UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 1999
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
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
CILCORP Inc. Common stock, no par value,
shares outstanding at June 30, 1999 13,610,680
CENTRAL ILLINOIS LIGHT COMPANY
Common stock, no par value,
shares outstanding and privately
held by CILCORP Inc. at June 30, 1999 13,563,871
1
CILCORP INC.
AND
CENTRAL ILLINOIS LIGHT COMPANY
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1: Financial Statements
CILCORP INC.
Consolidated Balance Sheets 3-4
Consolidated Statements of Income 5-6
Consolidated Statements of Cash Flows 7-8
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Balance Sheets 9-10
Consolidated Statements of Income 11
Consolidated Statements of Cash Flows 12-13
Statements of Segments of Business 14-17
Notes to Consolidated Financial Statements
CILCORP Inc. and Central Illinois Light Company 18-21
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
CILCORP Inc. and Central Illinois Light Company 22-33
PART II. OTHER INFORMATION
Item 1: Legal Proceedings 33
Item 4: Submission of Matters to a Vote of Security Holders 33
Item 5: Other Information 33-35
Item 6: Exhibits and Reports on Form 8-K 35
Signatures
2
<PAGE>
<TABLE>
CILCORP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<CAPTION>
June 30, December 31,
1999 1998
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and temporary cash investments $ 3,541 $ 1,669
Receivables, less reserves of
$1,657 and $3,411 68,405 134,548
Accrued unbilled revenue 27,800 39,339
Fuel, at average cost 9,049 13,431
Materials and supplies, at
average cost 16,444 15,435
Gas in underground storage, at
average cost 12,478 20,494
Prepayments and other 8,639 7,646
---------- ----------
Total current assets 146,356 232,562
---------- ----------
Investments and other property:
Investment in leveraged leases 143,297 146,977
Cash surrender value of company-owned
life insurance, net of related
policy loans of $51,871 and $48,132 2,362 2,655
Other investments 21,698 16,882
---------- ----------
Total investments and other
property 167,357 166,514
---------- ----------
Property, plant and equipment:
Utility plant, at original cost
Electric 1,245,551 1,237,885
Gas 420,812 417,585
---------- ----------
1,666,363 1,655,470
Less - accumulated provision for
depreciation 846,954 812,630
---------- ----------
819,409 842,840
Construction work in progress 45,576 30,075
Other, net of depreciation 610 7,755
---------- ----------
Total property, plant and
equipment 865,595 880,670
---------- ----------
Other assets 23,327 33,194
---------- ----------
Total assets $1,202,635 $1,312,940
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these Balance Sheets.
</TABLE>
3
<PAGE>
<TABLE>
CILCORP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<CAPTION>
June 30, December 31,
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 43,000 $ 13,027
Notes payable 73,300 96,200
Accounts payable 52,276 128,845
Accrued taxes 5,031 8,262
Accrued interest 9,386 9,994
FAC/PGA over-recoveries 367 304
Other 4,519 14,316
---------- ----------
Total current liabilities 187,879 270,948
---------- ----------
Long-term debt 257,168 288,135
---------- ----------
Deferred credits and other
liabilities:
Accumulated deferred income taxes 240,446 239,305
Regulatory liability of regulated
subsidiary 41,302 46,346
Deferred investment tax credits 18,654 19,450
Other 58,370 47,098
---------- ----------
Total deferred credits and
other liabilities 358,772 352,199
---------- ----------
Preferred stock of subsidiary 66,120 66,120
---------- ----------
Stockholders' equity:
Common stock, no par value;
authorized 50,000,000 shares -
outstanding 13,610,680 shares 192,853 192,853
Retained earnings 140,688 143,530
Accumulated other comprehensive
income (845) (845)
---------- ----------
Total stockholders' equity 332,696 335,538
---------- ----------
Total liabilities and
stockholders' equity $1,202,635 $1,312,940
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these Balance Sheets.
</TABLE>
4
<PAGE>
<TABLE>
CILCORP INC AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands)*
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenue:
Electric utility $ 88,044 $ 88,304 $169,006 $167,482
Gas utility 25,569 28,310 102,366 98,212
Other businesses 6,654 5,148 17,133 10,382
-------- -------- -------- --------
Total 120,267 121,762 288,505 276,076
-------- -------- -------- --------
Operating expenses:
Fuel for generation and
purchased power 27,113 29,313 57,183 58,329
Gas purchased for resale 14,234 16,034 65,005 60,025
Other operations and maintenance 43,116 33,311 73,724 62,001
Depreciation and amortization 16,160 15,982 34,481 31,966
Taxes, other than income taxes 9,349 8,517 20,916 19,305
-------- -------- -------- --------
Total 109,972 103,157 251,309 231,626
-------- -------- -------- --------
Fixed charges and other:
Interest expense 7,128 7,376 14,340 14,625
Preferred stock dividends of
subsidiary 773 797 1,570 1,599
Allowance for funds used
during construction (15) (29) (26) (6)
Other 259 207 506 412
-------- -------- -------- --------
Total 8,145 8,351 16,390 16,630
-------- -------- -------- --------
Income from continuing oper.
before income taxes 2,150 10,254 20,806 27,820
Income taxes 1,066 2,519 7,115 8,769
-------- -------- -------- --------
Net income from
continuing operations 1,084 7,735 13,691 19,051
Loss from operations of
discontinued business, net of
tax of $(266), $(5,512) $(221)
and $(7,867) (435) (8,423) (407) (12,045)
-------- -------- -------- --------
Net income (loss) $ 649 $ (688) $ 13,284 $ 7,006
======== ======== ======== ========
5
Avg. common shares outstanding -
basic 13,611 13,611 13,611 13,611
======== ======== ======== ========
Earnings per common share - basic
Continuing operations $ .08 $ .56 $ 1.01 $ 1.40
Discontinued operations (.03) (.62) (.03) (.89)
-------- -------- -------- --------
Net income per common
share - basic $ .05 $ (.06) $ .98 $ .51
======== ======== ======== ========
Avg. common shares outstanding -
diluted 13,752 13,611 13,752 13,690
======== ======== ======== ========
Earnings per common share - diluted
Continuing operations $ .08 $ .56 $ 1.00 $ 1.39
Discontinued operations (.03) (.62) (.03) (.88)
-------- -------- -------- --------
Net income per common
share - diluted $ .05 $ (.06) $ .97 $ .51
======== ======== ======== ========
Dividends per common share $ .615 $ .615 $ 1.23 $ 1.23
======== ======== ======== ========
<FN>
*Except per share amounts
The accompanying notes to the Consolidated Financial Statements are
an integral part of these statements.
</TABLE>
6
<PAGE>
<TABLE>
CILCORP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income before preferred dividends $ 15,261 $ 20,650
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Non-cash lease income and investment income (3,299) (3,415)
Cash receipts in excess of debt service
on leases 7,326 5,650
Depreciation and amortization 34,481 31,966
Deferred income taxes, investment tax credit
and regulatory liability of subsidiary, net (8,748) (4,094)
Changes in operating assets and liabilities:
Decrease in accounts receivable and
accrued unbilled revenue 7,719 21,343
Decrease in inventories 11,374 8,501
Decrease in accounts payable (20,337) (22,702)
Increase in accrued taxes 934 2,630
Decrease (increase) in other assets 1,700 (512)
Increase (decrease) in other liabilities 8,339 (1,469)
-------- --------
Total adjustments 39,489 37,898
-------- --------
Net cash provided by operating activities
from continuing operations 54,750 58,548
-------- --------
Net cash provided (used) by operating
activities of discontinued operations 8,112 (8,738)
-------- --------
Cash flow from operations 62,862 49,810
-------- --------
Cash flows from investing activities:
Additions to plant (27,311) (29,871)
Proceeds from sale of discontinued operations 17,376 --
Other (4,012) (909)
-------- --------
Net cash used by investing activities
from continuing operations (13,947) (30,780)
-------- --------
Net cash used by investing activities
from discontinued operations (4,838) (5,359)
-------- --------
Cash flow from investing activities (18,785) (36,139)
-------- --------
7
Cash flow from financing activities:
Net (decrease) increase in short-term debt (22,900) 2,350
Net decrease in long-term debt (994) (2,117)
Common dividends paid (16,741) (16,742)
Preferred dividends paid (1,570) (1,599)
-------- --------
Cash flow from financing activities (42,205) (18,108)
-------- --------
Net increase (decrease) in cash and
temporary cash investments: 1,872 (4,437)
Cash and temporary cash investments
at beginning of year: 1,669 10,576
-------- --------
Cash and temporary cash investments at
June 30 $ 3,541 $ 6,139
======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 13,832 $ 13,613
Income taxes $ 10,872 $ 7,068
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these statements.
</TABLE>
8
<PAGE>
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Balance Sheets
(In thousands)
<CAPTION>
June 30, December 31,
ASSETS 1999 1998
(Unaudited)
<S> <C> <C>
Utility plant, at original cost:
Electric $1,245,551 $1,237,885
Gas 420,812 417,585
---------- ----------
1,666,363 1,655,470
Less - accumulated provision
for depreciation 846,954 812,630
---------- ----------
819,409 842,840
Construction work in progress 45,576 30,075
Plant acquisition adjustments,
net of amortization 72 505
---------- ----------
Total utility plant 865,057 873,420
---------- ----------
Other property and investments:
Cash surrender value of company-owned
life insurance (net of related
policy loans of $51,871 and $48,132) 2,362 2,655
Other 1,205 1,176
---------- ----------
Total other property and
investments 3,567 3,831
---------- ----------
Current assets:
Cash and temporary cash investments 3,908 1,362
Receivables, less reserves of
$1,464 and $1,106 33,174 35,767
Accrued unbilled revenue 27,536 31,315
Fuel, at average cost 9,049 13,431
Materials and supplies,
at average cost 16,098 15,062
Gas in underground storage,
at average cost 12,402 20,494
Prepaid taxes 7,256 2,265
Other 8,478 6,626
---------- ----------
Total current assets 117,901 126,322
---------- ----------
Deferred debits:
Unamortized loss on reacquired debt 3,101 3,261
Unamortized debt expense 1,773 1,852
Prepaid pension cost 417 417
Other 12,151 15,325
---------- ----------
Total deferred debits 17,442 20,855
---------- ----------
Total assets $1,003,967 $1,024,428
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these Balance Sheets.
</TABLE>
9
<PAGE>
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Balance Sheets
(In thousands)
<CAPTION>
June 30, December 31,
CAPITALIZATION AND LIABILITIES 1999 1998
(Unaudited)
<S> <C> <C>
Capitalization:
Common stockholder's equity:
Common stock, no par value;
authorized 20,000,000 shares;
outstanding 13,563,871 shares $ 185,661 $ 185,661
Retained earnings 133,194 135,315
Accumulated other comprehensive income (845) (845)
---------- ----------
Total common stockholder's equity 318,010 320,131
Preferred stock without mandatory
redemption 44,120 44,120
Preferred stock with mandatory redemption 22,000 22,000
Long-term debt 237,909 267,884
---------- ----------
Total capitalization 622,039 654,135
---------- ----------
Current liabilities:
Current maturities of long-term debt 30,000 --
Notes payable 39,300 40,600
Accounts payable 34,958 53,260
Accrued taxes 8,450 7,303
Accrued interest 8,784 9,394
FAC/PGA over-recoveries 367 304
Level payment plan 47 1,519
Other 4,294 5,261
---------- ----------
Total current liabilities 126,200 117,641
---------- ----------
Deferred credits and other
liabilities:
Accumulated deferred income taxes 139,346 141,746
Regulatory liability 41,302 46,346
Deferred investment tax credit 18,654 19,450
Capital lease obligation 1,449 1,703
Other 54,977 43,407
---------- ----------
Total deferred credits and
other liabilities 255,728 252,652
---------- ----------
Total capitalization and
liabilities $1,003,967 $1,024,428
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these Balance Sheets.
</TABLE>
10
<PAGE>
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Statements of Income
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating revenue:
Electric $ 88,044 $ 88,304 $169,006 $167,482
Gas 25,569 28,310 102,366 98,212
-------- -------- -------- --------
Total operating revenues 113,613 116,614 271,372 265,694
-------- -------- -------- --------
Operating expenses:
Cost of fuel 21,030 21,135 45,261 45,477
Cost of gas 11,131 13,534 55,818 54,156
Purchased power 6,083 8,178 11,922 12,852
Other operations and maintenance 37,898 30,876 65,600 57,693
Depreciation and amortization 15,901 15,754 33,961 31,509
Income taxes 2,464 4,049 9,359 11,826
Other taxes 9,338 8,495 20,899 19,264
-------- -------- -------- --------
Total operating expenses 103,845 102,021 242,820 232,777
-------- -------- -------- --------
Operating income 9,768 14,593 28,552 32,917
-------- -------- -------- --------
Other income and deductions:
Cost of equity funds capitalized -- -- -- --
Company-owned life insurance, net (259) (207) (506) (412)
Other, net (156) 58 (384) (24)
-------- -------- -------- --------
Total other income and
(deductions) (415) (149) (890) (436)
-------- -------- -------- --------
Income before interest expense 9,353 14,444 27,662 32,481
-------- -------- -------- --------
Interest expenses:
Interest on long-term debt 4,809 4,922 9,617 9,882
Cost of borrowed funds
capitalized (15) (29) (26) (6)
Other 876 622 1,881 1,360
-------- -------- -------- --------
Total interest expense 5,670 5,515 11,472 11,236
-------- -------- -------- --------
Net income before preferred
dividends 3,683 8,929 16,190 21,245
-------- -------- -------- --------
Dividends on preferred stock 773 797 1,570 1,599
-------- -------- -------- --------
Net income available for
common stock $ 2,910 $ 8,132 $ 14,620 $ 19,646
======== ======== ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these statements.
</TABLE>
11
<PAGE>
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1999 1998
(In thousands)
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income before preferred dividends $ 16,190 $ 21,244
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 34,394 31,865
Deferred income taxes, investment tax
credit and regulatory liability, net (8,240) (4,205)
Changes in operating assets and liabilities:
Decrease in accounts receivable 2,593 15,612
Decrease in fuel, materials and supplies,
and gas in underground storage 11,437 8,495
Decrease in unbilled revenue 3,778 5,993
Decrease in accounts payable (18,302) (10,423)
Increase in accrued taxes and interest 537 1,506
Capital lease payments 323 323
Increase in other current assets (6,842) (1,078)
Decrease in other current liabilities (2,377) (3,235)
Decrease in other non-current assets 4,425 2,265
Increase in other non-current liabilities 11,829 1,356
-------- --------
Net cash provided by operating activities 49,745 69,718
-------- --------
Cash flows from investing activities:
Capital expenditures (26,587) (29,865)
Cost of equity funds capitalized -- --
Other (678) (2,891)
-------- --------
Net cash used in investing activities (27,265) (32,756)
-------- --------
Cash flow from financing activities:
Common dividends paid (16,741) (21,741)
Preferred dividends paid (1,570) (1,599)
Payments on capital lease obligation (323) (323)
Decrease in short-term borrowing (1,300) (900)
Long-term debt retired -- (10,650)
-------- --------
Net cash used in financing activities (19,934) (35,213)
-------- --------
Net increase in cash and temporary
cash investments 2,546 1,749
Cash and temporary cash investments at
beginning of year 1,362 698
-------- --------
Cash and temporary cash investments at
June 30 $ 3,908 $ 2,447
======== ========
12
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest (net of cost of borrowed
funds capitalized) $ 12,397 $ 12,203
Income taxes $ 19,308 $ 13,588
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these statements.
</TABLE>
13
<PAGE>
<TABLE>
Statements of Segments of Business
CILCORP Inc. and Subsidiaries
<CAPTION>
Three Months Ended June 30, 1999
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Oper. Totals
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $88,044 $25,569 $ 881 $ 5,711 $ -- $120,205
Interest income -- -- 35 27 -- 62
------- ------- ------- ------- ------- --------
Total 88,044 25,569 916 5,738 -- 120,267
------- ------- ------- ------- ------- --------
Operating
expenses 64,159 21,321 1,573 6,759 -- 93,812
Depreciation
and amort. 11,354 4,547 216 43 -- 16,160
------- ------- ------- ------- ------- --------
Total 75,513 25,868 1,789 6,802 -- 109,972
------- ------- ------- ------- ------- --------
Interest exp. 4,082 1,603 -- 1,443 -- 7,128
Preferred
stock div. -- -- 773 -- -- 773
Fixed charges
& other exp. (15) -- 259 -- -- 244
------- ------- ------- ------- ------- --------
Total 4,067 1,603 1,032 1,443 -- 8,145
------- ------- ------- ------- ------- --------
Income from
continuing
oper. before
income taxes 8,464 (1,902) (1,905) (2,507) -- 2,150
Income taxes 3,167 (703) (717) (681) -- 1,066
------- ------- ------- ------- ------- --------
Net income
from cont.
operations 5,297 (1,199) (1,188) (1,826) -- 1,084
------- ------- ------- ------- ------- --------
Effect of
discontinued
operations -- -- -- -- (435) (435)
------- ------- ------- ------- ------- --------
Segment net
income $ 5,297 $(1,199) $(1,188)$(1,826) $ (435) $ 649
======= ======= ======= ======= ======= ========
</TABLE>
14
<PAGE>
<TABLE>
Statements of Segments of Business
CILCORP Inc. and Subsidiaries
<CAPTION>
Three Months Ended June 30, 1998
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Oper. Totals
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $88,304 $28,310 $ 320 $ 4,653 $ -- $121,587
Interest income -- -- 155 20 -- 175
------- ------- ------- ------- ------- --------
Total 88,304 28,310 475 4,673 -- 121,762
------- ------- ------- ------- ------- --------
Operating
expenses 58,195 24,023 881 4,076 -- 87,175
Depreciation
and amort. 11,218 4,536 178 50 -- 15,982
------- ------- ------- ------- ------- --------
Total 69,413 28,559 1,059 4,126 -- 103,157
------- ------- ------- ------- ------- --------
Interest exp. 3,964 1,580 -- 1,832 -- 7,376
Preferred
stock div. -- -- 797 -- -- 797
Fixed charges
& other exp. (29) -- 207 -- -- 178
------- ------- ------- ------- ------- --------
Total 3,935 1,580 1,004 1,832 -- 8,351
------- ------- ------- ------- ------- --------
Income from
continuing
oper. before
income taxes 14,956 (1,829) (1,588) (1,285) -- 10,254
Income taxes 4,759 (710) (642) (888) -- 2,519
------- ------- ------- ------- ------- --------
Net income
from cont.
operations 10,197 (1,119) (946) (397) -- 7,735
------- ------- ------- ------- ------- --------
Effect of
discontinued
operations -- -- -- -- (8,423) (8,423)
------- ------- ------- ------- ------- --------
Segment net
income $10,197 $(1,119) $ (946)$ (397) $(8,423) $ (688)
======= ======= ======= ======= ======= ========
</TABLE>
15
<PAGE>
<TABLE>
Statements of Segments of Business
CILCORP Inc. and Subsidiaries
<CAPTION>
Six Months Ended June 30, 1999
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Oper. Totals
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $169,006 $102,366 $ 1,729 $ 15,235 $ -- $288,336
Interest income -- -- 113 56 -- 169
-------- -------- ------- -------- ------- --------
Total 169,006 102,366 1,842 15,291 -- 288,505
-------- -------- ------- -------- ------- --------
Operating
expenses 120,487 79,013 3,161 14,167 -- 216,828
Depreciation
and amort. 23,786 10,175 432 88 -- 34,481
-------- -------- ------- -------- ------- --------
Total 144,273 89,188 3,593 14,255 -- 251,309
-------- -------- ------- -------- ------- --------
Interest exp. 8,233 3,265 -- 2,842 -- 14,340
Preferred
stock div. -- -- 1,570 -- -- 1,570
Fixed charges
& other exp. (26) -- 506 -- -- 480
-------- -------- ------- -------- ------- --------
Total 8,207 3,265 2,076 2,842 -- 16,390
-------- -------- ------- -------- ------- --------
Income from
continuing
oper. before
income taxes 16,526 9,913 (3,827) (1,806) -- 20,806
Income taxes 5,315 4,044 (1,367) (877) -- 7,115
-------- -------- ------- -------- ------- --------
Net income
from cont.
operations 11,211 5,869 (2,460) (929) -- 13,691
-------- -------- ------- -------- ------- --------
Effect of
discontinued
operations -- -- -- -- (407) (407)
-------- -------- ------- -------- ------- --------
Segment net
income $ 11,211 $ 5,869 $(2,460)$ (929) $ (407) $ 13,284
======== ======== ======= ======== ======= ========
16
<PAGE>
</TABLE>
<TABLE>
Statements of Segments of Business
CILCORP Inc. and Subsidiaries
<CAPTION>
Six Months Ended June 30, 1998
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Oper. Totals
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $167,482 $ 98,212 $ 355 $ 9,780 $ -- $275,829
Interest income -- -- 191 56 -- 247
-------- -------- ------- -------- -------- --------
Total 167,482 98,212 546 9,836 -- 276,076
-------- -------- ------- -------- -------- --------
Operating
expenses 112,626 76,816 1,553 8,665 -- 199,660
Depreciation
and amort. 22,436 9,073 356 101 -- 31,966
-------- -------- ------- -------- -------- --------
Total 135,062 85,889 1,909 8,766 -- 231,626
-------- -------- ------- -------- -------- --------
Interest exp. 8,038 3,204 -- 3,383 -- 14,625
Preferred
stock div. -- -- 1,599 -- -- 1,599
Fixed charges
& other exp. (6) -- 412 -- -- 406
-------- -------- ------- -------- -------- --------
Total 8,032 3,204 2,011 3,383 -- 16,630
-------- -------- ------- -------- -------- --------
Income from
continuing
oper. before
income taxes 24,388 9,119 (3,374) (2,313) -- 27,820
Income taxes 8,181 3,645 (1,339) (1,718) -- 8,769
-------- -------- ------- -------- -------- --------
Net income
from cont.
operations 16,207 5,474 (2,035) (595) -- 19,051
-------- -------- ------- -------- -------- --------
Effect of
discontinued
operations -- -- -- -- (12,045) (12,045)
-------- -------- ------- -------- -------- --------
Segment net
income $ 16,207 $ 5,474 $(2,035)$ (595) $(12,045) $ 7,006
======== ======== ======= ======== ======== ========
</TABLE>
17
CILCORP INC. AND CENTRAL ILLINOIS LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Introduction
The consolidated financial statements include the accounts of CILCORP
Inc. (CILCORP or the Holding Company), Central Illinois Light Company
(CILCO), QST Enterprises Inc. (QST) and its subsidiaries (QST
Environmental Inc., QST Energy Inc. (QST Energy) and CILCORP
Infraservices Inc.) and CILCORP's other subsidiaries (collectively,
the Company) after elimination of significant intercompany
transactions. The consolidated financial statements of CILCO include
the accounts of CILCO and its subsidiaries, CILCO Exploration and
Development Company and CILCO Energy Corporation. CILCORP owns
directly or indirectly 100% of the common stock of its first-tier
subsidiaries. In the fourth quarter of 1998, the operations of QST
and its subsidiaries (excluding ESE Land Corporation and CILCORP
Infraservices Inc. - see Management's Discussion and Analysis) were
discontinued (see Note 4.) and, therefore, are being reported as
discontinued operations in the financial statements. QST completed
the sale of subsidiary QST Environmental Inc. in the second quarter
of 1999 (see Results of Operations - QST Enterprises Discontinued
Operations). Prior year amounts have been reclassified on a basis
consistent with the 1999 presentation.
The accompanying unaudited consolidated financial statements have
been prepared according to the rules and regulations of the
Securities and Exchange Commission (SEC). Although CILCORP believes
the disclosures are adequate to make the information presented not
misleading, these consolidated financial statements should be read
along with the Company's 1998 Annual Report on Form 10-K.
In the Company's opinion, the consolidated financial statements
furnished reflect all normal and recurring adjustments necessary for
a fair presentation of the results of operations for the periods
presented. Operating results for interim periods are not necessarily
indicative of operating results to be expected for the year or of the
Company's future financial condition.
NOTE 2. Contingencies
Gas Manufacturing Plant Sites
CILCO continues to investigate and/or monitor four former gas
manufacturing plant sites located within CILCO's present gas service
territory. The purpose of the investigations 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.
During the six months ended June 30, 1999, CILCO paid approximately
$362,000 to outside parties for former gas manufacturing plant site
monitoring, remediation and legal fees, and expects to spend
approximately $250,000 during the remainder of 1999. A $1.5 million
liability and a corresponding regulatory asset are recorded on the
Balance Sheets representing the minimum amount of coal tar
investigation and remediation costs CILCO expects to incur and
recover in the future. Coal tar remediation costs incurred through
June 1999 have been deferred on the Balance Sheets, net of amounts
recovered from customers.
Through June 30, 1999, CILCO has recovered approximately $6.6 million
in coal tar remediation costs from its customers through a gas rate
rider approved by the Illinois Commerce Commission (ICC). Currently,
that rider allows recovery of prudently incurred coal tar remediation
costs in the year that the expenditures occur. Under these
circumstances, management believes that the cost of coal tar
remediation will not have a material adverse effect on CILCO's
financial position or results of operations.
18
CILCO's Union Contracts
The International Brotherhood of Electrical Workers Local 51 (IBEW)
ratified its current agreement on October 10, 1997. The current
contract expires on July 1, 2000. The IBEW represents approximately
389 CILCO gas and electric department employees. The National
Conference of Firemen and Oilers Local 8 (NCF&O), ratified its
current agreement on October 23, 1998. The current contract expires
on July 1, 2001. The NCF&O represents approximately 159 CILCO power
plant employees.
NOTE 3. Commitments
In August 1990, CILCO entered into a firm, wholesale power purchase
agreement with Central Illinois Public Service Company, now
AmerenCIPS (CIPS). This agreement provided for a minimum contract
delivery rate from CIPS of 90 MW until the contract expired in May
1998.
In March 1995, CILCO and CIPS amended a limited-term power agreement
reached in November 1992. This agreement provided for CILCO to
purchase 150 MW of CIPS' capacity from June 1998 through May 2002,
and 50 MW from June 2002 through May 2009.
In May 1999, a settlement was reached between CILCO and CIPS
regarding disputed issues pertaining to these capacity and energy
agreements. The settlement amends the previous agreements to
provide for 100 MW of capacity and firm energy for the months of
June through September for the years 2000 through 2003 and
additionally provide for 100 MW of firm energy for the month of
January in each of those years. There are no commitments to
purchase capacity or energy beyond those dates. The agreements
provide specific prices for on-peak and off-peak energy, which
eliminates the ambiguity that arose under the old agreements due to
the use of pricing queues. Under the settlement, CILCO will have no
capacity payment obligations to CIPS for February through December
1999, resulting in 1999 capacity reservation savings of
approximately $6 million. The settlement also obligates both
parties to withdraw from regulatory action pertaining to related
contract issues. CIPS and CILCO are currently preparing the
settlement document filing for approval by the FERC.
NOTE 4. QST Enterprises Discontinued Operations
Due to uncertainties related to energy deregulation across the
country, the illiquidity of certain energy markets and the Company's
pending acquisition by AES, the Company intends to focus on the
opportunities in the Illinois energy market resulting from the
deregulation of electricity under the Electric Service Customer
Choice and Rate Relief Law of 1997 (see Management's Discussion and
Analysis - Illinois Electric Deregulation). As a result, the Company
decided in the fourth quarter of 1998 to sell its 100% ownership
interest in QST Environmental Inc. (QST Environmental), a first-tier
subsidiary of QST Enterprises Inc. providing environmental consulting
and engineering services. On May 7, 1999, QST Enterprises Inc.
signed a definitive agreement for the sale of QST Environmental to
MACTEC, Inc., a privately-held company which provides environmental
management services, for approximately $18 million in cash, which was
received by QST Enterprises Inc. on June 24, 1999, the effective date
of the sale. In August 1998, QST Enterprises Inc. sold its wholly-
owned fiber optic-based telecommunications subsidiary, QST
Communications, for $20 million cash and stock options then valued at
$5.5 million. After incurring material losses in the wholesale
electricity market in June 1998 and subsequent losses in its energy
operations outside of Illinois, QST Energy transferred its
Pennsylvania retail customers to other marketers, ceased its Houston-
based energy trading operations, and has terminated its obligations
to provide electricity to its non-Illinois customers. Accordingly,
the operations of QST Enterprises Inc. and its subsidiaries are shown
as discontinued operations in the statements of income. The
Company's investment in QST Enterprises Inc. (excluding CILCORP
Infraservices Inc.), as of June 30, 1999, on the accompanying
consolidated balance sheet, consists primarily of $1.7 million in
working capital, $.2 million in fixed assets
19
and $11.2 million of investments and other assets. Working capital
consists mainly of $1.7 million in receivables (see QST Enterprises
Discontinued Operations) offset by $16.6 million in outstanding debt
to the Holding Company. Investments and other assets consists
primarily of a $5.5 million investment in ESE Land Corporation (ESE
Land) and $5.5 million of stock options obtained in the sale of QST
Communications. The investment in ESE Land consists of residual
interests in three limited liability corporations obtained as part of
the sale of ESE Land assets in fourth quarter 1997. QST
Environmental's residual investment in ESE Land was transferred to
QST Enterprises Inc. prior to the sale of QST Environmental. Prior
year financial statements have been reclassified to conform to the
current year presentation.
NOTE 5. Financial Instruments and Price Risk Management
CILCORP utilizes commodity futures contracts, options and swaps in
the normal course of its natural gas and electric business
activities. Gains and losses arising from derivative financial
instrument transactions which hedge the impact of fluctuations in
energy prices are recognized in income concurrent with the related
purchases and sales of the commodity. If a derivative financial
instrument contract is terminated because it is probable that a
transaction or forecasted transaction will not occur, any gain or
loss as of such date is immediately recognized. If a derivative
financial instrument contract is terminated early for other economic
reasons, any gain or loss as of the termination date is deferred and
recorded concurrently with the related purchase and sale of natural
gas. CILCORP is subject to commodity price risk for deregulated
sales to the extent that energy is sold under firm price commitments.
Due to market conditions, at times CILCORP may have unmatched
commitments to purchase and sell energy on a price and quantity
basis. Physical and derivative financial instruments give rise to
market risk, which represents the potential loss that can be caused
by a change in the market value of a particular commitment. Market
risks are actively monitored to ensure compliance with the Company's
risk management policies, including limits to the Company's total net
exposure at any time.
The net gain reflected in operating results from derivative financial
instruments was approximately $415,000 for the second quarter 1999.
As of June 30, 1999, CILCORP had fixed-price derivative financial
instruments representing hedges of natural gas purchases of .5 Bcf
and natural gas sales of 1.6 Bcf for commitments through September
2000. The net deferred gain and carrying amount on these fixed-price
derivatives at June 30, 1999, was approximately $571,600. At
June 30, 1999, CILCORP had open positions in derivative financial
instruments used to hedge basis of 1.4 Bcf for commitments through
March 2000. The net deferred gain on these basis derivatives at
June 30, 1999, was approximately $30,500. As of June 30, 1999,
CILCORP had fixed-price derivative financial instruments representing
hedges of electricity purchases of 49,312 MWh and electricity sales
of 3,680 MWh for commitments through June 2000. The net deferred
loss and carrying amount on these fixed-price derivatives at June 30,
1999, was approximately $132,400.
NOTE 6. New Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). The statement establishes accounting and
reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position
and measure those instruments at fair value. As issued, SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999.
In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement
No. 133" (SFAS 137). SFAS 137 amends SFAS 133 to require
implementation of SFAS 133 for all fiscal quarters of fiscal years
beginning after June 15, 2000.
20
The Company has not yet adopted SFAS 133 and has not yet determined
its effect on the Company's financial position, results of operations
or cash flows.
NOTE 7. Earnings Per Share
The following data show the amounts used in computing earnings per
share and the effect on income and the weighted average number of
shares of dilutive potential common stock. The shares calculated
for dilutive potential result from Award Agreements entered into
pursuant to the CILCORP Shareholder Return Incentive Compensation
Plan.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
(In thousands)
<S> <C> <C>
Income available to common shareholders $13,284 $ 7,006
Weighted average number of common shares
used in Basic Earnings Per Share 13,611 13,611
Weighted number of dilutive potential common
shares used in Diluted Earnings Per Share 141 79
</TABLE>
The Company adopted Statement of Financial Accounting Standards No.
128, Earnings Per Share, for the year ended December 31, 1997.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In 1998 and prior years, the financial condition and operating
results of CILCORP Inc. and its subsidiaries (the Company) primarily
reflected the operations of Central Illinois Light Company (CILCO),
QST Enterprises Inc. (QST), and their subsidiaries. On November 23,
1998, the Company announced that The AES Corporation (AES) had
offered to buy 100% of the Company's outstanding common stock for $65
per share, subject to CILCORP shareholder approval and various
regulatory approvals. The Federal Trade Commission granted approval
of CILCORP's merger with AES under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 on February 22, 1999. On March 10, 1999,
the Illinois Commerce Commission issued its approval. The merger was
approved by CILCORP shareholders at a special meeting on May 20,
1999. The FERC issued an order to CILCORP approving the transaction
on June 16, 1999. The SEC staff is currently reviewing AES's
application for an exemption under Section 3(a)(5) of the Public
Utility Holding Company Act. The Company anticipates that this
transaction will close in the third quarter of 1999.
As a result of the pending acquisition and after reviewing its
business plans, the Company decided in late 1998 to sell its 100%
ownership interest in QST Environmental Inc. (QST Environmental), a
first-tier subsidiary of QST that provides environmental consulting
and engineering services. On May 7, 1999, QST agreed to sell all the
outstanding common stock of QST Environmental to MACTEC, Inc. for
approximately $18 million in cash. The sale was effective on
June 24, 1999. QST had sold another of its subsidiaries, QST
Communications Inc., in August 1998.
In June 1998, QST Energy Inc. (QST Energy), another first-tier
subsidiary of QST, incurred a material loss related to wholesale
electricity contracts, triggered by an unprecedented increase in
short-term wholesale electricity prices. QST Energy closed its
electric and gas non-retail positions and, in the fourth quarter of
1998, closed its Houston energy trading office and transferred its
Pennsylvania retail electric and gas customers to other marketers.
QST Energy has since discontinued providing electricity to its
remaining non-Illinois commercial customers.
Due to uncertainties related to electric deregulation across the
country, the illiquidity of certain energy markets, and the Company's
pending acquisition by AES, the Company intends to focus on the
opportunities in the Illinois energy market resulting from the
deregulation of electricity under the Electric Service Customer
Choice and Rate Relief Law of 1997 (see Item 5: Other Information -
Illinois Electric Deregulation). This law will enable CILCO, the
Company's regulated public utility that generates and distributes
electricity and purchases, transports and distributes natural gas, to
serve Illinois electric customers outside its traditional Central
Illinois service territory. As a result of these events, the Company
is reporting the results of QST Enterprises and its subsidiaries
(excluding ESE Land Corporation and CILCORP Infraservices Inc.) as
discontinued operations (see Note 4).
The Other Businesses segment includes the operations of the holding
company itself (Holding Company), its investment subsidiary, CILCORP
Investment Management Inc. (CIM), CILCORP Ventures Inc. (CVI) and
CILCORP Infraservices Inc. which provides utility infrastructure
operation and maintenance services.
Forward-Looking Information
Forward-looking information is included in Part I. Item 2:
Management's Discussion and Analysis of Financial Condition and
Results of Operations and Part II. Item 5: Other Information. Such
information generally relates to future expected or anticipated
events or trends and identified contingencies and uncertainties.
Certain material contingencies are also described in Note 2 to the
Consolidated Financial Statements.
22
Some important factors could cause actual results or outcomes to
differ materially from those expressed or implied in MD&A. The
business and profitability of CILCORP and its subsidiaries are
influenced by economic and geographic factors, including ongoing
changes in environmental laws and weather conditions; the extent and
pace of development of competition for retail and wholesale energy
customers; changes in technology; third party compliance with Year
2000 requirements; the inability to identify and remediate or replace
embedded computer chips in affected equipment; pricing and
transportation of commodities; market supply and demand for energy
and energy derivative financial instruments; inflation; capital
market conditions; environmental protection and compliance costs and
regulatory actions regarding the proposed merger with AES.
Prevailing governmental policies, statutory changes, and regulatory
actions with respect to rates, industry structure and recovery of
various costs incurred by CILCO in the course of its business and
increasing wholesale and retail competition in the electric and gas
business affect its earnings. All such factors are difficult to
predict, contain uncertainties that may materially affect actual
results and, to a significant degree, are beyond the control of
CILCORP and its subsidiaries. CILCORP and its subsidiaries undertake
no obligation to publicly update or revise any forward-looking
statements, whether as a result of changes in actual results,
assumptions or other factors.
Capital Resources & 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 to fund its capital
expenditures, pay its financial obligations, meet working capital
needs and retire or refinance debt as it matures. The Agreement and
Plan of Merger (The Agreement) between the Company and The AES
Corporation provides for the ongoing payment of common dividends, not
to exceed the average for the four quarterly dividend payments prior
to the effective date of The Agreement, pending the merger.
CILCORP
Short-term borrowing capability is available to the Company for
additional cash requirements. CILCORP's Board of Directors has
authorized it to borrow up to $60 million on a short-term basis. On
June 30, 1999, CILCORP had committed bank lines of credit of
$60 million, of which $34 million was used.
The Company had $30.5 million of medium-term notes outstanding at
June 30, 1999. The Company may issue an additional $27 million
under its existing $75 million medium-term note program in order to
retire maturing debt and to provide funds for other corporate
purposes.
CILCO
Capital expenditures totaled $26.6 million for the six months ended
June 30, 1999. Capital expenditures are anticipated to be
approximately $29.9 million for the remainder of 1999 and are
currently estimated to be $45 million in 2000. Included in 1999 and
2000 capital expenditures are $11.8 million and $3 million,
respectively, for information technology projects.
CILCO retired $10.65 million of medium-term notes in June 1998.
CILCO does not plan to issue long-term debt during the remainder of
1999. CILCO intends to finance its 1999 and 2000 capital
expenditures with funds provided by operations.
As of June 30, 1999, CILCO had committed bank lines of credit
aggregating $45 million, all of which were unused. CILCO uses these
lines of credit to support issuance of short-term commercial paper.
CILCO had $39.3 million of commercial paper outstanding at June 30,
1999, and expects to issue commercial paper periodically throughout
the remainder of 1999.
23
QST
Working capital balances at QST (excluding QST Environmental)
increased by $4.1 million during the second quarter of 1999,
primarily due to an increase in receivables from the Holding Company
and due to cash received in escrow from the sale of QST
Environmental. QST expects to finance working capital needs with
funds provided by the Holding Company as QST's operations are
discontinued. At June 30, 1999, QST (excluding QST Environmental)
had outstanding debt to the Holding Company of $16.6 million.
QST Environmental spent $.3 million for capital additions and
improvements during the second quarter of 1999. In conjunction with
the sale of QST Environmental to MACTEC, Inc. (see QST Enterprises
Discontinued Operations), QST Environmental's line of credit with
CILCORP was terminated on May 28, 1999.
CIM
At June 30, 1999, CIM had $33 million of outstanding debt owing to
CILCORP. During 1997 and prior years, CIM committed to invest $16.6
million in affordable housing tax credit funds. Through June 30,
1999, approximately $14.9 million of these commitments had been
funded. CIM expects to contribute approximately $.8 million in cash
for these investments during the remainder of 1999, and lesser
amounts each year thereafter through 2006. These investments will
be funded through borrowings from CILCORP. CIM expects to finance
any other new investments and working capital needs during the
remainder of 1999 with a combination of funds generated internally
and funds provided by CILCORP.
CVI
At June 30, 1999, CVI had outstanding debt of $.1 million, borrowed
from CILCORP. CVI expects to finance its activities and working
capital needs during the remainder of 1999 with a combination of
funds generated internally and with funds provided by CILCORP.
Year 2000
The Company is continuing its progress toward making its computer
systems and operations ready for the year 2000. CILCO began
evaluating its information technology systems in 1996. Systems were
reviewed and a schedule was developed for the analysis of all
computer application code and for the replacement or modification of
those systems that were identified as obsolete and/or having
potential Year 2000 (Y2K) issues. Replacement of several major
computer systems with Y2K issues began in 1997. A Y2K team was
established in March 1998, consisting of personnel from each
operating division of CILCO. In conjunction with the formation of
the Y2K team, an outside firm specializing in Y2K projects was
retained to assist CILCO with its overall Y2K project plans. CILCO
has also worked with an independent audit team to evaluate the status
of the Y2K project. The project was divided into three phases, as
follows:
Phase I tasks included an inventory of all present systems for
embedded chips having potential Y2K issues, contacting all
manufacturers of embedded chip devices for the Y2K status of these
devices, identifying and surveying all critical suppliers, and
conducting an inventory of all information technology hardware and
software for analysis of Y2K problems. Phase I was completed in
August 1998.
Phase II is currently in progress. This phase includes Y2K
compliance testing of all suspect embedded chip devices identified in
Phase I in the power plants, service centers, and business offices.
In addition, two separate groups of outside consultants evaluated all
mainframe application code to identify specific instances of date
problems in each application program for systems that are not being
replaced. Phase II has been completed except for the testing of
approximately 5% of non-critical embedded chip devices associated
with power plant operations. This testing will occur during the
first part of the third quarter of 1999.
24
Phase III is also in progress and includes the upgrade/replacement
and re-testing of embedded chip devices found not to be Y2K compliant
during Phase II. This phase includes completion of mainframe
computer operating software upgrades to current Y2K compliant
versions and defining Y2K contingency plans for each business unit.
Computer application code that was determined to have Y2K date
related problems during Phase II will be corrected. Testing of all
applications which have undergone Y2K upgrades/modifications, testing
of operating system software, and development and testing of
contingency plans through simulation or actual tests, where
practical, will complete Phase III, which is expected to be completed
by October 1999. Systems identified as critical to the continued
provision of utility services will be of particular focus during the
testing portion of Phase III. These critical systems are generating
station equipment, electric transmission and distribution control
systems, gas delivery control systems, and telecommunications
systems.
An estimated $2 million (historical and future costs) will be spent
for embedded chip analysis, vendor management, application code
scanning, remediation, testing and contingency planning at CILCO.
Approximately $30.7 million will have been spent prior to the year
2000 for system replacements or hardware upgrades initiated for
business purposes other than solely for Y2K compliance.
CILCO is working both internally and with utility industry groups,
including the Mid-America Interconnected Network (MAIN) and the North
American Electric Reliability Council (NERC), to identify and plan
for all identified risks associated with the Y2K issue. While these
groups are modeling potential worst case scenarios, the probability
of extreme disruptions due to Y2K issues is considered extremely low.
CILCO's Y2K team has identified the most likely worst case scenario
to be an interruption in service by a critical supplier.
Consequently, alternate sources for supplies have been identified and
the need for CILCO to stock additional inventories of critical items
is being evaluated.
CILCO is also following the contingency planning process recognized
by MAIN and NERC. Accordingly, CILCO has established a Y2K
contingency planning team that has received training in contingency
planning techniques and goals. The team is collecting data and
contingency planning began in March 1999. Within this structure,
CILCO submitted its final contingency plans to MAIN, which will
forward them to NERC. This contingency planning process is expected
to continue through the fourth quarter 1999, and will include CILCO's
participation in the NERC industry-wide drills during the fall of
1999.
The Company currently believes it will be able to adequately address
Y2K issues, as discussed above, through a combination of
modifications of certain existing programs and systems, the
replacement of others with new software that is Y2K compliant, and
the development of contingency plans. If such modifications and
conversions are not made, however, or are not made in a timely
manner, the Y2K issue could have a material impact on the Company's
operations. In addition, management cannot predict the nature or
impact on operations of third-party noncompliance with Y2K
requirements beyond the assurances given during critical vendor
assessments.
Price Risk Management
The majority of CILCORP's energy sales at the end of the second
quarter 1999 were to CILCO retail customers in Illinois under tariffs
regulated by the ICC. Although the Illinois retail electric market
is becoming deregulated (see Illinois Electric Deregulation),
prudently incurred costs of fuel used to generate electricity,
purchased power costs and gas purchased for resale may be recovered
from retail customers that purchase energy through regulated tariffs.
Thus, there is very limited commodity price risk associated with
CILCO's traditional regulated sales. However, as more customers in
Illinois purchase energy on a competitive basis pursuant to the
current Illinois deregulation timetable, CILCO's exposure to
commodity price risk will increase. At June 30, 1999, QST's non-
Illinois electric
25
operations and gas trading activities have been accounted for as
discontinued operations (see Note 4).
The market risk inherent in the activities of CILCORP (exclusive of
regulated Illinois tariff customers) is the potential loss arising
from adverse changes in natural gas and electric commodity prices
relative to the physical and financial positions that the Company
maintains. The prices of natural gas and electricity are subject to
fluctuations resulting from changes in supply and demand. At
June 30, 1999, CILCORP engaged in deregulated electric retail and
natural gas sales in Illinois, including wholesale power purchases
and sales to utilize its electric generating capability. These
deregulated activities had net open market price risk positions of
approximately 4,000 MWh of electricity and .2 Bcf of natural gas. A
market price sensitivity of 10% applied to these positions is not
material to the Company. At June 30, 1999, QST's discontinued
operations had a net open market price risk in electricity of
approximately 2,000 MWh. A market price sensitivity of 10% applied
to these positions held by QST is not material to the Company.
Actual results may differ materially. See Note 5 for a discussion of
CILCORP's use of financial derivatives for hedging purposes. Due to
the high correlation between the changes in the value of the
financial instruments owned by CILCORP to the change in price of the
underlying commodity, the net effect on CILCORP's net income
resulting from the change in value of these financial instruments is
not expected to be material.
26
Results of Operations
CILCO Electric Operations
The following table summarizes the components of CILCO electric
operating income for the three months and six months ended June 30,
1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Components of Electric Oper. Inc. 1999 1998 1999 1998
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Electric retail $ 84,089 $ 83,375 $160,785 $156,732
Sales for resale 3,955 4,929 8,221 10,750
-------- -------- -------- --------
Total revenue 88,044 88,304 169,006 167,482
-------- -------- -------- --------
Cost of sales:
Cost of fuel 21,030 21,135 45,261 45,477
Purchased power 6,083 8,178 11,922 12,852
Revenue taxes 4,228 4,061 8,871 8,378
-------- -------- -------- --------
Total cost of sales 31,341 33,374 66,054 66,707
-------- -------- -------- --------
Gross margin 56,703 54,930 102,952 100,775
-------- -------- -------- --------
Operating expenses
Other operations and maintenance 30,070 22,713 49,320 41,612
Depreciation and amortization 11,354 11,218 23,786 22,436
Other taxes 2,748 2,108 5,113 4,307
-------- -------- -------- --------
Total operating expenses 44,172 36,039 78,219 68,355
-------- -------- -------- --------
Total 12,531 18,891 24,733 32,420
-------- -------- -------- --------
Fixed charges and other
Cost of equity funds capitalized -- -- -- --
Interest on long-term debt 3,453 3,519 6,886 7,066
Cost of borrowed funds capitalized (15) (29) (26) (6)
Other interest 629 445 1,347 972
-------- -------- -------- --------
Total 4,067 3,935 8,207 8,032
Income before income taxes 8,464 14,956 16,526 24,388
Income taxes 3,167 4,759 5,315 8,181
-------- -------- -------- --------
Electric income $ 5,297 $ 10,197 $ 11,211 $ 16,207
======== ======== ======== ========
</TABLE>
Electric gross margin increased 3% for the quarter and 2% for the six
months ended June 30, 1999, compared to the same periods in 1998.
Retail kilowatt hour (KWh) sales increased 3% for the quarter and 6%
for the six months ended June 30, 1999, compared to the same periods
in 1998. Residential sales remained relatively constant for the
quarter and increased 5% for the six months ended June 30, 1999
compared to the same periods in 1998. Commercial sales increased 5%
for the quarter and 6% for the six months ended June 30, 1999,
compared to the same periods in 1998. Cooling degree days were 10%
lower for the quarter and 13% lower for the six months ended June 30,
1999, compared to the same periods in 1998. Although total cooling
degree days were lower for 1999, the majority of the
27
difference occurred in May, which traditionally has lower weather-
related electric sales. Therefore, despite May 1998 being 40% warmer
than May 1999 and 31% warmer than normal, this variance had only a
minor impact on sales. Industrial sales increased 3% for the quarter
and 7% for the six months ended June 30, 1999. Industrial sales were
favorably impacted by customers returning to retail supply due to the
completion of CILCO's Power Quest industrial program in April 1998.
Sales for resale decreased 20% for the quarter and 24% for the six
months ended June 30, 1999, compared to the same periods in 1998, due
to decreased sales volumes resulting from lower available capacity.
Sales for resale vary based on the energy requirements of native load
customers, neighboring utilities and power marketers, CILCO's
available capacity for bulk power sales and the price of power
available for sale. In the future, CILCO expects increased activity
in the sales for resale and purchased power markets.
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 will also be affected in the long term by deregulation and
increased competition in the electric utility industry.
The cost of fuel remained relatively constant for the quarter and six
months ended June 30, 1999, compared to the same periods in 1998.
Purchased power decreased 26% for the quarter and 7% for the six
months ended June 30, 1999, compared to the same periods in 1998.
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 and when required
during maintenance outages at CILCO plants. The costs of purchased
power for retail customers are passed through to those customers via
the fuel adjustment clause (FAC).
Electric operations and maintenance expense increased 32% for the
quarter and 19% for the six months ended June 30, 1999, compared to
the same periods in 1998. The increase was mainly due to a
$10.1 million charge to pension and benefits expense as a result of a
Voluntary Early Retirement Program offered to employees in CILCO's
electric power generation area (see Part II. Item 5: Other
Information, Voluntary Early Retirement Program). This increase was
partially offset by lower electric distribution overhead line
maintenance due to a severe storm in June 1998.
The change in income taxes in 1999 was primarily due to lower pre-tax
income as a result of pension and benefit expenses relating to the
Early Retirement offer.
Fixed charges and other expenses increased 3% for the quarter and 2%
for the six months ended June 30, 1999, compared to the same periods
in 1998.
28
CILCO Gas Operations
The following table summarizes the components of CILCO gas operating
income for the three months and six months ended June 30, 1999 and
1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Components of Gas Oper. Income 1999 1998 1999 1998
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Sale of gas $ 24,400 $ 26,812 $ 99,831 $ 95,092
Transportation services 1,169 1,498 2,535 3,120
-------- -------- -------- --------
Total revenue 25,569 28,310 102,366 98,212
-------- -------- -------- --------
Cost of sales:
Cost of gas 11,131 13,534 55,818 54,156
Revenue taxes 1,577 1,600 5,328 5,092
-------- -------- -------- --------
Total cost of sales 12,708 15,134 61,146 59,248
-------- -------- -------- --------
Gross margin 12,861 13,176 41,220 38,964
-------- -------- -------- --------
Operating expenses
Other operations and maintenance 7,828 8,163 16,280 16,081
Depreciation and amortization 4,547 4,536 10,175 9,073
Other taxes 785 726 1,587 1,487
-------- -------- -------- --------
Total operating expenses 13,160 13,425 28,042 26,641
-------- -------- -------- --------
Total (299) (249) 13,178 12,323
-------- -------- -------- --------
Fixed charges and other
Cost of equity funds capitalized -- -- -- --
Interest on long-term debt 1,356 1,403 2,731 2,816
Cost of borrowed funds capitalized -- -- -- --
Other interest expense 247 177 534 388
-------- -------- -------- --------
Total 1,603 1,580 3,265 3,204
-------- -------- -------- --------
Income before income taxes (1,902) (1,829) 9,913 9,119
Income taxes (703) (710) 4,044 3,645
-------- -------- -------- --------
Gas income $ (1,199)$ (1,119) $ 5,869 $ 5,474
======== ======== ======== ========
</TABLE>
Gas gross margin decreased 2% for the quarter and increased 6% for
the six months ended June 30, 1999, compared to the same periods in
1998. Residential and commercial sales volumes decreased 13% and 18%
for the quarter, respectively, and increased 12% and 5%,
respectively, for the six months ended June 30, 1999. Heating degree
days were 7% lower for the quarter and 10% higher for the six months
ended June 30, 1999, compared to the same periods in 1998. The
overall level of business activity in CILCO's service territory and
weather conditions are expected to continue to be the primary factors
affecting gas sales in the near term. CILCO's gas sales may also be
affected by further deregulation at the retail level in the natural
gas industry.
Revenue from gas transportation services decreased 22% and 19% for
the quarter and six months ended June 30, 1999, respectively, while
gas transportation sales
29
volumes decreased 14% for the quarter and 6% for the six months ended
June 30, 1999, compared to the same periods in 1998.
The cost of gas decreased 18% for the quarter ended June 30, 1999,
compared to the same period in 1998, primarily due to decreased gas
sales and lower natural gas prices. The cost of gas increased 3% for
the six months ended June 30, 1999, due to increased gas sales during
the first quarter offset partially by lower natural gas prices.
These costs are passed through to customers via the PGA.
Gas operations and maintenance expense decreased 4% for the quarter
and remained relatively constant for the six months ended June 30,
1999, compared to the same periods in 1998. The decrease for the
three months ended June 30, 1999, was primarily due to decreased
medical expenses.
The changes in income and other taxes were due to changes in pre-tax
operating income.
Fixed charges and other expenses remained relatively constant for the
quarter and increased 2% for the six months ended June 30, 1999,
compared to the same periods in 1998.
CILCO Other
The following table summarizes other income and deductions for the
three months and six months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Components of CILCO Other Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Revenue $ 881 $ 320 $ 1,729 $ 355
Interest income 35 155 113 191
Amortization (216) (178) (432) (356)
Operating expenses (1,572) (879) (3,159) (1,549)
Other taxes (1) (2) (2) (4)
Preferred stock dividends (773) (797) (1,570) (1,599)
Other (259) (207) (506) (412)
------- ------- ------- -------
Loss before income taxes (1,905) (1,588) (3,827) (3,374)
Income tax benefit (717) (642) (1,367) (1,339)
------- ------- ------- -------
CILCO Other net loss $(1,188)$ (946) $(2,460) $(2,035)
======= ======= ======= =======
</TABLE>
Other revenues and the related operating expenses increased for the
quarter and six months ended June 30, 1999, due to increased
nonregulated electricity sales in Illinois outside of CILCO's service
territory. These sales of electricity are to eligible customers of
other utilities' pilot programs formerly served by CILCO affiliate
QST. Expenses also increased due to start-up costs of other non-
regulated service programs such as outdoor lighting, energy
consulting, and performance audits.
30
Other Businesses Operations
The following table summarizes the components of Other Businesses net
loss for the three months and six months ended June 30, 1999 and
1998.
<TABLE>
<CAPTION>
Components of Other Businesses Three Months Ended Six Months Ended
Net Loss June 30, June 30,
1999 1998 1999 1998
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Leveraged lease revenue $ 1,677 $ 1,839 $ 3,634 $ 3,672
Other revenue 4,061 2,834 11,657 6,164
------- ------- ------- -------
Total revenue 5,738 4,673 15,291 9,836
------- ------- ------- -------
Expenses:
Gas purchased for resale 3,103 2,500 9,187 5,869
Operating expenses 3,646 1,556 4,965 2,759
Depreciation and amortization 43 50 88 101
Interest expense 1,443 1,832 2,842 3,383
Other taxes 10 20 15 37
------- ------- ------- -------
Total expenses 8,245 5,958 17,097 12,149
------- ------- ------- -------
Loss before income taxes (2,507) (1,285) (1,806) (2,313)
------- ------- ------- -------
Income tax benefit (681) (888) (877) (1,718)
------- ------- ------- -------
Other Businesses net loss $(1,826)$ (397) $ (929) $ (595)
======= ======= ======= =======
</TABLE>
Revenues increased 23% for the three months and 55% for the six
months ended June 30, 1999, primarily due to increased CVI gas
marketing revenue and revenue from CILCORP Infraservices Inc.
Expenses increased 38% for the three months and 41% for the six
months ended June 30, 1999, compared to the corresponding periods in
1998, primarily due to $1.8 million of merger transaction expenses
and $.5 million of incentive compensation expense at the Holding
Company and increased gas expense at CVI related to the gas retail
marketing program, while interest expense decreased due to lower
average debt balances.
Income and other taxes increased for the six months ended June 30,
1999, compared to the corresponding period in 1998, primarily due to
an increase in pre-tax income. For the three months ended June 30,
1999, the income tax benefit decreased despite increased losses,
reflecting the non-deductible nature of merger transaction expenses.
31
QST Enterprises Discontinued Operations
The results of QST Enterprises Inc. and its past and present
subsidiaries - QST Communications, QST Environmental and QST Energy -
are reported in 1999 and prior periods as discontinued operations
(see Note 4). The table below shows the components of the
discontinued operations.
Income (loss) from operations of discontinued businesses, net of tax:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C>
QST Communications, net of tax of
$(113)and $(287) $ -- $ (171) $ -- $ (437)
QST Enterprises (excluding QST
Environmental and QST Communications),
net of tax of $(5,556)and $(7,499) -- (8,451) -- (11,406)
QST Environmental, net of tax of
$(266), $157, $(221) and $(81) (435) 199 (407) (202)
------- ------- ------- --------
$ (435) $(8,423) $ (407) $(12,045)
======= ======= ======= ========
</TABLE>
In August 1998, QST Enterprises Inc. sold its wholly-owned fiber
optic-based telecommunications subsidiary, QST Communications, to
McLeod USA for $20 million cash and McLeod stock options then valued
at $5.5 million, resulting in an after-tax gain of approximately $8.3
million. Operating losses incurred by QST Communications for the
three months and six months ended June 30, 1998, are shown in the
preceding table.
During the fourth quarter of 1998, QST Enterprises Inc. (QST) and QST
Energy ceased operations, except for fulfillment of contractual
commitments for 1999 and beyond, and recorded loss provisions for the
discontinued energy operations. Financial results for the second
quarter of 1999 were reflected in the discontinued operations reserve
which was accrued at the end of 1998, resulting in no net income or
loss for the quarter.
In February 1999, QST Energy notified two of its California
commercial customers that they were in default of their contracts
with QST Energy as a result of not paying QST Energy for energy
delivered. QST Energy filed two suits in the U.S. District Court,
Central District of Illinois, seeking payment. In March, the
customers filed a suit in California Superior Court, Alameda County,
California, alleging that QST Energy was in breach of the contract.
This suit was subsequently removed to U.S. District Court, Northern
District of California. QST Energy has moved to dismiss this suit
filed in California as duplicative of the suits pending in Illinois,
and the customers similarly filed motions to dismiss the suits
pending in Illinois. QST Energy cannot predict the ultimate outcome
of this matter, but intends to vigorously pursue its claims to
collect all amounts due from the customers. The accounts receivable
reflected in CILCORP's consolidated balance sheet at June 30, 1999,
for these two customers, totaled $17.1 million. Under the terms of
the contract, QST Energy has terminated delivery of electricity to
the two customers.
In June 1999, QST Energy agreed to pay $3 million to the two
remaining California commercial customers to discontinue electricity
service. These payments, as well as losses on energy sales during
the first six months of 1999 (primarily electricity to the
California commercial customers) were included in QST's estimate for
loss related to discontinued operations recorded in December 1998.
32
QST's losses for the second quarter of 1998 were primarily due to
wholesale gas trading losses incurred when an unprecedented, sudden
increase in electricity prices occurred during the week of June 22,
1998.
On May 7, 1999, QST signed a definitive agreement to sell all the
outstanding common stock of QST Environmental to MACTEC, Inc. for
approximately $18 million in cash. The cash was received by QST on
June 24, 1999, the effective date of the sale. ESE Land and its
subsidiaries were not included in this sale and therefore, QST
Environmental's investment in ESE Land was transferred to QST
Enterprises Inc. prior to the sale. No after-tax gain or loss was
realized from the sale. QST Environmental's operating results
through May 30, 1999, are shown in the preceding table.
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
Reference is made to "Environmental Matters" under "Item 1. Business"
in the Company's 1998 Annual Report on Form 10-K (the "1998 Form 10-
K") and to "Note 2. Contingencies" and "QST Enterprises Discontinued
Operations", herein, for certain pending legal proceedings and
proceedings known to be contemplated by governmental authorities.
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 referred to above, 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; and/or
(iii) reserves for potential losses.
Item 4: Submission of Matters to a Vote of Security Holders
Shareholders cast the following votes at a Special Meeting of CILCORP
Inc. Shareholders held on May 20, 1999, for the purpose of approving
an Agreement and Plan of Merger among CILCORP Inc., The AES
Corporation and Midwest Energy, Inc., a wholly-owned subsidiary of
AES which has been specially created for the merger transaction.
Votes for Votes Against Abstain
10,387,193 620,974 163,006
Shareholders cast the following votes at the Company's Annual Meeting
of Shareholders held June 24, 1999:
Votes
Votes for Withheld
Elected to the Board of
Directors:
J. R. Brazil 10,725,720 303,210
J. D. Caulder 10,775,060 253,870
M. M. Yeomans 10,822,632 206,298
Item 5: Other Information
Illinois Electric Deregulation
In December 1997, the Electric Service Customer Choice and Rate
Relief Law of 1997 (Customer Choice Law) became effective. The
Customer Choice Law began a nine-year transition process to a fully
competitive market for electricity in Illinois, with all customers
being able to choose their electricity supplier by May 1, 2002.
Transition charges designed to help utilities recover the cost of
past investments
33
made under a regulated system may be collected through 2006 (2008
upon the ICC's finding that a utility's financial condition is
impaired). The Customer Choice Law also requires residential base
rate reductions which vary by utility. CILCO began its reduction in
residential base rates with an initial 2% decrease beginning August
1998. Also, CILCO's return on common equity will, in general, be
capped (the Equity Cap) at an index (a 12-month average yield for 30-
year U.S. Treasury bonds plus 8% for calendar years 1998 and 1999,
and a 12-month average yield for U.S. Treasury bonds plus 9% for
calendar years 2000 through 2004) plus 1.5 percentage points. If
CILCO's two-year average return on common equity exceeds the two-year
average of the Equity Cap, fifty percent of the earnings in excess of
the average Equity Cap must be refunded to customers in the following
year. (Refer to the caption "Competition" in Management's Discussion
and Analysis of Financial Condition and Results of Operations in
CILCORP's 1998 Annual Report to Shareholders.)
On June 30, 1999, Senate Bill 24 (a clarification and technical
correction of the Customer Choice Law) was signed into law. This
bill allows certain utilities, including CILCO, to increase the
Equity Cap by an additional 2% over the Equity Cap provided under the
Customer Choice Law, for the period 2000 through 2004. The increase
in the Equity Cap is allowed in exchange for these utilities offering
choice of electricity suppliers to certain non-residential customers
earlier than previously allowed under the Customer Choice Law and for
waiving the right to seek a two-year extension on the collection of
transition charges.
Power Quest Retail Competition Pilot Programs
In 1996, to lead the movement toward increased customer choice, CILCO
began Power Quest, which consisted of two electric pilot retail
competition programs and a natural gas pilot retail competition
program. The programs offered greater choice to customers and
provided the opportunity for CILCO and certain of its electric and
natural gas customers to participate in a competitive business
environment.
The pilot program for CILCO's industrial electric customers ended as
scheduled on April 30, 1998. The program allowed CILCO's eight
largest industrial customers (those with peak loads of 10 megawatts
or more) to secure all or part of their electric power requirements
from suppliers other than CILCO. However, program participants'
total purchases from other suppliers were limited to 50 megawatts
(10% of CILCO's industrial load) or less at all times. Participating
customers began receiving electricity under this Power Quest pilot in
May 1996.
Seven of the eligible customers elected to participate in this pilot
program. Caterpillar Inc., with three eligible accounts, elected to
form a strategic alliance with CILCORP and receive value-added energy
and environmental products and services rather than taking its entire
Power Quest allocation from suppliers other than CILCO. Based on
Power Quest participation levels by eligible industrial customers,
CILCORP experienced a reduction of $2.1 million in pre-tax income for
the first six months of 1998 (including electric margin lost by
CILCO, CVI costs associated with the Caterpillar alliance, and QST
margin on sales to Power Quest industrial customers). Costs
associated with the Caterpillar alliance are included in Other
Businesses Operations for the three months and six months ended
June 30, 1998.
Six of the Power Quest industrial program participants have signed
contracts for electric service with CILCO which extend 18 months or
more beyond October 1, 1999, the date on which they would have become
eligible to select alternative suppliers under the Customer Choice
Law. CILCO is exploring electric service contract terms with the
remaining initially eligible customers and with other key industrial
and commercial customers.
In the other Power Quest electric program, CILCO designated six areas
within its service territory as Open Access Sites for up to five
years. Based upon participation levels by eligible commercial and
residential customers, CILCORP experienced a reduction of
approximately $386,000 in pre-tax income for the first six months of
1999. In December 1998, CILCO received approval from the Illinois
34
Commerce Commission (ICC) to eliminate this program, and did so,
effective May 1, 1999.
While CILCO has not filed with the ICC to terminate the gas
residential pilot program, its affiliate, QST Energy, withdrew from
participation in the program in August 1998. Gas customers that had
been served by QST have returned to CILCO or other affiliates.
Participation in the gas pilot program by marketers other than QST
was minimal. This program did not have a material impact on
CILCORP's financial position or results of operations for 1998 or the
first six months of 1999.
Voluntary Early Retirement Programs
In April 1999, CILCO offered Voluntary Early Retirement Programs to
employees in its electric power generation area, including employees
represented by the NCF&O. A total of 86 of the 117 eligible employees
accepted the offer to retire under the programs, effective as early
as June 1, 1999. These programs resulted in an after-tax charge to
earnings of approximately $6.1 million.
In June 1999, the Company offered a similar Voluntary Early
Retirement Program to the management and office and technical
employees not previously included in the program offered in April. A
total of 155 employees are eligible to retire, and may elect, After
August 2, 1999, to accept the offer, and may retire as early as
October 1, 1999.
The Company expects to incur an additional after-tax charge to
earnings of up to $17 million during the third quarter related to
these programs.
System Peak Demand
A new all-time system peak demand of 1,235 MW was set on July 21,
1999. The previous system peak demand was 1,195 MW on June 26, 1998.
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
27 - Financial data schedules
(b) Reports on Form 8-K
None
35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the regis
trant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CILCORP Inc.
(Registrant)
Date August 12, 1999
R. O. Viets
R. O. Viets
President and Chief
Executive Officer
Date August 12, 1999
T. D. Hutchinson
T. D. Hutchinson
Controller
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the regis
trant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL ILLINOIS LIGHT COMPANY
(Registrant)
Date August 12, 1999
R. J. Sprowls
R. J. Sprowls
Vice President and Chief
Financial Officer
Date August 12, 1999
T. D. Hutchinson
T. D. Hutchinson
Controller and Manager
of Accounting
37
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME, STATEMENT OF CASH FLOWS AND BALANCE SHEET AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000762129
<NAME> CILCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 865,057
<OTHER-PROPERTY-AND-INVEST> 167,895
<TOTAL-CURRENT-ASSETS> 146,356
<TOTAL-DEFERRED-CHARGES> 23,327
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,202,635
<COMMON> 192,853
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 139,843
<TOTAL-COMMON-STOCKHOLDERS-EQ> 332,696
22,000
44,120
<LONG-TERM-DEBT-NET> 257,168
<SHORT-TERM-NOTES> 34,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 39,300
<LONG-TERM-DEBT-CURRENT-PORT> 43,000
0
<CAPITAL-LEASE-OBLIGATIONS> 1,449
<LEASES-CURRENT> 499
<OTHER-ITEMS-CAPITAL-AND-LIAB> 428,403
<TOT-CAPITALIZATION-AND-LIAB> 1,202,635
<GROSS-OPERATING-REVENUE> 312,748
<INCOME-TAX-EXPENSE> 6,894
<OTHER-OPERATING-EXPENSES> 275,939
<TOTAL-OPERATING-EXPENSES> 282,833
<OPERATING-INCOME-LOSS> 29,915
<OTHER-INCOME-NET> (506)
<INCOME-BEFORE-INTEREST-EXPEN> 29,409
<TOTAL-INTEREST-EXPENSE> 14,555
<NET-INCOME> 14,854
1,570
<EARNINGS-AVAILABLE-FOR-COMM> 13,284
<COMMON-STOCK-DIVIDENDS> 16,741
<TOTAL-INTEREST-ON-BONDS> 10,931
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<EPS-BASIC> .98
<EPS-DILUTED> .97
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME, STATEMENT OF CASH FLOWS AND BALANCE SHEET AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000018651
<NAME> CENTRAL ILLINOIS LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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<TOTAL-ASSETS> 1,003,967
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<RETAINED-EARNINGS> 132,349
<TOTAL-COMMON-STOCKHOLDERS-EQ> 318,010
22,000
44,120
<LONG-TERM-DEBT-NET> 237,909
<SHORT-TERM-NOTES> 0
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<COMMERCIAL-PAPER-OBLIGATIONS> 39,300
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0
<CAPITAL-LEASE-OBLIGATIONS> 1,449
<LEASES-CURRENT> 499
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<TOTAL-OPERATING-EXPENSES> 242,820
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1,570
<EARNINGS-AVAILABLE-FOR-COMM> 14,620
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