UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ........ to ........
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-8946 CILCORP Inc. 37-1169387
(An Illinois Corporation)
300 Hamilton Blvd., Suite 300
Peoria, Illinois 61602
(309) 675-8810
1-2732 CENTRAL ILLINOIS LIGHT COMPANY 37-0211050
(An Illinois Corporation)
300 Liberty Street
Peoria, Illinois 61602
(309) 675-8810
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class so registered on which registered
CILCORP Inc. Common stock, no par value New York and Chicago
CILCO Preferred Stock, Cumulative
$100 par, 4 1/2% series New York
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
At March 12, 1996, the aggregate market value of the voting stock of
CILCORP Inc. (CILCORP) held by nonaffiliates was approximately
$556 million. On that date, 13,366,069 common shares (no par value)
were outstanding.
At March 12, 1996, the aggregate market value of the voting stock of
Central Illinois Light Company (CILCO) held by nonaffiliates was
approximately $61 million. The voting stock of CILCO consists of its
common and preferred stock. On that date, 13,563,871 shares of CILCO's
common stock, no par value, were issued and outstanding and privately
held, beneficially and of record, by CILCORP Inc.
DOCUMENTS INCORPORATED BY REFERENCE
CILCORP Inc.'s Proxy Statement dated March 11, 1996, in connection with
its Annual Meeting to be held on April 23, 1996, is incorporated into
Part I and Part III hereof.
Central Illinois Light Company's Proxy Statement dated March 26, 1996,
in connection with its Annual Meeting to be held on April 23, 1996, is
incorporated into Part I and Part III hereof.
CILCORP Inc.'s Annual Report to Shareholders for the year ended December
31, 1995 -- Management@s Discussion and Analysis of Financial Condition
and Results of Operations is incorporated herein by reference into Part
II Item 7.
CILCORP Inc.'s Annual Report to Shareholders for the year ended December
31, 1995 -- Financial Statements, Notes to the Financial Statements and
Supplementary Data is incorporated herein by reference into Part II Item
8.
CILCORP INC.
and
Central Illinois Light Company
1995 Form 10-K Annual Report
This combined Form 10-K is separately filed by CILCORP Inc. and Central
Illinois Light Company (CILCO). Information herein relating to each
individual registrant is filed by such registrant on its own behalf.
Accordingly, except for its subsidiaries, CILCO makes no representation
as to information relating to any other subsidiary of CILCORP Inc.
Table of Contents
Page
Glossary 5-6
Part I
Item 1. Business
The Company and its Subsidiaries 7-9
Business of CILCO 9
Electric Service 9-11
Gas Service 11
Regulation 11-12
Electric Fuel and Purchased Gas
Adjustment Clauses 12
Fuel Supply - Coal 13
Natural Gas Supply 13-14
Financing and Capital Expenditures Programs 14
Environmental Matters 14-15
Significant Customer 15
Franchises 16
Competition 16
Employees 17
Union Contracts 17
Early Retirement Programs 17
Business of ESE 17-20
Customers 20
Regulation of ESE's Clients 20-22
Regulation of ESE 22
Competition 22-23
Subcontractors 23
Government Contracts 23
Patents and Trademark Protection 23
Potential Liabilities and Insurance 23-24
Employees 25
Business of QST 25
Other Businesses 25
CIM/CLM 25-26
Holding Company 26
CVI 26
Employees 26
Item 2. Properties 27-28
Item 3. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 29
Executive Officers of the Registrant 29-31
Part II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters 32
Item 6. Selected Financial Data 33
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 33
Item 8. Index - Financial Statements, Supplementary Data
and Exhibits 34
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 59
Part III
Item 10. Directors and Executive Officers of the Registrants 59
Item 11. Executive Compensation 60
Item 12. Security Ownership of Certain Beneficial
Owners and Management 60
Item 13. Certain Relationships and Related Transactions 60-61
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 62-66
GLOSSARY OF TERMS
When used herein, the following terms will have the meanings
indicated.
AFUDC -- Allowance for Funds Used During Construction
BTU -- British Thermal Unit. The quantity of heat required to raise
temperature of one pound of water one degree Fahrenheit.
BCF -- Billion cubic feet
Caterpillar -- Caterpillar Inc., CILCO's largest industrial customer
CECO -- CILCO Energy Corporation; a wholly-owned subsidiary of CILCO
CEDCO -- CILCO Exploration and Development Company; a wholly-owned
subsidiary of CILCO
CERCLA -- Comprehensive Environmental Response Compensation and
Liability Act
CESI -- CILCORP Energy Services Inc.
CILCO -- Central Illinois Light Company
CIM -- CILCORP Investment Management Inc.
CIPS -- Central Illinois Public Service Company
CLM -- CILCORP Lease Management Inc.
Company -- CILCORP Inc.
Cooling Degree Days -- The measure of the degree of warmer than normal
weather experienced, based on the extent to
which the average of high and low temperatures
for a day falls above 65 degrees Fahrenheit
(the historic average provided by U.S. Weather
Bureau for 30-year period).
CVI -- CILCORP Ventures Inc.
DSM -- Demand Side Management. The process of helping customers
control how they use energy resources.
EMF -- Electric and magnetic fields
EPA -- Environmental Protection Agency (Federal)
ESE -- Environmental Science & Engineering, Inc.
FAC -- Fuel Adjustment Clause
FASB -- Financial Accounting Standards Board
FERC -- Federal Energy Regulatory Commission
Heating Degree Days -- The measure of the degree of colder than normal
weather experienced, based on the extent to
which the average of high and low temperatures
for a day falls below 65 degrees Fahrenheit
(the historic average provided by U.S. Weather
Bureau for 30-year period).
ICC -- Illinois Commerce Commission
KW -- Kilowatt, a thousand watts
KWH -- Kilowatt-hour, one thousand watts used for one hour (unit of
work)
LCP -- Least Cost Energy Plan, a long-term resource acquisition
strategy that balances both supply and demand-side resource
options to provide the best value at the least cost to
customers.
MAIN -- Mid-America Interconnected Network. One of nine regions that
make up the National Electric Reliability Council. Its
purpose is to ensure the Midwest region will meet its load
responsibility.
MCF -- One thousand cubic feet
MW -- Megawatt, a million watts
MWG -- Midwest Grain Products, Inc.
NEPA -- National Energy Policy Act.
PGA -- Purchased Gas Adjustment
QST -- QST Enterprises Inc.
RCRA -- Resource Conservation and Recovery Act.
SFAS -- Statement of Financial Accounting Standards
Therm -- Unit of measurement for natural gas; a therm is equal to one
hundred cubic feet (volume) or 100,000 BTUs (energy).
PART I
Item 1. Business
THE COMPANY AND ITS SUBSIDIARIES
CILCORP Inc. (CILCORP or the Company) was incorporated as a holding
company in the state of Illinois in 1985. The financial condition and
operating results of CILCORP primarily reflect the operations of Central
Illinois Light Company (CILCO), the Company's principal business
subsidiary. The Company's other core business subsidiaries are
Environmental Science & Engineering, Inc. (ESE) and QST Enterprises Inc.
(QST). The Company also has two other first-tier subsidiaries, CILCORP
Investment Management Inc. (CIM) and CILCORP Ventures Inc. (CVI), whose
operations, combined with those of the holding company itself (Holding
Company), are collectively referred to herein as Other Businesses.
CILCORP owns 100% of the common stock of CILCO. All of the other
subsidiaries are wholly-owned by CILCORP.
CILCO is engaged in the generation, transmission, distribution and sale
of electric energy in an area of approximately 3,700 square miles in
central and east-central Illinois, and the purchase, distribution,
transportation and sale of natural gas in an area of approximately 4,500
square miles in central and east-central Illinois.
CILCO has two wholly-owned subsidiaries, CILCO Exploration and
Development Company (CEDCO) and CILCO Energy Corporation (CECO). CEDCO
was formed to engage in the exploration and development of gas, oil,
coal and other mineral resources. CECO was formed to research and
develop new sources of energy, including the conversion of coal and
other minerals into gas. The operations of these subsidiaries are not
currently significant.
ESE was formed in February 1990 to conduct the environmental consulting
and analytical services businesses acquired from Hunter Environmental
Services, Inc. (Hunter) during that year. ESE provides engineering and
environmental consulting, analysis and laboratory services to a variety
of governmental and private customers. ESE, through certain
subsidiaries, also acquires or invests in environmentally impaired
property for remediation and resale. ESE has 12 wholly-owned
subsidiaries: Keck Instruments, which manufactures geophysical
instruments used in environmental applications; Chemrox, Inc., which
formerly manufactured products and provided engineering services for the
safe use and control of ethylene oxide and chlorofluorocarbons, and is
now maintained to preserve the name; ESE Biosciences, Inc., whose on-
site biological treatment of contaminated soil and groundwater is now
performed by ESE, and is now maintained to preserve the name; ESE
Architectural Services, Inc., which provides architectural services;
National Professional Casualty Co., which provides professional and
pollution liability insurance to ESE; ESE International Ltd., which
provides engineering and consulting services in foreign countries; ESE
Michigan, Inc., which formerly conducted business as ESE Environmental
Science & Engineering, Inc., and is now maintained to preserve the name;
Keck Consulting Services, Inc., which is maintained to preserve the
name; Ordnance/Explosives Environmental Services, Inc. (OES), which is
engaged in the removal of unexploded ordnance and related waste from
contaminated sites; and ESE Land Corporation, Savannah Resources Corp.
and ESE Placentia Development Corporation, organized to purchase or
invest in environmentally impaired parcels of real estate for
remediation and resale. ESE Land Corporation is a member of North Shore
at Mandalay Bay L.L.C., organized to purchase an environmentally
impaired parcel of real estate for resale. In addition, ESE owns a
minority interest in ESE Ohio, Inc., which provides professional
engineering services in the State of Ohio.
QST was formed in December 1995 to facilitate CILCORP's expansion into
non-regulated energy and related services businesses and has not yet
generated revenues. QST has two wholly-owned subsidiaries - QST Energy
Inc. and QST Communications Inc. (formerly CILCORP FiberCom Inc., a
subsidiary of CVI). QST Energy Inc. has one wholly-owned subsidiary -
QST Energy Trading Inc.
CIM manages the Company's investment portfolio. CIM manages seven
leveraged lease investments through three wholly-owned subsidiaries:
CILCORP Lease Management Inc. which was formed in 1985, and CIM Leasing
Inc. and CIM Air Leasing Inc., which were both formed in 1993. CIM's
other wholly-owned subsidiary is CIM Energy Investments Inc., which was
formed in 1989 to invest in non-regulated, independent power production
facilities (see Other Businesses). CIM also directly owns limited
partnership interests in affordable housing portfolios.
CVI is a venture capital company which pursues investment opportunities
in new ventures and the expansion of existing ventures in environmental
services, biotechnology and health care. CVI has an 80% interest in
Agricultural Research and Development Corporation and one wholly-owned
subsidiary, CILCORP Energy Services, Inc. (CESI). CESI's primary
business is the sale of carbon monoxide detectors to utilities for
resale to their customers.
The following table summarizes the relative contribution of each
business group to consolidated assets, revenue and net income for the
year ended December 31, 1995.
<TABLE>
<CAPTION>
Assets Revenue Net Income
(Loss)
(In thousands)
<S> <C> <C> <C>
CILCO $1,059,991 $477,744 $39,099
ESE 87,952 127,530 113
Other Businesses 128,128 9,466 (630)
---------- -------- -------
$1,276,071 $614,740 $38,582
========== ======== =======
</TABLE>
CILCORP is an intrastate exempt holding company under the Public Utility
Holding Company Act of 1935 (Act). In June 1995 the SEC issued a report
recommending to Congress that the Act be repealed with certain
conditions or, if Congress so chooses, unconditionally. The Company has
endorsed the unconditional repeal of the Act and will continue to
monitor alternative proposals including those seeking conditional repeal
or amendment of the Act. On October 12, 1995, a bill, entitled the
"Public Utility Holding Company Act of 1995," was introduced in the
U.S. Senate. This bill provides for conditional repeal of the current
Act and for the assumption of certain responsibilities under the new Act
by the FERC. The Company cannot predict whether or when this bill or
any other proposals related to the Act may be enacted.
BUSINESS OF CILCO
CILCO was incorporated under the laws of Illinois in 1913. CILCO's
principal business is the generation, transmission, distribution and
sale of electric energy in an area of approximately 3,700 square miles
in central and east-central Illinois, and the purchase, distribution,
transportation and sale of natural gas in an area of approximately 4,500
square miles in central and east-central Illinois.
CILCO is continuing to experience, in varying degrees, the impact of
developments common to the electric and gas utility industries. These
include increased competition in wholesale markets and the prospect of
competition in retail markets, changes in regulation, uncertainties as
to the future demand for electricity and natural gas, structural and
competitive changes in the markets for these commodities, the high cost
of compliance with environmental and safety laws and regulations and
uncertainties in regulatory and political processes. At the same time,
CILCO has sought to provide reliable service at reasonable rates for its
customers and a fair return for its investors. Refer to the caption
"Electric Competition" of Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations on page 18 of CILCORP's
1995 Annual Report to Shareholders which is incorporated herein by
reference.
ELECTRIC SERVICE
CILCO furnishes electric service to retail customers in 138 Illinois
communities (including Peoria, East Peoria, Pekin, Lincoln and Morton).
At December 31, 1995, CILCO had approximately 192,000 retail electric
customers.
In 1995, 68% of CILCO's total operating revenue was derived from the
sale of electricity. Approximately 40% of electric revenue resulted
from residential sales, 31% from commercial sales, 27% from industrial
sales, 1% from sales for resale and 1% from other sales. Electric
sales, particularly residential and commercial sales during the summer
months, fluctuate based on weather conditions.
The electric operating revenues of CILCO were derived from the following
sources:
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Residential $129,722 $120,314 $119,709
Commercial 99,992 95,932 91,629
Industrial 87,491 86,804 85,384
Sales for resale 5,132 8,182 4,522
Street lighting 1,132 1,058 1,027
Other revenue 2,729 795 853
-------- -------- --------
Total electric revenue $326,198 $313,085 $303,124
======== ======== ========
</TABLE>
CILCO owns and operates two coal-fired base load generating plants and
two natural gas combustion turbine-generators which are used for peaking
service. A 21 megawatt (MW) cogeneration plant at Midwest Grain
Products, Inc. (MWG) began generating electricity for distribution to
CILCO's customers in June 1995 (see Item 2. Properties-CILCO). The
plant, which is owned by CILCO, also provides steam heat to MWG's Pekin,
Illinois, facility. CILCO set a new all-time system peak demand of
1,188 MW on August 17, 1995, surpassing the previous all-time system
peak demand of 1,137 MW set on July 5, 1994.
The system peak demand for 1996 is estimated to be 1,172 MW with a
reserve margin of approximately 10.9%. The system peak demand estimate
does not account for any load loss due to CILCO's proposed retail
competition pilot programs (see Competition). The reserve margin takes
into account 130 MW of firm purchased power and 81 MW of interruptible
industrial load and other related Demand Side Management (DSM) programs.
The system peak demand includes 25 MW of firm power to be provided to
the City of Springfield (City Water, Light and Power Department) and an
option for Commonwealth Edison to purchase 50 MW from CILCO. CILCO's
planned reserve margin complies with planning reserve margin
requirements established by the Mid-America Interconnected Network
(MAIN), of which CILCO is a member.
Studies conducted by CILCO indicate that it has sufficient base load
generating capacity and purchased capacity to provide an adequate and
reliable supply of electricity to satisfy base load demand through the
end of the century. To help meet anticipated increases in peak demand
and maintain adequate reserve margins, CILCO entered into a firm,
wholesale bulk power agreement to purchase capacity from CIPS. The
agreement, which expires in 1998, was approved by the Illinois Commerce
Commission (ICC) in 1990 as part of CILCO's first electric least cost
energy plan. In 1992, CILCO filed its second electric least cost energy
plan with the ICC which anticipates CILCO will experience shortages of
peak generating capacity ranging from 100 MW in 1998 up to 130 MW by
2001. In 1993, the ICC approved another firm, wholesale power purchase
agreement between CIPS and CILCO to meet this shortfall (see CILCO's
Note 8, Item 8. Financial Statements and Supplementary Data for further
discussion of the purchase agreement with CIPS).
CILCO is interconnected with CIPS, Commonwealth Edison Company, Illinois
Power Company and the City Water, Light and Power Department to provide
for the interchange of electric energy on an emergency and mutual help
basis.
GAS SERVICE
CILCO provides gas service to customers in 128 Illinois communities
(including Peoria, East Peoria, Pekin, Lincoln and Springfield). At
December 31, 1995, CILCO had approximately 199,000 gas customers,
including 391 industrial and commercial gas transportation customers
that purchase gas directly from suppliers for transportation through
CILCO's system.
In 1995, 32% of CILCO's total operating revenue was derived from the
sale or transportation of natural gas. Approximately 69% of gas revenue
resulted from residential sales, 22% from commercial sales, 2% from
industrial sales, 6% from transportation and 1% from other sales. Gas
sales, particularly residential and commercial sales during the winter
months, fluctuate based on weather conditions.
The gas operating revenues of CILCO were derived from the following
sources:
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Residential $103,992 $ 99,567 $104,348
Commercial 32,792 32,563 32,406
Industrial 3,165 4,219 3,013
Transportation of gas 8,927 10,124 10,134
Other revenue 2,670 1,812 853
-------- -------- --------
Total gas revenue $151,546 $148,285 $150,754
======== ======== ========
</TABLE>
CILCO's all-time maximum daily send-out of 443,167 MCF occurred on
January 15, 1972. The 1995 peak day send-out of 357,655 MCF occurred on
December 9, 1995. CILCO has been able to meet all of its existing
customer requirements during the 1995-1996 heating season. CILCO
believes that its present and planned supplies of gas will continue to
be sufficient to serve all of its existing customer requirements during
the 1996-1997 heating season.
REGULATION
CILCO is a public utility under the laws of the State of Illinois and is
subject to the jurisdiction of the ICC. The ICC has general power of
supervision and regulation with respect to services and facilities,
rates and charges, classification of accounts, valuations of property,
determination of depreciation rates, construction, contracts with any
affiliated interest, the issuance of stock and evidences of indebtedness
and various other matters. With respect to certain electric matters,
CILCO is subject to regulation by the Federal Energy Regulatory
Commission (FERC). CILCO is exempt from the provisions of the Natural
Gas Act, but is affected by orders, rules and regulations issued by the
FERC with respect to certain gas matters. Refer to the caption
"Electric Competition" of Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations on page 18 of CILCORP's
1995 Annual Report to Shareholders which is incorporated herein by
reference.
The Illinois statute governing public utilities requires the ICC to
review and adopt electric least-cost energy plans (LCP) for public
utilities. In general, CILCO's LCP consists of customer demand
forecasts and the projected resources that CILCO will rely upon to meet
that demand. The planning horizon is 20 years, and the LCP is reviewed
by the ICC every three years. CILCO filed its most recent electric LCP
on June 30, 1995. ICC approval of the plan is expected during the first
quarter of 1996. The ICC may not issue a certificate of convenience and
necessity for any new construction project unless the ICC has determined
that the proposed construction is consistent with CILCO's most recently
approved LCP, as updated. The law requires that the LCP incorporate
economical cogeneration, renewable resources and Demand Side Management
(DSM) programs, to the fullest extent possible, as resources for meeting
the future energy service needs of CILCO's customers.
This recently filed LCP contains several existing DSM programs including
interruptible and standby generation rates, residential heat pumps,
commercial audits and the "In Concert With The Environment" program.
The new plan also proposes to add four new DSM programs to help meet
system load growth anticipated over the planning period. These include
new interruptible contracts, new standby generation contracts, air
conditioning cycling and targeted thermal storage cooling programs.
Three new informational programs are also proposed, including new
construction efficiency, motor efficiency and commercial lighting
efficiency programs. Based on a preliminary assessment, electric DSM
programs are projected to reduce CILCO's peak demand by 137 MW over the
twenty-year planning horizon. In 1995, the total cost of the programs,
excluding interruptible rates, was approximately $380,000.
ELECTRIC FUEL AND PURCHASED GAS ADJUSTMENT CLAUSES
CILCO's tariffs provide for adjustments to its electric rates through
the fuel adjustment clause (FAC) to reflect increases or decreases in
the cost of fuel used in its generating stations. The transportation
costs of coal are not currently included in the FAC, and are normally
addressed in general ratemaking proceedings. However, by statute
effective as of August 27, 1991, any Illinois utility purchasing coal
under any contract that was in effect on August 27, 1991, shall,
whenever the utility requests, but not later than the conclusion of the
utility@s next general electric rate proceeding, begin recovering the
transportation costs of that coal through the utility's FAC.
CILCO's tariffs also provide for adjustments to its gas rates through
the purchased gas adjustment clause (PGA) to reflect increases or
decreases in the cost of natural gas purchased for sale to customers.
FUEL SUPPLY - COAL
Substantially all of CILCO's electric generation capacity is coal-fired,
including 100% of its current base load capacity. Approximately
2.4 million tons of coal were burned during 1995. Existing coal
contracts with suppliers in central Illinois and eastern Kentucky are
expected to supply about 70% of the 1996 requirements. Coal will be
purchased on the spot market during the year to meet remaining annual
fuel requirements.
During the years 1995, 1994 and 1993, the average cost per ton of coal
burned, including transportation, was $37.21, $39.22 and $40.30,
respectively. The cost of coal burned per million BTU's was $1.66,
$1.71 and $1.75, respectively (see Electric Fuel and Purchased Gas
Adjustment Clauses).
During 1995, Illinois mid-sulfur coal was successfully test burned at
E. D. Edwards Station. A two-year contract signed with the supplier at
the end of 1995 will reduce Edwards Station's dependency on east
Kentucky low-sulfur coal and contribute to lower station fuel cost.
CILCO has a long-term contract with Freeman United Coal Mining Company
(Freeman) for the purchase of high-sulfur, Illinois coal used
predominantly at the Duck Creek Station. The contract gives CILCO the
flexibility to purchase between 500,000 and 1,000,000 tons annually.
Under the terms of the contract, CILCO's obligation to purchase coal
could be extended through 2010; however, Freeman has the option of
terminating the contract after 1997. The contract requires CILCO to pay
all variable coal production costs on tons purchased and certain fixed
costs not affected by the volume purchased. CILCO and Freeman conducted
discussions in 1995 concerning coal cost reduction strategies in 1996.
Freeman will pursue several initiatives identified in those discussions.
NATURAL GAS SUPPLY
During 1995, CILCO continued to maintain a widely diversified and
flexible natural gas supply portfolio. This portfolio is structured
around firm and interruptible gas transportation service provided by
five interconnecting interstate pipeline suppliers and firm and
interruptible gas purchase arrangements of varying terms made directly
with approximately 35 gas suppliers. Reliability was enhanced through
natural gas injections and withdrawals at CILCO's two natural gas
storage fields and contracted storage facilities. The supply and
pipeline capacity portfolio continues to provide reliable supplies at
prevailing market prices. CILCO believes that its present and planned
supply of gas will continue to be sufficient to serve all of its present
and projected firm customer requirements at prevailing market prices.
During 1995, CILCO purchased approximately 32,000,000 MCF of natural gas
at a cost of approximately $68.4 million, or an average cost of $2.14
per MCF. The average cost per MCF of natural gas purchased was $2.71 in
1994 and $2.66 in 1993 (see Electric Fuel and Purchased Gas Adjustment
Clauses).
On August 23, 1995 the ICC entered an order authorizing the submission
to the Joint Committee on Administrative Rules (Committee) of the second
notice of the proposed repealer of 83 Ill. Adm. Code 525, "Uniform
Purchased Gas Adjustment Clause" and the second notice of proposed rules
for 83 Ill. Adm. Code 525, "Purchased Gas Adjustment Clause." The
purpose of this proceeding was to reflect the changes that have taken
place in the gas utility industry since the adoption of the previous
rules. The Committee issued its certifications of no objection on
September 12, 1995. As a result of current rulings, monthly utility
charges for gas will be more reflective of the market.
For a discussion of other gas issues, refer to the caption "Gas Pipeline
Supplier Transition Costs" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 21 of
CILCORP's 1995 Annual Report to Shareholders which is incorporated
herein by reference.
FINANCING AND CAPITAL EXPENDITURES PROGRAMS
CILCO's ongoing capital expenditures program is designed to maintain
reliable electric and gas service and to meet the anticipated demands of
its customers. Capital expenditures for 1996 are estimated to be
$49.3 million, including pollution control expenditures of $3.2 million.
Expenditures include $31.3 million for the electric business,
$15.9 million for the gas business and $2.1 million for general and
miscellaneous purposes. Electric expenditures include $7.7 million for
additions and modifications to generating facilities and $23.6 million
for transmission and distribution system additions and improvements.
Gas expenditures are primarily for necessary additions, replacements and
improvements to existing facilities. Anticipated gas and electric
capital expenditures for 1997-2000 are $198.6 million.
CILCO expects to finance its 1996 capital expenditures with funds
provided by operating activities. CILCO issued $20 million of secured
medium-term notes in May 1995. CILCO also issued $16 million of secured
medium-term notes in December 1995 which were used to retire $16 million
of first mortgage bonds due in February 1996. CILCO had $24.6 million
of short-term commercial paper outstanding at December 31, 1995, and
expects to issue short-term commercial paper throughout 1996. At
December 31, 1995, CILCO had bank lines of credit aggregating
$30 million, all of which were unused. CILCO expects these bank lines
will remain unused through 1996.
ENVIRONMENTAL MATTERS
Refer to the caption "Environmental Matters" of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations
on page 20 of CILCORP's 1995 Annual Report to Shareholders which is
incorporated herein by reference.
Some studies suggest that magnetic fields produced by electric
current, known as "electric and magnetic fields" or EMF, may be
associated with illness or disease. However, research conducted to
date has produced no conclusive evidence that EMF has an adverse
impact on health. CILCO is participating in utility industry-funded
studies on this subject. There are also claims that EMF may
contribute to losses in the market value of property near certain
electric transmission lines. CILCO will continue to monitor these
issues, but their ultimate impact cannot be predicted at this time.
CILCO, through agreements with the U. S. Department of Energy, has
developed and implemented voluntary programs pursuant to the Climate
Change Action Plan goal of limiting greenhouse gas emissions to 1990
levels by year 2000. Commitments made by CILCO will build upon
current and planned energy and environmental initiatives contained
within its Business Plan and will not materially impact CILCO's
financial results. Failure of voluntary programs undertaken by the
utility industry could result in the imposition of mandatory
greenhouse gas reduction programs which could have material impacts on
the Company. Past legislative proposals have called for as much as a
$30 per ton tax on carbon dioxide which could cost CILCO approximately
$166 million per year.
Many urban areas around the country face the major challenge of
achieving compliance with ozone air quality standards. Ozone is
formed when Volatile Organic Compound (VOC) emissions and/or Nitrogen
Oxide (NOx) emissions photochemically react in the atmosphere.
Strategies for reduction of ozone levels have targeted mobile, area
and stationary sources (including power plants) of VOCs and NOx.
Under Title I of the Clean Air Act, states are required to develop and
implement State Implementation Plans (SIP) for ozone compliance by
2007. Where boundary area emissions are contributing to the non-
attainment areas, additional VOC/NOx controls in attainment areas are
being considered. This matter is further complicated by the transport
of emissions across state boundaries and regionally. CILCO may be
targeted for additional NOx emission reductions at its power plants
pursuant to regional ozone compliance programs, despite the fact that
CILCO's plants are in attainment areas.
CILCO is participating in ozone compliance strategy activities at the
national, regional, and state levels. CILCO's position calls for
(1) equitable consideration among all VOC/NOx sources, (2) credit for
past and planned emission reductions and (3) cost-benefit/risk-benefit
support for control regulation.
Should additional NOx emission controls be mandated for CILCO's power
plants, new and costly control technology retrofits would be required.
The exact costs for such compliance cannot be determined at this time,
and multiple technologies might be necessary to meet extremely
stringent NOx levels.
SIGNIFICANT CUSTOMER
Caterpillar Inc. is CILCO's largest industrial customer. Aggregate gas
and electric revenues from sales to Caterpillar were 8.6%, 9.4%, and
9.1% of CILCO's total operating revenue for 1995, 1994 and 1993,
respectively. See CILCO's Consolidated Statements of Segments of
Business under Item 8. Financial Statements and Supplementary Data.
FRANCHISES
CILCO negotiates franchise agreements which authorize it to provide
utility services to the communities in its service area. The franchises
are for various terms, usually 25 to 50 years. Based on past
experience, CILCO anticipates that as franchises expire new franchises
will be granted in the normal course of business.
COMPETITION
CILCO, as a regulated public utility, has an obligation to provide
service to retail customers within its defined service territory; thus,
CILCO is not currently in competition with other public utilities for
retail electric or gas customers in these areas. However, electricity
and natural gas compete with other forms of energy available to
customers. For example, within the City of Springfield, CILCO's natural
gas business competes with the City's municipal electric system to
provide customer energy needs.
During 1995, CILCO continued to transport gas purchased by commercial
and industrial customers directly from producers and marketers. In
1995, approximately $8.9 million of revenue was generated from
transportation services provided to 391 customers. Transportation
arrangements have made it practical for certain industrial customers to
continue to use gas instead of switching to alternate fuels. The amount
of gas transported in the future will depend on a number of factors
including regulatory and legislative action, the relative cost of gas
purchased on the spot market compared to the cost of gas provided by
CILCO and the cost of alternate fuels, and the feasibility of customers
bypassing the CILCO system. Recent legislation passed in Illinois will
exempt qualifying gas transportation customers, beginning January 1,
1996, from paying gross receipts taxes on their purchases of natural gas
supply and interstate transportation from the local gas distribution
company. This legislation will allow CILCO to more effectively compete
with out-of-state gas marketing companies.
To lead the movement toward increased customer choice, CILCO requested
regulatory approval from the ICC in August 1995 to establish two
electric pilot retail competition programs known as Power Quest. The
proposed programs would offer greater choice to a limited number of
customers and provide the opportunity for CILCO and its customers to
participate in a competitive business environment. These programs were
approved by the ICC on March 13, 1996. Approval will also be required
from the FERC.
Refer to the captions "Electric Competition" and "CILCO Electric
Operations" of Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 18 and 21 of CILCORP's 1995
Annual Report to Shareholders, incorporated herein by reference, for
additional discussion of Power Quest and a discussion of other
competitive trends which may affect CILCO's electric operations.
EMPLOYEES
The number of full-time and part-time employees at December 31, 1995,
was 1,540, excluding employees assigned to the Holding Company, QST and
Other Businesses. Of these, 228 power plant employees were represented
by Local 8 of the International Brotherhood of Firemen and Oilers
(IBF&O), and 511 gas and electric department employees were represented
by Local 51 of the International Brotherhood of Electrical Workers
(IBEW).
CILCO'S UNION CONTRACTS
A two-year IBEW contract and a three-year IBF&O contract were both
ratified effective July 1, 1995. Both the IBEW and the IBF&O contracts
provide for annual 3% salary increases during the contracts. As part of
the IBF&O contract, medical benefits may be renegotiated in January
1997.
CILCO'S EARLY RETIREMENT PROGRAMS
As part of a continuing effort to better position itself for competition
in the energy services industry, CILCO offered Voluntary Early
Retirement Programs (programs) to eligible employees in July 1995. The
programs offered to the members of the IBEW and the IBF&O are based upon
agreements made between CILCO and its unions. Another program was
offered to all management and office and technical workers. CILCO had
257 full-time employees who were eligible for these programs. One
hundred and sixty-six accepted the offer, with retirements effective
January 1, 1996. The programs resulted in an after-tax charge of
approximately $7.8 million against fourth quarter 1995 earnings.
Management expects the programs to generate an annual after-tax cost
reduction of approximately $3.4 million beginning in 1996.
BUSINESS OF ESE
ESE is an environmental consulting and engineering firm with additional
capabilities in laboratory analysis and equipment manufacturing. ESE,
through its subsidiaries, also acquires or invests in environmentally
impaired property for remediation and resale. ESE's services are
intended to address the growing concern over the quality of the
environment, the promulgation of numerous complex federal, state and
local environmental regulations and enforcement efforts in support of
environmental laws. As such, ESE's business is affected by the
existence and enforcement of various federal and state statutes and
regulations dealing with the environment and the use, control, disposal
and clean-up of hazardous wastes (see Regulation of ESE's Clients
herein). ESE provides a full-service approach to business, industrial
and governmental clients, commencing with problem identification and
analysis, continuing through regulatory negotiation and engineering, and
concluding with the preparation and implementation of a remediation plan
or final design and construction.
ESE has a wide range of clients in business, industry and government,
including federal agencies, local and state governments, institutional,
commercial and industrial firms and professional service firms. ESE
employs environmental, chemical, geotechnical, civil, mechanical,
structural and transportation engineers; geologists; hydrogeologists;
chemists; biologists; toxicologists; meteorologists; industrial
hygienists; architects; and surveyors. ESE has a nationwide network of
offices with its corporate office in Peoria, Illinois. Presently, ESE
has three major laboratories located in Englewood, Colorado;
Gainesville, Florida; and Peoria, Illinois.
Through its wholly-owned subsidiary, ESE Land Corporation, ESE acquires
or invests in land that is environmentally impaired, and remediates and
then sells this property.
OES, a wholly-owned subsidiary, identifies and remediates unexploded
ordnance and related waste from contaminated sites. Employees of this
subsidiary are primarily former military personnel who have been trained
in unexploded ordnance procedures.
ESE provides services in the following areas:
Air Quality Services: ESE provides ambient air monitoring, source
testing, permitting and licensing emissions inventories; planning and
compliance strategies; dispersion modeling; data management; indoor air
quality; and engineering design/installation.
Analytical Services: ESE provides comprehensive chemical analysis,
field sampling services, and interpretation for environmental,
wastewater and air pollution chemistry, industrial hygiene and
treatability studies. These services include hazardous waste
analysis/characterization for inorganics/organics; trace environmental
analysis for toxics in water, sediments and tissue; acid rain analysis;
analytical methods research and development; priority pollutant
analysis; radiochemical analysis (including radon testing); asbestos
identification and quantification; drinking water characterization;
industrial hygiene analysis; and chemical data information management.
Services are provided to industry, agriculture, commercial firms,
consulting engineers and federal, state and local governmental agencies.
Asbestos Management/Industrial Hygiene/Lead-Based Paint Services: ESE
provides on-site consultation and facility surveys to identify potential
asbestos, industrial hygiene, and lead-based paint problems. ESE's
industrial hygiene staff collects bulk samples of suspect materials,
monitors buildings for contamination, and also provides construction
management/contract administration services, renovation and restoration
services (post-abatement) and health and safety training courses.
Engineering Design: ESE performs a variety of civil engineering
services including highway, street and bridge planning and design,
hydrological hydraulic studies and drainage design, structural analysis
and design foundation engineering, computer-aided drafting and design
services and subdivision design and surveying. ESE provides services
for new building projects, remodeling or additions, and investigations
and evaluations of building deficiencies. ESE also has experience
designing large industrial parks, major highways, waste water treatment
plants and certain types of military installations.
Construction Management: ESE provides turnkey design and construction
services and construction observation services on transportation and
site development projects and infrastructure projects. Using a Design-
Build approach, ESE has implemented major facility improvements for both
industrial and governmental facilities. Services provided by ESE on
these projects included detailed design, selection and purchases of
equipment, selection and hiring of subcontractors to perform the
installation, project scheduling and budgeting, construction
supervision, site safety, start-up and operational assistance.
Environmental Assessment and Toxicology Services: ESE conducts field
and laboratory studies involving chemical migration and transport,
aquatic toxicology and bioassay, ecological and human health risk
assessments, site selection and certification, development of regional
impact studies and environmental impact statements.
Environmental Audit Service: ESE performs operational audits for
clients in industry to verify an operating facility's compliance status
with regulatory requirements, identifies potential liabilities
associated with past waste management practices and identifies methods
for minimizing future waste generation. ESE also performs transactional
audits which focus on the transfer of potential liabilities in real
estate or business transactions.
Environmental Engineering Services: ESE provides environmental
engineering services which include applied research and development,
water and waste characterization, treatability and disposal studies,
process and concept design of treatment and disposal facilities, design
of drinking water treatment and distribution facilities, design of
wastewater/industrial waste treatment and collection facilities,
technical and economic feasibility evaluations, contract operation and
maintenance of water and wastewater treatment facilities, pursuit of
permit approval for water and solid waste-oriented activities and design
of solid waste landfills and recycling facilities.
Hydrogeology: ESE performs subsurface investigations and evaluations
for both geological and engineering studies. Service areas include
hydrogeologic investigations, geophysical studies, soils and materials
testing, aquifer evaluation, well inventories and consumptive use
analysis, saltwater intrusion investigations, leakage-recharge
investigations, well field studies, groundwater pollution
investigations, groundwater supply permitting and groundwater modeling.
Manufacture of Equipment: Through its wholly-owned subsidiary, Keck
Instruments, Inc., ESE designs, assembles, and markets instrumentation
for measuring, monitoring, detecting and sampling groundwater as well as
instruments for mineral exploration and detection, analysis and
subsurface mapping.
Remediation: ESE develops, designs and implements remediation plans at
contaminated sites. ESE has developed and patented an above-ground fixed-
film bioreactor, under the registered trademark PetroClean, which treats
contaminated soil and groundwater in place without excavating and
removing affected soil. ESE also provides remediation services for
contaminated soil and groundwater using a variety of other technologies.
ESE's subsidiary, OES, was formed to provide a single source service for
investigating and remediating former U. S. military bases containing
unexploded artillery, ammunition, explosive waste and debris so the site
may ultimately be converted to alternate uses.
Storage Tank Management Service: ESE provides services for managing
environmental issues related to underground and above-ground storage
tanks. Key service areas range from pre-planning to assessment and
closure of problem sites including site assessments, analytical
services, remediation and risk assessment. ESE's tank management
programs include tank removal, retrofitting, replacement and conversion
of underground systems to above-ground storage.
Surface Water Resources Service: ESE offers characterizations of the
freshwater, estuarine, and oceanic environments; environmental impact
assessments; site selection studies; licensing and permitting studies;
field surveys and monitoring; numerical/physical modeling; technical
analyses; and hydrologic and hydraulic engineering services including
stormwater drainage analysis, floodplain management and receiving water
quality evaluations.
Transportation Engineering: ESE has sited, designed and provided
construction oversight for numerous transportation systems, including
highways and bridges, for state transportation agencies and local
governments. ESE's engineers, planners and scientists work together to
develop alternatives that minimize environmental impacts while
maintaining transportation objectives.
CUSTOMERS
ESE sells its products and services to governmental agencies and public
and private companies. Approximately 46% of ESE's revenue for 1995 was
generated by services performed for federal, state and local
governmental agencies compared to 42% for 1994. No single customer
accounted for more than 5% of ESE's gross revenues for the years ended
December 31, 1995 and 1994.
In 1995, approximately 79% of ESE's revenue was generated from
environmental consulting and engineering services, 16% from laboratory
services, 4% from land remediation and resale and 1% from manufactured
equipment sales.
REGULATION OF ESE'S CLIENTS
The level and nature of ESE's business activity is largely dependent
upon government statutes and regulations relating to the environment.
Significant legislation includes the following:
Clean Air Act of 1970 (CAA): Provisions of the CAA, as amended in 1977
and 1990, authorize the EPA to set maximum acceptable contaminant levels
in the ambient air, to control emissions of certain toxic materials, and
to ensure compliance with air quality standards.
Clean Water Act of 1972, as amended in 1987 (CWA): CWA requires every
state to set water quality standards for each significant body of water
within its boundaries and to ensure attainment and/or maintenance of
those standards. These standards and limitations are enforced in large
part under a nationwide permit program known as the National Pollutant
Discharge Elimination System (NPDES). CWA@s reauthorization by Congress
is anticipated in 1996 or 1997.
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (Superfund or CERCLA): CERCLA is the most significant federal
statute addressing practices involving hazardous substances and imposing
liability for cleaning up contamination in soil and groundwater. This
legislation has four basic provisions: (i) creation of an information
gathering and analysis program which enables federal and state
governments to identify abandoned waste sites and to set priorities for
investigation and response; (ii) granting of federal authority to
respond to hazardous waste emergencies and to clean up hazardous waste
sites; (iii) imposition of liability on persons responsible for disposal
of hazardous substances that may be released into the environment; and
(iv) creation of a federally managed trust fund to pay for the cleanup
of waste sites where a "potentially responsible party" cannot be
identified or where a threat to the environment requires immediate
response. In October 1986, the Superfund Amendments and Reauthorization
Act (SARA) was passed as a five-year extension of the Superfund program.
Title III of SARA, also known as the Emergency Planning and Community
Right-to-Know Act of 1986, established a reporting and notification
system for companies dealing with hazardous chemicals. The Superfund
program was reauthorized in 1990 and was extended without change until
September 30, 1994. CERCLA's reauthorization is anticipated in 1996 or
1997.
Federal Insecticide, Fungicide and Rodenticide Act (FIFRA): FIFRA
regulates the use and manufacture of pesticides and related chemicals.
National Environmental Policy Act of 1970 (NEPA): NEPA requires an
analysis of the environmental impact of any major federal action,
including the issuance of federal environmental permits for industrial
facilities which may significantly affect the quality of the
environment.
National Pollutant Discharge Elimination System (NPDES) Stormwater
Permitting Regulations of 1990: The intent of these regulations, passed
in November 1990, is to control pollution from stormwater discharges
associated with industrial activity and municipal storm sewer systems.
Occupational Safety and Health Act of 1970 (OSHA): Health and safety at
the workplace are regulated under OSHA. OSHA provides for permissible
exposure levels for certain hazardous substances, including asbestos,
and also establishes an enforcement mechanism for these and other health
and safety standards.
Resource Conservation and Recovery Act of 1976 (RCRA): While Superfund
seeks to remedy the damage caused by inactive or abandoned waste sites,
RCRA imposes comprehensive regulation of the management of hazardous
waste at active facilities. RCRA and the regulations thereunder
establish a comprehensive "cradle to grave" regulatory program
applicable to hazardous waste and impose requirements for performance
testing and recordkeeping for any person generating, transporting,
treating, storing, or disposing of more than the specified minimum
levels of hazardous waste. In November 1984, RCRA was amended by the
Hazardous and Solid Waste Amendments, which extend RCRA to most
industrial and commercial activities in the nation. In addition, RCRA
requires that underground storage tanks be identified and inspected, and
those found to be leaking must be cleaned up. RCRA's reauthorization by
Congress has been postponed through 1996. Legislative actions continue
to evolve through regulatory changes such as risk-based corrective
actions.
Safe Drinking Water Act, as amended in 1986 (SDWA): The SDWA affects
numerous public water supplies. Under this Act, the EPA must establish
primary drinking water standards.
Toxic Substances Control Act of 1976 (TSCA): TSCA authorizes the EPA to
gather information relating to the risks posed by chemicals and to
regulate the use and disposal of asbestos and polychlorinated biphenyls.
State and Local Regulations: In addition to federal statutes and
regulations, numerous state and local statutes and regulations relating
to environmental risks impose additional environmental standards on
ESE's customers.
REGULATION OF ESE
The environmental statutes and regulations described above primarily
affect ESE's clients, and thus have a significant impact on the volume
of ESE's business activity and specific types of services that ESE
provides to its clients. These environmental statutes and regulations
also govern the manner in which ESE performs services for its clients.
ESE must comply with specific worker protection requirements and other
health and safety standards. These standards include taking steps to
limit exposure to asbestos and chemical substances in the workplace.
ESE also must comply with regulations pertaining to the disposal of
certain hazardous chemicals and substances pursuant to guidelines
established under federal and state law. Among those substances are
chemicals used in ESE's laboratory processes as well as materials
removed from the properties and facilities of its clients. Disposal
costs for these materials, and legal compliance costs generally for ESE,
have risen steadily in recent years and are expected to continue to
increase.
Management believes that the degree of enforcement of environmental
regulations at the federal, state and local level will continue to
affect the levels of business of ESE and its clients.
COMPETITION
The market for ESE's consulting services is highly competitive, and ESE
is subject to competition with respect to all of the services it
provides. ESE competes primarily on the basis of quality of service,
expertise and, to a lesser extent, price. ESE's competitors range from
small local firms to major national companies. No single entity
currently dominates the environmental consulting and engineering
services marketplace.
In February 1990, the Company paid Hunter $2 million for a five-year non-
compete agreement. Under the terms of this agreement, Hunter agreed not
to compete in the environmental consulting businesses conducted by the
companies acquired by CILCORP. Hunter also agreed not to solicit
employees or customers of the acquired businesses or represent itself as
being engaged in the businesses conducted by these companies. This non-
compete agreement expired in February 1995.
SUBCONTRACTORS
Because of the nature of the projects in which ESE is involved, ESE
often subcontracts a portion of its projects to other contractors in
order to utilize their expertise, equipment and experience in areas
where ESE may lack the ability to complete the entire project. For
example, because ESE does not have the necessary equipment to perform
drilling services in all parts of the country, such work may be
subcontracted to local contractors. In addition, contracts which ESE
has with federal, state and local governmental agencies may require, as
a matter of law, that on a particular job ESE hire a certain percentage
of minority-owned subcontractors.
GOVERNMENT CONTRACTS
Many of ESE's contracts with governmental agencies are cost-plus, based
on a combination of labor cost, overhead cost and allowable fee.
Overhead rates are estimated at the time of contract negotiations.
Following the completion of a contract, actual overhead is determined
and the difference is reimbursed to the government or paid to ESE within
the limits of the contract. Although ESE enjoys a good working
relationship with the governmental agencies for which it performs these
services, these contracts may be subject to renegotiation of profits or
termination at the election of the government agency.
PATENTS AND TRADEMARK PROTECTION
ESE has applied for or been assigned certain patents or patent rights.
ESE believes that its technical expertise, field experience,
understanding of regulatory requirements and implementation of
technological advances will continue to provide opportunities for ideas
to develop which may lead to patents; however, research and development
is not currently significant to ESE's operations.
POTENTIAL LIABILITIES AND INSURANCE
ESE is exposed to risk of financial loss during its normal course of
business in a variety of ways typically associated with an environmental
and engineering consulting business, including: work-related injury or
illness of employees or third parties; damage to property in ESE's
control during the course of a project; damage to ESE's property; repair
or rectification costs resulting from failure to detect, analyze, or
measure pollutants, asbestos or other toxic substances; repair or
rectification costs due to faulty design, workmanship, or liability
resulting from ESE's construction or design activities; failure to
perform or delay in project completion; and claims by third parties for
alleged pollution or contamination damage. Also, ESE assumes contingent
liabilities arising out of its need to exercise care in the selection
and supervision of subcontractors on various projects. Since ESE
derives revenues from work involving hazardous materials, toxic wastes
and pollutants, potential losses may surface many years after a project
is completed.
These risks, along with enforcement of environmental regulations and
increasing public awareness regarding environmental issues and
responsibilities, make it mandatory that ESE maintain a sound risk
management and insurance program.
ESE carries professional liability insurance which covers design errors
and omissions resulting from its typical operations. This policy is
extended to include pollution liability losses. Clients may also be
named as additional insured parties for specific projects. The current
policy, effective April 1, 1995, has a limit of $8 million, with the
first $3 million of coverage provided by ESE's wholly-owned captive
insurance subsidiary, National Professional Casualty Co. (Captive) and
the next $5 million of coverage provided by a non-affiliated company.
Captive is capitalized by the combination of an ESE letter of credit and
cash. Captive does not transfer risk and is not reinsured; CILCORP does
not provide credit support to Captive. The policies cover activities in
which ESE is typically involved. Accordingly, in the event of a serious
spill or loss resulting from a design error or omission, ESE faces
potential liability for the self-insured retention portion of a claim,
as well as any amounts in excess of $8 million. ESE's professional and
pollution liability insurance coverage has a standard term of one year.
ESE expects to renew these policies annually in the normal course of
business. The professional and pollution liability insurance policies
include standard industry exclusions for: dishonesty, discrimination,
warranties and guarantees, punitive damages, intentional non-compliance
with government regulations or statutes, nuclear energy, war and bodily
injury from the specification, installation, transportation, storage or
disposal of asbestos.
ESE also carries insurance policies covering worker's compensation,
general liability and auto and property damage claims. The worker's
compensation policy provides statutory average limits. It is a loss
sensitive program under which insurance premiums vary according to
actual claims paid. General liability and auto policies provide full
insurance coverage with minor deductible amounts. Also, performance and
payment bonds may be provided for specific projects if required by
clients. To supplement its insurance policies, ESE attempts with its
clients to limit and/or transfer its risk contractually.
ESE believes it operates in a safe manner and purchases insurance to
protect against loss and maintain competitiveness in the marketplace;
however, its entire potential liability may not be covered by insurance.
Also, the total cost of a potential claim could exceed ESE's policy
limits.
EMPLOYEES
At December 31, 1995, ESE employed 1,099 full-time, part-time and on-
call employees, many of whom have advanced degrees in a variety of
technical disciplines. ESE believes its relations with its employees
are good. No ESE employees are represented by a labor union.
BUSINESS OF QST
QST Enterprises Inc. was formed in December 1995 to facilitate CILCORP's
expansion into non-regulated energy and related services businesses.
QST will provide total energy services -- buying, managing, and
controlling energy -- for customers who are able to choose their energy
supplier.
The initial focus of QST will be to compete against other suppliers when
a portion of CILCO's service territory is opened to competition through
CILCO's Power Quest pilot programs (refer to the caption "Electric
Competition" of Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 18 of CILCORP's
1995 Annual Report to Shareholders which is incorporated herein by
reference). Power Quest will provide a means for certain customers to
begin buying electricity from suppliers other than CILCO in 1996. QST
also plans to compete against other energy suppliers to provide energy
to customers of other utilities that will offer similar retail
competition pilot programs in their service territories. QST will also
provide a portfolio of non-regulated energy-related products and
services to customers, and will supplement its competencies through
selected acquisitions aimed at broadening its customer base.
At December 31, 1995, there were 14 full-time employees assigned to QST.
OTHER BUSINESSES
CIM
The investment portfolio of CIM at December 31, 1995, and December 31,
1994, is shown in the following table:
<TABLE>
<CAPTION>
Type of Investment
At December 31 1995 1994
(In thousands)
<S> <C> <C>
Equity in leveraged leases $127,140 $120,961
Cash and temporary cash
investments 124 76
Investment in Energy Investors Fund 1,591 1,691
Investment in affordable housing
funds 1,500 10
Other 67 91
-------- --------
Total $130,422 $122,829
======== ========
</TABLE>
At December 31, 1995, CIM held equity investments in seven leveraged
leases through its wholly-owned subsidiaries, CILCORP Lease Management
Inc. (CLM), CIM Air Leasing Inc. and CIM Leasing Inc. According to the
terms of some of the lease agreements, under certain circumstances,
subsidiaries of CIM may be obligated to incur additional non-recourse
debt to finance the cost of certain alterations, additions, or
improvements required by the lessee.
CIM, through its wholly-owned subsidiary CIM Energy Investments Inc.,
has a net investment of $1.6 million in the Energy Investors Fund,
L.P.(Fund), representing a 3.1% interest in the Fund at December 31,
1995. The Fund invests in non-regulated, non-utility facilities for the
production of electricity or thermal energy. The equity method of
accounting is used for the investment.
CIM is a limited partner in three affordable housing portfolios. The
ownership interests in these partnerships range from 3.4% to 6.4% at
December 31, 1995. The cost method of accounting is used for these
investments.
HOLDING COMPANY
The Company issued 299,850 shares of common stock in 1995 through the
CILCO Employees' Savings Plan (ESP) and the CILCORP Automatic
Reinvestment and Stock Purchase Plan (DRIP). These shares were issued
at an average price of $37.83 per share for total proceeds of $11.3
million (refer to the caption "Capital Resources and Liquidity" of Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations on page 17 of CILCORP's 1995 Annual Report to
Shareholders which is incorporated herein by reference.) Depending on
market conditions, the Company may issue additional shares of common
stock through these plans or through a conventional stock offering.
CVI
In 1995, CVI invested an additional $138,000 in Peoria Medical Research
Corporation doing business as Health Advance Institute - Medical
Research Centers (Health Advance Institute). Health Advance Institute's
objective is to create a clinical research organization which will be
paid by pharmaceutical firms to administer clinical trials for new
products. In March of 1995, CVI sold its $500,000 investment in
preferred stock of Multilink, Inc. for approximately $872,000, which
included dividends received by CVI of approximately $372,000.
CVI's investment in CESI, its wholly-owned subsidiary, is approximately
$500,000. CESI's primary business is the sale of carbon monoxide
detectors to utilities for resale to their customers.
EMPLOYEES
At December 31, 1995, there were 32 full-time employees assigned to
CILCORP, CVI and CIM.
Item 2. Properties
CILCO
CILCO owns and operates two steam-electric generating plants and two
combustion turbine-generators. These facilities had an available summer
capability of 1,152 MW in 1995.
One of the two combustion turbine-generators is a cogeneration plant at
a MWG facility in Pekin, Illinois. The plant, which became operational
during 1995, produces steam for MWG and also generates electricity for
distribution to CILCO's customers. This turbine-generator has an
available summer capability of 16 MW. (See Electric Service under Item
1. Business.)
The major generating facilities of CILCO (representing 96.0% of CILCO's
available summer generating capability projected for 1995), all of which
are fueled with coal, are as follows:
<TABLE>
<CAPTION>
Available Summer
Capability (MW)
Station & Unit Installed Actual 1995
<S> <C> <C>
Duck Creek
Unit 1 1976 366
E. D. Edwards
Unit 1 1960 117
Unit 2 1968 262
Unit 3 1972 361
</TABLE>
CILCO's transmission system includes approximately 285 circuit miles
operating at 138,000 volts, 48 circuit miles operating at 345,000 volts
and 14 principal substations with an installed capacity of 3,364,200
kilovolt-amperes.
The electric distribution system includes approximately 6,212 miles of
overhead pole and tower lines and 1,976 miles of underground
distribution cables. The distribution system also includes 105
substations with an installed capacity of 2,007,860 kilovolt-amperes.
The gas system includes approximately 3,490 miles of transmission and
distribution mains.
CILCO has an underground gas storage facility located about ten miles
southwest of Peoria near Glasford, Illinois. The facility has a present
recoverable capacity of approximately 4.5 BCF. An additional storage
facility near Lincoln, Illinois, has a present recoverable capacity of
approximately 5.2 BCF.
ESE
ESE owns approximately 53 acres of land in Gainesville, Florida,
containing 118,000 square feet of offices, laboratory and other space.
In 1995 ESE expanded its Gainesville, Florida, laboratory by
approximately 8,000 square feet. In Peoria, Illinois, ESE owns
approximately 27,000 square feet of offices, laboratory and other space
and leases approximately 21,000 square feet of additional space for
offices. ESE and its subsidiaries lease additional facilities for
offices, laboratories and warehouse space in 32 cities throughout the
United States. ESE believes its facilities are suitable and adequate
for its current businesses and does not expect to make any material
acquisitions of real property in the near future, other than the
purchases of land for remediation and resale through its subsidiaries.
Refer to the caption "Capital Resources and Liquidity - ESE" of Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operation on page 18 of CILCORP's 1995 Annual Report to shareholders
which is incorporated herein by reference.
Item 3. Legal Proceedings
Reference is made to the captions "Environmental Matters" and "Gas
Pipeline Supplier Transition Costs" of Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations of
CILCORP's 1995 Annual Report to Shareholders incorporated herein by
reference, for certain pending legal proceedings and/or proceedings
known to be contemplated by governmental authorities. Reference is also
made to Note 9 - Rate Matters, included herein. Pursuant to CILCO's By-
Laws, CILCO has advanced legal and other expenses actually and
reasonably incurred by employees, and former employees, in connection
with the investigation of CILCO's Springfield gas operations described
in Note 9 - Rate Matters.
On July 6, 1994, a lawsuit was filed against CILCO in a United States
District Court by the current property owner, Vector-Springfield
Properties, Ltd., seeking damages related to alleged coal tar
contamination from a gas manufacturing plant formerly located at the
site which was owned but never operated by CILCO. The lawsuit seeks cost
recovery of more than $3 million related to coal tar investigation
expenses, operating losses and diminution of market value. CILCO
intends to vigorously defend these claims. For a further discussion of
gas manufacturing plant sites refer to the caption "Environmental
Matters" of Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 20 of CILCORP's 1995 Annual
Report to Shareholders which is incorporated herein by reference.
Management cannot currently determine the outcome of this litigation,
but does not believe it will have a material adverse impact on CILCO's
financial position or results of operations.
The Company and its subsidiaries are subject to certain claims and
lawsuits in connection with work performed in the ordinary course of
their businesses. Except as otherwise disclosed or referred to in this
section, in the opinion of management, all such claims currently pending
either will not result in a material adverse effect on the financial
position and results of operations of the Company or are adequately
covered by: (i) insurance; (ii) contractual or statutory
indemnification, or (iii) reserves for potential losses.
Item 4. Submission of Matters to a Vote of Security Holders
CILCORP
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
CILCO
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
<TABLE>
<CAPTION>
Executive Officers of CILCORP
Age at Positions Held During Initial
Name 3/31/96 Past Five Years Effective Date(1)
<S> <C> <C> <C>
R. O. Viets 52 President and Chief
Executive Officer February 1, 1988
J. G. Sahn 49 Vice President, General March 1, 1994
Counsel and Secretary
Vice President
and General Counsel February 1, 1989
M. D. Austin(2) 37 Treasurer and
Assistant Secretary April 25, 1995
Director - Corporate
Investments April 1, 1990
J. L. Barnett(3) 37 Controller April 1, 1995
Tax Manager April 1, 1992
Director - Financial
Analysis February 1, 1989
<FN>
Notes:
(1) The term of each executive officer extends to the organization
meeting of CILCORP's Board of Directors following the next annual
election of Directors.
(2) R. J. Sprowls served as Treasurer and Assistant Secretary from
October 1, 1990, until April 1, 1995 when he became CILCO Vice
President - Strategic Services Division. Effective January 29,
1996, Mr. Sprowls became Assistant to the President and Chief
Executive Officer of CILCORP.
(3) T. D. Hutchinson served as Controller from February 1, 1988, until
April 1, 1995, when he became CILCO Director - Competitive
Strategy. Mr. Hutchinson is currently Director of Planning and
Administration for QST Enterprises Inc., a subsidiary of CILCORP.
</TABLE>
<TABLE>
<CAPTION>
Executive Officers of CILCO
Age as of Positions Held During Initial
Name 3/31/96 Past Five Years(1) Effective Date(2)
<S> <C> <C> <C>
R. O. Viets 52 Chairman of the Board
and Chief Executive
Officer April 1, 1995(3)
J. F. Vergon 48 President and Chief
Operating Officer January 29, 1996(4)
Group President,
Gas Operations April 1, 1995
Vice President October 1, 1986
M. J. Bowling 49 Vice President April 1, 1995(5)
S. A. Cisel 42 Vice President April 1, 1995(5)
S. R. Corwell 40 Vice President April 1, 1995(5)
T. S. Romanowski 46 Vice President October 1, 1986(5)
W. R. Dodds 41 Treasurer and Manager
of Treasury Department October 1, 1990
Controller and Manager
of Accounting February 1, 1988
R. L. Beetschen 50 Controller and Manager
of Accounting October 1, 1990
Supervisor - General
Accounting May 1, 1988
J. G. Sahn 49 Secretary March 1, 1993
<FN>
Notes:
(1) The officers listed have been employed by CILCO in executive or
management positions for the past five years except for Mr. Viets,
Mr. Shay, Mr. Sprowls and Mr. Sahn. Mr. Viets previously served
as Chairman of the Board from February 1, 1988 to April 23, 1991.
He also serves as President and Chief Executive Officer of CILCO's
parent, CILCORP Inc., a position he has held since February 1,
1988. Mr. Shay was Vice President and Chief Financial Officer of
CILCORP Inc., from August 15, 1988, through December 31, 1992. Mr.
Sprowls was Treasurer and Assistant Secretary of CILCORP Inc. from
October 1, 1990 to March 31, 1995. Mr. Sahn also serves as Vice
President and General Counsel of CILCORP Inc., a position he has
held since February 1, 1989. He was elected Secretary and
Assistant Treasurer of CILCORP effective March 1, 1994.
(2) The term of each executive officer extends to the organization
meeting of CILCO's Board of Directors following the next annual
election of Directors.
(3) R. W. Slone retired from CILCO April 1, 1995. He was replaced by
R. O. Viets as Chairman and Chief Executive Officer.
(4) W. M. Shay and J. F. Vergon became Group Presidents of Electric
Operations and Gas Operations, respectively, on April 1, 1995.
Effective January 29, 1996, W. M. Shay resigned as Group President
to become President and Chief Operating Officer of QST Enterprises
Inc., also a subsidiary of CILCORP. J. F. Vergon was elected
President and Chief Operating Officer of CILCO on January 29, 1996.
He also serves as Chairman of the Board of CILCORP Investment
Management Inc.
(5) M. J. Bowling, S. A. Cisel, S. R. Corwell and T. S. Romanowski head
Distribution; Rates, Regulation and Legislation; Sales and Customer
Service; and Finance, respectively. T. S. Romanowski also serves
as CILCO's Principal Financial Officer. T. S. Kurtz, a former Vice
President of the Company resigned effective November 8, 1995.
R. J. Sprowls, also a former Vice President, resigned January 29,
1996 to become Assistant to the President and Chief Executive
Officer of CILCORP.
</TABLE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
CILCORP
The Company's common stock is listed on the New York and Chicago Stock
Exchanges (ticker symbol CER). At December 31, 1995, there were 13,976
holders of record of the Company's common stock. The following table
sets forth, for the periods indicated, the dividends per share of common
stock and the high and low prices of the common stock as reported in New
York Stock Exchange Composite Transactions.
<TABLE>
<CAPTION>
Quarter
1994 First Second Third Fourth
<S> <C> <C> <C> <C>
Price Range
High $37 1/2 $34 7/8 $31 $32 1/2
Low $33 $28 7/8 $28 3/4 $29 1/4
Dividends Paid $ .615 $ .615 $ .615 $ .615
1995
Price Range
High $37 $37 7/8 $38 $44 3/4
Low $31 7/8 $35 3/8 $34 $37 1/2
Dividends Paid $ .615 $ .615 $ .615 $ .615
<FN>
The number of common shareholders of record as of March 12, 1996, was
13,697.
</TABLE>
CILCO
CILCO's common stock is not traded on any market. As of March 12, 1996,
13,563,871 shares of CILCO's Common Stock, no par value, were issued,
and outstanding and privately held, beneficially and of record, by
CILCORP Inc.
CILCO's requirement for retained earnings before common stock dividends
may be paid is described in Note 5 of CILCO's Notes to the Consolidated
Financial Statements contained in Item 8. Financial Statements and
Supplementary Data.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
CILCORP INC.
Selected Financial Data
<CAPTION>
For the Years Ended December 31
1995 1994 1993 1992 1991
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue $ 614,740 $ 605,139 $ 584,511 $ 581,225 $ 590,165
Net income available
for common
stockholders 38,582 32,586 33,583 32,097 39,656
Earnings per share 2.93 2.50 2.60 2.48 3.14
Total assets 1,276,071 1,238,384 1,198,440 1,184,916 1,147,978
Long-term debt 344,113 326,695 325,711 307,628 324,998
Dividends declared
per common share 2.46 2.46 2.46 2.46 2.46
</TABLE>
<TABLE>
Central Illinois Light Company
Selected Financial Data
<CAPTION>
For the Years Ended December 31
1995 1994 1993 1992 1991
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenue $ 477,744 $ 461,370 $453,878 $433,739 $454,602
Net income available
for common
stockholders 39,099 29,507 33,635 31,195 39,790
Total assets 1,059,991 1,019,109 988,325 965,691 942,634
Long-term debt 298,397 278,359 278,321 257,361 268,006
Ratio of earnings to
fixed charges 3.3 3.0 3.2 3.1 3.7
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information under the heading Management's Discussion and Analysis
of Financial Condition and Results of Operations on pages 16 through 25
of CILCORP's 1995 Annual Report to Shareholders is incorporated herein
by reference.
Item 8.: Financial Statements and Supplementary Data
The financial statements on pages 27 through 42 and Management's
Report to the Stockholders of CILCORP Inc. on page 26 of CILCORP's
1995 Annual Report to Shareholders are incorporated herein by
reference.
Index to Financial Statements:
CILCORP
Page
Report of Independent Public Accountants on
Schedules 35
CILCO
Management's Report 36
Report of Independent Public Accountants 37
Consolidated Statements of Income 38
Consolidated Balance Sheets 39-40
Consolidated Statements of Cash Flows 41-42
Statements of Segments of Business 43-44
Consolidated Statements of Retained Earnings 45
Notes to Consolidated Financial Statements 46-59
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To CILCORP Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in CILCORP
Inc.'s Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 2, 1996.
Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The financial statement schedules listed
in Item 14(a)2 are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements.
These 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 LLP
Chicago, Illinois
February 2, 1996
<PAGE>
MANAGEMENT'S REPORT
The accompanying financial statements and notes for CILCO and its
consolidated subsidiaries have been prepared by management in accordance
with generally accepted accounting principles. Estimates and judgments
used in developing these statements are the responsibility of
management. Financial data presented throughout this report is
consistent with these statements.
CILCO maintains a system of internal accounting controls which
management believes is adequate to provide reasonable assurance as to
the integrity of accounting records and the protection of assets. Such
controls include established policies and procedures, a program of
internal audit and the careful selection and training of qualified
personnel.
The financial statements have been audited by CILCO's independent public
accountants, Arthur Andersen LLP. Their audit was conducted in
accordance with generally accepted auditing standards and included an
assessment of selected internal accounting controls only to determine
the scope of their audit procedures. The report of the independent
public accountants is contained in this Form 10-K annual report.
The Audit Committee of the CILCORP Inc. Board of Directors, consisting
solely of outside directors, meets periodically with the independent
public accountants, internal auditors and management to review
accounting, auditing, internal accounting control and financial
reporting matters. The independent public accountants have direct
access to the Audit Committee. The Audit Committee meets separately
with the independent public accountants.
J. F. Vergon
President and Chief
Operating Officer
T. S. Romanowski
Vice President and Chief
Financial Officer
R. L. Beetschen
Controller and Manager of
Accounting
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Central Illinois Light Company:
We have audited the accompanying consolidated balance sheets of Central
Illinois Light Company (an Illinois corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
income, cash flows, segments of business, and retained earnings for each
of the three years in the period ended December 31, 1995. These
financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule 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 Central
Illinois Light Company and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule
listed in Item 14(a)2 is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a required part of
the basic financial statements. This financial statement schedule has
been subjected to the auditing procedures applied in our audits of the
basic financial statements and, in our opinion, fairly states 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 LLP
Chicago, Illinois
February 2, 1996
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Statements of Income
<CAPTION>
For the Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Operating Revenues:
Electric $326,198 $313,085 $303,124
Gas 151,546 148,285 150,754
------- -------- --------
Total Operating Revenues 477,744 461,370 453,878
------- -------- --------
Operating Expenses:
Cost of Fuel 94,235 97,184 92,112
Cost of Gas 68,948 78,696 79,022
Purchased Power 12,353 9,433 8,754
Other Operation Expenses 94,519 81,143 77,125
Maintenance 31,037 28,174 30,648
Depreciation and Amortization 56,765 54,349 53,023
Income Taxes 23,267 21,489 22,226
State and Local Taxes on Revenue 20,867 20,450 19,417
Other Taxes 12,205 11,945 11,364
------- -------- --------
Total Operating Expenses 414,196 402,863 393,691
------- -------- --------
Operating Income 63,548 58,507 60,187
------- -------- --------
Other Income and Deductions:
Cost of Equity Funds Capitalized 97 530 (23)
CILCO-owned Life Insurance, Net (623) (667) (516)
Disallowed Plant Cost -- (7,523) --
Income Tax Reduction for Disallowed Plant Cost -- 2,982 --
Other, Net 2,581 (1,051) 262
------- -------- --------
Total Other Income and (Deductions) 2,055 (5,729) (277)
------- -------- --------
Income Before Interest Expenses 65,603 52,778 59,910
------- -------- --------
Interest Expenses:
Interest on Long-term Debt 20,242 19,221 19,753
Cost of Borrowed Funds Capitalized (417) (510) (222)
Other 3,380 1,580 2,701
------- -------- --------
Total Interest Expenses 23,205 20,291 22,232
------- -------- --------
Net Income 42,398 32,487 37,678
------- -------- --------
Dividends on Preferred Stock 3,299 2,980 4,043
------- -------- --------
Net Income Available for Common Stock $ 39,099 $ 29,507 $ 33,635
======= ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Balance Sheets
Assets
<CAPTION>
As of December 31 1995 1994
(In thousands)
<S> <C> <C>
Utility Plant, At Original Cost:
Electric $1,142,945 $1,092,382
Gas 379,985 355,270
---------- ----------
1,522,930 1,447,652
Less - Accumulated Provision for Depreciation 682,574 653,571
---------- ----------
840,356 794,081
Construction Work in Progress 44,749 71,105
Plant Acquisition Adjustments, Net of
Amortization 2,642 3,355
---------- ----------
Total Utility Plant 887,747 868,541
---------- ----------
Other Property and Investments:
Cash Surrender Value of Company-owned Life
Insurance (Net of Related Policy Loans of
$33,211 in 1995 and $28,831 in 1994) 1,924 1,637
Other 1,623 1,041
---------- ----------
Total Other Property and Investments 3,547 2,678
---------- ----------
Current Assets:
Cash and Temporary Cash Investments 16,556 629
Receivables, Less Reserves of $650 and $600 42,312 30,543
Accrued Unbilled Revenue 28,891 22,340
Fuel, at Average Cost 11,596 14,765
Materials and Supplies, at Average Cost 16,541 16,731
Gas in Underground Storage, at Average Cost 13,592 17,484
Prepaid Taxes 7,978 2,103
Other 10,300 7,217
---------- ----------
Total Current Assets 147,766 111,812
---------- ----------
Deferred Debits:
Unamortized Loss on Reacquired Debt 6,029 6,486
Unamortized Debt Expense 2,374 2,212
Prepaid Pension Cost 536 13,312
Other 11,992 14,068
---------- ----------
Total Deferred Debits 20,931 36,078
---------- ----------
Total Assets $1,059,991 $1,019,109
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Balance Sheets
Capitalization and Liabilities
<CAPTION>
As of December 31 1995 1994
(In thousands)
<S> <C> <C>
Capitalization:
Common Shareholder's Equity:
Common Stock, No Par Value; Authorized
20,000,000 Shares; Outstanding 13,563,871
Shares $ 185,661 $ 185,661
Retained Earnings 140,814 122,125
---------- ----------
Total Common Shareholder's Equity 326,475 307,786
Preferred Stock Without Mandatory Redemption 44,120 44,120
Preferred Stock With Mandatory Redemption 22,000 22,000
Long-term Debt 298,397 278,359
---------- ----------
Total Capitalization 690,992 652,265
---------- ----------
Current Liabilities:
Current Maturities of Long-Term Debt 16,000 --
Notes Payable 24,600 23,400
Accounts Payable 40,483 47,536
Accrued Taxes 5,917 6,387
Accrued Interest 8,508 8,477
PGA Over-Recoveries 1,987 2,142
Level Payment Plan 1,870 4,155
Other 6,418 6,809
---------- ----------
Total Current Liabilities 105,783 98,906
---------- ----------
Deferred Liabilities and Credits:
Accumulated Deferred Income Taxes 144,378 151,856
Regulatory Liability, Net 59,482 59,997
Investment Tax Credits 24,485 26,178
Capital Lease Obligation 3,025 2,665
Other 31,846 27,242
---------- ----------
Total Deferred Liabilities and Credits 263,216 267,938
---------- ----------
Total Capitalization and Liabilities $1,059,991 $1,019,109
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Before Preferred Dividends $ 42,398 $ 32,487 $ 37,678
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Disallowed Plant Costs -- 7,522 --
Income Tax Reduction for Disallowed Plant
Costs -- (2,982) --
Depreciation and Amortization 57,478 55,062 53,734
Deferred Taxes, Investment Tax Credits and
Regulatory Liability, Net (9,687) (2,006) (1,512)
Decrease (Increase) in Accounts Receivable (11,769) 3,654 1,513
Decrease (Increase) in Fuel, Materials and
Supplies, and Gas in Underground Storage 7,251 565 (5,609)
Decrease (Increase) in Unbilled Revenue (6,551) 2,771 (320)
Increase in Accounts Payable (7,053) 6,565 6,098
Increase in Accrued Taxes and Interest (439) 867 3,304
Capital Lease Payments 590 478 478
Decrease (Increase) in Other Current Assets (8,958) 193 (272)
Increase (Decrease) in Other Current
Liabilities (2,831) 1,192 (6,398)
(Increase) Decrease in Other Non-Current
Assets 17,025 (1,631) 3,050
Increase in Other Non-Current Liabilities 3,424 2,319 81
-------- -------- --------
Net Cash Provided by Operating Activities 80,878 107,056 91,825
-------- -------- --------
Cash Flows from Investing Activities:
Capital Expenditures (69,412) (90,873) (72,580)
Cost of Equity Funds Capitalized (97) (530) 23
Other (8,462) (7,308) 2,581
-------- -------- --------
Net Cash Used in Investing Activities (77,971) (98,711) (69,976)
-------- -------- --------
Cash Flows from Financing Activities:
Common Dividends Paid (20,056) (16,027) (15,878)
Preferred Dividends Paid (3,299) (2,980) (4,043)
Long-Term Debt Issued 35,765 175 107,269
Preferred Stock Issued -- -- 46,006
Long-Term Debt Retired -- -- (97,756)
Preferred Stock Retired -- -- (46,051)
Payments on Capital Lease Obligation (590) (478) (478)
(Decrease) Increase in Short-Term Borrowing 1,200 11,000 (12,100)
-------- -------- --------
Net Cash Provided to (Used in) Financing
Activities 13,020 (8,310) (23,031)
-------- -------- --------
Net Increase (Decrease) in Cash and Temporary
Cash Investments 15,927 35 (1,182)
Cash and Temporary Cash Investments at Beginning
of Year 629 594 1,776
-------- -------- --------
Cash and Temporary Cash Investments at
December 31 $ 16,556 $ 629 $ 594
======== ======= =======
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (Net of Cost of Borrowed Funds
Capitalized) $ 22,145 $ 20,809 $20,271
Income Taxes 35,954 24,155 13,198
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Statements of Segments of Business
<CAPTION>
Operating Information
For the Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Utility Segment:
Electric Operations
Revenue $326,198 $313,085 $303,124
Expenses 277,429 263,462 253,995
-------- -------- --------
Operating Income 48,769 49,623 49,129
Income Taxes 17,975 19,925 17,542
-------- -------- --------
Operating Income Before
Income Taxes $ 66,744 $ 69,548 $ 66,671
======== ======== ========
Depreciation and
Amortization $ 40,665 $ 39,130 $ 38,337
Capital Expenditures $ 45,466 $ 66,537 $ 41,880
Gas Operations
Revenue $151,546 $148,285 $150,754
Expenses 136,767 139,401 139,696
-------- -------- --------
Operating Income 14,779 8,884 11,058
Income Taxes 5,292 1,564 4,684
-------- -------- --------
Operating Income Before
Income Taxes $ 20,071 $ 10,448 $ 15,742
======== ======== ========
Depreciation and
Amortization $ 16,100 $ 15,219 $ 14,686
Capital Expenditures $ 24,043 $ 24,867 $ 30,677
</TABLE>
<TABLE>
<CAPTION>
Major Customer for the Years Ended December 31
1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Caterpillar Inc.
Electric Revenue $40,109 12.3% $41,422 13.2% $39,831 13.1%
Gas Revenue 1,022 .7% 1,719 1.2% 1,581 1.0%
------- ----- ------- ---- ------- ----
Total $41,131 8.6% $43,141 9.4% $41,412 9.1%
======= ===== ======= ==== ======= ====
</TABLE>
<TABLE>
<CAPTION>
Utility Identifiable Assets as of December 31
1995 1994 1993
<S> <C> <C> <C>
Electric $ 735,463 $ 718,431 $684,618
Gas 273,428 260,070 259,462
Other Utility Assets* 51,100 40,608 44,245
---------- ---------- --------
Total Utility Assets $1,059,991 $1,019,109 $988,325
========== ========== ========
<FN>
*Other investments, miscellaneous accounts receivable, prepaid assets,
deferred pension costs and unamortized debt, discount and expense.
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Statements of Retained Earnings
<CAPTION>
For the Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Balance Beginning of Year $122,125 $108,645 $ 92,433
Add
Net Income 42,398 32,487 37,678
-------- -------- --------
Total $164,523 $141,132 $130,111
-------- -------- --------
Deduct
Cash Dividends Declared
Preferred Stock
$100 Par Value
4 1/2% Series 501 501 501
4.64% Series 371 371 371
5.85% Series 1,287 1,287 725
7.56% Series -- -- 668
7.72% Series -- -- 686
8.28% Series -- -- 817
Auction Rate Series (rate at
December 31, 1995 was 4.40%) 1,140 821 275
Common Stock, No Par Value 20,056 16,027 15,878
-------- -------- --------
Total Dividends Declared 23,355 19,007 19,921
-------- -------- --------
Capital Stock Expense -- -- 720
Excess of stated value over purchase
price of 135,000 shares 7.72%
Series preferred stock and
150,000 shares 8.28% Series
preferred stock retired in 1993 -- -- 825
Additional Minimum Liability for Non-
Qualified Pension Plan at
December 31, 1995, net of
$233 taxes 354 -- --
-------- ------- --------
23,709 19,007 21,466
-------- -------- ---------
Balance End of Year $140,814 $122,125 $108,645
======== ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE>
CENTRAL ILLINOIS LIGHT COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of CILCO include the accounts
of CILCO and its subsidiaries, CILCO Exploration and Development
Company and CILCO Energy Corporation. CILCO is a subsidiary of
CILCORP Inc. Prior year amounts have been reclassified on a basis
consistent with the 1995 presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
REGULATION
CILCO is a public utility subject to regulation by the Illinois
Commerce Commission and the Federal Energy Regulatory Commission with
respect to accounting matters, and maintains its accounts in
accordance with the Uniform System of Accounts prescribed by these
agencies.
As a regulated public utility, CILCO is subject to the provisions of
Statement of Financial Accounting Standards No. 71, "Accounting for
the Effects of Certain Types of Regulation." Regulatory assets
represent the probable future revenues to CILCO resulting from the
ratemaking action of regulatory agencies. Net regulatory liabilities
are approximately $59.5 million and $60 million at December 31, 1995
and 1994, respectively (see Note 2). At December 31, 1995, and 1994,
the regulatory assets included on the Consolidated Balance Sheets were
as follows:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Included in prepayments and other:
Fuel and gas cost adjustments $ 1,516 $ 3,682
Coal tar remediation cost - estimated
current 1,500 300
Gas transition costs 2,268 1,171
------- -------
Current costs included in
prepayments and other 5,284 5,153
------- -------
Included in other assets:
Coal tar remediation cost, net of
recoveries 4,222 4,993
Gas transition costs 1,656 2,781
Deferred gas costs 3,207 3,895
Unamortized loss on reacquired debt 6,029 6,486
------- -------
Future costs included in other assets 15,114 18,155
------- -------
Total regulatory assets $20,398 $23,308
======= =======
</TABLE>
If a portion of CILCO's operations becomes no longer subject to the
provisions of SFAS 71, a write-off of related regulatory assets and
liabilities would be required, unless some form of transition cost
recovery (refund) continues through rates established and collected
for CILCO's remaining regulated operations. In addition, CILCO would
be required to determine any impairment to the costs recorded for
deregulated plant and inventory assets.
UTILITY OPERATING REVENUES, FUEL COSTS AND COST OF GAS
Electric and gas revenues include service provided but unbilled at
year end. Substantially all electric rates and gas system sales rates
of CILCO include a fuel adjustment clause and a purchased gas
adjustment clause, respectively. These clauses provide for the
recovery of changes in electric fuel costs, excluding coal
transportation, and changes in the cost of gas on a current basis in
billings to customers. CILCO adjusts the cost of fuel and cost of gas
to recognize over or under recoveries of allowable costs. The
cumulative effects are deferred on the Balance Sheets as a current
asset or current liability (see Regulation, above) and adjusted by
refunds or collections through future billings to customers.
CONCENTRATION OF CREDIT RISK
CILCO, as a public utility, must provide service to customers within
its defined service territory and may not discontinue service to
residential customers when certain weather conditions exist. CILCO
continually reviews customers' creditworthiness and requests deposits
or refunds deposits based on that review. At December 31, 1995, CILCO
had net receivables of $42.3 million, of which approximately $5.5
million was due from its major industrial customers.
TRANSACTIONS WITH AFFILIATES
CILCO, which is a subsidiary of CILCORP, incurs certain corporate
expenses such as legal, shareholder and accounting fees on behalf of
CILCORP and its other subsidiaries. These expenses are billed monthly
to CILCORP and its other subsidiaries based on specific identification
of costs except for shareholder-related costs which are based on the
relative equity percentages of CILCORP and its subsidiary
corporations. A return on CILCO assets used by CILCORP and its other
subsidiaries is also calculated and billed monthly. Total billings
to CILCORP and its other subsidiaries amounted to $1.7 million, $2.4
million and $2.3 million in 1995, 1994 and 1993, respectively.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
The allowance, representing the cost of equity and borrowed funds used
to finance construction, is capitalized as a component of the cost of
utility plant. The amount of the allowance varies depending on the
rate used and the size and length of the construction program. The
Uniform System of Accounts defines AFUDC, a non-cash item, as the net
cost for the period of construction of borrowed funds used for
construction purposes and a reasonable rate upon other funds when so
used. On the income statement, the cost of borrowed funds capitalized
is reported as a reduction of total interest expense and the cost of
equity funds capitalized is reported as other income. In accordance
with the FERC formula, the composite AFUDC rates used in 1995, 1994
and 1993 were 6.7%, 8.0% and 3.5%, respectively.
DEPRECIATION AND MAINTENANCE
Provisions for depreciation of utility property for financial
reporting purposes are based on straight-line composite rates. The
annual provisions for utility plant depreciation, expressed as a
percentage of average depreciable utility property, were 3.8% and 4.6%
for electric and gas, respectively, for each of the last three years.
Utility maintenance and repair costs are charged directly to expense.
Renewals of units of property are charged to the utility plant
account, and the original cost of depreciable property replaced or
retired, together with the removal cost less salvage, is charged to
the accumulated provision for depreciation.
INCOME TAXES
CILCO follows a policy of comprehensive interperiod income tax
allocation. Investment tax credits related to utility property have
been deferred and are being amortized over the estimated useful lives
of the related property. CILCORP and its subsidiaries file a
consolidated federal income tax return. Income taxes are allocated to
the individual companies based on their respective taxable income or
loss.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CILCO considers all highly liquid debt instruments purchased with a
remaining maturity of three months or less to be cash equivalents for
purposes of the Consolidated Statements of Cash Flows.
CILCO-OWNED LIFE INSURANCE POLICIES
The following amounts related to CILCO-owned life insurance
contracts, issued by one major insurance company, are recorded on the
Consolidated Balance Sheets:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Cash surrender value of contracts $35,135 $30,468
Borrowings against contracts (33,211) (28,831)
------- -------
Net investment $ 1,924 $ 1,637
======= =======
</TABLE>
Interest expense related to borrowings against CILCO-owned life
insurance, included in CILCO-owned Life Insurance, Net on the
Consolidated Statements of Income, was $2.3 million, $2 million and
$1.4 million for 1995, 1994 and 1993, respectively.
NOTE 2 - INCOME TAXES
CILCO follows the liability method to account for income taxes. Under
the liability method, deferred income taxes are recognized at
currently enacted income tax rates to reflect the tax effect of
temporary differences between the financial reporting basis and the
tax basis of assets and liabilities. Temporary differences occur
because the income tax law either requires or permits certain items to
be reported on CILCO's income tax return in a different year than they
are reported in the financial statements. CILCO established a
regulatory liability to account for the net effect of expected future
regulatory actions related to unamortized investment tax credits,
income tax liabilities initially recorded at tax rates in excess of
current rates, the equity component of Allowance for Funds Used During
Construction and other items for which deferred taxes had not
previously been provided. The temporary differences related to the
consolidated net deferred income tax liability at December 31, 1995,
December 31, 1994 and December 31, 1993, were as follows:
<TABLE>
<CAPTION>
December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Property, including
allowance for funds used
during construction $213,187 $212,308 $213,056
Other 3,759 11,105 11,835
Deferred tax assets:
Other (13,086) (11,560) (10,446)
Net regulatory liability (59,482) (59,997) (69,477)
-------- -------- --------
Deferred income taxes $144,378 $151,856 $144,968
======== ======== ========
<FN>
Of the $7,478,000 decrease in the net deferred income tax liability
at December 31, 1995, from December 31, 1994, $5,351,000 is
attributable to the implementation of CILCO's early retirement
programs.
</TABLE>
Income tax expenses were as follows:
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Current income taxes
Federal $26,712 $18,912 $18,510
State 5,780 4,165 4,860
------- ------- -------
Total operating current
taxes 32,492 23,077 23,370
------- ------- -------
Deferred operating income
taxes, net
Depreciation and
amortization (3,642) (1,905) (1,786)
Repair allowance 1,917 648 168
Borrowed component of AFUDC 396 (249) 76
Capitalized overhead costs (893) (794) (888)
Removal costs 2,130 2,176 2,471
Call premiums (236) 401 2,623
Gas take-or-pay settlements (751) (1,244) 1,413
Gas storage field 861 408 (2,856)
Taxable salvage 654 1,229 573
Coal tar remediation costs 642 253 120
Pension expense (6,673) (145) (646)
Other (1,937) (674) (718)
------- ------- -------
Total operating deferred
income taxes (7,532) 104 550
------- ------- -------
Investment tax credit
amortization (1,693) (1,693) (1,694)
------- ------- -------
Total operating
income taxes 23,267 21,488 22,226
------- ------- -------
Income tax reduction for
disallowed plant costs 168 (2,982) --
Other net (902) (1,339) (1,859)
------- ------- -------
Total income taxes $22,533 $17,167 $20,367
======= ======= =======
<FN>
Total deferred income taxes, net, includes deferred state income taxes
of $533,000, $752,000 and $332,000 for 1995, 1994 and 1993,
respectively.
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory federal income tax rate 35.0 35.0% 35.0%
===== ==== ====
Equity component of AFUDC not subject to
taxation (.1) (.4) --
Depreciation differences for which
deferred taxes have not been provided 1.0 1.4 1.0
Amortization of investment tax credit (2.7) 3.6 (3.1)
CILCO-owned life insurance (1.0) (1.0) (.6)
State income taxes 5.8 6.0 6.2
Civil fine -- .7 --
Other differences (1.4) (1.3) (.8)
----- ---- -----
Total 1.6 1.8 2.7
----- ---- -----
Effective income tax rate 36.6% 36.8% 37.7%
----- ---- -----
</TABLE>
NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE
CILCO has recorded a liability of approximately $.9 million and
$1.5 million at December 31, 1995 and 1994, respectively, for benefits
other than pensions or health care provided to former or inactive
employees.
PENSION BENEFITS
Substantially all of CILCO's full-time employees, including those assigned
to the Holding Company and QST, are covered by trusteed, non-contributory
defined benefit pension plans. Benefits under these qualified plans
reflect the employee's years of service, age at retirement and maximum
total compensation for any consecutive sixty-month period prior to
retirement. CILCO also has an unfunded nonqualified plan for certain
employees.
Pension costs for the past three years were charged as follows:
<TABLE>
<CAPTION> 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Operating expenses $15,383 $2,465 $1,841
Utility plant and other 1,139 1,189 925
------- ------ ------
Net pension costs $16,522 $3,654 $2,766
======= ====== ======
</TABLE>
Provisions for pension expense reflect the use of the projected unit
credit actuarial cost method. At December 31, 1995, CILCO recognized
an additional minimum liability on the Balance Sheets for the plan in
which the accumulated benefit obligation exceeds the fair value of
plan assets.
The components of net periodic pension costs follow:
<TABLE>
<CAPTION> 1995 1994
(In thousands)
<S> <C> <C>
Cost of pension benefits earned by employees $ 4,654 $ 5,589
Interest cost on projected benefit obligation 15,188 14,422
Actual return on plan assets (50,816) 1,237
Net amortization and deferral 34,437 (17,594)
Special termination benefits 13,059 --
-------- --------
Net pension costs $ 16,522 $ 3,654
======== ========
</TABLE>
During 1995, CILCO recognized $13.1 million of net pension costs 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. These amounts
represented the costs associated with additional benefits extended in
connection with voluntary early retirement programs.
Information on the funded status of plans in which assets exceed
accumulated benefits follows:
<TABLE>
<CAPTION>
Actuarial present value of accumulated benefit 1995 1994
obligation: (In thousands)
<S> <C> <C>
Vested benefits - employees' rights to receive
benefits no longer contingent upon continued
employment $171,422 $145,975
Non-vested benefits - employees' rights to
receive benefits contingent upon continued
employment 15,266 11,258
-------- --------
Net benefit obligation $186,688 $157,233
======== ========
Funded status: pension assets and obligations
Pension assets at fair market value $232,560 $192,427
Projected benefit obligation at present value (233,746) (189,438)
Unrecognized transition asset (6,675) (7,842)
Unrecognized prior service cost 9,034 10,603
Unrecognized net (gain) loss (3,338) 7,562
------- --------
Pension asset (liability) recorded on Balance
Sheets $ (2,165) $ 13,312
======= ========
</TABLE>
Information on the funded status of the plan in which accumulated
benefits exceed assets follows:
<TABLE>
<CAPTION>
Actuarial present value of accumulated benefit 1995 1994
obligation: (In thousands)
<S> <C> <C>
Vested benefits - employees' rights to receive
benefits no longer contingent upon continued
employment $ 1,792 $900
Non-vested benefits - employees' rights to
receive benefits contingent upon continued
employment 132 --
------ ----
Net benefit obligation $ 1,924 $900
====== ====
Funded status: pension assets and obligations
Pension assets at fair market value $ -- $ --
Projected benefit obligation at present value (2,689) (1,002)
Unrecognized prior service cost 536 576
Unrecognized net (gain) loss 1,352 (363)
Adjustment to recognize minimum liability (1,123) (111)
------- ------
Pension liability recorded on Balance Sheets $(1,924) $ (900)
======= ======
</TABLE>
<TABLE>
<CAPTION>
Significant assumptions used for calculations: 1995 1994
<S> <C> <C>
Discount rate 7.25% 8.00%
Expected rate of salary increase 4.50% 4.50%
Expected long-term rate of return 8.50% 8.50%
</TABLE>
POSTRETIREMENT HEALTH CARE BENEFITS
Provisions for postretirement benefits expenses are determined under
the accrual method of accounting.
Substantially all of CILCO's full-time employees, including those
assigned to the Holding Company and QST, are currently covered by a
trusteed, non-contributory defined benefit postretirement health care
plan. The plan pays stated percentages of most necessary medical
expenses incurred by retirees, after subtracting payments by Medicare
or other providers and after a stated deductible has been met.
Participants become eligible for the benefits if they retire from
CILCO after reaching age 55 with 10 or more years of service.
Postretirement health care benefit costs were charged as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Operating expenses $5,108 $5,253 $5,767
Utility plant and other 1,882 1,913 2,060
------ ------ ------
Net postretirement health care
benefit costs $6,990 $7,166 $7,827
====== ====== ======
</TABLE>
Information on the plan's funded status follows:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Components of net postretirement health care
benefit costs:
Service cost - benefits attributed
to service during the period $ 1,302 $ 1,496
Actual return on plan assets (5,936) 133
Interest cost on accumulated
postretirement health care
benefit obligation 4,795 4,469
Amortization of transition
obligation over 18.6 years 2,858 2,858
Other net amortization and
deferral 3,971 (1,790)
------- -------
Net postretirement health care
benefit costs $ 6,990 $ 7,166
======= =======
Accumulated postretirement health
care benefit obligation:
Retirees $36,646 $30,849
Other fully eligible participants 12,668 10,859
Other active participants 22,003 20,046
------- -------
Total accumulated postretirement
health care benefit obligation 71,317 61,754
Less:
Unrecognized actuarial gain (814) (3,046)
Unrecognized transition obligation 38,871 41,730
Plan assets at fair value 33,157 22,929
------- -------
Accrued postretirement health
care benefit cost liability $ 103 $ 141
======= =======
</TABLE>
For measurement purposes, the annual health care cost trend rate
averaged 8.5% for 1995; the rate was assumed to decrease gradually to
6% by 2049 and remain at that level thereafter.
Increasing the assumed health care cost trend rate by 1% in each year
would increase the accumulated postretirement benefit obligation at
December 31, 1995, by $3.2 million and the aggregate of the service
and interest cost components of net postretirement health care cost
for 1995 by $268,000. The discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1995,
was 7.25% and at December 31, 1994, was 8%. The weighted average
expected return on assets net of taxes was 8.1%, where taxes are
assumed to decrease return by 0.4%.
NOTE 4 - SHORT-TERM DEBT
CILCO had arrangements for bank lines of credit totaling $30.0 million
at December 31, 1995, all of which were unused. These lines of credit
were maintained by commitment fees of 1/20 of 1% per annum in lieu of
balances. These bank lines of credit support CILCO's issuance of
commercial paper. Short-term borrowings consisted of commercial paper
totaling $24.6 million and $23.4 million at December 31, 1995 and
1994, respectively.
NOTE 5 - RETAINED EARNINGS
CILCO's Articles of Incorporation provide that no dividends shall be
paid on the common stock if, at the time of declaration, the balance
of retained earnings does not equal at least two times the annual
dividend requirement on all outstanding shares of preferred stock.
The amount of retained earnings so required at December 31, 1995, was
$6.5 million.
NOTE 6 - PREFERRED STOCK
<TABLE>
<CAPTION>
At December 31 1995 1994
(In thousands)
<S> <C> <C>
Preferred stock, cumulative
$100 par value, authorized 1,500,000 shares
Without mandatory redemption
4.50% series - 111,264 shares $11,126 $11,126
4.64% series - 79,940 shares 7,994 7,994
Class A, no par value, authorized
3,500,000 shares
Flexible auction rate - 250,000
shares (a) 25,000 25,000
With mandatory redemption
5.85% series - 220,000 shares 22,000 22,000
------- -------
Total preferred stock $66,120 $66,120
======= =======
<FN>
(a) Dividend rates at December 31, 1995 and 1994, were 4.40% and 4.72%,
respectively.
</TABLE>
All classes of preferred stock are entitled to receive cumulative
dividends and rank equally as to dividends and assets, according to their
respective terms.
The total annual dividend requirement for preferred stock outstanding at
December 31, 1995, is $3.3 million, assuming a continuation of the auction
dividend rate at December 31, 1995, for the flexible auction rate series.
PREFERRED STOCK WITHOUT MANDATORY REDEMPTION
The call provisions of preferred stock redeemable at CILCO's option
outstanding at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Series Callable Price Per Share (plus accrued dividends)
<S> <C>
4.50% $110
4.64% $102
Flexible auction rate $100
</TABLE>
PREFERRED STOCK WITH MANDATORY REDEMPTION
CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per
share. A mandatory redemption fund must be established on July 1, 2003.
The fund will provide for the redemption of 11,000 shares for $1.1 million
on July 1 of each year through July 1, 2007. On July 1, 2008, the
remaining 165,000 shares will be retired for $16.5 million.
PREFERENCE STOCK, CUMULATIVE
No Par Value, Authorized 2,000,000 shares, of which none have been issued.
NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31 1995 1994
(In thousands)
<S> <C> <C>
First Mortgage Bonds
5 1/8% series due 1996 $ 16,000 $ 16,000
5 1/2% series due 1997 20,000 20,000
7 1/2% series due 2007 50,000 50,000
8 1/5% series due 2022 65,000 65,000
Medium-Term Notes
5.7% series due 1998 10,650 10,650
6.4% series due 2000 30,000 30,000
6.82% series due 2003 25,350 25,350
6.13% series due 2005 16,000 --
7.8% series due 2023 10,000 10,000
7.73% series due 2025 20,000 --
Pollution Control Refunding Bonds
6.5% series F due 2010 5,000 5,000
6.2% series G due 2012 1,000 1,000
6.5% series E due 2018 14,200 14,200
5.9% series H due 2023 32,000 32,000
-------- --------
315,200 279,200
Unamortized premium and discount on
long-term debt, net (803) (841)
-------- --------
Total CILCO long-term debt $314,397 $278,359
======== ========
</TABLE>
CILCO's first mortgage bonds are secured by a lien on substantially
all of its property and franchises. Unamortized borrowing expense,
premium and discount on outstanding long-term debt are being
amortized over the lives of the respective issues.
Scheduled maturities of long-term debt for 1997, 1998 and 2000 are
$20 million, $10.6 million and $30 million, respectively. There are
no scheduled maturities of long-term debt for 1999.
The 1996 maturities of long-term borrowings have been classified as
current liabilities.
NOTE 8 - COMMITMENTS & CONTINGENCIES
CILCO's 1996 capital expenditures for utility plant are estimated to
be $49.3 million, in connection with which CILCO has normal and
customary purchase commitments at December 31, 1995.
CILCO's policy is to act as a self-insurer for certain insurable
risks resulting from employee health and life insurance programs.
In August 1990, CILCO entered into a firm, wholesale power purchase
agreement with Central Illinois Public Service Company (CIPS). This
agreement, which expires in 1998, provides for an initial purchase of
30 megawatts (MW) of capacity, increasing to 90 MW in 1997. CILCO
can increase purchases to a maximum of 100 MW during the contract
period, provided CIPS then has the additional capacity available. In
November 1992, CILCO entered into a limited-term power agreement to
purchase 100 MW of CIPS's capacity during the time period June 1998
through May 2002.
In March 1995, CILCO and CIPS renegotiated the November 1992 limited-
term power agreement. This agreement, which now expires in May 2009,
provides for CILCO to purchase 150 MW of CIPS@ capacity from June 1998
through May 2002, and 50 MW from June 2002 through May 2009. This
renegotiated agreement is subject to the ICC@s final approval of CILCO@s
1995 electric least cost energy plan, which has been revised to include
the terms of this bulk power purchase agreement. ICC approval is
expected in June 1996.
For a discussion of former gas manufacturing sites, refer to the
caption"'Environmental Matters" of Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations on
page 20 of CILCORP's 1995 Annual Report which is incorporated herein
by reference.
NOTE 9 - RATE MATTERS
In December 1994, the Illinois Commerce Commission (ICC) issued a
rate order designed to grant CILCO a $10.6 million, or 6.7% annual
increase in gas base rate revenues. The new rates, designed to yield
an 11.82% return on common equity and a 9.24% return on rate base,
were effective in December 1994.
In mid-1992, after a significant number of leaks were detected in
CILCO's Springfield cast iron gas distribution system, CILCO began a
detailed examination of its Springfield gas distribution system and
related operating practices and procedures. CILCO thereafter began
an aggressive program to renew its Springfield gas cast iron main
system. This project was completed in November 1995.
As a part of its rate order, the ICC disallowed approximately $7.5
million of CILCO's $24 million investment in the Springfield cast
iron main renewal project. To reflect the disallowance, CILCO
recorded a pre-tax charge of approximately $7.5 million ($4.5 million
after-tax) against 1994 earnings.
The ICC staff began an informal review of CILCO@s Springfield gas
operations and record-keeping practices in September 1992.
Subsequently, the U.S. Department of Transportation (DOT) and the
U.S. Department of Justice (DOJ) began conducting investigations of
CILCO which were also focused principally on CILCO@s Springfield gas
operations and its record-keeping practices.
In September 1994, CILCO entered into a federal court civil consent
decree with the DOJ which concluded the DOT and DOJ investigations.
As a part of the settlement with the DOJ, CILCO accepted adjustments
recommended by the ICC staff which resulted in a net disallowance
from CILCO's gas rate base of approximately $4.5 million of the cost
of the Springfield cast iron main renewal project. This charge is
part of the $7.5 million disallowance included in the December 1994
rate order. In addition to the rate base disallowance, CILCO agreed
to pay an $844,000 civil fine to the United States and agreed to
reimburse the ICC, the DOT and the DOJ $156,000 for the costs of
their investigations. CILCO also agreed to underwrite the reasonable
expense of an outside expert, selected by the ICC, to examine CILCO's
gas operations manuals and systems to ensure they are in compliance
with all applicable statutes and regulations. The audit was
completed in October 1995 at a total cost of $356,000.
The DOJ agreed not to seek any additional civil or criminal penalties
from CILCO or the Company. The ICC staff also agreed not to seek any
additional enforcement penalties from CILCO or the Company. CILCO
agreed to continue to cooperate with the DOJ in its investigation and
prosecution of any individuals who may be responsible for willful
violations of any applicable statute or regulation.
For a discussion of other gas and electric rate matters refer to
information under the heading Management's Discussion and Analysis of
Financial Condition and Results of Operations of CILCORP's 1995
Annual Report to Shareholders, which is incorporated herein by
reference.
NOTE 10 - LEASES
CILCO leases certain equipment, buildings and other facilities under
capital and operating leases. Minimum future rental payments under
non-cancelable capital and operating leases having remaining terms in
<PAGE>
excess of one year as of December 31, 1995, are $19.4 million in
total. Payments due during the years ending December 31, 1996,
through December 31, 2000, are $4.9 million, $4.4 million, $3.2
million, $2.7 million and $1.7 million, respectively.
NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly operating results are unaudited, but, in the
opinion of management, include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of CILCO's
operating results for the periods indicated. The results of
operations for each of the fiscal quarters are not necessarily
comparable to, or indicative of, the results of an entire year due to
the seasonal nature of CILCO's business.
<TABLE>
<CAPTION>
For the Three Months Ended March 31 June 30 September 30 December 31
(In thousands)
<S> <C> <C> <C> <C>
1995
Operating revenue $133,227 $100,512 $122,035 $121,970
Operating income 17,883 13,019 26,127 6,519
Net income 12,082 7,074 20,106 3,136
1994
Operating revenue $145,386 $101,505 $108,142 $106,337
Operating income 16,007 12,204 18,227 12,069
Net income 10,615 7,057 8,986 5,829
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
CILCORP
Not applicable.
CILCO
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
CILCORP
The information required by Item 10 relating to directors is set forth
in the Company's definitive proxy statement for its 1996 Annual Meeting
of Stockholders filed with the Commission pursuant to Regulation 14A.
Such information is incorporated herein by reference to the material
appearing under the caption "Election of Directors" of such proxy
statement. Information required by Item 10 relating to executive
officers of the Company is set forth under a separate caption in Part I
hereof.
CILCO
The information required by Item 10 relating to directors is set forth
in CILCO's definitive proxy statement for its 1996 Annual Meeting of
Stockholders filed with the Commission pursuant to Regulation 14A. Such
information is incorporated herein by reference to the material
appearing under the caption "Election of Directors" of such proxy
statement. Information required by Item 10 relating to executive
officers of CILCO is set forth under a separate caption in Part I
hereof.
Item 11. Executive Compensation
CILCORP
The Company has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 11 is
incorporated herein by reference to the material appearing under the
caption "Executive Compensation" of such proxy statement.
CILCO
CILCO has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 11 is
incorporated herein by reference to the material appearing under the
caption "Executive Compensation" of such proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
CILCORP
The Company has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 12 is
incorporated herein by reference to the material appearing under the
caption "Voting Securities and Principal Holders" of such proxy
statement.
CILCO
CILCO has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 12 is
incorporated herein by reference to the material appearing under the
caption "Voting Securities and Principal Holders" of such proxy
statement.
Item 13. Certain Relationships and Related Transactions
CILCORP
CILCORP Inc. (CILCORP or Company), a holding company, is the parent of
its direct subsidiaries Central Illinois Light Company (CILCO), CILCORP
Investment Management Inc. (CIM), CILCORP Ventures Inc. (CVI), QST
Enterprises Inc. (QST) and Environmental Science & Engineering, Inc.
(ESE). In the course of business, the Company carries on certain
relations with affiliated companies such as shared facilities,
utilization of employees and other business transactions. Central
Illinois Light Company is reimbursed at cost by the Company and the
other subsidiaries for any services it provides.
ESE and the Holding Company entered into an agreement to consolidate
ESE's outstanding debt. Under this agreement, ESE can draw on a $15
million revolving line of credit which expires May 2, 1996. At
December 31, 1995, ESE had $2.6 million borrowed from CILCORP under this
agreement. ESE also borrowed $20 million from the Holding Company on a
term credit basis with the principal due May 2, 1998.
At December 31, 1995, CILCORP guaranteed $3 million of outstanding debt
of CILCORP Lease Management Inc. CILCORP receives a fee for the
guarantee.
CIM has guaranteed the performance of CIM Leasing Inc. and CIM Air
Leasing Inc. with respect to certain obligations arising from the
leveraged lease investments held by these subsidiaries.
CILCO
Certain members of the Board of Directors of CILCORP Inc. are also
members of the Board of Directors of CILCO. The Chairman and Chief
Executive Officer of CILCO is also the President and Chief Executive
Officer of CILCORP and the secretary of CILCO is also Vice President,
General Counsel and Secretary of CILCORP Inc.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
CILCORP
Page in
Annual Report to
Stockholders
(a) 1. Financial Statements
The following statements are included in
Exhibit 13 of this filing and are incorporated
herein by reference from CILCORP Inc.@s 1995
Annual Report:
Management's Report 26
Report of Independent Public Accountants 26
Consolidated Statements of Income for the three
years ended December 31, 1995 27
Consolidated Balance Sheets as of
December 31, 1995, and December 31, 1994 28-29
Consolidated Statements of Segments of Business for
the three years ended December 31, 1995 30-31
Consolidated Statements of Cash Flows for the three
years ended December 31, 1995 32
Consolidated Statements of Common Stockholders' Equity
for the three years ended December 31, 1995 33
Notes to the Consolidated Financial Statements 34-42
(a) 2. Financial Statement Schedules
The following schedules are included herein:
Page No.
Form 10-K
---------
Schedule II - Valuation and Qualifying Accounts
and Reserves 67
Schedule XIII -Investment in Leveraged Leases at
December 31, 1995 69
Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements or
notes thereto.
(a) 3. Exhibits
*(3) Articles of Incorporation (Designated in Form 10-K for the
year ended December 31, 1991, File No. 1-8946, as Exhibit 3)).
(3)a By-laws as amended effective April 25, 1995.
***(4) Instruments defining the rights of security holders, including
indentures
(10) CILCO Executive Deferral Plan as amended through January 29,
1996. (Designated in Form 10-K for the year ended December 31,
1993, File No. 1-8946, as Exhibit (10)).
(10)a Executive Deferral Plan II as amended January 29, 1996
(Designated in Form 10-K for the year ended December 31, 1989,
File No. 1-8946, as Exhibit (10)b).
*(10)b CILCORP Economic Value Added Incentive Compensation Plan
(Adopted February 29, 1989 & Revised January 29, 1991 and
January 30, 1996.)
*(10)c CILCORP Compensation Protection Plan. (Adopted June 28, 1994.)
*(10)d CILCO Benefit Replacement Plan (Designated in Form 10-K for the
year ended December 31, 1991, File No. 1-8946, as Exhibit
(10)e).
*(10)e Deferred Compensation Stock Plan (Designated in Form 10-K for
the year ended December 31, 1991, File No. 1-8946, as Exhibit
(10)f).
*(10)f Shareholder Return Incentive Compensation Plan (included as
part of Company's definitive proxy in 1993 Annual Meeting of
Stockholders, filed with the Commission on March 26, 1993.)
(12) Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
Page No.
Form 10-K
----------
(13) Annual Report to Security Holders 74
(24) Consent of Arthur Andersen LLP 75
(25) Power of Attorney
(27) CILCORP Inc. Consolidated Financial Data Schedule
(b) 3. Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
1995.
* These exhibits have been previously filed with the Securities and
Exchange Commission (SEC) as exhibits to registration statements or
to other filings of CILCORP or CILCO with the SEC and are incorporated
herein as exhibits by reference. The file number and exhibit
number of each such exhibit (where applicable) are stated in the
description of such exhibit.
***Pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K,
the Company has not filed as an exhibit to this Form 10-K any
instrument with respect to long-term debt as the total amount of
securities authorized thereunder does not exceed 10 percent of the
total assets of the Company and its subsidiaries on a consolidated
basis, but hereby agrees to furnish to the SEC on request any such
instruments.
CILCO
Page No.
Form 10-K
----------
(a) 1. Financial Statements
The following are included herein:
Management's Report 36
Report of Independent Public Accountants 37
Consolidated Statements of Income for the three years
ended December 31, 1995 38
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1994 39-40
Consolidated Statements of Cash Flows for the three
years ended December 31, 1995 41-42
Consolidated Statements of Segments of Business for
the three years ended December 31, 1995 43-44
Consolidated Statements of Retained Earnings for the
three years ended December 31, 1995 45
Notes to the Consolidated Financial Statements 46-59
(a) 2. Financial Statement Schedules
The following schedule is included herein:
Schedule II - Valuation and Qualifying Accounts and
Reserves for the three years ended
December 31, 1995 68
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in
the financial statements or notes thereto.
(a) 3. Exhibits
*(3) Articles of Incorporation. As amended July 26, 1993.
(3)a Bylaws. As amended effective April 1, 1995.
*(4) Indenture of Mortgage and Deed of Trust between Illinois
Power Company and Bankers Trust Company, as Trustee, dated as of
April 1, 1933, Supplemental Indenture between the same parties
dated as of June 30, 1933, Supplemental Indenture between the
Company and Bankers Trust Company, as Trustee, dated as of
July 1, 1933 and Supplemental Indenture between the same
parties dated as of January 1, 1935, securing First Mortgage
Bonds, and indentures supplemental to the foregoing through
November 1, 1994. (Designated in Registration No. 2-1937 as
Exhibit B-1, in Registration No. 2-2093 as Exhibit B-1(a), in
Form 8-K for April 1940, File No. 1-2732-2, as Exhibit A, in
Form 8-K for December 1949, File No. 1-2732-2, as Exhibit A,
in Form 8-K for December 1951, File No. 1-2732, as Exhibit A,
in Form 8-K for July 1957, File No. 1-2732, as Exhibit A, in
Form 8-K for July 1958, File No. 1-2732, as Exhibit A, in Form
8-K for March 1960, File No. 1-2732, as Exhibit A, in Form 8-K
for September 1961, File No. 1-2732, as Exhibit B, in Form 8-K
for March 1963, File No. 1-2732, as Exhibit A, in Form 8-K for
February 1966, File No. 1-2732, as Exhibit A, in Form 8-K for
March 1967, File No. 1-2732, as Exhibit A, in Form 8-K for
August 1970, File No. 1-2732, as Exhibit A, in Form 8-K for
September 1971, File No. 1-2732, as Exhibit A, in Form 8-K for
September 1972, File No. 1-2732, as Exhibit A, in Form 8-K for
April 1974, File No. 1-2732, as Exhibit 2(b), in Form 8-K for
June 1974, File No. 1-2732, as Exhibit A, in Form 8-K for
March 1975, File No. 1-2732, as Exhibit A, in Form 8-K for May
1976, File No. 1-2732, as Exhibit A, in Form 10-Q for the
quarter ended June 30, 1978, File No. 1-2732, as Exhibit 2, in
Form 10-K for the year ended December 31, 1982, File No. 1-
2732, as Exhibit (4)(b), in Form 8-K dated January 30, 1992,
File No. 1-2732, as Exhibit (4) in Form 8-K dated January 29,
1993, File No. 1-2732, as Exhibit (4) and in Form 8-K dated
December 2, 1994, File No. 1-273, as Exhibit (4).)
*(4)a Supplemental Indenture dated November 1, 1994. (Designated in
Form 8-K dated November 1, 1994, File No. 1-2732, as
Exhibit (4).)
(10) Executive Deferral Plan as amended January 29, 1996.
(Designated in Form 10-K for the year ended December 31, 1993,
File No. 1-8946, as Exhibit (10).)
(10)a Executive Deferral Plan II as amended January 29, 1996.
(Designated in Form 10-K for the year ended December 31, 1989,
File No. 1-2732, as Exhibit (10)b.)
*(10)b CILCO Compensation Protection Plan. (Designated in Form 10-K
for the year ended December 31, 1990, File No. 1-2732, as
Exhibit (10)c.)
*(10)c Deferred Compensation Stock Plan. (Designated in Form 10-K
for the year ended December 31, 1990, File No. 1-2732, as
Exhibit (10)d.)
(10)d CILCO Economic Value Added Incentive Compensation Plan
(adopted January 29, 1991 and revised January 29, 1996).
(Designated in Form 10-K for the year ended December 31, 1990,
File No. 1-2732, as Exhibit (10)e.)
*(10)e Benefit Replacement Plan. (Designated in Form 10-K for the
year ended December 31, 1991, File No. 1-2732, as Exhibit
(10)f.)
*(10)f Shareholder Return Incentive Compensation Plan (included as
part of CILCORP Inc.'s definitive proxy in 1993 Annual Meeting
of Stockholders, filed with the Commission on March 26, 1993.)
(12) Computation of Ratio of Earnings to Fixed Charges
(25) Power of Attorney
(27) Central Illinois Light Company Financial Data Schedule
(b) 3. Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
1995.
*These exhibits have been previously filed with the Securities and
Exchange Commission (SEC) as exhibits to registration statements or to
other filings of CILCO with the SEC and are incorporated herein as
exhibits by reference. The file number and exhibit number of each such
exhibit (where applicable) are stated in the description of such
exhibit.
<PAGE>
<TABLE>
SCHEDULE II
CILCORP INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1995, 1994 and 1993
(Thousands of dollars)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged Charged Balance at
Beginning to to Other End of
Description of Period Income Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $2,291 $2,216 -- $2,284 $2,223
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 2,600 1,279 -- 1,329 2,550
Year ended December 31, 1994
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $2,255 $2,617 -- $2,581 $2,291
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 2,321 1,027 -- 748 2,600
Year ended December 31, 1993
Deducted from Assets -
Doubtful Accounts $1,943 $2,760 -- $2,448 $2,255
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 1,869 1,209 -- 757 2,321
</TABLE>
SCHEDULE II
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Valuation of Qualifying Accounts and Reserves
Years Ended December 31, 1995, 1994 and 1993
(Thousands of dollars)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged Charged Balance at
Beginning to to other End of
Description of Period Income Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $ 600 $1,299 -- $1,249 $ 650
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 2,600 1,279 -- 1,329 2,550
Year ended December 31, 1994
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $ 585 $1,494 -- $1,479 $ 600
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 2,321 1,027 -- 748 2,600
Year ended December 31, 1993
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $ 799 $1,079 -- $1,293 $ 585
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 1,869 1,209 -- 757 2,321
</TABLE>
SCHEDULE XIII
<TABLE>
CILCORP INC. AND SUBSIDIARY COMPANIES
Investment in Leveraged Leases
Year Ended December 31, 1995
(Thousands of dollars)
<CAPTION>
Cost Amount
Leveraged Leases of each carried on
lease (A) Balance Sheet (B)
<S> <C> <C>
Office buildings $23,130 $ 49,944
Warehouses 11,746 19,852
Mining equipment 10,244 16,895
Generating station 14,957 22,312
Passenger railway equipment 3,805 4,907
Cargo aircraft 9,583 13,230
------ -------
Totals $73,465 $127,140
====== =======
<FN>
(A) This value is the original cost of the leveraged lease net of original
nonrecourse debt.
(B) The amount carried on the balance sheet includes current rents
receivable and estimated residual value, net of unearned and
deferred income and nonrecourse debt.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly cuased this report to be
signed on its behalf by the undersigned, therunto duly authorized.
CILCORP INC.
March 14, 1996 By R. O. Viets
R. O. Viets
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.
Signature Title Date
(i) and (ii) Principal executive officer, director and principal
financial officer:
R. O. Viets
R. O. Viets President, Chief March 14, 1996
Executive Officer
And Director
(iii) Controller
J. L. Barnett
J. L. Barnett Controller March 14, 1996
(iv) A majority of the Directors
(including the director named above):
M. Alexis* Director March 14, 1996
J. R. Brazil* Director March 14, 1996
W. Bunn III* Director March 14, 1996
D. E. Connor* Director March 14, 1996
H. J. Holland* Director March 14, 1996
H. S. Peacock* Director March 14, 1996
K. E. Smith* Director March 14, 1996
R. M. Ullman* Director March 14, 1996
M. M. Yeomans* Director March 14, 1996
R. O. Viets
R. O. Viets Director March 14, 1996
*By R. O. Viets
R. O. Viets
Attorney-in-fact
<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.
CENTRAL ILLINOIS LIGHT COMPANY
March 14, 1996 By J. F. Vergon
J. F. Vergon
President and Chief
Operating 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.
Signature Title Date
(i) Principal executive officer and director:
J. F. Vergon
J. F. Vergon President and Chief March 14, 1996
Operating Officer
and Director
(ii( Principal financial officer:
T. S. Romanowski
T. S. Romanowski Vice President March 14, 1996
(iii) controller
R. L. Beetschen
R. L. Beetschen Controller March 14, 1996
(iv) A majority of the Directors
(including the director named above):
M. Alexis* Director March 14, 1996
D. E. Connor* Director March 14, 1996
R. W. Slone* Director March 14, 1996
K. E. Smith* Director March 14, 1996
J. F. Vergon* Director March 14, 1996
R. O. Viets* Director March 14, 1996
M. M. Yeomans* Director March 14, 1996
J. F. Vergon
J. F. Vergon Director March 14, 1996
*By J. F. Vergon
J. F. Vergon
Attorney-in-fact
<PAGE>
EXHIBIT (12)
<TABLE>
CILCORP INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
<CAPTION>
Twelve Months Ended 1995 1994 1993 1992 1991
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Earnings, as Defined:
Net Income $38,582 $32,586 $33,583 $32,097 $ 39,656
Income Taxes 23,274 18,180 18,069 20,810 29,676
Interest 29,861 26,341 27,363 29,205 28,661
Interest Portion of Rentals 1,905 1,864 2,447 415 453
Preferred Dividends 3,299 2,980 4,043 4,441 4,441
Convertible Preferred
dividends -- -- -- -- 828
------- ------ ------ ------ -------
Total Earnings, as Defined $96,921 $81,951 $85,505 $86,968 $103,715
Fixed Charges, as Defined:
Interest Expense $27,512 $24,313 $25,929 $28,275 $ 27,791
Interest Expense on COLI 2,349 2,028 1,434 930 870
Interest Portion of Rentals 1,905 1,864 2,447 415 453
Tax Effected Preferred
Dividends 5,468 4,939 6,701 7,249 8,601
------- ------- ------- ------- --------
Total Fixed Charges, as
Defined $37,234 $33,144 $36,511 $36,869 $37,715
======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges 2.6 2.5 2.3 2.4 2.8
=== === === === ===
</TABLE>
EXHIBIT (12)
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Computation of Ratio of Earnings
to Fixed Charges
<CAPTION>
Twelve Months Ended 1995 1994 1993 1992 1991
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Earnings, as Defined:
Net Income $42,398 $32,487 $37,678 $35,636 $44,231
Income Taxes 22,534 17,168 20,368 17,723 22,329
Fixed Charges, as Below 27,876 24,693 26,335 25,130 24,295
------- ------- ------- ------- -------
Total Earnings, as Defined $92,808 $74,348 $84,381 $78,489 $90,855
======= ======= ======= ======= =======
Fixed Charges, as Defined:
Interest on COLI $ 2,349 $ 2,028 $ 1,434 $ 930 $ 870
Interest on Short-term Debt 744 292 592 180 --
Interest on Long-term Debt 20,242 19,221 19,753 20,747 21,285
Amortization of Debt Discount
& Expense, Premium and
Reacquired Loss 669 665 624 410 96
Miscellaneous Interest
Expense 1,967 623 1,485 2,448 1,591
Interest Portion of Rentals 1,905 1,864 2,447 415 453
------- ------- ------- ------- -------
Total Fixed Charges, as
Defined $27,876 $24,693 $26,335 $25,130 $24,295
======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges 3.3 3.0 3.2 3.1 3.7
=== === === === ===
</TABLE>
<PAGE>
NOTICE
This copy of CILCORP Inc.'s and central Illinois Light Company's Form 10-K
does not include our 1995 Consolidated Annual Report. If you have not
received our 1995 Consolidated Annual Report and would like one, please
let us know.
Telephone:
In Peoria 675-8808
Elsewhere in Illinois 1-800-322-3569
Outside Illinois 1-800-322-3569
TDD 1-309-675-8892
Or you can write to us at:
Investor Relations Department
CILCORP Inc.
300 Hamilton Blvd.
Suite 300
Peoria, IL 61602-1238
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our reports, dated February 2, 1996, included herein or
incorporated by reference in this Form 10-K, into CILCORP Inc.'s
previously filed Registration Statements File No. 33-45318, 33-51315
and 33-51241.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 8, 1996
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The financial condition and operating results of CILCORP Inc. (the Company)
primarily reflect the operations of Central Illinois Light Company (CILCO),
the Company's principal business subsidiary. The Company's other core
business subsidiary is Environmental Science & Engineering, Inc. (ESE). The
Other Businesses segment includes the operations of the holding company itself
(Holding Company), its investment subsidiary, CILCORP Investment Management
Inc. (CIM) and its venture capital subsidiary, CILCORP Ventures Inc. (CVI).
CILCO is a regulated public utility engaged in the generation, transmission
and distribution of electric energy and the purchase, transportation and
distribution of natural gas in Central Illinois.
ESE is an environmental consulting and engineering firm with additional
capabilities in laboratory analysis and equipment manufacturing. ESE, through
its subsidiaries, also acquires environmentally impaired property for
remediation and resale.
OVERVIEW
Contributions to the Company's earnings per share for the last three calendar
years are shown below:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CILCO $2.97 $2.26 $2.60
ESE .01 .14 (.17)
Other Businesses (.05) .10 .17
----- ----- -----
Earnings per share $2.93 $2.50 $2.60
===== ===== =====
</TABLE>
CILCO's earnings increased by 31% in 1995. Electric gross margin increased
by 6% due primarily to warmer summer weather. Gas gross margin increased by
22% in 1995 due to a 6.7% gas base rate increase effective in December 1994
(see Note 9) and increased sales due to colder weather during the heating
season. In addition, CILCO sold two parcels of land in 1995 at the former R. S.
Wallace electric generating plant site (see CILCO Other Income and Deductions)
which generated an after-tax gain of $2.1 million, or $.16 per share.
Offsetting these increases was a one-time $7.8 million after-tax charge related
to CILCO's early retirement programs (see CILCO Early Retirement Programs).
This item reduced 1995 earnings by $.59 per share. Earnings for 1994 include
a $4.5 million after-tax charge against income to reflect the Illinois
Commerce Commission's (ICC) disallowance of a portion of CILCO's
investment in renewing its gas system in Springfield, Illinois. In 1994 CILCO
also paid $1 million, consisting of a fine and expenses, related to a U. S.
Department of Justice and U. S. Department of Transportation review of
CILCO's gas operations (see Note 9). These one-time charges reduced 1994
earnings by $.42 per share.
ESE's earnings declined in 1995 due primarily to delays in government spending
and changes in the regulatory climate at both the federal and state levels.
Other Businesses' results declined in 1995 because the prior year's results
included a one-time $1.8 million gain on the sale of stock and warrants held by
a CILCORP subsidiary as a result of a leveraged lease restructuring. Also,
revenue from CIM's lease portfolio was lower in 1995 compared to 1994 due to the
normal aging of the leases. Results for 1993 reflect the favorable settlement
of a federal tax dispute related to CIM's lease portfolio.
The following table summarizes each business segment's contribution to net
income (see Results of Operations for further discussion).
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
(in thousands)
Electric operating income $48,769 $49,623 $49,129
Gas operating income 14,779 8,884 11,058
------- ------- -------
Total utility operating income 63,548 58,507 60,187
Utility interest expense and other (24,743) (24,686) (26,828)
Disallowed plant cost of
regulated subsidiary, net of tax -- (4,541) --
Environmental and engineering
services net income (loss) 113 1,824 (2,266)
Other businesses net income (loss) (336) 1,482 2,490
------- ------- -------
Net income $38,582 $32,586 $33,583
======= ======= =======
</TABLE>
Return on average common equity was 11% in 1995 compared to 9.5% in 1994 and
10% in 1993. The ratio of common equity to total capitalization, including
short-term debt, was 43% in 1995 and 44% in 1994 and 1993. The fixed charge
coverage ratio increased to 2.7 in 1995 compared to 2.6 in 1994 and 2.4 in
1993.
Inflation may have a significant impact on the Company's future operations and
its ability to contain costs. To help protect CILCO from the effects of
inflation, substantially all electric and gas sales rates include a fuel
adjustment clause or a purchased gas adjustment clause to provide for changes
in electric fuel costs, excluding coal transportation, and changes in the cost
of natural gas. Over the past five years, the annual rate of inflation, as
measured by the Consumer Price Index, has ranged from 2.6% to 4.3%.
CAPITAL RESOURCES AND LIQUIDITY
The Company believes that internal and external sources of capital which are,
or are expected to be, available to the Holding Company and its subsidiaries
will be adequate during the coming year to fund the Company's capital
expenditures program, pay interest and dividends, meet working capital needs
and retire or refinance debt as it matures. The Company@s long-term ability to
declare and pay dividends depends upon the ability of its subsidiaries to
generate cash from their operations, future business conditions, earnings, and
the financial condition of the Company.
THE COMPANY
The Company issued 299,850 and 64,255 shares of common stock during 1995 and
1994, respectively, through the CILCO Employees@ Savings Plan (ESP) and the
CILCORP Inc. Automatic Reinvestment and Stock Purchase Plan (DRIP). These
shares were issued at average prices of $37.83 and $36.18 for 1995 and 1994,
respectively. Depending on market conditions, the Company may issue
additional shares of common stock through the ESP, the DRIP or through a
conventional stock offering. The proceeds from newly-issued stock have been,
and will continue to be, used to retire CILCORP short-term debt, to meet
working capital and capital expenditure requirements at CILCO and for other
corporate purposes. Future proceeds may also fund the operations and
investments of QST Enterprises Inc. and its affiliated subsidiaries (see
Electric Competition).
CILCORP is currently authorized by its Board of Directors to borrow up to $50
million on a short-term basis. The Company had $50 million and $40 million of
committed bank lines at the end of 1995 and 1994, respectively. The Company
also had $5 million of discretionary bank lines at the end of 1995 and 1994.
At December 31, 1995, $22.5 million of the lines were used, compared to $6
million at December 31, 1994.
At the end of 1995, the Company had $45 million of medium-term notes
outstanding, compared to $48 million outstanding at the end of 1994. The
Company may issue up to $75 million under its medium-term note program. The
Company may issue additional notes in the future under this program to retire
maturing debt and to provide funds for other corporate purposes.
CILCO
In 1995, CILCO spent $69.5 million for capital additions and improvements.
These expenditures consisted primarily of replacements and improvements to the
existing electric and gas systems, including $3.3 million for the steam
boilers and related auxiliary equipment of a cogeneration plant at Midwest
Grain Products, Inc. (MWG), one of CILCO's major gas, electric and steam
customers. The total expenditures for the MWG project were $19.1 million
incurred in 1994 and 1995. The plant, which is owned by CILCO, began
providing steam to MWG's Pekin, Illinois, facility in December 1994, and began
generating electricity for distribution to CILCO's customers in June 1995.
CILCO recognizes that increased competition in the utility industry requires
different systems and processes for providing quality customer service. To
address this need, CILCO replaced its Customer Information System (CIS) in
September 1995, at a cost of approximately $12.7 million, of which $4.6
million was spent in 1995. Utility capital projects were financed during 1995
with funds from operating activities, $20 million of medium-term notes, and
issuance of short-term debt. CILCO's net cash flow from operations in 1995
was $80.9 million. CILCO paid $20.1 million in cash dividends to CILCORP
during 1995.
CILCO's estimated capital expenditures for 1996 and 1997 are $49.3 million and
$49.7 million, respectively. The 1996 estimate includes $8.4 million for
electric energy supply and transmission projects, $1.8 million for gas supply
and transmission projects, and $37 million for electric and gas distribution
system improvements. Capital expenditures for 1998-2000 are currently
estimated to be $148.9 million. Actual capital expenditures may vary from
these estimates because of a number of factors, including changes in costs of
labor, equipment, capital, environmental regulations, and load growth
estimates.
CILCO's short-term debt increased to $24.6 million at December 31, 1995, from
$23.4 million at December 31, 1994. CILCO expects to issue commercial paper
periodically during 1996, and is currently authorized by its Board of
Directors to issue up to $66 million of short-term debt. At December 31,
1995, committed bank lines of credit totaled $30 million, all of which were
unused. CILCO expects these bank lines will remain unused through 1996.
In May 1995, CILCO issued $20 million of secured medium-term notes to finance
capital expenditures and to retire a portion of CILCO's short-term debt. In
December 1995, CILCO issued $16 million of secured medium-term notes which
were used to retire $16 million of first mortgage bonds due in February 1996
(see Note 7). CILCO plans to finance its 1996 and 1997 capital expenditures
with funds provided by operations.
ESE
ESE spent $4.5 million for capital additions and improvements in 1995. In
addition, through its wholly-owned subsidiary, Savannah Resources, Inc.
(Savannah), ESE spent $2.4 million in 1995 to acquire land that will be
remediated and sold in 1996. In September 1995, ESE sold property which was
acquired in 1994 for remediation, realizing a pre-tax gain of $1.2 million.
ESE expects to spend $8 million in 1996 to acquire land for remediation and
resale, and $1 million for other purposes.
ESE's cash flow from operations totaled $7.8 million in 1995. Cash flow is
supplemented by a $15 million revolving line of credit with the Holding
Company. The revolving line of credit expires on May 2, 1996, at which time
it may be renewed or replaced with a line of credit from a non-affiliated
lender. ESE has also issued a $20 million term note to the Holding Company
which is due on May 2, 1998. At December 31, 1995, ESE had $2.6 million
outstanding on the revolving line of credit, compared to $5.6 million
outstanding at December 31, 1994. ESE also has a $10 million bank line of
credit to collateralize performance bonds issued in connection with ESE
projects, of which $4.4 million was committed as of December 31, 1995. ESE
anticipates that the funds generated by operations and the amounts available
under the revolving credit facility will be sufficient to meet its anticipated
working capital requirements.
CIM
CIM had outstanding debt of $26 million and $27 million at the end of 1995 and
1994, respectively. The debt at the end of 1995 consisted of $23 million
borrowed from the Holding Company and $3 million borrowed from external
sources. The debt at the end of 1994 consisted of $6 million borrowed from
the Holding Company and $21 million borrowed from external sources. In
December 1995, CIM purchased a $1 million limited partnership interest in an
affordable housing portfolio. CIM expects to finance new investments and
working capital needs during 1996 with a combination of funds generated
internally and periodic short-term borrowings from the Holding Company.
ELECTRIC COMPETITION
The National Energy Policy Act of 1992 (NEPA) encourages competition but
specifically bans federally-mandated transmission of power to retail
customers. However, several state legislatures and public utility regulatory
commissions are investigating or adopting pilot programs to initiate
competition at the retail level. In addition, incentive regulation is being
implemented or considered by legislatures and public utility commissions in
over twenty states. Utilities may benefit or lose depending upon their
ability to reduce costs and improve efficiency.
In July 1995, Illinois enacted a law which offers gas and electric public
utilities an opportunity to develop alternative regulation and
performance-based ratemaking programs. These programs will be subject to
standards established by the ICC and restricted to the utility's service
territory. They may begin in 1996 and must end by June 30, 2000. A report
on the results of the programs will be delivered to the Illinois legislature
by December 31, 2000. Programs developed under the law may become effective
January 1, 1996, with the ICC's approval.
In 1995, legislation was introduced in Illinois to provide, among other
things, an option for electric utilities to lease their generating plants to a
subsidiary or other affiliated company, to provide for full competition for
power requirements of larger electric customers within five years, to provide
experimental retail competition for smaller electric customers, to create a
new class or status of "competitive" customers that are permitted to negotiate
service contracts with their electric utility suppliers without regulatory
oversight, and to provide for alternative regulation. This proposal allows
recovery of costs incurred by utilities, but @stranded@ as a result of retail
competition. The legislation was not adopted by the 1995 session of the
legislature, which instead created a Joint Committee on Electric Utility
Regulatory Reform (Committee) to study deregulation and increased competition
in the electric industry. The Committee will review reports and studies from
a diverse group of organizations. A technical advisory group comprised of
representatives from the ICC and various companies, including CILCO, will
conduct research and offer testimony. The Committee will include the
previously described legislative proposal in its deliberations and is expected
to recommend legislation to the Illinois legislature in late 1996. During
1996, CILCO plans to develop and offer its own proposal.
With the proposed changes in the regulatory environment and the potential for
increased competition in the electric utility industry at both the wholesale
and retail levels, CILCO anticipates significant changes in the industry in
the years to come. Management cannot predict the ultimate effect of these
changes, but believes that they will result in customers having the
opportunity to select the electric supplier of their choice and that low
operating costs and improved efficiency will be key competitive factors for
electric utilities.
In August 1995, CILCORP took steps to position itself and its subsidiaries to
deal more effectively with industry change. The Company developed a point of
view about the future utility and energy services industry which has led it to
champion customer choice and to develop a growth strategy. In addition,
CILCORP identified the need to gain additional customer insight through market
research and other means, to obtain new core competencies, to develop new
product and service offerings, to make operational changes to become more
competitive, to pursue legislative and regulatory strategies to further
competition, and to identify and strategically allocate Company resources.
To lead the movement toward increased customer choice, in August 1995 CILCO
requested regulatory approval from the ICC to establish two electric pilot
retail competition programs known as Power Quest. The programs, as proposed,
would offer greater choice to customers and provide the opportunity for CILCO
and its customers to participate in a competitive business environment. CILCO
expects these programs to be approved by the ICC during the first quarter of
1996.
One program will permit eight of CILCO's industrial customers that had peak
loads of 10 megawatts or more during the twelve months ended July 31, 1995, to
secure part or all of their electric power requirements from suppliers other
than CILCO, subject to the limitation that at no time shall total purchases by
participants in the program exceed 50 megawatts (approximately 10% of CILCO's
industrial load). The program@s two-year term may be extended with the
approval of the ICC.
In the other program, the first of its kind proposed in the nation, CILCO will
designate one or more areas within its service territory as "Open Access
Sites" for up to five years. During that period, customers located within an
Open Access Site-whether residential, commercial or industrial-will be
eligible to purchase some or all of their electric power requirements from
suppliers other than CILCO. The five-year program period may be extended with
ICC approval.
Under Power Quest, CILCO will deliver, for an approved fee, other suppliers'
power from a designated receipt point on CILCO's system to the customer's
location, as well as provide other associated services. CILCO will not impose
any exit fees, entrance fees, or stranded cost recovery upon any customers in
connection with Power Quest.
CILCO anticipates that, during Power Quest, it is likely that there will be some
reduction in electric profit margin because some eligible customers may
purchase some or all of their power requirements from other suppliers. The
amount of any such reduction depends largely upon the extent of customer
participation in Power Quest. CILCO expects, but cannot assure, that some
of the reduced profit margin will be offset by increased sales to customers
and utilities outside its service territory. The estimated annual net
income reduction associated with the pilot program for industrial customers
is not likely to exceed $2.5 million. The amount of any such loss associated
with the other pilot program cannot be estimated at this time, but it is not
expected to be material. Management cannot currently predict the impact on
its financial condition which may result from proposed changes in the
regulatory environment or from increased competition in the electric utility
industry.
In December 1995, CILCORP formed a new wholly-owned subsidiary - QST
Enterprises Inc. (QST) - to facilitate CILCORP's expansion into non-regulated
energy and related services businesses. QST will initially have two
subsidiaries: QST Energy Inc. and QST Energy Trading Inc. The staff of QST
will initially consist of 14 employees transferred from CILCO and CILCORP.
Also in December 1995, QST Energy Trading Inc. filed a proposal with the
Federal Energy Regulatory Commission (FERC) to operate as a wholesale marketer
and broker of electric power, transmission services, and fuel supplies.
QST Energy Inc. will sell power and provide related metering and billing
services to retail customers. These activities will take place through
unregulated service opportunities as they become available, including CILCO's
Power Quest retail competition program.
In an effort to obtain a competitive advantage, various mergers and business
combinations are occurring in the utility industry. There have been several
announced utility industry mergers or business combinations which will have an
impact on the region in which CILCO currently operates. Mergers and
combinations have also been announced in other areas of the country. CILCO
management will monitor this activity and continue to position itself for
competition by keeping its costs and prices low, maintaining good customer
relations and developing the flexibility to respond directly to individual
customer requirements.
CILCO'S EARLY RETIREMENT PROGRAMS
As part of a continuing effort to better position itself for competition in the
energy services industry (see Electric Competition), CILCO offered Voluntary
Early Retirement Programs (programs) to eligible employees in July 1995. The
programs offered to the International Brotherhood of Electrical Workers (IBEW)
and the International Brotherhood of Firemen and Oilers (IBF&O) are based upon
agreements made between CILCO and its unions. Another program was offered to
all management and office and technical workers. CILCO had 257 full-time
employees who were eligible for these programs. One hundred and sixty-six
accepted the offer, with retirements effective January 1, 1996. The programs
resulted in an after-tax charge of approximately $7.8 million against fourth
quarter 1995 earnings. Management expects the programs to generate an annual
after-tax cost reduction of approximately $3.4 million beginning in 1996.
ENVIRONMENTAL MATTERS
CILCO's capital expenditures related to pollution control facilities are
estimated to be $3.2 million and $5 million for 1996 and 1997, respectively.
The acid rain provisions of the Clean Air Act Amendments of 1990 (Amendments)
require additional sulfur dioxide (SO2) and nitrogen oxide (NOx) emission
reductions at CILCO's generating facilities. CILCO's facilities are exempt
from Phase I of the Amendments due to previous emission reductions, but are
subject to Phase II of the Amendments which require additional emission
reductions by the year 2000.
CILCO's final compliance strategy will depend upon regulations issued under
the Amendments; therefore, CILCO cannot currently determine definitive
compliance costs and schedules. CILCO will continue to monitor regulatory
actions and develop compliance strategies to minimize any financial impact.
Under current regulatory policies, CILCO can recover compliance costs
associated with the Amendments and other environmental regulations through
rates charged to customers. CILCO's present strategy includes use of an
existing SO2 scrubber and limited fuel switching to control SO2 emissions, and
combustion control modifications to reduce NOx emissions. CILCO's generating
units will not require additional SO2 scrubbers.
In 1996 and 1997, CILCO expects to spend $4.8 million for boiler retrofits and
emissions monitoring equipment related to the Amendments. CILCO spent $12.1
million through 1995. In 1993, the U. S. Environmental Protection Agency
established SO2 emission allowance reserves for power plants in Phase II.
Allowances are transferable to third parties at market prices. CILCO
continues to weigh the costs of allowances against alternative operating
scenarios and may use the allowance market if allowances are the least cost
option to meet future compliance goals.
Neither CILCORP, CILCO, nor any of their affiliates has been identified as a
potentially responsible party under federal or state environmental laws
governing waste storage or disposal.
CILCO continues to investigate and/or monitor four former gas manufacturing
plant sites (Sites A, B, C, and D) located within CILCO's present gas service
territory. The purpose of these studies is to determine if waste materials,
principally coal tar, are present, whether such waste materials constitute an
environmental or health risk and if CILCO is responsible for the remediation
of any remaining waste materials at those sites. CILCO previously operated
plants at three of the four sites (Sites A, B, and C) and currently owns two
(Sites A and B). CILCO has remediated Site A, at a cost of $3.3 million. In
1994, CILCO investigated Site B to define the extent of waste materials at the
site. A risk assessment remedial alternatives study at Site B is underway,
taking into consideration new clean-up options available under current
Illinois law. CILCO has paid approximately $397,000 to date to outside
parties for investigating, testing and clean-up of Site B. CILCO has not yet
formulated a remediation plan for Site C. Until more detailed site specific
testing has been completed, CILCO cannot determine the ultimate extent or cost
of any remediation of Site C. CILCO has not yet determined the extent, if
any, of its remediation responsibility for Site D.
CILCO spent approximately $251,000 for former gas manufacturing plant site
monitoring, legal fees and feasibility studies in 1995. A $4.2 million
regulatory asset and a corresponding liability are recorded on the Balance
Sheets (see Note 1) representing the minimum amount of future coal tar
investigation and remediation costs CILCO expects to incur. Coal tar
remediation costs incurred through December 1995 have been deferred on the
Balance Sheets, net of amounts recovered from customers.
Through December 31, 1995, CILCO has recovered approximately $4.2 million in
coal tar remediation costs from its customers through a gas rate rider approved
by the ICC. Since the spring of 1994, this gas rate rider has allowed recovery
of these costs over five years without carrying charges. In April 1995, the
Illinois Supreme Court held that Illinois utilities are entitled to recover
100% of their prudently incurred coal tar remediation costs. Based upon the
Supreme Court's decision, the ICC granted CILCO's request to implement revised
gas rate riders in November 1995 which will allow recovery of coal tar
remediation costs in the year they are incurred. Under these circumstances,
management continues to believe that the cost of coal tar remediation will
not have a material adverse effect on CILCO's financial position or results
of operations.
GAS PIPELINE SUPPLIER TRANSITION COSTS
In 1992, the FERC issued Orders 636, 636A, and 636B (collectively Order 636).
Order 636 substantially restructured the relationship between gas pipelines
and distribution companies, such as CILCO, for the sale, transportation and
storage of natural gas. These services, which traditionally had been
@bundled@ by interstate pipeline companies, are now individually arranged by
CILCO. CILCO believes it is well-positioned to ensure the continued
acquisition of adequate and reliable gas supplies.
Order 636 also permitted pipeline suppliers to recover from gas distribution
companies prudently incurred transition costs attributed to compliance with
Order 636. As of December 31, 1995, pipeline suppliers have billed CILCO,
subject to refund, for approximately $2.2 million of transition costs,
including interest. These charges have been, or will be, recovered from
CILCO@s customers through its purchased gas adjustment clause (PGA). The PGA
requires CILCO to adjust customer billings to reflect changes in the cost of
natural gas. Presently, CILCO cannot determine its actual allocation of
suppliers' transition costs but believes that it could ultimately be billed an
additional $1.6 million, excluding interest. During 1994, the ICC affirmed
the right of Illinois gas distribution companies to recover pipeline
transition costs from their customers; therefore, management does not expect
that Order 636 will materially impact CILCO's financial position or results of
operations.
Under FERC Order 500, and subsequent Orders 528 and 528A, interstate gas
pipelines may bill gas distribution utilities for take-or-pay and other
charges related to the transition to a more competitive gas industry. Through
December 1995, gas pipelines have billed CILCO $23.1 million, including
interest, for take-or-pay charges and certain costs related to one supplier@s
liquefied natural gas project. CILCO estimates that it could ultimately be
directly billed a total of approximately $24.4 million, excluding interest,
for these costs. CILCO is allowed by the ICC to recover these charges via a
factor incorporated into the PGA, and through December 31, 1995, has recovered
$23 million, including interest, from its customers.
CILCO has recorded a regulatory asset and corresponding liability of $3.9
million on its Balance Sheets as of December 31, 1995, of which $2.3 million
will be due in one year (see Note 1). The remaining $1.6 million represents
the minimum amount of the estimated range of such future pipeline direct
billings which CILCO expects to receive related to take-or-pay and transition
costs.
ACCOUNTING PRONOUNCEMENTS
No accounting pronouncements issued by the Financial Accounting Standards
Board (FASB) in 1995 will have a material effect on the Company's financial
position, results of operations or cash flows.
RESULTS OF OPERATIONS
CILCO ELECTRIC OPERATIONS
The following table summarizes electric operating revenue and expenses by
component.
<TABLE>
<CAPTION>
Components of Electric Operating Income 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Revenue:
Electric retail $321,066 $304,903 $298,602
Sales for resale 5,132 8,182 4,522
-------- -------- --------
Total revenue 326,198 313,085 303,124
-------- -------- --------
Cost of sales:
Cost of fuel 94,235 97,184 92,112
Purchased power expense 12,353 9,433 8,754
Revenue taxes 14,244 13,260 12,378
-------- -------- --------
Total cost of sales 120,832 119,877 113,244
-------- -------- --------
Gross margin 205,366 193,208 189,880
-------- -------- --------
Operating expenses:
Operation and maintenance
expenses 89,113 75,806 76,287
Depreciation and amortization 40,665 39,130 38,337
Income taxes 17,975 19,925 17,542
Other taxes 8,844 8,724 8,585
-------- -------- --------
Total operating expenses 156,597 143,585 140,751
-------- -------- --------
Electric operating incoe $ 48,769 $ 49,623 $ 49,129
======== ======== ========
</TABLE>
Electric gross margin increased 6% in 1995, primarily due to a 4% increase in
retail kilowatt hour (kwh) sales. The increase in retail sales was partially
offset by a decrease in sales for resale revenue. Residential sales volumes
increased 7% while commercial sales volumes increased 5%. These increases
were primarily due to warmer summer weather. Cooling degree days were 11%
higher in 1995 than in 1994. Industrial sales volumes increased 1% compared
to 1994. CILCO set a new all-time system peak demand of 1,188 megawatts (MW)
on August 17, 1995.
Electric gross margin increased 2% in 1994, primarily due to a 3% increase in
retail kilowatt hour sales. The ratio of 1994 gross margin to revenue
remained relatively constant compared to prior years. Increases in the number
of residential and commercial customers, higher demand by commercial customers
and warmer summer weather contributed to the increased sales volumes. Cooling
degree days were 5% higher in 1994 than in 1993. Industrial sales volumes
increased 3% compared to 1993, due to greater demand by several of CILCO's
large industrial customers.
Sales for resale decreased 37% in 1995 compared to 1994 due to lower available
capacity. Sales for resale vary based on CILCO@s available capacity for bulk
power sales, energy requirements of neighboring utilities and the price of
power available for sale. In the future, CILCO expects increased competition
and reduced margins in the sales for resale and purchased power markets (see
Electric Competition).
The overall level of business activity in CILCO's service territory and
weather conditions are expected to continue to be the primary factors
affecting electric sales in the near term. CILCO's electric sales and gross
margin may also be affected in the long-term by increased competition in the
electric utility industry (see Electric Competition).
The cost of fuel for generation decreased 3% in 1995 primarily due to lower
coal costs and electric generation. Substantially all of CILCO's electric
generation capacity is coal-fired. The cost per ton of coal burned, including
transportation cost, decreased 5% in 1995 compared to 1994. The decrease was
partially offset by an increase in purchased power for the same period.
Purchased power expense varies based on CILCO's need for energy and the price
of power available for purchase. CILCO makes use of purchased power when it
is economical to do so, or when required to meet its power requirements, such
as during maintenance outages at CILCO plants. Costs and savings realized
from the purchase of power are passed on to CILCO's customers via the fuel
adjustment clause (FAC), which requires CILCO to pass increases and decreases
in the cost of fuel through to customers. CILCO expects the wholesale power
market to become increasingly competitive due to certain provisions of NEPA
(see Electric Competition).
Freeman United Coal Mining Company (Freeman), a coal supplier with whom CILCO
has a long-term contract, notified CILCO of its intent to change from the cash
method of billing for postretirement benefits/costs other than pensions to the
accrual basis pursuant to SFAS 106 (see Note 3). Freeman has billed CILCO an
additional $5.8 million for postretirement benefit costs for the period from
January 1, 1993, through December 31, 1995. CILCO anticipates that Freeman
will continue to bill CILCO on the accrual basis for such costs. Based upon
the language of a 1992 settlement agreement between CILCO and Freeman, CILCO
believes it is responsible for paying these postretirement benefit costs on a
cash basis rather than on an accrual basis. To date, no liability for these
charges has been recorded and no payments have been remitted to Freeman. This
issue has been submitted to arbitration.
CILCO believes that any additional charges which may be paid to Freeman are
properly recoverable through the FAC. Management cannot currently determine
the outcome of this arbitration, but does not believe it will have a material
adverse impact on CILCO's financial position or results of operations.
Electric operation and maintenance expenses increased 18% in 1995 compared to
1994. The 1995 increases were primarily due to the early retirement programs
(see CILCO's Early Retirement Programs), power plant operating and maintenance
expenses, and outside services . The 1995 increases were partially offset by
decreased costs accrued for certain benefits provided to former or inactive
employees (see Note 3). The decrease in 1994 from 1993 was primarily due to
lower power plant and overhead line maintenance expenses, injury and damage
claims and other postretirement benefit costs.
The increases in depreciation and amortization expense in 1995 and 1994
reflect additions and replacements of utility plant at costs in excess of the
original cost of the property retired.
The changes in income taxes in 1995 and 1994 were primarily the result of
changes in pre-tax income.
CILCO GAS OPERATIONS
The following table summarizes gas operating revenue and expenses by
component.
<TABLE>
<CAPTION>
Components of Gas Operating Income 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Revenue:
Sale of gas $142,619 $138,161 $140,620
Transportation services 8,927 10,124 10,134
------- -------- --------
Total revenue 151,546 148,285 150,754
------- -------- --------
Cost of sales:
Cost of gas 68,948 78,696 79,022
Revenue taxes 6,623 7,190 7,039
-------- -------- --------
Total cost of sales 75,571 85,886 86,061
-------- -------- --------
Gross margin 75,975 62,399 64,693
-------- --------- --------
Operating expenses:
Operation and maintenance
expenses 36,443 33,511 31,486
Depreciation and
amortization 16,100 15,219 14,686
Income taxes 5,292 1,564 4,684
Other taxes 3,361 3,221 2,779
-------- -------- --------
Total operating
expenses 61,196 53,515 53,635
-------- -------- --------
Gas operating income $ 14,779 $ 8,884 $ 11,058
======== ======== ========
</TABLE>
Gas gross margin increased 22% in 1995 compared to 1994. Gross margin was
positively affected by a December 1994 6.7% increase in overall gas base rates
(see Note 9). Residential and commercial sales volumes increased 6% and 10%,
respectively, primarily due to colder weather during the heating season.
Heating degree days were 9% higher in 1995 than in 1994.
The cost of gas decreased 12% in 1995, primarily due to lower natural gas
prices. The lower natural gas prices were passed through to customers via
the PGA. Gas operation and maintenance expenses increased 9% in
1995 and 6% in 1994. The increase for 1995 was principally due to increased
pension expenses resulting from the early retirement programs (see CILCO's
Early Retirement Programs), increased outside services expenses, and increased
injury and damage claims. Decreased gas regulatory commission expenses
partially offset the increases. The 1994 increases were primarily due to
increased regulatory costs associated with CILCO's gas rate case and higher
employee benefit costs related to the implementation of SFAS 112 (see Note 3).
Decreased other postretirement benefit costs and gas maintenance expenses
partially offset the increases. Maintenance expenses decreased as a result of
the completion of repairs to the Springfield gas distribution system in 1993
(see Note 9).
Gas gross margin decreased 4% in 1994, primarily due to a 4% decrease in
retail sales volumes. Residential and commercial sales volumes decreased 7%
and 1%, respectively, primarily due to milder weather during the heating
season. Increases in sales volumes by certain classes of industrial customers
partially offset the decreases in retail sales. Heating degree days were 8%
lower in 1994 than in 1993. The cost of gas decreased in 1994 primarily due
to decreased retail sales volumes and lower natural gas prices.
Revenue from gas transportation services decreased 12% in 1995 and decreased
slightly in 1994, while the volume of gas transported decreased 10% in 1995
and increased 8% in 1994. Transportation revenues for 1995 declined primarily
due to increased customer purchases of gas from CILCO. The revenue change in
1994 was not proportional to the changes in volume because certain large
volume transportation customers negotiated lower unit charges for service.
Transportation arrangements have made it practical for certain industrial
customers to continue to use gas instead of switching to alternate fuels,
allowing CILCO to provide transportation services. There were 391
transportation customers in 1995 compared to 567 customers in 1994 and 668 in
1993. As a result of CILCO's new gas rates (see Note 9), CILCO's system rates
are more competitive with transportation rates. Some transportation customers
switched back to CILCO's system in December 1994 and during 1995.
During 1994 and 1995, CILCO utilized NYMEX (New York Mercantile Exchange)
futures contracts on a pilot basis to hedge approximately 3% of CILCO-owned
natural gas storage. The program, which includes investments in derivatives
as defined by FASB Statement No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments" (SFAS 119), will be
expanded in 1996 to hedge a greater portion of CILCO's gas costs. Costs
incurred and benefits realized from this program will be passed along to
customers.
Weather conditions, the ability of customers to purchase gas on the open
market at competitive rates, the continuing trend toward more efficient gas
appliances and overall economic conditions in CILCO's service area will affect
future gas sales.
The increases in depreciation and amortization expenses in 1995 and 1994
reflect additions and replacements of utility plant at costs in excess of the
original cost of the property retired.
The changes in income taxes in 1995 and 1994 were primarily the result of
changes in taxable income.
CILCO OTHER INCOME AND DEDUCTIONS
Utility other income increased in 1995 from 1994 primarily due to the sale in
December 1995 of two parcels of land at the former R. S. Wallace electric
generating plant site. The after-tax gain from the sale totalled
$2.1 million. In 1994, CILCO entered into an agreement to sell the 95-acre
site for $7 million. The remaining three parcels at the site will be sold in
1996 and 1997. Interest expense increased primarily due to the issuance of
$36 million of secured medium-term notes (see Note 7) and an increase in short-
term debt during 1995.
In 1994, disallowed gas plant costs, net of related income taxes, resulting
from an ICC gas rate order, significantly increased CILCO's other deductions
(see Note 9). The civil fine and other costs CILCO agreed to pay as a result
of the U. S. Department of Justice and the U. S. Department of Transportation
investigations also contributed to the increase in other deductions.
ESE
The following table summarizes environmental and engineering services revenue
and expenses.
<TABLE>
<CAPTION>
Components of ESE Net Income (Loss) 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Environmental and
engineering services
revenue $127,530 $132,799 $123,162
Direct non-labor project costs 50,245 52,896 43,627
-------- -------- --------
Net revenue 77,285 79,903 79,535
-------- -------- --------
Expenses:
Direct salaries and other costs 38,624 39,720 40,180
General & administrative 30,153 29,319 34,418
Depreciation and amortization 5,646 5,867 6,064
-------- -------- --------
Operating expenses 74,423 74,906 80,662
-------- -------- --------
Interest 1,902 1,915 1,719
-------- -------- --------
Income before income taxes 960 3,082 (2,846)
Income taxes 847 1,258 (580)
-------- -------- --------
ESE net income (loss) $ 113 $ 1,824 $(2,266)
======== ======== ========
</TABLE>
ESE incurs substantial direct non-labor project costs from the use of
subcontractors on projects. These costs are passed directly through to ESE's
clients. As a result, a better measure of operating performance is net
revenue, which is determined by deducting such direct non-labor project costs
from gross revenues. Net revenue decreased by 3% in 1995 compared to 1994,
after remaining relatively unchanged in 1994 compared to 1993. The 1995
decrease was due primarily to delays in government spending, changes in the
regulatory climate at both the federal and state levels, and increased
competition for laboratory services.
The overall decrease in consulting and laboratory net revenues was partially
offset by the sale of property owned by Savannah (see Capital Resources and
Liquidity--ESE). The pre-tax gain on this sale was $1.2 million. This
property was acquired in 1994 and was remediated by Savannah and its
subcontractors.
Direct salaries and other costs reflect the cost of professional and technical
staff and other costs billable to customers. Such costs consist of salaries
and related fringe benefits, including employer-paid insurance, payroll taxes,
vacations, sick leave, and retirement plan contributions. General and
administrative expenses include non-billable employee time devoted to
marketing, proposals, supervision, and professional development; supplies
expenses; and corporate administrative expenses.
Direct salaries and other costs decreased by 3% in 1995, after decreasing by
1% in 1994. The decreases reflect ESE's adjustment of its staffing levels to
respond to changing business conditions.
General and administrative expenses increased by 3% in 1995, following a 15%
decrease in 1994, due to ESE's additional marketing efforts.
Depreciation and amortization expense declined by 4% in 1995 primarily due to
the full amortization in early 1995 of a non-compete agreement associated with
the acquisition of ESE and an increase in fully depreciated assets.
Amortization expense continues for the Cost in Excess of Net Assets of
Acquired Businesses, which is being amortized over 40 years.
Interest expense remained the same in 1995 after increasing in 1994.
ESE formed a wholly-owned subsidiary, Ordnance/Explosives Environmental
Services, Inc. (OES), on May 4, 1995, to engage in removing unexploded
ordnance and related waste from contaminated sites. Employees of this
subsidiary are primarily former military personnel who have been trained in
unexploded ordnance procedures. ESE's initial equity investment in the
subsidiary is $100,000.
On October 24, 1995, ESE formed a wholly-owned subsidiary, ESE Land
Corporation, to coordinate both organizationally and financially the
acquisition, remediation and resale of environmentally impaired properties.
ESE's future business activity will continue to be impacted by the level of
demand for its services, which is affected by governmental funding levels, the
enforcement of various federal and state statutes and regulations dealing with
the environment and the use, control, disposal and clean-up of hazardous
wastes. The market for ESE's services is competitive; however, no single
entity currently dominates the environmental and engineering consulting
services marketplace.
OTHER BUSINESSES
The following table summarizes Other Businesses revenue and expenses. Other
Businesses results include income earned and expenses incurred at the Holding
Company, CIM, CVI and non-operating interest income of CILCO.
<TABLE>
<CAPTION>
Components of Other Businesses
Net Income (Loss) 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Revenue:
Leveraged lease revenue $6,224 $ 6,907 $ 4,280
Other revenue 3,242 4,063 3,191
------ ------ -------
Total revenue 9,466 10,970 7,471
------ ------- -------
Expenses:
Operating expenses 5,064 5,527 2,637
Depreciation and
amortization 203 214 177
Interest expense 4,227 3,624 3,190
Income and other taxes 308 123 (1,283)
Minority interest -- -- 260
------ ------- -------
Total expenses 9,802 9,488 4,981
------ ------- -------
Other businesses net income
(loss) $ (336) $ 1,482 $ 2,490
====== ======= =======
</TABLE>
Leveraged lease revenues declined by 10% in 1995. Under generally accepted
accounting principles pertaining to leveraged leases, revenues decline as the
lease portfolio matures. During 1996 and future years, CIM expects leveraged
lease revenues to decrease, absent any investment in new leases.
Leveraged lease revenues in 1994 reflected a full year's revenues from two
leveraged lease investments made in late 1993. This increase was partially
offset by a decline in 1994 revenues from CIM's other leveraged leases.
Other revenues decreased in 1995 primarily because 1994 results included a
$1.8 million gain from the sale of Tucson Electric Power (TEP) common stock
and warrants. In 1993, CIM sold one million shares of TEP stock for a $2
million gain. The effect of the gain in 1994 was partially offset by the
inclusion of a full year's revenues from CILCORP Energy Services Inc. (CESI)
in 1995. This subsidiary of CVI was formed in 1994 to market energy related
services and consumer products.
Operating expenses declined in 1995 primarily because 1994 expenses include
several one-time charges, including termination of a lease at an ESE facility
which it no longer uses. The lease was entered into during negotiations which
led to CILCORP's 1990 acquisition of ESE. The effect of the one-time charges
in 1994 was partially offset by the inclusion of a full year's costs from CESI
in 1995.
Interest expense increased in 1995 and 1994 due to higher average debt
balances used to finance working capital and CILCO capital expenditures.
Income and other taxes increased in 1995 primarily because the expense in
1994 includes a reduction in taxes to reflect the settlement of several issues
with the Internal Revenue Service (IRS) which were unrelated to CIM's lease
portfolio. Income and other taxes in 1993 include a $3.1 million reversal of
tax expense which had been recorded in prior years to reflect the potential
unfavorable outcome of a tax dispute between the Company and the IRS regarding
the depreciable life of the Springerville Unit No. 1 lease. Offsetting this
reduction in 1993 was an additional $1.1 million of income tax expense to
record the effect of an increase in the federal income tax rate on the
Company's lease portfolio.
In December 1993, CIM purchased the remaining 19% minority interest in a
subsidiary, CILCORP Lease Management Inc., for $1.4 million.
<PAGE>
Management's Report
To the Stockholders of CILCORP Inc.:
Management has prepared the accompanying financial statements and notes for
CILCORP Inc. and its consolidated subsidiaries in accordance with generally
accepted accounting principles. Estimates and judgments used in developing
these statements are the responsibility of management. Financial data
presented throughout this report is consistent with these statements.
CILCORP Inc. maintains a system of internal accounting controls which
management believes is adequate to provide reasonable assurance as to the
integrity of accounting records and the protection of assets. Such controls
include established policies and procedures, a program of internal audit and
the careful selection and training of qualified personnel.
The financial statements have been audited by CILCORP's independent public
accountants, Arthur Andersen LLP, whose appointment was ratified by
stockholders. Their audit was conducted in accordance with generally accepted
auditing standards and included an assessment of selected internal accounting
controls only to determine the scope of their audit procedures. The report of
the independent public accountants is contained in this annual report.
The Audit Committee of the Board of Directors, consisting solely of outside
directors, meets periodically with the independent public accountants, internal
auditors and management to review accounting, auditing, internal accounting
control, and financial reporting matters. The independent public accountants
have direct access to the Audit Committee. The Audit Committee meets
separately with the independent public accountants.
R. O. Viets
President and Chief Executive Officer
J. L. Barnett
Controller
Report of Independent Public Accountants
To the Stockholders of CILCORP Inc.:
We have audited the accompanying consolidated balance sheets of CILCORP Inc.
(an Illinois corporation) and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, cash flows, stockholders'
equity and segments of business for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CILCORP Inc. and subsidiaries
as of December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
February 2, 1996
<PAGE>
<TABLE>
Consolidated Statements of Income
CILCORP Inc. and Subsidiaries
<CAPTION>
For the Years Ended December 31 1995 1994 1993
(In thousands except per share amounts)
<S> <C> <C> <C>
Revenue:
Electric $326,198 $313,085 $303,124
Gas 151,546 148,285 150,754
Environmental and Engineering
Services 127,530 132,799 123,162
Other Businesses 9,466 10,970 7,471
-------- -------- --------
Total 614,740 605,139 584,511
-------- -------- --------
Operating Expenses:
Fuel for Generation and
Purchased Power 106,588 106,617 100,866
Gas Purchased for Resale 68,948 78,696 79,022
Other Operations and Maintenance 243,043 234,323 225,135
Disallowed Plant Cost of
Regulated Subsidiary -- 7,522 --
Depreciation and Amortization 63,326 61,143 59,975
State and Local Revenue Taxes 20,866 20,485 19,466
Other Taxes 16,844 16,640 16,412
-------- -------- --------
Total 519,615 525,426 500,876
-------- -------- --------
Fixed Charges and Other:
Interest Expense 29,861 26,341 27,363
Preferred Stock Dividends
of Subsidiary 3,299 2,980 4,043
Allowance for Funds Used During
Construction (514) (1,040) (199)
Other 623 666 516
-------- -------- --------
Total 33,269 28,947 31,723
-------- -------- --------
Income Before Income Taxes 61,856 50,766 51,912
Income Taxes 23,274 18,180 18,069
-------- -------- --------
Net Income Including Minority
Interest 38,582 32,586 33,843
Minority Interest -- -- 260
-------- -------- --------
Net Income Available for
Common Stockholders $ 38,582 $ 32,586 $ 33,583
======== ======== ========
Average Common Shares
Outstanding 13,147 13,026 12,914
======== ======== ========
Net Income Per Common Share $2.93 $2.50 $2.60
======== ======== ========
Dividends Per Common Share $2.46 $2.46 $2.46
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
CILCORP Inc. and Subsidiaries
<CAPTION
Assets (As of December 31) 1995 1994
(In thousands)
<S> <C> <C>
Current Assets:
Cash and Temporary Cash Investments $ 17,100 $ 1,604
Receivables, Less Reserves of $2,223 and $2,291 68,479 55,779
Accrued Unbilled Revenue 42,842 40,474
Fuel, at Average Cost 11,596 14,765
Materials and Supplies, at Average Cost 16,963 16,731
Gas in Underground Storage, At Average Cost 13,592 17,484
Prepayments and Other 14,921 12,402
---------- ----------
Total Current Assets 185,493 159,239
---------- ----------
Investments and Other Property:
Investment in Leveraged Leases 127,141 120,961
Other Investments 7,316 5,427
---------- ----------
Total Investments and Other Property 134,457 126,388
---------- ----------
Property, Plant and Equipment:
Utility Plant, at Original Cost
Electric 1,142,945 1,092,382
Gas 379,985 355,270
---------- ----------
1,522,930 1,447,652
Less - Accumulated Provision for Depreciation 682,574 653,571
---------- ----------
840,356 794,081
Construction Work in Progress 44,749 71,105
Plant Acquisition Adjustments, being Amortized to 1999 2,642 3,355
Other, Net of Depreciation 22,774 23,152
---------- ----------
Total Property, Plant and Equipment 910,521 891,693
---------- ----------
Other Assets:
Prepaid Pension Expense 536 13,312
Cost in Excess of Net Assets of Acquired Businesses,
Net of Accumulated Amortization of $4,293 and $3,589 23,845 24,548
Other 21,219 23,204
---------- ----------
Total Other Assets 45,600 61,064
---------- ----------
Total Assets $1,276,071 $1,238,384
========== ==========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
CILCORP Inc. and Subsidiaries
<CAPTION>
Liabilities and Stockholders' Equity (As of December 31)
1995 1994
(In thousands)
<S> <C> <C>
Current Liabilities:
Current Portion of Long-Term Debt $ 19,052 $ 21,200
Notes Payable 47,100 29,400
Accounts Payable 44,550 51,952
Accrued Taxes 5,035 7,729
Accrued Interest 10,059 9,024
Purchased Gas Adjustment Over-Recoveries 1,987 2,142
Other 15,259 16,557
---------- ----------
Total Current Liabilities 143,042 138,004
---------- ----------
Long-Term Debt 344,113 326,695
---------- ----------
Deferred Credits and Other Liabilities:
Deferred Income Taxes 241,603 246,815
Net Regulatory Liability of Regulated Subsidiary 59,482 59,997
Deferred Investment Tax Credit 24,485 26,178
Other 35,248 29,860
---------- ----------
Total Deferred Credits 360,818 362,850
---------- ----------
Preferred Stock of Subsidiary 66,120 66,120
---------- ----------
Stockholders' Equity: (See Statements on page 33)
Common Stock, no par value; Authorized
50,000,000 shares - Outstanding 13,335,606 and
13,035,756 shares 179,330 167,987
Retained Earnings 182,648 176,728
---------- ----------
Total Stockholders' Equity 361,978 344,715
---------- ----------
Total Liabilities and Stockholders@ Equity $1,276,071 $1,238,384
========== ==========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
CILCORP Inc. and Subsidiaries
<CAPTION>
For the Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Before Preferred Dividends $ 41,881 $ 35,566 $ 37,626
-------- -------- --------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Non-Cash Lease & Investment Income (6,224) (7,121) (4,280)
Depreciation and Amortization 63,326 61,143 59,975
Disallowed Plant Cost of Regulated
Subsidiary -- 7,522 --
Deferred Income Taxes, Investment
Tax Credit and Regulatory
Liability of Subsidiary, Net (7,420) 5,745 6,354
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable and Accrued Unbilled
Revenue (15,068) 276 9,476
(Increase) Decrease in Inventories 6,829 565 (5,609)
Increase (Decrease) in Accounts
Payable (7,402) 4,284 8,067
(Increase) Decrease in Other Assets 12,591 (4,509) (7,831)
Increase (Decrease) in Other
Liabilities 2,276 6,885 (6,565)
-------- -------- --------
Total Adjustments 48,908 74,790 59,587
-------- -------- --------
Net Cash Provided by Operating
Activities 90,789 110,356 97,213
-------- -------- --------
Cash Flows from Investing Activities:
Additions to Plant (74,046) (95,762) (76,933)
Purchase of Long-Term Investments and
Leveraged Lease Property (1,617) (11) (13,595)
Proceeds from Sale of Long-Term
Investments and Leveraged Lease
Property 500 4,667 3,787
Purchase of Minority Interest in
Consolidated Subsidiary -- -- (1,425)
Other (8,836) (6,559) 2,625
-------- -------- --------
Net Cash Provided by (Used) in
Investing Activities (83,999) (97,665) (85,541)
-------- -------- --------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term
Debt 17,700 (1,800) 1,949
Proceeds from Issuance of Long-Term
Debt 36,473 22,000 107,269
Repayment of Long-Term Debt (21,203) -- (108,781)
Proceeds from Issuance of Preferred
Stock by Subsidiary -- -- 46,006
Retirement of Preferred Stock by
Subsidiary -- -- (46,051)
Common Dividends Paid (32,308) (32,063) (31,757)
<PAGE>
Preferred Dividends Paid (3,299) (2,980) (4,043)
Common Stock Issued 11,343 2,325 2,365
Preferred and Common Stock Issuance
Costs -- (9) (1,590)
-------- -------- --------
Net Cash Used in Financing
Activities 8,706 (12,527) (34,633)
-------- -------- --------
Net Increase (Decrease) in Cash and
Temporary Cash Investments 15,496 164 (22,961)
Cash and Temporary Cash Investments
at Beginning of Year 1,604 1,440 24,401
-------- -------- --------
Cash and Temporary Cash Investments
at End of Year $ 17,100 $ 1,604 $ 1,440
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
CILCORP Inc. and Subsidiaries
<CAPTION>
Common Stock Retained
Shares Amount Earnings Total
(In thousands except share amounts)
<S> <C> <C> <C> <C>
Balance at December 31, 1992 12,909,281 $163,297 $175,978 $339,275
Common Stock Issued 62,220 2,365 2,365
Cash Dividend Declared on
Common Stock ($2.46 per (31,757) (31,757)
share)
Preferred and Common Stock
Issuance Costs (1,590) (1,590)
Net Income 33,583 33,583
---------- -------- -------- --------
Balance at December 31, 1993 12,971,501 $165,662 $176,214 $341,876
Common Stock Issued 64,255 2,325 2,325
Cash Dividend Declared on
Common Stock ($2.46 per (32,063) (32,063)
share)
Preferred and Common Stock
Issuance Costs (9) (9)
Net Income 32,586 32,586
---------- -------- -------- --------
Balance at December 31, 1994 13,035,756 $167,987 $176,728 $344,715
Common Stock Issued 299,850 11,343 11,343
Cash Dividend Declared on
Common Stock ($2.46 per
share) (32,308) (32,308)
Additional Minimum Liability of
Non-Qualified Pension Plan at
December 31, 1995, net of
$233 taxes (354) (354)
Net Income 38,582 38,582
---------- -------- -------- --------
Balance at December 31, 1995 13,335,606 $179,330 $182,648 $361,978
========== ======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Segments of Business
CILCORP Inc. and Subsidiaries
<CAPTION>
Operating Information For the Years Ended December 31
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Utility Segment:
Electric Operations
Revenue $326,198 $313,085 $303,124
Expenses 277,429 263,462 253,995
-------- -------- --------
Operating Income 48,769 49,623 49,129
Income Taxes 17,975 19,925 17,542
-------- -------- --------
Operating Income Before
Income Taxes $ 66,744 $ 69,548 $ 66,671
======== ======== ========
Depreciation and Amortization
$ 40,665 $ 39,130 $ 38,337
======== ======== ========
Capital Expenditures $ 45,466 $ 66,537 $ 41,880
======== ======== ========
Gas Operations
Revenue $151,546 $148,285 $150,754
Expenses 136,767 139,401 139,696
-------- -------- --------
Operating Income 14,779 8,884 11,058
Income Taxes 5,292 1,564 4,684
-------- -------- --------
Operating Income Before
Income Taxes $ 20,071 $ 10,448 $ 15,742
======== ======== ========
Depreciation and Amortization
$ 16,100 $ 15,219 $ 14,686
======== ======== ========
Capital Expenditures $ 24,043 $ 24,867 $ 30,677
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Major Customer For the Years Ended December 31
1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Caterpillar Inc.
Electric Revenue $40,109 12.3% $41,422 13.2% $39,831 13.1%
Gas Revenue 1,022 .7% 1,719 1.2% 1,581 1.0%
------- ----- ------- ---- ------- ----
Total $41,131 8.6% $43,141 9.4% $41,412 9.1%
======= ===== ======= ==== ======= ====
</TABLE>
<TABLE>
<CAPTION>
Utility Identifiable Assets as of December 31
1995 1994 1993
<S> <C> <C> <C>
Electric $ 735,463 $ 718,431 $ 684,618
Gas 273,428 260,070 259,462
Other Utility Assets* 43,122 38,505 44,245
---------- ---------- --------
Total Utility Assets $1,052,013 $1,017,006 $ 988,325
========== ========== ========
<FN>
*Other investments, miscellaneous accounts receivable, prepaid assets,
deferred pension costs, and unamortized debt, discount, and expense
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
Environmental and Engineering Services Segment
<CAPTION>
For the Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Revenue $127,530 $132,799 $123,162
Operating Expenses 124,668 127,802 124,289
-------- -------- --------
Operating Income (Loss) Before
Income Taxes $ 2,862 $ 4,997 $ (1,127)
======== ======== ========
Depreciation and Amortization $ 5,646 $ 5,867 $ 6,064
======== ======== ========
Capital Expenditures $ 4,537 $ 4,358 $ 4,300
======== ======== ========
</TABLE>
<TABLE>
Environmental and Engineering Services
<CAPTION>
Identifiable Assets as of December 31 1995 1994 1993
<S> <C> <C> <C>
Property, Plant and Equipment $21,961 $22,254 $23,116
Cost in Excess of Net Assets of
Acquired Businesses, Net of
Amortization 23,845 24,548 25,251
Accounts Receivable and Unbilled
Revenue 37,238 42,199 36,637
Other Assets* 4,908 4,463 2,433
------- ------- -------
Total Environmental and
Engineering Services Assets $87,952 $93,464 $87,437
======= ======= =======
<FN>
*Real estate held for resale and other current assets
</TABLE>
<TABLE>
Other Businesses Segment
<CAPTION>
For the Years Ended December 31 1995 1994 1993
<S> <C> <C> <C>
Revenue $9,466 $10,970 $ 7,471
Expenses 9,494 9,365 6,264
------ ------- -------
Income (Loss) Before
Income Taxes $ (28) $ 1,605 $ 1,207
====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Other Businesses Identifiable
Assets as of December 31 1995 1994 1993
<S> <C> <C> <C>
Leveraged Leases $127,140 $120,961 $114,803
Cash and Temporary Cash
Investments 544 1,179 1,564
Other Assets 8,422 5,774 6,311
-------- -------- --------
Total Other Businesses Assets $136,106 $127,914 $122,678
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CILCORP Inc.
(CILCORP or the Company), Central Illinois Light Company (CILCO),
Environmental Science & Engineering, Inc. (ESE) and CILCORP's other
subsidiaries after elimination of significant intercompany transactions.
Prior year amounts have been reclassified on a basis consistent with the 1995
presentation.
CILCORP is an investor-owned public utility holding company. The Company's
principal business subsidiary is engaged in the generation, transmission,
distribution and sale of electric energy in an area of approximately 3,700
square miles in central and east-central Illinois, and the purchase,
distribution, transportation and sale of natural gas in an area of
approximately 4,500 square miles in central and east-central Illinois. The
Company also has four other first-tier subsidiaries which are nonutility
businesses. These subsidiaries provide: engineering and environmental
consulting, analysis and laboratory services; acquire and remediate
environmentally impaired property for resale; manage the Company's investment
portfolio; pursue investment opportunities in new ventures and the expansion
of existing ventures in environmental services, energy, biotechnology, health
care and telecommunications; and provide wholesale marketing and brokering
services for electric power, transmission services, and fuel supplies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REGULATION
CILCO is a public utility subject to regulation by the Illinois Commerce
Commission and the Federal Energy Regulatory Commission with respect to
accounting matters, and maintains its accounts in accordance with the Uniform
System of Accounts prescribed by these agencies.
As a regulated public utility, CILCO is subject to the provisions of Statement
of Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation" (SFAS 71). Regulatory increases and decreases,
respectively, of assets and liabilities represent probable future increases
and decreases, respectively, of revenues to CILCO resulting from the
ratemaking action of regulatory agencies. Net regulatory liabilities are
approximately $59.5 million and $60 million at December 31, 1995 and 1994,
respectively (see Note 2). At December 31, 1995 and 1994, the regulatory
assets included on the Consolidated Balance Sheets were as follows:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Included in prepayments and other:
Fuel and gas cost adjustments $ 1,516 $ 3,682
Coal tar remediation cost - estimated
current 1,500 300
Gas transition costs 2,268 1,171
------- -------
Current costs included in
prepayments and other 5,284 5,153
------- -------
Included in other assets:
Coal tar remediation cost, net of
recoveries 4,222 4,993
Gas transition costs 1,656 2,781
Deferred gas costs 3,207 3,895
Unamortized loss on reacquired debt 6,029 6,486
------- -------
Future costs included in other assets 15,114 18,155
------- -------
Total regulatory assets $20,398 $23,308
======= =======
</TABLE>
If a portion of CILCO's operations becomes no longer subject to the provisions
of SFAS 71, a write-off of related regulatory assets and liabilities would be
required, unless some form of transition cost recovery (refund) continues
through rates established and collected for CILCO's remaining regulated
operations. In addition, CILCO would be required to determine any impairment
to the costs recorded for deregulated plant and inventory assets.
UTILITY OPERATING REVENUES, FUEL COSTS AND COST OF GAS
Electric and gas revenues include service provided but unbilled at year end.
Substantially all electric rates and gas system sales rates of CILCO include a
fuel adjustment clause and a purchased gas adjustment clause, respectively.
These clauses provide for the recovery of changes in electric fuel costs,
excluding coal transportation, and changes in the cost of gas on a current
basis in billings to customers. CILCO adjusts the cost of fuel and cost of
gas to recognize over or under recoveries of allowable costs. The cumulative
effects are deferred on the Balance Sheets as a current asset or current
liability (see Regulation, above) and adjusted by refunds or collections
through future billings to customers.
CONCENTRATION OF CREDIT RISK
CILCO, as a public utility, must provide service to customers within its
defined service territory and may not discontinue service to residential
customers when certain weather conditions exist. CILCO continually reviews
customers' creditworthiness and requests deposits or refunds deposits based on
that review. At December 31, 1995, CILCO had net receivables of
$42.3 million, of which approximately $5.5 million was due from its major
industrial customers.
See Note 5 for a discussion of receivables related to CILCORP Investment
Management Inc.'s leveraged lease portfolio.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of Cash and Temporary Cash Investments, Other Investments,
Preferred Stock with Mandatory Redemption and Notes Payable approximates fair
value. The estimated fair value of the Company's Long-Term Debt, including
current maturities, was $399 million at December 31, 1995, and $340 million at
December 31, 1994, based on current market interest rates for other companies
with comparable credit ratings, capital structures, and size.
ENVIRONMENTAL AND ENGINEERING SERVICES REVENUES
ESE performs professional environmental and engineering consulting and
analytical laboratory services under time and material, cost-plus and fixed-
price contracts. These service revenues include amounts for services provided
but unbilled at year end. Revenues from time and material and cost-plus
contracts are recognized as costs are incurred. Revenues from fixed-price
contracts are recognized under the percentage-of-completion method.
DEPRECIATION AND MAINTENANCE
Provisions for depreciation of utility property for financial reporting
purposes are based on straight-line composite rates. The annual provisions
for utility plant depreciation, expressed as a percentage of average
depreciable utility property, were 3.8% and 4.6% for electric and gas,
respectively, for each of the last three years. Utility maintenance and
repair costs are charged directly to expense. Renewals of units of property
are charged to the utility plant account, and the original cost of depreciable
property replaced or retired, together with the removal cost less salvage, is
charged to the accumulated provision for depreciation.
Non-utility property is depreciated over estimated lives ranging from 5 to 40
years.
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES
Cost in excess of net assets of acquired businesses is being amortized using
the straight-line method over 40 years. The amortization is related to ESE
and is a component of depreciation and amortization expense on the
Consolidated Statements of Income.
INCOME TAXES
The Company follows a policy of comprehensive interperiod income tax
allocation. Investment tax credits related to utility property have been
deferred and are being amortized over the estimated useful lives of the
related property. CILCORP and its subsidiaries file a consolidated federal
income tax return. Income taxes are allocated to the individual companies
based on their respective taxable income or loss.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company considers all highly liquid debt instruments purchased with a
remaining maturity of three months or less to be cash equivalents for purposes
of the Consolidated Statements of Cash Flows.
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Interest $27,615 $27,663 $24,514
Income taxes 32,673 13,103 14,760
------- ------- -------
</TABLE>
COMPANY-OWNED LIFE INSURANCE POLICIES
The following amounts related to Company-owned life insurance contracts,
issued by one major insurance company, are included in Other Investments:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Cash surrender value of contracts $35,135 $30,468
Borrowings against contracts (33,211) (28,831)
------- -------
Net investment $ 1,924 $ 1,637
======= =======
</TABLE>
Interest expense related to borrowings against Company-owned life insurance,
included in "Other" on the Consolidated Statements of Income, was
$2.3 million, $2 million and $1.4 million for 1995, 1994 and 1993,
respectively.
NOTE 2 - INCOME TAXES
The Company follows the liability method to account for income taxes. Under
the liability method, deferred income taxes are recognized at currently
enacted income tax rates to reflect the tax effect of temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities. Temporary differences occur because the income tax law either
requires or permits certain items to be reported on the Company's income tax
return in a different year than they are reported in the financial statements.
CILCO has recorded a regulatory liability to account for the net effect of
expected future regulatory actions related to unamortized investment tax
credits, income tax liabilities initially recorded at tax rates in excess of
current rates, the equity component of Allowance for Funds Used During
Construction and other items for which deferred taxes had not previously been
provided. The temporary differences related to the consolidated net deferred
income tax liability at December 31, 1995, December 31, 1994 and December 31,
1993, were as follows:
<TABLE>
<CAPTION>
December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Property, including
allowance for funds used
during construction $217,049 $216,304 $216,897
Leveraged leases 93,566 88,308 80,129
Other 5,641 13,760 14,427
Deferred tax assets:
Other (15,171) (11,560) (12,079)
Net regulatory liability of
regulated subsidiary (59,482) (59,997) (69,477)
-------- -------- --------
Deferred income taxes $241,603 $246,815 $229,897
======== ======== ========
<FN>
Of the $5,212,000 decrease in the consolidated net deferred income tax
liability at December 31, 1995, from December 31, 1994, $5,377,000 is due to
current year deferred federal and state income tax. An additional reduction to
deferred tax liability of approximately $233,000 was recorded due to an equity
adjustment related to the CILCO early retirement programs.
</TABLE>
Income tax expenses were as follows:
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Current income taxes
Federal $25,024 $11,825 $10,102
State 5,320 2,238 3,352
------- ------- -------
Total current taxes 30,344 14,063 13,454
------- ------- -------
Deferred income taxes, net
Property-related deferred
income taxes 516 (1,094) (2,316)
Leveraged leases 6,341 8,179 5,257
Unbilled revenue (2,982) 222 758
Gas take-or-pay settlements (751) (1,244) 1,413
Coal tar remediation costs 642 253 120
Pension expenses (6,673) (145) (646)
Customer advances (1,467) (143) (24)
Other (1,003) (218) 1,747
-------- ------- -------
Total deferred income
taxes, net (5,377) 5,810 6,309
-------- ------- -------
Investment tax credit
amortization (1,693) (1,693) (1,694)
-------- ------- -------
Total income tax
provisions $23,274 $18,180 $18,069
======== ======= =======
<FN>
Total deferred income taxes, net, includes deferred state income taxes of
$(67,000), $1,801,000 and $1,827,000 for 1995, 1994 and 1993, respectively.
</TABLE>
The following table represents a reconciliation of the effective tax rate with
the statutory federal income tax rate.
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Statutory federal income tax 35.0% 35.0% 35.0%
----- ----- -----
Equity component of AFUDC not subject to
taxation (.1) (.4) --
Depreciation differences for which
deferred taxes have not been provided 1.0 1.2 1.0
Amortization of investment tax credit (2.7) (3.3) (3.3)
State income taxes 5.9 5.3 7.1
Excess of book over tax basis of assets .4 .5 .5
Preferred dividends of subsidiary and
other permanent differences 1.1 2.3 2.4
Tax provision adjustment .5 (1.3) (5.3)
Civil fine -- .7 --
Other differences (3.5) (4.2) (2.6)
----- ----- ----
Total 2.6 .8 (.2)
----- ----- ----
Effective income tax rate 37.6% 35.8 34.8
===== ==== ====
</TABLE>
NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE
CILCO has recorded a liability of approximately $0.9 million and $1.5 million
at December 31, 1995 and 1994, respectively, for benefits other than pensions
or health care provided to former or inactive employees.
PENSION BENEFITS
Substantially all of CILCO's full-time employees, including those assigned to
the Holding Company and QST, are covered by trusteed, non-contributory defined
benefit pension plans. Benefits under these qualified plans reflect the
employee's years of service, age at retirement and maximum total compensation
for any consecutive sixty-month period prior to retirement. CILCO also has an
unfunded nonqualified plan for certain employees.
Pension costs for the past three years were charged as follows:
<TABLE>
<CAPTION> 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Operating expenses $15,383 $2,465 $1,841
Utility plant and other 1,139 1,189 925
------- ------ ------
Net pension costs $16,522 $3,654 $2,766
======= ====== ======
</TABLE>
Provisions for pension expense reflect the use of the projected unit credit
actuarial cost method. At December 31, 1995, CILCO recognized an additional
minimum liability on the Balance Sheets for the plan in which the accumulated
benefit obligation exceeds the fair value of plan assets.
The components of net periodic pension costs follows:
<TABLE>
<CAPTION> 1995 1994
(In thousands)
<S> <C> <C>
Cost of pension benefits earned by employees $ 4,654 $ 5,589
Interest cost on projected benefit obligation 15,188 14,422
Actual return on plan assets (50,816) 1,237
Net amortization and deferral 34,437 (17,594)
Special termination benefits 13,059 --
-------- --------
Net pension costs $ 16,522 $ 3,654
======== ========
</TABLE>
During 1995, CILCO recognized $13.1 million of net pension costs 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. These amounts represented the costs associated with
additional benefits extended in connection with voluntary early retirement
programs.
Information on the funded status of plans in which assets exceed accumulated
benefits follows:
<TABLE>
<CAPTION>
Actuarial present value of accumulated benefit 1995 1994
obligation: (In thousands)
<S> <C> <C>
Vested benefits - employees' rights to receive
benefits no longer contingent upon continued
employment $171,422 $145,975
Non-vested benefits - employees' rights to
receive benefits contingent upon continued
employment 15,266 11,258
-------- --------
Net benefit obligation $186,688 $157,233
======== ========
Funded status: pension assets and obligations
Pension assets at fair market value $232,560 $192,427
Projected benefit obligation at present value (233,746) (189,438)
Unrecognized transition asset (6,675) (7,842)
Unrecognized prior service cost 9,034 10,603
Unrecognized net (gain) loss (3,338) 7,562
------- --------
Pension asset (liability) recorded on Balance
Sheets $ (2,165) $ 13,312
======= ========
</TABLE>
Information on the funded status of the plan in which accumulated benefits
exceed assets follows:
<TABLE>
<CAPTION>
Actuarial present value of accumulated benefit 1995 1994
obligation: (In thousands)
<S> <C> <C>
Vested benefits - employees' rights to receive
benefits no longer contingent upon continued
employment $1,792 $900
Non-vested benefits - employees' rights to
receive benefits contingent upon continued
employment 132 --
------ ----
Net benefit obligation $1,924 $900
====== ====
Funded status: pension assets and obligations
Pension assets at fair market value $ -- $ --
Projected benefit obligation at present value (2,689) (1,002)
Unrecognized prior service cost 536 576
Unrecognized net (gain) loss 1,352 (363)
Adjustment to recognize minimum liability (1,123) (111)
------- -----
Pension liability recorded on Balance Sheets $(1,924) $ (900)
======= =====
</TABLE>
<TABLE>
<CAPTION>
Significant assumptions used for calculations: 1995 1994
<S> <C> <C>
Discount rate 7.25% 8.00%
Expected rate of salary increase 4.50% 4.50%
Expected long-term rate of return 8.50% 8.50%
</TABLE>
POSTRETIREMENT HEALTH CARE BENEFITS
Provisions for postretirement benefits expenses are determined under the
accrual method of accounting.
Substantially all of CILCO's full-time employees, including those assigned to
the Holding Company and QST, are currently covered by a trusteed, non-
contributory defined benefit postretirement health care plan. The plan pays
stated percentages of most necessary medical expenses incurred by retirees,
after subtracting payments by Medicare or other providers and after a stated
deductible has been met. Participants become eligible for the benefits if
they retire from CILCO after reaching age 55 with 10 or more years of service.
ESE does not provide health care benefits to retired employees.
Postretirement health care benefit costs were charged as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Operating expenses $5,108 $5,253 $5,767
Utility plant and other 1,882 1,913 2,060
------ ------ ------
Net postretirement health care
benefit costs $6,990 $7,166 $7,827
====== ====== ======
</TABLE>
Information on the plans' funded status, on an aggregate basis, follows:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Components of net postretirement health care
benefit costs:
Service cost - benefits attributed
to service during the period $ 1,302 $ 1,496
Actual return on plan assets (5,936) 133
Interest cost on accumulated
postretirement health care
benefit obligation 4,795 4,469
Amortization of transition
obligation over 18.6 years 2,858 2,858
Other net amortization and 3,971 (1,790)
deferral
------- -------
Net postretirement health care
benefit costs $ 6,990 $ 7,166
======= =======
Accumulated postretirement health
care benefit obligation:
Retirees $36,646 $30,849
Other fully eligible participants 12,668 10,859
Other active participants 22,003 20,046
------- -------
Total accumulated postretirement
health care benefit obligation 71,317 61,754
Less:
Unrecognized actuarial gain (814) (3,046)
Unrecognized transition obligation 38,871 41,730
Plan assets at fair value 33,157 22,929
------- -------
Accrued postretirement health
care benefit cost liability $ 103 $ 141
======= =======
</TABLE>
For measurement purposes, the health care cost trend rate averaged 8.5%
annually for 1995; the rate was assumed to decrease gradually to 6% by 2049
and remain at that level thereafter.
Increasing the assumed health care cost trend rate by 1% in each year would
increase the accumulated postretirement benefit obligation at
December 31, 1995, by $3.2 million and the aggregate of the service and
interest cost components of net postretirement health care cost for 1995 by
$268,000. The discount rate used in determining the accumulated
postretirement benefit obligation at December 31, 1995, was 7.25% and at
December 31, 1994, was 8%. The weighted average expected return on assets net
of taxes was 8.1%, where taxes are assumed to decrease return by 0.4%.
NOTE 4 - SHORT-TERM DEBT
Short-term debt at December 31, 1995, consisted of $22.5 million of Holding
Company bank borrowings and $24.6 million of CILCO commercial paper. Short-
term debt at December 31, 1994, included $6 million of Holding Company bank
borrowings and $23.4 million of CILCO commercial paper.
The Holding Company had arrangements for bank lines of credit totaling
$50 million at December 31, 1995, of which $22.5 million was used. These
lines were maintained by commitment fees of 1/8 of 1% per annum in lieu of
balances. The Company also had a $5 million discretionary bank line at the
end of 1995, which was unused.
CILCO had arrangements for bank lines of credit totaling $30 million at
December 31, 1995, all of which were unused. These lines of credit were
maintained by commitment fees of 1/20 of 1% per annum in lieu of balances.
These bank lines of credit support CILCO's issuance of commercial paper.
At December 31, 1995, ESE had a $10 million bank line of credit, of which $4.4
million was committed at year end to collateralize performance bonds issued in
connection with ESE projects.
NOTE 5 - LEVERAGED LEASE INVESTMENTS
The Company, through subsidiaries of CILCORP Investment Management Inc. (CIM),
is a lessor in seven leveraged lease arrangements under which mining
equipment, electric production facilities, warehouses, office buildings,
passenger railway equipment and an aircraft are leased to third parties. The
economic lives and lease terms vary with the leases. CIM's share of total
equipment and facilities cost was approximately $305 million at December 31,
1995 and 1994.
The cost of the equipment and facilities owned by CIM is partially financed by
non-recourse debt provided by lenders, who have been granted as their sole
remedy in the event of a lessee default, an assignment of rents due under the
leases and a security interest in the leased property. Such debt amounted to
$216 million at December 31, 1995, and $223 million at December 31, 1994.
Leveraged lease residual value assumptions, which are conservative in relation
<PAGE>
to independently appraised residual values, are tested on a periodic basis.
CIM's net investment in leveraged leases at December 31, 1995 and 1994 is
shown below:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Minimum lease payments receivable $122,713 $122,757
Estimated residual value 94,368 94,368
Less: Unearned income 89,940 96,164
-------- --------
Investment in lease financing
receivables 127,141 120,961
Less: Deferred taxes arising from
leveraged leases 93,566 88,308
-------- --------
Net investment in leveraged leases $ 33,575 $ 32,653
======== ========
</TABLE>
NOTE 6 - PREFERRED STOCK
PREFERRED STOCK OF SUBSIDIARY
<TABLE>
<CAPTION>
At December 31 1995 1994
(In thousands)
<S> <C> <C>
Preferred stock, cumulative
$100 par value, authorized 1,500,000 shares
Without mandatory redemption
4.50% series - 111,264 shares $11,126 $11,126
4.64% series - 79,940 shares 7,994 7,994
Class A, no par value, authorized
3,500,000 shares
Flexible auction rate - 250,000
shares (a) 25,000 25,000
With mandatory redemption
5.85% series - 220,000 shares 22,000 22,000
------- -------
Total preferred stock $66,120 $66,120
======= =======
<FN>
(a) Dividend rates at December 31, 1995 and 1994, were 4.40% and 4.72%,
respectively.
</TABLE>
All classes of preferred stock are entitled to receive cumulative dividends and
rank equally as to dividends and assets, according to their respective terms.
The total annual dividend requirement for preferred stock outstanding at
December 31, 1995, is $3.3 million, assuming a continuation of the auction
dividend rate at December 31, 1995, for the flexible auction rate series.
PREFERRED STOCK WITHOUT MANDATORY REDEMPTION
The call provisions of preferred stock redeemable at CILCO's option outstanding
at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Series Callable Price Per Share (plus accrued dividends)
<S> <C>
4.50% $110
4.64% $102
Flexible Auction Rate $100
</TABLE>
PREFERRED STOCK WITH MANDATORY REDEMPTION
CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per
share. A mandatory redemption fund must be established on July 1, 2003. The
fund will provide for the redemption of 11,000 shares for $1.1 million on
July 1 of each year through July 1, 2007. On July 1, 2008, the remaining
165,000 shares will be retired for $16.5 million.
PREFERENCE STOCK OF SUBSIDIARY, CUMULATIVE
No Par Value, Authorized 2,000,000 shares, of which none have been issued.
PREFERRED STOCK OF HOLDING COMPANY
No Par Value, Authorized 4,000,000 shares, of which none were outstanding
at December 31, 1995 and 1994.
NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31 1995 1994
(In thousands)
<S> <C> <C>
CILCO first mortgage bonds
5 1/8% series due 1996 $ -- $ 16,000
5 1/2% series due 1997 20,000 20,000
7 1/2% series due 2007 50,000 50,000
8 1/5% series due 2022 65,000 65,000
Medium-term notes
5.7% series due 1998 10,650 10,650
6.4% series due 2000 30,000 30,000
6.82% series due 2003 25,350 25,350
6.13% series due 2005 16,000 --
7.8% series due 2023 10,000 10,000
7.73% series due 2025 20,000 --
Pollution control refunding bonds
6.5% series F due 2010 5,000 5,000
6.2% series G due 2012 1,000 1,000
6.5% series E due 2018 14,200 14,200
5.9% series H due 2023 32,000 32,000
-------- --------
299,200 279,200
Unamortized premium and discount on
long-term debt, net (803) (841)
-------- --------
Total CILCO $298,397 $278,359
-------- --------
CILCORP Lease Management Inc.
Unsecured financial institution borrowings;
interest rate of 9.55%; matures in 1997 $3,000 $3,000
CILCORP Inc.
Unsecured medium-term notes; varying in term
from 2 years to 6 years; interest rates
ranging from 8.33% to 9.10% 42,000 45,000
Other 716 336
-------- --------
Total long-term debt $344,113 $326,695
======== ========
</TABLE>
CILCO's first mortgage bonds are secured by a lien on substantially all of its
property and franchises. Unamortized borrowing expense, premium and discount
on outstanding long-term debt are being amortized over the lives of the
respective issues.
Total consolidated maturities of long-term debt for 1997-2000 are $23 million,
$22 million, $13 million and $30 million, respectively.
The 1996 maturities of long-term borrowings have been classified as current
liabilities.
NOTE 8 - COMMITMENTS & CONTINGENCIES
CILCO's 1996 capital expenditures are estimated to be $49.3 million, in
connection with which CILCO has normal and customary purchase commitments at
December 31, 1995.
CILCO's policy is to act as a self-insurer for certain insurable risks
resulting from employee health and life insurance programs.
ESE expects to spend $8 million in 1996 to acquire land for remediation and
resale. Additional capital expenditures for 1996 are estimated to be
$1 million, in connection with which ESE has normal and customary purchase
commitments at December 31, 1995.
ESE's policy is to act as a self-insurer for certain insurable risks resulting
from employee health programs and professional liability claims.
In August 1990, CILCO entered into a firm, wholesale power purchase agreement
with Central Illinois Public Service Company (CIPS). This agreement, which
expires in 1998, provides for an initial purchase of 30 megawatts (MW) of
capacity, increasing to 90 MW in 1997. CILCO can increase purchases to a
maximum of 100 MW during the contract period, provided CIPS then has the
additional capacity available. In November 1992, CILCO entered into a limited-
term power agreement to purchase 100 MW of CIPS' capacity from June 1998
through May 2002.
In March 1995, CILCO and CIPS renegotiated the November 1992 limited-term power
agreement. This agreement, which now expires in May 2009, provides for CILCO
to purchase 150 MW of CIPS@ capacity from June 1998 through May 2002, and 50 MW
from June 2002 through May 2009. This renegotiated agreement is subject to the
ICC's final approval of CILCO's 1995 electric least cost energy plan, which has
been revised to include the terms of this bulk power purchase agreement. ICC
approval is expected in June 1996.
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations, Environmental Matters (regarding former
gas manufacturing sites) for a discussion of that item.
NOTE 9 - RATE MATTERS
In December 1994, the ICC issued a rate order designed to grant CILCO a $10.6
million, or 6.7% annual increase in gas base rate revenues. The new rates,
designed to yield an 11.82% return on common equity and a 9.24% return on rate
base, were effective in December 1994.
In mid-1992, after a significant number of leaks were detected in CILCO@s
Springfield cast iron gas distribution system, CILCO began a detailed
examination of its Springfield gas distribution system and related operating
practices and procedures. CILCO thereafter began an aggressive program to
renew its Springfield gas cast iron main system. This project was completed
in November 1995.
As a part of the rate order, the ICC disallowed approximately $7.5 million of
CILCO@s $24 million investment in the Springfield cast iron main renewal
project. To reflect the disallowance, CILCO recorded a pre-tax charge of
approximately $7.5 million ($4.5 million after tax) against 1994 earnings.
The ICC staff began an informal review of CILCO@s Springfield gas operations
and record-keeping practices in September 1992. Subsequently, the U.S.
Department of Transportation (DOT) and the U.S. Department of Justice (DOJ)
began conducting investigations of CILCO which were also focused principally
on CILCO@s Springfield gas operations and its record-keeping practices.
In September 1994, CILCO entered into a federal court civil consent decree
with the DOJ which concluded the DOT and DOJ investigations of CILCO. As a
part of the settlement with the DOJ, CILCO accepted adjustments recommended by
the ICC staff which resulted in a net disallowance from CILCO@s gas rate base
of approximately $4.5 million of the cost of the Springfield cast iron main
renewal project. This charge is part of the $7.5 million disallowance
included in the December 1994 rate order. In addition to the rate base
disallowance, CILCO agreed to pay an $844,000 civil fine to the United States
and agreed to reimburse the ICC, the DOT and the DOJ $156,000 for the costs of
their investigations. CILCO also agreed to underwrite the reasonable expense
of an outside expert, selected by the ICC, to examine CILCO's gas operations
manuals and systems to ensure they are in compliance with all applicable
statutes and regulations. The audit was completed in October 1995 at a total
cost of $356,000.
The DOJ agreed not to seek any additional civil or criminal penalties from
CILCO or the Company. The ICC staff also agreed not to seek any additional
enforcement penalties from CILCO or the Company. CILCO agreed to continue to
cooperate with the DOJ in its investigation and prosecution of any individuals
who may be responsible for willful violations of any applicable statute or
regulation.
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations, Electric Competition and Environmental
Matters for a discussion of other gas and electric rate matters.
NOTE 10 - LEASES
The Company and its subsidiaries lease certain equipment, buildings and other
facilities under capital and operating leases. Several of the operating
leases provide that the Company pay taxes, maintenance and other occupancy
costs applicable to these premises.
Minimum future rental payments under non-cancellable capital and operating
leases having remaining terms in excess of one year as of December 31, 1995,
are $27.2 million in total. Payments due during the years ending December 31,
1996 through December 31, 2000, are $8.1 million, $6.4 million, $4.4 million,
$3.5 million and $2.2 million, respectively.
NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly operating results are unaudited, but, in the opinion
of management, include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of CILCORP Inc.'s operating
results for the periods indicated. The results of operations for each of the
fiscal quarters are not necessarily comparable to, or indicative of, the
results of an entire year due to the seasonal nature of the Company's business
and other factors.
<TABLE>
<CAPTION>
For the Three Months Ended March 31 June 30 September 30 December 31
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
1995
Revenue $170,587 $132,490 $157,574 $154,089
Income before income taxes 18,833 8,890 32,031 2,102
Net income 11,473 5,677 19,435 1,997
Earnings per average
common share $.88 $.43 $1.47 $.15
1994
Revenue $177,436 $137,146 $145,854 $144,703
Income before income taxes 15,577 11,469 15,158 8,562
Net income 9,701 6,940 9,570 6,375
Earnings per average
common share $.75 $.53 $.73 $.49
</TABLE>
BY-LAWS
of
CILCORP Inc.
(As Amended Effective April 25, 1995)
ARTICLE I
OFFICES
The corporation shall continuously maintain in the State of Illinois
a registered office and a registered agent whose business office is identical
with such registered office, and may have other offices within or without the
State.
ARTICLE II
SHAREHOLDERS
SECTION l. ANNUAL MEETING. An annual meeting of the shareholders
shall be held on the fourth Tuesday of April in each year commencing in 1986,
such meeting to be held at such time as determined by the Board of Directors
and specified in the notice of such annual meeting for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal holi
day, such meeting shall be held on the next succeeding business day.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the Chief Executive Officer, by the Board of Directors, or by
the holders of not less than one-fifth of all the outstanding shares entitled
to vote on the matter for which the meeting is called, for the purpose or
purposes stated in the call of the meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate
any place as the place of meeting for any annual meeting or for any special
meeting called by the Board of Directors. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be at the
principal office of the corporation in the City of Peoria, Illinois.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place,
date and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten nor more than sixty days before the date of the meeting, or in
the case of a merger, consolidation, share exchange, dissolution or sale,
lease or exchange of assets, not less than twenty nor more than sixty days
before the meeting, either personally or by mail, by or at the direction of
the President, or the Secretary, or the officer or persons calling the meet
ing, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the records of the corporation, with postage thereon prepaid. When
a meeting is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
the shareholders entitled to notice of or to vote at any meeting of sharehold
ers, or to receive payment of any dividend, or for the purpose of determining
shareholders for any other proper purpose, the Board of Directors may fix in
advance a record date which shall not be more than sixty days and, for a
meeting of shareholders, not less than ten days, or in the case of a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of
assets, not less than twenty days, before the date of such meeting. If no
record date is fixed, the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall be the
date on which notice of the meeting is mailed, and the record date for the
determination of shareholders for any other purpose shall be the date on which
the Board of Directors adopts the resolution relating thereto. A determina
tion of shareholders of record entitled to notice of or to vote at a meeting
of shareholders shall apply to any adjournment of the meeting.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation shall make, within twenty days
after the record date for a meeting of shareholders or ten days before such
meeting, whichever is earlier, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of ten days prior
to such meeting, shall be kept on file at the registered office of the corpo
ration and shall be subject to inspection by any shareholder, and to copying
at the shareholder's expense, for any purpose germane to the meeting, at any
time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and may be inspected by any share
holder during the whole time of the meeting. The original share ledger or
transfer book, or a duplicate thereof kept in this State, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or share
ledger or transfer book or to vote at any meeting of shareholders.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation entitled to vote on a matter, represented in person or by proxy,
shall constitute a quorum for consideration of such matter at a meeting of
shareholders; provided, that if less than a majority of the outstanding shares
entitled to vote on a matter are represented at said meeting, a majority of
the shares so represented may adjourn the meeting as to that matter at any
time without further notice. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
a matter shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by the Business Corporation Act of
1983, or the Articles of Incorporation. At any adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the original meeting. Withdrawal of shareholders from any
meeting shall not cause failure of a duly constituted quorum at that meeting.
SECTION 8. PROXIES. Each shareholder entitled to vote at a meeting
of shareholders or to express consent or assent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be valid after eleven months from the date
thereof, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares registered
in the name of another corporation, domestic or foreign, may be voted by any
officer, agent, proxy or other legal representative authorized to vote such
shares under the law of incorporation of such corporation.
Shares registered in the name of a deceased person, a minor ward or
person under legal disability, may be voted by his or her administrator,
executor or court appointed guardian, either in person or by proxy, without a
transfer of such shares into the name of such administrator, executor or court
appointed guardian. Shares standing in the name of a trustee may be voted by
him or her, either in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted
by such receiver without the transfer thereof into his or her name if authori
ty so to do is contained in an appropriate order of the court by which such
receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Shares of the corporation held by it in a fiduciary capacity may be
voted and shall be counted in determining the total number of outstanding
shares entitled to vote at any given time.
SECTION 11. INSPECTORS. At any meeting of shareholders, the
chairman of the meeting may, or upon the request of any shareholder shall,
appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or
her or by a majority of them if there be more than one inspector acting at
such meeting. If there is more than one inspector, the report of a majority
shall be the report of the inspectors. The report of the inspector or inspec
tors on the number of shares represented at the meeting and the results of the
voting shall be prima facie evidence thereof.
SECTION 12. VOTING BY BALLOT. Voting on any question or in any
election may be by voice unless the chairman of the meeting shall order or any
shareholder entitled to vote shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION l. GENERAL POWERS. The business and affairs of the corpo
ration shall be managed by or under the direction of its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of direc
tors of the corporation shall be ten.
Directors need not be residents of Illinois or shareholders of the
corporation. Unless sooner terminated by any other provision hereof, the term
of any director shall automatically expire at the first annual meeting of the
shareholders following his or her attainment of the age of 67. Provided,
however, that the term of any director serving in such capacity and over the
age of 60 on August 20, 1993 shall automatically expire at the first annual
meeting of the shareholders following his or her attainment of the age of 70.
Notwithstanding any other provision hereof, the term of any director who is an
officer or other full time employee of the corporation shall automatically
expire at the first annual meeting of the shareholders following his or her
retirement from employment by the corporation unless such retiree was the
Chief Executive Officer of the corporation at the time of retirement, in which
case his or her term as a director (unless such term otherwise sooner termi
nates) shall automatically terminate at the second annual meeting of share
holders following his or her retirement. Any such retiree shall not thereafter
be eligible to stand for election to the Board of Directors, except that any
such retiree who was the Chief Executive of the corporation at the time of
retirement and whose term expires at the annual meeting of shareholders next
following his or her retirement shall be eligible to stand for election to a
single, additional term of one year, which one-year term shall commence at the
annual meeting of shareholders next following the retirement of such Chief
Executive Officer. If a vacancy occurs in the Board of Directors prior to the
end of what would have been a three-year term but for the provisions of this
paragraph, the vacancy shall be filled for the balance of said three-year term
in accordance with the provisions of Section 9 of this Article.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this By-law, immediately
after the annual meeting of shareholders. The Board of Directors may provide,
by resolution, the time and place for the holding of additional regular
meetings without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chief Executive Officer or
any two directors. The person or persons authorized to call special meetings
of the Board of Directors may fix any place as the place for holding any
special meeting of the Board of Directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given by
written notice to each director at his business address. If mailed, such
notice shall be given at least seven days prior to the meeting, and shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, or overnight
delivery service, such notice shall be given at least three days prior to the
meeting and shall be deemed to be delivered when, in the case of a telegram,
it is delivered to the telegraph company, or in the case of overnight delivery
service, it is delivered to the carrier. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the trans
action of any business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by
these By-laws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, provided that if less than a majority of
such number of directors are present at said meeting, a majority of the
directors present may adjourn the meeting at any time without further notice.
The presence of a director who is directly or indirectly a party to a transac
tion to be acted upon by the Board of Directors, or who is otherwise not
disinterested, may be counted in determining whether a quorum is present, but
the vote of such director may not be counted when the Board of Directors or a
committee of the Board takes action on the transaction.
SECTION 7. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors, unless the act of a greater number is required by
these By-laws or the Articles of Incorporation. Members of the Board of
Directors or of any committee of the Board may participate in and act at a
meeting through the use of a conference telephone or other communication
equipment by means of which all persons participating in the meeting can hear
each other. Participation in such meeting shall constitute attendance and
presence in person at the meeting of the person or persons so participating.
SECTION 8. RESIGNATIONS. A director may resign at any time by
giving written notice to the Board of Directors, its chairman, or to the
President or Secretary of the corporation. A resignation is effective when
the notice is given unless the notice specifies a future date.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of
Directors, including any vacancy occurring by reason of an increase in the
number of directors, shall be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose, provided that the
Board of Directors may fill by appointment any such vacancy occurring between
meetings of the shareholders. A director appointed by the Board of Directors
pursuant to this Section to fill a vacancy shall serve until the next meeting
of shareholders at which directors are to be elected. A director elected by
the shareholders to fill a vacancy shall hold office for the balance of the
term for which he or she was elected.
SECTION 10. ACTION WITHOUT A MEETING. Any action required to be
taken at a meeting of the Board of Directors, or any other action which may be
taken at a meeting of the Board of Directors or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors entitled to vote with respect to
the subject matter thereof, or by all the members of such committee, as the
case may be. The consent shall be evidenced by one or more written approvals,
each of which sets forth the action taken and bears the signature of one or
more directors. All such approvals shall be delivered to the Secretary to be
filed in the corporate records. The action taken shall be effective when all
the directors have approved the consent unless the consent specifies a
different effective date. Any such consent signed by all the directors or all
the members of a committee shall have the same effect as a unanimous vote, and
may be stated as such in any document filed with the Secretary of State of
Illinois or with anyone else.
SECTION 11. COMPENSATION. The Board of Directors, by the
affirmative vote of a majority of directors then in office, and irrespective
of any personal interest of any of its members, shall have authority to
establish reasonable compensation of all directors for services to the
corporation as directors, officers or otherwise. The directors shall be paid
their expenses, if any, of attendance at each meeting of the Board. No such
payment previously mentioned in this Section shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
SECTION 12. REMOVAL OF DIRECTORS. If the notice of a meeting of
shareholders shall state that a purpose of the meeting is to vote upon the
removal of one or more directors named in the notice, then one or more of such
directors may be removed at such meeting by the affirmative vote of the
holders of a majority of the outstanding shares then entitled to vote at an
election of directors. Only the named director or directors may be removed at
such meeting and directors may only be removed for cause.
SECTION 13. PRESUMPTION OF ASSENT. A director of the corporation
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be conclusively presumed to have assented to
the action taken unless his or her dissent is entered in the minutes of the
meeting or unless he or she (a) files his or her written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof, or (b) forwards such dissent by registered or certified
mail to the Secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent does not apply to a director who voted in
favor of such action.
SECTION 14. COMMITTEES. A majority of the directors may create one
or more committees and appoint members of the Board to serve on the committee
or committees. Each committee shall have two or more members, who serve at the
pleasure of the Board. Each committee, to the extent specified by the Board of
Directors, may exercise the authority of the Board of Directors in the
management of the corporation, except as otherwise provided by law. Vacancies
in the membership of the committee shall be filled by the Board of Directors
at a regular or special meeting of the Board of Directors. Each committee
shall render a report of its proceedings to the Board when required. Unless
the resolution of appointment by the Board of Directors requires a greater
number, a majority of any committee shall constitute a quorum, and a majority
of a quorum shall be necessary for committee action. A committee may act by
unanimous consent in writing without a meeting and, subject to the provisions
of these By-laws or action of the Board of Directors, the committee by
majority vote of its members shall determine the time and place of meetings
and the notice required therefor.
SECTION 15. NOMINATIONS OF DIRECTORS. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of shareholders (a) by or at the
direction of the Board of Directors by any nominating committee or person
appointed by the Board or, (b) by any shareholder of the corporation entitled
to vote for the election of directors at the meeting who complies with the
notice procedures set forth in this Section 15. Such nominations, other than
those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary. To be timely, a shareholder's
notice shall be delivered to, or mailed and received at, the principal
executive offices of the corporation not less than sixty (60) days prior to
the first anniversary of the date of the last annual meeting of shareholders.
Such shareholder's notice to the Secretary shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election
as a director, (i) the name, age, business address and residence address of
the person, (ii) the principal occupation or employment of the person,
(iii) the class and number of shares of the corporation which are beneficially
owned by the person, and (iv) such other information relating to the person
that would be required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission as then in effect;
and (b) as to the shareholder giving the notice (i) the name and record
address of the shareholder, and (ii) the class and number of shares of the
corporation which are beneficially owned by the shareholder.
If the Chairman of the meeting of shareholders shall determine that
a nomination was not made in accordance with the foregoing procedure, he or
she shall so declare to the meeting and the defective nomination shall be
disregarded.
ARTICLE IV
OFFICERS
SECTION l. NUMBER. The officers of the corporation shall be a
Chairman of the Board (if one is elected by the Board of Directors), a Presi
dent, one or more Vice Presidents (the number thereof to be determined by the
Board of Directors), a Treasurer, and a Secretary to be elected by the Board
of Directors, and such Assistant Treasurers, Assistant Secretaries, Controller
or other officers as may be elected by the Board of Directors or appointed by
the Board of Directors or the Chief Executive Officer of the corporation. The
Chief Executive Officer of the corporation shall be the Chairman of the Board
or the President as designated by the Board of Directors. In the event that a
Chairman of the Board is not elected, the President shall be the Chief
Executive Officer. Any two or more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The elected officers of
the corporation shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as shall be convenient.
Vacancies may be filled or new offices created and filled at any meeting of
the Board of Directors. Each officer shall hold office until his or her
successor shall have been duly elected and shall have qualified or until his
or her death or until he or she shall resign or shall have been removed in the
manner hereinafter provided. Election or appointment of an officer shall not
of itself create contract rights.
SECTION 3. REMOVAL. Any elected officer may be removed by the
Board of Directors whenever in its judgment the best interests of the
corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Any
appointed officer may be similarly removed by either the Board of Directors or
the Chief Executive Officer of the corporation.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall have such duties and functions as shall be assigned or
delegated to him or her from time to time by the Board of Directors. The
chairman shall report to the Board of Directors, and shall preside at the
meetings of the shareholders and of the Board of Directors.
SECTION 5. PRESIDENT. Subject to the direction and control of the
Board of Directors, the President shall be in charge of the business of the
corporation; he or she shall see that the resolutions and directions of the
Board of Directors are carried into effect except in those instances in which
that responsibility is specifically assigned to some other person by the Board
of Directors; and, in general, he or she shall discharge all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time. In the absence of the Chairman of the
Board, the President shall preside at all meetings of the shareholders and of
the Board of Directors. Except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the corporation
or a different mode of execution is expressly prescribed by the Board of
Directors or these By-laws, the President may execute for the corporation
certificates for its shares, and any contracts, deeds, mortgages, bonds, or
other instruments which the Board of Directors has authorized to be executed,
and may accomplish such execution either under or without the seal of the
corporation and either individually or with the Secretary, any Assistant
Secretary, or any other officer thereunto authorized by the Board of
Directors, according to the requirements of the form of the instrument. The
President may vote all securities which the corporation is entitled to vote
except to the extent such authority shall be vested in a different officer or
agent of the corporation by the Board of Directors.
SECTION 6. THE VICE PRESIDENTS. Each Vice President shall assist
the President in the discharge of his or her duties, as the President may
direct, and shall perform such other duties as from time to time may be
assigned to him or her by the President or by the Board of Directors. In the
absence of the President or in the event of his or her inability or refusal to
act, the Vice President (or in the event there be more than one Vice Presi
dent, the Vice Presidents in the order designated by the Board of Directors,
or by the President if the Board of Directors has not made such a designation,
or in the absence of any designation, then in the order of seniority of tenure
as Vice President) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the corporation
or a different mode of execution is expressly prescribed by the Board of
Directors or these By-laws, the Vice President (or each of them if there are
more than one) may execute for the corporation certificates for its shares and
any contracts, deeds, mortgages, bonds or other instruments which the Board of
Directors has authorized to be executed, and he or she may accomplish such
execution either under or without the seal of the corporation and either
individually or with the Secretary, any Assistant Secretary, or any other
officer thereunto authorized by the Board of Directors, according to the
requirements of the form of the instrument.
SECTION 7. THE TREASURER. Subject to the supervision of the Board
of Directors and Chief Executive Officer, the Treasurer shall have the custody
of all funds and securities of the corporation and charge of the collection of
amounts due the corporation. He or she shall disburse the funds of the
corporation only upon receipt of properly authorized vouchers and shall keep a
record of all receipts and disbursements of funds by him or her. He or she
shall have authority to give receipts for moneys paid to the corporation and
to endorse checks, drafts and warrants in the name of the corporation.
SECTION 8. THE SECRETARY. The Secretary shall: (a) record the
minutes of the shareholders' and the Board of Directors' meetings in one or
more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these By-laws or as required by law; (c)
be custodian of the corporate records and of the seal of the corporation; (d)
keep a register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) sign with the President or
a Vice President, or any other officer thereunto authorized by the Board of
Directors, certificates for shares of the corporation, the issue of which
shall have been authorized by the Board of Directors, and any contracts,
deeds, mortgages, bonds, or other instruments which the Board of Directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed
by the Board of Directors or these By-laws; (f) have general charge of the
stock transfer books of the corporation; and (g) perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him or her by the President or by the Board of Directors. The
Secretary shall have the authority to certify the By-laws, resolutions of the
shareholders and Board of Directors and committees thereof, and other docu
ments of the corporation as true and correct copies thereof.
SECTION 9. ASSISTANT TREASURERS, ASSISTANT SECRETARIES, CONTROLLER,
AND OTHER OFFICERS. The Assistant Treasurers and Assistant Secretaries shall
perform such duties as shall be assigned to them by the Treasurer or the
Secretary, respectively, or by the President or the Board of Directors. The
Assistant Secretaries may sign with the President, or a Vice President, or any
other officer thereunto authorized by the Board of Directors, certificates for
shares of the corporation, the issue of which shall have been authorized by
the Board of Directors, and any contracts, deeds, mortgages, bonds, or other
instruments which the Board of Directors has authorized to be executed,
according to the requirements of the form of the instrument, except when a
different mode of execution is expressly prescribed by the Board of Directors
or these By-laws. The Assistant Treasurers shall respectively, if required by
the Board of Directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the Board of Directors shall determine.
The Controller, if one be elected or appointed, shall be the principal
accounting officer of the corporation and as such shall have and perform all
duties normally incident to the office of principal accounting officer. The
Assistant Treasurers, the Assistant Secretaries, the Controller and any other
officers shall have and perform such other duties as may be assigned from time
to time by the Board of Directors or the Chief Executive Officer of the
corporation.
SECTION 10. SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors or, if authorized by the Board, by
the Chief Executive Officer of the corporation. No officer shall be prevented
from receiving any salary by reason of the fact that he or she is also a
director of the corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION l. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the corporation,
and such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from time to
time be determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION l. CERTIFICATES FOR SHARES. Certificates representing
shares of the corporation shall be signed by the President or a Vice President
or by such officer as shall be designated by resolution of the Board of
Directors and by the Secretary or an Assistant Secretary, and shall be sealed
with the seal or a facsimile of the seal of the corporation. If both of the
signatures of the officers be by facsimile, the certificate shall be manually
signed by or on behalf of a duly authorized transfer agent or clerk. Each
certificate representing shares shall be consecutively numbered or otherwise
identified, and shall also state the name of the person to whom issued, the
<PAGE>
number and class of shares (with designation of series, if any), the date of
issue, and that the corporation is organized under Illinois law. If the
corporation is authorized and does issue shares of more than one class or of a
series within a class, the certificate shall also contain such information or
statement with respect thereto as may be required by law.
The name and address of each shareholder, the number and class of
shares held and the date on which the certificates for the shares were issued
shall be entered on the books of the corporation. The person in whose name
shares stand on the books of the corporation shall be deemed the owner thereof
for all purposes as regards the corporation.
SECTION 2. LOST CERTIFICATES. If a certificate representing shares
allegedly has been lost or destroyed, the Board of Directors may in its
discretion, except as may be required by law, direct that a new certificate be
issued upon such indemnification and other reasonable requirements as it may
impose.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the
corporation shall be recorded on the books of the corporation and, except in
the case of a lost or destroyed certificate, shall be made only upon surrender
for cancellation of the certificate for such shares. A certificate presented
for transfer must be duly endorsed and accompanied by proper guaranty of
signature and other appropriate assurances that the endorsement is effective.
ARTICLE VII
INDEMNIFICATION
SECTION l. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he or she is or was a director, officer, employee
or agent of the corporation, or who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, if such person acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
SECTION 2. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, if such person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
provided that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation, unless, and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or
agent of the corporation has been successful, on the merits or otherwise, in
the defense of any action, suit or proceeding referred to in Sections l and 2
of this Article, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
SECTION 4. Any indemnification under Sections l and 2 of this
Article (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case, upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section l or 2 of this Article. Such determination shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or even if obtainable, if a quorum of disinterested direc
tors so directs, by independent legal counsel in a written opinion, or (c) by
the shareholders.
SECTION 5. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding, as authorized by the
Board of Directors in the specific case, upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay such amount,
unless it shall ultimately be determined that he or she is entitled to be
indemnified by the corporation as authorized in this Article.
SECTION 6. The indemnification provided by this Article shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability asserted against such person and incurred by such person in any
such capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under the provisions of this Article.
SECTION 8. If the corporation has paid indemnity or has advanced
expenses to a director, officer, employee or agent, the corporation shall
report the indemnification or advance in writing to the shareholders with or
before the notice of the next shareholders' meeting.
SECTION 9. For purposes of this Article, references to "the
corporation" shall include, in addition to the surviving corporation, any
merging corporation (including any corporation having merged with a merging
corporation) absorbed in a merger which, if its separate existence had
continued, would have had the power and authority to indemnify its directors,
officers and employees or agents, so that any person who was a director,
officer, employee or agent of such merging corporation, or was serving at the
request of such merging corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article with
respect to the surviving corporation as such person would have with respect to
such merging corporation if its separate existence had continued.
SECTION 10. For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries. A person who acted in good faith and in a
manner he or she reasonably believed to be in the best interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this Article.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January in each year and end on the last day of December in each year.
ARTICLE IX
DISTRIBUTIONS
The Board of Directors from time to time may authorize, and the
corporation may make, distributions to its shareholders in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE X
SEAL
The corporation shall have a corporate seal with the name of the
corporation and the word "Illinois" inscribed about a circle and the phrase
"Incorporated 1985" within such circle. Such seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of
these By-laws, the Articles of Incorporation or the Business Corporation Act
of 1983, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice. Attendance at any meeting
shall constitute waiver of notice thereof unless the person at the meeting
objects to the holding of the meeting because proper notice was not given.
ARTICLE XII
AMENDMENTS
In furtherance of, and not in limitation of, the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized and
empowered to adopt, amend or repeal the By-laws (or any portion thereof) of
the Corporation. The shareholders of the Corporation are authorized and
empowered to adopt, amend or repeal the By-laws only by an affirmative vote of
75% of the shares outstanding and entitled to vote thereon. The By-laws may
contain any provisions for the regulation and management of the affairs of the
Corporation not inconsistent with law or the Articles of Incorporation.
[DESCRIPTION] Graph Data attached to EXHIBIT 13
Information related to the nine graphs included in the CILCORP Inc. Annual
Report in Management@s Discussion and Analysis and Financial Statements follows.
A bar graph titled "Fixed Charge Coverage (Scale: # of Times)" depicting the
following information appears in the left hand column on Page 16 of
Management's Discussion and Analysis.
1991 2.8
1992 2.4
1993 2.4
1994 2.6
1995 2.7
A bar graph titled "Utility Plant Expenditures (Scale: $ Millions)" depicting
the following information appears in the right hand column on page 17 of
Management's Discussion and Analysis.
1991 56
1992 62
1993 73
1994 91
1995 70
A bar graph titled "Electric Sales (Scale: Millions of kilowatt-hours)"
depicting the following information appears in the right hand column on page 21
of Management's Discussion and Analysis. Each bar consists of four sections
which build on one another.
1995 1994 1993 1992 1991
BAR 1 RESIDENTIAL 1,783 1,672 1,664 1,508 1,680
BAR 2 COMMERCIAL 1,537 1,470 1,396 1,327 1,318
CUMULATIVE 3,320 3,142 3,060 2,835 2,998
BAR 3 INDUSTRIAL 2,325 2,303 2,238 2,120 2,202
CUMULATIVE 5,645 5,445 5,298 4,955 5,200
BAR 4 OTHER 270 390 234 457 428
CUMULATIVE 5,915 5,835 5,532 5,412 5,628
A bar graph titled "Cooling Degree Days Per Year Compared to Normal" depicting
the following information appears in the left hand column on page 22 of
Management's Discussion and Analysis. A horizontal bar depicting normal
cooling days is shown at approximately 1,059 days.
1991 1,344.0
1992 811.5
1993 1,056.0
1994 1,104.0
1995 1,222.0
A bar graph titled "Gas Sales (Scale: Millions of mcf)" depicting the following
information appears in the right hand column on page 23 of Management's
Discussion and Analysis. Each bar consists of three sections which build on
one another.
1995 1994 1993 1992 1991
BAR 1 RESIDENTIAL 20,080 18,929 20,263 18,427 18,993
BAR 2 COMMERCIAL 7,374 6,686 6,748 6,205 6,371
CUMULATIVE 27,454 25,615 27,011 24,632 25,364
BAR 3 INDUSTRIAL 1,242 1,186 756 960 736
CUMULATIVE 28,696 26,801 27,767 25,592 26,100
A bar graph titled "Heating Degree Days Per Year Compared to Normal" depicting
the following information appears in the right hand column on page 23 of
Management's Discussion and Analysis. A horizontal bar depicting normal
heating degree days is shown at approximately 5,930 days.
1991 5,410.5
1992 5,320.0
1993 5,882.0
1994 5,443.5
1995 5,920.5
Two pie charts titled "Consolidated Assets by Segment" as percentage of the
whole by year are printed on page 28 below the Asset portion of the Balance
Sheets.
1995 1995 1994 1994
Electric 761,336 59.9% 741,578 59.9%
Gas 290,677 22.6% 275,428 22.3%
Environmental and
Engineering Services 87,952 6.9% 93,464 7.5%
Other 136,106 10.6% 127,914 10.3%
Total 1,276,071 100.0% 1,238,384 100.0%
Two pie charts titled "Consolidated Capitalization Including Short-Term Debt"
as percentages of the whole by year are printed on page 29 below the Liability
portion of the Balance Sheets.
1995 1995 1994 1994
S-T Debt 66,152 8% 50,600 6%
L-T Debt 344,113 41% 326,695 42%
Preferred Stock 66,120 8% 66,120 8%
Common Stock 361,978 43% 344,715 44%
Total 838,363 100% 788,130 100%
Three pie charts titled "Consolidated Revenue by Component" as percentages of
the whole by year is printed on page 31 below the Statements of Segments of
Business.
1995 1995 1994 1994 1993 1993
Electric 326,198 53% 313,085 52% 326,198 52%
Gas 151,546 24% 148,285 24% 150,754 26%
Environmental and
Engineering Services 127,530 21% 132,799 22% 123,162 21%
Other 9,466 2% 10,970 2% 7,471 1%
Total 614,740 100% 605,139 100% 584,511 100%
CENTRAL ILLINOIS LIGHT COMPANY
As Amended Effective April 1, 1995
ARTICLE I: LOCATION OF OFFICES
Section 1 - Principal Office: The principal office of the Company shall
be in the City of Peoria, Illinois, at such place as the Board of
Directors may designate.
Section 2 - Other Offices: The Company may have and maintain such other
offices as the Board of Directors may deem expedient.
ARTICLE II: CORPORATE SEAL
Section 1 - The Company shall have a corporate seal with the name of the
Company described about a circle and the words "Incorporated 1913
Illinois" within such circle.
ARTICLE III: FISCAL YEAR
Section 1 - The fiscal year of the Company shall begin with the first day
of January and end with the thirty-first day of December of each year.
ARTICLE IV: SHAREHOLDERS' MEETINGS
Section 1 - Annual Meeting: The annual meeting of the shareholders shall
be held at the principal office of the Company on the fourth Tuesday of
April in each year if not a legal holiday, and if a legal holiday, then
on the next day following which is not a legal holiday nor a Saturday or
a Sunday. Such annual meeting shall commence at a time determined by the
Board of Directors specified in a notice of such annual meeting sent to
shareholders, which shall not be earlier than 9:00 AM, nor later than
3:00 PM, local time at the place of the meeting.
Section 2 - Special Meetings: Unless otherwise provided by law, special
meetings of the shareholders may be called by the Board of Directors, by
the Chairman of the Board, by the President, by the Secretary under the
written direction of a majority of the Directors, or by shareholders
holding not less than one-fifth of the total capital stock. Such meetings
shall be held at the principal office of the Company, or if the Board of
Directors or the Chairman of the Board or the President shall designate
another place, then at such other place as may be so designated.
Section 3 - Notices: Written notice of either annual or special meetings
shall be mailed at least ten days prior to the meeting, or in the case of
a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets at least twenty days prior to the meeting, to each
shareholder at his last known address as the same appears on the stock
books of the Company. Such notice shall specify the time and place of
holding the meeting and shall further specify the dates for closing and
opening the stock transfer books of the Company, provided the Board of
Directors shall have ordered them closed.
Notices of special meetings shall further specify the purpose
for which the meeting is called and no other business shall be transacted
at such special meeting.
No notice of a special meeting shall be necessary provided
every shareholder shall have signed a written waiver of such notice or
shall be present or represented by proxy at the meeting.
No notice of the holding of an adjourned meeting shall be
necessary.
Section 4 - Quorum: The holders of a majority of the stock of the
Company issued and outstanding shall constitute a quorum for the
transaction of business at any meeting but a less number may convene and
adjourn.
Section 5 - Voting: Shareholders may vote at all meetings in person or
by proxy.
At all meetings, each share of stock shall be entitled to one
vote on all questions and a majority of the votes cast at any such
meeting shall be sufficient for the adoption or rejection of any question
presented, unless otherwise provided by law.
In the election of Directors, each shareholder shall have the
right to cast as many votes in the aggregate as shall equal the number of
shares of stock held by such shareholder, multiplied by the number of
Directors to be then elected, and each shareholder may cast the whole
number of votes for one candidate or distribute them among two or more
candidates.
ARTICLE V: DIRECTORS
Section 1 - Number: The Board of Directors of this Company shall consist
of eleven members.
Section 2 - Election: The Directors shall be elected annually at the
annual meeting of the shareholders, provided that in the event of failure
to hold such meeting or to hold said election thereat, it may be held at
any special meeting of shareholders called for that purpose.
Unless sooner terminated by any other provision hereof, the
term of any director shall automatically expire at the first annual
meeting of the shareholders following his or her attainment of the age of
67. Provided, however, that the term of any director serving in such
capacity and over the age of 60 on August 20, 1993 shall automatically
expire at the first annual meeting of the shareholders following his or
her attainment of the age of 70. No Director who is an officer or
full-time employee of the Company, except the Chief Executive Officer,
shall be re-elected to the Board after retirement. The Chief Executive
Officer may be re-elected as a Director for one full term after
retirement.
The Chief Executive Officer may appoint inspectors or judges
for such election who shall pass upon the validity of all proxies,
receive and count the votes cast, and make a report thereof to the
shareholders' meeting.
Section 3 - Term of Office: The Directors shall hold office from the
date of their election until the next succeeding annual meeting or until
their successors are elected and shall qualify.
Section 4 - Vacancies: Any vacancy occurring in the Board of Directors
and any directorship to be filled by reason of an increase in the number
of Directors shall be filled in the manner provided by the laws of
Illinois then in effect.
Section 5 - Fees: Directors shall be reimbursed for expenses, if any,
incurred in attending meetings of the Board of Directors and in otherwise
performing duties of such Directors. Directors' fees shall be fixed by
the Board of Directors, provided that any Director who receives
compensation from the Company as an officer or full-time employee shall
not receive Director's fees.
Section 6 - Executive or Other Committees: The Board of Directors may
authorize appointment of an Executive Committee or other committees of
the Board as the Board of Directors determines to be desirable, and may
fix the number of members and designate the chairman of each such
committee. The powers, terms of office, and method of filing vacancies
shall be as defined in the resolution or resolutions of the Board of
Directors relating to the authorization of such committees. Each such
committee shall make a written report or recommendation following its
meetings or keep minutes of all of its meetings.
ARTICLE VI: DIRECTORS' MEETINGS
Section 1 - Regular Meetings: Regular meetings of the Board of Directors
shall be held at the principal office of the Company or at such other
place or places, within or without the State of Illinois, at such time
and day as the Board of Directors may designate.
Section 2 - Special Meetings: Unless otherwise provided by law, special
meetings of the Board of Directors may be held at any time, at the
principal office of the Company or elsewhere, within or without the
state.
The Secretary or Assistant Secretary shall call a special
meeting whenever so requested by the Chairman of the Board, the
President, a Vice President, or by three Directors.
Section 3 - Organization Meeting: As soon as possible after their
election, the Board of Directors shall meet and organize and they may
also transact such other business as may be presented, provided the same
shall receive the affirmative votes of a majority of the constituent
membership of the Board.
Section 4 - Notice: No notice shall be required for a regular meeting.
No notice shall be required for an "Organization Meeting," if
held on the same day as the shareholders' meeting at which the Directors
were elected.
No notice of the holding of an adjourned meeting shall be
necessary.
A reasonable notice of special meetings, in writing or
otherwise, shall be given to each Director or sent to his residence or
place of business.
Notice of special meeting shall specify the time and place of
holding the meeting and, unless otherwise stated, any and all business
may be transacted at such special meeting.
Notice of any meeting may be waived in writing.
Section 5 - Quorum: At all meetings of the Board of Directors, a
majority shall constitute a quorum, but a less number may convene and
adjourn.
Section 6 - Voting: All questions coming before any meeting of the Board
of Directors for action shall be decided by a majority vote of the
Directors present at said meeting, unless otherwise provided by law or by
these Bylaws.
ARTICLE VII: OFFICERS
Section 1 - General: The principal officers of the Company shall be
elected by the Board of Directors. They shall include a President, one
or more Vice Presidents, one or more of whom may be designated as
Executive or Senior Vice President, one or more Assistant Vice
Presidents, a Secretary and a Treasurer, and may include a Chairman of
the Board. The Board of Directors may appoint or remove such other
officers and agents of the Company as it may deem proper or may delegate
such authority to the Chief Executive Officer. The Chief Executive
Officer of the Company shall be the President or Chairman of the Board,
as designated by the Board of Directors. In the event that a Chairman of
the Board has not been elected, the President shall be the Chief
Executive Officer.
Section 2 - Qualifications: The Chairman of the Board, if one is
elected, and the President shall be chosen from among the Board of
Directors.
Section 3 - Election: The principal officers shall be elected annually
at the organization meeting of the Directors, provided that any such
officers not elected at such meeting may be elected at any succeeding
meeting of the Directors.
Section 4 - Term of Office: The principal officers shall hold office
from the date of their election until the next succeeding organization
meeting of Directors or until their successors are elected and shall
qualify, provided that the Directors shall at all times have the power to
remove any officer, when in their judgment such removal may be to the
best interests of the Company.
Section 5 - Vacancies: Any vacancy or vacancies among the officers,
arising from any cause, shall be filled by the Directors as provided
above.
Section 6 - Compensation: The compensation of the principal officers
shall be fixed by the Board of Directors. The compensation of other
officers shall, in the absence of any action by the Board of Directors,
be fixed by the Chief Executive Officer.
Section 7 - Combining Offices: Except to the extent otherwise provided
by law, any two or more of such offices may be held by the same person
but no officer shall execute, acknowledge, or verify any instrument in
more than one capacity if such instrument is required by law or by the
Bylaws to be executed, acknowledged, or verified by any two or more
officers.
ARTICLE VIII: AGENTS
Section 1 - Depositories: The funds of the Company, from any source,
shall be deposited in the name of the Company with such depositories as
may be designated by the Board of Directors.
ARTICLE IX: POWERS AND DUTIES
Section 1 - Directors: The Board of Directors shall have and exercise
all power and authority in the government of the affairs of the Company
except where specifically excepted by law or by these Bylaws.
Section 2 - Chairman of the Board: The Chairman of the Board, if one is
elected, shall preside at all meetings of the shareholders and the Board
of Directors. He shall do and perform all acts and things incident to
the position of Chairman of the Board and such other duties as may be
assigned to him by the Board of Directors.
Section 3 - President: The President shall have the general control and
management of the business and affairs of the Company, subject, however,
to the supervision of the Board of Directors. He shall perform and do
all acts and things incident to the position of President and such other
duties as may be assigned to him by the Board of Directors. In the
absence or disability of the Chairman of the Board, or if a Chairman of
the Board has not been elected, he shall have and exercise all of the
powers and duties of that office.
He shall appoint such agents and employees as he may deem necessary
for the proper conduct of the business of the Company and shall prescribe
their duties and fix their compensation, provided that the Board of
Directors shall at all times have the power to remove any agent or
employee, when, in their judgment, such removal may be to the best
interest of the Company.
Section 4 - Vice Presidents: The Vice Presidents shall perform such of
the duties of the President and such other duties on behalf of the
Company as may be respectively assigned to them by the Board of
Directors, or the Chief Executive Officer. In the absence or disability
of the President or in the case of his death, resignation, or removal
from office, the powers and duties of the President shall temporarily
pass to such one of the Vice Presidents as the Board of Directors shall
have designated or shall designate, and the Vice President so designated
shall have and exercise all the powers and duties of the President during
such absence or disability or until the vacancy in the office of
President shall be filled.
Section 5 - Assistant Vice Presidents: The Assistant Vice Presidents
shall perform such of the duties of the Vice Presidents and such other
duties on behalf of the Company as may be respectively assigned to them
by the Board of Directors, the Chief Executive Officer or a Vice
President who would otherwise perform such duties.
Section 6 - Secretary: Subject to the supervision of the Board of
Directors and the Chief Executive Officer, the Secretary shall have the
custody of the corporate seal and records of the Company and shall
prepare and file all reports required by law to be made to any and all
public authorities and officials.
He shall act as Secretary at meetings of the shareholders and
Directors and shall be responsible for keeping and recording the minutes
of all meetings in a suitable minute book and shall attend to publishing,
giving, and serving all official notices of the Company. He shall be
responsible for keeping the capital stock records.
He shall perform such other duties as may be assigned to him by
the Board of Directors and the Chief Executive Officer.
Section 7 - Treasurer: Subject to the supervision of the Board of
Directors and Chief Executive Officer, the Treasurer shall have the
custody of all funds and securities of the Company and charge of the
collection of amounts due the Company.
He shall disburse the funds of the Company only upon receipt of
properly authorized vouchers and shall keep a record of all receipts and
disbursements of funds by him.
He shall have authority to give receipts for moneys paid to the
Company and to endorse checks, drafts, and warrants in the name of the
Company.
He shall perform such other duties as may be assigned to him by
the Board of Directors and Chief Executive Officer.
Section 8 - Other Officers and Agents: The powers and duties of such
other officers and agents shall be prescribed by the Board of Directors
or the Chief Executive Officer.
ARTICLE X: STOCK
Section 1 - Stock Certificates: The shares of stock of the Company shall
be represented by certificates signed by the President or a Vice
President and the Secretary or an Assistant Secretary and sealed with the
seal of the Company. Such seal may be a facsimile. Where such
certificate is countersigned by a Transfer Agent other than the Company
itself or an employee of the Company, or by a Transfer Clerk and
registered by a Registrar, the signatures of the President or Vice
President and the Secretary or Assistant Secretary upon such certificate
may be facsimiles engraved or printed. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued,
it may be issued by the Company with the same effect as if such officer
had not ceased to be such at the date of its issue.
Section 2 - Stock Transfer Books: The stock shall be transferable on the
stock transfer books of the Company in person or by proxy duly
authorized, and upon surrender and cancellation of the old certificates
therefor.
Section 3 - Replacing Certificates: In case of the loss or destruction
of any certificate of stock and the submission of proper proof thereof by
the owner, a new certificate may be issued in lieu thereof under such
regulations and restrictions as the Board of Directors may prescribe.
ARTICLE XI: DIVIDENDS
Section 1 - The Directors may declare, from the net profits or surplus of
the Company, dividends upon its capital stock, payable at such times and
for such amounts as they may determine in conformity with the Articles of
Incorporation of the Company, as amended, and the laws of the State of
Illinois.
ARTICLE XII: AUTHORIZED SIGNATURES
Section 1 - All checks, drafts, and other negotiable instruments issued
by the Company shall be made in the name of the Company and shall be
signed by such officer or officers of the Company, or by such other
person or persons as the Board of Directors may designate. To the extent
authorized by the Board of Directors, facsimile signatures may be used.
ARTICLE XIII: FIDELITY BONDS
Section 1 - The officers and employees of the Company shall, in the
discretion of the President, give bonds for the faithful discharge of
their respective duties, in such form and for such amounts as may be
directed by the President.
ARTICLE XIV: AMENDMENTS
Section 1 - The Bylaws of the Company may be altered, amended, or
repealed by either the shareholders or the Board of Directors.
ARTICLE XV: INDEMNIFICATION
Section 1 - The Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the Company) by reason of the fact that he or she is or was a
director, officer, employee or agent of the Company, or who is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding, if such
person acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
Section 2 - The Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit, if such person acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the Company, provided that no indemnification shall
be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the Company, unless, and only to the
extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability,
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the court shall
deem proper.
Section 3 - To the extent that a director, officer, employee or agent of
the Company has been successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in Sections l and 2
of this Article, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection
therewith.
Section 4 - Any indemnification under Sections l and 2 of this Article
(unless ordered by a court) shall be made by the Company only as
authorized in the specific case, upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he or she has met the applicable standard of
conduct set forth in Section l or 2 of this Article. Such determination
shall be made (a) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit
or proceeding, or (b) if such a quorum is not obtainable, or even if
obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by the
shareholders.
Section 5 - Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding, as authorized by the
Board of Directors in the specific case, upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount, unless it shall ultimately be determined that he or she is
entitled to be indemnified by the Company as authorized in this Article.
Section 6 - The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action
in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent, and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 7 - The Company shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of
the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of his or her status as such,
whether or not the Company would have the power to indemnify such person
against such liability under the provisions of this Article.
Section 8 - If the Company has paid indemnity or has advanced expenses
to a director, officer, employee or agent, the Company shall report the
indemnification or advance in writing to the shareholders with or before
the notice of the next shareholders' meeting.
Section 9 - For purposes of this Article, references to "the Company"
shall include, in addition to the surviving Company, any merging Company
(including any Company having merged with a merging Company) absorbed in
a merger which, if its separate existence had continued, would have had
the power and authority to indemnify its directors, officers and
employees or agents, so that any person who was a director, officer,
employee or agent of such merging Company, or was serving at the request
of such merging Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article with respect to the surviving Company as such person would have
with respect to such merging Company if its separate existence had
continued.
Section 10 - For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Company" shall include any service as a director, officer, employee or
agent of the Company which imposes duties on, or involves services by
such director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries. A person who acted in
good faith and in a manner he or she reasonably believed to be in the
best interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Company" as referred to in this Article.
January 31, 1996
Mr. R. O. Viets
Mr. J. G. Sahn
300 Hamilton Boulevard, Suite 300
Peoria, Illinois 61602
Mr. J. H. Byington, Jr.
Mr. D. P. Falck
One Battery Park Plaza
New York, New York 10004-1490
Gentlemen:
We hereby make, constitute and appoint each of you and any one of you our
true and lawful attorney for each of us and in each of our names, places or
steads, both in our individual capacities as directors and/or that of
officers of CILCORP Inc., to sign and cause to be filed with the Securities
and Exchange Commission CILCORP Inc.'s annual report on Form 10-K for the
fiscal year ended December 31, 1995 and any appropriate amendment or
amendments to said report and any necessary exhibits.
The undersigned, CILCORP Inc., also authorizes you and any one of you to
sign said annual report and any amendment or amendments thereto on its
behalf as attorney-in-fact for its respective officers, and to file the same
as aforesaid together with any exhibits.
Very truly yours,
CILCORP Inc.
By______________________
R. O. Viets, President
Power of attorney related to execution and filing of CILCORP Inc. 1995 annual
report on Form 10-K.
____________________________________ __________________________________
M. Alexis K. E. Smith
____________________________________ __________________________________
J. R. Brazil R. N. Ullman
____________________________________ _________________________________
W. Bunn III R. O. Viets
____________________________________ __________________________________
D. E. Connor M. M. Yeomans
____________________________________ __________________________________
H. J. Holland J. L. Barnett
____________________________________
H. S. Peacock
Extract from Minutes of the Board of Directors of
CILCORP Inc.
held January 30, 1996
Upon motion duly made and seconded, the following resolution was
unanimously adopted:
RESOLVED: That for the purpose of executing and completing
CILCORP Inc.'s annual report on Form 10-K for the fiscal year ended
December 31, 1995 to be filed with the Securities and Exchange Commission,
and of remedying any deficiencies with respect thereto by appropriate
amendment or amendments, this Company, its officers and members of its
Board of Directors are authorized to give their several powers of attorney
to R. O. Viets, J. G. Sahn, J. H. Byington, Jr. and D. P. Falck, or any
one of them, in such form as the officers of the Company may determine
and as counsel may advise.
* * * * * * * * * * *
I, John G. Sahn, Secretary of CILCORP Inc. do hereby certify
that the foregoing is a true and correct copy of a resolution duly and
regularly adopted at meeting of the Board of Directors of CILCORP Inc.,
duly held January 29, 1996, at which a quorum was in attendance and
voting throughout, and that said resolution has not since been rescinded,
but is still in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the seal of the Company this 8th day of March, 1996.
____________________________________
John G. Sahn
(S E A L)
January 29, 1996
Mr. R. O. Viets
Mr. T. S. Romanowski
300 Hamilton Blvd.
Peoria, Illinois 61602
Mr. J. H. Byington, Jr.
Mr. D. P. Falck
One Battery Park Plaza
New York, New York 10004-1490
Gentlemen:
We hereby make, constitute and appoint each of you and any one of you
our true and lawful attorney for each of us and in each of our names,
places or steads, both in our individual capacities as directors and/or that
of officers of Central Illinois Light Company to sign and cause to be filed
with the Securities and Exchange Commission Central Illinois Light
Company's annual report on Form 10-K for the fiscal year ended December
31, 1995 and any appropriate amendment or amendments to said report and
any necessary exhibits.
The undersigned, Central Illinois Light Company, also authorizes you and
any one of you to sign said annual report and any amendment or
amendments thereto on its behalf as attorney-in-fact for its respective
officers, and to file the same as aforesaid together with any exhibits.
Very truly yours,
CENTRAL ILLINOIS LIGHT COMPANY
By_________________________
R. O. Viets, Chairman and
Chief Executive Officer
January 29, 1996
Power of attorney related to execution and filing of Central Illinois
Light Company 1995 annual report on Form 10-K.
________________________________ ______________________________
M. Alexis R. W. Slone
________________________________ ______________________________
J. R. Brazil K. E. Smith
________________________________ _______________________________
W. Bunn III R. N. Ullman
________________________________ _______________________________
D. E. Connor J. F. Vergon
________________________________ _______________________________
W. M. Shay R. O. Viets
________________________________ _______________________________
T. S. Romanowski M. M. Yeomans
________________________________
R. L. Beetschen
Extract from Minutes of Meeting of the Board of Directors of
Central Illinois Light Company
held January 29, 1996
Upon motion duly made and seconded, the following
resolution was unanimously adopted:
RESOLVED: That for the purpose of executing and
completing Central Illinois Light Company's annual report on
Form 10-K for the fiscal year ended December 31, 1995 to be
filed with the Securities and Exchange Commission, and of
remedying any deficiencies with respect thereto by appropriate
amendment or amendments, this Company, its officers and
members of its Board of Directors are authorized to give their
several powers of attorney to R. O. Viets, J. F. Vergon,
J. H. Byington, Jr. and D. P. Falck, or any one of them, in
such form as the officers of the Company may determine and
as counsel may advise.
* * * * * * * * * * *
I, John G. Sahn, Secretary of Central Illinois Light
Company, do hereby certify that the foregoing is a true and correct copy of
a resolution duly and regularly adopted at meeting of the Board of Directors
of Central Illinois Light Company, duly held January 29, 1996, at which a
quorum was in attendance and voting throughout, and that said resolution has
not since been rescinded, but is still in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the seal of the Company this 8th day of March, 1996.
____________________________________
John G. Sahn
(S E A L)
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
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<TOTAL-NET-UTILITY-PLANT> 887,747
<OTHER-PROPERTY-AND-INVEST> 157,231
<TOTAL-CURRENT-ASSETS> 185,493
<TOTAL-DEFERRED-CHARGES> 45,600
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<TOTAL-ASSETS> 1,276,071
<COMMON> 179,330
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<RETAINED-EARNINGS> 182,648
<TOTAL-COMMON-STOCKHOLDERS-EQ> 361,978
22,000
44,120
<LONG-TERM-DEBT-NET> 344,113
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<LONG-TERM-DEBT-CURRENT-PORT> 19,052
0
<CAPITAL-LEASE-OBLIGATIONS> 3,025
<LEASES-CURRENT> 371
<OTHER-ITEMS-CAPITAL-AND-LIAB> 434,312
<TOT-CAPITALIZATION-AND-LIAB> 1,276,071
<GROSS-OPERATING-REVENUE> 614,740
<INCOME-TAX-EXPENSE> 23,274
<OTHER-OPERATING-EXPENSES> 519,615
<TOTAL-OPERATING-EXPENSES> 542,889
<OPERATING-INCOME-LOSS> 71,851
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 71,742
<TOTAL-INTEREST-EXPENSE> 29,861
<NET-INCOME> 41,881
3,299
<EARNINGS-AVAILABLE-FOR-COMM> 38,582
<COMMON-STOCK-DIVIDENDS> 32,308
<TOTAL-INTEREST-ON-BONDS> 20,242
<CASH-FLOW-OPERATIONS> 90,789
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<TABLE> <S> <C>
<ARTICLE> OPUR1
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<NAME> CENTRAL ILLINOIS LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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<TOTAL-DEFERRED-CHARGES> 20,931
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<TOTAL-ASSETS> 1,059,991
<COMMON> 185,661
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 140,814
<TOTAL-COMMON-STOCKHOLDERS-EQ> 326,475
22,000
44,120
<LONG-TERM-DEBT-NET> 298,397
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 24,600
<LONG-TERM-DEBT-CURRENT-PORT> 16,000
0
<CAPITAL-LEASE-OBLIGATIONS> 3,025
<LEASES-CURRENT> 371
<OTHER-ITEMS-CAPITAL-AND-LIAB> 325,003
<TOT-CAPITALIZATION-AND-LIAB> 1,059,991
<GROSS-OPERATING-REVENUE> 477,744
<INCOME-TAX-EXPENSE> 23,267
<OTHER-OPERATING-EXPENSES> 390,929
<TOTAL-OPERATING-EXPENSES> 414,196
<OPERATING-INCOME-LOSS> 63,548
<OTHER-INCOME-NET> 2,055
<INCOME-BEFORE-INTEREST-EXPEN> 65,506
<TOTAL-INTEREST-EXPENSE> 23,108
<NET-INCOME> 42,398
3,299
<EARNINGS-AVAILABLE-FOR-COMM> 39,099
<COMMON-STOCK-DIVIDENDS> 20,056
<TOTAL-INTEREST-ON-BONDS> 20,242
<CASH-FLOW-OPERATIONS> 80,878
<EPS-PRIMARY> 0
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</TABLE>
[DESCRIPTION] This document is Exhibit (10) for both CILCORP Inc. and CILCO
CENTRAL ILLINOIS LIGHT COMPANY
EXECUTIVE DEFERRAL PLAN
(EDP)
December 1, 1985
as amended
February 22, 1994
and January 29, 1996
TABLE OF CONTENTS
Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article I - Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Article II - Eligibility . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Selection By Committee . . . . . . . . . . . . . . . . . . . 3
2.2 Plan Agreement of Executive . . . . . . . . . . . . . . . . 3
Article III - Deferral Commitments . . . . . . . . . . . . . . . . . . 4
3.1 Minimum Deferral . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Maximum Deferral . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Special Deferral . . . . . . . . . . . . . . . . . . . . . 4
3.4 Withholding of Deferral Amounts . . . . . . . . . . . . . . 4
3.5 Annual Rate . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Deferral Period . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Default . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Deferral Penalty In the Event
of Default . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 No Waiver of Default . . . . . . . . . . . . . . . . . . . . 5
3.10 Crediting of Deferral Amounts,
Company Contributions and Rollover
ESPP Amounts . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Termination of Participation . . . . . . . . . . . . . . . . 5
Article IV - 7th-Year Distribution . . . . . . . . . . . . . . . . . . 5
4.1 7th-Year Distribution . . . . . . . . . . . . . . . . . . . 5
4.2 Supplemental Plan Agreements . . . . . . . . . . . . . . . . 5
4.3 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . 6
Article V - Retirement Benefit . . . . . . . . . . . . . . . . . . . . 6
5.1 Retirement Benefit . . . . . . . . . . . . . . . . . . . . . 6
5.2 Rate of Interest for Retirement Benefits . . . . . . . . . . 7
5.3 Commencement of Retirement Benefits . . . . . . . . . . . . 7
5.4 Post-Retirement Plan Agreements . . . . . . . . . . . . . . 7
5.5 Amount of Retirement Benefit . . . . . . . . . . . . . . . . 8
5.6 Death Prior to Completion of
Retirement Benefits . . . . . . . . . . . . . . . . . . . . 8
Article VI - Rollover ESPP . . . . . . . . . . . . . . . . . . . . . . 8
6.1 Participants Eligible for ESPP Rollover . . . . . . . . . . 8
6.2 ESPP Vesting Credit . . . . . . . . . . . . . . . . . . . . 8
Article VII - Survivor Benefit . . . . . . . . . . . . . . . . . . . . 9
7.1 Pre-Retirement Survivor Benefit . . . . . . . . . . . . . . 9
7.2 Amount of Survivor Benefit . . . . . . . . . . . . . . . . . 9
7.3 Eligibility Requirements for
Survivor Benefits . . . . . . . . . . . . . . . . . . . . . 9
7.4 Restriction in the Event of Suicide . . . . . . . . . . . . 9
Article VIII - Termination Benefit . . . . . . . . . . . . . . . . . 10
8.1 Termination Benefits . . . . . . . . . . . . . . . . . . . 10
8.2 Termination Prior to 7 Years of Plan
Participation and Prior to Age 55 . . . . . . . . . . . . . 10
8.3 Termination after 7 Years of Plan
Participation and Prior to Age 55 . . . . . . . . . . . . . 10
Article IX - Disability Benefit . . . . . . . . . . . . . . . . . . . 11
9.1 Amount of Disability Benefit . . . . . . . . . . . . . . . 11
9.2 Commencement and Termination of
Disability Benefits . . . . . . . . . . . . . . . . . . . . 11
9.3 Maximum Age for Disability Benefits . . . . . . . . . . . . 11
Article X - Beneficiary Designation . . . . . . . . . . . . . . . . . 11
10.1 Beneficiary Designation . . . . . . . . . . . . . . . . . . 11
10.2 Change of Beneficiary Designation . . . . . . . . . . . . . 11
10.3 No Participant Designation . . . . . . . . . . . . . . . . 11
10.4 Effect of Payment . . . . . . . . . . . . . . . . . . . . . 12
Article XI - Leave of Absence . . . . . . . . . . . . . . . . . . . . 12
11.1 Paid Leave of Absence . . . . . . . . . . . . . . . . . . . 12
11.2 Unpaid Leave of Absence . . . . . . . . . . . . . . . . . . 12
Article XII - Other Benefits and Agreements . . . . . . . . . . . . . 12
12.1 Coordination With Other Benefits . . . . . . . . . . . . . 12
12.2 Restoration of Pension Benefits . . . . . . . . . . . . . . 12
Article XIII - Termination, Amendment or Modification . . . . . . . . 13
13.1 Discontinuance . . . . . . . . . . . . . . . . . . . . . . 13
13.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 13
13.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . 13
Article XIV - Miscellaneous . . . . . . . . . . . . . . . . . . . . . 13
14.1 Unsecured General Creditor . . . . . . . . . . . . . . . . 13
14.2 Nonassignability . . . . . . . . . . . . . . . . . . . . . 14
14.3 Not a Contract of Employment . . . . . . . . . . . . . . . 14
14.4 Protective Provisions . . . . . . . . . . . . . . . . . . . 14
14.5 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 14
14.8 Validity . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . 15
14.11 Hostile Takeover . . . . . . . . . . . . . . . . . . . . . 15
14.12 Attorneys Fees . . . . . . . . . . . . . . . . . . . . . . 15
14.13 Late Payment Penalty . . . . . . . . . . . . . . . . . . . 15
14.14 Incompetent . . . . . . . . . . . . . . . . . . . . . . . . 15
Article XV - Administration . . . . . . . . . . . . . . . . . . . . . 16
15.1 Committee Duties . . . . . . . . . . . . . . . . . . . . . 16
15.2 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.3 Binding Effect of Decisions . . . . . . . . . . . . . . . . 16
15.4 Indemnity of Committee . . . . . . . . . . . . . . . . . . 16
15.5 Employer Information . . . . . . . . . . . . . . . . . . . 16
15.6 Change in Payments . . . . . . . . . . . . . . . . . . . . 16
EXECUTIVE DEFERRAL PLAN
OF
CENTRAL ILLINOIS LIGHT COMPANY
Purpose
The primary purpose of the Executive Deferral Plan of Central
Illinois Light Company is to help attract and maintain high caliber employees
in high-level management positions. Directors, executive officers of the
Company and certain other key employees on the Company's management staff
(i.e., elected officers, department heads, and other key employees reporting
to executive officers) will be allowed to participate in the Executive Defer
ral Plan. Members of the management staff allowed to participate will be
those key employees who, in the opinion of the administrative committee of the
Executive Deferral Plan, contribute significantly to the health and well-being
of the Company through their leadership and managerial talents and who occupy
management positions of importance in the Company.
Article 1
Definitions
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Base Annual Salary" shall mean the yearly compensation excluding
bonuses or other fees paid to a Participant for employment services
rendered to the Employer, before reduction for compensation deferred
pursuant to this plan.
1.2 "Beneficiary" shall mean the person or persons, or the entity desig
nated by the Participant to receive any benefits payable under this
Plan upon the death of a Participant. Any Participant's Beneficiary
designation shall be made by written instrument filed with the
Committee and shall become effective only when received, accepted
and acknowledged in writing by the Committee.
1.3 "Committee" shall mean the administrative committee appointed to
manage and administer the Plan in accordance with its provisions
pursuant to Article 15.
1.4 "Company" shall mean CENTRAL ILLINOIS LIGHT COMPANY, any corporation
which is, along with the Company, a member of a controlled group of
corporations as described in Section 414(b) of the Internal Revenue
Code of 1954, as amended, and all successor companies thereto.
1.5 "Company Contributions" shall mean such amounts, if any, that an
Employer, in its sole discretion, contributed to the Plan in any
year for the benefit of all or some Participants.
1.5(a) "Continuing Director" means any member of the Board of the Company
or of its majority shareholder (hereinafter the "Board"), while such
person is a member of the Board, who was a member of the Board prior
to January 29, 1996. A "Continuing Director" also means any person
who subsequently becomes a member of the Board, while such person is
a member of the Board, if such person's nomination for election or
election to the Board is recommended or approved by resolution of a
majority of the Continuing Directors.
1.6 "Covered Salary" shall mean a Participant's Base Annual Salary and
bonuses which serves as a basis for computation of the Retirement,
Survivor or Termination benefits pursuant to the terms and condi
tions of this Plan.
1.7 "Deferral Amount" shall mean the amount of Covered Salary deferred
by a Participant each year pursuant to his election in the form of a
Plan Agreement.
1.8 "Deferral Period" shall mean the period during which amounts of
Covered Salary are being deferred pursuant to the deferral election
of the Participant as set forth in the Participant's Plan Agreement.
1.9 "Disability". A Participant shall be considered totally disabled by
bodily injuries, sickness or disease for purposes of the Plan for
the period, excluding any period for which he receives benefits
under the Company's Sick Pay Plan, if:
a. During the first two years of any period of total disability,
the Participant is unable to perform the duties of his occupa
tion; and
b. During continuation of the period of total disability beyond
two years, the Participant is unable to engage in any business
or occupation or to perform any work for compensation, gain or
profit for which he is reasonably fitted by education, training
or experience.
1.10 "EDP Account" shall mean an individual account comprised of a
Participant's Deferral Amounts, Rollover ESPP amounts, Company
Contributions and interest credited thereon. An EDP Account shall
be maintained for each Participant. A Participant's EDP Account
shall be utilized solely as a device for the measurement and deter
mination of the amounts to be paid to the Participant pursuant to
this Plan. A Participant's EDP Account shall not constitute or be
treated as a trust fund.
1.11 "Employer" shall mean the Company having one or more eligible
Employees who have been selected by the Committee to participate.
Where the context dictates, the term "Employer" as used herein
refers to the particular Employer which has entered into a Plan
Agreement with a specific Participant.
1.12 "Executive" shall mean directors and those persons in the regular
full-time employment of the Company who are key employees and
members of the management staff who are selected for participation
in the Plan by the Committee.
1.12(a) "Hostile Takeover" shall mean the acquisition of beneficial
ownership (determined in accordance with Rule 13(d)-3 of the
Exchange Act) directly or indirectly, of more than 30% of the voting
power of the outstanding stock of the Company or its majority
shareholder by any person coupled with or followed by the failure of
Continuing Directors to constitute a majority of the Board."
1.13 "Moody's Seasoned Corporate Bond Rate" (Moody's) shall mean an
economic indicator which is an arithmetic average of yields of
representative bonds: industrials, public utilities, Aaa, Aa, A,
and Baa.
1.14 "Participant" shall mean any Executive who elects to participate in
the Plan by executing a Plan Agreement.
1.15 "Plan" shall mean the Executive Deferral Plan of the Employer which
shall be evidenced by this instrument and by each Plan Agreement, as
amended from time to time.
1.16 "Plan Agreement" shall mean the form of written agreement, as
amended from time to time, which is entered into by and between an
Employer and a Participant.
1.17 "Plan Anniversary Date" shall be the last day of the Plan Year.
1.18 "Plan Year" shall mean the 12 consecutive month period commencing on
December 1 and ending on the next following November 30.
1.19 "Retirement" and "Retire" shall mean severance from employment with
the Employer at or after the attainment of age fifty-five (55).
1.20 "Retirement Benefit Date" shall mean the date that the Retired
Participant first receives Retirement benefits under the Plan.
1.21 "Rollover ESPP" shall mean the amount credited to a Participant
under the Executive Salary Protection Plan which is to be credited
to the Participant's EDP Account (one-time credit equal to the
present value of the ESPP benefit).
1.22 "Secondary Account Balance" shall mean the portion of the EDP
Account attributable to the 5% interest credited thereon which is
above Moody's and any accumulation thereon at a crediting rate of
Moody's plus five percent (5%).
1.23 "Termination of Employment" shall mean the ceasing of employment
with the Company, voluntarily or involuntarily, for any reason other
than Retirement, Disability or death.
Article 2
Eligibility
2.1 Selection By Committee. The Committee shall have the sole discre
tion to determine the employees of the Company who are key employees
and members of the management staff who are eligible to become
Participants in accordance with the purpose of the Plan. The
Committee shall also have the sole discretion to determine the
directors of the Company who are eligible to become Participants.
The foregoing notwithstanding, participation shall be limited to
those individuals who are Participants as of June 15, 1994.
2.2 Plan Agreement of Executive. As a condition of participation, each
Executive shall complete, execute and return to the Committee prior
to the beginning of the applicable Deferral Period a Plan Agreement.
Article 3
Deferral Commitments
3.1 Minimum Deferral. The Participant may defer no less than $2,000 per
Plan Year.
3.2 Maximum Deferral. A Participant who became eligible to participate
in the Plan on or before November 30, 1989, and all directors of the
Company, may defer no more than 100% of Covered Salary or board
fees, as applicable. A Participant who became eligible to partici
pate in the Plan on or after December 1, 1989 may defer no more than
15% of Covered Salary.
3.3 Special Deferral. The Committee may specify the Plan Years, if any,
in which each Participant may elect to defer an amount ("Special
Deferral Amount") in addition to the amount or percentage of Covered
Salary otherwise specified for deferral under the Plan Agreement.
The Special Deferral Amount, if any, shall be set forth in the Plan
Agreement of the Participant and shall be treated as a Deferral
Amount under the provisions of the Plan except as otherwise provided
in Sections 7.2 and 9.1.
3.4 Withholding of Deferral Amounts. The amount or percentage of
Covered Salary elected to be deferred pursuant to the Plan Agreement
of a Participant shall be withheld over the Deferral Period in the
manner set forth in the Plan Agreement of the Participant.
3.5 Annual Rate. The Moody's rate for any Plan Year shall be fixed 60
days prior to the beginning of the Plan Year. Subject to the
provisions and limitations of the Plan, the EDP Account will accrue
annual interest at a crediting rate of Moody's plus five percent
(5%) from the date of Plan inception.
3.6 Deferral Period. The Deferral Period for each Participant shall be
a fixed 4 year period commencing on the December 1 coincident with
or next preceding the date on which the Participant's initial
Deferral Amount is made to the Plan following the Participant's
filing of a Plan Agreement with the Committee.
3.7 Default. Default occurs when the Participant does not defer the
amount of Covered Salary previously committed to the Plan under that
Participant's Plan Agreement. Termination of Employment is not
considered a default. A Participant who has a Termination of
Employment will receive Termination Benefits, as set forth in
Article 8.
3.8 Deferral Penalty In the Event of Default. In the event of default
by a Participant on a deferral commitment during the Deferral
Period, the Participant may not defer any portion of his Covered
Salary for the balance of the Plan Year in which the default occurs
or for the next following Plan Year.
3.9 No Waiver of Default. The Committee may not waive any default
penalty set forth in Section 3.8.
3.10 Crediting of Deferral Amounts, Company Contributions and Rollover
ESPP Amounts. The amount or percentage of Covered Salary that a
Participant elects to defer in the Plan Agreement executed by the
Participant with respect to each Plan Year shall be credited by the
Employer to the Participant's EDP Account throughout each Plan Year
as the Participant is paid the nondeferred portion of Covered Salary
for such Plan Year or on the date any lump sum Deferral Amount is
contributed to the Plan. The amount or percentage of Covered Salary
so credited to a Participant's EDP Account shall equal the amount
deferred. The Participant shall designate in the Plan Agreement the
amount or percentage of Covered Salary to be deferred. Company
Contributions, if any, and Rollover ESPP amounts, if any, shall be
credited to a Participant's EDP Account at the time made by the
Employer.
3.11 Termination of Participation. A Participant may terminate partici
pation in the Plan at any time by giving the Employer written notice
of such termination not less than 30 days prior to the anniversary
date of the execution of the most recent Plan Agreement of the
Participant. Benefits to a Participant who elects to terminate Plan
participation shall be payable in accordance with the terms of the
Plan.
Article 4
7th Year Distribution
4.1 7th-Year Distribution. Except as otherwise provided in Section 4.2,
a Participant shall be paid his EDP Account, excluding that portion
attributable to interest credited in excess of Moody's and any
accumulation thereon, 45 days after the commencement of his seventh
Plan Year of participation in the Plan. All other funds in the EDP
Account will remain in the Plan until the Participant dies, incurs a
Disability, Retires or incurs a Termination of Employment.
4.2 Supplemental Plan Agreements
Prior to the Plan Anniversary Date preceding the Plan Year in which
the 7th-Year Distribution is payable to a Participant, the Partici
pant may enter into a Supplemental Plan Agreement ("Supplemental
Plan Agreement") whereby the Participant and the Employer agree to a
further deferral until retirement of all or a portion of the amount
that would otherwise be payable as a 7th-Year Distribution. The
Supplemental Plan Agreement must be entered into a minimum of one
(1) year prior to the Plan Anniversary Date preceding the Plan Year
in which the 7th-Year Distribution is payable to a Participant, must
be executed by the Participant in writing in a form acceptable to
the Committee, and must be returned to the Committee one (1) year
prior to the beginning of the Plan Year in which the 7th-Year
Distribution would otherwise be payable. If a Supplemental Plan
Agreement is timely executed all funds remaining in the EDP Account
will remain in the Plan until the Participant's death, disability,
retirement or termination of employment. No Retired Participant
shall be eligible to enter into a Supplemental Plan Agreement under
this provision.
4.3 Hardship Withdrawals
A Participant may make a "Hardship" withdrawal of his EDP Account
balance only if: (1) the withdrawal is on account of an immediate
and heavy financial need of the Participant; and (2) the withdrawal
does not exceed the amount necessary to satisfy the immediate and
heavy financial need. Any request for a withdrawal in accordance
with this subsection 4.3 shall be in writing filed with the Commit
tee in such form and at such time as the Committee may require. A
Participant will be deemed to have a Hardship if he has an immediate
and heavy financial need and if such withdrawal is for the purpose
of: (1) medical expenses of the Participant, his spouse or a depen
dent, (2) the purchase of a Participant's principal residence; (3)
the post-secondary tuition (for a period following the date of the
hardship request) of the Participant, his spouse or a dependent; or
(4) the prevention of the eviction from or the foreclosure on a
Participant's principal residence. A distribution will be deemed
not to exceed the amount necessary to meet the Participant's immedi
ate and heavy financial need if: (a) the amount of withdrawal under
this paragraph 4.3 does not exceed the amount necessary to satisfy
his immediate and heavy financial need; (b) he has received all
distributions and taken all loans under any tax-qualified plan of
the Company; (c) his ability to make contributions to any salary
deferral plan, qualified or nonqualified, is suspended for a period
of 12 months following a withdrawal under this paragraph 4.3; and
(d) the maximum amount of contributions the Participant may make to
any salary deferral plan, qualified or nonqualified, for the Plan
Year next following the Plan Year in which a Hardship withdrawal,
pursuant to this paragraph 4.3 is made, is reduced by the amount of
contributions, if any, the Participant made during the Plan Year in
which such a withdrawal was made.
Article 5
Retirement Benefit
5.1 Retirement Benefit
A Participant who Retires shall become eligible to receive, in
accordance with this Article 5, Retirement benefits on the Partici
pant's Retirement Benefit Date. Unless a Post-Retirement Plan
Agreement provides otherwise, the Retirement Benefit Date of a
Participant who Retires shall be the first day of the month follow
ing his Retirement. Retirement benefits may be in the form of a
lump sum or an amount per month based on his EDP Account as of the
Participant's Retirement Benefit Date.
5.2 Rate of Interest for Retirement Benefits. The interest on the EDP
Account will be based on a fixed rate which is an average of the
annual Moody's Seasoned Corporate Bond Rate for a five (5) year
period consisting of the Plan Year in which the Participant's
Retirement Benefit Date occurs and the four (4) immediately preced
ing Plan Years with an additional 5% interest credited to the fixed
rate.
5.3 Form and Commencement of Retirement Benefits
Thirty (30) days before his Retirement the Participant must inform
the Committee in writing of the form in which his Retirement bene
fits are to be paid, either in a lump sum or in equal monthly
payments. If no election is timely made, the Plan will pay benefits
in equal monthly installments. Unless otherwise provided pursuant
to a Post-Retirement Plan Agreement, Retirement benefits, if a lump
sum form of payment is selected, shall be paid on the first day of
the month following the Participant's Retirement. If the Partici
pant elects the monthly installment form of payment, his Retirement
benefits shall commence on the first day of the month following the
Retirement of the Participant and shall be paid over a period up to
120 months or a 180 or 240 month period, in equal monthly
installments. Thirty (30) days before his Retirement, the
Participant must inform the Committee in writing of the benefit
payment period over which his monthly benefits are to be paid. If
no election is timely made, the Plan will pay benefits over 240
months.
5.4 Post-Retirement Plan Agreements
A Participant may enter into a Post-Retirement Plan Agreement
whereby the Participant and the Employer agree to a deferral to a
date certain of the payment of the Retirement benefits that would
otherwise be paid under Section 5.3, the form in which the benefits
are to be paid and/or, if a monthly installment form has been
selected, the time period over which such benefits are to be paid.
The Post-Retirement Plan Agreement must be executed by the Partici
pant in writing in a form acceptable to the Committee and delivered
to the Committee at least thirty (30) days prior to the
Participant's Retirement. Retirement benefits which are deferred by
reason of a Post-Retirement Plan Agreement shall be paid to the
Participant in the form and on the date certain as selected by the
Participant. No Participant may defer the payment of his Retirement
benefits to a date beyond the later of (1) ten (10) years following
the Participant's commencement of Plan participation, (2)
Retirement, or (3) age 65 (age 72 in the case of a Participant who
was a Director on August 20, 1993).
5.5 Amount of Retirement Benefit
A Participant's Retirement benefits shall be equal to the balance of
his EDP Account as of his Retirement Benefit Date, except that the
amount payable from the Participant's Secondary Account Balance
shall be reduced, as appropriate, in accordance with the vesting
schedule set forth in Section 8.3 and fixed as of the date that a
lump sum payment is made or that monthly payments commence (the
Retirement Benefit Date).
5.6 Death Prior to Completion of Retirement Benefits
If a Retired Participant who has elected the monthly installment
form of payment dies after the commencement of Retirement benefit
payments but before the applicable Retirement benefit is paid in
full, the Participant's unpaid Retirement benefit payments shall
continue and be paid to that Participant's Beneficiary in the same
manner as selected by the Participant. If a Retired Participant
dies prior to the payment of Retirement benefits, his Beneficiary
shall be paid benefits in a lump sum on the first day of the month
following the death of the Participant, unless the Participant had
retired on or before January 1, 1995, in which case the benefit will
be paid over a 240 month period. The aggregate benefits to be paid
to the Participant's Beneficiary will be in an amount equal to the
balance of the Participant's EDP Account as of the date of the
Participant's death. Notwithstanding the foregoing, the Committee
may, in its sole and absolute discretion, select a later commence
ment date or an alternate payment period not to exceed 120 months
for the payment of benefits under this Section to any Beneficiary.
Article 6
Rollover ESPP
6.1 Participants Eligible for ESPP Rollover. A Participant who had
participated in the Executive Salary Protection Plan ("ESPP") shall
be entitled to a Rollover ESPP only if such Participant is age 55 or
older as of December 1, 1985. Each Participant who is eligible for
a Rollover ESPP will be credited with such amount in his EDP Ac
count. Individual Rollover ESPP amounts, if any, will be reported
on the Participant's Plan Agreement.
6.2 ESPP Vesting Credit. All Participants who had participated in the
ESPP shall be credited with three additional years of Plan
participation for purposes of the vesting schedule set forth in
Section 8.3 but for no other purpose under the Plan. The vesting
years so credited shall be in addition to actual years (and
fractional years) of actual participation in the ESPP. A
Participant's Rollover ESPP will at all times remain fully vested.
For example, a Participant with four and one-half years in the ESPP
will initially be 70% vested in his Secondary Account Balance (4 1/2
years + 3 years = 7 1/2 years = 70% vested).
Article 7
Survivor Benefits
7.1 Pre-Retirement Survivor Benefit. If a Participant dies before
Retirement, the Employer will pay a Survivor's Benefit to the
designated Beneficiary of the Participant.
7.2 Amount of Survivor Benefits. The Beneficiary eligible for a Survi
vor Benefit will receive in a lump sum as soon as practicable the
greater of:
a. The existing EDP Account balance, or
b. Ten (10) times the sum of:
i. the greatest Deferral Amount committed in one Plan Year by
the Participant, except that only one-quarter (1/4) of any
Special Deferral Amount shall be considered for this
purpose, and
ii. the Company Contributions made for that Plan Year,
provided, however, that if a Participant failed to meet the eligi
bility requirement set forth in Section 7.3(b), the Beneficiary of
that Participant shall be limited to the Survivor Benefit set forth
in paragraph (a) of this Section 7.2.
7.3 Eligibility Requirements For Survivor Benefit. The obligation of
the Employer to pay the Survivor Benefit to any Beneficiary shall
exist only if:
a. at the time of death, the Participant was employed by the
Employer, on an authorized leave of absence, or absent from
employment due to Disability;
b. all amounts committed for deferral under the Plan were actually
deferred;
c. the Participant's death was determined not to be from a bodily
or mental cause or causes, the information about which was
withheld, or knowingly concealed, or falsely provided by the
Participant, when requested by the Employer to furnish evidence
of good health;
d. proof of death in such form as determined acceptable by the
Committee is furnished.
7.4 Restriction in the Event of Suicide. In the event of a Partici
pant's suicide, the amount of the Survivor Benefit which the Employ
er shall be obligated to pay shall be limited to benefits granted
more than two years prior to the date of such suicide.
Article 8
Termination Benefit
8.1 Termination Benefits. If the Participant incurs a Termination of
Employment prior to age 55 by means other than death or Disability,
such Participant will be eligible to receive a Termination Benefit
as set forth in this Article 8.
8.2 Termination Prior to 7 Years of Plan Participation and Prior to Age
55. A participant who incurs a Termination of Employment before
completing 7 years of Plan participation, and prior to attaining age
55, shall be entitled to receive in a lump sum that portion of his
EDP Account attributable to his Deferral Amount, his Rollover ESPP
Benefit, if any, his Company Contributions, if any, and interest
credited at Moody's. Such amount shall be paid to the Participant
within 90 days of the date of his Termination of Employment.
8.3 Termination after 7 Years of Plan Participation and Prior to Age 55.
A participant who incurs a Termination of Employment after complet
ing 7 years of Plan participation, and prior to attaining age 55,
shall receive, to the extent not otherwise distributed pursuant to
Article 4, a distribution of his EDP Account, including that vested
portion attributable to interest credited in excess of Moody's and
any accumulation thereon, in a lump sum within 90 days of the date
of his Termination of Employment. The vested portion of such
Participant's Secondary Account Balance shall be determined upon his
Termination of Employment in accordance with the following schedule:
Percentage of
Years of Plan Secondary
Participation Account Balance
Less than 7 years 0%
7 but less than 8 years 70%
8 but less than 9 years 80%
9 but less than 10 years 90%
10 or more years 100%
<PAGE>
Article 9
Disability Benefit
9.1 Amount of Disability Benefit. If the Committee determines that a
Participant has a Disability, the Participant shall be eligible to
receive an annual Disability Benefit in an amount equal to one and
one-half (1.5) times the greatest Deferral Amount committed under
the Plan in any Plan Year prior to or coincident with the date in
which benefits commence under the Sick Pay Plan of the Company,
except that only one quarter (1/4) of any Special Deferral Amount
shall be considered for this purpose.
9.2 Commencement and Termination of Disability Benefits. Disability
Benefits will be paid to a Participant who has a Disability commenc
ing on the date immediately following the expiration of benefits to
that Participant under the Sick Pay Plan of the Company. The
Disability Benefits of a Participant shall continue until the
earliest of:
(a) the date of the death of the Participant;
(b) the date as of which the Participant ceases to be classified as
having a Disability; or
(c) the date the Participant attains age 65.
9.3 Maximum Age for Disability Benefits. In order to be eligible to
receive a Disability Benefit upon Disability as set forth in this
Article 9, a Participant must first enter into a Plan Agreement
prior to attaining age 60.
Article 10
Beneficiary Designation
10.1 Beneficiary Designation. Each Participant shall have the right, at
any time, to designate any person or persons as his Beneficiary or
Beneficiaries (both principal as well as contingent).
10.2 Change of Beneficiary Designation. Any Beneficiary designation may
be changed by a Participant at any time by the filing in writing of
such change on a form prescribed by the Committee. The filing of a
new Beneficiary designation form will cancel all Beneficiary desig
nations previously filed. The Committee shall be entitled to rely
on the last designation filed by the Participant prior to his death.
10.3 No Participant Designation. If a Participant fails to designate a
Beneficiary as provided above, or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of
the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the surviving spouse. If the
Participant has no surviving spouse, the benefits remaining under
the Plan shall be payable to the Participant's personal representa
tive (executor or administrator of the Participant's estate).
10.4 Effect of Payment. The payment of benefits under the Plan to the
deemed Beneficiary shall completely discharge the Employer's obliga
tions under this Plan.
Article 11
Leave of Absence
11.1 Paid Leave of Absence. If a Participant is authorized by the
Company for any reason to take a paid leave of absence from the
employment of the Company, the deferral commitments for the Deferral
Period shall remain in full force and effect during such leave of
absence.
11.2 Unpaid Leave of Absence. If a Participant is authorized by the
Company for any reason to take an unpaid leave of absence from the
employment of the Company, the deferral commitments shall be sus
pended and shall be considered a default pursuant to Section 3.7.
Article 12
Other Benefits and Agreements
12.1 Coordination With Other Benefits. The benefits provided for a
Participant or for the Beneficiary of a Participant under the Plan
are in addition to any other benefits to which the Participant or
Beneficiary may be entitled under any other plan or program of the
Employer. This Plan shall supplement and shall not supersede,
modify or amend any other such plan or program except as may other
wise be expressly provided.
12.2 Restoration of Pension Benefits. The Company recognizes that
amounts deferred under the Plan may not be considered as earnings
for purposes of the computation of benefits under qualified plans
under the Employee Retirement Income Security Act of 1974, as
amended, and the Internal Revenue Code of 1954, as amended. There
fore, any loss of retirement benefits incurred by a Participant
under the Pension Plan for Management, Office & Technical Employees
of Central Illinois Light Company, as may be amended and restated
from time to time (the "Pension Plan"), which result from the
deferrals made under the Plan by the Participant, shall be restored
by the Company upon the Retirement of a Participant or upon the
Termination of Employment of a Participant prior to Retirement.
Such pension restoration benefit payments may be paid from this Plan
or, in the sole discretion of the Committee, may be paid through an
alternate vehicle. Such pension restoration benefits shall be in an
amount designed to restore the benefits, if any, that were lost
under the Pension Plan due to the deferral under this Plan, and the
timing and other characteristics of the pension restoration benefit
payments shall coincide as closely as practicable to benefit pay
ments which would otherwise have been made under the Pension Plan.
Article 13
Discontinuance, Amendment or Termination
13.1 Discontinuance. The Company reserves the right to discontinue the
Plan at any time. Upon discontinuance of the Plan, the Partici
pants' EDP Accounts shall be paid out according to the schedules set
forth in Articles 5 and 8, as applicable. The discontinuance of the
Plan shall not adversely affect any Participant or Beneficiary who
has become entitled to the payment of benefits under the Plan.
13.2 Amendment. The Company may, at any time, amend or modify the Plan
in whole or in part, provided, however, that no amendment or modifi
cation shall adversely affect any EDP Account in existence at the
time the amendment or modification is made. The amendment or
modification of the Plan shall not affect any Participant or Benefi
ciary who has become entitled to the payment of benefits under the
Plan as of the date of the amendment or modification.
13.3 Termination. The Company reserves the right, in the event of a
hostile or non-negotiated takeover or acquisition of the Company, or
upon a final decision of any court or administrative agency pertain
ing to the income tax treatment of Plan benefits or deductions to
the Company or a Participant which is deemed adverse by the Company,
to terminate the Plan and to distribute the present value of the
Participants' estimated future EDP Accounts, as determined by the
Company, to them as soon as practicable thereafter.
Article 14
Miscellaneous
14.1 Unsecured General Creditor. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of Employer,
nor shall they be Beneficiaries of, or have any rights, claims or
interests in any life insurance policies, annuity contracts or the
proceeds therefrom owned or which may be acquired by the Employer
("Policies"). Such Policies or other assets of the Employer shall
not be held under any trust for the benefit of Participants, their
Beneficiaries, heirs, successors or assigns, or held in any way as
collateral security for the fulfilling of the obligations of the
Employer under this Plan. Any and all of the Employer's assets and
Policies shall be, and remain, the general assets of the Employer.
The Employer's obligation under the Plan shall be merely that of an
unfunded and unsecured promise of the Employer to pay money in the
future.
14.2 Nonassignability. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, antici
pate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which
are, expressly declared to be unassignable and nontransferable. No
part of the amounts payable shall, prior to actual payment, be
subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by Participant or
any other person, nor be transferable by operation of law in the
event of a Participant's or any other person's bankruptcy or insol
vency.
14.3 Not a Contract of Employment. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between
the Employer and the Participant, and the Participant (or his
Beneficiary) shall have no rights against the Employer except as may
otherwise be specifically provided herein. Moreover, nothing in
this Plan shall be deemed to give a Participant the right to be
retained in the service of the Employer or to interfere with the
right of the Employer to discipline or discharge him at any time.
14.4 Protective Provisions. A Participant will cooperate with the
Employer by furnishing any and all information requested by the
Employer in order to facilitate the payment of benefits hereunder
and by taking such physical examinations as the Employer may deem
necessary and taking such other action as may be requested by the
Employer.
14.5 Terms. Whenever any words are used herein in the masculine, they
shall be construed as though they were used in the feminine in all
cases where they would so apply; and whenever any words are used
herein in the singular or in the plural, they shall be construed as
though they were used in the plural or the singular, as the case may
be, in all cases where they would so apply.
14.6 Captions. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
14.7 Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Illinois.
14.8 Validity. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed
and enforced as if such illegal and invalid provision had never been
inserted herein.
14.9 Notice. Any notice or filing required or permitted to be given to
the Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to
Central Illinois Light Company
Executive Deferral Plan
Administrative Committee
300 Liberty Street
Peoria, Illinois 61602
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on
the receipt for registration or certification.
14.10 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Employer and its successors and assigns. The term
successors as used herein shall include any corporate or other
business entity which shall, whether by merger, consolidation,
purchase or otherwise acquire all or substantially all of the
business and assets of the Employer, and successors of any such
corporation or other business entity.
14.11 Hostile Takeover. In the event of a hostile or non-negotiated
takeover or acquisition of an Employer by another corporation or
entity, the benefits to all persons under the Plan may become fully
vested at the option of the Employer prior to such takeover or
acquisition.
14.12 Attorney Fees. In the event that the Company breaches any of the
terms of the Plan and it is necessary for a Participant to institute
court proceedings to enforce the Plan provisions, the Participant,
upon prevailing, shall also recover reasonable attorney's fees and
costs as damages from the Company.
14.13 Late Payment Penalty. In the event that the Company fails or
refuses to make any of the payments to a Participant or a Beneficia
ry required by the Plan, after the Participant or Beneficiary has
advised the Company in writing of such failure or refusal and has
given the Company thirty (30) days to make such payment, the Company
shall pay interest to the Participant or Beneficiary on the amount
of the late payment at the rate of two times Moody's, plus 10%, from
the date such payment was due until the date such payment is made by
the Company.
14.14 Incompetent. In the event that it shall be found upon evidence
satisfactory to the Committee that any Participant or Beneficiary to
whom a benefit is payable under this Plan is unable to care for his
affairs because of illness or accident, any payment due (unless
prior claim therefor shall have been made by a duly authorized
guardian or other legal representative) may be paid, upon appropri
ate indemnification of the Committee, to the spouse of such person
or other person deemed by the Committee to have incurred expense for
such Participant. Any such payment shall be a payment for the
account of the Participant and shall be a complete discharge of any
liability of the Plan for such payment amount.
Article 15
Administration
15.1 Committee Duties. This Plan shall be administered by a Committee
which shall consist of persons appointed by the Board of Directors
of the Company. Members of the Committee may be Participants under
this Plan. The Committee shall also have the authority to make,
amend, interpret, and enforce all appropriate rules and regulations
for the administration of this Plan and decide or resolve any and
all questions including interpretations of this Plan, as may arise
in connection with the Plan.
15.2 Agents. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit and may from time to time consult with counsel
who may be counsel to the Employer.
15.3 Binding Effect of Decision. The decision or action of the Committee
with respect to any question arising out of or in connection with
the administration, interpretation and application of the Plan and
the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
15.4 Indemnity of Committee. The Employer shall indemnify and hold
harmless the members of the Committee against any and all claims,
loss, damage, expense or liability arising from any action or
failure to act with respect to this Plan, except in the case of
willful misconduct by the Committee or any of its members.
15.5 Employer Information. To enable the Committee to perform its
functions, the Employer shall supply full and timely information to
the Committee on all matters relating to the Covered Salary of all
Participants, the date and circumstances of the Retirement, Disabil
ity, death or Termination of Employment of all Participants, and
such other pertinent information as the Committee may reasonably
require.
15.6 Change in Payments. The Committee shall have the power, in its sole
discretion, to change the manner and time of payments to be made to
a Participant or Beneficiary from that which would be otherwise
payable to such person.
[DESCRIPTION] This document in Exhibit (10)a for both CILCORP Inc. and CILCO.
EXECUTIVE DEFERRAL PLAN II
OF
CENTRAL ILLINOIS LIGHT COMPANY
(EDP II)
December 1, 1989
AMENDED
January 29, 1996
Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article I - Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
Article II - Eligibility. . . . . . . . . . . . . . . . . . . . . . 3
2.1 Selection By Committee. . . . . . . . . . . . . . . . . . . 3
2.2 Plan Agreement of Executive. . . . . . . . . . . . . . . . 3
Article III - Deferral Commitments. . . . . . . . . . . . . . . . . 3
3.1 Minimum Deferral. . . . . . . . . . . . . . . . . . . . . . 3
3.2 Maximum Deferral. . . . . . . . . . . . . . . . . . . . . . 3
3.3 Deferral Election. . . . . . . . . . . . . . . . . . . . . 3
3.4 Changing Deferral Election . . . . . . . . . . . . . . . . 3
3.5 Withholding of Deferral Amounts. . . . . . . . . . . . . . 3
3.6 Annual Rate. . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Deferral Period. . . . . . . . . . . . . . . . . . . . . . 4
3.8 Default. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 Deferral Penalty In the Event
of Default . . . . . . . . . . . . . . . . . . . . . . . . 4
3.10 No Waiver of Default . . . . . . . . . . . . . . . . . . . 4
3.11 Crediting of Deferral Amounts. . . . . . . . . . . . . . . 4
Article IV - 5th-Year Distribution . . . . . . . . . . . . . . . . . 4
4.1 5th-Year Distribution. . . . . . . . . . . . . . . . . . . 4
Article V - Retirement Benefit. . . . . . . . . . . . . . . . . . . 4
5.1 Retirement Benefit . . . . . . . . . . . . . . . . . . . . 4
5.2 Rate of Interest for Retirement Benefits. . . . . . . . . . 5
5.3 Commencement of Retirement Benefits. . . . . . . . . . . . 5
5.4 Pre-Retirement Plan Agreements. . . . . . . . . . . . . . . 5
5.5 Amount of Retirement Benefit. . . . . . . . . . . . . . . . 5
5.6 Death Prior to Completion of
Retirement Benefits . . . . . . . . . . . . . . . . . . . 5
Article VI - Survivor Benefits. . . . . . . . . . . . . . . . . . . 6
6.1 Survivor Benefit. . . . . . . . . . . . . . . . . . . . . . 6
6.2 Amount of Survivor Benefits. . . . . . . . . . . . . . . . 6
Article VII - Termination Benefit. . . . . . . . . . . . . . . . . . 6
7.1 Termination Benefits . . . . . . . . . . . . . . . . . . . 6
Article VIII - Disability Benefit. . . . . . . . . . . . . . . . . . 6
8.1 Amount of Disability Benefit. . . . . . . . . . . . . . . . 6
Article IX - Beneficiary Designation. . . . . . . . . . . . . . . . 6
9.1 Beneficiary Designation. . . . . . . . . . . . . . . . . . 6
9.2 Change of Beneficiary Designation. . . . . . . . . . . . . 6
9.3 No Participant Designation. . . . . . . . . . . . . . . . . 6
9.4 Effect of Payment. . . . . . . . . . . . . . . . . . . . . 7
Article X - Leave of Absence. . . . . . . . . . . . . . . . . . . . 7
10.1 Paid Leave of Absence. . . . . . . . . . . . . . . . . . . 7
10.2 Unpaid Leave of Absence . . . . . . . . . . . . . . . . . 7
Article XI - Other Benefits and Agreements. . . . . . . . . . . . . 7
11.1 Coordination With Other Benefits. . . . . . . . . . . . . 7
11.2 Restoration of Pension Benefits . . . . . . . . . . . . . 7
Article XII - Discontinuance, Amendment or Termination. . . . . . . 8
12.1 Discontinuance . . . . . . . . . . . . . . . . . . . . . . 8
12.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 8
12.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . 8
Article XIII - Miscellaneous. . . . . . . . . . . . . . . . . . . . 8
13.1 Unsecured General Creditor. . . . . . . . . . . . . . . . 8
13.2 Nonassignability. . . . . . . . . . . . . . . . . . . . . 8
13.3 Not a Contract of Employment. . . . . . . . . . . . . . . 9
13.4 Protective Provisions. . . . . . . . . . . . . . . . . . . 9
13.5 Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . 9
13.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 9
13.8 Validity . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.10 Successors. . . . . . . . . . . . . . . . . . . . . . . 10
13.11 Attorney Fees. . . . . . . . . . . . . . . . . . . . . . 10
13.12 Late Payment Penalty. . . . . . . . . . . . . . . . . . 10
13.13 Incompetent . . . . . . . . . . . . . . . . . . . . . . 10
Article XIV - Administration. . . . . . . . . . . . . . . . . . . . 10
14.1 Committee Duties. . . . . . . . . . . . . . . . . . . . . 10
14.2 Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 11
14.3 Binding Effect of Decisions. . . . . . . . . . . . . . . 11
14.4 Indemnity of Committee. . . . . . . . . . . . . . . . . . 11
14.5 Employer Information. . . . . . . . . . . . . . . . . . . 11
14.6 Change in Payments. . . . . . . . . . . . . . . . . . . . 11
EXECUTIVE DEFERRAL PLAN II
OF
CENTRAL ILLINOIS LIGHT COMPANY
Purpose
The primary purpose of the Executive Deferral Plan II of Central
Illinois Light Company is to help attract and maintain high caliber employees
in high-level management positions. Directors, executive officers of the
Company and certain other key employees on the Company's management staff
(i.e., selected officers, department heads, and other key employees reporting
to executive officers) will be allowed to participate in the Executive Defer-
ral Plan II. Members of the management staff allowed to participate will be
those key employees who, in the opinion of the administrative committee of the
Executive Deferral Plan II, contribute significantly to the health and
wellbeing of the Company through their leadership and managerial talents and
who occupy management positions of importance in the Company.
Article 1
Definitions
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Base Annual Salary" shall mean the yearly compensation excluding
bonuses or other fees paid to a Participant for employment services
rendered to the Employer, before reduction for compensation deferred
pursuant to this plan.
1.2 "Beneficiary" shall mean the person, persons, or the entity
designated by the Participant to receive any benefits payable under
this Plan upon the death of a Participant. Any Participant's
Beneficiary designation shall be made by written instrument filed
with the Committee and shall become effective only when received,
accepted and acknowledged in writing by the Committee.
1.3 "Committee" shall mean the administrative committee appointed to
manage and administer the Plan in accordance with its provisions
pursuant to Article 14.
1.4 "Company" shall mean CENTRAL ILLINOIS LIGHT COMPANY, any corporation
which is, along with the Company, a member of a controlled group of
corporations as described in Section 414(b) of the Internal Revenue
Code of 1986, as amended, and all successor companies thereto.
1.4(a) "Continuing Director" means any member of the Board of the Company or
of its majority shareholder (hereinafter the "Board"), while such
person is a member of the Board, who was a member of the Board prior
to January 29, 1996. A "Continuing Director" also means any person
who subsequently becomes a member of the Board, while such person
is a member of the Board, if such person's nomination for election or
election to the Board is recommended or approved by resolution of a
majority of the Continuing Directors.
1.5 "Covered Salary" shall mean a Participant's Base Annual Salary and
bonuses.
1.6 "Deferral Amount" shall mean the amount of Covered Salary deferred by
a Participant pursuant to his election in the form of a Plan
Agreement, or as changed pursuant to Article 3.4 hereof.
1.7 "Deferral Period" shall mean the period during which amounts of
Covered Salary are being deferred pursuant to the deferral election
of the Participant as set forth in the Participant's Plan Agreement.
1.8 "Disability". A Participant shall be considered totally disabled by
bodily injuries, sickness or disease for purposes of the Plan for
the period, excluding any period for which he receives benefits
under the Company's Sick Pay Plan, if the Participant is unable to
perform the duties of his occupation.
1.9 "EDP II Account" shall mean an individual account comprised of a
Participant's Deferral Amounts and interest credited thereon. An EDP
II Account shall be maintained for each Participant. A Participant's
EDP II Account shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to the
Participant pursuant to this Plan. A Participant's EDP II Account
shall not constitute or be treated as a trust fund.
1.10 "Employer" shall mean the Company having one or more eligible
Employees who have been selected by the Committee to participate.
Where the context dictates, the term "Employer" as used herein refers
to the particular Employer which has entered into a Plan Agreement
with a specific Participant.
1.11 "Executive" shall mean directors and those persons in the regular
full-time employment of the Company who are key employees and members
of the management staff who are selected for participation in the
Plan by the Committee.
1.11(a) "Hostile Takeover" shall mean the acquisition of beneficial ownership
(determined in accordance with Rule 13(d)-3 of the Exchange Act)
directly or indirectly, of more than 30% of the voting power of the
outstanding stock of the Company or its majority shareholder by any
person coupled with or followed by the failure of Continuing
Directors to constitute a majority of the Board."
1.12 "Moody's Seasoned Corporate Bond Rate" (Moody's) shall mean an
economic indicator which is an arithmetic average of yields of
representative Aaa, Aa, and Baa bonds for industrials and public
utilities.
1.13 "Participant" shall mean any Executive who elects to participate in
the Plan by executing a Plan Agreement.
1.14 "Plan" shall mean the Executive Deferral Plan II of the Employer
which shall be evidenced by this instrument and by each Plan
Agreement, as amended from time to time.
1.15 "Plan Agreement" shall mean the form of written agreement, as amended
from time to time, which is entered into by and between and Employer
and a Participant.
1.16 "Plan Anniversary Date" shall be the last day of the Plan Year.
1.17 "Plan Year" shall mean the 12 consecutive month period commencing on
January I and ending on the next following December 31.
1.18 "Retirement" and 'Retire' shall mean severance from employment with
the Employer at or after the attainment of age fifty-five (55).
1.19 "Retirement Benefit Date" shall mean the date that the Retired
Participant first receives Retirement benefits under the Plan.
1.20 "Termination of Employment" shall mean the ceasing of employment with
the Company, voluntarily or involuntarily, for any reason other than
Retirement, Disability or death.
Article 2
Eligibility
2.1 Selection By Committee. The Committee shall have the sole discretion
to determine the employees of the Company who are key employees
and members of the management staff who are eligible to become
Participants in accordance with the purpose of the Plan. The
Committee shall also have the sole discretion to determine the
directors of the Company who are eligible to become Participants.
2.2 Plan Agreement of Executive. As a condition of participation, each
Executive shall complete, execute and return to the Committee prior
to the beginning of the applicable Deferral Period a Plan Agreement.
Article 3
Deferral Commitments
3.1 Minimum Deferral. The Participant may defer no less than $1.00 per
Plan Year.
3.2 Maximum Deferral. The Participant may defer no more than 100% of
Covered Salary or board fees, as applicable.
3.3 Deferral Election. The Participant may elect to participate in the
Plan by executing a Plan Agreement. If the Participant executes a
Plan Agreement on or before December 15, the Participant's Deferral
Period shall begin on January 1 of the following Plan Year. However,
if a Participant was participating in the Company's Executive
Deferral Plan dated December 1, 1985, the Participant may begin
his initial Deferral Period for this Plan on the December 1
immediately following the completion of his Deferral Period in
that Plan by executing a Plan Agreement hereunder by December 1 of
that year.
3.4 Changing Deferral Election. A Participant may change his Deferral
Amount for any following Plan Year by providing the Employer with
written notice of such change by December 15.
3.5 Withholding of Deferral Amounts. The amount or percentage of Covered
Salary elected to be deferred pursuant to the Plan Agreement of a
Participant shall be withheld over the Deferral Period in the manner
set forth in the Plan Agreement of the Participant.
3.6 Annual Rate. The Moody's rate for any Plan Year shall be fixed 90
days prior to the beginning of the Plan Year. Subject to the
provisions and limitations of the Plan, the EDP II Account will
accrue annual interest at a crediting rate of Moody's. Interest
shall accrue monthly on a Participant's EDP II Account balance.
3.7 Deferral Period. The Deferral Period for each Participant shall be
that individual's full time employment term, or directorship, with
the Company.
3.8 Default. Default occurs when the Participant does not defer the
amount of Covered Salary previously committed to the Plan under that
Participant's Plan Agreement.
3.9 Deferral Penalty In the Event of Default. In the event of default by
a Participant on a deferral commitment during the Deferral Period,
the Participant may not defer any portion of his Covered Salary for
the balance of the Plan Year in which the default occurs or for the
next following Plan Year.
3.10 No Waiver of Default. The Committee may not waive any default
penalty set forth in Section 3.9.
3.11 Crediting of Deferral Amounts. The amount or percentage of Covered
Salary that a Participant elects to defer in the Plan Agreement
executed by the Participant with respect to each Plan Year shall be
credited by the Employer to the Participant's EDP II Account
throughout each Plan Year as the Participant is paid the nondeferred
portion of Covered Salary for such Plan Year. The amount or perc-
entage of Covered Salary so credited to a Participant's EDP II
Account shall equal the amount deferred. The Participant shall
designate in the Plan Agreement the percentage of Covered Salary to
be deferred.
Article 4
5th Year Distributions
4.1 5th-Year Distribution. A Participant may elect in writing, at the
time of the execution of his Plan Agreement, to receive a
distribution of all, or any percentage, of his EDP II Account, as it
exists as of the distribution date, on January 15, 1995, January
15, 2000, January 15, 2005 and January 15, 2010. All other funds in
the EDP II Account will remain in the Plan until the Participant
dies, incurs a Disability, Retires or incurs a Termination of
Employment.
Article 5
Retirement Benefit
5.1 Retirement Benefit. A Participant who Retires shall become eligible
to receive, in accordance with this Article 5, an amount per month
based on his EDP II Account as of the Participant's Retirement
Benefit Date. The Retirement Benefit Date of a Participant who
Retires shall be the first day of the month following his
Retirement.
5.2 Rate of Interest for Retirement Benefits. The interest on the EDP II
Account, for purposes of calculating the retirement benefit, will be
based on a fixed rate which is an average of the annual Moody's
Seasoned Corporate Bond Rate for a five (5) year period consisting of
the Plan Year in which the Participant's Retirement Benefit Date
occurs and the four (4) immediately preceding Plan Years.
5.3 Commencement of Retirement Benefits. Unless otherwise provided
pursuant to a Pre-Retirement Plan Agreement as provided in Section
5.4, Retirement benefit payments of a Participant shall commence on
the first day of the month following the Retirement of the
Participant and shall be paid at the Participant's election in a
lump sum or in equal monthly payments, not to exceed 240 months,
pursuant to the election made by the Participant at the time of the
execution of his Plan Agreement. Not less than thirty (30) days
before his Retirement, the Participant must inform the Committee in
writing of any desired change in the benefit payment period over
which his benefits are to be paid. If no change in the election is
timely made, the Plan will pay benefits pursuant to the
Participant's Plan Agreement election.
5.4 Pre-Retirement Plan Agreements. A Participant may enter into a
Pre-Retirement Plan Agreement whereby the Participant and the
Employer agree to a change of the time period over which such
benefits are to be paid. The Pre-Retirement Plan Agreement must be
executed by the Participant in writing in a form acceptable to the
Company not less than 30 days prior to the Participant's
Retirement. Retirement benefit payments which are changed by
reason of a Pre-Retirement Agreement shall be paid to the
Participant commencing on the first day of the month following the
Retirement of the Participant pursuant to the terms of the
Pre-Retirement Plan Agreement (the Retirement Benefit Date) in a
lump sum or in equal monthly payments, not to exceed 240
months, as selected by the Participant.
5.5 Amount of Retirement Benefit. A Participant's Retirement benefits
shall be equal to the balance of his EDP II Account as of his
Retirement Benefit Date plus interest thereon at the rate set
forth in Article 5.2 hereof on any undistributed balance.
5.6 Death Prior to Completion of Retirement Benefits. If a Retired
Participant dies after the commencement of Retirement benefit
payments, but before the applicable Retirement benefit is paid in
full, the Participant's unpaid Retirement benefit payments shall
continue and shall be paid to the Participant's Beneficiary in the
same manner as selected by the Participant.
Article 6
Survivor Benefits
6.1 Survivor Benefit. If a Participant dies before the commencement of
Retirement benefit payments, the Employer will pay a Survivor's
Benefit to the designated Beneficiary of the Participant.
6.2 Amount of Survivor Benefits. The Beneficiary eligible for a Survivor
Benefit will receive in a lump sum as soon as practicable the
existing EDP II Account balance.
Article 7
Termination Benefit
7.1 Termination Benefits. If the Participant incurs a Termination of
Employment, by means other than Retirement, Disability or death, such
Participant shall receive in a lump sum his EDP II Account. Such
amount shall be paid to the Participant within 90 days of the date of
his Termination of Employment.
Article 8
Disability Benefit
8.1 Amount of Disability Benefit. If the Committee determines that a
Participant has a Disability, the Participant shall receive in a lump
sum his EDP II Account. Such amount shall be paid to the participant
within 90 days of the date that the Committee determines that the
Participant is disabled.
Article 9
Beneficiary Designation
9.1 Beneficiary Designation. Each Participant shall have the right, at
any time, to designate any person or persons as his Beneficiary or
Beneficiaries (both principal as well as contingent).
9.2 Change of Beneficiary Designation. Any Beneficiary designation
may be changed by a Participant at any time by the filing in
writing of such change on a form prescribed by the Committee. The
filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed. The Committee shall be
entitled to rely on the last designation filed by the Participant
prior to his death.
9.3 No Participant Designation. If a Participant fails to designate a
Beneficiary as provided above, or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of
the Participant's benefits, then the Participant's designated
Beneficiary shall be deemed to be the surviving spouse. If the
Participant has no surviving spouse, the benefits remaining under the
Plan shall be payable to the Participant's personal representative
(executor or administrator of the Participant's estate).
9.4 Effect of Payment. The payment of benefits under the Plan to the
deemed Beneficiary shall completely discharge the Employer's
obligations under this Plan.
Article 10
Leave of Absence
10.1 Paid Leave of Absence. If a Participant is authorized by the Company
for any reason to take a paid leave of absence from the employment of
the Company, the Deferral Amount for the Deferral Period shall remain
in full force and effect during such leave of absence.
10.2 Unpaid Leave of Absence. If a Participant is authorized by the
Company for any reason to take an unpaid leave of absence from the
employment of the Company, the Deferral Amount shall be suspended and
shall be considered a Default pursuant to Section 3.8.
Article 11
Other Benefits and Agreements
11.1 Coordination With Other Benefits. The benefits provided for a
Participant or for the Beneficiary of a Participant under the Plan
are in addition to any other benefits to which the Participant or
Beneficiary may be entitled under any other plan or program of the
Employer. This Plan shall supplement and shall not supersede, modify
or amend any other such plan or program except as may otherwise be
expressly provided.
11.2 Restoration of Pension Benefits. The Company recognizes that amounts
deferred under the Plan may not be considered as earnings for
purposes of the computation of benefits under qualified plans
under the Employee Retirement Income Security Act of 1974, as
amended, and the Internal Revenue Code of 1986, as amended.
Therefore, any loss of retirement benefits incurred by a
Participant under the Pension Plan for Management, Office &
Technical Employees of Central Illinois Light Company, as may be
amended and restated from time to time (the "Pension Plan"), which
result from deferrals made under the Plan by the Participant,
shall be restored by the Company upon the Retirement of a
Participant or upon the Termination of Employment of a Participant
prior to Retirement. Such pension restoration benefit payments
may be paid from this Plan or, in the sole discretion of the
Committee, may be paid through an alternate vehicle. Such pension
restoration benefits shall be in an amount designed to restore the
benefits, if any, that were lost under the Pension Plan due to the
deferral under this Plan, and the timing and other characteristics of
the pension restoration benefit payments shall coincide as closely as
practicable to benefit payments which would otherwise have been made
under the Pension Plan.
Article 12
Discontinuance, Amendment or Termination
12.1 Discontinuance. The Company reserves the right to discontinue the
Plan at any time. Upon discontinuance of the Plan, the Participants'
EDP II Accounts shall be paid out according to the Plan. The
discontinuance of the Plan shall not adversely affect any Participant
or Beneficiary who has become entitled to the payment of benefits
under the Plan.
12.2 Amendment. The Company may, at any time, amend or modify the Plan in
whole or in part, provided, however, that no amendment or
modification shall adversely affect any EDP II Account in
existence at the time the amendment or modification is made. The
amendment or modification of the Plan shall not affect any
Participant or Beneficiary who has become entitled to the payment
of benefits under the Plan as of the date of the amendment or
modification.
12.3 Termination. The Company reserves the right, in the event of a
hostile or nonnegotiated takeover or acquisition of the Company, or
upon a final decision of any court or administrative agency
pertaining to the income tax treatment of Plan benefits or deductions
to the Company or a Participant which is deemed adverse by the
Company, to terminate the Plan and to distribute the Participants'
EDP II Accounts to them as soon as practicable thereafter.
Article 13
Miscellaneous
13.1 Unsecured General Creditor. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of Employer,
nor shall they be Beneficiaries of, or have any rights, claims or
interests in any life insurance policies, annuity contracts or the
proceeds therefrom owned or which may be acquired by the Employer
("Policies").
Such Policies or other assets of the Employer shall not be held under
any trust for the benefit of Participants, their Beneficiaries,
heirs, successors or assigns, or held in any way as collateral
security for the fulfilling of the obligations of the Employer
under this Plan. Any and all of the Employer's assets and Policies
shall be, and remain, the general assets of the Employer. The
Employer's obligation under the Plan shall be merely that of an
unfunded and unsecured promise of the Employer to pay money in
the future.
<PAGE>
13.2 Nonassignability. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate
or convey in advance of actual receipt, the amounts, if any,
payable hereunder, or any part thereof, which are, and all rights
to which are, expressly declared to be unassignable and
nontransferable. No part of the amounts payable shall, prior to
actual payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate maintenance
owed by Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or
any other person's bankruptcy or insolvency.
13.3 Not a Contract of Employment. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between
the Employer and the Participant, and the Participant (or his
Beneficiary) shall have no rights against the Employer except as
may otherwise be specifically provided herein. Moreover, nothing
in this Plan shall be deemed to give a Participant the right to be
retained in the service of the Employer or to interfere with the
right of the Employer to discipline or discharge him at any time.
13.4 Protective Provisions. A Participant will cooperate with the
Employer by furnishing any and all information requested by the
Employer in order to facilitate the payment of benefits hereunder
and by taking such physical examinations as the Employer may deem
necessary and taking such other action as may be requested by the
Employer.
13.5 Terms. Whenever any words are used herein in the masculine, they
shall be construed as though they were used in the feminine in all
cases where they would so apply; and whenever any words are used
herein in the singular or in the plural, they shall be construed as
though they were used in the plural or the singular, as the case may
be, in all cases where they would so apply.
13.6 Captions. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
13.7 Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Illinois.
13.8 Validity. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed
and enforced as if such illegal and invalid provision had never been
inserted herein.
13.9 Notice. Any notice or filing required or permitted to be given to
the Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to
Central Illinois Light Company
Executive Deferral Plan II
Administrative Committee
300 Liberty Street
Peoria, Illinois 61602
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
13.10 Successors. The provisions of this Plan shall bind and inure to the
benefit and detriment of the Employer and its successors and
assigns. The term successors as used herein shall include any
corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise acquire all or substantially
all of the business and assets of the Employer, and successors of
any such corporation or other business entity.
13.11 Attorney Fees. In the event that the Company breaches any of the
terms of the Plan and it is necessary for a Participant to institute
court proceedings to enforce the Plan provisions, the Participant,
upon prevailing, shall also recover reasonable attorney's fees and
costs as damages from the Company.
13.12 Late Payment Penalty. In the event that the Company fails or refuses
to make any of the payments to a Participant or a Beneficiary
required by the Plan, after the Participant or Beneficiary has
advised the Company in writing of such failure or refusal and has
given the Company thirty (30) days to make such payment, the
Company shall pay interest to the Participant or Beneficiary on the
amount of the late payment at the rate of two times Moody's from
the date such payment was due until the date such payment is made
by the Company.
13.13 Incompetent. In the event that it shall be found upon evidence
satisfactory to the Committee that any Participant or Beneficiary to
whom a benefit is payable under this Plan is unable to care for his
affairs because of illness or accident, any payment due (unless prior
claim therefor shall have been made by a duly authorized guardian or
other legal representative) may be paid, upon appropriate
indemnification of the Committee, to the spouse of such person or
other person deemed by the Committee to have incurred expense for
such Participant. Any such payment shall be a payment for the
account of the Participant and shall be a complete discharge of
any liability of the Plan for such payment amount.
Article 14
Administration
14.1 Committee Duties. This Plan shall be administered by a Committee
which shall consist of persons appointed by the Board of Directors of
the Company. Members of the Committee may be Participants under this
Plan. The Committee shall also have the authority and discretion to
make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve
any and all questions including interpretations of this Plan and the
calculation of benefits, as may arise in connection with the Plan.
14.2 Agents. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit and may from time to time consult with counsel
who may be counsel to the Employer.
<PAGE>
14.3 Binding Effect of Decision. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
14.4 Indemnity of Committee. The Employer shall indemnify and hold
harmless the members of the Committee against any and all claims,
loss, damage, expense or liability arising from any action or failure
to act with respect to this Plan, except in the case of willful
misconduct by the Committee or any of its members.
14.5 Employer Information. To enable the Committee to perform its
functions, the Employer shall supply full and timely information to
the Committee on all matters relating to the Covered Salary of all
Participants, the date and circumstances of the Retirement,
Disability, death or Termination of Employment of all Participants,
and such other pertinent information as the Committee may reasonable
require.
14.6 Change in Payments. The Committee shall have the power, in its sole
discretion, to change the manner and time of payments to be made to a
Participant or Beneficiary from that which would be otherwise payable
to such person.
[DESCRIPTION] This is exhibit (10)d to CILCO's Exhibits
CENTRAL ILLINOIS LIGHT COMPANY
EVA-BASED INCENTIVE COMPENSATION PLAN
Central Illinois Light Company (hereinafter "CILCO") EVA-BASED
INCENTIVE COMPENSATION PLAN adopted by the Board of Directors of CILCO this
29th day of January 1991.
ARTICLE I
Statement of Purpose
1.1 The purpose of the PLAN is to provide an incentive to officers and
employees of CILCO to increase and maintain shareholder value by rewarding the
achievement of this objective.
ARTICLE II
Definitions
Unless the context provides a different meaning, whenever used in
this PLAN, the following terms shall have the following meanings:
2.1 "Award" means the amount of money credited annually to the award bank of
each Participant in accordance with the terms and conditions of the PLAN.
2.2 "Bank" means the account maintained for each PLAN Participant which
includes the award(s) credited annually to the participant plus interest
earned thereon.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Capital" means, except where specifically noted on a Schedule attached
hereto pertaining to each Participating Unit, the following components of
Capital for each participating Unit of the Company:
Current Assets
Less: Non-interest bearing current liabilities
Plus: Long Term Assets
Less: Construction in Progress (CWIP)
Accumulated Depreciation
Accumulated Deferred Taxes
Plus: Adjustments (if they exist)
LIFO Reserve
Present Value of Noncapitalized Leasesa
Cumulative Amortization of Goodwill
Cumulative FAS-90 Writedown
Less: Deferred Expenses & Payments<PAGE>
Notes:
a. Minimum lease commitments discounted at long-term borrowing
rate
2.5 "Capital Asset pricing Model" or "CAPM" is a method for calculation of
the cost of capital
2.6 "Committee" means the Compensation Committee of the Board of Directors of
the Company or such other committee to which the Board has delegated the
responsibility for administering the PLAN.
2.7 "Company" means Central Illinois Light Company ("CILCO").
2.8 "Cost of Capital" or "C*" means the weighted average of the (after tax)
cost of debt, common equity and preferred equity for the year in question.
The Capital Asset pricing Model (CAPM) is used to estimate equity costs. Cost
of Capital is calculated on a quarterly basis. A Schedule attached hereto
sets forth the methodology for calculation of the Cost of capital. Cost of
Capital is the same as "required return.
2.9 "Discretionary Award" has the meaning given at Paragraph 5.3 hereof.
2.10 "Economic value added" or "EVA" is an amount equal to the difference
between the return management actually earns on capital and Cost of Capital.
It is calculated as follows:
EVA - (return earned - Cost of capital) x capital
2.11 "Employee" means a person who is employed by the Company.
2.12 "Established Award" has the meaning given at Paragraph 5.2 hereof.
2.13 "Improvement Award" means a percent of each year's increase in EVA.
2.14 "Maintenance Award" means a percent of a moving three-year average of
the level of EVA.
2.15 "Net operating profit after tax" or "NOPAT" means the adjusted cash
earnings attributable to the capital employed in the participating Unit for the
Plan year to date. The components of NOPAT are as follows:
operating Revenuesa
Less: Operating Expenses
Depreciation Expenses
Sales, General and Administrative Expenses
Non-Operating Incomea
Cash Taxes on Operating Profitsb
Plus: Goodwill Amortization Expense
Plus: Increases in:
LIFO Reserve
Deferred Sales & Credits
Less: Increases in:
Deferred Expenses & Debits
Notes:
a. Non-0perating revenues, expenses. and income will not
ordinarily exist. Only extremely unusual items should be
classed as Non-operating.
b. "Cash Taxes on Operating Profits" is calculated as follows:
Book Tax provision
Less: Increase in deferred ITC's
Tax at appropriate rate on any non-operating
incomec
Plus: Tax saved on interest expensed
Sub-Notes:
c. See footnote above
d. Calculate as:
(Interest Expensee) x (Marginal Tax Rate)
Sub-Sub-Note:
e. Include implicit interest expense on non-capitalized
leases:
(PV of Non-capitalized leases) x (capitalization rate)
2.16 "Participant" means an employee who is participating in the PLAN.
2.17 "PLAN" means the CILCO EVA-BASED INCENTIVE COMPENSATION PLAN, as set
forth herein.
2.18 "Plan Year" shall be the period from 1 October through 30 September.
2.19 "Prime interest rate" means the month-end prime rate charged by the First
National Bank of Chicago in Chicago, Illinois.
2.20 "Required return" means Cost of Capital or C*.
2.21 "Return on capital" or "R" or "Return" means NOPAT divided by beginning
Capital balances for each of the four quarters contained within the Plan Year.
2.22 "Total performance Award" means the aggregate of the Award in any PLAN
year for EVA Improvement and EVA Maintenance.
ARTICLE III
Participation
3.1 Participants. The Participants will include those officers and employees
who most directly affect value creation. A list of Participants shall be
established as soon as possible after commencement of each PLAN year.
3.2 Change in Participants. The addition or deletion of Participants
shall be made upon the request of the Chief Executive Officer (CEO) of the
Company subject to approval by the Committee. The Award Bank of each additional
Participant shall be primed in the manner set forth at paragraph 4.4 hereof.
The addition or deletion of a participant during any PLAN year may require an
amendment to the Established Award allocation as described hare in at Article
V. Notice of any such amendment shall be given to each Participant whose
allocable share of the Established Award is thereby changed.
3.3 Partial Participation. In any PLAN year the CEO may include Partial
Participant(s) who share only in the Discretionary Award. Partial Partici-
pants may be added or deleted at the discretion of the CEO of the Company
without notice to other PLAN participants. No Award Bank shall be established
for partial participants. Awards to partial participants shall be paid in
cash.
ARTICLE IV
Awards
4.1 Use of EVA. The Total Performance Award shall be based upon the calcula-
tion of EVA. It is not reduced by award payments to PLAN participants or
partial Participants.
4.2 Calculation of EVA. Two performance results are calculated for the
Company. These include the following:
a. Improvement in EVA
b. Three-year average of EVA.
A percentage of each is added to the incentive award pool. The percentages
are referenced at paragraphs 4.3.1 and 4.3.2 hereof.
4.3 Total Performance Award Components. The total performance award in any
plan year is determined based upon the sum of EVA measurements for improving
performance and for maintaining value.
4.3.1 EVA Improvement. The percent, specified on Schedule A
attached hereto, of each year's change in EVA is credited to the
Total performance Award. In the event of a decrease in EVA, a
negative percent is calculated and the Total Performance Award is
decreased accordingly.
4.3.2 EVA Maintenance. The moving three-year average of the level
of EVA is calculated and the percent, specified on the schedule A
attached hereto, of the three-year average EVA is added to or
subtracted from the Total Performance Award.
4.4 PLAN Start UP. In the initial year of operation, several adjustments are
needed to make the PLAN workable. Calculation of an award for EVA
improvement requires establishment of an EVA from the previous year.
Calculation of beginning balances in the Award Banks requires having
an ending balance from the previous year.
4.4.1 First Year EVA Target. First year EVA targets will be the
average of EVA for the Company for the five (5) years preceding the
Plan year.
4.4.2. Priming the Award Bank. To allow full incentives to be paid
in the first year an employee is a full participant in the PLAN,
each Award Bank shall be primed with an amount sufficiently large
that, if an average award is earned, an average payment can be made.
This amount shall be equal to twice the targeted bonus percentage of
base salary. In that the amounts used to prime the Award Banks have
not been earned by the Participants, no interest is earned on said
amounts. The loan is amortized evenly over a five year period
commencing in the third year of the PLAN. The loan shall be repaid
without interest.
4.5 Adjustments to EVA. In order that the calculation of EVA will be fair
during each separate year of the PLAN, adjustments will be made in the
calculation of EVA where certain one-time events,acquisitions or dives-
titures would otherwise significantly distort the award calculations.
4.5.1 One Time Events. In the event assets are sold, it is possi-
ble for EVA to increase or decrease sharply when gains or losses are
realized. Although EVA in the year of such event is calculated to
include the event, the target for the following years' EVA Improve-
ment Award will exclude the event. The Maintenance Award in all
years will include the event. Determination of what constitutes a
one-time event will be made by the Committee.
4.5.2 Acquisitions and Divestitures. In the event of acquisitions or
divestitures, the EVA calculated for the operating results of an
acquired or divested entity is added to or subtracted from, as the
case may be, the ongoing calculations. The full price paid for the
acquisition (including good will) is the capital base for the
acquired company. A partial adjustment is made for transactions
which occur during the year. One time gains from divestitures are
treated as discussed at Paragraph 4.5.1 above.
In the event of an acquisition of a company whose earnings are
expected to increase substantially (eg., a company with a high P/E
ratio), EVA may be negative at first and thereby discourage other-
wise prudent acquisitions. In such cases, the Capital of the
acquisition may be divided in two parts. The first, which will be
used for the award calculation is an amount equal to an amount
sufficient to allow the acquisition to exactly earn its Cost of
Capital in the first year. The remainder of the purchase price is
placed in a reserve account which is increased each year at an
interest rate equal to the Acquisition's Cost of Capital. The
reserve is amortized into the Capital base of the acquisition over a
period of time equal to the earnings growth period. If the reserve
amount is negative, no adjustment is made.
4.5.3. Award Allocation Cap. Unless the Committee approves an
allocation of awards in any PLAN year in which the Total Performance
Award equals more than 200% of the aggregate base salaries, no
allocation of awards in excess of 200% of aggregate base salaries
shall be paid to participants during the PLAN year. Failure of the
Committee to approve a Total Performance Award in excess of 200% of
salaries may, at the Committee's discretion, result in allocation of
a portion of such excess, deferral of all or a portion of the
allocation of any such excess until the next PLAN year or forfeiture
of said excess amount.
ARTICLE V
Allocation of Award
5.1 Annual Allocation. The Total Performance Award is allocated annually
among participants. Except as provided at paragraph 3.3 regarding partial
Participants, each Participant's award is credited to the Award Bank main-
tained for each Participant. Such crediting will occur as soon as possible
after conclusion of each PLAN year. Although an Award Bank may, as a result
of negative EVA, have a deficit, no PLAN Participant shall be required, at
any time, to reimburse his/her Award Bank.
5.2 Established Award. Except in the event of an amendment as provided at
paragraph 3.2 herein and further as provided at paragraph 5.4 hereof, in each
PLAN year, the Committee, upon recommendation by the CEO, shall pre-determine
an allocation to PLAN Participants such that 80% of the Total Performance
Award will be allocated. This is the Established Award. Each participant
will be notified of his/her allocable share of the Established Award as soon
as possible after commencement of the PLAN year.
5.3 Discretionary Award. The discretionary Award is the remaining 20% of the
Total Performance Award. It will be utilized to reward outstanding perfor-
mance for one or more Participants or partial Participants. The Discretionary
Award shall be allocated by the CEO of the Company, with the approval of the
Committee at the conclusion of each PLAN year, provided that the allocation
to the CEO of the Company of a Discretionary Award shall be at the same
percentage as his/her allocable share of the Established Award for the PLAN
year. The Committee may, in their discretion, increase or decrease the
Discretionary Award to the CEO which increase or decrease shall not alter the
Discretionary Awards determined by the CEO for other Participants and partial
Participants.
5.4 Committee Adjustment or Suspension of Plan. In any PLAN year in which
the CEO fails to recommend the allocation of the Established Award Paragraph
5.2 hereof, the Plan shall be suspended, except that the Plan shall not be
suspended in the event the Committee in their discretion, either apply the
allocation percentages from the previous PLAN year or establish new allocation
percentages for the PLAN year.
5.5 Annual Review. Prior to the payment of the Awards in any PLAN year, the
calculation of such Awards shall be reviewed by an independent party selected
by the Audit Committee of the Board. The report of the independent party
shall be delivered to the Committee as soon as possible after allocation of
the Total Performance Award has been calculated.
ARTICLE VI
Payment of Awards
6.1 Reporting Status of the Plan. A report of the current status of the plan
shall be provided to Participants within 45 days after the close of each
calendar quarter.
6.2 Award Banks. All allocations from the PLAN shall be credited to an
individual Award Bank for each PLAN Participant. The Award Bank shall include
the Award plus interest earned thereon less any payments therefrom. Award
Banks are not secured by the Company and are 100 percent at risk. The Award
Bank balance increases in the event of an Award and decreases if the Award is
negative. Following the crediting of the Award for the prior year, one-third
of the Award Bank balance of each Participant who has a positive Bank balance
shall be distributed in cash to the Participant. No distribution shall be
made in the event of a negative Bank balance. Although an Award Bank may, as
a result of negative EVA or otherwise, have a deficit, no Plan Participant
shall be required, except in the event of an overpayment, to reimburse his/her
Award Bank.
6.3 Interest. Except as provided at paragraph 4.4.2 regarding loans to prime
Award Banks, the amounts in the Award tanks will be credited monthly with
interest at the prime interest rate. Negative bank balances will not earn or
accrue interest.
6.4 Deferral of Payment. Amounts not paid from the Award Bank as specified
hereinabove will be deferred and maintained in individual Award Banks for each
Participant.
6.5 Accelerated Payment. Notwithstanding any other provisions of the PLAN to
the contrary, upon the occurrence of a successful tender offer, where the
purchase is by a person, or by a group as defined in section 14 (d)(2) of the
securities Exchange Act of 1934, of 30% or more of the voting stock of the
Company and subject to approval by the Committee, all Participants may receive
immediate distribution of the entire amount in their Award Banks less any
amounts used to prime an Award Bank as provided herein at Article IV, Section
D. 2 (paragraph 4.8). Each bank balance shall be payable upon demand from the
Participant, with interest to the date of distribution.
ARTICLE VII
Termination
7.1 Termination by the Company.
7.1.1. Termination of Plan. The PLAN may be terminated by the Board
at any time and for any reason or no reason. Payment of Award Banks
shall proceed as specified hereinabove at Paragraph 6.5 for
accelerated payment.
7.1.2. Committee Action. Upon recommendation by the CEO and with
or without cause, any Participant may be terminated by the Committee
from participation in the PLAN whether or not the Participant
continues to be an employee. In such event, the Participant shall
have no further right to any distribution from his/her Award Bank
except that, at the discretion of the Committee, he/she way be
granted a pro-rata allocation for the PLAN year in which he/she
ceases to be a Participant and may be granted a full or partial
distribution of his/her Bank balance.
7.1.3. Sale of the Company. In the event a Participant ceases to
be an employee because of a sale or transfer of the business of the
Company to a person or entity not controlled, directly or indirectly,
by the Company or a sale, lease, exchange or transfer of all or
substantially all the assets of the Company, the Participant shall
receive a distribution of the entire balance of his/her Bank at the
time when distributions are :made in the year following the year that
he/she ceases to be an employee less any amounts used to prime the
Award Bank (paragraph 4.4).
7.2 Termination by the Participant.
7.2.1. Death or Disability. Termination of participation in the
PLAN results from death or disability of the Participant. Disabil-
ity will be determined in accordance with other benefit provisions of
the Company which define "disability." The entire Award Bank, less
any amounts used to prime the Award Bank Paragraph 4.4.2. shall be
distributed to the Participant or his/her legal representative when
distributions are made in the year following the PLAN year in which
the Participant died or became disabled.
7.2.2. Retirement. A Participant who retires from the employment
of the Company, as retirement shall, from time to time, be defined
by the Company for purposes of awarding pension and other similar
benefits, shall continue to receive distribution from his/her Award
Bank as though he/she had continued to be an employee for a period
of two (2) Plan years following the Plan year in which he/she
retires. The distributions to such a retired Participant shall be
the entire balance of his/her Award Bank less an amount used to
prime the Award Bank Paragraph 4.4.2. The amount used to prime the
Award Bank shall be deducted from the Participant's Award Bank on
the first day of the first Plan Year following the date of retire-
ment.
7.2.3. Voluntary Quit. A Participant who voluntarily terminates
employment with the Company other than to retire shall be deemed to
have forfeited the balance in his/her Award Bank. However, at the
recommendation of the CEO and upon approval by the Committee, the
Participant may be granted a pro-rata allocation for the PLAN year
in which his/her employment terminates and may be granted full or
partial distribution of his/her Award Bank.
ARTICLE VIII
Forfeiture
8.1 Voluntary Quit. In the event a Participant voluntarily terminates
employment with the Company and thereby forfeits all or a portion of
his/her Award Bank, the balance remaining in the Award Bank shall be
distributed or deleted and the Award Bank terminated.
8.2 Non-Allocation of Award. In the event of a suspension of the PLAN in any
PLAN year, as provided herein at paragraph 5.4, the Total Performance Award
for the subject PLAN year shall be deemed forfeited and no portion thereof
shall be allocated to Participants. Any such forfeiture shall not affect
the calculation of EVA in any subsequent year.
ARTICLE IX
Limitations
9.1 No Continued Employment. Nothing contained herein shall provide any
employee with any right to continued employment or in any way abridge the
rights of the Company and its Participating Units to determine the terms and
conditions of employment and whether to terminate employment of any employee.
9.2 No Vested Rights. Except as otherwise provided herein, no employee or
other person shall have any claim of right (legal, equitable. or otherwise)
to any award, allocation, or distribution or any right, title, or vested
interest in any amounts in his/her Award Bank and no officer or employee of
the Company or any Participating Unit or any other person shall have any
authority to make representations or agreements to the contrary. No
interest conferred herein to a Participant shall be assignable or subject
to claim by a Participant's creditors.
9.3 Not a Part of Other Benefits. The benefits provided in this PLAN shall not
be deemed a part of any other benefit provided by the Company to its
employees. The Company assumes no obligation to PLAN Participants except as
specified herein. This is a complete statement, along with the Schedules and
Appendices attached hereto, of the terms and conditions of the PLAN.
ARTICLE X
Authority
10.1 Committee Authority. Except as otherwise expressly provided herein,
full power and authority to interpret and administer this PLAN shall be
vested in the Committee.
10.2 Board of Directors Authority. The Board shall be ultimately responsible
for administration of the PLAN. References made herein to the "Committee"
assume that the Board of Directors has created a committee of its membership
to administer the PLAN. In the event a Committee is not so designated, the
Board shall administer the PLAN. The Board or its Committee, as appropriate,
shall work with the CEO of the Company in all aspects of the administration of
the PLAN.
10.3 Annual Review. The PLAN shall be reviewed at least annually by the
Audit Committee of the Board. It shall report its findings to the Board. The
report prepared annually in accordance with the provisions of Paragraph 5.5
shall be provided to the Audit Committee.
ARTICLE XI
Notice
11.1 Any notice to be given pursuant to the provisions of the PLAN shall be
in writing and directed to the appropriate recipient thereof at his/her
business address or office location.
ARTICLE XII
Effective Date
12.1 This PLAN shall be effective as of 1 October 1990.
ARTICLE XIII
Amendments
13.1 This PLAN may be amended, suspended or terminated at any time at the
sole discretion of the Board upon the recommendation of the Committee.
Provided, however, that no such change in the PLAN shall be effective to
eliminate or diminish the distribution of any Award that has been allocated to
the Bank of a Participant prior to the date of such amendment, suspension or
termination. Notice of any such amendment, suspension or termination shall be
given promptly to each Participant.
ARTICLE XIV
Applicable Law
14.1 This PLAN shall be construed in accordance with the provisions of the
laws of the State of Illinois.
CENTRAL ILLINOIS LIGHT COMPANY
EVA-BASED INCENTIVE COMPENSATION PLAN
Schedule A: Central Illinois Light Company
I. Components of Capital
(As defined in PLAN)
II. Cost of Capital (C*):
C* - weighted average of the following components;
Cost of debt - (current borrowing rate) (l-t)
Cost of equity - [Quarterly avg. B) x 4.5%] + Quarterly
avg. LTCB
Cost of preferred - Quarterly avg. yield on preferred
Note: The D/C ratio is adjusted to reflect an estimate which neither
improves nor detracts from the Company's overall credit. i.e. D/C
should be the Participating Units targeted capital structure.
Glossary: Avg - Average
Beta - Beta Coefficient
D/C - Debt/Capital
LTGB - Long term government bond rate (30 years)
t - Marginal tax rate
YTD - Plan year-to-date
Sources: The following sources are recommended for Cost of Capital
calculations:
1. LTGB rate available from Federal Reserve Bulletin. Salomon
Bros., Moody' s Bond Record etc.
2. Beta calculated by the Company using methodology
provided by ALCAR for an appropriate peer group of
companies.
3. Current borrowing rate and YTD yield available from
current rating.
4. Debt, equity and preferred percents taken against
capital, as defined.
III. Components of NOPAT:
(As defined in PLAN)
IV. First-year EVA Target for Improvement Award: 1]
V. Award Payment Percentages:
EVA Improvement 2.5% of EVA allocated to Total Performance
Award
EVA Maintenance 7.5% of EVA allocated to Total Performance
Award
1] To be calculated using five-year average of EVA
JGS:2022
