FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 2-7793
THE UNION LIGHT, HEAT AND POWER COMPANY
(Exact name of registrant as specified in its charter)
Kentucky 31-0473080
(State of Incorporation) (I.R.S. Employer Identification No.)
139 EAST FOURTH STREET, CINCINNATI, OHIO 45202
(Address of principal executive offices) (Zip Code)
513-381-2000
(Registrant's telephone number)
No Securities Registered Pursuant to Section 12(b) of the Act.
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-------- ---------
Requirements Pursuant to Item 405 of Regulation S-K Are Not Applicable.
The Capital Shares of the Registrant are wholly owned by The Cincinnati Gas &
Electric Company.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction J(1)(a) and (b) of Form 10-K and is therefore filing this
Form 10-K with the reduced disclosure format specified in General Instruction
J(2) to Form 10-K.
585,333 shares of Capital Stock ($15.00 Par Value) were outstanding as of
February 28, 1994.
<PAGE>
TABLE OF CONTENTS
Page
Number
------
Part I
Item 1. Business................................................. 1
General................................................ 1
Electric Operations.................................... 2
Gas Operations and Gas Supply.......................... 3
Rate Matters........................................... 3
Construction........................................... 4
Environmental Matters.................................. 4
Employee Relations..................................... 5
Operating Statistics................................... 6
Item 2. Properties............................................... 8
Item 3. Legal Proceedings........................................ 8
Item 4. Submission of Matters to a Vote of Security Holders...... 8
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters........................... 8
Item 6. Selected Financial Data.................................. 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 9
Item 8. Financial Statements and Supplementary Data.............. 13
Report of Independent Public Accountants................. 31
Item 9. ......................................................... 32
Part III
Item 10. Directors and Executive Officers of the Registrant....... 32
Item 11. Executive Compensation................................... 32
Item 12. Security Ownership of Certain Beneficial Owners
and Management....................................... 32
Item 13. Certain Relationships and Related Transactions........... 32
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.............................. 33
Signatures........................................................ 43
<PAGE>
PART I
Item 1. Business - Registrant (Union Light)
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General
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Union Light, a wholly-owned subsidiary of The Cincinnati Gas & Electric
Company (CG&E), was incorporated in Kentucky in 1901, and operates in that
portion of Kentucky contiguous to the area served by CG&E. Both companies are
managed by substantially the same principal officers and have their principal
executive offices at the same address, 139 East Fourth Street, Cincinnati, Ohio.
In January 1994, Union Light transferred its former subsidiary, Enertech
Associates International, Inc., to CGE Corp., which is a wholly-owned non-
regulated subsidiary of CG&E.
Union Light provides electric or gas service, or both, to a population of
about 280,000 in an area of about 500 square miles in six counties in northern
Kentucky.
In December 1992, CG&E, PSI Resources, Inc. (PSI) and PSI Energy, Inc.,
PSI's principal subsidiary, an Indiana electric utility (PSI Energy), entered
into an agreement which, as subsequently amended (the Merger Agreement) provides
for the merger of PSI into a newly formed corporation named CINergy Corp.
(CINergy) and the merger of a newly formed subsidiary of CINergy into CG&E.
CINergy will become a holding company required to be registered under the Public
Utility Holding Company Act of 1935 (PUHCA) with two operating subsidiaries,
CG&E and PSI Energy. Union Light will remain a subsidiary of CG&E.
The merger will be accounted for as a "pooling of interests", and it is
anticipated that the transaction will be completed in the third quarter of 1994.
The merger is subject to approval by the Securities and Exchange Commission
(SEC) and the Federal Energy Regulatory Commission (FERC). Shareholders of both
companies approved the merger in November 1993.
FERC issued conditional approval of the CINergy merger in August 1993, but
several intervenors, including The Public Utilities Commission of Ohio (PUCO)
and the Kentucky Public Service Commission (KPSC), filed for rehearing of that
order. On January 12, 1994, FERC withdrew its conditional approval of the
merger and ordered the setting of FERC-sponsored settlement procedures to be
held.
On March 4, 1994, CG&E reached a settlement agreement with the PUCO and the
Ohio Office of Consumers' Counsel on merger issues identified by FERC. On March
2, PSI Energy and Indiana's consumer representatives had reached a similar
agreement. Both settlement agreements have been filed with FERC. These
documents address, among other things, the coordination of state and federal
regulation and the commitment that neither CG&E nor PSI electric base rates, nor
CG&E's gas base rates, will rise because of the merger, except
<PAGE>
to reflect any effects that may result from the divestiture of CG&E's gas
operations if ordered by the SEC in accordance with the requirements of PUHCA
discussed below.
CG&E also filed with FERC a unilateral offer of settlement addressing all
issues raised in the KPSC's application for rehearing with FERC. Although it
is the belief of CG&E and PSI that no state utility commissions have
jurisdiction over approval of the proposed merger, an application has been filed
with the KPSC to comply with the Staff of the KPSC's position that the KPSC's
authorization is required for the indirect acquisition of control of Union Light
by CINergy. As part of the settlement offer, Union Light will agree not to
increase gas base rates as a result of the merger except to reflect any effects
that may result from the divestiture of Union Light's gas operations discussed
below.
If the settlement agreements filed with FERC are not acceptable, FERC could
set issues for hearing. If a hearing is held by FERC, consummation of the
merger would likely be extended beyond the third quarter of 1994.
PUHCA imposes restrictions on the operations of registered holding company
systems. Among these are requirements that securities issuances, sales and
acquisitions of utility assets or of securities of utility companies and
acquisitions of interests in any other business be approved by the SEC. PUHCA
also limits the ability of registered holding companies to engage in non-utility
ventures and regulates holding company system service companies and the
rendering of services by holding company affiliates to the system's utilities.
The SEC has interpreted the PUHCA to preclude registered holding companies, with
some exceptions, from owning both electric and gas utility systems. The SEC may
require that CG&E and Union Light divest their gas properties within a
reasonable time after the merger in order to approve the merger as it has done
in many cases involving the acquisition by a holding company of a combination
gas and electric company. In some cases, the SEC has allowed the retention of
the gas properties or deferred the question of divestiture for a substantial
period of time. In those cases in which divestiture has taken place, the SEC
usually has allowed companies sufficient time to accomplish the divestiture in a
manner that protects shareholder value. CG&E and Union Light believe good
arguments exist to allow retention of the gas assets, and will request that the
Companies be allowed to do so.
Electric Operations
- -------------------
Union Light does not own or operate any electric generating facilities.
Its requirements for electric energy are purchased from CG&E at rates regulated
by FERC. The maximum net peak load experienced by Union Light in 1993 of
661,397 Kw exceeded by 10% the previous record net peak load of 598,889 Kw
established in 1991. Union Light owns an electric transmission system and an
electric distribution system in Covington, Newport and other smaller communities
and in adjacent rural territory within all or parts of the Counties of Kenton,
Campbell, Boone, Grant, and Pendleton, in Kentucky.
<PAGE>
The Energy Policy Act of 1992 (Energy Act) addresses several matters
affecting electric utilities including mandated open access to the electric
transmission system and greater encouragement of independent power production
and cogeneration. Union Light cannot predict the long-term consequences the
Energy Act will have on its operations.
Gas Operations and Gas Supply
- -----------------------------
In 1992, FERC issued Order 636 which restructures the relationships
between interstate gas pipelines companies and their customers, including Union
Light, for gas sales and transportation services. Order 636 has changed the way
Union Light purchases gas supplies and contracts for transportation and storage
services. Union Light has contracts that provide adequate supply and storage
capacity, including transportation services, to meet normal demand, as well as
unanticipated load swings. Union Light expects to purchase approximately 5% of
its annual firm gas requirements on the spot market.
Order 636 also allows pipelines to recover transition costs they incur in
complying with the Order from customers, including Union Light. The KPSC has
issued an order which allows recovery of these transition costs through Union
Light's purchased gas adjustment clause. Order 636 transition costs are not
expected to significantly impact Union Light.
Union Light has an approved rate structure for the transportation of gas
allowing its gas price to remain competitive with alternate fuels. Union Light
transports gas for certain large-volume customers. Without this program, Union
Light would have lost many of these customers to alternate fuels. Union Light
can either transport gas purchased by its customers for a transportation charge,
or buy spot market gas which is then sold to customers at a rate competitive
with alternate fuels.
Rate Matters
- ------------
In September 1992, Union Light filed a request with the KPSC to increase
annual gas revenues by approximately $9 million. In accordance with Kentucky
law, on April 26, 1993, Union Light implemented the proposed rate increase,
subject to refund. On July 23, 1993, the KPSC issued an Order authorizing Union
Light to increase annual gas revenues by $3.9 million effective retroactively to
April 26, 1993. The authorized rates were not placed into effect pending
resolution of Union Light's request for rehearing of the Order. On August 31,
1993, the KPSC granted an additional annual increase of $247,000. Union Light
has placed these rates into effect and has refunded the excess revenue collected
with interest to customers.
Rules established by the KPSC pertaining to Union Light's electric fuel
adjustment clause provide for public hearings at six-month intervals to review
past calculations, reconciliation of over- or under-recovery of fuel costs, and
a public hearing every two years to review the application of the adjustment
charge and fuel procurement practices. In accordance with a
<PAGE>
purchased gas adjustment clause approved by the KPSC, Union Light is permitted
to make quarterly adjustments in gas costs and reconciliation of over- or under-
recovery of gas costs. In conjunction with these rules, Union Light expenses
the costs of gas and electricity purchased as recovered through revenue and
defers the portion of these costs recoverable or refundable in future periods.
Construction
- ------------
During 1993, construction expenditures amounted to $24.4 million. Of this
amount, $14.5 million was for electric facilities and $6.8 million for gas
facilities and $3.1 million for facilities used in both electric and gas
operations.
Construction expenditures for Union Light are estimated to be
$20.3 million for 1994 and $120.2 million for the five years 1994-1998. These
estimates are under continuing review and are subject to adjustment.
In October 1993, Union Light filed its second integrated resource plan
(IRP) in the state of Kentucky. The primary emphasis of IRP is on procedures
for the evaluation of long-term electric forecasts and the integration of demand
and supply alternatives for meeting future electric needs. The KPSC is
currently reviewing this report. A review conference is scheduled for
April 19, 1994.
Environmental Matters
- ---------------------
CG&E has advised Union Light that CG&E's inability to comply with
potential environmental regulations, and more rigid enforcement policies with
respect to existing standards and regulations, could cause substantial capital
expenditures in addition to those included in CG&E's construction program, and
increase the cost per Kwh of generation to CG&E and, ultimately, the cost of
electric energy purchased by Union Light from CG&E by reducing the amount of
electricity available for delivery or by necessitating increased fuel and/or
operating and capital costs, and may cause serious fuel supply problems for
CG&E, or require it to cease operating a portion of its generating facilities.
Union Light is subject to regulation by various Federal, state, and local
authorities relative to air and water quality, solid and hazardous waste
disposal, and other environmental matters. Pursuant to Federal law, the
Secretary of the Natural Resources and Environmental Protection Cabinet (NREPC)
administers regulations prescribing air and water quality standards and
regulations pertaining to solid and hazardous wastes. NREPC is generally
empowered by Kentucky environmental laws to issue construction and operating
permits and variances for facilities which may contribute to air pollution and
issue similar permits for facilities which discharge pollutants into the waters
of the state, as well as permits for the disposal of solid and hazardous waste.
The Kentucky implementation plan is fully enforceable by the state and, to the
extent approved by the U.S. Environmental Protection Agency, is also enforceable
by it.
<PAGE>
The Comprehensive Environmental Response Compensation and Liability Act
(CERCLA) expanded reporting and liability requirements covering the release of
hazardous substances into the environment. Some of these substances, including
polychlorinated biphenyls (PCBs), a substance regulated under the Toxic
Substances Control Act, are contained in certain equipment currently used by
Union Light. Union Light cannot predict the occurrence and effect of a release
of such substances.
CERCLA provides, among other things, for a trust fund, drawn from industry
and federal appropriations, to finance cleanup and containment efforts of
improperly managed hazardous waste sites. Under CERCLA, and other laws,
responsible parties may be strictly, and jointly and severally, liable for money
expended by the government to take necessary corrective action at such sites.
The Superfund Amendments and Reauthorization Act of 1986 (SARA)
significantly amended CERCLA and established programs dealing with emergency
preparedness and community right-to-know, leaking underground storage tanks, and
other matters. SARA provides for a significant increase in CERCLA funding,
adopts strict cleanup standards and schedules, places limitations on the timing
and scope of court review of government cleanup decisions, authorizes state and
citizen participation in cleanup plans, enforcement actions, and court
proceedings, including provisions for citizens' suits against both private and
public entities to enforce CERCLA's requirements, expands liability provisions,
and increases civil and criminal penalties for violations of CERCLA.
Employee Relations
- ------------------
Union Light presently employs about 340 full-time employees, of whom about
280 belong to bargaining units. Approximately 90 employees are represented by
the International Brotherhood of Electrical Workers (IBEW), 110 by the United
Steelworkers of America (USWA) and 80 by the Independent Utilities Union (IUU).
The collective bargaining agreements with the IBEW and USWA expire on
April 1, and May 15, 1994, respectively. The three-year agreement with the IUU,
which expires in March 1995, has a wage reopener for the third year of the
contract. Negotiations with both the IBEW and IUU are presently under way.
<PAGE>
<TABLE>
<CAPTION>
OPERATING STATISTICS
The following tables are indicative of the general development of the business conducted by Union Light during the
periods indicated:
Year Ended December 31
------------------------------------------
1993 1992 1991
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<S> <C> <C> <C>
ELECTRIC DEPARTMENT
Electric Energy Purchased (thousand Kwh)......... 3,121,383 2,935,418 2,876,418
============ ============ ============
Average Cost per Kwh Purchased (cents)........... 4.30 4.33 3.91
Sales (thousand Kwh)
Residential.................................... 1,096,048 1,028,082 1,094,598
Commercial..................................... 772,621 730,487 726,829
Industrial..................................... 803,004 769,507 668,195
Other retail................................... 300,021 279,095 278,106
Other electric utilities-non-affiliated........ 45,154 43,108 42,744
------------ ------------ ------------
Total sales........................ 3,016,848 2,850,279 2,810,472
Unaccounted For and Company Use.................. 104,535 85,139 65,946
------------ ------------ ------------
Total distribution................. 3,121,383 2,935,418 2,876,418
============ ============ ============
Gross Revenues
Residential.................................... $ 70,890,901 $ 64,000,032 $ 65,009,743
Commercial..................................... 47,610,545 43,475,442 41,149,428
Industrial..................................... 37,498,916 34,649,667 30,462,192
Other retail................................... 16,467,489 14,790,849 13,928,285
Other electric utilities-non-affiliated........ 1,795,795 1,636,347 1,685,738
------------ ------------ ------------
Total.............................. 174,263,646 158,552,337 152,235,386
Other departmental revenues.................... 1,448,527 1,137,475 1,130,321
------------ ------------ ------------
Total revenues..................... $175,712,173 $159,689,812 $153,365,707
============ ============ ============
Customers at End of Period
Residential.................................... 97,750 97,668 95,878
Commercial..................................... 10,188 10,255 10,028
Industrial..................................... 408 414 410
Other retail................................... 925 900 871
Other electric utilities-non-affiliated........ 1 1 1
------------ ------------ ------------
Total customers.................... 109,272 109,238 107,188
============ ============ ============
Average Revenue per Kwh (cents)
Residential.................................... 6.47 6.23 5.94
Commercial..................................... 6.16 5.95 5.66
Industrial..................................... 4.67 4.50 4.56
<FN>
__________________
Note: See Note 10 to the Financial Statements for additional financial
information by business segments.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPERATING STATISTICS (Continued)
Year Ended December 31
----------------------------------------
1993 1992 1991
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<S> <C> <C> <C>
GAS DEPARTMENT
Sources of Gas (thousand cubic feet)
Natural gas purchased.......................... 12,208,366 11,145,809 10,771,633
Transportation gas received.................... 1,754,705 1,921,404 1,817,464
Gas produced................................... 1,422 856 551
------------ ------------ ------------
Total available for deliveries..... 13,964,493 13,068,069 12,589,648
============ ============ ============
Average Cost per Mcf Purchased (cents)........... 355.3 317.7 311.4
Distribution of Gas (thousand cubic feet)
Gas sales
Residential.................................. 7,331,799 6,775,605 6,190,034
Commercial................................... 2,730,055 2,622,676 2,519,870
Industrial................................... 1,353,038 1,092,345 1,073,474
Other retail................................. 472,215 482,166 474,975
Other gas utilities.......................... 172,114 137,363 132,559
------------ ------------ ------------
Total gas sales.................... 12,059,221 11,110,155 10,390,912
Gas transported ............................... 1,702,808 1,903,190 1,770,908
------------ ------------ ------------
Total gas sales and gas
transported....................... 13,762,029 13,013,345 12,161,820
Unaccounted for and company use................ 202,464 54,724 427,828
------------ ------------ ------------
Total distribution................. 13,964,493 13,068,069 12,589,648
============ ============ ============
Gross Revenues
Residential.................................... $ 47,856,633 $ 39,184,217 $ 36,219,223
Commercial..................................... 15,712,279 13,333,515 13,047,685
Industrial..................................... 6,493,388 4,983,019 4,792,291
Other retail................................... 2,724,414 2,427,285 2,445,240
Other gas utilities............................ 142,724 86,394 51,472
------------ ------------ ------------
Total.............................. 72,929,438 60,014,430 56,555,911
Other departmental revenues (including
gas transported)............................. 2,814,727 2,589,779 2,394,481
------------ ------------ ------------
Total revenues..................... $ 75,744,165 $ 62,604,209 $ 58,950,392
============ ============ ============
Customers at End of Period
Residential.................................... 63,444 62,850 61,320
Commercial..................................... 5,646 5,567 5,439
Industrial..................................... 272 286 284
Other retail................................... 297 290 278
Other gas utilities............................ 1 1 1
------------ ------------ ------------
Total customers.................... 69,660 68,994 67,322
============ ============ ============
Average Revenue per Mcf Sold (cents)
Residential.................................... 652.73 578.31 585.12
Commercial..................................... 575.53 508.39 517.79
Industrial..................................... 479.91 456.18 446.43
<FN>
__________________
Note: See Note 10 to the Financial Statements for additional financial information by business segments.
</TABLE>
<PAGE>
Item 2. Properties
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Union Light owns an electric transmission system and an electric
distribution system in Covington, Newport, and other smaller communities and in
adjacent rural territory within all or parts of the Counties of Kenton,
Campbell, Boone, Grant, and Pendleton, in Kentucky. Union Light owns a gas
distribution system in Covington, Newport, and other smaller communities and in
adjacent rural territory within all or parts of the Counties of Kenton,
Campbell, Boone, Grant, Gallatin, and Pendleton, in Kentucky. Union Light owns
a 7,000,000 gallon capacity underground cavern for the storage of liquid propane
and a related vaporization and mixing plant and feeder lines, located in Kenton
County, Kentucky near the Kentucky-Ohio line and adjacent to one of the gas
lines which transports natural gas to CG&E. The cavern and vaporization and
mixing plant are used primarily to augment CG&E's and Union Light's supply of
natural gas during periods of peak demand and emergencies.
Under the terms of the mortgage indenture securing first mortgage bonds
issued by Union Light, substantially all property is subject to a direct first
mortgage lien.
Item 3. Legal Proceedings
- ------- -----------------
The registrant has no material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Omitted pursuant to Instruction J(2)(c).
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- ------- ----------------------------------------------------------------------
All of Union Light's Capital Shares are owned by CG&E.
Union Light declared a dividend of $5.00 per capital share during the
fourth quarter of 1993. No dividends were declared in 1992.
Item 6. Selected Financial Data
- ------- -----------------------
Omitted pursuant to Instruction J(2)(a).
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
Earnings per capital share increased in 1993 to $15.95 from $2.23 in 1992.
The increase was due to a gas rate increase in 1993, higher gas and electric
sales volumes and cost control efforts. For information on the gas rate
increase see "Future Outlook" herein. In 1992, earnings per capital share
decreased to $2.23 from $12.48 in 1991. The decrease was primarily due to Union
Light incurring increased purchased power costs from CG&E which were not
reflected in Union Light's electric revenues for the period and to the KPSC
ordering a $2.5 million decrease in the retail portion of Union Light's electric
rates in May 1992.
Electric operating revenues increased $16.0 million in 1993 due to an
increase in electric Kwh sales of 5.8% and to the full effect of a rate increase
that became effective in May 1992. In 1992, electric operating revenues
increased $6.3 million primarily due to a rate increase that became effective in
May 1992 and to a 1.4% increase in sales volumes.
Gas operating revenues increased $13.1 million in 1993 due to the operation
of an adjustment clause reflecting increases in the cost of gas purchased, a
rate increase (see "Future Outlook" herein), and a 5.8% increase in total
volumes sold and transported. In 1992, gas operating revenues increased $3.7
million primarily due to a 7.0% increase in total volumes sold and transported.
Electricity purchased increased $7.1 million in 1993 due to a 6.3% increase
in volumes purchased. In 1992, electricity purchased increased $14.8 million
due to a 10.9% increase in the average cost per Kwh purchased and to a 2.1%
increase in volume purchased.
Gas purchased expense for 1993 increased $8.0 million due to an 11.8%
increase in the average cost per Mcf purchased and to a 9.5% increase in volumes
purchased. In 1992, gas purchased expense increased $1.9 million due to a 3.5%
increase in volumes purchased and a 2.0% increase in the average cost per Mcf
purchased.
Other operation expense decreased $1.2 million in 1993 due to a number of
factors including reduced electric and gas distribution expenses and cost
control efforts.
In 1992, maintenance expense decreased $.8 million primarily due to
reduced maintenance costs related to gas and electric distribution facilities.
Depreciation expense increased $1.5 million in 1993 due to an increase in
depreciable plant in service and to increases in depreciation accrual rates on
gas and common plant in accordance with a KPSC rate order issued in 1993.
Depreciation expense increased $.7 million in 1992 due to an increase in
depreciable plant in service.
<PAGE>
Allowance for funds used during construction (AFC) decreased $.6 million in
1992 due to lower AFC rates.
Increases in interest on long-term debt of $.7 million and $.5 million in
1993 and 1992, respectively, were due to the issuance of additional first
mortgage bonds in August 1992.
Other interest expense decreased $.6 million in 1993 due to a decrease in
the amount of short-term borrowings and lower interest rates.
Liquidity and Capital Resources
- -------------------------------
During 1993, internally generated funds provided 51% of the amount needed
for construction expenditures, an increase from 34% in 1992. External funds
were obtained in 1993 from the net issuance of $18.5 million of short-term debt.
Union Light also retired at maturity $6.5 million of first mortgage bonds in
1993.
The issuance of first mortgage bonds by Union Light is limited by earnings
coverage and fundable property provisions of Union Light's First Mortgage
Indenture. Certain provisions in the mortgage indenture of CG&E prohibit the
sale by Union Light of debt securities except to CG&E if, after giving effect to
the sale of such securities, the outstanding debt securities of Union Light are
in excess of 75% of the net plant of Union Light. Bonds may be issued upon the
basis of property additions and cash deposits only if net earnings, as defined
in the Mortgage, are at least 2.00 times the annual interest charges on all
outstanding indebtedness having an equal or prior lien. In accordance with the
most restrictive of these provisions, Union Light would have been permitted to
issue at December 31, 1993, at least $50 million of additional first mortgage
bonds at current interest rates. In addition, Union Light presently can issue
$9.1 million of first mortgage bonds against previously retired bonds without
regard to the Indenture's earnings coverage or fundable property requirements.
The construction expenditures for Union Light are estimated to be
$20.3 million for 1994 and $120.2 million over the next five years (1994-1998).
These estimates are under continuing review and are subject to adjustment.
Construction and financing plans for the future are dependent on, among other
things, the amount and timing of rate changes, sales volumes, changes in
construction plans, cost control efforts, market conditions, regulatory actions,
and the ability to obtain financing. Short-term indebtedness will be used to
supplement internal sources of funds for the interim financing of the
construction program. Union Light presently has authorized a maximum amount of
short-term indebtedness of $35 million through December 31, 1994, and $25.0
million of short-term borrowings were outstanding at December 31, 1993. Union
Light has authority to issue to CG&E up to $15 million of Capital Stock
through December 31, 1994.
Ratings on Union Light's first mortgage bonds by Standard & Poor's and
Moody's Investors Service are BBB+ and Baa1, respectively.
<PAGE>
Future Outlook
- --------------
Union Light's future earnings will be affected by its ability to secure
adequate and timely rate relief.
In September 1992, Union Light filed a request with the KPSC to increase
annual gas revenues by approximately $9 million. In accordance with Kentucky
law, on April 26, 1993, Union Light implemented the proposed rate increase,
subject to refund. On July 23, 1993, the KPSC issued an Order authorizing Union
Light to increase annual gas revenues by $3.9 million effective retroactively to
April 26, 1993. The authorized rates were not placed into effect pending
resolution of Union Light's request for rehearing of the Order. On August 31,
1993, the KPSC granted an additional annual increase of $247,000. Union Light
has placed these rates into effect and has refunded the excess revenue collected
with interest to customers.
In April 1992, FERC issued Order 636 which restructures the relationships
between interstate gas pipelines and their customers for gas sales and
transportation services. Order 636 will result in changes in the way Union
Light purchases gas supplies and contracts for transportation and storage
services, and will result in increased risks in managing the ability to meet
demand.
Order 636 also allows pipelines to recover transition costs they incur in
complying with the Order from customers, including Union Light. The KPSC has
issued an Order which allows recovery of these transition costs through Union
Light's purchased gas adjustment clause. Order 636 transition costs are not
expected to significantly impact Union Light.
The Energy Act addresses several matters affecting electric utilities
including mandated open access to the electric transmission system and greater
encouragement of independent power production and cogeneration. Union Light
cannot predict the long-term consequences the Energy Act will have on its
operations.
In recent years several new accounting standards have been issued by the
Financial Accounting Standards Board. While the impact on earnings and cash
flow associated with the new standards has been relatively minor, these
accounting changes do affect the recognition and presentation of amounts
reported in Union Light's financial statements. For information in addition to
that provided below on recently adopted accounting standards, see Note 1 to the
Financial Statements.
In 1993, CG&E and its subsidiaries adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (SFAS No. 106). Union Light is a participating company
under CG&E's health care and life insurance benefit plans. SFAS No. 106
requires the accrual of the expected cost of providing postretirement benefits
other than pensions to an employee and the employee's covered dependents during
the employee's active working career. SFAS No. 106 also requires the
recognition of the actuarially determined total postretirement benefit
obligation earned by existing retirees. Currently, SFAS No. 106
<PAGE>
health care costs are being expensed. The adoption of SFAS No. 106 did not have
a material effect on results on operations.
Also in 1993, Union Light adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS No. 109
requires deferred tax recognition for all temporary differences in accordance
with the liability method, requires that deferred tax liabilities and assets be
adjusted for enacted changes in tax laws or rates and prohibits net-of-tax
accounting and reporting. Union Light believes it is probable that any net
future increase or decrease in income taxes payable will be reflected in future
rates. In accordance with SFAS No. 109, Union Light has recorded a net
regulatory liability at December 31, 1993. Adoption of SFAS No. 109 had no
impact on results of operations.
In 1993, CG&E and its subsidiaries adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (SFAS No. 112). SFAS No. 112 requires the accrual of the cost of
certain postemployment benefits provided to former or inactive employees. The
adoption of SFAS No. 112 did not have a material effect on results of
operations.
Over the past several years, the rate of inflation has been relatively
low. Union Light believes that the recent inflation rates do not materially
affect its results of operations or financial condition. However, under
existing regulatory practice, only the historical cost of plant is recoverable
from customers. As a result, cash flows designed to provide recovery of
historical plant costs may not be adequate to replace plant in future years.
<PAGE>
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENT OF INCOME
Year Ended December 31
------------------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Operating Revenues
Electric...................................... $175,712,173 $159,689,812 $153,365,707
Gas........................................... 75,744,165 62,604,209 58,950,392
------------ ------------ ------------
Total operating revenues............... 251,456,338 222,294,021 212,316,099
------------ ------------ ------------
Operating Expenses
Electricity purchased from
parent company for resale................... 134,290,067 127,185,243 112,369,214
Gas purchased................................. 43,380,287 35,410,712 33,542,603
Other operation............................... 30,395,427 31,596,872 31,155,740
Maintenance................................... 6,267,181 6,547,259 7,349,237
Provision for depreciation.................... 9,812,929 8,315,795 7,656,099
Taxes other than income taxes................. 3,623,331 3,626,364 3,302,536
Income taxes (Note 2)......................... 5,751,240 304,473 3,556,056
------------ ------------ ------------
Total operating expenses............... 233,520,462 212,986,718 198,931,485
------------ ------------ ------------
Operating Income.................................. 17,935,876 9,307,303 13,384,614
------------ ------------ ------------
Other Income and Deductions
Allowance for other funds used
during construction.......................... 296,639 (46,241) 292,277
Other income and deductions-net............... (533,920) 18,749 (73,139)
------------ ------------ ------------
Total other income and
deductions........................... (237,281) (27,492) 219,138
------------ ------------ ------------
Income Before Interest Charges.................... 17,698,595 9,279,811 13,603,752
------------ ------------ ------------
Interest Charges
Interest on long-term debt.................... 8,207,155 7,547,708 7,049,375
Other interest................................ 331,499 896,776 1,052,693
Amortization of debt discount,
premium and other........................... 89,592 57,218 35,335
Allowance for borrowed funds
used during construction-
credit...................................... (268,226) (323,927) (590,511)
------------ ------------ ------------
Net interest charges................... 8,360,020 8,177,775 7,546,892
------------ ------------ ------------
Net Income........................................ $ 9,338,575 $ 1,102,036 $ 6,056,860
============ ============ ============
Average Number of Capital Shares
Outstanding..................................... 585,333 493,666 485,333
Earnings Per Capital Share........................ $ 15.95 $ 2.23 $ 12.48
Dividends Declared Per Capital
Share........................................... $ 5.00 $ -- $ 5.00
<FN>
The accompanying notes are an integral part of the above statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENT OF CASH FLOWS
Year Ended December 31
---------------------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Cash Flows From Operations:
Net Income....................................... $ 9,338,575 $ 1,102,036 $ 6,056,860
------------- ------------- -------------
Adjustments to reconcile net income to
net cash:
Deferred gas and electric fuel costs--net.... (44,636) (626,086) 3,245,938
Depreciation................................. 9,812,929 8,315,795 7,656,099
Allowance for other funds used
during construction........................ (296,639) 46,241 (292,277)
Deferred income taxes and
investment tax credits--net................ 998,476 1,525,939 799,198
Other--net................................... 3,375,042 1,690,532 (51,469)
Change in current assets and liabilities:
Receivables and unbilled revenues.......... (5,858,755) (6,173,601) (2,040,610)
Materials, supplies and fuel............... (1,582,978) (1,845,203) (2,124,145)
Other current assets....................... 619,456 (785,934) 509,062
Accounts payable and other
current liabilities...................... (1,604,233) 3,889,604 3,521,408
------------- ------------- -------------
Total adjustments...................... 5,418,662 6,037,287 11,223,204
------------- ------------- -------------
Net cash provided by operations........ 14,757,237 7,139,323 17,280,064
------------- ------------- -------------
Cash Flows From Investing:
Construction expenditures (less allowance
for other funds used during construction)...... (24,127,582) (24,607,471) (31,357,469)
Gain on disposition of assets.................... 985,963 1,526,428 309,585
------------- ------------- -------------
Net cash used in investing activities.. (23,141,619) (23,081,043) (31,047,884)
------------- ------------- -------------
Cash Flows From Financing:
Capital stock proceeds........................... -- 15,000,000 --
Long-term debt proceeds.......................... -- 19,670,800 --
Retirement of long-term debt..................... (6,500,000) -- --
Net short-term borrowings........................ 18,500,000 (18,500,000) 16,000,000
Dividends paid on capital shares................. (2,926,665) -- (2,426,665)
------------- ------------- -------------
Net cash provided by
financing activities................. 9,073,335 16,170,800 13,573,335
------------- ------------- -------------
Net increase (decrease) in cash and
temporary cash investments........... 688,953 229,080 (194,485)
Cash and temporary cash investments--
beginning of year................................ 1,788,390 1,559,310 1,753,795
------------- ------------- -------------
Cash and temporary cash investments--
end of year...................................... $ 2,477,343 $ 1,788,390 $ 1,559,310
============= ============= =============
<FN>
The accompanying notes are an integral part of the above statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEET
December 31
--------------------------------
1993 1992
------ ------
<S> <C> <C>
ASSETS
Property, Plant and Equipment, at original cost (Note 4)
In service -
Electric...................................................... $172,589,194 $158,316,894
Gas........................................................... 128,242,203 121,835,888
Common........................................................ 18,772,070 8,987,009
------------ ------------
319,603,467 289,139,791
Less-Accumulated provisions for depreciation.................. 96,164,955 89,131,680
------------ ------------
Net property, plant and equipment in service.............. 223,438,512 200,008,111
Construction work in progress................................... 5,060,043 14,336,175
------------ ------------
228,498,555 214,344,286
------------ ------------
Current Assets
Cash (Note 8)................................................... 2,477,343 1,788,390
Accounts receivable, less accumulated provision of $1,609,144 in
1993 and $1,000,629 in 1992 for doubtful accounts.............. 25,564,221 24,788,501
Accrued unbilled revenues....................................... 17,128,720 12,045,685
Materials, supplies, and fuel, at average cost.................. 8,664,381 7,081,403
Prepayments..................................................... 703,243 1,322,699
------------ ------------
54,537,908 47,026,678
------------ ------------
Other Assets...................................................... 3,008,226 7,563,922
------------ ------------
$286,044,689 $268,934,886
LIABILITIES ============ ============
Capitalization
Shareholders' equity -
Capital shares, par value $15 per share -
Authorized - 1,000,000 shares
Outstanding - 585,333 shares................................ $ 8,779,995 $ 8,779,995
Premium on capital shares..................................... 18,838,946 18,838,946
Retained earnings............................................. 69,327,355 62,915,445
------------ ------------
Total shareholders' equity................................ 96,946,296 90,534,386
Long-term debt (Note 4)......................................... 89,171,831 89,105,243
------------ ------------
Total capitalization...................................... 186,118,127 179,639,629
------------ ------------
Current Liabilities
Current portion of bonds........................................ -- 6,500,000
Notes payable (Note 8).......................................... 25,000,000 6,500,000
Accounts payable................................................ 6,914,373 6,573,414
Accounts payable to associated companies - net.................. 17,118,008 15,147,500
Accrued taxes................................................... (434,538) 821,902
Accrued interest on debt........................................ 2,126,283 2,259,913
Refunds due electric customers.................................. -- 2,852,581
Other current and accrued liabilities........................... 3,632,084 3,305,133
------------ ------------
54,356,210 43,960,443
------------ ------------
Deferred Credits and Other
Deferred income taxes........................................... 20,486,616 27,609,241
Investment tax credits.......................................... 5,651,190 5,939,519
Income taxes refundable through rates........................... 4,692,028 --
Other liabilities and deferred credits.......................... 14,740,518 11,786,054
------------ ------------
45,570,352 45,334,814
------------ ------------
$286,044,689 $268,934,886
============ ============
<FN>
The accompanying notes are an integral part of the above statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended December 31
---------------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
CAPITAL SHARES
Balance, beginning of year........................... $ 8,779,995 $ 7,279,995 $ 7,279,995
100,000 shares of $15 par value sold in 1992....... -- 1,500,000 --
----------- ----------- -----------
Balance, end of year................................. $ 8,779,995 $ 8,779,995 $ 7,279,995
=========== =========== ===========
PREMIUM ON CAPITAL SHARES
Balance, beginning of year........................... $18,838,946 $ 5,338,946 $ 5,338,946
Premium on sale of capital shares.................. -- 13,500,000 --
----------- ----------- -----------
Balance, end of year................................. $18,838,946 $18,838,946 $ 5,338,946
=========== =========== ===========
RETAINED EARNINGS
Balance, Beginning of year........................... $62,915,445 $61,813,409 $58,183,214
Add--Net Income...................................... 9,338,575 1,102,036 6,056,860
----------- ----------- -----------
72,254,020 62,915,445 64,240,074
Deduct-Cash dividends on capital shares at the
annual rate of $5.00 per share for 1993 and 1991... 2,926,665 -- 2,426,665
----------- ----------- -----------
Balance, end of year................................. $69,327,355 $62,915,445 $61,813,409
=========== =========== ===========
<FN>
The accompanying notes are an integral part of the above statement.
</TABLE>
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Union Light follows the Uniform Systems of Accounts prescribed by the
Federal Energy Regulatory Commission (FERC), and is subject to the provisions of
Statement of Financial Accounting Standards No. 71, "Accounting for the Effects
of Certain Types of Regulation". The more significant accounting policies are
summarized below:
UTILITY PLANT. Property, plant and equipment is stated at the original
cost of construction, which includes payroll and related costs such as taxes,
pensions and other fringe benefits, general and administrative costs, and an
allowance for funds used during construction.
REVENUES AND PURCHASED GAS AND ELECTRICITY COSTS. Union Light recognizes
revenues for gas and electric service rendered during the month, which includes
revenue for sales unbilled at the end of each month. Union Light expenses the
costs of gas and electricity purchased as recovered through revenues and defers
the portion of these costs recoverable or refundable in future periods.
DEPRECIATION AND MAINTENANCE. Union Light determines its provision for
depreciation using the straight-line method and by the application of rates to
various classes of property, plant and equipment. The rates are based on
periodic studies of the estimated service lives and net cost of removal of the
properties. The percentages of the annual provisions for depreciation to the
weighted average of depreciable property during the three years ended
December 31, 1993, were equivalent to:
1993 1992 1991
---- ---- ----
Electric 3.3 3.3 3.3
Gas 2.9 2.7 2.7
Common 5.0 1.7 1.8
In a July 1993 rate order, the Kentucky Public Service Commission (KPSC)
authorized changes in depreciation accrual rates on Union Light's gas and common
plant. These changes resulted in an increase in depreciation expense for 1993
of approximately $500,000.
Expenditures for maintenance and repairs of units of property, including
renewals of minor items, are charged to the appropriate maintenance expense
accounts. A betterment or replacement of a unit of property is accounted for as
an addition and retirement of property, plant and equipment. At the time of such
a retirement, the accumulated provision for depreciation is charged with the
original cost of the property retired and also for the net cost of removal.
<PAGE>
INCOME TAXES. For income tax purposes, Union Light uses liberalized
depreciation methods and deducts removal costs as incurred. Consistent with
regulatory treatment, Union Light provides for income tax deferrals resulting
from the use of liberalized depreciation and from interest deductions associated
with borrowed funds used during construction.
Union Light adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109), in 1993. SFAS No. 109 requires
deferred tax recognition for all temporary differences in accordance with the
liability method, requires that deferred tax liabilities and assets be adjusted
for enacted changes in tax laws or rates and prohibits net-of-tax accounting and
reporting. Union Light believes it is probable that any net future increase or
decrease in income taxes payable will be reflected in future rates. In
accordance with SFAS No. 109, Union Light has recorded a net regulatory
liability at December 31, 1993. Adoption of SFAS No. 109 had no impact on
results of operations.
The following are the tax effects of temporary differences resulting in
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
December 31, January 1,
1993 1993
------------ -----------
<S> <C> <C>
Deferred Tax Liabilities
- ------------------------
Depreciation and Other Plant
Related Items--net $30,497,624 $27,447,519
Other Liabilities 1,547,646 1,285,802
----------- -----------
32,045,270 28,733,321
----------- -----------
Deferred Tax Assets
- -------------------
Investment Tax Credits 2,290,346 2,342,843
Income Taxes Due Customers--net 1,977,584 2,252,990
Other Assets 7,290,724 5,747,940
----------- -----------
11,558,654 10,343,773
----------- -----------
Net Deferred Tax Liability $20,486,616 $18,389,548
=========== ===========
</TABLE>
The following table reconciles the change in the net deferred tax
liability to the deferred income tax expense included in the accompanying
Statement of Income for the year ended December 31, 1993:
<TABLE>
<S> <C>
Net change in deferred tax liability per above table $2,097,068
Change in income taxes refundable through rates (810,263)
----------
Deferred income tax expense for
the year ended December 31, 1993 $1,286,805
==========
</TABLE>
<PAGE>
In August 1993, President Clinton signed into law the Omnibus Budget
Reconciliation Act of 1993. Among the Act's provisions is an increase in the
corporate Federal income tax rate from 34% to 35%, retroactive to January 1,
1993. Under SFAS No. 109, the increase in the tax rate has resulted in an
increase in the net deferred tax liability and a decrease in income tax related
regulatory liabilities. In the above table, this decrease in regulatory
liabilities has been included in "Change in income taxes refundable through
rates". The increase in the Federal income tax rate has not had a material
impact on Union Light's results of operations.
RETIREMENT INCOME PLANS. Union Light is a participating company under
CG&E's trusteed non-contributory retirement income plans covering substantially
all regular employees. The benefits are based on the employee's compensation,
years of service, and age at retirement. Union Light's funding policy is to
contribute annually to the plans an amount which is not less than the minimum
amount required by the Employee Retirement Income Security Act of 1974 and not
more than the maximum amount deductible for income tax purposes.
The plans' funded status and amounts recognized by CG&E and its subsidiary
companies for the years 1993 and 1992 are presented below:
<TABLE>
<CAPTION>
December 31,
1993 1992
-------- --------
(Thousands)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation...................................... $328,075 $294,114
Nonvested benefit obligation................................... 32,286 26,891
-------- --------
Total accumulated benefit obligation............................. 360,361 321,005
Projected future compensation increases.......................... 110,332 101,915
-------- --------
Projected benefit obligation for service rendered................ 470,693 422,920
Plans' assets at fair value, primarily stocks and bonds.......... 423,052 417,551
-------- --------
Plans' assets in excess of (less than) projected benefit
obligation..................................................... (47,641) (5,369)
Unrecognized net gain............................................ (15,970) (55,936)
Unrecognized prior service cost.................................. 29,149 31,995
Unrecognized net transition asset................................ (7,364) (7,985)
-------- --------
Accrued pension cost....................................... $(41,826) $(37,295)
======== ========
</TABLE>
<PAGE>
During 1992, CG&E and its subsidiaries recorded $28.4 million
($2.8 million applicable to Union Light) of accrued pension cost in accordance
with Statement of Financial Accounting Standards No. 88, "Employers' Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits". This amount represented the costs associated with
additional benefits extended in connection with an early retirement program and
workforce reduction discussed below.
The following assumptions were used in accounting for pensions:
<TABLE>
<CAPTION>
1993 1992 1991
--------- -------- --------
<S> <C> <C> <C>
Discount rate used to determine actuarial present value of the
projected benefit obligation................................... 7.50% 8.25% 8.25%
Assumed rate of increase in future compensation levels used to
determine actuarial present value of the projected benefit
obligation..................................................... 5.00% 5.75% 5.75%
Expected long-term rate of return on plans' assets............... 9.50% 9.50% 9.50%
</TABLE>
Net pension cost for CG&E and its subsidiary companies for the years 1993, 1992
and 1991 included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(Thousands)
<S> <C> <C> <C>
Service cost--benefits earned............................. $ 9,174 $ 8,767 $ 7,973
Interest cost on projected benefit obligation............. 34,475 30,424 27,903
Reduction in pension costs from actual return on assets... (31,371) (27,015) (76,705)
Net amortization and deferral............................. (4,666) (7,472) 43,857
-------- -------- --------
Net periodic pension cost............................... $ 7,612 $ 4,704 $ 3,028
======== ======== ========
</TABLE>
EARLY RETIREMENT PROGRAM AND WORKFORCE REDUCTIONS. As a result of
unfavorable rate orders received in 1992, CG&E and its subsidiaries eliminated
approximately 900 regular, temporary and contract positions. The workforce
reduction was accomplished through a voluntary early retirement program and
involuntary separations. At December 31, 1992, the accrued liability for CG&E
and its subsidiaries associated with the workforce reduction was $30.4 million
($3.0 million applicable to Union Light), including $28.4 million ($2.8 million
for Union Light) of additional pension benefits discussed above. In accordance
with a July 1993 Order of the KPSC, Union Light is recovering the majority of
these costs associated with gas operations through gas rates over a period of
ten years. Costs associated with electric operations shall be addressed by the
KPSC in Union Light's next electric rate case. The balance of unrecovered costs
at December 31, 1993, totalled $2.9 million and is reflected in "Other Assets"
on the Balance Sheet.
POSTRETIREMENT BENEFITS. Effective January 1, 1993, CG&E and its
subsidiaries adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS
<PAGE>
No. 106). Union Light is a participating company under CG&E's health care and
life insurance benefit plans. SFAS No. 106 requires the accrual of the expected
cost of providing postretirement benefits other than pensions to an employee and
the employee's covered dependents during the employee's active working career.
SFAS No. 106 also requires the recognition of the actuarially determined total
postretirement benefit obligation earned by existing retirees. CG&E offers
health care and life insurance benefits which are subject to SFAS No. 106.
Life insurance benefits are fully paid by the Companies for qualified
employees. Eligibility to receive postretirement coverage is limited to those
employees who had participated in the plans and earned the right to
postretirement benefits prior to January 1, 1991.
In 1988, CG&E and its subsidiaries recognized the actuarially determined
accumulated benefit obligation for postretirement life insurance benefits earned
by retirees. The accumulated benefit obligation for active employees is being
amortized over 15 years, the employees' estimated remaining service lives. The
accounting for postretirement life insurance benefits is not impacted by the
adoption of SFAS No. 106.
Postretirement health care benefits are subject to deductibles, copayment
provisions and other limitations. Retirees can participate in health care plans
by paying 100% of the group coverage premium. Prior to the adoption of SFAS No.
106, the cost of postretirement health care benefits was expensed by the
Companies as paid. Beginning in 1993, the Companies began recognizing the
accumulated postretirement benefit obligation over 20 years in accordance with
SFAS No. 106. Currently, SFAS No. 106 health care costs are being expensed.
The adoption of SFAS No. 106 did not have a material effect on results on
operations.
The net periodic postretirement cost for the Companies' postretirement
benefit plans for 1993 are presented below.
<TABLE>
<CAPTION>
Health Life
Care Insurance Total
------ --------- -------
(Thousands)
<S> <C> <C> <C>
Service cost....................... $ 995 $ 116 $ 1,111
Interest cost...................... 4,269 1,924 6,193
Amortization of the unrecognized
transition obligation............ 2,584 415 2,999
------ ------ -------
Postretirement benefit cost... $7,848 $2,455 $10,303
====== ====== =======
</TABLE>
<PAGE>
The Companies' accumulated postretirement benefit obligation and accrued
postretirement benefit cost under the plans at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Health Life
Care Insurance Total
--------- --------- --------
(Thousands)
<S> <C> <C> <C>
Retirees................................. $ 22,753 $22,271 $45,024
Active employees eligible to retire...... 2,363 1,494 3,857
Other active employees who are plan
participants........................... 27,501 2,912 30,413
-------- ------- -------
Accumulated postretirement benefit
obligation............................. 52,617 26,677 79,294
Unrecognized net gain (loss)............. 3,822 (249) 3,573
Unrecognized transition obligation....... (49,104) (3,733) (52,837)
-------- ------- --------
Accrued postretirement benefit cost... $ 7,335 $22,695 $ 30,030
======== ======= ========
</TABLE>
The following assumptions were used to determine the accumulated
postretirement benefits obligation:
<TABLE>
<CAPTION>
December 31, January 1,
1993 1993
------------ ----------
<S> <C> <C>
Discount rate......................... 7.50% 8.25%
Health care cost trend rate, gradually
declining to 5% in 2002 and 10.00% to 12.00% to
2003, respectively................. 13.00% 15.00%
</TABLE>
Increasing the assumed medical care cost trend rates by one percentage point in
each year would increase the estimated accumulated postretirement benefit
obligation as of December 31, 1993 by $10.5 million and the net periodic
postretirement cost by $1.2 million. No funding has been established by the
Companies for postretirement benefits.
POSTEMPLOYMENT BENEFITS. In 1993, CG&E and its subsidiaries adopted
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS No. 112). SFAS No. 112 requires the accrual of
the cost of certain postemployment benefits provided to former or inactive
employees. The adoption of SFAS No. 112 did not have a material effect on
results of operations.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION. The applicable regulatory
uniform systems of accounts define "allowance for funds used during
construction" (AFC) as including "the net cost for the period of construction of
borrowed funds used for construction purposes and a reasonable rate on other
funds when so used." This amount of AFC constitutes an actual cost of
construction and, under established regulatory rate practices, a return on and
<PAGE>
recovery of such costs heretofore has been permitted in determining the rates
charged for utility services.
AFC was accrued at average pre-tax rates of 8.79%, 3.96% and 8.38%
compounded semi-annually for 1993, 1992 and 1991, respectively. AFC represents
non-cash earnings and, as a result, does not affect current cash flow.
STATEMENT OF CASH FLOWS. For purposes of the Statement of Cash Flows,
Union Light considers short-term investments having maturities of three months
or less at time of purchase to be cash equivalents.
The cash amounts of interest (net of allowance for borrowed funds used
during construction) and income taxes paid by Union Light in 1993, 1992 and 1991
are as follows:
1993 1992 1991
---------- ---------- ----------
Interest...................... $8,404,058 $7,597,202 $7,523,242
Income Taxes.................. $4,001,150 $ (440,612) $2,395,392
RECLASSIFICATIONS. Certain reclassifications of previously reported
amounts have been made to conform with current classifications. These
reclassifications had no effect on earnings on common shares.
<PAGE>
(2) INCOME TAXES:
The provision for income taxes included in the accompanying Statement of
Income consists of the following components:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Included in
operating expenses --
Currently payable.......................... $ 4,749,667 $ (1,218,369) $ 2,750,244
Deferred -- net
Liberalized depreciation................. 2,463,794 2,423,410 2,408,482
Gas costs................................ 722,981 442,507 (1,668,695)
Alternative minimum tax credit
carryforward........................... 168,796 (168,796) --
Unbilled revenues -- net................. (848,559) (338,275) 171,137
Pension and post-employment benefits..... (493,441) (238,166) (180,686)
Capitalized interest..................... (73,963) (57,480) (135,692)
Contributions in aid of construction..... (231,984) (53,955) (312,815)
Allowance for funds used during
construction........................... 93,263 115,354 220,295
Workforce reduction...................... 40,520 29,834 --
Uncollectible accounts................... (244,670) 30,637 (45,841)
Loss on disposition of utility property.. (56,244) (56,244) (56,244)
Systems costs capitalized................ (7,024) (31,556) 1,131,473
Vacation pay............................. 62,058 39,905 (209,205)
Curb box program -- net.................. 116,723 17,371 (192,285)
Gas refunds.............................. (456,772) -- --
Other reserves........................... -- (315,560) --
Other.................................... 34,424 (26,949) (104,555)
Investment tax credits--net................ (288,329) (289,195) (219,557)
------------ ------------ ------------
Total.................................. 5,751,240 304,473 3,556,056
------------ ------------ ------------
Included in other income
and deductions--net
Currently payable.......................... (42,678) 8,633 (23,896)
Deferred--net
Alternative minimum tax credit
carryforward........................... (3,097) 3,097 --
------------ ------------ ------------
Total.................................. (45,775) 11,730 (23,896)
------------ ------------ ------------
Total provision........................ $ 5,705,465 $ 316,203 $ 3,532,160
============ ============ ============
Analysis of provision
Federal income taxes....................... $ 4,370,673 $ 166,890 $ 2,684,855
State income taxes......................... 1,334,792 149,313 847,305
------------ ------------ ------------
$ 5,705,465 $ 316,203 $ 3,532,160
============ ============ ============
</TABLE>
<PAGE>
Federal income taxes (included in the total provision for income tax
expense set forth above) are different from the amount which would be computed
by applying the statutory Federal income tax rate to income before provision for
Federal income taxes; the principal reasons for this difference are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Pre-tax income..................... $13,709,248 $1,268,926 $8,741,715
=========== ========== ==========
Tax at statutory Federal income
tax rate applied to pre-tax
income........................... $ 4,798,237 $ 431,435 $2,972,183
Changes in Federal income
taxes resulting from -
Allowance for funds used during
construction which does not
constitute taxable income....... (103,824) 15,722 (99,374)
Excess of book depreciation over
tax depreciation................ 316,178 276,771 188,492
Amortization of investment
tax credits..................... (288,323) (289,172) (303,398)
Cost of removal for
property retired................ (208,317) (265,857) (242,139)
Medical expense.................. -- 29,144 1,988
Amortization of deferred gains
on intercompany sales of assets. 25,250 25,958 19,639
Provision for injuries and
damages......................... 3,675 (62,104) (2,288)
Change in tax rate............... (136,979) (56,088) (62,153)
Other-net........................ (35,224) 61,081 211,905
----------- ---------- ----------
Federal income tax
provision................ $ 4,370,673 $ 166,890 $2,684,855
=========== ========== ==========
</TABLE>
<PAGE>
(3) CAPITAL STOCK:
Union Light sold $15 million of Capital Stock to CG&E in December 1992 and
has authority from the KPSC to issue up to an additional $15 million of Capital
Stock through December 31, 1994. Also in 1992, CG&E purchased, from the
remaining minority shareholders, 36-63/94 shares of the capital stock of Union
Light. As a result, all of Union Light's Capital Shares are owned by CG&E.
(4) LONG-TERM DEBT:
Under the terms of the mortgage indenture securing first mortgage bonds
issued by Union Light, substantially all property is subject to a direct first
mortgage lien.
<TABLE>
<CAPTION>
December 31
-------------------------------
1993 1992
---- ----
<S> <C> <C>
First mortgage bonds -
4-3/8% series due 1993.................... $ -- $ 6,500,000
6-1/2% series due 1999.................... 20,000,000 20,000,000
8 % series due 2003.................... 10,000,000 10,000,000
9-1/2% series due 2008.................... 10,000,000 10,000,000
9.70 % series due 2019.................... 20,000,000 20,000,000
10-1/4% series due 2020.................... 30,000,000 30,000,000
----------- -----------
90,000,000 96,500,000
Less current maturities................... -- 6,500,000
Unamortized premium (discount) - net...... (828,169) (894,757)
----------- -----------
$89,171,831 $89,105,243
=========== ===========
</TABLE>
Improvement and sinking fund provisions contained in the indenture
applicable to the First Mortgage Bonds of Union Light issued prior to 1981
require deposits with the Trustee, on or before April 30 of each year, of
amounts in cash and/or principal amount of bonds equal to 1% ($200,000) of the
principal amount of bonds of the applicable series originally outstanding less
certain designated retirements. In lieu of such cash deposits or delivery of
bonds and as permitted under the terms of the indenture, historically Union
Light has followed the practice of pledging unfunded property additions to the
extent of 166-2/3% of the annual sinking fund requirements.
(5) RATES:
Reference is made to "Rate Matters" on page 3 herein with respect to
electric and gas rate matters.
<PAGE>
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" (SFAS No. 107), requires disclosure
of the estimated fair value of certain financial instruments of Union Light.
This information does not purport to be a valuation of Union Light as a whole.
The following methods and assumptions were used to estimate the fair value
of each major class of financial instrument of Union Light as required by SFAS
No. 107:
CASH, NOTES PAYABLE, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The
carrying amount as reflected on the Balance Sheet approximates the fair value of
these instruments due to the short period to maturity.
LONG-TERM DEBT. At December 31, 1993 and 1992, Union Light's first
mortgage bonds had an estimated fair value of approximately $107,078,000 and
$103,782,000, respectively. The aggregate fair value for the first mortgage
bonds is based on the present value of future cash flows. The discount rate
used approximates the incremental borrowing cost for similar instruments.
(7) COMMITMENTS AND CONTINGENCIES:
In December 1992, CG&E, PSI Resources, Inc. (PSI) and PSI Energy, Inc.,
PSI's principal subsidiary, an Indiana electric utility (PSI Energy), entered
into an agreement which, as subsequently amended (the Merger Agreement) provides
for the merger of PSI into a newly formed corporation named CINergy Corp.
(CINergy) and the merger of a newly formed subsidiary of CINergy into CG&E.
CINergy will become a holding company required to be registered under the Public
Utility Holding Company Act of 1935 (PUHCA) with two operating subsidiaries,
CG&E and PSI Energy. Union Light will remain a subsidiary of CG&E.
The merger will be accounted for as a "pooling of interests", and it is
anticipated that the transaction will be completed in the third quarter of 1994.
The merger is subject to approval by the Securities and Exchange Commission
(SEC) and FERC. Shareholders of both companies approved the merger in November
1993.
FERC issued conditional approval of the CINergy merger in August 1993, but
several intervenors, including The Public Utilities Commission of Ohio (PUCO)
and the KPSC, filed for rehearing of that order. On January 12, 1994, FERC
withdrew its conditional approval of the merger and ordered the setting of
FERC-sponsored settlement procedures to be held.
On March 4, 1994, CG&E reached a settlement agreement with the PUCO and the
Ohio Office of Consumers' Counsel on merger issues identified by FERC. On March
2, PSI Energy and Indiana's consumer representatives had reached a similar
agreement. Both settlement agreements have been filed with FERC. These
documents address, among other things, the coordination of state and federal
regulation and the commitment that neither CG&E nor PSI electric
<PAGE>
base rates, nor CG&E's gas base rates, will rise because of the merger, except
to reflect any effects that may result from the divestiture of CG&E's gas
operations if ordered by the SEC in accordance with the requirements of PUHCA
discussed below.
CG&E also filed with FERC a unilateral offer of settlement addressing all
issues raised in the KPSC's application for rehearing with FERC. Although it
is the belief of CG&E and PSI that no state utility commissions have
jurisdiction over approval of the proposed merger, an application has been filed
with the KPSC to comply with the Staff of the KPSC's position that the KPSC's
authorization is required for the indirect acquisition of control of Union Light
by CINergy. As part of the settlement offer, Union Light will agree not to
increase gas base rates as a result of the merger except to reflect any effects
that may result from the divestiture of Union Light's gas operations discussed
below.
If the settlement agreements filed with FERC are not acceptable, FERC could
set issues for hearing. If a hearing is held by FERC, consummation of the
merger would likely be extended beyond the third quarter of 1994.
PUHCA imposes restrictions on the operations of registered holding company
systems. Among these are requirements that securities issuances, sales and
acquisitions of utility assets or of securities of utility companies and
acquisitions of interests in any other business be approved by the SEC. PUHCA
also limits the ability of registered holding companies to engage in non-utility
ventures and regulates holding company system service companies and the
rendering of services by holding company affiliates to the system's utilities.
The SEC has interpreted the PUHCA to preclude registered holding companies, with
some exceptions, from owning both electric and gas utility systems. The SEC may
require that CG&E and Union Light divest their gas properties within a
reasonable time after the merger in order to approve the merger as it has done
in many cases involving the acquisition by a holding company of a combination
gas and electric company. In some cases, the SEC has allowed the retention of
the gas properties or deferred the question of divestiture for a substantial
period of time. In those cases in which divestiture has taken place, the SEC
usually has allowed companies sufficient time to accomplish the divestiture in a
manner that protects shareholder value. CG&E and Union Light believe good
arguments exist to allow retention of the gas assets, and will request that the
Companies be allowed to do so.
CG&E and Union Light are subject to regulation by various Federal, state
and local authorities relative to air and water quality, solid and hazardous
waste disposal, and other environmental matters. Compliance programs necessary
to meet existing and future environmental laws and regulations will increase the
cost of utility service.
Reference is made to "Gas Operations and Gas Supply" herein for information
relating to FERC Order 636 and commitments for the purchase of gas and to
"Construction" with respect to estimated construction expenditures.
<PAGE>
(8) COMPENSATING BANK BALANCES AND NOTES PAYABLE:
At December 31, 1993, Union Light had lines of credit totaling
$30 million, which were maintained by compensating balances. Unused lines of
credit at December 31, 1993 totaled $9.0 million (generally subject to
withdrawal by the banks). Substantially all of the cash balances of Union Light
are maintained to compensate the respective banks for banking services and to
obtain lines of credit; however, Union Light has the right of withdrawal of such
funds. The maximum amount of outstanding short-term notes payable authorized by
Union Light's Board of Directors and approved by FERC to be incurred at any time
through December 31, 1994 is $35 million.
<PAGE>
(9) SUPPLEMENTARY INCOME INFORMATION:
Taxes other than income taxes as set forth in the Statement of Income are
as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Property............................. $1,939,773 $1,890,386 $1,689,054
Payroll.............................. 1,336,543 1,426,474 1,342,721
Regulatory Commission Maintenance.... 329,755 296,678 261,754
Other................................ 17,260 12,826 9,007
---------- ---------- ----------
$3,623,331 $3,626,364 $3,302,536
========== ========== ==========
</TABLE>
(10) FINANCIAL INFORMATION BY BUSINESS SEGMENTS:
<TABLE>
<CAPTION>
Operating Operating Income Provision for Construction
Revenues Income Taxes Depreciation Expenditures
------------ ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Electric................... $175,712,173 $ 9,820,462 $3,078,258 $5,797,594 $16,290,845
Gas........................ 75,744,165 8,115,414 2,672,982 4,015,335 8,133,376
------------ ------------ ---------- ---------- -----------
Total.................... $251,456,338 $ 17,935,876 $5,751,240 $9,812,929 $24,424,221
============ ============ ========== ========== ===========
Year Ended December 31, 1992
Electric................... $159,689,812 $ 4,157,255 $ (441,640) $4,999,733 $16,459,497
Gas........................ 62,604,209 5,150,048 746,113 3,316,062 8,101,733
------------ ------------ ---------- ---------- -----------
Total.................... $222,294,021 $ 9,307,303 $ 304,473 $8,315,795 $24,561,230
============ ============ ========== ========== ===========
Year Ended December 31, 1991
Electric................... $153,365,707 $ 9,554,793 $3,377,338 $4,568,758 $17,182,517
Gas........................ 58,950,392 3,829,821 178,718 3,087,341 14,467,229
------------ ------------ ---------- ---------- -----------
Total.................... $212,316,099 $ 13,384,614 $3,556,056 $7,656,099 $31,649,746
============ ============ ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Property, Plant and Equipment, net -
Electric.......................... $130,053,966 $119,491,978 $110,541,684
Gas............................... 98,444,589 94,852,308 89,815,507
------------ ------------ ------------
228,498,555 214,344,286 200,357,191
Other Corporate Assets.............. 57,546,134 54,590,600 41,981,483
------------ ------------ ------------
Total Assets...................... $286,044,689 $268,934,886 $242,338,674
============ ============ ============
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Union Light, Heat and Power Company:
We have audited the accompanying balance sheet of THE UNION LIGHT, HEAT
AND POWER COMPANY (a Kentucky corporation and a subsidiary of The Cincinnati Gas
& Electric Company) as of December 31, 1993 and 1992, and the related statements
of income, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements and the
schedules referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
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 financial statements referred to above present fairly,
in all material respects, the financial position of The Union Light, Heat and
Power Company as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
As explained in Note 1 to the financial statements, the Company changed its
methods of accounting for income taxes, postretirement health care benefits and
postemployment benefits effective January 1, 1993.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in
Item 14 are presented for purposes of complying with the Securities and Exchange
Commission's Rules and Regulations under the Securities Exchange Act of 1934 and
are not a required part of the basic financial statements. The 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.
Cincinnati, Ohio,
January 24, 1994.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------ ---------------------------------------------------------------
Financial Disclosure
--------------------
Not Applicable.
PART III
Items 10., 11., 12. and 13.
- ---------------------------
Omitted pursuant to Instruction J(2)(c).
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------- -----------------------------------------------------------------
(a) Listed below are all financial statements, schedules, and
exhibits attached hereto, incorporated herein, and filed as a
part of this Annual Report.
(1) Financial Statements:
Statement of Income for the Three Years Ended December 31,
1993
Statement of Cash Flows for the Three Years Ended
December 31, 1993
Balance Sheet, December 31, 1993 and 1992
Statement of Changes in Shareholders' Equity for the Three
Years Ended December 31, 1993
Notes to Financial Statements
Report of Independent Public Accountants
(2) Financial Statement Schedules:
#Schedule V -- Property, Plant and Equipment (1993, 1992,
and 1991)
#Schedule VI -- Accumulated Provisions for Depreciation
(1993, 1992, and 1991)
#Schedule VIII -- Other Accumulated Provisions (1993,
1992, and 1991)
#Schedule IX -- Short-Term Borrowings (1993, 1992, and
1991)
(3) Exhibits:
Exhibit
No.
-------
*3-A --Copy of Restated Articles of Incorporation
made effective May 7, 1976 (filed as Exhibit 1 to
Form 8-K, May 1976)
*3-B --Copy of By-Laws of Union Light as amended,
adopted by shareholders May 3, 1989 (filed as
Exhibit 3-B under cover of Form SE
dated August 8, 1989)
<PAGE>
*4-A-1 --Copy of First Mortgage dated as of
February 1, 1949, between Union Light and The
Bank of New York (filed as Exhibit 7 to
Registration Statement No. 2-7793)
*4-A-2 --Copy of Fifth Supplemental Indenture dated as
of January 1, 1967, between Union Light and The
Bank of New York (filed as Exhibit 2-C-6 to
Registration Statement No. 2-60961 of CG&E)
*4-A-3 --Copy of Seventh Supplemental Indenture dated
as of October 1, 1973, between Union Light and
The Bank of New York (filed as Exhibit 2-C-7 to
Registration Statement No. 2-60961 of CG&E)
*4-A-4 --Copy of Eighth Supplemental Indenture dated
as of December 1, 1978, between Union Light and The
Bank of New York (filed as Exhibit 2-C-8 to
Registration Statement No. 2-63591 of CG&E)
*4-A-5 --Copy of Tenth Supplemental Indenture dated as
of July 1, 1989 between Union Light and The Bank of
New York (filed as Exhibit 4-B to Form 10-Q
for the quarter ended June 30, 1989 of CG&E)
*4-A-6 --Copy of Eleventh Supplemental Indenture dated
as of June 1, 1990 between Union Light and The Bank
of New York (filed as Exhibit 4-B to
Form 10-Q for the quarter ended June 30, 1990 of
CG&E)
*4-A-7 --Copy of Twelfth Supplemental Indenture dated
as of November 15, 1990, between Union Light and
The Bank of New York (filed as
Exhibit 4-B-8 to 1990 Form 10-K of CG&E)
*4-A-8 --Copy of Thirteenth Supplemental Indenture
dated as of August 1, 1992, between Union Light and
The Bank of New York (filed as Exhibit 4-B-9 to
1992 Form 10-K of CG&E)
23 --Consent of Independent Public Accountants
dated as of March 15, 1994
(b) No reports on Form 8-K were filed during the three months ended
December 31, 1993.
----------------
#All schedules other than Schedules V, VI, VIII and IX, are
omitted, as the information is not required or is otherwise
furnished, per Title 17, Section 210.5-04, CFR.
*The exhibits with an asterisk have been filed with the
Securities and Exchange Commission and are incorporated herein
by reference.
<PAGE>
<PAGE>
<TABLE>
SCHEDULE V
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Property, Plant and Equipment
-----------------------------
For the Year Ended December 31, 1993
------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other changes-- Balance at
December 31, Additions Retirements debit or December 31,
Classification 1992 at cost or sales (credit)(a) 1993
-------------- ------------ ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Transmission $ 11,018,492 $ 1,275,565 $ 38,188 $ 6,012 $ 12,261,881
Distribution 136,455,641 13,492,812 2,149,684 (6,012) 147,792,757
General 4,623,499 108,864 123,918 (33,445) 4,575,000
Completed construction-not classified (b) 6,219,262 1,740,294 -- -- 7,959,556
------------ ----------- ---------- ---------- ------------
Total electric 158,316,894 16,617,535 2,311,790 (33,445) 172,589,194
------------ ----------- ---------- ---------- ------------
GAS
Production 3,335,222 12,357 -- -- 3,347,579
Distribution 111,159,724 8,478,414 705,379 -- 118,932,759
General 3,449,591 229,141 205,470 1,891 3,475,153
Completed construction-not classified (b) 3,891,351 (1,404,639) -- -- 2,486,712
------------ ----------- ---------- ---------- ------------
Total gas 121,835,888 7,315,273 910,849 1,891 128,242,203
------------ ----------- ---------- ---------- ------------
COMMON 8,946,189 9,716,524 14,038 31,554 18,680,229
Completed construction-not classified (b) 40,820 51,021 -- -- 91,841
------------ ----------- ---------- ---------- ------------
Total common 8,987,009 9,767,545 14,038 31,554 18,772,070
------------ ----------- ---------- ---------- ------------
Property, plant and equipment in service $289,139,791 $33,700,353 $3,236,677 $ -- $319,603,467
============ =========== ========== ========== ============
CONSTRUCTION WORK IN PROGRESS (b)
Electric $ 6,688,415 $(2,114,095) $ -- $ -- $ 4,574,320
Gas 1,106,252 (528,614) -- -- 577,638
Common 6,541,508 (6,633,423) -- -- (91,915)
------------ ----------- ---------- ---------- ------------
Total construction work in progress $ 14,336,175 $(9,276,132) $ -- $ -- $ 5,060,043
============ =========== ========== ========== ============
<FN>
Notes: (a) Amounts in Column E represent transfers between plant accounts.
(b) Additions are net of transfers to plant in service.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE V
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Property, Plant and Equipment
-----------------------------
For the Year Ended December 31, 1992
------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other changes-- Balance at
December 31, Additions Retirements debit or December 31,
Classification 1991 at cost or sales (credit)(a) 1992
-------------- ------------ ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Transmission $ 10,910,119 $ 127,324 $ 18,951 $ -- $ 11,018,492
Distribution 126,976,296 11,816,041 2,336,696 -- 136,455,641
General 4,250,663 1,163,859 791,713 690 4,623,499
Completed construction-not classified (b) 4,078,696 2,140,566 -- -- 6,219,262
------------ ----------- ---------- ---------- ------------
Total electric 146,215,774 15,247,790 3,147,360 690 158,316,894
------------ ----------- ---------- ---------- ------------
GAS
Production 3,266,203 69,944 925 -- 3,335,222
Distribution 104,138,970 7,701,807 681,053 -- 111,159,724
General 3,219,718 457,535 227,662 -- 3,449,591
Completed construction-not classified (b) 4,467,641 (576,290) -- -- 3,891,351
------------ ----------- ---------- ---------- ------------
Total gas 115,092,532 7,652,996 909,640 -- 121,835,888
------------ ----------- ---------- ---------- ------------
COMMON 3,277,215 5,739,406 69,742 (690) 8,946,189
Completed construction-not classified (b) 4,862,100 (4,821,280) -- -- 40,820
------------ ----------- ---------- ---------- ------------
Total common 8,139,315 918,126 69,742 (690) 8,987,009
------------ ----------- ---------- ---------- ------------
Property, plant and equipment in service $269,447,621 $23,818,912 $4,126,742 $ -- $289,139,791
============ =========== ========== ========== ============
CONSTRUCTION WORK IN PROGRESS (b)
Electric $ 5,785,983 $ 902,432 $ -- $ -- $ 6,688,415
Gas 1,370,896 (264,644) -- -- 1,106,252
Common 6,436,978 104,530 -- -- 6,541,508
------------ ----------- ---------- ---------- ------------
Total construction work in progress $ 13,593,857 $ 742,318 $ -- $ -- $ 14,336,175
============ =========== ========== ========== ============
<FN>
Notes: (a) Amounts in Column E represent transfers between plant accounts.
(b) Additions are net of transfers to plant in service.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE V
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Property, Plant and Equipment
-----------------------------
For the Year Ended December 31, 1991
------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other changes-- Balance at
December 31, Additions Retirements debit or December 31,
Classification 1990 at cost or sales (credit)(a) 1991
-------------- ------------ ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Transmission $ 10,765,822 $ 163,044 $ 19,696 $ 949 $ 10,910,119
Distribution 119,999,857 8,342,901 1,365,513 (949) 126,976,296
General 3,948,644 1,376,745 1,074,726 -- 4,250,663
Completed construction-not classified (b) 3,316,390 762,306 -- -- 4,078,696
------------ ----------- ---------- ---------- ------------
Total electric 138,030,713 10,644,996 2,459,935 -- 146,215,774
------------ ----------- ---------- ---------- ------------
GAS
Production 3,266,203 -- -- -- 3,266,203
Distribution 92,693,329 12,176,102 730,461 -- 104,138,970
General 3,148,850 344,233 273,365 -- 3,219,718
Completed construction-not classified (b) 5,306,227 (838,586) -- -- 4,467,641
------------ ----------- ---------- ---------- ------------
Total gas 104,414,609 11,681,749 1,003,826 -- 115,092,532
------------ ----------- ---------- ---------- ------------
COMMON 3,329,345 158,270 210,400 -- 3,277,215
Completed construction-not classified (b) 179,907 4,682,193 -- -- 4,862,100
------------ ----------- ---------- ---------- ------------
Total common 3,509,252 4,840,463 210,400 -- 8,139,315
------------ ----------- ---------- ---------- ------------
Property, plant and equipment in service $245,954,574 $27,167,208 $3,674,161 $ -- $269,447,621
============ =========== ========== ========== ============
CONSTRUCTION WORK IN PROGRESS (b)
Electric $ 4,010,723 $ 1,775,260 $ -- $ -- $ 5,785,983
Gas 1,956,050 (585,154) -- -- 1,370,896
Common 3,144,546 3,292,432 -- -- 6,436,978
------------ ----------- ---------- ---------- ------------
Total construction work in progress $ 9,111,319 $ 4,482,538 $ -- $ -- $ 13,593,857
============ =========== ========== ========== ============
<FN>
Notes: (a) Amounts in Column E represent transfers between plant accounts.
(b) Additions are net of transfers to plant in service.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VI
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Accumulated Provisions for Depreciation
---------------------------------------
For the Years Ended December 31, 1993, 1992 and 1991
----------------------------------------------------
Column A Column B Column C Column D Column E Column F
- -------- -------- --------------------------------------- ------------------------- -------- ----------
Additions Deductions
--------------------------------------- -------------------------
Accrued
Balance at Charged to depreciation Salvage and Balance at
beginning of Charged to transportation on property Retirements cost of end of
Description period expenses clearing acquired or sales removal, net Other period
----------- ------------ ---------- -------------- ------------ ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended
December 31, 1993
Electric $53,266,316 $5,453,817 $363,330 $211,345 $2,311,786 $ (229,730) $(3,080) $57,209,672
Gas 34,264,800 3,600,175 222,285 1,520 910,839 (560,562) 507 37,739,010
Common 958,499 601,437 37,872 29,454 14,037 (1,132) 2,573 1,616,930
Retirement work in
progress 642,065 -- -- -- -- 1,042,722 -- (400,657)
----------- ---------- -------- -------- ---------- ----------- ------- -----------
$89,131,680 $9,655,429 $623,487 $242,319 $3,236,662 $ 251,298 $ -- $96,164,955
=========== ========== ======== ======== ========== =========== ======= ===========
For the Year Ended
December 31, 1992
Electric $49,988,077 $4,928,160 $356,861 $485,705 $3,021,940 $ (529,112) $ 341 $53,266,316
Gas 32,153,477 3,109,805 214,165 682 909,645 303,684 -- 34,264,800
Common 900,220 120,330 37,131 2,158 69,742 31,257 (341) 958,499
Retirement work in
progress (357,487) -- -- -- -- (999,552) -- 642,065
----------- ---------- -------- -------- ---------- ----------- ------- -----------
$82,684,287 $8,158,295 $608,157 $488,545 $4,001,327 $(1,193,723) $ -- $89,131,680
=========== ========== ======== ======== ========== =========== ======= ===========
For the Year Ended
December 31, 1991
Electric $47,424,282 $4,539,338 $290,317 $299,832 $2,459,936 $ 105,756 $ -- 49,988,077
Gas 30,262,427 2,902,946 207,632 427 1,003,828 216,127 -- 32,153,477
Common 1,080,854 56,315 33,785 9,326 210,400 69,660 -- 900,220
Retirement work in
progress (560,657) -- -- -- -- (203,170) -- (357,487)
----------- ---------- -------- -------- ---------- ----------- ------- -----------
$78,206,906 $7,498,599 $531,734 $309,585 $3,674,164 $ 188,373 $ -- $82,684,287
=========== ========== ======== ======== ========== =========== ======= ===========
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Other Accumulated Provisions
----------------------------
For the Year Ended December 31, 1993
------------------------------------
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------- Deductions for
Balance at Charged to purposes for which Balance at
December 31, Charged to other provisions December 31,
Description 1992 expenses accounts were made 1993
----------- ------------ ---------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Shown on asset side of balance sheet
- ------------------------------------
Doubtful accounts $ 1,000,629 $2,632,062 $ 2,937 $2,026,484 $ 1,609,144
=========== ========== =========== ========== ===========
Deferred income taxes (a) $ 3,717,402 $ 526,919 $(4,559,523)(b) $ (315,202) $ --
=========== ========== =========== ========== ===========
Shown on liability side of balance sheet
- ----------------------------------------
Deferred income taxes $27,609,241 $1,203,910 $(9,251,551)(b) $ (925,016) $20,486,616
=========== ========== =========== ========== ===========
Investment tax credits $ 5,939,519 $ (6) $ -- $ 288,323 $ 5,651,190
=========== ========== =========== ========== ===========
Income taxes refundable through rates $ -- $ -- $ 4,692,028 (b) $ -- $ 4,692,028
=========== ========== =========== ========== ===========
Other liabilities and deferred credits-
Customers' advances for construction $ 1,822,950 $ -- $ (161,821)(c) $ -- $ 1,661,129
Injuries and damages 143,000 641,662 -- 659,662 125,000
Other 9,820,104 1,504,904 2,695,228 1,065,847 12,954,389(d)
----------- ---------- ----------- ---------- -----------
$11,786,054 $2,146,566 $ 2,533,407 $1,725,509 $14,740,518
=========== ========== =========== ========== ===========
<FN>
Notes: (a) Included in Other Assets on the Balance Sheet.
(b) Reflects the adoption of SFAS No. 109, "Accounting for Income Taxes", in 1993.
(c) Net of refunds and forfeited advances.
(d) Includes $2.8 million of additional pension benefits extended in connection with an early retirement program and
workforce reduction, $2.3 million of accrued post-retirement life insurance benefits, $1.2 million of gas costs
refundable to customers and $.7 million of post-retirement health care costs. See Note 1 to the Financial Statements
for additional information.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Other Accumulated Provisions
----------------------------
For the Year Ended December 31, 1992
------------------------------------
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------- Deductions for
Balance at Charged to purposes for which Balance at
December 31, Charged to other provisions December 31,
Description 1991 expenses accounts were made 1992
----------- ------------ ---------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Shown on asset side of balance sheet
- ------------------------------------
Doubtful accounts $ 1,081,527 $2,448,314 $ 9,345 $2,538,557 $ 1,000,629
=========== ========== ========== ========== ===========
Deferred income taxes (a) $ 3,002,707 $3,761,524 $ 378,914 $3,425,743 $ 3,717,402
=========== ========== ========== ========== ===========
Shown on liability side of balance sheet
- ----------------------------------------
Deferred income taxes $25,079,412 $2,379,980 $ 378,914 $ 229,065 $27,609,241
=========== ========== ========== ========== ===========
Investment tax credits $ 6,228,714 $ (23) $ -- $ 289,172 $ 5,939,519
=========== ========== ========== ========== ===========
Other liabilities and deferred credits-
Customers' advances for construction $ 2,128,090 $ -- $ (305,140)(b) $ -- $ 1,822,950
Injuries and damages 328,000 1,431,858 -- 1,616,858 143,000
Other 6,175,985 1,000,993 3,304,592 661,466 9,820,104(c)
----------- ---------- ---------- ---------- -----------
$ 8,632,075 $2,432,851 $2,999,452 $2,278,324 $11,786,054
=========== ========== ========== ========== ===========
<FN>
Notes: (a) Included in Other Assets on the Balance Sheet.
(b) Net of refunds and forfeited advances.
(c) Includes $2.8 million of additional pension benefits extended in connection with an early retirement program and
workforce reduction and $2.2 million of accrued post-retirement life insurance benefits. See Note 1 to the
Financial Statements for additional information.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Other Accumulated Provisions
----------------------------
For the Year Ended December 31, 1991
------------------------------------
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------- Deductions for
Balance at Charged to purposes for which Balance at
December 31, Charged to other provisions December 31,
Description 1990 expenses accounts were made 1991
----------- ------------ ---------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Shown on asset side of balance sheet
- ------------------------------------
Doubtful accounts $ 1,007,713 $2,233,807 $ 6,017 $2,166,010 $ 1,081,527
=========== ========== ========== ========== ===========
Deferred income taxes (a) $ 1,609,742 $4,404,916 $ (529,649) $2,482,302 $ 3,002,707
=========== ========== ========== ========== ===========
Shown on liability side of balance sheet
- ----------------------------------------
Deferred income taxes $22,661,078 $3,360,009 $ (529,649) $ 412,026 $25,079,412
=========== ========== ========== ========== ===========
Investment tax credits $ 6,454,885 $ 77,227 $ -- $ 303,398 $ 6,228,714
=========== ========== ========== ========== ===========
Other liabilities and deferred credits-
Customers' advances for construction $ 1,907,560 $ -- $ 220,530(b) $ -- $ 2,128,090
Injuries and damages 330,000 613,022 -- 615,022 328,000
Other 4,780,523 3,743,985 (449,955) 1,898,568 6,175,985(c)
----------- ---------- ---------- ---------- -----------
$ 7,018,083 $4,357,007 $ (229,425) $2,513,590 $ 8,632,075
=========== ========== ========== ========== ===========
<FN>
Notes: (a) Included in Other Assets on the Balance Sheet.
(b) Net of refunds and forfeited advances.
(c) Includes $2.1 million of accrued post-retirement life insurance benefits.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
---------------------------------------
Short-Term Borrowings
---------------------
For the Years Ended December 31, 1993, 1992 and 1991
----------------------------------------------------
Column A Column B Column C Column D Column E Column F
----------- ---------- ---------------- ------------------ -------------- -----------------
Category of Average amount Weighted
aggregate Balance Maximum amount outstanding average interest
short-term at end of Weighted average outstanding during during the rate during the
borrowings period interest rate the period period (a) period (a)
----------- ---------- ---------------- ------------------ -------------- -----------------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1993
Bank Loans (b) $25,000,000 3.48% $25,000,000 $ 5,565,753 3.34%
For the Year Ended December 31, 1992
Bank Loans (b) $ 6,500,000 3.57% $34,000,000 $17,867,486 4.17%
For the Year Ended December 31, 1991
Bank Loans (b) $25,000,000 4.81% $25,000,000 $ 6,902,740 5.94%
<FN>
Notes: (a) Computed by using the average daily borrowings outstanding during the period.
(b) Bank loans consist of notes issued for 90 days or less.
</TABLE>
<PAGE>
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, on this 15th day of
March, 1994.
THE UNION LIGHT, HEAT AND POWER COMPANY
By Jackson H. Randolph
______________________________________
(Jackson H. Randolph,
Chairman of the Board, President
and Chief Executive Officer)
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.
(i) Principal Executive Officer:
Chairman of the Board,
President and Chief
Jackson H. Randolph Executive Officer March 15, 1994
_____________________________________
(Jackson H. Randolph)
(ii) Principal Financial Officer:
Senior Vice-President
Finance
C. R. Everman and Director March 15, 1994
____________________________________
(C. Robert Everman)
(iii) Principal Accounting Officer:
Daniel R. Herche Controller March 15, 1994
_____________________________________
(Daniel R. Herche)
<PAGE>
(iv) A Majority of the Board of Directors:
Terry E. Bruck Director March 15, 1994
_____________________________________
(Terry E. Bruck)
James J. Mayer Director March 15, 1994
_____________________________________
(James J. Mayer)
George H. Stinson Director March 15, 1994
_____________________________________
(George H. Stinson)
W. D. Waymire Director March 15, 1994
_____________________________________
(W. Denis Waymire)
R. P. Wiwi Director March 15, 1994
_____________________________________
(R. P. Wiwi)
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report, dated January 24, 1994, included in the Annual
Report on Form 10-K for the year ended December 31, 1993, of The Union Light,
Heat and Power Company, into its previously filed Registration Statement No. 33-
40245.
ARTHUR ANDERSEN & CO.
Cincinnati, Ohio,
March 15, 1994.
