sites during 1994 and, more than likely, will perform comprehensive investigations of some, or all, of these sites to determine if remedial action is required and to estimate the extent of such action and the associated costs.
The Company has notified all known insurance carriers providing coverage during the probable period of operation of these facilities of potential claims for coverage of environmental costs. The Company has not, however, recorded any receivables representing future recovery from insurance carriers. Additionally, the Company is attempting to identify all potentially responsible parties for each site. The Company has not been named a potentially responsible party by the Environmental Protection Agency for any of these sites.
While the Company intends to seek recovery from other responsible parties or insurance carriers, the Company does not presently anticipate seeking recovery of these investigation costs from its ratepayers. Therefore, the Company has expensed the $.5 million of anticipated cost of performing preliminary site assessments and the more comprehensive specific site investigations of all four sites. If, however, the specific site investigations indicate that significant remedial action is required, the Company will seek recovery of all related costs in excess of amounts recovered from other potentially responsible parties or insurance carriers through rates.
Although the IURC has not yet ruled on a pending request for rate recovery by another Indiana utility of such environmental costs, the IURC did grant that utility authority to utilize deferred accounting for such costs until the IURC rules on the request.
NATIONAL ENERGY POLICY ACT OF 1992.
In late 1992, the National Energy Policy Act of 1992 (the Act) was signed into law, enacting the first comprehensive energy legislation since the National Energy Act of 1978.
Key provisions contained in the Act, specifically Title VII (Electricity), are expected to cause some of the most significant changes in the history of the electric industry. The primary purpose of Title VII is to increase competition in electric generation by enabling virtually nonregulated entities, such as exempt wholesale generators, to develop power plants, and by providing the FERC authority to require a utility to provide transmission services, including the expansion of the utility's transmission facilities necessary to provide such services, to any entity generating electricity. Although the FERC may not order retail wheeling, the transmission of electricity directly to an ultimate consumer, it may order wheeling of electricity generated by an exempt wholesale generator or another utility to a wholesale customer of a regulated utility.
The changes brought about by the Act may require, or provide opportunities for, the Company to compete with other utilities and wholesale generators for sales to existing wholesale customers of the Company and other potential wholesale customers. The Company has long-term contracts with its five wholesale customers which mitigate the opportunity for other generators to provide service to them. Many observers of the electric utility industry, including major credit rating agencies, certain financial analysts, and some industry executives, have expressed an opinion that retail wheeling to large retail customers and other elements of a more competitive business environment will occur in the electric utility industry, similar to developments in the telecommunications and natural gas industries. The timing of these projected developments is uncertain. In addition, the FERC has adopted a position, generically and on a case- by-case basis, that it will pursue a more competitive, less regulated, electric utility industry. Although the Company is uncertain of the final outcome of these developments, it is committed to pursuing, and is moving rapidly to implement, its corporate strategy of positioning itself as a low-cost energy producer and the provider of high quality service to its retail as well as wholesale customers.
The Company already has some of the lowest per unit administrative, operation, and maintenance costs in the nation, and is continuing its efforts to further reduce its coal costs (see previous discussion of coal contract renegotiation in "Rates and Regulatory Matters").
CLEAN AIR ACT.
Revisions to federal clean air laws were enacted in 1990 which have a significant impact on all of American industry. Electric utilities, especially in the Midwest, were severely impacted by Title IV (acid rain provisions) of the Clean Air Act Amendments of 1990.
Title IV mandates utilities to significantly reduce emissions of sulfur dioxide (SO2) and nitrogen oxide (NOx) from coal-burning electric generating facilities in two steps. The Company is required to reduce annual emissions of SO2 on a Company-wide basis by approximately 50% by 1995 (Phase I). By the year 2000 (PhaseII), the Company must reduce emissions of SO2 by approximately 50% from the allowed 1995 level. Since the Company's two newest coal- fired generating units, A.B. Brown Units 1 and2 (500 MW total), are equipped with SO2 removal equipment (scrubbers), the impact of the law, although significant, is not as great for the Company as for some other midwestern utilities.
To meet the Phase I requirements and nearly all of the Phase II requirements, the Company's Clean Air Act Compliance Plan (the Compliance Plan), which was developed as a least-cost approach to compliance, proposed the installation of a single scrubber at the Culley Generating Station to serve both Culley Unit 2 (92MW) and Culley Unit 3 (250 MW) and the installation of state of the art low NOx burners on these two units.
In January 1992, the Company filed a petition with the IURC, requesting preapproval of the Compliance Plan and proposing recovery of financing costs to be incurred during the construction period. In October 1992, the IURC approved a stipulation and settlement agreement between the Company and intervenors pertaining to the petition, which essentially granted the request.
Construction of the facilities, originally projected to cost approximately $115 million including the related allowance for funds used during construction, began during 1992 with completion and testing expected to occur in late 1994. Construction costs are currently running under budget. Commercial operation will begin about January 1, 1995 to
comply with requirements of the Clean Air Act Amendments of 1990. Under the settlement agreement, the maximum capital cost of the compliance plan to be recovered from ratepayers is capped at approximately $107 million, plus any related allowance for funds used during construction. The estimated cost to operate and maintain the facilities, including the cost of chemicals to be used in the process, is $4-6 million per year, beginning in 1995.
By installing a scrubber, the Company was entitled to apply for extra allowances, called "extension allowances", to the federal EPA. However, because utilities applied for more extension allowances than the Act made available, the federal EPA established a lottery procedure to determine which utilities would actually receive the extension allowances. In order to ensure receipt of a majority of the extension allowances, the Company, and nearly all of the other applying utilities, formed an allowance pooling group. As a result, the Company will receive about 88,000 extension allowances, which it has sold to another party under a confidential agreement. The Company will credit the proceeds to customers over 1995-1999, reducing the rate impact of the Compliance Plan.
With the addition of the scrubber, the Company expects to exceed the minimum compliance requirements of Phase I of the Clean Air Act and have available unused allowances, called "overcompliance allowances", for sale to others. Proceeds from sales of overcompliance allowances will also be passed through to customers.
The scrubbing process utilized by the Culley scrubber produces a salable by-product, gypsum, a substance commonly used in wallboard and other products. In December 1993, the Company finalized negotiations for the sale of an estimated 150,000 to 200,000 tons annually of gypsum to a major manufacturer of wallboard. The agreement will enable the Company to reduce certain operating costs and to credit ratepayers with the proceeds from the sale of the gypsum, further mitigating the rate impact of the Compliance Plan.
The rate impact related to the Compliance Plan, estimated to be 7-10%, is being phased in over a three year period beginning in October 1993. (See "Rate and Regulatory Matters" for further discussion.)
DEMAND SIDE MANAGEMENT.
In October 1991, the IURC issued an order approving expenditures by the Company for development and implementation of demand side management (DSM) programs. The primary purpose of the DSM programs is to reduce the demand on the Company's generating capacity at the time of system peak requirements, thereby postponing or avoiding the addition of generating capacity. Thus, the order of the IURC provided that the accounting and ratemaking treatment of DSM program expenditures should generally parallel the treatment of construction of new generating facilities.
Most of the DSM program expenditures are being capitalized per the IURC order and will be amortized over a 15 year period beginning at the time the Company reflects such costs in its rates. The Company is requesting recovery of these costs in its general electric rate increase request filed December 22, 1993 (see "Rates and Regulatory Matters" for further discussion). In addition to the recovery of DSM program costs through base rate adjustments, the Company is collecting, through a quarterly rate adjustment mechanism, most of the margin on sales lost due to the implementation of DSM programs.
The Company expects to incur costs of approximately $51 million on DSM programs during the 1994-1998 period. By 1998, approximately 108 megawatts of capacity are expected to be postponed or eliminated due to these programs. Based on the latest projections, the expenditures for DSM programs, as approved by the IURC, will total an estimated $195 million through the year 2012 and result in overall savings of $160 million to ratepayers due to deferring the construction of about 156 megawatts of new generating capacity.
INTEGRATED RESOURCE PLAN.
In November 1993, the Company filed with the IURC a biannual update to its Integrated Resource Plan (IRP), including the DSM program expenditures referred to above. The IRP process is a least-cost approach to determining the combination of new generating facilities and conservation and load management options that will best meet customers' future energy needs.
The 1993 IRP update was the result of a nine month evaluation of detailed technology costs, customer energy use patterns, and market information, and includes natural gas conservation options not in the initial 1991 IRP. If the new IRP is approved by the IURC, the Company will implement several new DSM programs recommended by the IRP, including a residential weatherization pilot project. Supply side options recommended by the IRP include strategies to diversify the Company's natural gas suppliers, maximize the use of economical purchased power during peak usage periods, and expand the strategic use of the Company's gas storage fields.
While the Company intends to aggressively utilize various DSM programs to help delay the need for additional power sources, the 1993 IRP forecasts the need of a 125 megawatt base-load generating plant in the early 21st century to meet the future electricity needs of the Company's customers.
POSTEMPLOYMENT BENEFITS.
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits", effective for years beginning after December 15, 1993, which will require the Company to accrue the estimated cost of benefits provided to former or inactive employees after employment but before retirement age. Postemployment benefits include, but are not limited to, salary continuation, supplemental unemployment benefits, severance benefits, disability-related benefits (including workers' compensation), and continuation of benefits such as health care and life insurance coverage. The Company will adopt SFAS No. 112 on January 1, 1994. The impact of the new statement will not have a material impact on financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES.
The Company experienced record earnings per share during 1993, and financial performance continued to be solid. Internally generated cash, bolstered by the increased retail sales, provided over 74% of the Company's construction and DSM program expenditures, despite the requirements of the Culley scrubber project. Earnings continued to be of high quality, of which 11.4% represented allowance for funds used during construction. The ratio of earnings to fixed charges (SEC method) was 3.8:1, the embedded cost of long-term debt is approximately 6.6%, and the Company's long-term debt continues to be rated AA by major credit rating agencies.
The Company has access to outside capital markets and to internal sources of funds that together should provide sufficient resources to meet capital requirements. The Company does not anticipate any changes that would materially alter its current liquidity.
On April 30, 1993, the Company called $84.5 million of its first mortgage bonds at a premium, plus accrued interest. The bonds called were the 8% due 2001, the 8% due 2002, the 8.35% due 2007, the 9-1/4% due 2016, and the 8-5/8% due 2017. The bonds called, having a weighted average interest rate of 8.5%, were refunded with two $45 million issues carrying interest rates of 6% and 7.6%, due 1999 and 2023, respectively.
On May 11, 1993, the Company issued two series of adjustable rate first mortgage bonds in connection with the sale of Warrick County, Indiana environmental improvement revenue bonds. The proceeds of the bonds have been placed in trust and are being used to finance a portion of the Culley scrubber project. The first series of bonds was for $22.2 million due 2028, the interest rate of which is fixed at 4.65% through April 30, 1998. The second series of bonds was for $22.8 million due 2023; the interest rate of this series is fixed at 6% through maturity.
On June 15, 1993, the Company retired $20 million of 8.50% first mortgage bonds maturing in June of 1993 with $20 million of 7-5/8% first mortgage bonds due 2025.
The only financing activity during 1992 was in December when the Company called 75,000 shares of 8.75% series cumulative preferred stock at $102 per share, plus accrued dividends, with the issuance of 75,000 shares of 6.50% series redeemable cumulative preferred stock, at $100 per share.
During the five year period 1994-1998, the Company anticipates that a total of $47.7 million of debt securities will be redeemed.
Construction expenditures, including $4.5 million for DSM programs, totaled $80.1 million during 1993, compared to the $52.1 million expended in 1992. As discussed in "Clean Air Act", construction of the new scrubber continued in 1993, requiring $49.2 million. The remainder of the 1993 construction expenditures consisted of the normal replacements and improvements to gas and electric facilities.
The Company expects that construction requirements for the years 1994-1998 will total approximately $270 million. Included in this amount is approximately $44 million to comply with the Clean Air Act amendments by 1995 and approximately $51 million of capitalized expenditures to develop and implement DSM programs. While the Company expects the majority of the construction program and debt redemption requirements to be provided by internally generated funds, external financing requirements of $50-70 million are anticipated.
At year end, the Company had $11 million in short-term borrowings, leaving unused lines of credit and trust demand note arrangements totaling $16 million.
The Company is confident that its long-term financial objectives, which include maintaining a capital structure near 45-50% long-term debt, 3-7% preferred stock, and 43-48% common equity, will continue to be met, while providing for future construction and other capital requirements.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page No.
1. Financial Statements:
Report of Independent Public Accountants 23
Consolidated Statements of Income for the
years ended December 31, 1993, 1992 and 1991 24
Consolidated Statements of Cash Flows for the
years ended December 31, 1993, 1992 and 1991 25
Consolidated Balance Sheets - December 31,
1993 and 1992 26 - 27
Consolidated Statements of Capitalization -
December 31, 1993 and 1992 28
Consolidated Statements of Retained Earnings
for the years ended December 31, 1993,
1992 and 1991 29
Notes to Consolidated Financial Statements 29 - 39
2. Supplementary Information:
Selected Quarterly Financial Data 40
3. Supplemental Schedules:
Schedule V - Property, Plant and Equipment
for the years ended December 31, 1993, 1992
and 1991 44 - 46
Schedule VI - Accumulated Provision for
Depreciation and Amortization of Property,
Plant and Equipment for the years ended
December 31, 1993, 1992 and 1991 47 - 49
Schedule VIII - Valuation and Qualifying
Accounts and Reserves for the years ended
December 31, 1993, 1992 and 1991 50
Schedule IX - Short-Term Borrowings 51
Schedule X - Supplementary Income Statement
Information 52
Schedule XIII - Other Investments 53
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All other schedules have been omitted as not applicable or not required or because the information required to be shown is included in the Consolidated Financial Statements or the accompanying Notes to Consolidated Financial Statements.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Southern Indiana Gas and Electric Company:
We have audited the consolidated balance sheets and consolidated statements of capitalization of SOUTHERN INDIANA GAS AND ELECTRIC COMPANY (an Indiana corporation) AND SUBSIDIARY as of December 31, 1993 and 1992, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and the supplemental schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and supplemental schedules 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Southern Indiana Gas and Electric Company and Subsidiary as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 1, effective January 1, 1993, the Company changed its methods of accounting for income taxes and postretirement benefits other than pensions.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed under Item 8 (3) are presented for the purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
January 24, 1994
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31,
1993 1992 1991
(in thousands except per share data)
OPERATING REVENUES
Electric $258,405 $243,077 $263,887
Gas 70,116 62,870 58,695
Total operating revenues 328,521 305,947 322,582
OPERATING EXPENSES
Operation:
Fuel for electric generation 81,080 81,239 90,054
Purchased electric energy 9,348 2,914 5,653
Cost of gas sold 50,544 46,063 40,694
Other 40,541 35,952 37,278
Total operation 181,513 166,168 173,679
Maintenance 26,655 21,947 27,117
Depreciation and amortization 36,939 36,213 36,795
Federal and state income taxes 18,325 16,490 19,397
Property and other taxes 13,447 14,210 12,438
Total operating expenses 276,879 255,028 269,426
OPERATING INCOME 51,642 50,919 53,156
Other Income:
Allowance for other funds used
during construction 3,092 988 974
Interest 920 1,001 907
Other, net 2,530 2,100 2,680
________ ________ ________
6,542 4,089 4,561
INCOME BEFORE INTEREST CHARGES 58,184 55,008 57,717
Interest Charges:
Interest on long-term debt 18,437 17,768 18,238
Amortization of premium, discount,
and expense on debt 773 446 740
Other interest 746 461 719
Allowance for borrowed funds
used during construction (1,425) (434) (493)
________ ________ ________
18,531 18,241 19,204
NET INCOME 39,653 36,767 38,513
Preferred Stock Dividends 1,105 1,267 1,281
NET INCOME APPLICABLE TO COMMON STOCK $ 38,548 $ 35,500 $ 37,232
AVERAGE COMMON SHARES OUTSTANDING 15,705 15,705 15,705
EARNINGS PER SHARE OF COMMON STOCK $2.45 $2.26 $2.37
The accompanying Notes to Consolidated Financial Statements are an integral
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CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31,
1993 1992 1991
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 39,653 $ 36,767 $ 38,513
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 36,939 36,213 36,795
Deferred income taxes and investment
tax credits, net 9,459 26 285
Allowance for other funds used
during construction (3,092) (988) (974)
Change in assets and liabilities:
Receivables, net (4,076) 3,770 (2,795)
Inventories 9,734 (7,232) 1,586
Coal contract settlement (13,295) - -
Accounts payable (185) 4,739 (2,777)
Accrued taxes (1,837) 2,387 785
Refunds from gas suppliers 1,545 12 290
Refunds to customers (412) (3,499) (3,674)
Accrued coal liability 8,749 - -
Other 7,120 (1,886) 1,564
Net cash provided by operating
activities 90,302 70,309 69,598
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (72,487) (49,203) (34,733)
Demand side management program
expenditures (4,530) (1,920) (962)
Investments in leveraged leases (2,769) - -
Purchases of investments (6,569) (20,532) (23,995)
Sales of investments 7,016 21,570 23,981
Investments in partnerships (2,488) (2,476) (2,723)
Change in nonutility property (862) (1,258) (440)
Other 307 1,031 247
Net cash used in investing activities (82,382) (52,788) (38,625)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds 155,000 - -
Preferred stock - 7,500 -
Dividends paid (26,391) (25,737) (24,844)
Reduction in preferred stock
and long-term debt (104,500) (7,685) (110)
Change in environmental improvement
funds held by Trustee (22,613) - -
Change in notes payable 7,610 4,426 (1,224)
Other (5,849) (496) (158)
Net cash provided (used)
in financing activities 3,257 (21,992) (26,336)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 11,177 (4,471) 4,637
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,328 7,799 3,162
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 14,505 $ 3,328 $ 7,799
The accompanying Notes to Consolidated Financial Statements are an integral
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CONSOLIDATED BALANCE SHEETS
December 31,
1993 1992
(in thousands)
ASSETS
Utility Plant, at original cost:
Electric $879,476 $865,862
Gas 107,100 103,138
________ ________
986,576 969,000
Less-Accumulated provision for depreciation 423,730 391,541
________ ________
562,846 577,459
Construction work in progress 72,615 19,668
Net Utility Plant 635,461 597,127
Other Investments and Property:
Investments in leveraged leases 34,924 32,332
Investments in partnerships 25,023 22,851
Environmental improvement funds
held by Trustee 22,613 -
Nonutility property and other 7,997 7,135
________ ________
90,557 62,318
Current Assets:
Cash and cash equivalents 5,756 3,328
Restricted cash 8,749 -
Temporary investments, at cost which
approximates market 6,540 6,988
Receivables, less allowance of $166
and $136, respectively 28,360 24,284
Inventories 38,189 47,923
Other current assets 3,047 2,460
________ ________
90,641 84,983
Deferred Charges:
Coal contract settlement 13,295 -
Unamortized premium on reacquired debt 7,100 3,118
Postretirement benefits other than pensions 4,125 -
Demand side management program 7,411 2,881
Other deferred charges 11,433 10,854
________ ________
43,364 16,853
________ ________
$860,023 $761,281
The accompanying Notes to Consolidated Financial Statements are an integral
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December 31,
1993 1992
(in thousands)
SHAREHOLDERS' EQUITY AND LIABILITIES
Common Stock $102,691 $102,691
Retained Earnings 204,058 190,796
________ ________
306,749 293,487
Less Treasury Stock, at cost 24,540 24,540
________ ________
Common Shareholders' Equity 282,209 268,947
Cumulative Nonredeemable Preferred Stock 11,090 11,090
Cumulative Redeemable Preferred Stock 7,500 7,500
Cumulative Special Preferred Stock 1,015 1,015
Long-Term Debt, net of current maturities 261,100 198,764
Long-Term Partnership Obligations,
net of current maturities 12,881 13,255
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 575,795 500,571
Current Liabilities:
Current Portion of Adjustable Rate
Bonds Subject to Tender 41,475 31,500
Current Maturities of Long-Term Debt, Interim Financing,
and Long-Term Partnership Obligations:
Maturing long-term debt 763 20,859
Notes payable 11,000 5,000
Partnership obligations 3,849 2,859
Total current maturities of long-term
debt, interim financing, and
long-term partnership obligations 15,612 28,718
Other Current Liabilities:
Accounts payable 33,753 33,938
Dividends payable 135 135
Accrued taxes 7,931 9,768
Accrued interest 4,517 5,117
Refunds to customers 3,398 2,537
Accrued coal liability 8,749 -
Other accrued liabilities 10,041 6,554
Total other current liabilities 68,524 58,049
Total current liabilities 125,611 118,267
Deferred Credits and Other:
Accumulated deferred income taxes 117,267 113,138
Accumulated deferred investment tax credits, being
amortized over lives of property 26,549 28,416
Regulatory income tax liability 7,197 -
Postretirement benefits other
than pensions 4,125 -
Other 3,479 889
________ ________
158,617 142,443
________ ________
$860,023 $761,281
The accompanying Notes to Consolidated Financial Statements are an integral
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December 31,
1993 1992
(in thousands)
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 16,815,604 shares $102,691 $102,691
Retained Earnings, $2,209,642 restricted
as to payment of cash dividends on
common stock 204,058 190,796
________ ________
306,749 293,487
Less Treasury Stock, at cost,
1,110,177 shares 24,540 24,540
________ ________
282,209 268,947
PREFERRED STOCK
Cumulative, $100 par value, authorized
800,000 shares, issuable in series:
Nonredeemable
4.8% Series, outstanding 85,895 shares,
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares,
callable at $101 per share 2,500 2,500
________ ________
11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 shares,
redeemable at $100 per share
December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series,
outstanding 10,150 shares, redeemable
at $100 per share 1,015 1,015
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 254,740 194,315
Notes payable 7,263 5,456
Unamortized debt premium and discount, net (903) (1,007)
________ ________
261,100 198,764
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 12,881 13,255
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
BONDS SUBJECT TO TENDER, DUE
2015, Series A, presently 5.75% 9,975 -
2015, Series B, presently 2.7% 31,500 31,500
________ ________
41,475 31,500
Total capitalization, including
bonds subject to tender $617,270 $532,071
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
for the years ended December 31,
1993 1992 1991
(in thousands)
Balance Beginning of Period $190,796 $180,291 $166,622
Net income 39,653 36,767 38,513
________ ________ ________
230,449 217,058 205,135
Preferred Stock Dividends 1,105 1,235 1,281
Common Stock Dividends ($1.61 per share
in 1993, $1.56 per share in 1992,
and $1.50 per share in 1991) 25,286 24,502 23,563
Capital Stock Expenses - 525 -
________ ________ ________
26,391 26,262 24,844
Balance End of Period (See Consolidated
Statements of Capitalization
for restriction) $204,058 $190,796 $180,291
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Southern Indiana Properties, Inc. All significant intercompany transactions and balances have been eliminated.
CUSTOMER RECEIVABLES, SALES, AND TRANSPORTATION REVENUES
The Company's customer receivables, gas and electric sales, and gas transportation revenues are primarily derived from supplying electricity and natural gas to a broadly diversified base of residential, commercial, and industrial customers located in a southwestern region of Indiana. The Company serves 118,163 electric customers in the city of Evansville and 74 other communities and serves 100,398 gas customers in the city of Evansville and 63 other communities.
UTILITY PLANT
Utility plant is stated at the historical original cost of construction. Such cost includes payroll-related costs such as taxes, pensions, and other fringe benefits, general and administrative costs, and an allowance for the cost of funds used during construction (AFUDC), which represents the estimated debt and equity cost of funds capitalized as a cost of construction. While capitalized AFUDC does not represent a current source of cash, it does represent a basis for future cash revenues through depreciation and return allowances. The weighted average AFUDC rate (before income tax) used by the Company was 10.5% in 1993, 11.5% in 1992, and 11.2% in 1991.
DEPRECIATION
Depreciation of utility plant is provided using the straight-line method over the estimated service lives of the depreciable plant. Provisions for depreciation, expressed as an annual percentage of the cost of average depreciable plant in service, were 4.0% for electric and 3.7 % for gas in 1993, 4.0% for electric and 3.9% for gas in 1992, and 4.0% for both electric and gas in 1991.
INCOME TAXES
The Company utilizes a comprehensive interperiod income
tax allocation policy, providing deferred taxes on temporary
timing differences. Investment tax credits recorded have
been deferred and are amortized through credits to income
over the lives of the related property.
Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires an
asset and liability approach for financial accounting and
reporting for income taxes rather than the deferred method.
The new standard requires the Company to establish deferred
tax assets and liabilities, as appropriate, for all
temporary differences and to adjust deferred tax balances to
reflect changes in tax rates expected to be in effect during
the periods the temporary differences reverse. In the first
quarter of 1993, because of the effects of rate regulation,
the Company recorded an increase of $4,987,000 in deferred
tax assets and a decrease of $8,551,000 in deferred tax
liabilities, and established a corresponding regulatory
liability of $13,538,000, primarily to recognize the
probable future reduction in rates to flow back to customers
deferred taxes previously collected in excess of current tax
rates. The adoption of this standard did not have a
material impact on results of operations, cash flow, or
financial position.
The components of the net deferred income tax liability
at January 1, 1993 and December 31, 1993 are as follows:
January 1 December 31
(in thousands)
Deferred Tax Liabilities:
Depreciation and cost recovery
timing differences $96,460 $100,796
Deferred fuel costs, net 257 5,307
Leveraged leases 25,112 27,064
Regulatory assets recoverable through
future rates 26,246 27,660
Deferred Tax Assets:
Unbilled revenue (6,428) (6,149)
Regulatory liabilities to be settled
through future rates (39,784) (34,857)
Other, net (2,264) (2,554)
Net deferred income tax liability $99,599 $117,267
|
Of the $17,668,000 increase in the net deferred income
tax liability from January 1, 1993 to December 31, 1993,
$11,263,000 is due to current year deferred federal and
state income tax expense and the remaining $6,405,000
increase is primarily a result of the decrease in the net
regulatory liability.
The components of current and deferred income tax
expense for the years ended December 31 are as follows:
1993 1992 1991
(in thousands)
Current
Federal $ 9,320 $16,152 $17,967
State 1,497 2,543 2,732
Deferred, net
Federal 7,958 (624) 252
State 1,418 292 323
Investment tax credit, net (1,868) (1,873) (1,877)
Income tax expense as shown on Consolidated
Statements of Income 18,325 16,490 19,397
Current income tax expense included
in Other Income (3,608) (3,203) (4,087)
Deferred income tax expense included
in Other Income 1,887 1,322 3,111
Total income tax expense $16,604 $14,609 $18,421
|
The components of deferred federal and state income tax expense for the years ended December 31 are as follows:
1993 1992 1991
(in thousands)
Depreciation and cost recovery
timing differences $ 3,924 $1,234 $1,858
Debt component of deferred return
on A. B. Brown Unit 2 - (37) (357)
Deferred fuel costs 5,593 340 (21)
Unbilled revenue 43 (1,054) (359)
Leveraged leases 1,887 1,322 2,905
Other, net (184) (815) (340)
Total deferred federal and state
income tax expense $11,263 $ 990 $3,686
|
As a result of the Omnibus Budget Reconciliation Act of 1993, signed into law on August 10, 1993, the Company provided additional income tax expense of $524,000 in 1993 to recognize the impact of the 1% increase in federal income tax rates. A reconciliation of the statutory tax rates to the Company's effective income tax rate for the years ended December 31 is as follows:
1993 1992 1991
Statutory federal and state rate 37.9% 37.0% 37.0%
Equity portion of allowance for funds
used during construction (2.1) (0.7) (0.6)
Equity portion of deferred return
on A. B. Brown Unit 2 - 0.1 0.9
Book depreciation over related tax
depreciation-nondeferred 1.9 2.0 2.2
Amortization of deferred investment
tax credit (3.3) (3.7) (3.3)
Low income housing credit (4.4) (4.3) (2.3)
Other, net (0.5) (2.0) (1.5)
Effective tax rate 29.5% 28.4% 32.4%
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PENSION PLANS
The Company has trusteed, noncontributory defined
benefit plans which cover eligible full-time regular
employees. The plans provide retirement benefits based on
years of service and the employee's highest 60 consecutive
months' base compensation during the last 120 months of
employment. The funding policy of the Company is to
contribute amounts to the plans equal to at least the
minimum funding requirements of the Employee Retirement
Income Security Act of 1974 (ERISA) but not in excess of the
maximum deductible for federal income tax purposes. The
plans' assets as of December 31, 1993 consist of investments
in interest bearing obligations and common stocks of 51% and
49%, respectively.
The components of net pension cost for the years ended
December 31 are as follows:
1993 1992 1991
(in thousands)
Service cost - benefits earned
during the period $ 1,454 $ 1,408 $ 1,324
Interest cost on projected
benefit obligation 3,605 3,390 3,152
Actual return on plan assets (2,669) (3,060) (9,759)
Net amortization and deferral (1,712) (1,319) 6,071
Net pension cost $ 678 $ 419 $ 788
|
Part of the pension cost is charged to construction and other accounts.
The funded status of the retirement plans at December 31 is as follows:
1993 1992
(in thousands)
Actuarial present value of:
Vested benefit obligation $44,502 $37,538
Accumulated benefit obligation $44,742 $37,605
Plan assets at fair value $51,869 $51,559
Projected benefit obligation 56,230 46,075
(Deficit)excess of assets over projected
benefit obligation (4,361) 5,484
Remaining unrecognized transitional asset (3,904) (4,322)
Unrecognized net loss (gain) 5,621 (3,205)
Accrued pension liability $(2,644) $(2,043)
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The projected benefit obligation at December 31, 1992 was determined using an assumed discount rate of 8%. Due to the decline in yields on high quality fixed income investments, a discount rate of 7% was used to determine the projected benefit obligation at December 31, 1993. For both periods, the long-term rate of compensation increases was assumed to be 5%, and the long-term rate of return on plan assets was assumed to be 8%. The transitional asset is being recognized over approximately 15, 18, and 14 years for the Salaried, Hourly, and Hoosier plans, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain postretirement health care
and life insurance benefits for retired employees and their
dependents through fully insured plans. Retired employees
are eligible for lifetime medical and life insurance
coverage if they retire on or after attainment of age 55,
regardless of length of service. Their spouses are eligible
for medical coverage until age 65. Prior to age 65,
retirees are covered by the same insured health care plans
provided to active employees. After attaining age 65, the
retirees are covered by insured Medicare supplement plans.
Additionally, the Company reimburses the retirees for
Medicare Part B premiums incurred. The health care plans
pay stated percentages of covered medical expenses incurred,
after subtracting payments by Medicare or other providers
and after a stated deductible has been met. Prior to 1993,
the cost of retiree health care and life insurance benefits
was recognized as insurance premiums were paid, which was
consistent with current ratemaking practices. The costs for
retirees totaled $670,000 and $598,000 in 1992 and 1991,
respectively.
Effective January 1, 1993, the Company adopted SFAS No.
106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires the expected cost of
these benefits be recognized during the employees' years of
service. The actuarial assumptions and calculations
involved in determining the recognized costs closely
parallel pension accounting requirements. As authorized by
the Indiana Utility Regulatory Commission in a December 30,
1992 generic ruling, the Company is deferring as a
regulatory asset the additional SFAS No. 106 costs accrued
over the costs of benefits actually paid after date of
adoption, but prior to inclusion in rates. As required by
the generic order, the Company anticipates including the
additional costs of the benefits in rates within four years
after date of adoption of SFAS No. 106.
The components of the net periodic other postretirement
benefit cost for the year ended December 31, 1993, is as
follows:
(in thousands) Service cost-benefits earned during the period $ 924 Interest cost on accumulated benefit obligation 2,463 Amortization of transition obligation 1,472 Net periodic postretirement benefit cost $4,859 Deferred postretirement benefit obligation 4,125 Charged to operations and construction $ 734 |
The 1993 cost determined under the new standard
includes the amortization of the discounted present value of
the obligation at the adoption date, $29,400,000, over a 20
year period.
Reconciliation of the accumulated postretirement
benefit obligation to the accrued liability for
postretirement benefits as of January 1, 1993 and December
31, 1993, is as follows:
January 1 December 31
(in thousands)
Accumulated other postretirement
benefit obligation:
Retirees $12,159 $13,096
Other fully eligible participants 6,013 7,120
Other active participants 11,262 15,725
Total accumulated benefit obligation 29,434 35,941
Unrecognized transition obligation (29,434) (27,962)
Unrecognized net loss - (3,854)
Accrued postretirement benefit liability $ - $ 4,125
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The assumptions used to develop the accumulated postretirement benefit obligation at January 1, 1993 included a discount rate of 8.5% and a health care cost trend rate applicable to gross eligible charges of 14% in 1993 declining to 6% in 2008, and remaining level thereafter. Due to the decline in yields on high quality fixed income investments and general inflation, a discount rate of 7.25% and a health care cost trend rate of 13.5% in 1994 declining to 5.5% in 2008 were used to determine the accumulated postretirement benefit obligation at December 31, 1993. The estimated cost of these future benefits could
be significantly impacted by future changes in health care costs, work force demographics, interest rates, or plan changes. A 1% increase in the assumed health care cost trend rate each year would increase the aggregate service and interest costs for 1993 by $900,000 and the accumulated postretirement benefit obligation by $4,700,000. The Company currently anticipates continuing its policy of funding postretirement benefits costs other than pensions as incurred.
POSTEMPLOYMENT BENEFITS
In November 1992, the FASB issued SFAS No. 112,
"Employers' Accounting for Postemployment Benefits", which
will require the Company to accrue the estimated cost of
benefits provided to former or inactive employees after
employment but before retirement.
The Company will adopt SFAS No. 112 on January 1,
1994. The impact of the new statement will not have a
material impact on financial position or results of
operations.
CASH FLOW INFORMATION
For the purposes of the Consolidated Balance Sheets and
the Consolidated Statements of Cash Flows, the Company
considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash
equivalents.
The Company, during 1993, 1992, and 1991, paid interest
(net of amounts capitalized) of $18,359,000, $17,890,000,
and $18,502,000, respectively, and income taxes of
$10,248,000, $14,291,000, and $18,289,000, respectively.
The Company is involved in several partnerships which are
partially financed by partnership obligations amounting to
$16,730,000 and $16,114,000 at December 31, 1993 and 1992,
respectively.
INVENTORIES
The Company accounts for its inventories under the
average cost method except for gas in underground storage
which is accounted for under two inventory methods: the
average cost method for the Company's Hoosier Division
(formerly Hoosier Gas Corporation) and the last-in, first-
out (LIFO) method for all other gas in storage. Inventories
at December 31 are as follows:
1993 1992
(in thousands)
Fuel (coal and oil) for electric generation $14,533 $24,718
Materials and supplies 13,720 13,686
Gas in underground storage - at LIFO cost 6,907 6,601
- at average cost 3,029 2,918
Total inventories $38,189 $47,923
|
Based on the December 1993 price of gas purchased, the cost of replacing the current portion of gas in underground storage exceeded the amount stated on a LIFO basis by approximately $12,400,000 at December 31, 1993.
OPERATING REVENUES AND FUEL COSTS
Revenues include all gas and electric service billed
during the year except as discussed below.
All metered gas rates contain a gas cost adjustment
clause which allows for adjustment in charges for changes in
the cost of purchased gas. As ordered by the IURC, the
calculation of the adjustment factor is based on the
estimated cost of gas in a future quarter. The order also
provides that any under- or overrecovery caused by variances
between estimated and actual cost in a given quarter, as
well as refunds from its pipeline suppliers, will be
included in adjustment factors of four future quarters
beginning with the second succeeding quarter's adjustment
factor.
All metered electric rates contain a fuel adjustment
clause which allows for adjustment in charges for electric
energy to reflect changes in the cost of fuel and the net
energy cost of purchased power. As ordered by the IURC, the
calculation of the adjustment factor is based on the
estimated cost of fuel and the net energy cost of purchased
power in a future quarter. The order also provides that any
under- or overrecovery caused by variances between estimated
and actual cost in a given quarter will be included in the
second succeeding quarter's adjustment factor.
The Company also collects through a quarterly rate
adjustment mechanism, the margin on electric sales lost due
to the implementation of demand side management programs.
Reference is made to "Demand Side Management" in
Management's Discussion and Analysis of Operations and
Financial Condition for further discussion.
The Company records monthly any under- or overrecovery
as an asset or liability, respectively, until such time as
it is billed or refunded to its customers. The IURC reviews
for approval the adjustment clauses on a quarterly basis.
The cost of gas sold is charged to operating expense as delivered to customers and the cost of fuel for electric generation is charged to operating expense when consumed.
2. REGULATORY AND OTHER MATTERS
The IURC has jurisdiction over all investor-owned gas
and electric utilities in Indiana. The FERC has
jurisdiction over those investor-owned utilities that make
wholesale energy sales. These agencies regulate the
Company's utility business operations, rates, accounts,
depreciation allowances, services, security issues, and the
sale and acquisition of properties.
On July 21, 1993, the IURC approved an overall increase
of approximately 8%, or $5.5 million in revenues, in the
Company's base gas rates. The increase is to be implemented
in two equal steps. The first step of the rate adjustment,
approximately 4%, took place August 1, 1993; the second step
will become effective August 1, 1994.
On May 24, 1993, the Company petitioned the IURC for an
adjustment in its base electric rates representing the first
step in the recovery of the financing costs on its
investment through March 31, 1993 in the Clean Air Act
Compliance project presently being constructed at the Culley
Generating Station. The majority of the costs are for the
installation of a sulfur dioxide scrubber on Culley Units 2
and 3. On September 15, 1993, the IURC granted the
Company's request for a 1% revenue increase (approximately
$1,800,000 on an annual basis), which took effect October 1,
1993. The Company anticipates petitioning the IURC in
February 1994 for a 2-3% increase for financing costs
related to project construction expenditures incurred since
April 1, 1993, with implementation of the new rates
effective mid-1994.
On December 22, 1993, the Company filed a request with
the IURC for a general electric rate increase. This
adjustment, expected to occur in early 1995, is estimated to
be 6-9% and is necessary to recover financing costs related
to the balance of the scrubber project construction
expenditures, costs related to the operation of the
scrubber, and certain nonscrubber-related costs such as
additional costs incurred for postretirement benefits other
than pensions beginning in 1993 and the recovery of demand
side management program expenditures.
In April 1992, the Federal Energy Regulatory Commission
(FERC) issued Order No. 636 (the Order) which required
interstate pipelines to restructure their services. In
August 1992, the FERC issued Order No. 636-A which
substantially reaffirmed the content of the original Order.
On November 2, 1992, the Company's major pipeline , Texas
Gas Transmission Corporation (TGTC), filed a recovery
implementation plan with the FERC as part of its revised
compliance filing regarding the Order. On October 1, 1993,
the FERC accepted, subject to certain conditions, the TGTC
recovery implementation plan.
Under the new TGTC transportation tariffs, which became
effective November 1, 1993, the Company will incur
additional annual demand-related charges of approximately
$1.9 million. Savings from lower volume-related
transportation costs will partially offset the additional
charges. TGTC has not yet determined the Company's
allocation of transition costs, however, an estimate of such
costs and implementation of revised TGTC tariffs to recover
such costs, are expected during the first quarter of 1994.
Due to the anticipated regulatory treatment at the state
level, the Company does not expect the Order to have a
detrimental effect on its financial condition or results of
operations.
Over the past several years, the Company has been
involved in contract negotiations and legal actions to
reduce its coal costs. During 1992, the Company
successfully negotiated a new coal supply contract with a
major supplier which was retroactive to 1991 and effective
through 1995. In 1993, the Company exercised a provision of
the agreement which allowed the Company to reopen the
contract for the modification of certain coal
specifications. In response, the coal supplier elected to
terminate the contract enabling the Company to buy out the
remainder of its contractual obligations and acquire lower
priced spot market coal.
The cost of the contract buyout in 1993, which was
based on estimated tons of coal to be consumed during the
agreement period, and related legal and consulting services,
totaled approximately $18 million. The Company anticipates
that $2 million in additional buyout costs for actual tons
of coal consumed above the previously estimated amount may
be incurred during the 1994-1995 period. On September 22,
1993, the IURC approved the Company's request to amortize
all buyout costs to coal inventory during the period July 1,
1993 through December 31, 1995 and to recover such costs
through the fuel adjustment clause beginning February 1994.
As of December 31, 1993, $13,295,000 of settlement costs
paid to date had not yet been amortized to coal inventory.
The Company is currently in litigation with another
coal supplier in an attempt to restructure an existing
contract. Under the terms of the contract, the Company
was allegedly obligated to take 600,000 tons of coal
annually. In early 1993, the Company informed the supplier
that it would not require shipments under the contract until
later in 1993. On March 26, 1993, the Company and the
supplier agreed to resume coal shipments under the terms of
their original contract except the invoiced price per ton
would be substantially lower than the contract price. As
approved by the IURC, the Company has charged the full
contract price to coal inventory for subsequent recovery
through the fuel adjustment clause. The difference between
the contract price and the invoice price has been deposited
in an escrow account with an offsetting accrued liability
which will be paid to either the Company's ratepayers or its
coal supplier upon resolution of the litigation. The
escrowed amount was $8,749,000 at December 31, 1993. This
litigation is scheduled for trial in June of 1994. Since
the litigation arose due to the Company's efforts to reduce
fuel costs, management believes that any related costs
should be recoverable through the regulatory ratemaking
process.
In late 1993, in a further effort to reduce coal
costs, the Company and the supplier entered into a letter
agreement, effective January 1, 1994, and until the
litigation is settled, whereby the Company will purchase an
additional 50,000 tons monthly above the alleged base
requirements at a price lower than the original contract
price for tons over 50,000 per month. Reference is made to
"Rate and Regulatory Matters" in Management's Discussion and Analysis of Operations and Financial Condition for further discussion.
3. SOUTHERN INDIANA PROPERTIES, INC.
Southern Indiana Properties, Inc. (SIPI), a wholly-
owned subsidiary, was formed to conduct nonutility
investment activities while segregating such activities from
the Company's regulated utility business. Net income for
the years 1993, 1992, and 1991 was $2,525,000, $2,321,000,
and $1,936,000, respectively, and is included in "Other,
net" in the Consolidated Statements of Income. SIPI
investment activities consist principally of investments in
partnerships (primarily in real estate), leveraged leases,
and marketable securities.
SIPI is a lessor in four leveraged lease agreements
under which an office building, a part of a reservoir, an
interest in a paper mill, and passenger railroad cars are
leased to third parties. The economic lives and lease terms
vary with the leases. The total equipment and facilities
cost was approximately $101,200,000 and $83,400,000 at
December 31, 1993 and 1992, respectively. The cost of the
equipment and facilities was partially financed by
nonrecourse debt provided by lenders, who have been granted
an assignment of rentals due under the leases and a security
interest in the leased property, which they accept as their
sole remedy in the event of default by the lessee. Such
debt amounted to approximately $78,700,000 and $63,700,000
at December 31, 1993 and 1992, respectively. The Company's
net investment in leveraged leases at those dates was
$8,184,000 and $7,191,000, respectively, as shown:
1993 1992
(in thousands)
Minimum lease payments receivable $64,120 $64,046
Estimated residual value 22,095 18,544
Less: Unearned income 51,291 50,258
Investment in lease financing receivables and loans 34,924 32,332
Less: Deferred taxes arising from leveraged leases 26,740 25,141
Net investment in leveraged leases $ 8,184 $ 7,191
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4. SHORT-TERM FINANCING
The Company has trust demand note arrangements totaling
$17,000,000 with several banks, of which $11,000,000 was
utilized at December 31, 1993. Funds are also borrowed from
time to time from banks on a short-term basis, made
available through lines of credit. These available lines of
credit totaled $10,000,000 at December 31, 1993 of which
none was utilized at that date.
1993 1992 1991
(in thousands)
Notes Payable:
Balance at year end $11,000 $5,000 $ -
Weighted average interest rate on
year end balance 3.44% 3.59% -
Maximum amount outstanding during
the year $17,000 $9,000 $2,000
Average daily amount outstanding
during the year $ 6,992 $ 309 $ 52
Weighted average interest rate on
average daily amount outstanding
during the year 3.36% 3.91% 6.55%
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5. LONG-TERM DEBT
The annual sinking fund requirement of the Company's
first mortgage bonds is 1% of the greatest amount of bonds
outstanding under the Mortgage Indenture. This requirement
may be satisfied by certification to the Trustee of unfunded
property additions in the prescribed amount as provided in
the Mortgage Indenture. The Company intends to meet the
1994 sinking fund requirement by this means and,
accordingly, the sinking fund requirement for 1994 is
excluded from current liabilities on the balance sheet. At
December 31, 1993, $106,887,000 of the Company's utility
plant remained unfunded under the Company's Mortgage
Indenture.
Several of the Company's partnership investments have
been financed through obligations with such partnerships.
Additionally, the Company's investments in leveraged leases
have been partially financed through notes payable to banks.
Of the amount of first mortgage bonds, notes payable, and
partnership obligations outstanding at December 31, 1993,
the following amounts mature in the five years subsequent to
1993: 1994 - $4,612,000; 1995 - $11,143,000; 1996 -
$12,394,000; 1997 - $2,672,000; and 1998 - $16,577,000.
In addition, $41,475,000 of adjustable rate pollution
control series first mortgage bonds could, at the election
of the bondholder, be tendered to the Company in 1994 on
certain interest payment dates. If the Company's agent is
unable to remarket any bonds tendered at that time, the
Company would be required to obtain additional funds for
payment to bondholders. For financial statement
presentation purposes those bonds subject to tender in 1994
are shown as current liabilities.
First mortgage bonds, notes payable, and partnership
obligations outstanding and classified as long-term at
December 31 are as follows:
1993 1992
(in thousands)
First Mortgage Bonds due:
1995, 4-3/4% $ 5,000 $ 5,000
1996, 6% 8,000 8,000
1998, 6-3/8% 12,000 12,000
1999, 6% 45,000 -
2001, 8% - 7,500
2002, 8% - 12,000
2003, 5.60% Pollution Control Series A 5,240 5,340
2007, 8.35% - 30,000
2008, 6.05% Pollution Control Series A 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8-7/8% 25,000 25,000
2016, 9-1/4% - 15,000
2017, 8-5/8% - 20,000
2023, 7.60% 45,000 -
2025, 7-5/8% 20,000 -
Adjustable Rate Pollution Control:
2015, Series A, presently 5.75% - 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 -
2028, Series A, presently 4.65% 22,200 -
$254,740 $194,315
Notes Payable:
Banks, due 1995 through 1998, presently 6% to 8% $ 6,263 $ 4,456
Tax Exempt, due 2003, 6.25% 1,000 1,000
$ 7,263 $ 5,456
Partnership Obligations, due 1995 through 2001,
without interest $ 12,881 $ 13,255
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6. CUMULATIVE PREFERRED STOCK
The amount payable in the event of involuntary
liquidation of each series of the $100 par value preferred
stock is $100 per share, plus accrued dividends.
The nonredeemable preferred stock is callable at the
option of the Company as follows:
4.8% Series at $110 per share, plus accrued
dividends; and
4.75% Series at $101 per share, plus accrued
dividends.
7. CUMULATIVE REDEEMABLE PREFERRED STOCK
On December 8, 1992, the Company issued $7,500,000 of its Cumulative Redeemable Preferred Stock to replace a like amount of 8.75% of Cumulative Preferred Stock. The new series has an interest rate of 6.50% and is redeemable at $100 per share on December 1, 2002. In the event of involuntary liquidation of this series of $100 par value preferred stock, the amount payable is $100 per share, plus accrued dividends.
8. CUMULATIVE SPECIAL PREFERRED STOCK
The Cumulative Special Preferred Stock contains a provision which allows the stock to be tendered on any of its dividend payment dates. On April 1, 1992, the Company repurchased 850 shares of the Cumulative Special Preferred Stock at a cost of $85,000 as a result of a tender within the provision of the issuance. On March 8, 1991, the Company repurchased 100 shares at a cost of $10,000 as a result of the same provision.
9. COMMITMENTS AND CONTINGENCIES
The Company presently estimates that approximately
$90,000,000 will be expended for construction purposes in
1994, including those amounts applicable to the Company's
Clean Air Act Compliance Plan and demand side management
(DSM) programs. Commitments for the 1994 construction
program are approximately $44,000,000 at December 31, 1993.
Reference is made to "Clean Air Act" and "Demand Side
Management" in Management's Discussion and Analysis of
Operations and Financial Condition for discussion of the
impact of the Federal Clean Air Act and implementation of
the Company's DSM programs.
The Company is currently investigating the possible
existence of facilities once owned and operated by the
Company, its predecessors, previous landowners, or former
affiliates of the Company utilized for the manufacture of
gas. Based on its investigations, the Company has
identified the existence and general location of four sites
at which contamination may be present. The Company is
attempting to identify all potentially responsible parties
for each site. The Company has not been named a potentially
responsible party by the Environmental Protection Agency for
any of these sites.
While the Company intends to seek recovery from other
responsible parties or insurance carriers, the Company does
not presently anticipate seeking recovery of these
investigation costs from its ratepayers. Therefore, the
Company has expensed the $500,000 anticipated cost of
performing preliminary and comprehensive specific site
investigations of all four sites. If the specific site
investigations indicate that significant remedial action is
required, the Company will seek recovery of all related
costs in excess of amounts recovered from other potentially
responsible parties or insurance carriers through rates.
Although the IURC has not yet ruled on a pending
request for rate recovery by another Indiana utility of such
environmental costs, the IURC did grant that utility
authority to utilize deferred accounting for such costs
until the IURC rules on the request.
10. COMMON STOCK
Since 1986, the Board of Directors of the Company authorized the repurchase of up to $25,000,000 of the Corporation's common stock. As of December 31, 1993, the Company had accumulated 1,110,177 common shares with an associated cost of $24,540,000 under this plan.
On January 21, 1992, the Board of Directors of the
Company approved a four-for-three common stock split
effective March 30, 1992. The stock split was authorized by
the IURC on March 18, 1992. Average common shares
outstanding, earnings per share of common stock and
dividends per share of common stock as shown in the
accompanying financial statements have been adjusted to
reflect the split. Shares issued during 1992 as a result of
the stock split were 3,923,706. No shares of common stock
were issued during 1993 and 1991.
Each outstanding share of the Company's stock contains
a right which entitles registered holders to purchase from
the Company one one-hundredth of a share of a new series of
the Company's Redeemable Preferred Stock, no par value,
designated as Series 1986 Preferred Stock, at an initial
price of $120.00 (Purchase Price) subject to adjustment.
The rights will not be exercisable until a party acquires
beneficial ownership of 20% of the Company's common shares
or makes a tender offer for at least 30% of its common
shares. The rights expire October 15, 1996. If not
exercisable, the rights in whole may be redeemed by the
Company at a price of $.01 per right at any time prior to
their expiration. If at any time after the rights become
exercisable and are not redeemed and the Company is involved
in a merger or other business combination transaction,
proper provision shall be made to entitle a holder of a
right to buy common stock of the acquiring company having a
value of two times such Purchase Price.
11. OWNERSHIP OF WARRICK UNIT 4
The Company and Alcoa Generating Corporation (AGC), a subsidiary of Aluminum Company of America, own the 270 MW Unit 4 at the Warrick Power Plant as tenants in common. Construction of the unit was completed in 1970. The cost of constructing this unit was shared equally by AGC and the Company, with each providing its own financing for its share of the cost. The Company's share of the cost of this unit at December 31, 1993 is $30,733,000 with accumulated depreciation totaling $17,846,000. AGC and the Company also share equally in the cost of operation and output of the unit. The Company's share of operating costs is included in operating expenses in the Consolidated Statements of Income.
12. SEGMENTS OF BUSINESS
The Company is primarily a public utility operating company engaged in distributing electricity and natural gas.
The reportable items for electric and gas departments for the years ended December 31 are as follows:
1993 1992 1991
(in thousands)
OPERATING INFORMATION-
Operating revenues:
Electric $258,405 $243,077 $263,887
Gas 70,116 62,870 58,695
Total 328,521 305,947 322,582
Operating expenses, excluding
provision for income taxes:
Electric 188,875 176,371 193,200
Gas 69,679 62,167 56,829
Total 258,554 238,538 250,029
Pre-tax operating income:
Electric 69,530 66,706 70,687
Gas 437 703 1,866
Total 69,967 67,409 72,553
Allowance for funds used during
construction 4,517 1,422 1,467
Other income, net 1,729 1,220 2,611
Interest charges (19,956) (18,675) (19,697)
Provision for income taxes (16,604) (14,609) (18,421)
Net income per accompanying
Consolidated Statements of Income $ 39,653 $ 36,767 $ 38,513
OTHER INFORMATION -
Depreciation and amortization expense:
Electric $ 33,481 $ 32,786 $ 33,579
Gas 3,458 3,427 3,216
Total $ 36,939 $ 36,213 $ 36,795
Capital expenditures:
Electric <F1> $ 74,182 $ 44,387 $ 28,967
Gas 5,927 7,723 7,702
Total $ 80,109 $ 52,110 $ 36,669
INVESTMENT INFORMATION -
Identifiable assets:<F2>
Electric $679,044 $596,836 $577,014
Gas 87,632 84,752 85,277
Total $766,676 $681,588 $662,291
Nonutility plant and other investments 67,944 62,318 62,263
Assets utilized for overall Company
operations 25,403 17,375 22,891
Total assets $860,023 $761,281 $747,445
<F1>(a) Includes $4,530,000, $1,920,000, and $962,000 of demand side
management program expenditures for 1993, 1992, and 1991, respectively.
<F2>(b) Utility plant less accumulated provision for depreciation,
inventories, receivables (less allowance), and other identifiable assets.
|
13. TAXES OTHER THAN INCOME TAXES
The items comprising property and other taxes for the
years ended December 31 are as follows:
1993 1992 1991
(in thousands)
Real estate and personal property $ 7,168 $ 8,479 $ 6,480
Indiana gross income 4,078 3,686 3,901
Social security and unemployment 1,707 1,591 1,571
Other 494 454 486
Property and other taxes as shown on
Consolidated Statements of Income 13,447 14,210 12,438
Property and other taxes included
in Other Income 44 42 40
Total property and other taxes $13,491 $14,252 $12,478
|
14. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
CASH AND TEMPORARY INVESTMENTS
The carrying amount approximates fair value because of the short maturity of those investments. The fair value of temporary investments were based on current market values.
LONG-TERM DEBT
The fair value of the Company's long-term debt was estimated based on the current quoted market rate of utilities with a comparable debt rating. Nonutility long- term debt was valued based upon the most recent debt financing.
PARTNERSHIP OBLIGATIONS
The fair value of the Company's partnership obligations was estimated based on the current quoted market rate of comparable debt.
REDEEMABLE PREFERRED STOCK
Fair value of the Company's redeemable preferred stock
was estimated based on the current quoted market of
utilities with a comparable debt rating.
The carrying amount and estimated fair values of the
Company's financial instruments at December 31 are as
follows:
1993 1992
Carrying Estimated Carrying Estimated
Amount Fair ValueAmount Fair Value
(in thousands) (in thousands)
Cash and Temporary Investments $ 21,045 $ 21,268 $ 10,316 $ 10,346
Long-Term Debt (including
current portion) 304,241 323,776 252,130 263,549
Partnership Obligations 16,730 14,447 16,114 13,200
Redeemable Preferred Stock 7,500 7,135 7,500 7,500
|
At December 31, 1993 and 1992, approximately $19,100,000 and $11,200,000, respectively, represent the excess of fair value over carrying amounts of the Company's long-term debt relating to utility operations. Anticipated regulatory treatment of the excess of fair value over carrying amounts of the Company's long-term debt, if in fact settled at amounts approximating those above, would dictate that these amounts be used to reduce the Company's rates over a prescribed amortization period. Accordingly, any settlement would not result in a material impact on the Company's financial position or results of operations.
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited) Quarters Ended
March 31, June 30, September 30, December 31,
1993 1992 1993 1992 1993 1992 1993 1992
(in thousands except per share data)
Operating Revenues
$93,236 $84,737 $75,941 $70,839 $82,778 $74,815 $76,566 $75,556
Operating Income
$16,169 $15,185 $12,668 $13,798 $17,495 $14,957 $ 5,310 $ 6,979
Net Income
$12,733 $11,334 $ 9,188 $10,402 $14,819 $11,458 $ 2,913 $ 3,573
Earnings Per Share of Common Stock
$ 0.79 $ 0.70 $ 0.57 $ 0.64 $ 0.93 $ 0.71 $ 0.17 $ 0.21
Average Common Shares Outstanding
15,705 15,705 15,705 15,705 15,705 15,705 15,705 15,705
Information for any one quarterly period is not
indicative of the annual results which may be expected due
to seasonal variations common in the utility industry.
The quarterly earnings per share may not add to the
total earnings per share for the year due to rounding.
|
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
(a) Identification of Directors
The information required by this item is included in the Company's Proxy Statement, definitive copies of which were filed with the Commission pursuant to Regulation 14A.
(b) Identification of Executive Officers
The information required by this item is included in Part I, Item 1. - BUSINESS on page 9, to which reference is hereby made.
Item 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
The information required by this item is included in the Company's Proxy Statement, definitive copies of which were filed with the Commission pursuant to Regulation 14A.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included in the Company's Proxy Statement, definitive copies of which were filed with the Commission pursuant to Regulation 14A.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included in the Company's Proxy Statement, definitive copies of which were filed with the Commission pursuant to Regulation 14A.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1) The financial statements, including supporting
schedules, are listed in the Index to Financial
Statements, page 22,
(a) 2) filed as part of this report.
(a) 3) Exhibits:
EX-2(a) Merger Agreement - Plan of Reorganization
and Agreement of Merger, by and among: Southern
Indiana Gas and Electric Company; Southern
Indiana Group, Inc.; Horizon Investments,
Inc.; and MPM Investment Corporation, dated
August 27, 1987. (Physically filed and
designated as Exhibit A in Form S-4
Registration Statement filed November 12, 1987,
File No. 33-18475.)
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 herewith as EX-3(b).)
EX-4(a)*Mortgage and Deed of Trust dated as of April 1,
1932 between the 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 herewith
as EX-4(a).)
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 the 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 the Company. (Physically filed and
designated in Registration No. 2-41209 as
Exhibit 4(e)-2.)
|
*Pursuant to paragraph (b)(4)(iii)(a) of Item 601 of Regulation S-K, the Company 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 the Company, and has therefore not filed such documents as exhibits to this Form 10-K.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K (Continued)
EX-10.3 Letter Agreement, dated April 9, 1973, and
agreement dated April 30, 1973, between
Alcoa and the 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 the 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 the Company and Alcoa, which amends
Agreement for Sale in an Emergency of
Electrical Power and Energy Generation by
Alcoa and the 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 the Company.
(Physically filed and designated in Form 10-
K for the fiscal year 1980, File No. 1-3553,
as Exhibit (20)-1.)
EX-10.12* Agreement dated May 6, 1991 between the
Company and Ronald G. Reherman for
consulting services and supplemental pension
and disability benefits. (Physically filed
and designated in Form 10-K for the fiscal
year 1992, File No. 1-3553, as Exhibit 10-A-
12.)
EX-10.13* Agreement dated July 22, 1986 between the
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 the
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 the
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
the 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 the 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.)
|
* Filed pursuant to paragraph (b)(10)(iii)(A) of Item 601 of Regulation S-K.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K (Continued)
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 the 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* Company's Corporate Performance Incentive
Plan as amended for the plan year beginning
January 1, 1994. (Physically filed herewith
as Exhibit 10-A-20.)
|
* Filed pursuant to paragraph (b)(10)(iii)(A) of Item 601 of Regulation S-K.
(b) Reports on Form 8-K
No Form 8-K reports were filed by the Company during the fourth quarter of 1993.
SCHEDULE V
Column A Column B Column C Column D Column E Column F
Retirements
Balance Additions or Sales at Other Balance
Classification Jan. 1, At Cost Orig. Cost Changes Dec. 31,
1993 1993
(in thousands)
ELECTRIC PLANT:
Production:
Steam $519,788 $ 5,403 $ 540 $ 5 $ 524,656
Other 43,870 - - - 43,870
Transmission 94,610 2,555 215 (91) 96,859
Distribution 167,115 8,174 1,212 95 174,172
General 9,966 667 418 764) 9,451
Total
Electric Plant $853,349 $16,799 $2,385 $(755) $ 849,008<F1>
GAS PLANT:
Gas Prod. &
Gathering $ 54 $ - $ - $ - $ 54
Underground
Storage 7,933 245 - - 8,178
Transmission 11,854 229 58 34 12,059
Distribution 73,103 4,482 560 (34) 76,991
General 4,383 455 129 (693) 4,016
Total Gas Plant $ 97,327 $ 5,411 $ 747 $(693) $ 101,298<F1>
COMMON PLANT: $ 36,324 $ 416 $1,922 $1,452 $ 36,270
Plant in
Service $969,000 $22,626 $5,054 $ 4 $ 986,576
CONSTRUCTION WORK
IN PROGRESS $ 19,668 $52,947 $ - $ - $ 72,615
Total Utility
Plant $988,668 $75,573 $5,054 $ 4 $1,059,191
<F1>(a)Amounts do not agree with balance sheet totals as
common plant is allocated between electric and gas plant for
financial statement purposes.
NOTE:Depreciation of utility plant is computed using the
straight-line method over the estimated lives of depreciable
plant. The average depreciation rates for 1993 were:
Electric - 3.9%; Gas 3.6%; and Common - 6.1%.
/TABLE
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SCHEDULE V
Page 2 of 3
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
PROPERTY, PLANT AND EQUIPMENT
Year 1992
|
Column A Column B Column C Column D Column E Column F
Retirements
Balance Additions or Sales at Other Balance
Classification Jan. 1, At Cost Orig. Cost Changes Dec. 31,
1992 1992
(in thousands)
ELECTRIC PLANT:
Production:
Steam $516,533 $ 4,068 $ 481 $ (332) $519,788
Other 44,274 (404) - - 43,870
Transmission 88,390 6,850 598 (32) 94,610
Distribution 160,631 8,021 1,501 (36) 167,115
General 9,391 841 266 - 9,966
Total Electric
Plant $819,219 $19,376 $2,846 $ (400) $835,349 <F1>
GAS PLANT:
Gas Prod. &
Gathering $ 54 $ - $ - $ - $ 54
Underground
Storage 7,642 291 - - 7,933
Transmission 10,608 1,258 12 - 11,854
Distribution 69,273 4,479 641 (8) 73,103
General 4,129 464 210 - 4,383
Total Gas Plant $ 91,706 $ 6,492 $ 863 $ (8) $ 97,327 <F1>
COMMON PLANT: $ 22,183 $14,444 $ 303 $ - $ 36,324
Plant in
Service $933,108 $40,312 $4,012 $(408) $969,000
CONSTRUCTION WORK
IN PROGRESS $ 9,792 $ 9,876 $ - $ - $ 19,668
Total Utility
Plant $942,900 $50,188 $4,012 $(408) $988,668
<F1>(a)Amounts do not agree with balance sheet totals as
common plant is allocated between electric and gas plant
for financial statement purposes.
NOTE:Depreciation of utility plant is computed using the
straight-line method over the estimated lives of depreciable
plant. The average depreciation rates for 1992 were:
Electric - 3.9%; Gas 3.8%; and Common - 6.5%
/TABLE
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SCHEDULE V
Page 3 of 3
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
PROPERTY, PLANT AND EQUIPMENT
Year 1991
|
Column A Column B Column C Column D Column E Column F
Retirements
Balance Additions or Sales at Other Balance
Classification Jan. 1, At Cost Orig. Cost Changes Dec. 31,
1991 1991
(in thousands)
ELECTRIC PLANT:
Production:
Steam $510,413 $ 7,331 $1,211 $ - $516,533
Other 18,183 26,145 54 - 44,274
Transmission 87,014 1,698 323 1 88,390
Distribution 154,844 7,001 1,228 14 160,631
General 8,733 906 253 5 9,391
Total Electric
Plant $779,187 $ 43,081 $3,069 $ 20 $819,219<F1>
GAS PLANT:
Gas Prod. &
Gathering $ 54 $ - $ - $ - $ 54
Underground
Storage 7,355 358 71 - 7,642
Transmission 10,364 249 5 - 10,608
Distribution 64,852 4,880 459 - 69,273
General 3,651 645 167 - 4,129
Total Gas Plant $ 86,276 $ 6,132 $ 702 $ - $ 91,706<F1>
COMMON PLANT: $ 19,740 $ 2,803 $ 360 $ - $ 22,183
Plant in
Service $885,203 $ 52,016 $4,131 $ 20 $933,108
CONSTRUCTION WORK
IN PROGRESS $ 26,064 $(16,272) $ - $ - $ 9,792
Total Utility
Plant $911,267 $ 35,744 $4,131 $ 20 $942,900
<F1>Amounts do not agree with balance sheet totals as common
plant is allocated between electric and gas plant for
financial statement purposes.
NOTE:Depreciation of utility plant is computed using the
straight-line method over the estimated lives of depreciable
plant. The average depreciation rates for 1991 were:
Electric - 3.9%; Gas 3.8%; and Common - 8.2%.
/TABLE
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SCHEDULE VI
Page 1 of 3
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
Year 1993
|
Column A Column B Column C Column D Column E Column F
Additions
Charged to
Balance Costs and Net Other Balance
Classification Jan. 1, Expenses Retirements Changes Dec. 31,
1993 1993
(in thousands)
ELECTRIC PLANT:
Production:
Steam $216,349 $20,197 $ 653 $ - $235,893
Other 16,131 2,188 - - 18,319
Transmission 45,194 3,533 304 - 48,423
Distribution 61,537 5,796 1,393 - 65,940
General 6,676 851 368 (349) 6,810
Total Electric
Plant $345,887 $32,565 $2,718 $(349) $375,385
GAS PLANT:
Gas Prod. &
Gathering $ 23 $ 1 $ - $ - $ 24
Underground
Storage 2,275 91 - - 2,366
Transmission 5,223 381 - - 5,604
Distribution 29,180 2,602 691 - 31,091
General 2,095 278 93 (186) 2,094
Total Gas Plant $ 38,796 $ 3,353 $ 784 $(186) $ 41,179
COMMON PLANT: $ 6,858 $ 2,037 $2,264 $ 535 $ 7,166
Total Utility
Plant $391,541 $37,955 $5,766 $ - $423,730
NOTE:Depreciation of utility plant is computed using the
straight-line method over the estimated lives of depreciable
plant. The average depreciation rates for 1993 were:
Electric - 3.9%; Gas 3.6%; and Common - 6.1%.
/TABLE
|
SCHEDULE VI
Page 2 of 3
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
Year 1992
|
Column A Column B Column C Column D Column E Column F
Additions
Charged to
Balance Costs and Net Other Balance
Classification Jan. 1, Expenses Retirements Changes Dec. 31,
1992 1992
(in thousands)
ELECTRIC PLANT:
Production:
Steam $196,788 $20,053 $ 492 $ - $216,349
Other 14,039 2,092 - - 16,131
Transmission 42,601 3,377 784 - 45,194
Distribution 57,519 5,566 1,548 - 61,537
General 6,101 812 229 (8) 6,676
Total Electric
Plant $317,048 $31,900 $3,053 $ (8) $345,887
GAS PLANT:
Gas Prod. &
Gathering $ 21 $ 2 $ - $ - $ 23
Underground
Storage 2,212 63 - - 2,275
Transmission 4,860 375 12 - 5,223
Distribution 27,224 2,654 698 - 29,180
General 1,985 301 169 (22) 2,095
Total Gas Plant $ 36,302 $ 3,395 $ 879 $ (22) $ 38,796
COMMON PLANT: $ 5,583 $ 1,703 $ 458 $ 30 $ 6,858
Total Utility
Plant $358,933 $36,998 $4,390 $ - $391,541
NOTE:Depreciation of utility plant is computed using the
straight-line method over the estimated lives of depreciable
plant. The average depreciation rates for 1992 were:
Electric - 3.9%; Gas 3.8%; and Common - 6.5%.
|
SCHEDULE VI
Page 3 of 3
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
Year 1991
|
Column A Column B Column C Column D Column E Column F
Additions
Charged to
Balance Costs and Net Other Balance
Classification Jan. 1, Expenses Retirements Changes Dec. 31,
1991 1991
(in thousands)
ELECTRIC PLANT:
Production:
Steam $178,501 $19,880 $1,593 $ - $196,788
Other 12,283 1,756 - - 14,039
Transmission 39,722 3,226 347 - 42,601
Distribution 53,430 5,363 1,274 - 57,519
General 5,560 750 220 11 6,101
Total Electric
Plant $289,496 $30,975 $3,434 $ 11 $317,048
GAS PLANT:
Gas Prod. &
Gathering $ 20 $ 1 $ - $ - $ 21
Underground
Storage 2,205 83 76 - 2,212
Transmission 4,509 356 5 - 4,860
Distribution 25,338 2,500 614 - 27,224
General 1,847 263 136 11 1,985
Total Gas Plant $ 33,919 $ 3,203 $ 831 $ 11 $ 36,302
COMMON PLANT: $ 4,450 $ 1,480 $ 325 $ (22) $ 5,583
Total Utility
Plant $327,865 $35,658 $4,590 $ - $358,933
NOTE:Depreciation of utility plant is computed using the
straight-line method over the estimated lives of depreciable
plant. The average depreciation rates for 1991 were:
Electric - 3.9%; Gas 3.8%; and Common - 8.2%.
/TABLE
|
SCHEDULE VIII
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|
Column A Column B Column C Column D Column E
Additions
Balance Charged Charged Deductions Balance
Beginning to to Other from Re- End of
Description of Year Expenses Accounts serves, Net Year
(in thousands)
VALUATION AND QUALIFYING
ACCOUNTS:
Year 1993 - Accumulated
provision for uncollectible
accounts $ 136 $ 616 $ - $ 586 $ 166
Year 1992 - Accumulated
provision for uncollectible
accounts $ 260 $ 330 $ - $ 454 $ 136
Year 1991 - Accumulated
provision for uncollectible
accounts $ 605 $ 777 $ - $1,122 $ 260
OTHER RESERVES:
Year 1993 - Reserve for
injuries and
damages $ 334 $1,177 $ 97<F1> $ 287 $1,321
Year 1992 - Reserve for
injuries and
damages $ 626 $ 58 $ 58<F1> $ 408 $ 334
Year 1991 - Reserve for
injuries and
damages $1,086 $ 89 $ 122<F1> $ 671 $ 626
<F1> Charged to construction accounts
|
SCHEDULE IX
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
SHORT-TERM BORROWINGS
Reference is made to Note 4 of the Notes to Consolidated Financial Statements, page 35, regarding short- term borrowings.
SCHEDULE X
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Reference is made to Note 13 of the Notes to Consolidated Financial Statements, page 39, regarding taxes other than income taxes.
Maintenance and depreciation, other than set forth in the "Consolidated Statements of Income," rents, advertising costs, research and development and royalties during the periods were not significant.
SCHEDULE XIII
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
OTHER INVESTMENTS
December 31, 1993
Column A Column B Column C
Cost of Each Amount Carried
Type of Investment Investment on Balance Sheet
(in thousands)
Leveraged Leases
JVA 1 - Paper Mill $ 7,219 $ 8,632
JVA 2 - Reservoir 10,069 13,895
MCN Equities - Office Building 6,882 9,501
Dutch Rail Equipment 2,769 2,896
Total Leveraged Leases 26,939 34,924
Limited Partnerships
Low income housing projects 26,821 21,833
Other 2,735 3,190
Total Limited Partnerships 29,556 25,023
Environmental improvement funds
held by Trustee 22,613 22,613
Real estate and other 8,794 7,997
Total other investments $87,902 $90,557
|
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.
Date: March 28, 1994 SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By R. G. Reherman, Chairman, President
and Chief Executive Officer
BY (R. G. Reherman)
R. G. Reherman
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.
Signatures Title Date
R. G. Reherman Chairman, President, Chief
Executive Officer (Principal
Executive Officer) March 28, 1994
A. E. Goebel* Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
(Principal Financial
Officer) March 28, 1994
S. M. Kerney* Controller (Principal
Accounting Officer) March 28, 1994
Melvin H. Dodson* )
)
Walter B. Emge* )
)
Robert L. Koch II* )
)
Jerry A. Lamb* )
)
Donald A. Rausch* ) Directors March 28, 1994
)
John H. Schroeder* )
)
Richard W. Shymanski*)
)
Donald E. Smith* )
)
James S. Vinson* )
)
N. P. Wagner* )
*By
(R. G. Reherman, Attorney-in-fact)
|
SIGECO
10-K
EXHIBIT INDEX
Sequential
Page Number
Exhibits incorporated by reference are found on 42-44
EX-3(b) By-Laws as amended through
September 22, 1993 63-79
EX-4(a) Supplemental Indentures dated May 1, 1993 81-108
EX-10.20 Company's Corporate Performance
Incentive Plan as amended for the
plan year beginning January 1, 1994 110-114
EX-12 Computation of ratio of earnings to
fixed charges 55
EX-21 Subsidiary of the Registrant 56
EX-24 Power-of-Attorney 60-61
|
BY-LAWS
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
AS AMENDED THROUGH SEPTEMBER 22, 1993
ARTICLE I: LOCATION OF OFFICES
Section 1 - Principal Office: The principal office of the corporation shall be at 20-24 N. W. Fourth Street, Evansville, Vanderburgh County, Indiana.
Section 2 - Other Offices: The corporation may have and maintain such other offices as the Board of Directors may deem expedient.
ARTICLE II: CORPORATE SEAL
The corporation shall have a corporate seal with the name of the corporation and the words "Evansville, Indiana" inscribed about a circle and the words "Incorporated, 1912" within such circle.
ARTICLE III: FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January and end on the thirty-first day of December of each year.
ARTICLE IV: SHAREHOLDERS' MEETINGS
Section 1 - Place of Meetings: All meetings of the shareholders shall be held at the principal office of the corporation, except such meetings as the Board of Directors by resolution determine shall be held elsewhere, in which case meetings may be held upon notice, as hereinafter provided, at such place or places within or without the State of Indiana as the Board of Directors may determine.
Section 2 - Annual Meeting: The annual meeting of the
shareholders shall be held at 3:00 o'clock P.M. on the
fourth Tuesday of March in each year, or on such other
date or time as may be fixed by the Board of Directors
and stated in the notice of the meeting, provided such
annual meeting shall be held in any event within five
(5) months after the close of the fiscal year of the
corporation for the election of Directors and the
transaction of such other business as may properly come
before the meeting.
Section 3 - Special Meetings: Except as otherwise required by law and subject to the rights of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, a special
meeting of the shareholders of the corporation may be called by the Board of Directors, the Chairman of the Board or the Chief Executive Officer, or by the Secretary upon the request in writing of the holders of not less than seventy percent (70%) of the voting stock of the corporation.
Section 4 - Notices: At least ten (10) days before any meeting of shareholders written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting or when required by law or by the Amended Articles of Incorporation, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary or by the officers or persons calling the meeting to each shareholder of record entitled by law, these By-Laws or the Amended Articles of Incorporation to vote at such meeting, at such address as appears on the records of the corporation. Notice of any shareholders' meeting may be waived in writing by any shareholder if the waiver sets forth in reasonable detail the purpose or purposes for which the meeting is called and the time and place thereof. Attendance at any meeting in person or by proxy when the instrument of proxy sets forth in reasonable detail the purpose or purposes for which the meeting is called, shall constitute a waiver of notice of such meeting. No notice of the holding of an adjourned meeting shall be necessary. Each shareholder who has, in the manner above provided, waived notice of a shareholders' meeting or who personally attends a shareholders' meeting or is represented thereat by a proxy authorized to appear by an instrument of proxy complying with the requirements above set forth, shall be conclusively presumed to have been given due notice of such meeting.
Section 5 - Quorum: Subject to the provisions of the Amended Articles of Incorporation, at any meeting of the shareholders one-third (1/3) of the shares of the outstanding capital stock represented in person or by proxy shall constitute a quorum for the transaction of business, but a lesser number may convene and adjourn.
Section 6 - Voting: Shareholders entitled by law, these ByLaws or the Amended Articles of Incorporation to vote at any meeting of shareholders may vote either in person or by proxy executed in writing by the shareholder or a duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from the date of its execution unless a longer time is expressly provided therein. At all meetings of the shareholders the holder of each share of the preferred stock $100.00 par value and of the common stock shall be entitled to one (1) vote for each share of such stock standing in his name on the books of the corporation and the holder of each share of the preferred stock, no par value, shall be entitled to a fraction of one (l) vote per share, which fraction shall be equal to the ratio of
the involuntary liquidation value of such share to $100.00, upon all questions; and a majority of the votes cast at any such meeting shall be sufficient for the adoption or rejection of any question presented unless otherwise provided by law or by the Amended Articles of Incorporation. No shareholder shall have cumulative voting rights in connection with the election of Directors.
No share shall be voted at any meeting:
(1) Upon which any installment is due and unpaid, or
(2) Which belongs to the corporation.
For the purpose of determining shareholders entitled to vote at any meeting of the shareholders or any adjournment thereof or shareholders entitled to receive payment of any dividend or in order to make a determination of shareholders for any other purpose, only those shareholders who are shareholders of record on the record date fixed by the Board of Directors or as provided in Article XI, Section 2 hereof, shall be entitled to vote. Any shareholder acquiring title to shares of stock after said record date shall, upon written request to the shareholder of record, be entitled to receive a proxy from such shareholder with power of substitution to vote such stock.
Shares standing in the name of a corporation (other than Southern Indiana Gas and Electric Company) may be voted by such officers, agents or proxy as the Board of Directors of such corporation may appoint. Shares held by fiduciaries may be voted by the fiduciaries in such manner as the instrument or order appointing such fiduciaries may direct. In the absence of any such direction or the inability of the fiduciaries to act in accordance therewith, shares held jointly by three (3) or more fiduciaries shall be voted in accordance with the will of the majority. Where the fiduciaries or a majority of them cannot agree or where they are equally divided upon the questions of voting such shares, any court of general equity jurisdiction may, upon petition filed by any of such fiduciaries or by any party in interest, direct the voting of such shares as it may deem for the best interests of the beneficiaries and such shares shall be voted in accordance with such direction. Shares that are pledged may, unless otherwise provided in the agreement of pledge, be voted by the shareholder pledging the same until the shares have been transferred to the pledgee on the books of the corporation and thereafter they may be voted by the pledgee.
Section 7 - Voting Lists: At least five (5) days before each election of Directors, the officer or agent having charge of the stock transfer books shall make a
complete list of the shareholders, arranged in alphabetical order, with the address and number of shares and votes held by each, which list shall be on file at the principal office of the company and subject to inspection by any shareholder. Such list shall be produced and kept open at the time and place of election and subject to the inspection of any shareholder during the holding of such election. The original stock register or transfer books, or duplicates thereof kept in the State of Indiana, shall be the only evidence as to who are the shareholders entitled to examine such list or the stock ledger or transfer book or to vote at any meeting of the shareholders.
ARTICLE V: DIRECTORS
Section 1 - Number: The Board of Directors of this corporation shall consist of eleven (11) members.
Section 2 - Classes: The Board of Directors shall be and is divided into three (3) Classes - Class I, Class II and Class III - which will be as nearly equal in number as possible. No Class shall include less than three (3) Directors.
Section 3 - Election: At the annual meeting of shareholders during which the members of the Board of Directors are initially divided into the above described Classes by appropriate amendment of the Amended Articles of Incorporation of the corporation, those Directors who are assigned to Class I shall be elected for one-year terms, those assigned to Class II shall be elected for two-year terms and those assigned to Class III shall be elected for three-year terms. At each succeeding annual meeting of the shareholders, an election of Directors of the corporation shall be held for the Class of Directors whose terms of office expire at such time. In the event of a failure to hold an annual meeting of the shareholders or to conduct an election of Directors at any annual meeting of shareholders which-is held, the Directors to be elected at such meeting may be elected at any special meeting of the shareholders called for that purpose. At any election of Directors, the Chairman of the Board, if presiding, or the Chief Executive Officer, if other than the Chairman of the Board, may appoint inspectors or judges who shall report to the meeting upon the validity of all proxies received, count the votes cast and make a report thereof at such meeting.
Section 4 - Term of Office, Qualification and Retirement:
A. With Respect to Each Director Elected Prior to
July 23, 1985, except for each initial Director in
Class I and Class II who shall serve for the
respective terms designated in the preceding
Section 3, each such Director shall serve for a
term ending on the date of the third annual
meeting of shareholders following the annual
meeting at which such Director was elected;
provided, however, that any Director who arrives
at the age of seventy-two (72) years subsequent to
January 1, 1991, shall tender his resignation to
become effective at the end of the calendar year
prior to the year of expiration of the term during
which the Director attains his seventy-second
(72nd) birthday, and his successor shall be chosen
in accordance with the provisions of Section 5 of
this Article V.
B. With Respect to Each Director Elected After July 22, 1985, each such Director shall serve for a term ending on the date of the third annual meeting of shareholders following the annual meeting at which such Director was elected; provided, however, that any such Director who arrives at the age of seventy (70) years during his elected term shall tender his resignation to become effective at the end of the calendar year during which he attains his seventieth (70th) birthday, and his successor shall be chosen in accordance with the provisions of Section 5 of this Article V.
C. By invitation of the Board of Directors, board members who have held the position of Chairman of the Board or Chief Executive Officer of the Company may, upon retirement from the Board of Directors, be elected, on an annual basis, to serve in the capacity of an advisory board member. Advisory board members are entitled to receive the annual stipend portion of the regularly established directors compensation then in effect pursuant to Section 7 of this Article V; however, they shall not enjoy voting privileges. Furthermore, advisory board members shall not receive regular committee assignments, but may, from time to time, be called for committee service for which they will be compensated at the established per meeting fee.
Section 5 - Vacancies: Each Director shall serve until his successor is elected and qualified or until his death, retirement, resignation or removal. Should a vacancy occur or be created, whether arising through the death, resignation or removal of a Director or through an increase in the number of Directors, such vacancy shall be filled by a majority vote of the remaining Directors of all Classes of the Board of Directors or, at the discretion of the Board of Directors, such vacancy may be filled by vote of the shareholders at a special meeting called for that purpose. A Director so elected to fill a vacancy shall serve for the remainder of the then-present term of office of the Class to which such Director was elected.
Section 6 - Removal: Any Director, or the entire
Board of Directors, may be removed; provided, however,
that such removal must be for cause and must be
approved in accordance with provisions of this Section
6. Removal for cause must be approved by at least
seventy percent (70%) of the combined voting power of
the outstanding shares of stock of the corporation then
entitled to be voted at an election for that Director,
voting together as a single Class, and the action for
removal must be brought within three (3) years of the
occurrence of such cause.
Section 7 - Compensation: The Directors shall receive such compensation for their service as Directors and as members of any committee appointed by the Board as may be prescribed by the Board of Directors. The Directors shall also be reimbursed for ordinary and reasonable expenses incurred in the performance of their duties. No such payment shall preclude any Director from serving the corporation in any other capacity and receiving compensation therefor.
ARTICLE VI: DIRECTORS' MEETINGS
Section 1 - Regular Meetings: Regular meetings of the Board of Directors shall be held at the principal office of the corporation on the third Tuesday of each month at 10:00 o'clock A.M., or on such other day of the month, time of the day or place, within or without the State, as the Board of Directors may designate.
Section 2 - Special Meetings: Special meetings of the Board of Directors may be held at any time at the principal office of the corporation or elsewhere within or without the State as shall be specified in the notice of such meeting.
The Secretary shall call a special meeting whenever and wherever so requested by the Chairman of the Board, the Chief Executive Officer or any three (3) Directors.
Section 3 - Organization Meeting: Immediately following the meeting of the shareholders at which the members of any Class of Directors are elected, the members of all Classes of the Board of Directors shall meet and organize and transact such other business as may properly be presented at such meeting.
Section 4 - Notice: No notice shall be required for a regular meeting of the Board of Directors or of an adjourned meeting. A reasonable notice of special meetings, in writing or otherwise, shall be given to each Director or sent to his residence or place of business. Notice of a special meeting shall specify the time and place of holding the meeting. Unless otherwise stated in the notice thereof, any and all business may be transacted at a special meeting of the
Board of Directors. No notice shall be required to be given to any Director who signs a written waiver of notice before the meeting, at the time of the meeting or at any time thereafter.
Section 5 - Quorum: At all meetings of the Board of Directors a majority of the whole Board shall be necessary to constitute a quorum for the transaction of any business except the filling of vacancies, but a lesser number may convene and adjourn.
Section 6 - Voting: All questions coming before any meeting of the Board of Directors for action shall be decided by a majority vote of all Classes of the Board of Directors present at such meeting unless otherwise provided by law, the Amended Articles of Incorporation or the other provisions of these By-Laws.
ARTICLE VII: EXECUTIVE COMMITTEE
Section 1 - Number, Qualification, Appointment, Alternates: The Board of Directors shall appoint not less than two (2) Directors who, together with the Chairman of the Board and the Chief Executive Officer (if other than the Chairman), shall constitute the Executive Committee. The Board of Directors in its discretion may also appoint one (1) or more Directors as alternate members of the Executive Committee to serve in place of any regular member of the Executive Committee (other than the Chairman of the Board or the Chief Executive Officer) during any period of time when such regular member is unavailable as a member of the Executive Committee on account of illness, absence or otherwise. The Chief Executive Officer of the corporation shall serve as Chairman of the Executive Committee.
Section 2 - Powers and Duties: The Executive Committee shall have and exercise all the authority of the entire Board of Directors when the Board is not in session with respect to all matters except the following:
(1) Amending the Amended Articles of Incorporation;
(2) Adopting an Agreement or a Plan of Merger, Consolidation or other "Business Combination" as that term is defined in Article XI of the Amended Articles of Incorporation;
(3) Proposing a special corporate transaction such as the sale, lease, exchange, mortgage, pledge or disposition of all fixed assets of the corporation; or
(4) Terminating, winding up and/or changing the nature of the corporation's business.
Section 3 - Term of Office: The members of the Executive Committee shall hold office from the date of their appointment until the next succeeding organization meeting of the Directors, provided that the Board of Directors shall at all times have the power to remove any member of the Executive Committee.
Section 4 - Vacancies: Any vacancy or vacancies in the Executive Committee arising from any cause shall be filled by the remaining Directors.
Section 5 - Fees: Members of the Executive Committee, as such, shall not receive any stated salary for their services, but expenses of attendance, if any, and a fee in such an amount as may be determined by the Board of Directors from time to time shall be paid for attendance at each Executive Committee meeting.
Section 6 - Meetings: The Executive Committee shall meet at such times and places as the Chairman of the Board or Chief Executive Officer or a majority of the Committee members may designate, provided that reasonable notice of such meeting shall be given each member. A majority of the Executive Committee shall constitute a quorum for the transaction of all business.
Section 7 - Minutes: The Executive Committee shall keep minutes of all its meetings which shall be recorded in the minute book of the corporation and shall be promptly submitted to the Board of Directors for approval.
ARTICLE VIII: AUDIT COMMITTEE
The Board of Directors shall appoint an Audit Committee consisting of not less than three (3) nor more than five (5) members of the Board of Directors, none of whom shall be an officer of the corporation. Each member of the Audit Committee shall receive a fee fixed by the Board of Directors for attendance at each meeting of the Audit Committee.
ARTICLE IX: OFFICERS
Section 1 - Titles: The mandatory officers of the corporation shall consist of a Chairman of the Board, a President, a Secretary and a Treasurer. In addition, the Chairman of the Board or the President shall be elected by the Board of Directors to be Chief Executive Officer of the corporation. In the event of a vacancy in the office of Chief Executive Officer, or the absence or disability of the officer serving in such capacity, then the other officer eligible to be elected to such office (if not one and the same person) shall perform the duties of Chief Executive Officer. The
Board of Directors may elect, at the request of the
Chief Executive Officer, one (1) or more Executive Vice
Presidents, one (1) or more Senior Vice-Presidents, one
(1) or more Vice-Presidents, one (1) Controller, one
(1) or more Assistant Controllers, one (1) or more
Assistant Secretaries, one (1) or more Assistant
Treasurers, Assistant or Assistants to the President or
any Executive Vice-President or Vice-President.
The Board of Directors may designate the President or any Vice President as the Chief Operating Officer of the Corporation and may designate any Vice President or the Secretary or the Treasurer as the Chief Financial Officer of the Corporation.
Section 2 - Qualifications of the Chairman of the Board and President: The Chairman of the Board and the President shall be chosen from among the members of the Board of Directors.
Section 3 - Election of Officers: The mandatory officers of the corporation shall be elected annually at the organization meeting of the Board of Directors. Any other officers not so elected at such meeting may be elected subsequently at any regular or special meeting of the Board.
Section 4 - Term of Office Qualification and Retirement: All officers shall serve at the pleasure of the Board and shall hold office from the date of their election until the next succeeding annual organization meeting of the Board of Directors or until their successors are elected and shall qualify; provided, however, that any officer, except those having attained age 64 as of January 1, 1989, shall tender his resignation to become effective at the end of the calendar month during which the officer attains his sixty-fifth (65th) birthday.
Section 5 - Vacancies: Any vacancy or vacancies among the officers arising from any cause may be filled by the Board of Directors.
Section 6 - Compensation of Officers: The Board of Directors shall fix the compensation of the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer and the Chairman of the Board, when said Chairman is also serving as an active employee of the Company. The compensation of all other officers shall be fixed by the Chief Executive Officer.
Section 7 - Combining Offices: Any two (2) or more offices may be held by the same person except that the duties of President and Secretary shall not be performed by the same person.
ARTICLE X: POWERS AND DUTIES OF DIRECTORS AND OFFICERS
Section 1 - Directors: The business and affairs of the corporation shall be managed by the Board of Directors, except where specifically excepted by law, the Amended Articles of Incorporation or the other provisions of these By-Laws.
Section 2 - Chairman of the Board: The Chairman of the Board shall preside at all meetings of the Board of Directors and at all meetings of shareholders and shall in general perform all duties incident to the office of Chairman of the Board and such other duties as may be assigned to him from time to time by the Board of Directors. The Chairman of the Board when acting as the Chief Executive Officer shall also exercise the duties set forth in Section 3 of this Article X.
Section 3 - Chief Executive Officer: The Chief Executive Officer of the corporation shall have the general control and management of its business and affairs subject to the control of the Board of Directors.
Section 4 - President: The President shall perform all
duties as may be assigned to him from time to time by
the Chief Executive Officer (if other than the
President) or by the Board of Directors. The President
when acting as the Chief Executive Officer of the
corporation shall also exercise the duties set forth in
Section 3 of this Article X.
Section 5 - Vice-Presidents: The Executive, Senior or other Vice-Presidents shall have such responsibilities and perform such duties as may be respectively assigned to them from time to time by the Board of Directors, the Executive Committee or the Chief Executive Officer. In the absence or disability of the President, an Executive Vice-President or a Senior Vice-President may be designated by the Board of Directors or Executive Committee to perform and exercise all of the powers of the President.
Section 6 - Secretary: The Secretary shall have the custody of the corporate seal and records of the corporation and be in charge of all the records and accounts of the corporation. He shall act as Secretary at meetings of the shareholders, Directors and Executive Committee and enter the minutes of such meetings in a book provided for that purpose and shall attend to publishing, giving and serving all official notices of the corporation. He shall perform such other duties as may be assigned to him.
Section 7 - Assistant Secretaries: In the absence or disability of the Secretary, the Assistant Secretaries shall act with all the powers of the Secretary. They shall perform such other duties as may be assigned to them.
Section 8 - Treasurer: The Treasurer shall have the custody of all negotiable instruments and securities of the corporation and be in charge of collection of amounts due the corporation. He shall disburse the funds of the corporation only by check upon properly authorized vouchers and shall keep a record of all receipts and disbursements by him. He shall have authority to give receipts for moneys paid to the corporation and to endorse checks, drafts and other instruments for the payment of money for deposit or collection where necessary or proper and to deposit the same to the credit of the corporation in such bank or banks or depositary as the Board of Directors or the Executive Committee may designate and he may endorse all commercial documents requiring endorsements for or on behalf of the corporation. He shall perform such other duties as may be assigned to him.
Section 9 - Assistant Treasurers: In the absence or disability of the Treasurer, the Assistant Treasurers shall act with all the powers of the Treasurer. They shall perform such other duties as may be assigned to them.
Section 10 - Controller: The Controller shall have general supervision of the accounting of the corporation including the preparation of all pertinent accounting reports. He shall perform such other duties as may be assigned to him. In the event that a Controller has not been elected by the Board of Directors, the powers and duties of the Controller shall be assigned to the Treasurer.
Section 11 - Assistant Controllers: In the absence or disability of the Controller, the Assistant Controllers shall act with all the powers of the Controller. They shall perform such other duties as may be assigned to them.
ARTICLE XI: STOCK
Section 1 - Stock Certificates: Each shareholder shall be entitled to a certificate signed by the President or a VicePresident and the Secretary or an Assistant Secretary of the corporation and sealed with the corporate seal of the corporation, certifying to the number of shares owned by him in the corporation. If such certificate is counter-signed by the written signature of a transfer agent other than the corporation or its employee, the signatures of the officers of the corporation may be facsimiles. If such certificate is counter-signed by the written signature of a registrar other than the corporation or its employee, the signatures of the transfer agent and the officers of the corporation may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of its issue.
Section 2 - Transfer of Shares: Stock shall be transferable on the stock transfer books of the corporation in person or by attorney duly authorized and upon surrender and cancellation of the old certificates therefor.
The Board of Directors of the corporation may close its
stock transfer books for a period not exceeding fifty
(50) days preceding the date of any meeting of
shareholders or the date for the payment of any
dividend. In lieu of closing the stock transfer books
the Board of Directors may fix in advance a date not
more than fifty (50) days prior to the date of any
meeting of shareholders or the date for the payment of
any dividend as the record date for the determination
of the shareholders entitled to notice of and to vote
at any such meeting or entitled to receive payment of
such dividend; and such shareholders, and only such
shareholders, as shall be shareholders of record on the
date so fixed shall be entitled to such notice of and
to vote at such meeting or be entitled to receive
payment of such dividend, as the case may be,
notwithstanding the transfer of any stock on the books
of the corporation after such record date fixed as
aforesaid. If the stock transfer books are not closed
and no record date is fixed by the Board of Directors,
no shares shall be voted at any meeting which shall
have been transferred on the books of the corporation
within ten (10) days next preceding the date of such
meeting.
Section 3 - Replacing Certificates: In case of the loss or destruction of any certificate of stock and the submission of proper proof thereof by the owner, a new certificate may be issued in lieu thereof under such regulations and restrictions as the Board of Directors may prescribe.
ARTICLE XII: AUTHORIZED SIGNATURES
All checks, drafts and other negotiable instruments issued by the corporation shall be made in the name of the corporation and shall be signed by such one (1) of the officers of the corporation and countersigned by such other officer of the corporation or by such other person as the Board of Directors from time to time direct; provided, however, that the same person shall not both sign and countersign the same instrument; provided further, that dividend checks, payroll checks, customer deposit refund checks and cashier's checks drawn upon special accounts with designated depositaries need not be countersigned.
ARTICLE XIII: FIDELITY BONDS
The officers and employees of the corporation shall, in the discretion of the Board of Directors, Executive Committee or Chief Executive Officer, give bonds for the faithful discharge of their respective duties in such form and for such amounts as they or any of them may direct.
ARTICLE XIV: INDEMNIFICATION
Section 1 - Every person (and the heirs, executors and administrators of such person) who is or was a director or officer of this corporation or of any subsidiary of this corporation or who, at the request of this corporation, served in any position or capacity or on any committee for this corporation or for or in any other corporation, partnership, association, trust, foundation, not-for-profit corporation, employee benefit plan or other organization or entity, shall be indemnified by the corporation against any and all liability and reasonable expense that may be incurred by him in connection with or resulting from any claim, action, suit or proceeding in which either (i) such person is wholly successful, thereby entitling such person to Mandatory Indemnification, or (ii) such person is not wholly successful but it is nevertheless determined, pursuant to the procedures set forth below in Section 2 of this Article IX of these By-Laws, that such person acted in good faith and that such person reasonably believed that (a) in the case of conduct in his official capacity, his conduct was in the corporation's best interests, or (b) in all other cases, his conduct was at least not opposed to the best interests of such corporation, entity or organization, and, in addition, with respect to any criminal action or proceeding, either had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, thereby entitling such person to Permissive Indemnification. The terms "claim", "action", "suit" or "proceeding" shall mean and include any claim, action, suit or proceeding (whether brought by or in the right of the corporation or any other corporation or otherwise), civil, criminal, administrative or investigative action, or threat thereof, in which a director or officer of the corporation (or his heirs, executors or administrators) may become involved as a party or otherwise:
(a) by reason of his being or having been a director or officer of the corporation, or of any subsidiary corporation of the corporation, or of any other corporation where he served as such at the request of the corporation, or
(b) by reason of his acting or having acted in any position or capacity or on any committee for this
corporation or any subsidiary corporation of this corporation or in any position or capacity in or for a partnership, association, trust, foundation, not-for-profit corporation, employee benefit plan or other organization or entity where he served as such at the request of the corporation, or
(c) by reason of any action taken or not taken by him in any such capacity, whether or not he continues in such capacity at the time such liability or expense shall have been incurred.
The terms "liability" and "expenses" shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against, and amounts paid in settlement by or on behalf of, a person, and excise taxes assessed with respect to an employee benefit plan, but shall not on account of profits realized by him in the purchase or sale of securities of the corporation. The term "wholly successful" shall mean termination of any action, suit or proceeding against the person in question without any finding of liability or guilt against him or the expiration of a reasonable period of time after the making of any claim or threat of an action, suit or proceeding with out the institution of the same, without any payment or promise made to induce a settlement.
Section 2 - With regard to Permissive Indemnification, the determination that a person acted in good faith and that such person reasonably believed that (a) in the case of conduct in his official capacity, his conduct was in the corporation's best interests, or (b) in all other cases, his conduct was at least not opposed to the best interests of the corporation, and, in addition, with respect to any criminal action or proceeding, either had reasonable cause to believe that his conduct was lawful or had no reasonable cause to believe that his conduct was unlawful with regard to a specific claim, action, suit or proceeding in or as to which such person is not wholly successful shall be made by or for the board of directors of the corporation in the manner hereinafter described. Any request for such indemnification must first be proposed to the board of directors of the corporation, and a motion for such indemnification may be made by any director of the corporation, including a director who is seeking such indemnification for himself. If a quorum of directors eligible to decide the matter exists within the limitations and requirements of I. C. 23-1-37-12(b)(1), such directors may either (i) decide the question themselves; (ii) refer the matter to Special Legal Counsel for decision pursuant to I. C. 23-1-37-12(b)(3)(A); or (iii) decline to take any action to either decide the question of such indemnification or refer the matter for decision to Special Legal Counsel. If there does not exist a
quorum of directors eligible to decide the matter
within the limitations and requirements of I.C. 23-1-
37-12(b)(1), a majority of the entire board of
directors may either (i) refer the matter to a
committee of two or more directors who are eligible to
vote thereon pursuant to I.C. 23-1-37-12(b)(2) who may
either decide the matter themselves or refer the matter
to Special Legal Counsel for decision pursuant to I.C.
23-1-37-12(b)(3)(B); or (iii) decline to take any
action to refer the matter of such indemnification to a
committee or to Special Legal Counsel. Any decision on
the question of entitlement to such Permissive
Indemnification by a majority of a quorum of the board
of directors eligible to vote pursuant to I.C. 23-1-37-
12(b)(1); by a special committee of eligible directors
pursuant to I.C. 23-1-27-12(b)(2); or by Special Legal
Counsel duly appointed pursuant to the provisions of
I.C. 23-1-37-12(b)(3), shall be in the sole and
absolute discretion of such person or persons who are
to make such determination. If it is determined and
decided that such Permissive Indemnification should be
given in a specific situation, the authorization for
such indemnification and a determination of the amount
thereof shall be made in accordance with the procedures
and requirements of I.C. 23-1-37-12(c). For purposes
of this Section 2, Permissive Indemnification shall be
deemed to have been denied (i) if a majority of any
group of persons who are to decide the question do not
vote in favor of the proposed indemnification; (ii) if
the board of directors or any committee thereof
declines to take any permitted action to either decide
the question, refer it to a committee, or refer it to
Special Legal Counsel; (iii) if no decision is made by
the person or persons who were to decide such question
within a period of six (6) months after such
indemnification was first proposed to the board of
directors of the corporation; or (iv) to the extent
that the dollar amount of any indemnification to be
made by the corporation is less than the total dollar
amount of indemnification proposed or requested to be
made. If proposed Permissive Indemnification is
denied, the question may not be reconsidered at any
subsequent time by the corporation.
Section 3 - Expenses incurred with respect to any claim, action, suit or proceeding may be advanced by the corporation (by action of the board of directors, whether or not a disinterested quorum exists) prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount unless he is entitled to indemnification under this Article of these By-Laws.
Section 4 - The rights of Mandatory and Permissive Indemnification provided in this Article of the By-Laws shall be in addition to any rights to which any such person may otherwise be entitled by contract, as matter of law, or pursuant to I.C. 23-1-37. Any person claiming the right to indemnification pursuant to any
provisions of these By-Laws may at any time apply for indemnification to or seek review of any decision denying indemnification or determining the amount thereof by a court pursuant to I.C. 23-1-37-11. Persons who are not directors or officers of the corporation but who are employees or agents of the corporation or any subsidiary or who are directors or officers of any subsidiary may be indemnified to the extent authorized at any time or from time to time by the board of directors.
Section 5 - Irrespective of the provisions of this Article of the By-Laws, the board of directors may, at any time or from time to time, approve indemnification of directors and officers or other persons to the full extent permitted by the provisions of the Indiana Business Corporation Law at the time in effect, whether on account of past or future transactions.
Section 6 - To the extent not inconsistent with Indiana law as in effect from time to time, the board of directors may, at any time or from time to time, approve the purchase and maintenance of insurance on behalf of any such director, officer or other person against any liability asserted against him in his capacity or arising out of his status as a director, officer, employee or agent of the corporation or any corporation, partnership, association, employee benefit plan, trust, foundation, not-for-profit corporation or other organization or entity in which he served as such at the request of the corporation, whether or not the corporation would have the power to indemnify him under the provisions of this Article of the By-Laws. In the event that any expense or liability otherwise subject to indemnification hereunder is covered entirely or in part by any insurance, the indemnification provided for by this Article of these By-Laws shall only be available, if at all, as to any uninsured liability or expense or that portion which is in excess of the amount of all available insurance coverage. Under no circumstances shall any insurer or other person making payment under such an insurance policy or contract be subrogated to the rights of any person entitled to indemnification under this Article of these By-Laws.
Section 7 - Any and all references contained in Article XIV of these By-Laws to any provision, section, sub- section or portion of the Indiana Code (I.C.) shall mean the Indiana Code as the same existed on June 26, 1987, and no subsequent amendment, repeal, modification, change, or judicial invalidation of any provision of the Indiana Code subsequent to June 26, 1987, shall alter, modify, or otherwise affect these By-Laws, and these By-Laws shall be construed and interpreted under the statutory law of the State of Indiana as it existed as of the date of adoption of these By-Laws.
Section 8 - The indemnification herein required or permitted by these By-Laws shall be a contractual obligation, under-taking and commitment of the corporation as to any person who either continued to serve or commenced to serve, following the date of the adoption of these amended indemnification By-Laws, as a director or officer of this corporation or any subsidiary of this corporation, or in any other position or capacity, at the request of this corporation or any subsidiary corporation, on any committee, partnership, association, trust, foundation, not-for-profit corporation, employee benefit plan, or other organization or entity, and no subsequent amendment or repeal of these By-Laws and no judicial decision invalidating the legislation authorizing the indemnification provided for by these By-Laws or invalidating all or any part of these indemnification By-Laws shall in any manner deny, diminish, limit, restrict, or qualify the indemnification herein provided for any such person who so continued to serve or commenced to serve with regard to any claim concerning any matter which occurred, which commenced to occur, or which continued to occur subsequent to the adoption of these indemnification By-Laws and prior to any such amendment, repeal, or judicial invalidation.
ARTICLE XV: MISCELLANEOUS
Section 1 - Depositaries: The funds of the corporation shall be deposited in the name of the corporation with such depositaries as may be designated by the Board of Directors.
Section 2 - Gender: The masculine pronoun wherever used in these By-Laws shall mean or include the feminine pronoun where applicable.
ARTICLE XVI: AMENDMENTS
These By-Laws may be altered, amended or repealed by a majority vote of the whole Board of Directors at any meeting, the notice of which shall include notice of the proposed alteration, amendment or repeal.
[Conformed]
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
WITH
BANKERS TRUST COMPANY,
As Trustee
SUPPLEMENTAL INDENTURE
Providing among other things for
FIRST MORTGAGE BONDS
Series A 1993 due 2028
and
Series B 1993 due 2023
Dated as of May 1, 1993
SUPPLEMENTAL INDENTURE, dated as of May 1, 1993, between Southern Indiana Gas and Electric Company, a corporation organized and existing under the laws of the State of Indiana (hereinafter called the "Company"), party of the first part, and Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, as Trustee under the Mortgage hereinafter referred to, party of the second part.
Whereas, the Company heretofore executed and delivered to Bankers Trust Company, as Trustee (hereinafter called the "Trustee"), a certain Indenture of Mortgage and Deed of Trust dated as of April 1, 1932, to secure an issue of bonds of the Company, issued and to be issued in series, from time to time, in the manner and subject to the conditions set forth in the said Indenture, and the said Indenture has been amended and supplemented by Supplemental Indentures dated as of 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, November 15, 1986, January 15, 1987, December 15, 1987, December 13, 1990 and April 1, 1993, which Indenture as so amended and supplemented is hereinafter referred to as the "Mortgage" and as further supplemented by this Supplemental Indenture is hereinafter referred to as the "Indenture"; and
Whereas, the Mortgage provides that the Company and the Trustee may, from time to time, enter into such indentures supplemental to the Mortgage as shall be deemed by them necessary or desirable, to establish the terms and provisions of any series of bonds to be issued under said Mortgage and to add to the covenants and agreements of the Company for the protection of the holders of bonds and of the mortgaged and pledged property; and
Whereas, the Company has entered into a Loan Agreement dated as of May 1, 1993 with Warrick County, Indiana (the "County") pursuant to which the County will issue $22,200,000 aggregate principal amount of its Adjustable Rate Environmental Improvement Bonds, 1993 Series A (Southern Indiana Gas and Electric Company Project) in order to provide funds to loan to the Company for the purpose of financing a portion of the costs of acquiring, constructing and equipping certain pollution control facilities, and pursuant to such Loan Agreement the Company has agreed to issue a series of its bonds under the Indenture in order to evidence and secure certain of its indebtedness under the Loan Agreement; and
Whereas, the Company has entered into a Loan Agreement dated as of May 1, 1993 with the County pursuant to which the County will issue $22,800,000 aggregate principal amount of its Adjustable Rate Environmental Improvement Bonds, 1993 Series B (Southern Indiana Gas and Electric Company Project) in order to provide funds to loan to the Company for the purpose of financing a portion of the costs of acquiring, constructing and equipping certain pollution control facilities, and pursuant to such Loan Agreement the Company has agreed to issue a series of its bonds under the Indenture in order to evidence and secure certain of its indebtedness under the Loan Agreement; and
Whereas, the Company and the Trustee deem it necessary or desirable to enter into this Supplemental Indenture for such purposes; and
Whereas, the Company by appropriate corporate action in conformity with the terms of the Indenture has duly determined to create a series of bonds which shall be issued under the Indenture in an aggregate principal amount of $22,200,000 and be designated as "First Mortgage Bonds, Series A 1993 due 2028" (hereinafter sometimes referred to as "Bonds of the Thirty-fifth Series"), shall bear interest at the rate per annum set forth in, shall be subject to certain optional and mandatory redemption rights and obligations set forth in, and will otherwise be in the form and have the terms and provisions provided for in this Supplemental Indenture and set forth in the form of such bonds below; and
Whereas, the Company by appropriate corporate action in conformity with the terms of the Indenture has duly determined to create a series of bonds which shall be issued under the Indenture in an aggregate principal amount of $22,800,000 and be designated as "First Mortgage Bonds, Series B 1993 due 2023" (hereinafter sometimes referred to as "Bonds of the Thirty-sixth Series"), shall bear interest at the rate per annum set forth in, shall be subject to certain optional and mandatory redemption rights and obligations set forth in, and will otherwise be in the form and have the terms and provisions provided for in this Supplemental Indenture and set forth in the form of such bonds below; and
Whereas, the definitive registered bonds without coupons of the Thirty-fifth Series and the Trustee's certificate of authentication to be borne by such bonds are to be substantially in the following forms, respectively:
[FORM OF FULLY REGISTERED BOND OF THE THIRTY-FIFTH SERIES]
[FORM OF FACE OF BOND]
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
FIRST MORTGAGE BOND, SERIES A 1993
DUE 2028
No________________ $__________.
Southern Indiana Gas and Electric Company, a corporation of the State of Indiana (hereinafter called the Company), for value received, hereby promises to pay to
or registered assigns dollars, on May 1, 2028 at the office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y., in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, and to 0ay to the registered owner hereof interest thereon from the interest payment date (May 1 or November 1) next preceding the date of this bond unless the date hereof is prior to November 1, 1993, in which case from May 1, 1993 (or, if this bond is dated between the record date for any interest payment date and such interest payment date, then from such interest payment date), at the rate from time to time borne by the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series A (Southern Indiana Gas and Electric Company Project) (the "Warrick County Bonds") issued by Warrick County, Indiana (the "County") under the Indenture of Trust, dated as of May 1, 1993 (the "County Indenture"), between the County and The Citizens National Bank of Evansville, as trustee (the "County Trustee"); provided, however, that in no event shall the rate of interest borne by the Bonds of this series exceed 10% per annum. Such interest, in like coin or currency, payable at said office or agency semi- annually on May 1 and November 1 in each year, until the Company's obligation with respect to the payment of such principal shall have been discharged; provided, however, that the amount of interest payable as set forth above on any interest payment date (the "Original Interest Amount") shall be reduced by an amount equal to the difference, if any, between the Original Interest Amount and the amount of interest due and payable on such interest payment date on a like principal amount of Warrick County Bonds. The
principal and interest so payable on any May 1 or November 1 will, subject to certain exceptions provided in the Mortgage hereinafter mentioned, be paid to the person in whose name this bond is registered at the close of business on the record date, which shall be the April 15 or October 15, as the case may be, next preceding such interest payment date, or, if such April 15 or October 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, The City of New York, N.Y., are authorized or obligated by law to close, the next preceding day which shall not be a legal holiday or a day on which such institutions are so authorized or obligated to close.
The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.
This bond shall not become obligatory until Bankers Trust Company, the Trustee under the Mortgage, or its successor thereunder, shall have signed the form of certificate endorsed hereon.
In witness whereof, Southern Indiana Gas and Electric Company has caused this bond to be signed in its name by its President or a Vice President, by his signature or a facsimile thereof, and a facsimile of its corporate seal to be imprinted hereon, attested by its Secretary or an Assistant Secretary, by his signature or a facsimile thereof.
Dated:
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By:______________________________
President and
Chief Executive Officer
Attest:
[FORM OF TRUSTEE'S CERTIFICATE]
This bond is one of the bonds of the series designated therein, described in the within-mentioned Mortgage.
BANKERS TRUST COMPANY,
as Trustee,
By:_______________________________
Authorized Officer
[FORM OF REVERSE OF BOND]
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
FIRST MORTGAGE BOND, SERIES A 1993 DUE 2028
This bond is one of an issue of First Mortgage Bonds of the Company, issuable in series, and is one of the series designated in the title hereof, all issued and to be issued under and equally secured (except as to any sinking fund established in accordance with the provisions of the Mortgage hereinafter mentioned for the bonds of any particular series) by an Indenture of Mortgage and Deed of Trust, dated as of April 1, 1932, executed by the Company to Bankers Trust Company, as Trustee (the "Trustee"), as amended and supplemented by indentures supplemental thereto, including without limitation a Supplemental Indenture dated as of May 1, 1993, to which Indenture as so amended and supplemented (herein referred to as the Mortgage) reference is made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds are secured.
The Bonds of this series are issued and to be issued in order to evidence and secure a loan made by the County to the Company pursuant to a Loan Agreement dated as of May 1, 1993. In order to provide moneys to fund such loan, the County has issued the Warrick County Bonds under and pursuant to the County Indenture. Payments made by the
Company of principal and interest on the Bonds of this series are intended to be sufficient to permit payments of principal and interest to be made on the Warrick County Bonds. Upon certain terms and conditions, moneys held under and pursuant to the County Indenture, including moneys so held from the proceeds of the sale of the Warrick County Bonds or earnings on the investment of such proceeds, or redemption of the Warrick County Bonds shall be credited to or used for the payment of the Bonds of this series and to the extent so credited or used shall satisfy a like amount otherwise due hereunder.
The Bonds of this series are subject to mandatory redemption, in whole or in part, as the case may be, on each date that Warrick County Bonds are to be redeemed. The principal amount of the Bonds of this series to be redeemed on any such date shall be equal to the principal amount of Warrick County Bonds called for redemption on that date. All redemptions of Bonds of this series shall be at 100% of the principal amount thereof, plus accrued interest to the redemption date.
If and whenever the Trustee or the Company is notified that an event of default has occurred and is continuing under Section 901(d) of the County Indenture, and provided that the principal of all Warrick County Bonds then outstanding and the interest thereon shall have been declared immediately due and payable, then not later than 2 business days following the occurrence of the foregoing events, the Company shall, upon not less than 30 days' and not more than 45 days' prior written notice given in the manner provided in the Mortgage, call for redemption on a redemption date selected by it not later than 45 days following the date of such notice, all of the Bonds of this series then outstanding, and shall on such redemption date redeem the same at a price equal to 100% of the principal amount thereof, together with accrued interest thereon to the redemption date, except that such requirement or redemption shall be deemed to be waived if, prior to the date fixed for such redemption of the Bonds of this series, such event of default is waived or cured.
In case a completed default, as defined in the Mortgage, shall occur, the principal of this bond and all other bonds of the Company at any such time outstanding under the Mortgage may be declared or may become due and payable, upon the conditions and in the manner and with the effect provided in the Mortgage. The Mortgage provides that such declaration may in certain events be waived by the holders of a majority in principal amount of the bonds entitled to vote then outstanding.
This bond, subject to the limitations with regard thereto contained in the County Indenture, is transferable
as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y., upon surrender and cancellation of this bond, and thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange thereof as provided in the Mortgage, and upon payment, if the Company shall require it, of the charges therein prescribed. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner for the purpose of receiving payment of or on account of the principal and interest due hereon and for all other purposes.
The Bonds of this series are issuable as registered bonds without coupons in denominations of $1,000 and authorized multiples thereof. In the manner and upon payment of the charges prescribed in the Mortgage, registered bonds without coupons of this series may be exchanged for a like aggregate principal amount of fully registered bonds without coupons of other authorized denominations of the same series, upon presentation and surrender thereof, for cancellation, to the Trustee at its principal corporate trust office in the Borough of Manhattan, The City of New York, N.Y.
No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, office or director of the Company or of any predecessor or successor corporation, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
Pursuant to the Mortgage, the holder or owner of this bond by his acceptance hereof is deemed to have agreed to amendments to the Mortgage which will eventually permit certain amendments to the Mortgage with the consent of the holders of 66-2/3% of the principal amount of the outstanding bonds of all series issued under the Mortgage and which redefine, effective at such time as all bonds of each series of bonds issued under the Mortgage prior to January 1, 1977 are no longer outstanding, the amounts required to be spent by the Company under the Mortgage for the repair, maintenance, renewal and replacement of its property.
[END OF FORM OF BOND]
and
Whereas, the definitive registered bonds without coupons of the Thirty-sixth Series and the Trustee's certificate of authentication to be borne by such bonds are to be substantially in the following forms, respectively:
[FORM OF FULLY REGISTERED BOND OF THE THIRTY-SIXTH SERIES]
[FORM OF FACE OF BOND]
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
FIRST MORTGAGE BOND, SERIES B 1993
DUE 2023
No_____________ $__________
Southern Indiana Gas and Electric Company, a corporation of the State of Indiana (hereinafter called the Company), for value received, hereby promises to pay to
or registered assigns dollars, on May 1, 2023 at the office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y., in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, and to pay to the registered owner hereof interest thereon from the interest payment date (May 1 or November 1) next preceding the date of this bond unless the date hereof is prior to November 1, 1993, in which case from May 1, 1993 (or, if this bond is dated between the record date for any interest payment date and such interest payment date, then from such interest payment date), at the rate from time to time borne by the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series B (Southern Indiana Gas and Electric Company Project) (the "Warrick County Bonds") issued by Warrick County, Indiana (the "County") under the Indenture of Trust, dated as of May 1, 1993 (the "County Indenture"), between the County and The Citizens National Bank of Evansville, as trustee (the "County Trustee"); provided, however, that in no event shall the rate of interest borne by the Bonds of this series exceed 10% per annum. Such interest, in like coin or currency, payable at said office or agency semi- annually on May 1 and November 1 in each year, until the Company's obligation with respect to the payment of such
principal shall have been discharged; provided, however, that the amount of interest payable as set forth above on any interest payment date (the "Original Interest Amount") shall be reduced by an amount equal to the difference, if any, between the Original Interest Amount and the amount of interest due and payable on such interest payment date on a like principal amount of Warrick County Bonds. The principal and interest so payable on any May 1 or November 1 will, subject to certain exceptions provided in the Mortgage hereinafter mentioned, be paid to the person in whose name this bond is registered at the close of business on the record date, which shall be the April 15 or October 15, as the case may be, next preceding such interest payment date, or, if such April 15 or October 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, The City of New York, N.Y., are authorized or obligated by law to close, the next preceding day which shall not be a legal holiday or a day on which such institutions are so authorized or obligated to close.
The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.
This bond shall not become obligatory until Bankers Trust Company, the Trustee under the Mortgage, or its successor thereunder, shall have signed the form of certificate endorsed hereon.
In witness whereof, Southern Indiana Gas and Electric Company has caused this bond to be signed in its name by its President or a Vice President, by his signature or a facsimile thereof, and a facsimile of its corporate seal to be imprinted hereon, attested by its Secretary or an Assistant Secretary, by his signature or a facsimile thereof.
Dated:
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By:______________________________
President and
Chief Executive Officer
Attest:
[FORM OF TRUSTEE'S CERTIFICATE]
This bond is one of the bonds of the series designated therein, described in the within-mentioned Mortgage.
BANKERS TRUST COMPANY,
as Trustee,
By:_______________________________
Authorized Officer
[FORM OF REVERSE OF BOND]
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
FIRST MORTGAGE BOND, SERIES B 1993 DUE 2023
This bond is one of an issue of First Mortgage Bonds of the Company, issuable in series, and is one of the series designated in the title hereof, all issued and to be issued under and equally secured (except as to any sinking fund established in accordance with the provisions of the Mortgage hereinafter mentioned for the bonds of any particular series) by an Indenture of Mortgage and Deed of Trust, dated as of April 1, 1932, executed by the Company to Bankers Trust Company, as Trustee (the "Trustee"), as amended and supplemented by indentures supplemental thereto, including without limitation a Supplemental Indenture dated as of May 1, 1993, to which Indenture as so amended and supplemented (herein referred to as the Mortgage) reference is made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds are secured.
The Bonds of this series are issued and to be issued in order to evidence and secure a loan made by the County to the Company pursuant to a Loan Agreement dated as of May 1, 1993. In order to provide moneys to fund such loan, the County has issued the Warrick County Bonds under and pursuant to the County Indenture. Payments made by the Company of principal and interest on the Bonds of this series are intended to be sufficient to permit payments of principal and interest to be made on the Warrick County
Bonds. Upon certain terms and conditions, moneys held under and pursuant to the County Indenture, including moneys so held from the proceeds of the sale of the Warrick County Bonds or earnings on the investment of such proceeds, or redemption of the Warrick County Bonds shall be credited to or used for the payment of the Bonds of this series and to the extent so credited or used shall satisfy a like amount otherwise due hereunder.
The Bonds of this series are subject to mandatory redemption, in whole or in part, as the case may be, on each date that Warrick County Bonds are to be redeemed. The principal amount of the Bonds of this series to be redeemed on any such date shall be equal to the principal amount of Warrick County Bonds called for redemption on that date. All redemptions of Bonds of this series shall be at 100% of the principal amount thereof, plus accrued interest to the redemption date.
If and whenever the Trustee or the Company is notified that an event of default has occurred and is continuing under Section 901(d) of the County Indenture, and provided that the principal of all Warrick County Bonds then outstanding and the interest thereon shall have been declared immediately due and payable, then not later than 2 business days following the occurrence of the foregoing events, the Company shall, upon not less than 30 days' and not more than 45 days' prior written notice given in the manner provided in the Mortgage, call for redemption on a redemption date selected by it not later than 45 days following the date of such notice, all of the Bonds of this series then outstanding, and shall on such redemption date redeem the same at a price equal to 100% of the principal amount thereof, together with accrued interest thereon to the redemption date, except that such requirement or redemption shall be deemed to be waived if, prior to the date fixed for such redemption of the Bonds of this series, such event of default is waived or cured.
In case a completed default, as defined in the Mortgage, shall occur, the principal of this bond and all other bonds of the Company at any such time outstanding under the Mortgage may be declared or may become due and payable, upon the conditions and in the manner and with the effect provided in the Mortgage. The Mortgage provides that such declaration may in certain events be waived by the holders of a majority in principal amount of the bonds entitled to vote then outstanding.
This bond, subject to the limitations with regard thereto contained in the County Indenture, is transferable as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The
City of New York, N.Y., upon surrender and cancellation of this bond, and thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange thereof as provided in the Mortgage, and upon payment, if the Company shall require it, of the charges therein prescribed. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner for the purpose of receiving payment of or on account of the principal and interest due hereon and for all other purposes.
The Bonds of this series are issuable as registered bonds without coupons in denominations of $1,000 and authorized multiples thereof. In the manner and upon payment of the charges prescribed in the Mortgage, registered bonds without coupons of this series may be exchanged for a like aggregate principal amount of fully registered bonds without coupons of other authorized denominations of the same series, upon presentation and surrender thereof, for cancellation, to the Trustee at its principal corporate trust office in the Borough of Manhattan, The City of New York, N.Y.
No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, office or director of the Company or of any predecessor or successor corporation, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
Pursuant to the Mortgage, the holder or owner of this bond by his acceptance hereof is deemed to have agreed to amendments to the Mortgage which will eventually permit certain amendments to the Mortgage with the consent of the holders of 66-2/3% of the principal amount of the outstanding bonds of all series issued under the Mortgage and which redefine, effective at such time as all bonds of each series of bonds issued under the Mortgage prior to January 1, 1977 are no longer outstanding, the amounts required to be spent by the Company under the Mortgage for the repair, maintenance, renewal and replacement of its property.
[END OF FORM OF BOND]
and
Whereas, all things necessary to make the Bonds of the Thirty-fifth Series and the Thirty-sixth Series, when authenticated by the Trustee and issued as in the Indenture provided, the valid, binding and legal obligations of the Company, entitled in all respects to the security of the Indenture, have been done and performed, and the creation, execution and delivery of this Supplemental Indenture has in all respects been duly authorized; and
Whereas, the Company and the Trustee deem it advisable to enter into this Supplemental Indenture for the purposes above stated and for the purpose of describing the Bonds of the Thirty-fifth Series and the Thirty-sixth Series, and of providing the terms and conditions of redemption thereof;
Now, therefore, this supplemental indenture witnesseth:
That Southern Indiana Gas and Electric Company, in
consideration of the premises and of one dollar to it duly
paid by the Trustee at or before the ensealing and delivery
of these presents, the receipt whereof is hereby
acknowledged, and of the purchase and acceptance of the
bonds issued or to be issued hereunder by the holders or
registered owners thereof, and in order to secure the
payment of the principal, premium, if any, and interest of
all bonds at any time issued and outstanding under the
Indenture, according to their tenor and effect, and the
performance of all of the provisions hereof and of said
bonds, hath granted, bargained, sold, released, conveyed,
assigned, transferred, pledged, set over and confirmed and
by these presents doth grant, bargain, sell, release,
convey, assign, transfer, pledge, set over and confirm unto
Bankers Trust Company, as Trustee, and to its successor or
successors in said trust, and to its and their assigns
forever, all the properties of the Company located in the
State of Indiana described in Schedule A (which is
identified by the signature of an officer of each party
hereto at the end thereof) hereto annexed and hereby made a
part hereof and does hereby confirm that the Company will
not cause or consent to a partition, either voluntary or
through legal proceedings, of property, whether herein
described or heretofore or hereafter acquired, in which its
ownership shall be as a tenant in common, except as
permitted by and in conformity with the provisions of the
Indenture and particularly of Article X thereof.
Together with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any party thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Article X of the Indenture), the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right title interest and claim whatsoever, at law as well as
in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
To have and to hold all such properties, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns forever.
In trust, nevertheless, upon the terms and trusts of the Indenture, for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Indenture (and subject to any sinking funds that may be created for the benefit of any particular series).
Provided, however, and these presents are upon the condition that, if the Company, its successors or assigns, shall pay or cause to be paid, the principal of, premium, if any, and interest on said bonds, at the times and in the manner stipulated therein and herein, and shall keep, perform and observe all and singular the covenants and promises in said bonds and in the Indenture expressed to be kept, performed and observed by or on the part of the Company, then this Supplemental Indenture and the estate and rights hereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect.
It is hereby covenanted, declared and agreed, by the Company, that all such bonds and coupons are to be issued, authenticated and delivered, and that all property subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts in the Indenture set forth, and the Company, for itself and its successors and assigns, does hereby covenant and agree to and with the Trustee and its successor or successors in such trust, for the benefit of those who shall hold said bonds and interest coupons, or any of them, as follows:
PART I.
DEFINITIONS
The terms defined in this Part I shall, for all purposes of this Supplemental Indenture, have the meanings herein specified, unless the context otherwise requires:
Warrick County Bonds:
The term "Warrick County Bonds", when used in connection with the Bonds of the Thirty-fifth Series, shall mean the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series A (Southern Indiana Gas and Electric Company Project) issued under and pursuant to the applicable County Indenture and, when used in connection with the Bonds of the Thirty-Sixth Series, shall mean the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series B (Southern Indiana Gas and Electric Company Project) issued under and pursuant to the applicable County Indenture.
County Indenture:
The term "County Indenture", when used in connection with the Bonds of the Thirty-fifth Series, shall mean the Indenture of Trust, dated as of May 1, 1993, by and between Warrick County, Indiana and The Citizens National Bank of Evansville, as Trustee, and any indenture supplemental thereto or amendatory thereof, pursuant to which the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series A (Southern Indiana Gas and Electric Company Project) are issued and secured and, when used in connection with the Bonds of the Thirty-Sixth Series, shall mean the Indenture of Trust, dated as of May 1, 1993, by and between Warrick County, Indiana and The Citizens National Bank of Evansville, as Trustee, and any indenture supplemental thereto or amendatory thereof, pursuant to which the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series B (Southern Indiana Gas and Electric Company Project) Bonds are issued and secured.
County Trustee:
The term "County Trustee", shall mean the person and/or corporation acting as trustee at any time under the applicable County Indenture.
Loan Agreement:
The term "Loan Agreement", when used in connection with the Bonds of the Thirty-Fifth Series, shall mean the Loan Agreement dated as of May 1, 1993 between Warrick County, Indiana, a municipal corporation and political subdivision of the State of Indiana, and the Company, relating to the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series A (Southern Indiana Gas and Electric Company Project), and any and all modifications, amendments and Supplements thereof and, when used in connection with the Bonds of the Thirty-Sixth Series, shall mean the Loan Agreement dated as of May 1, 1993 between Warrick County, Indiana, and the Company, relating to the Adjustable Rate Environmental Improvement Revenue Bonds, 1993 Series B (Southern Indiana Gas and Electric Company Project), and any and all modifications, amendments and Supplements thereof.
PART II.
DESCRIPTION OF BONDS OF THE THIRTY-FIFTH SERIES
Section 1. Bonds of the Thirty-fifth Series shall mature on the date set forth in the form of bond relating thereto hereinbefore set forth, shall bear interest at the rate from time to time borne by the Warrick County Bonds; provided, however, that in no event shall the rate of interest borne by the Bonds of the Thirty-fifth Series exceed 10%. Such interest, payable semi-annually, on May 1 and November 1 in each year, and all bonds of said series shall be designated as hereinbefore in the sixth Whereas clause set forth. Both principal of and interest on said bonds shall be payable, to the extent specified in the form of bond hereinabove set forth, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, at the office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. Definitive bonds of said series may be issued, originally or otherwise, only as registered bonds without coupons; and they and the Trustee's certificate of authentication shall be substantially in the forms hereinbefore recited, respectively. Definitive registered bonds of the Thirty-fifth Series may be issued in the denomination of $1,000 and in such other denominations (in multiples of $1,000) as the Board of Directors of the Company shall approve, and execution and delivery to the Trustee for authentication shall be conclusive evidence of such approval. In the manner and upon payment of the charges prescribed in the Indenture, registered bonds without coupons of said series may be exchanged for a like aggregate principal amount of fully registered bonds without coupons of other authorized denominations of the same series, upon presentation and surrender thereof for
cancellation to the Trustee at its principal corporate trust office in the Borough of Manhattan, The City of New York, N.Y. However, notwithstanding the provisions of Section 12 of the Indenture, no charge shall be made upon any transfer or exchange of bonds of said series other than for any tax or taxes or other governmental charge required to be paid by the Company. The form of the temporary bonds of said series shall be in substantially the form of the form of registered bond hereinbefore recited with such appropriate changes therein as are required on account of the temporary nature thereof. Said temporary bonds of said series shall be in registered form without coupons, registrable as to principal, and shall be exchangeable for definitive bonds of said series when prepared.
The person in whose name any registered bond without coupons of the Thirty-fifth Series is registered at the close of business on any record date (as hereinbelow defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such registered bond upon any transfer or exchange thereof subsequent to the record date and prior to such interest payment date, except if and to the extent the Company shall default in the payment of the interest due on such interest payment date, in which case such defaulted interest shall be paid to the person in whose name such bond is registered either at the close of business on the day preceding the date of payment of such defaulted interest or on a subsequent record date for such payment if one shall have been established as hereinafter provided. A subsequent record date may be established by or on behalf of the Company by notice mailed to the holders of bonds not less than ten days preceding such record date, which record date shall be not more than thirty days prior to the subsequent interest payment date. The term "record date" as used in this Section with respect to any regular interest payment date shall mean the April 15 or October 15, as the case may be, next preceding such interest payment date, or, if such April 15 or October 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, The City of New York, N.Y., are authorized or obligated by law to close, the next preceding day which shall not be a legal holiday or day on which such institutions are so authorized or obligated to close.
Except as provided in this Section, every registered bond without coupons of the Thirty-fifth Series shall be dated and shall bear interest as provided in Section 10 of the Indenture; provided, however, that so long as there is no existing default in the payment of interest on the bonds, the holder of any bond authenticated by the Trustee between the record date for any interest payment date and such interest payment date shall not be entitled to the payment of the interest due on such interest payment date and shall
have no claim against the Company with respect thereto; and provided, further, that, if and to the extent the Company shall default in the payment of the interest due on such interest payment date, then any such bond shall bear interest from the May 1 or November 1, as the case may be, next preceding the date of such bond, to which interest has been paid or, if the Company shall be in default with respect to the interest due on November 1, 1993, then from May 1, 1993.
It is provided in the County Indenture that moneys on deposit with the County Trustee for redemption of Warrick County Bonds under certain circumstances shall be credited to or used for the payment of principal or interest on the Bonds of the Thirty-fifth Series. The Company shall notify the Trustee of all credits to or payments of principal (whether at maturity, by redemption or by acceleration) and interest on the Bonds of the Thirty-fifth Series by mailing a statement to the Trustee on the date of such credit or payment to the effect that such credit or payment has been made, and further stating the extent to which the credit or payment has been made on account of redemption of Warrick County Bonds or from funds on deposit with the County Trustee under the County Indenture. In addition, the Company shall promptly notify the Trustee of each change in the interest rate borne by the Warrick County Bonds.
PART III.
DESCRIPTION OF BONDS OF THE THIRTY-SIXTH SERIES
Section 1. Bonds of the Thirty-sixth Series shall mature on the date set forth in the form of bond relating thereto hereinbefore set forth, shall bear interest at the rate from time to time borne by the Warrick County Bonds; provided, however, that in no event shall the rate of interest borne by the Bonds of the Thirty-sixth Series exceed 10%. Such interest, payable semi-annually, on May 1 and November 1 in each year, and all bonds of said series shall be designated as hereinbefore in the seventh Whereas clause set forth. Both principal of and interest on said bonds shall be payable, to the extent specified in the form of bond hereinabove set forth, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, at the office or agency of the Company in the Borough of Manhattan, The City of New York, N.Y. Definitive bonds of said series may be issued, originally or otherwise, only as registered bonds without coupons; and they and the Trustee's certificate of authentication shall be substantially in the forms hereinbefore recited, respectively. Definitive registered bonds of the Thirty-sixth Series may be issued in the denomination of $1,000 and in such other denominations
(in multiples of $1,000) as the Board of Directors of the Company shall approve, and execution and delivery to the Trustee for authentication shall be conclusive evidence of such approval. In the manner and upon payment of the charges prescribed in the Indenture, registered bonds without coupons of said series may be exchanged for a like aggregate principal amount of fully registered bonds without coupons of other authorized denominations of the same series, upon presentation and surrender thereof for cancellation to the Trustee at its principal corporate trust office in the Borough of Manhattan, The City of New York, N.Y. However, notwithstanding the provisions of Section 12 of the Indenture, no charge shall be made upon any transfer or exchange of bonds of said series other than for any tax or taxes or other governmental charge required to be paid by the Company. The form of the temporary bonds of said series shall be in substantially the form of the form of registered bond hereinbefore recited with such appropriate changes therein as are required on account of the temporary nature thereof. Said temporary bonds of said series shall be in registered form without coupons, registrable as to principal, and shall be exchangeable for definitive bonds of said series when prepared.
The person in whose name any registered bond without coupons of the Thirty-sixth Series is registered at the close of business on any record date (as hereinbelow defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such registered bond upon any transfer or exchange thereof subsequent to the record date and prior to such interest payment date, except if and to the extent the Company shall default in the payment of the interest due on such interest payment date, in which case such defaulted interest shall be paid to the person in whose name such bond is registered either at the close of business on the day preceding the date of payment of such defaulted interest or on a subsequent record date for such payment if one shall have been established as hereinafter provided. A subsequent record date may be established by or on behalf of the Company by notice mailed to the holders of bonds not less than ten days preceding such record date, which record date shall be not more than thirty days prior to the subsequent interest payment date. The term "record date" as used in this Section with respect to any regular interest payment date shall mean the April 15 or October 15, as the case may be, next preceding such interest payment date, or, if such April 15 or October 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, The City of New York, N.Y., are authorized or obligated by law to close, the next preceding day which shall not be a legal holiday or day on which such institutions are so authorized or obligated to close.
Except as provided in this Section, every registered bond without coupons of the Thirty-sixth Series shall be dated and shall bear interest as provided in Section 10 of the Indenture; provided, however, that so long as there is no existing default in the payment of interest on the bonds, the holder of any bond authenticated by the Trustee between the record date for any interest payment date and such interest payment date shall not be entitled to the payment of the interest due on such interest payment date and shall have no claim against the Company with respect thereto; and provided, further, that, if and to the extent the Company shall default in the payment of the interest due on such interest payment date, then any such bond shall bear interest from the May 1 or November 1, as the case may be, next preceding the date of such bond, to which interest has been paid or, if the Company shall be in default with respect to the interest due on November 1, 1993, then from May 1, 1993.
It is provided in the County Indenture that moneys on deposit with the County Trustee for redemption of Warrick County Bonds under certain circumstances shall be credited to or used for the payment of principal or interest on the Bonds of the Thirty-sixth Series. The Company shall notify the Trustee of all credits to or payments of principal (whether at maturity, by redemption or by acceleration) and interest on the Bonds of the Thirty-sixth Series by mailing a statement to the Trustee on the date of such credit or payment to the effect that such credit or payment has been made, and further stating the extent to which the credit or payment has been made on account of redemption of Warrick County Bonds or from funds on deposit with the County Trustee under the County Indenture. In addition, the Company shall promptly notify the Trustee of each change in the interest rate borne by the Warrick County Bonds.
PART IV.
ISSUE OF BONDS OF THE THIRTY-FIFTH SERIES
Section 1. The principal amount of Bonds of the Thirty-fifth Series which may be authenticated and delivered hereunder is limited to the aggregate principal amount of Twenty-two Million Two Hundred Thousand Dollars ($22,200,000).
Section 2. Bonds of the Thirty-fifth Series in the aggregate principal amount of Twenty-two Million Two Hundred Thousand Dollars ($22,200,000) may at any time subsequent to the execution hereof be executed by the Company and delivered to the Trustee and shall be authenticated by the
Trustee and delivered (either before or after the recording hereof) to the Company upon direction of the Company evidenced by a writing or writings, signed by its President or one of its Vice Presidents and its Treasurer or one of its Assistant Treasurers, at such time or times as may be requested by the Company upon the receipt by the Trustee of the certificates, resolutions, opinions and other documents required by the Indenture.
Section 3. The consideration for the Bonds of the Thirty-fifth Series shall be the loan from Warrick County, Indiana, provided for in Section 4.1 of the Loan Agreement, which shall be deposited and disbursed pursuant to the Loan Agreement.
PART V.
ISSUE OF BONDS OF THE THIRTY-SIXTH SERIES
Section 1. The principal amount of Bonds of the Thirty-sixth Series which may be authenticated and delivered hereunder is limited to the aggregate principal amount of Twenty-two Million Eight Hundred Thousand Dollars ($22,800,000).
Section 2. Bonds of the Thirty-sixth Series in the aggregate principal amount of Twenty-two Million Eight Hundred Thousand Dollars ($22,800,000) may at any time subsequent to the execution hereof be executed by the Company and delivered to the Trustee and shall be authenticated by the Trustee and delivered (either before or after the recording hereof) to the Company upon direction of the Company evidenced by a writing or writings, signed by its President or one of its Vice Presidents and its Treasurer or one of its Assistant Treasurers, at such time or times as may be requested by the Company upon the receipt by the Trustee of the certificates, resolutions, opinions and other documents required by the Indenture.
Section 3. The consideration for the Bonds of the Thirty-sixth Series shall be the loan from Warrick County, Indiana, provided for in Section 4.1 of the Loan Agreement, which shall be deposited and disbursed pursuant to the Loan Agreement.
PART VI.
REDEMPTION PROVISIONS
Section 1. The Bonds of the Thirty-fifth Series and the Bonds of the Thirty-sixth Series shall be subject to redemption by the Company prior to maturity, respectively, in the events and in the manner and at the redemption prices set forth in the respective forms of Bond of such series contained in the eight and ninth Whereas clauses hereof and not otherwise.
Section 2. In the manner provided by the provisions of Article IX of the Indenture, notice of redemption shall be mailed not less than thirty (30) and not more than forty- five (45) days prior to the date of redemption, to the registered owner of the Bonds of the Thirty-fifth Series or of the Bonds of the Thirty-sixth Series, as the case may be, at the address thereof as the same shall appear on the transfer register of the Company; provided, however, that the owners of all of the Bonds of the Thirty-fifth Series or the owners of all of the Bonds of the Thirty-sixth Series may agree in writing with the Company to a shorter notice period with respect to their respective series, and such agreement, if filed with the Trustee, shall be binding on the Company.
PART VII.
MISCELLANEOUS
Section 1. The Company covenants that the provisions of Section 36A of the Indenture and of Section 1.02 of the Supplemental Indenture dated as of July 1, 1948, which are to remain in effect so long as any bonds of the series referred to in said Section shall be outstanding under the Indenture, shall remain in full force and effect so long as any Bonds of the Thirty-fifth Series and any Bonds of the Thirty-sixth Series shall be outstanding under the Indenture.
Section 2. Except as herein otherwise expressly provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture, other than as set forth in the Mortgage. The Trustee shall not be responsible for the recitals herein or in the bonds (except the Trustee's certificate of authentication), all of which are made by the Company solely.
Section 3. As supplemented and amended by this Supplemental Indenture, the Mortgage is in all respects ratified and confirmed, and the Mortgage and this Supplemental Indenture shall be read, taken and construed as one and the same instrument.
Section 4. This Supplemental Indenture may be executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.
In Witness Whereof, Southern Indiana Gas and Electric Company, party of the first part hereto, and Bankers Trust Company, party of the second part hereto, have caused these presents to be executed in their respective names by their respective Chairmen of the Board or Presidents or one of their Vice Presidents or Assistant Vice Presidents and their respective seals to be hereunto affixed and attested by their respective Secretaries or one of their Assistant Secretaries, all as of the day and year first above written.
(SEAL) SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY,
By: /s/ R.G. Reherman
R.G. Reherman
President and
Chief Executive Officer
Attest:
/s/ A.E. Goebel
A.E. Goebel
Senior Vice President,
Secretary and Treasurer
(SEAL) BANKERS TRUST COMPANY,
By: /s/ Samir Pandiri
Samir Pandiri
Assistant Vice President
Attest:
/s/ Shikha Dombek
Shikha Dombek
Assistant Secretary
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STATE OF INDIANA )
: ss.:
COUNTY OF VANDERBURGH )
|
On this ____ day of May, 1993, before me, the undersigned, a notary public in and for the county and state aforesaid, personally came R.G. Reherman, to me known, who being by me duly sworn, did depose and say that he resides at 10881 Watershore Drive, Evansville, Indiana 47710; that he is President and Chief Executive Officer of Southern Indiana Gas and Electric Company, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of the said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order; and the said R.G. Reherman acknowledged the execution of the foregoing instrument on behalf of the said corporation as the voluntary act and deed of the said corporation for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and seal the day and year first above written.
(SEAL) _____________________________ Notary Public
My Commission Expires
My County of Residence is
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
|
On this ____ day of May, 1993, before me, the undersigned, a notary public in and for the county and state aforesaid, personally came Samir Pandiri, to me known, who being by me duly sworn, did depose and say that he resides at 45 River Drive South, Jersey City, NJ 07310; that he is an Assistant Vice President of Bankers Trust Company, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of the said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order; and the said Samir Pandiri, acknowledged the execution of the foregoing instrument on behalf of the said corporation as the voluntary act and deed of the said corporation for the uses and purposes therein set forth.
In Witness Whereof, I have hereunto set my hand and seal the day and year first above written.
(SEAL) ___________________________________ Notary Public
SCHEDULE A
Detailed Description of Additional Properties
Real Estate in Warrick County, Indiana
Part of the East Half of the Northwest Quarter of
Section Fifteen (15), Township Seven (7) South, Range Eight
(8) West, in Warrick County, Indiana, more fully described
in deed dated January 14, 1985 from Old National Bank in
Evansville, Indiana, recorded in the office of the Recorder
of Warrick County, Indiana, in Deed File No. 2, Card Number
15148.
Signed for identification
/s/ A.E. Goebel
A.E. Goebel, Senior Vice President,
Secretary and Treasurer
SOUTHERN INDIANA GAS AND ELECTRIC
COMPANY
/s/ Samir Pandiri
Samir Pandiri, Assistant Vice President
BANKERS TRUST COMPANY
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SOUTHERN INDIANA GAS & ELECTRIC COMPANY
CORPORATE PERFORMANCE INCENTIVE PLAN
FEBRUARY 1994
I. PURPOSE OF THE OUTLINE
* To highlight the annual corporate performance incentive plan approved for the period January 1994 - December 1996, subject to annual review by the compensation committee of the Board of Directors.
* To review the objectives and key features of the plan.
II. PLAN OBJECTIVES
* To motivate and reward outstanding performance by SIGECO and its executive team.
* To compare SIGECO's performance with a group of regional utilities.
* To focus on stockholder and rate payer interests.
* To support long-term objectives by achieving short-term goals.
III. KEY FEATURES OF THE PLAN
* Participation limited to officers, management staff, and other selected management positions.
* Incentive awards determined primarily by corporate results:
- Five measures of Company performance.
- Results for annual and multi-year periods
compared to ten other utilities.
* Payments of awards in cash.
* Levels of award opportunities established to reflect organizational level of responsibility and impact on company performance for each position.
* Opportunity for the Chief Executive Officer to adjust individual awards by +/- 5% based on his judgment of the participants' base salaries during the plan year.
* Award levels stated as percentage of participants' basic salaries during the plan year.
* Maximum annual incentive plan fund limited to 1.5% of net income.
IV. PARTICIPATION AND INCENTIVE AWARD LEVELS
* A review of SIGECO's organization structure suggests that eligibility for plan participation should be limited to officer and key management positions per the following categories:
RANGE OF AWARD OPPORTUNITIES
INCENTIVE (% OF BASE SALARY)
CATEGORY POSITION THRESHOLD MAXIMUM
I. Chairman and Chief Executive Officer 20% 30%
II. Sr. Vice President-Operations 15% 25%
Sr. Vice President-Secretary & Treasurer
III. All Other Plan Participants 10% 20%
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V. INCENTIVE PLAN FUNDING
* The size of the incentive fund will be determined each plan year by five measures of Company performance compared with the performance of ten utilities.
* Measures to be used are shown below. Different measures may be appropriate in subsequent plan years based on Company objectives and priorities.
PERFORMANCE MEASURES BASIS FOR COMPARISON
Shareholder Related
1. Ratio of market to book value Fiscal year end - highest
2. Total shareholder return on common stock Five-year total return -
highest
Customer Related
1. Revenue per kilowatt hour Annual average - lowest
2. Revenue per Mcf Annual average - lowest
3. Total operating expenses per customer Average annual growth rate
over a three year period -
lowest
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VI. COMPARISON OF RESULTS FOR PLAN YEAR
* SIGECO's results for the five performance measures will be compared to the performance of 10 utilities: 8 combination companies (primarily located in the midwest), 1 electric and 1 gas company (both located in Indiana).
COMPARISON COMPANIES
* Indiana Energy * Louisville Gas & Electric
* Indianapolis Power & Light * Northwestern Public Service
* Interstate Power * Orange & Rockland Utilities
* Iowa-Illinois Gas & Electric * Wisconsin Power & Light
* Madison Gas & Electric * Wisconsin Public Service
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* Comparing SIGECO's performance to other utilities:
- provides an objective measure from the standpoint of the Company's external publics,
- encourages management to out-perform similar utilities,
- reduces the influence of factors beyond management's control, such as general economic and utility industry conditions.
* At the end of the plan year, the performance scale shown below is used to evaluate SIGECO's performance for each of the measures selected, compared with the utility group.
PERFORMANCE LEVEL PERFORMANCE RATING RANKING
POINTS
Equals or exceeds nine companies Outstanding 20
in the comparison group
Equals or exceeds seven companies Superior 15
in the comparison group
Equals or exceeds five companies in Satisfactory 10
the comparison group
Falls below the fifth highest Below Standard 0
company in the comparison group
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PERFORMANCE RATING TOTAL POINTS Outstanding 90 - 100 Superior 70 - 89 Satisfactory 50 - 69 Below Standard Below 50 |
* The Chairman and Chief Executive Officer's award will be established directly from the performance rating of SIGECO against the comparison companies.
* The Chairman will have the latitude to adjust the indicated awards for other participating executives by +/- 5%, based on his evaluation of their individual contributions during the plan year.
VII. SUMMARY OF STEPS TO DETERMINE AWARDS
* Corporate results are calculated for each performance measure used.
* SIGECO's results are ranked in relation to the comparison group of utilities and the total incentive award is determined. This total may not exceed 1.5% of SIGECO's net income for the plan year.
* The indicated award for the other participants may be adjusted by +/- 5% by the CEO on the basis of individual performance during the plan year, but total fund dollars available may not be exceeded.
* Recommended awards are reviewed and approved by the Compensation Committee and the Board of Directors.
VIII. COMPENSATION COMMITTEE RESPONSIBILITIES
* The Compensation Committee has responsibility for approving the plan and assuring that it meets SIGECO's objectives. The Committee's specific responsibilities include:
1. Approving corporate performance measures, the measurement scale used, and the comparison utilities selected.
2. Reviewing eligibility for plan participation.
3. Approving the size of the total incentive fund and individual levels of award opportunities.
4. Reviewing and approving the recommended awards for participants.
EX-12
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Five Years Ended December 31, 1993
1993 1992 1991 1990 1989
(in thousands)
EARNINGS AS DEFINED
Net income $39,653 $36,767 $38,513 $37,691 $36,216
Add:
Income Taxes:
Current:
Federal 5,897 13,049 14,176 12,025 13,404
State 1,312 2,444 2,436 1,642 2,116
Deferred, net:
Federal 9,682 550 2,996 5,597 5,496
State 1,581 439 690 1,532 823
Deferred investment
tax credit, net (1,868) (1,873) (1,877) (1,883) (1,878)
Interest on long-term
debt 18,437 17,768 18,238 18,249 18,102
Amortization of premium,
discount and expense
on debt 773 446 740 667 714
Other interest 746 461 719 572 2,173
Interest component of
rent expense <F1> 405 391 382 369 351
Earnings as defined $76,618 $70,442 $77,013 $76,461 $77,517
FIXED CHARGES AS DEFINED
Interest on long-term
debt $18,437 $17,768 $18,238 $18,249 $18,102
Amortization of premium,
discount and expense
on debt 773 446 740 667 714
Other interest 746 461 719 572 2,173
Interest component of
rent expense <F1> 405 391 382 369 351
Fixed charges as
defined $20,361 $19,066 $20,079 $19,857 $21,340
Ratio of Earnings to
Fixed Charges <f2) 3.76 3.69 3.84 3.85 3.63
NOTES:
<F1> One-third of rentals represents a reasonable
approximation of the interest factor.
<F2> The ratios shown above do not reflect the fixed
charge component in the Company's power contract with OVEC
(see "Electric Business", page 1). Inclusion of the
component in the computation would not have a significant
effect on the ratios.
|
EX-21
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
SUBSIDIARY OF THE REGISTRANT
Southern Indiana Properties, Incorporated in Indiana
February 15, 1994
Mr. R. G. Reherman
Mr. A. E. Goebel
Southern Indiana Gas and Electric Company
29 N.W. Fourth Street
Evansville, Indiana 47741
J. H. Byington, Jr., Esq.
Winthrop, Stimson, Putnam & Roberts
40 Wall Street
New York, New York 10005
Dear Gentlemen:
Southern Indiana Gas and Electric Company will file an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 ("Form 10-K") before April 1, 1994 which will be accompanied by certain exhibits.
We hereby authorize you, or any one of your, to complete said Form 10-K and to remedy any deficiencies with respect to said Form 10-K by appropriate amendment or amendments; and we hereby make, constitute and appoint each of you our true and lawful attorney for each of us and in each of our names, places and steads, both in our individual capacities as directors and that of officers of Southern Indiana Gas and Electric Company, to sign and cause to be filed with the Securities and Exchange Commission said Form 10-K, any appropriate amendment or amendments thereto, and any exhibits thereto.
The undersigned, Southern Indiana Gas and Electric Company, also authorizes you and any one of you to sign said
Form 10-K and any amendment or amendments thereto on its behalf as attorney-in-fact for its respective officers, and to file the same as aforesaid together with exhibits.
Very truly yours,
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
By ( R. G. Reherman )
R. G. Reherman, Chairman, President and
Chief Executive Officer
(Melvin H. Dodson) (R. W. Shymanski) Melvin H. Dodson Richard W. Shymanski (Walter R. Emge) (Donald E. Smith) Walter R. Emge Donald E. Smith (Robert L. Koch II) (James S. Vinson) Robert L. Koch II James S. Vinson (Jerry A. Lamb) (N. P. Wagner) Jerry A. Lamb N. P. Wagner (Donald A. Rausch) (A. E. Goebel) Donald A. Rausch A. E. Goebel (Ronald G. Reherman) (S. M. Kerney) Ronald G. Reherman S. M. Kerney (John H. Schroeder) John H. Schroeder |