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, 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 Liberty Street
Peoria, Illinois 61602
(309) 675-8826
1-2732 CENTRAL ILLINOIS LIGHT COMPANY 37-0211050
(An Illinois Corporation)
300 Liberty Street
Peoria, Illinois 61602
(309) 675-8826
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. 8.700% Senior Notes
due 2009
CILCORP Inc. 9.375% Senior Bonds
due 2029
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
1
At March 15, 2000, there was no voting stock of CILCORP Inc.
(CILCORP) held by nonaffiliates. On that date, 1,000 common
shares (no par value) were outstanding and privately held,
beneficially and of record, by The AES Corporation.
At March 15, 2000, the aggregate market value of the voting stock
of Central Illinois Light Company (CILCO) held by nonaffiliates
was approximately $56 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.
DOCUMENT INCORPORATED BY REFERENCE
Central Illinois Light Company's Proxy Statement, to be filed not
later than April 17, 2000, in connection with its Annual Meeting
to be held on May 23, 2000, is incorporated by reference into
Part I and Part III hereof.
2
CILCORP INC.
and
Central Illinois Light Company
1999 Form 10-K Annual Report
This combined Form 10-K is filed separately 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 7-8
Business of CILCO 9
Electric Service 9
Gas Service 9-10
Regulation 10
Electric Fuel and Purchased Gas
Adjustment Clauses 10
Fuel Supply - Coal 10-11
Natural Gas Supply 11
Financing and Capital Expenditures Programs 11-12
Environmental Matters 12
Significant Customer 12
Franchises 12
Competition 12
People 12
Union Contracts 12
Business of QST 13
Other Businesses 13
CIM 13
CVI 13
Year 2000 14
Item 2. Properties 14
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Executive Officers of the Registrant 16-18
3
Part II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters 19
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 21-50
Item 8. Financial Statements and Supplementary Data 51-114
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 114
Part III
Item 10. Directors and Executive Officers of the
Registrants 115-116
Item 11. Executive Compensation 117-125
Item 12. Security Ownership of Certain Beneficial
Owners and Management 125
Item 13. Certain Relationships and Related Transactions 126
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 127-130
4
GLOSSARY OF TERMS
When used herein, the following terms have the meanings
indicated.
AES -- The AES Corporation, parent of CILCORP Inc. upon
completion of acquisition on October 18, 1999.
AFUDC -- Allowance for Funds Used During Construction
BTU -- British Thermal Unit. The quantity of heat required to
raise the temperature of one pound of water one degree Fahrenheit.
Bcf -- Billion cubic feet
CAA -- Clean Air Act
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
CESI -- CILCORP Energy Services Inc.
CILCO -- Central Illinois Light Company
CIM -- CILCORP Investment Management Inc.
CIPS -- AmerenCIPS, formerly Central Illinois Public Service Company
CLM -- CILCORP Lease Management Inc.
Company -- CILCORP Inc. and subsidiaries
Cooling Degree Day -- The measure of the extent to which the
average of high and low temperatures for a day
rises above 65 degrees Fahrenheit (annual
degree days above historic average indicate
warmer than average temperatures); the
historic average provided by The National
Weather Service for 30-year period.
CVI -- CILCORP Ventures Inc.
DSM -- Demand Side Management. The process of helping customers
control how they use energy resources.
FAC -- Fuel Adjustment Clause
FASB -- Financial Accounting Standards Board
FERC -- Federal Energy Regulatory Commission
Heating Degree Day -- The measure of the extent to which the
average of high and low temperatures for
a day falls below 65 degrees Fahrenheit (annual
degree days above historic average indicates
cooler than average temperatures); the historic
average provided by The National Weather
Service for 30-year period.
5
ICC -- Illinois Commerce Commission
IEPA -- Illinois Environmental Protection Agency
KW -- Kilowatt, a thousand watts
kWh -- Kilowatt-hour, one thousand watts used for one hour
(unit of work)
MAIN -- Mid-America Interconnected Network. One of nine
regions that make up the North American Electric
Reliability Council. Its purpose is to ensure the Midwest
region of the United States will meet its load
responsibility.
MCF -- One thousand cubic feet
MW -- Megawatt, a million watts
MWG -- Midwest Grain Products, Inc.
OSHA -- Occupational Safety and Health Act
PGA -- Purchased Gas Adjustment
Pre-merger Period -- January 1, 1999, through October 18, 1999
Post-merger Period -- October 19, 1999, through December 31, 1999
QST -- QST Enterprises Inc.
QST Communications -- QST Communications Inc.
QST Energy -- QST Energy Inc.
QST Environmental -- QST Environmental Inc.
QST Trading -- QST Energy Trading Inc.
SFAS -- Statement of Financial Accounting Standards
Therm -- Unit of measurement for natural gas; a therm is equal to one
hundred cubic feet (volume); a therm is also equal to
100,000 BTUs (energy).
USEPA -- U.S. Environmental Protection Agency
6
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 results from continuing operations of CILCORP
primarily reflect the operations of Central Illinois Light
Company (CILCO), the Company's principal business subsidiary. In
the fourth quarter of 1998, the operations of CILCORP first-tier
subsidiary QST Enterprises Inc. (QST) and its subsidiaries
(excluding ESE Land Corporation and CILCORP Infraservices Inc.)
were discontinued (see Management's Discussion and Analysis) and,
therefore, are being reported as discontinued operations in the
financial statements. 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 ESE Land Corporation, CILCORP Infraservices Inc., and
the holding company itself (Holding Company), are collectively
referred to herein as Other Businesses. CILCORP owns 100% of the
common stock of all of its 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. AES
completed the acquisition of the Company on October 18, 1999.
Refer to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for discussion
regarding this transaction and its effect on the separation and
comparability of 1999 financial information presented in this
document.
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.
QST, formed in December 1995, provided energy and energy-related
services to a broad spectrum of retail and wholesale customers
through its subsidiary, QST Energy Inc. (QST Energy). QST Energy
has one wholly-owned subsidiary - QST Energy Trading Inc. (QST
Trading), which purchased and sold energy in the wholesale
market. QST provided fiber optic telecommunications services
through another wholly-owned subsidiary, QST Communications Inc.
(QST Communications), which it sold in August 1998. QST provided
engineering and environmental consulting services through
wholly-owned subsidiary QST Environmental. During the fourth
quarter of 1997, QST Environmental completed the sale of
substantially all of the assets of one of its subsidiaries, ESE
Land, for cash and non-controlling membership interests in the
acquiring companies. In the fourth quarter of 1998, the Company
decided to sell its 100% ownership interest in QST Environmental,
and 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.
In the fourth quarter of 1998, QST decided to discontinue its
energy operations and report their results as discontinued.
Refer to the caption "QST Enterprises Discontinued Operations" of
Item 7. Management's Discussion
7
and Analysis of Financial Condition and Results of Operations and
to "Note 14 - QST Enterprises Discontinued Operations" of Item 8.
Financial Statements and Supplementary Data.
CIM manages the Company's investment portfolio. CIM holds eight
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 primarily invests in ventures in energy-related products and
services. CVI has an 80% interest in the Agricultural Research
and Development Corporation and has one wholly-owned subsidiary,
CILCORP Energy Services Inc. (CESI). CESI was formed to pursue
energy-related opportunities in the non-regulated market. CESI's
primary business is gas management services (including commodity
purchasing for gas management customers).
The following table summarizes the relative contribution of each
business group to consolidated assets at December 31, 1999, and
to revenue and net income for the periods January 1, 1999,
through October 18, 1999, and October 19, 1999, through December
31, 1999.
<TABLE>
<CAPTION>
Assets Revenue Net Income (Loss)
at Oct. 19 Jan. 1 Oct. 19 Jan. 1
Dec 31, to Dec. to Oct. to Dec. to Oct.
1999 31, 1999 18, 1999 31, 1999 18, 1999
(In thousands)
<S> <C> <C> <C> <C> <C>
CILCO $1,056,280 $117,968 | $441,130 $ 7,364 | $ 8,677
Other Businesses 754,377 2,621 | 19,131 (7,896)| (7,990)
---------- -------- | -------- ------- | -------
Total Continuing |
Operations (532)| 687
|
QST Discontinued |
Operations (213)| (407)
------ | -------
Net Income $ (745)| $ 280
====== | =======
</TABLE>
CILCORP is an intrastate exempt holding company under
Section 3(a)(1) of the Public Utility Holding Company Act of 1935
(PUHCA). Federal legislation dealing with the restructuring of
the electric utility industry, including repeal of PUHCA, has
been introduced in both Houses of Congress. Repeal of PUHCA
would, among other things, remove certain presently applicable
restrictions to the merger or combination of non-contiguous
electric and natural gas utility holding companies. The Company
cannot predict whether or when any of these proposals might be
enacted at the federal level or the ultimate effect on the
Company.
8
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 industries. These
include increased competition in wholesale markets and the
prospect of competition in retail markets, changes in regulation
and legislation affecting utilities, 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 "Competition" of
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
ELECTRIC SERVICE
CILCO furnishes electric service to retail customers in 136
Illinois communities (including Peoria, East Peoria, Pekin,
Lincoln and Morton). At December 31, 1999, CILCO had
approximately 190,000 retail electric customers.
CILCO owns and operates two coal-fired base load generating
plants, a natural gas-fired cogeneration plant, and two natural
gas combustion turbine generators which are used for peaking
service. The 1999 system peak demand was 1,235 MW on July 21,
1999. This was a new all-time system peak demand.
The system peak demand for 2000 is estimated to be 1,243 MW with
a planned reserve margin of approximately 16%. The planned
reserve margin takes into account 150 MW of firm purchased power
(see CILCORP Note 7 - Commitments and Contingencies) and 88 MW of
interruptible industrial load and other related Demand Side
Management (DSM) programs. CILCO's planned reserve margin is
designed to comply 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.
CILCO is interconnected with AmerenCIPS (CIPS), formerly Central
Illinois Public Service Company, Commonwealth Edison Company,
Illinois Power Company and the Springfield 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, 1999, CILCO had approximately
196,000 gas customers, including 115 industrial, commercial and
residential gas transportation customers that purchase gas
directly from suppliers for transportation through CILCO's
system. For further discussion of gas transportation, refer to
the caption "CILCO Gas Operations" of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
9
CILCO's all-time maximum daily send-out of 443,167 MCF occurred
on January 15, 1972. The 1999 peak day send-out of 391,056 MCF
occurred on January 4, 1999. CILCO has been able to meet all of
its existing customer requirements during the 1999-2000 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 2000-2001 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. In Illinois, the Electric Service Customer Choice and
Rate Relief Law of 1997 (Customer Choice Law) began a transition
process to a fully competitive market for electricity. The ICC's
supervision and regulatory oversight of certain transactions by
electric utilities is reduced or suspended during the mandatory
transition period (which terminates on January 1, 2005) and, for
certain non-utility transactions, is permanently eliminated under
the Customer Choice Law. Refer to the caption "Competition" of
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. With respect to certain
electric matters, CILCO is subject to regulation by the 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.
ELECTRIC FUEL AND PURCHASED GAS ADJUSTMENT CLAUSES
CILCO's tariffs provide for adjustments to its electric rates
through the fuel adjustment clause (FAC) to recover the cost of
energy purchased from other suppliers and to reflect increases or
decreases in the cost of fuel used in its generating stations.
The transportation costs of coal are not included in the FAC, but
are collected through base rates.
CILCO's current 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. Approximately 2.7 million tons of coal were burned during
1999. Existing coal contracts with suppliers in Illinois are
expected to supply 100% of the 2000 requirements.
During the years 1999, 1998, and 1997, the average cost per ton
of coal burned, including transportation, was $32.41, $33.56, and
$34.01, respectively. The cost of coal burned per million BTU's
was $1.49, $1.54, and $1.56, respectively (see Electric Fuel and
Purchased Gas Adjustment Clauses).
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 extends through 2010; however,
Freeman has the option of terminating the contract with two
years' notice. The contract requires CILCO to pay all variable
coal production costs on tons purchased and certain fixed costs
not affected by the volume purchased. On August 8, 1997, CILCO
filed a demand for arbitration with Freeman alleging that Freeman
has
10
failed to keep and perform its prudent mining obligations as
required by the parties' contract. The relief sought by CILCO
through this arbitration includes damages and confirmation of
CILCO's termination rights under this contract. CILCO and
Freemen have agreed to continue operating under the present
contract until a ruling on CILCO's claims is reached by the
arbitrators, which is expected early in the third quarter of
2000. CILCO cannot at this time predict the ultimate outcome of
this dispute or whether its resolution will have a material
impact on CILCO's operating results.
NATURAL GAS SUPPLY
During 1999, 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 interstate pipeline suppliers and firm
and interruptible gas purchase arrangements of varying terms made
directly with approximately 30 gas suppliers. Reliability is
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.
During 1999, CILCO purchased and delivered approximately
38,318,400 MCF of natural gas at a cost of approximately
$106 million, or an average cost of $2.77 per MCF. The average
cost per MCF of natural gas purchased and delivered was $2.67 in
1998 and $3.03 in 1997 (see Electric Fuel and Purchased Gas
Adjustment Clauses).
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
2000 are estimated to be $53.6 million, including pollution
control expenditures of $1.3 million. Expenditures include
$36.9 million for the electric business, $11.1 million for the
gas business and $5.6 million for general and miscellaneous
purposes. Electric expenditures include $17.9 million for
additions and modifications to generating facilities and the
installation of diesel powered generation modules at two CILCO
substations. Transmission and distribution system additions and
improvements are expected to total $18.9 million. Gas
expenditures are primarily for additions, replacements and
improvements to existing facilities. Anticipated gas and
electric capital expenditures for 2001-2004 are $230 million.
The estimates for 2000 capital expenditures include $2.7 million
for information technology projects.
CILCO's short-term debt increased to $46.9 million at December
31, 1999, from $40.6 million at December 31, 1998. CILCO retired
$30.0 million of medium-term notes in February 2000 and
$10.65 million of medium-term notes in June 1998. CILCO is
considering the redemption of $25 million of auction rate
preferred stock in June 2000. In 1999, CILCO paid three regular
quarterly dividends and one prorated quarterly dividend to
CILCORP totaling $29.8 million. As part of the acquisition of
CILCORP by AES, CILCO received $27 million of additional paid-in
capital from CILCORP in the fourth quarter of 1999. CILCO used
the funds to retire commercial paper during the fourth quarter of
1999. In 1998, CILCO paid $20 million of dividends to CILCORP in
addition to regular quarterly dividends. At December 31, 1999,
CILCO had bank lines of credit aggregating $55 million, all of
which were unused, except in support of commercial paper
issuance. In the third quarter of 1999, CILCO issued commercial
paper to cover purchases of additional electricity to meet
increased consumer demand due to abnormally warm weather
conditions. (See
11
Results of Operations - Electric Operations.) Refer to the
caption "Capital Resources and Liquidity - CILCO" of Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
CILCO expects to continue to support commercial paper issuance
with its bank lines during 2000. It expects to finance its 2000
capital expenditures primarily with funds provided by operating
activities. CILCO is currently considering various options to
refinance its medium-term notes, which matured in February 2000,
and the redemption of the auction rate preferred stock. Future
funds provided by operations may be affected by the deregulation
of the electric and natural gas utility industries.
ENVIRONMENTAL MATTERS
Refer to the caption "Environmental Matters" of Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
SIGNIFICANT CUSTOMER
Caterpillar Inc. is CILCO's largest industrial customer. Gas
revenues, electric revenues, and sales of other services to
Caterpillar were 7.2%, 7.6%, and 7.5% of CILCO's total revenue
for 1999, 1998 and 1997, respectively. Sales to Caterpillar from
all continuing CILCORP subsidiaries represent 8.1%, 8.6%, and
7.6% of CILCORP consolidated operating revenue from continuing
operations for 1999, 1998, and 1997, 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 10 to 25 years.
Based on past experience, CILCO anticipates that, as franchises
expire, new franchises will be granted in the normal course of
business.
COMPETITION
Refer to the caption "Competition" of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
PEOPLE
The number of full-time and part-time people at CILCO as of
December 31, 1999, was 1,013. Of these, 374 gas and electric
field people were represented by Local 51 of the International
Brotherhood of Electrical Workers (IBEW), and 177 power plant
people were represented by Local 8 of the National Conference of
Firemen and Oilers (NCF&O).
UNION CONTRACTS
The IBEW ratified its current agreement on October 10, 1997. Its
contract expires on July 1, 2000. The NCF&O ratified its current
contract with the Company on October 23, 1998. The NCF&O
contract expires on July 1, 2001.
12
BUSINESS OF QST
QST Enterprises Inc. (QST) was formed in December 1995. Through
its wholly-owned subsidiary, QST Energy, QST provided a portfolio
of non-regulated, energy-related products and services including
wholesale and retail sales of electricity and natural gas in
markets that are open to competition. QST and QST Energy ceased
operations during the fourth quarter of 1998, except for
fulfillment of contractual obligations for 1999 and beyond, and
recorded loss provisions for the discontinued energy operations.
The results of QST and its past and present subsidiaries are
shown as discontinued operations in the statements of income for
the periods January 1, 1999, through October 18, 1999, October
19, 1999, through December 31, 1999, and prior periods. QST sold
its wholly-owned environmental services subsidiary, QST
Environmental, in June 1999, and its fiber optic-based
telecommunications subsidiary, QST Communications, in August
1998.
OTHER BUSINESSES
CIM
The investment portfolio of CIM at December 31, 1999, and
December 31, 1998, is shown in the following table:
<TABLE>
<CAPTION>
Type of Investment
At December 31 1999 1998
(In thousands)
<S> <C> <C>
Investment in leveraged leases $143,697 $146,977
Cash and temporary cash investments 158 71
Investment in Energy Investors Fund 1,181 1,510
Investment in affordable housing funds 12,409 13,821
Other 125 120
-------- --------
Total $157,570 $162,499
======== ========
</TABLE>
At December 31, 1999, CIM held equity investments in eight
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
lessees.
CIM, through its wholly-owned subsidiary, CIM Energy Investments
Inc., has a net investment of $1,181,000 in the Energy Investors
Fund, L.P.(Fund), representing a 2.5% interest in the Fund at
December 31, 1999. 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 this
investment.
CIM is a limited partner in eight affordable housing portfolios.
The ownership interests in these partnerships ranged from 3% to
10% at December 31, 1999. The equity method of accounting is
used for these investments.
CVI
CVI's net investment in CESI, its wholly-owned subsidiary, is
approximately $836,000. CESI's primary business is gas
management services (including commodity purchasing for gas
management customers).
13
YEAR 2000
Refer to the caption "Year 2000" of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
Item 2. Properties
CILCO
CILCO owns and operates two coal-fired generating plants, a
cogeneration plant and two combustion turbine-generators. These
facilities had an available summer capability of 1,146 MW in
1999. The two combustion turbine generators have a summer rating
of 30 MW (15 MW each) and are used during peak periods. They
typically operate less than 100 hours per year. The cogeneration
plant, which became operational during 1995, produces steam heat
for Midwest Grain Products, Inc. (MWG) and also generates
electricity for distribution to CILCO's customers. This turbine-
generator has an available summer capability of 10 MW. These
facilities will be supplemented by 26 MW of electric power
capacity provided by 16 diesel-fueled power modules to be placed
in service in 2000.
The major generating facilities of CILCO (representing 96.0% of
CILCO's available summer generating capability projected for
2000), all of which are fueled with coal, are as follows:
<TABLE>
<CAPTION>
Available Summer
Capability (MW)
Station & Unit Installed Actual 1999
<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 16 principal substations with an installed
capacity of 2,150,000 kilovolt-amperes.
The electric distribution system includes approximately 6,223
miles of overhead pole and tower lines and 2,096 miles of
underground distribution cables. The distribution system also
includes approximately 105 substations with an installed capacity
of 1,665,885 kilovolt-amperes.
The gas system includes approximately 3,581 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.
14
Item 3. Legal Proceedings
Reference is made to the captions "Fuel Supply - Coal" of Item 1.
Business, "Environmental Matters" of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations and to "Note 7 - Commitments and Contingencies" of
Item 8. Financial Statements and Supplementary Data for certain
pending legal proceedings and/or proceedings known to be
contemplated by governmental authorities.
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. These motions are still pending. The parties have
commenced discovery. 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 December 31, 1999, for these two customers, totaled
$15.4 million, excluding interest of approximately $1.3 million.
Under the terms of the contracts, QST Energy has terminated
delivery of electricity to the two customers.
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 will not result in a material
adverse effect on the financial position and results of
operations of the Company. Risk of loss is mitigated, in some
cases, by insurance or contractual or statutory indemnification.
The Company has established appropriate 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 periods October 1, 1999, through October 18, 1999, and
October 19, 1999, through December 31, 1999.
CILCO
There were no matters submitted to a vote of security holders
during the fourth quarter of 1999.
15
<TABLE>
<CAPTION>
Executive Officers of CILCORP
Age as of Positions Held During Initial
Name 3/31/00 Past Five Years Effective Date (1)
<S> <C> <C> <C>
Paul D. Stinson (2) 43 President October 18, 1999
Scott A. Cisel (3) 46 Vice President October 18, 1999
James L. Luckey, III (4) 39 Vice President December 17, 1999
Greg T. Russell (5) 35 Vice President December 17, 1999
Robert J. Sprowls (6) 42 Vice President October 18, 1999
Thomas D. Hutchinson (7) 45 Controller and Chief
Financial Officer October 18, 1999
Thomas S. Romanowski (8) 50 Treasurer October 18, 1999
John G. Sahn (9) 53 Secretary October 18, 1999
<FN>
Notes:
(1)The term of each executive officer extends until the next
succeeding organizational meeting of Directors or until their
successors are elected and shall qualify.
(2)Mr. Stinson is also a Vice President of the Company's parent,
The AES Corporation, and President of Central Illinois Light
Company (CILCO). Mr. Stinson is manager of the new AES Great
Plains Group formed in the Central United States in 1999.
From 1997 to 1999, he was manager of AES's Silk Road Group,
where he was responsible for business development and
operations for the countries which comprise the former Soviet
Union. In 1993, Mr. Stinson became Plant Manager of the 700
megawatt Medway Power Station in the United Kingdom. Mr.
Stinson has been with AES since 1986.
(3)Mr. Cisel also serves as Vice President of CILCO. He was
elected CILCO Vice President - Sales and Marketing on April
1, 1995, and on November 9, 1995, he became responsible for
federal and state government and regulatory activities. He
is currently Vice President and Leader of CILCO's Sales and
Marketing Business Unit.
(4)Mr. Luckey also serves as a Vice President of CILCO. Mr.
Luckey was elected CILCO Vice President on December 17, 1999,
and has been Plant Manager of CILCO's Duck Creek Power
Generation Facility since January 2000. Prior to coming to
CILCO, Mr. Luckey worked with CILCO's parent company, The AES
Corporation, at AES Thames generating plant.
(5)Mr. Russell also serves as a Vice President of CILCO. Mr.
Russell came to CILCO in June 1999 to become a Team Leader at
CILCO's Edwards Power Plant. On December 17, 1999, he was
elected CILCO Vice President and in January, 2000, Mr. Russell
became manager of CILCO's Indian Trails Cogeneration Facility.
Prior to coming to CILCO, Mr. Russell worked with
16
CILCO's parent company, The AES Corporation, at AES
Southington, AES Barry Operations and AES Thames.
(6)Mr. Sprowls is also a Vice President of CILCO. Mr. Sprowls
is currently Vice President and Leader of CILCO's Energy Delivery
Business Unit. He was previously CILCO's Chief Financial Officer
from August 17, 1998 to October 18, 1999. He was Senior Vice
President and Chief Financial Officer of QST Enterprises Inc.
from April 22, 1997 to August 17, 1998, and Vice President from
August 19, 1996 to April 22, 1997. Mr. Sprowls was Vice
President of CILCO from April 1, 1995 to January 29, 1996, and
served from October 1, 1990, to October 25, 1995, as Treasurer of
CILCORP.
(7)Mr. Hutchinson also served as Controller of the Company from
February 1, 1988 until April 1, 1995. He began serving as
Controller again, effective January 20, 1997, and continues in
that capacity along with serving as Chief Financial Officer. He
served as CILCO Director - Competitive Strategy from April 1,
1995 to January 1, 1996. From January 1, 1996 to January 20,
1997, Mr. Hutchinson served as Director of Planning and
Administration of QST Enterprises Inc. Mr. Hutchinson also
serves as CILCO's Controller and Chief Financial Officer.
(8)Mr. Romanowski also serves as Treasurer of CILCO. He was
Vice President of CILCO from October 1, 1986 until October 18,
1999.
(9)Mr. Sahn served as Vice President, General Counsel and
Secretary from March 1, 1994 until August 17, 1998, when he
became Vice President, Secretary and Treasurer.
</TABLE>
<TABLE>
<CAPTION>
Executive Officers of CILCO
Age as of Positions Held During Initial
Name 3/31/00 Past Five Years Effective Date (1)
<S> <C> <C> <C>
Paul D. Stinson (2) 43 President October 18, 1999
Jerry Cagle 49 Vice President October 18, 1999
Scott A. Cisel (3) 46 Vice President April 1, 1995
James L. Luckey, III (4) 39 Vice President December 17, 1999
Greg T. Russell (5) 35 Vice President December 17, 1999
Robert J. Sprowls (6) 42 Vice President October 18, 1999
Thomas D. Hutchinson (7) 45 Controller and Chief
Financial Officer October 18, 1999
Thomas S. Romanowski (8) 50 Treasurer October 18, 1999
Craig W. Stensland (9) 40 Secretary March 15, 2000
17
<FN>
Notes:
(1)The term of each executive officer extends until the next
succeeding organizational meeting of Directors or until their
successors are elected and shall qualify.
(2)Mr. Stinson is a Vice President of CILCORP Inc.'s parent, The
AES Corporation, and President of CILCORP Inc.
(3)Mr. Cisel also serves as a Vice President of CILCORP.
(4)Mr. Luckey also serves as a Vice President of CILCORP.
(5)Mr. Russell also serves as a Vice President of CILCORP.
(6)Mr. Sprowls also serves as a Vice President of CILCORP. Mr.
Sprowls served as CILCO's Chief Financial Officer from August
17, 1998, to October 18, 1999. He was Senior Vice President
and Chief Financial Officer of QST Enterprises Inc. from
April 22, 1997, to August 17, 1998, and Vice President from
August 19, 1996, to April 22, 1997. Mr. Sprowls was Vice
President of the Company from April 1, 1995, to January 29,
1996, and served from October 1, 1990, to October 25, 1995,
as Treasurer of CILCORP.
(7)Mr. Hutchinson served as Controller of CILCO from January 20,
1997, until he began his current position as Controller and
Chief Financial Officer on October 18, 1999. He also serves
as Controller and Chief Financial Officer of CILCORP. Mr.
Hutchinson was CILCORP's Controller from February 1, 1988, to
April 1, 1995, and again from January 20, 1997, until he
became Controller and Chief Financial Officer. He served as
CILCO's Director - Competitive Strategy from April 1, 1995,
to December 31, 1995, and as Director of Planning and
Administration of QST Enterprises Inc. from January 1, 1996,
to January 20, 1997.
(8)Mr. Romanowski also serves as Treasurer of CILCORP. Mr.
Romanowski was a Vice President of CILCO from October 1,
1986, to October 18, 1999.
(9)Mr. Stensland served as a Principal Attorney for CILCORP and
CILCO from May 22, 1991, to March 15, 2000.
</TABLE>
18
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
CILCORP
The Company's common stock is not traded on any market. At
December 31, 1999, there were 10,000 authorized, no par value,
shares of the Company's common stock. One thousand of those
shares were issued, and outstanding and privately held,
beneficially and of record, by The AES Corporation.
CILCO
CILCO's common stock is not traded on any market. As of
March 10, 2000, 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 12 of CILCO's Notes to
the Consolidated Financial Statements contained in Item 8.
Financial Statements and Supplementary Data.
19
Item 6. Selected Financial Data
<TABLE>
CILCORP INC.
Selected Financial Data
<CAPTION>
For the Periods Ended
Oct. 19 Jan. 1
to to
Dec. 31, Oct 18, December 31
1999 1999 1998 1997 1996 1995
(In thousands except ratios)
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 120,589 |$ 460,261 $ 559,168 $ 558,259 $ 527,060 $ 482,642
|
Net income |
available |
for common |
stockholders (745)| 280 16,310 16,395 27,943 38,582
Total assets 1,830,953 | 1,312,940 1,334,819 1,285,693 1,279,303
Long-term debt 730,434 | 285,552 298,528 320,666 344,113
Ratio of |
earnings to |
fixed charges 0.9 | 1.0 2.4 2.7 2.5 2.5
</TABLE>
<TABLE>
Central Illinois Light Company
Selected Financial Data
<CAPTION>
For the Years Ended December 31
1999 1998 1997 1996 1995
(In thousands except ratios)
<S> <C> <C> <C> <C> <C>
Electric and
Gas Revenue $ 553,474 $ 532,336 $ 546,854 $ 518,555 $ 477,744
Net income
available for
common
stockholders 16,041 41,041 50,251 41,939 39,099
Total assets 1,056,280 1,024,428 1,022,655 1,036,169 1,063,223
Long-term debt 237,934 267,884 267,836 278,439 298,397
Ratio of
earnings to
fixed charges 1.9 3.4 3.5 3.4 3.3
</TABLE>
20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
In 1999 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 CILCO and AES approving the
transaction on June 16, 1999. The SEC staff approved AES'
application for an exemption under Section 3(a)(5) of the Public
Utility Holding Company Act on August 20, 1999. AES completed
the acquisition of the Company on October 18, 1999.
To complete the merger, approximately $886 million was raised
through a combination of additional paid-in capital contributed
by AES and the offering of senior notes and bonds assumed by
CILCORP. The approximately $886 million was used to purchase
13,625,680 shares of CILCORP's common stock. AES has 100%
ownership of the 1,000 CILCORP common shares currently issued
and outstanding.
Financial results reflect application of the purchase method of
accounting to the merger. Under this method, the purchase price
is allocated to the fair market value of the assets acquired and
the liabilities assumed. Any excess purchase price over the
fair value of the assets acquired and the liabilities assumed is
allocated to goodwill. As a result, CILCORP recorded purchase
accounting fair value adjustments to 1) adjust plant to its net
fair value, 2) adjust pension and other post-retirement
liabilities, and 3) record goodwill. Of these adjustments, the
primary effect of purchase accounting was to record
approximately $573 million of goodwill which will be amortized
over 40 years. The adjustments are reflected on CILCORP's
financial statements as of the merger date, but were not "pushed
down" to CILCORP's subsidiaries. Accordingly, CILCORP's post-
merger financial statements reflect a new basis of accounting,
and separate financial statements are presented for pre-merger
and post-merger periods, separated by a heavy black line. For
discussion throughout this document, for categories and segments
substantially unaffected by the merger and with no pre-merger or
post-merger accounting events, the 1999 pre-merger and post-
merger periods have been combined for comparison in total to
1998.
In late 1998, in light of the pending acquisition and after
reviewing its business plans, the Company decided to sell its
100% ownership interest in QST Environmental Inc. (QST
Environmental), a first-tier subsidiary of QST that provided
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 completed on June 24, 1999. QST previously
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
21
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 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 of Financial Condition and Results of Operations -
Competition). 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 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 Management's
Discussion and Analysis of Financial Condition and Results of
Operations - QST Discontinued Operations). During the fourth
quarter of 1997, QST Environmental sold substantially all of the
assets of ESE Land Corporation (ESE Land), its wholly-owned
subsidiary that acquired environmentally impaired property for
remediation and resale, for cash and non-controlling membership
interests in the acquiring companies.
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.
22
OVERVIEW
Contributions to the Company's earnings for the last three
calendar years are shown below. (Following the Company's
acquisition by AES, presentation of earnings per share is no
longer meaningful, as no common shares are publicly held.)
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
<S> <C> <C> <C> <C>
CILCO (excluding Extraordinary |
Item) $ 7,364 | $ 8,677 $ 41,041 $ 46,151
CILCO Extraordinary Item -- | -- -- 4,100
Other Businesses (7,896) | (7,990) (2,823) (2,442)
QST Enterprises Discontinued |
Operations (213) | (407) (21,908) (31,414)
------- | ------- -------- --------
Net Income $ (745) | $ 280 $ 16,310 $ 16,395
======= | ======= ======== ========
</TABLE>
CILCO's earnings decreased by 61% in 1999, primarily due to
approximately $22.7 million of after-tax costs associated with
Voluntary Early Retirement Programs offered in the second and
third quarters of 1999 (see Voluntary Early Retirement Programs).
Also contributing to the earnings decrease were the costs of non-
regulated service programs. Electric gross margin remained
relatively constant in 1999. Total cooling degree days were 15%
lower in 1999, despite the extremely warm weather in July which
resulted in greater demands for electricity. Gas gross margin
increased 3% in 1999 due to a 7% increase in heating degree days.
CILCO's earnings, excluding the extraordinary item, decreased by
11% in 1998 primarily due to increased power plant maintenance
expense, repairs to the electric distribution system resulting
from a severe storm in June 1998, higher gas maintenance
expenses, and higher information technology costs. Electric
gross margin increased by 5% as a result of warmer than normal
summer weather. However, this increase was partially offset by a
9% decrease in gas gross margin due to warmer than normal weather
during the heating season. CILCO's 1997 earnings included a
credit of $4.1 million for an after-tax extraordinary item
related to the write-off of regulatory assets and liabilities
associated with electric generating plant (see CILCO Note 1).
Other Businesses' results for the period October 19, 1999,
through December 31, 1999, were negatively impacted by increased
interest expense due to new debt issued by the Holding Company to
fund the AES acquisition of CILCORP and by increased goodwill
amortization. Other Businesses' results for the period January
1, 1999, through October 18, 1999, were negatively impacted by
merger-related expenses incurred by CILCORP, including
transaction fees, legal fees, and expenses related to the
Shareholder Return Incentive Compensation Plan (see CILCORP
Note 15).
Other Businesses' results for 1998 were approximately the same as
1997. CIM realized a gain from the refinancing of a leveraged
lease investment and also shared in the after-tax gain resulting
from the sale of facilities of the Energy Investors Fund, L.P.,
in which CIM has a 2.5% interest. These items were offset by
reduced income from CIM's affordable housing investments and
costs incurred by the Holding Company related to the AES
transaction.
23
QST Enterprises' (excluding QST Environmental) financial results
for the period from January 1, 1999, through October 18, 1999,
were reflected in the discontinued operations liability which was
accrued at the end of 1998, resulting in no net income or loss.
Results from October 19, 1999, through December 31, 1999, are
shown as a loss for that period. QST Environmental's operating
results (prior to its sale in June 1999) are included in the
January 1 through October 18 loss from operations of discontinued
businesses.
An unprecedented short-term increase in wholesale electricity
prices during June 1998 contributed to a $10.6 million reduction
in QST's electric gross margin in the second quarter of 1998.
QST Energy's electric gross margin for 1998 was $(14.3) million
compared to $(.8) million in 1997. In addition, as a result of
discontinuing its operations at December 31, 1998, QST Energy
adjusted to market value its future contractual commitments to
sell electricity and natural gas, resulting in a $5.2 million pre-
tax charge against income. Additional losses were recognized in
1998 related to the disposal of QST assets, termination of leases
and other agreements, severance costs, and estimated operating
expenses which were incurred as QST exited the non-Illinois
markets.
In August 1998, QST sold its 100% interest in QST Communications,
realizing an after-tax gain of $8.3 million, partially offset by
the $.7 million 1998 loss from discontinued operations prior to
the sale.
In 1997, $22.6 million of goodwill related to QST Environmental
was written off (see CILCORP Note 1). The results of QST
Environmental were adversely affected in 1998 by continued losses
at its laboratory operations and by the estimated loss from the
discontinuance of the business. The loss includes estimated
severance costs and other closing costs related to laboratory and
other operations which were being discontinued. These amounts
were partially offset by approximately $.6 million earned at its
consulting business.
Return on average common equity for the period October 19, 1999,
through December 31, 1999, was (.2)% and for the period January
1, 1999, through October 18, 1999, was .1%, compared to 4.7% in
1998, and 4.5% in 1997. Excluding discontinued operations and
extraordinary items, return on average common equity was .2% for
the period January 1, 1999, through October 18, 1999, and (.1)%
for the period October 19, 1999, through December 31, 1999,
compared to 9.8% in 1998, and 11.5% in 1997. The ratio of common
equity to total capitalization, including short-term debt at
December 31, was 34% in 1999, 42% in 1998, and 44% in 1997. The
fixed charge coverage ratio from continuing operations was .9 for
October 19, 1999 through December 31, 1999, 1.0 for January 1,
1999, through October 18, 1999, 2.4 in 1998, and 2.7 in 1997.
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 (FAC) or a
purchased gas adjustment (PGA) 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 1.6% to 2.9%.
24
Forward-Looking Information
Forward-looking information is included in Management's
Discussion and Analysis of Financial Condition and Results of
Operations (MD&A). Certain material contingencies are also
described in Note 9 to the Consolidated Financial Statements.
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; changes in company-wide
operation and plant availability compared to our historical
performance and changes in our historical operating cost
structure, including changes in various costs and expenses;
pricing and transportation of commodities; market supply and
demand for energy and energy derivative financial instruments;
inflation; capital market conditions; and environmental
protection and compliance costs. Prevailing governmental
policies, statutory changes, and regulatory actions with respect
to rates, tariffs, 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.
25
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 to fund its capital
expenditures, pay its financial obligations, meet working capital
needs and retire or refinance debt as it matures.
THE COMPANY
CILCORP is currently authorized by its Board of Directors to
borrow up to $60 million on a short-term basis and had
$60 million of committed bank lines at the end of 1999 and 1998.
At December 31, 1999, $45 million of the lines were used,
compared to $55.6 million in use at December 31, 1998.
In October 1999, CILCORP issued $225 million of 8.7% senior notes
(due 2009) and $250 million of 9.375% senior notes (due 2029).
Along with equity funds provided by AES, the proceeds of the
notes were used by AES to acquire all outstanding shares of
CILCORP common stock for approximately $886 million, to pay
transaction costs related to the acquisition, and to retire short-
term debt.
The Company had $17.5 million of medium-term notes outstanding at
year-end. With the issuance of the senior notes in October 1999,
the Company may no longer issue debt under its medium-term note
program.
CILCO
In 1999, CILCO spent $55.1 million for capital additions and
improvements, consisting primarily of replacements and
improvements to the existing electric transmission and
distribution and natural gas distribution systems and information
technology projects. Estimated 2000 and 2001 capital
expenditures are $53.6 million and $55.9 million, respectively.
The 2000 expenditures include $18.8 million for electric energy
supply and transmission projects, $.7 million for gas supply and
transmission projects, $28.4 million for electric and gas
distribution systems improvements, and $2.7 million for
information technology projects. Actual capital expenditures may
vary from these estimates due to 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 $46.9 million at
December 31, 1999, from $40.6 million at December 31, 1998.
CILCO retired $30.0 million of medium-term notes in February 2000
and $10.65 million of medium-term notes in June 1998. CILCO is
considering the redemption of $25 million of auction rate
preferred stock in June 2000. In 1999, CILCO paid three regular
quarterly dividends and one prorated quarterly dividend to
CILCORP totaling $29.8 million. As part of the acquisition of
CILCORP by AES, CILCO received $27 million of additional paid-in
capital from CILCORP in the fourth quarter of 1999. CILCO used
the funds to retire commercial paper during the fourth quarter of
1999. CILCO expects to issue commercial paper periodically
during 2000, and is currently authorized by its Board of
Directors to issue up to $100 million of short-term debt. At
December 31, 1999, committed bank lines of credit totaled
$55 million, all of which were unused except in support of
commercial paper issuance. During 2000, CILCO expects to
continue to support commercial paper issuance with its bank lines
of credit. CILCO plans to finance its 2000 and 2001 capital
expenditures primarily with funds provided
26
by operations. CILCO is currently considering various options to
refinance the matured medium-term notes and the redemption of the
auction rate preferred stock. Future funds provided by
operations may be affected by the deregulation of the electric
and natural gas utility industries (see Competition).
CIM
CIM had outstanding debt of $31.4 million and $37.7 million (all
to the Holding Company) at the end of 1999 and 1998,
respectively.
During 1998 and prior years, CIM committed to invest
$16.6 million in affordable housing funds. Through December 31,
1999, CIM has paid $15.3 million to fund these commitments,
$1.3 million of which was paid during 1999. CIM expects to pay
approximately $.5 million of the remaining $1.3 million
commitment in 2000, and lesser amounts in each year thereafter
through 2006. CIM funded these commitments with cash borrowed
from the Holding Company. CIM expects to finance its capital
needs during 2000 with a combination of funds generated
internally and with funds provided by the Holding Company.
YEAR 2000
The Company completed its effort to make sure its computer
systems and operations function properly in the year 2000,
including the leap year period present in 2000. The Company
experienced no significant Year 2000 (Y2K) problems during the
transition from December 31, 1999 to January 1, 2000, or at
February 29, 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 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 team, an outside firm specializing in
Y2K projects was retained to assist CILCO with its overall
Y2K project plans. CILCO 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 included the 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 were not replaced. Phase II
was completed in December 1999.
Phase III included the upgrade/replacement and re-testing of
embedded chip devices found not to be Y2K compliant in Phase
II, the completion of mainframe computer operating software
upgrades to the 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 was corrected. Testing of
all applications that had undergone Y2K
27
upgrades/modifications, testing of operating system software, and
development and testing of contingency plans were also included.
Systems identified as critical to the continued provision of
utility service were of particular focus during the testing
portion of Phase III. These critical systems were generating
station equipment, electric transmission and distribution control
systems, gas delivery control systems, and telecommunications
systems. Phase III included the final documentation effort and
the testing for the leap year period present in 2000.
Less than the previously estimated $2 million was spent for
embedded chip analysis, vendor management, application code
scanning, remediation, testing, and contingency planning at
CILCO. Approximately $30.7 million was spent prior to the year
2000 for system replacements or hardware upgrades initiated for
business purposes other than solely Y2K compliance, in line
with 1999 projections. The 2000 budget for completion of Y2K work is
approximately $165,000.
CILCO worked 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 risks associated with the Y2K issue. These
groups modeled potential worst case scenarios even though the
probability of extreme disruptions due to Y2K issues was
considered extremely low. CILCO participated in the NERC
industry-wide drills during September 1999, without incident.
CILCO also followed the contingency planning process recognized
by MAIN and NERC.
The Company was able to adequately address Y2K issues,
as discussed above, through a combination of modifications to
certain existing programs and systems, the replacement of others
with new software that was Y2K compliant, and the development
of contingency plans. The modifications and conversions were
made in a timely manner, resulting in no material Y2K impact on the
Company's operations.
COMPETITION
CILCO, as a regulated public utility, has an obligation to
provide service to retail customers within its defined service
territory; thus, CILCO had not generally been in competition with
other public utilities for retail electric or gas customers in
these areas. However, the passage of the Electric Service
Customer Choice and Rate Relief Law of 1997 (Customer Choice Law)
began a transition process to a fully competitive market for
electricity in Illinois. In addition, 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.
Primarily as a result of the Customer Choice Law, the electric
industry in Illinois will change significantly during the coming
years at both the wholesale and retail levels. Large industrial
customers and customers representing one-third of remaining
non-residential kWh sales had the ability to choose their
electric supplier beginning October 1, 1999, and all other non-
residential customers will have choice no later than December 31,
2000. Residential electric customers will be able to choose
their electric supplier on May 1, 2002.
If a customer chooses to leave its present electricity supplier,
that utility will collect a fee for delivering power and may
assess an additional transition charge on the customer. This
collection methodology must be filed and approved by the Illinois
Commerce Commission (ICC) and is designed to help utilities
recover a portion of the costs of past investments made under a
regulated system. The transition charge will reduce a customer's
economic
28
incentive to switch suppliers. Transition charges may be
collected through 2006 (2008 upon the ICC's finding that a
utility's financial condition is impaired and the utility meets
other requirements specified in the Customer Choice Law).
On March 9, 2000, CILCO filed with the ICC revised tariff sheets
eliminating the collection of the customer transition charge
effective March 17, 2000. At a March 15, 2000 hearing, the ICC
approved CILCO's revised tariffs, thereby eliminating the
collection of any customer transition charge. CILCO cannot re-
establish the collection of a transition charge until it files
and the ICC approves revised tariff sheets that reinstate a
transition charge.
The Customer Choice Law also requires electric base rate
reductions that vary by utility. CILCO reduced its residential
base rates by 2% in August 1998 and must reduce base rates by an
additional 2% in October 2000 and 1% in October 2002. 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.
On June 30, 1999, Senate Bill 24 (a clarification and technical
correction of the Customer Choice Law) was signed into law. This
law 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 selected
manufacturing customers on June 1, 2000, and to the remaining
manufacturing customers on October 1, 2000, earlier than
previously allowed under the Customer Choice Law. Utilities
selecting this option also waive the right to seek a two-year
extension on the collection of transition charges. CILCO intends
to notify customers that selected manufacturing operations will
be eligible for choice on June 1, 2000, in order to increase the
equity cap by 2%, as outlined in Senate Bill 24.
With the enactment of the Customer Choice Law, electric
generation in Illinois will become deregulated and competitive.
As a result, the accounting principles applicable to rate-
regulated enterprises will no longer apply to the electric
generation portion of CILCO's business (see CILCO Note 1). Also,
the cost of any assets for which recovery is impaired by the
transition to a competitive marketplace must be written off.
CILCO does not believe its electric generating asset values to be
impaired. Its ability to keep total production costs competitive
in a deregulated market will determine whether and to what extent
the value of these assets may be impaired in the future.
With electric choice beginning on October 1, 1999 for its
industrial customers and some of its commercial customers, CILCO
has entered into multi-year contracts with customers representing
approximately 50% of total 1999 electric kWh sales to
non-residential customers. These contracts, which expire from
2001 to 2002, were designed to capture a significant portion of
the margin that the customers paid to CILCO in the most recent
twelve months.
The ultimate market price for electricity, the cost for a utility
to produce or buy electricity, and the number of customers that
may be gained or lost due to customer choice of supplier in
Illinois cannot be predicted. As a result, management cannot
predict the ultimate impact that the Customer Choice Law will
have on CILCORP's financial position or results of operation, but
the effect could be significant. However, CILCO is currently a
low-cost provider
29
of electricity, and management will continue to position CILCO
for competition by controlling costs, maintaining good customer
relations, and developing flexibility to meet individual customer
requirements. As of December 31, 1999, all eligible electric
customers continue to purchase their electricity supply from
CILCO other than those who self-generate. CILCO has acquired
approximately 750,000 megawatt hours of new retail load to be
served outside its service territory in 2000. CILCO will supply
these new customers by using its owned generation and electricity
purchases from other suppliers. CILCO has made the necessary
supply and transmission arrangements to meet customer
requirements.
ENVIRONMENTAL MATTERS
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 were exempt from Phase I of the Amendments due
to previous emission reductions, but are subject to Phase II of
the Amendments, which require further emission reductions
beginning in the year 2000.
The U.S. Environmental Protection Agency (USEPA) has issued a
State Implementation Plan (SIP) Call to Illinois under Title I of
the Amendments requiring additional NOx emission reductions from
CILCO's coal-fired power plants beginning May 2003 to reduce the
long-range transport of emissions. Each of CILCO's generating
units would be allowed a targeted amount of NOx emissions during
the peak ozone months of May through September. This SIP Call is
currently being litigated. The Illinois Environmental Protection
Agency (IEPA) must adopt rules implementing this new requirement
pending the outcome of the litigation. Under a related state
initiative, IEPA is developing rules in 2000 which will require
NOx emission reductions comparable to the USEPA SIP Call. This
rulemaking will meet state obligations for SIP compliance in
areas of the state that do not attain air quality standards.
CILCO's capital expenditures to meet the NOx emission
requirements could total $69 million by 2003.
CILCO's near-term compliance strategy is being implemented based
upon regulations issued under the Amendments. CILCO continues to
monitor regulatory actions and develop compliance strategies to
minimize any financial impact. Due to the deregulation of the
electric industry resulting from the Customer Choice Law,
recovery of compliance costs in the future will depend upon the
number of retail customers CILCO serves and the marketability of
the power it generates in a competitive environment.
CILCO's present environmental compliance strategy includes use of
an existing SO2 scrubber, fuel blending and SO2 allowance
purchases to meet Phase II SO2 emissions targets, and combustion
control modifications to meet Phase II NOx emissions targets.
The USEPA established SO2 emission allowance reserves for power
plants in Phase II. Allowances are transferable to third parties
at market prices. The cost of purchased SO2 allowances may be
recovered from customers through the fuel adjustment clause and
has been incorporated into the fuel purchase program. CILCO is
purchasing additional allowances to meet its annual SO2 tonnage
cap. Under this strategy, CILCO's generating units will not
require additional SO2 scrubbers, but will require some fuel
blending.
30
CILCO is currently in the process of investigating and
implementing potential beneficial re-use for ash (a coal
combustion by-product) generated at both its coal-fired
generating stations. Providing alternate uses for the ash will
allow CILCO to avoid potential costs associated with the
construction of additional facilities to store and manage this by-
product.
Various initiatives are being discussed both in the United States
and worldwide to reduce so-called "greenhouse gases" such as
carbon dioxide and other by-products of burning fossil fuels.
Reductions of emissions below historical levels could require
significant capital outlays or material increases in annual
operating expenses.
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 located within its 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. Remediation work at one of the four
sites was substantially completed in 1991. Based on the
operation of a groundwater collection system and other controls,
CILCO received a "No Further Remediation" letter for this site in
1999. A remedial action plan for the second site was determined
during 1997 and site remediation was completed in 1998. CILCO
also received a "No Further Remediation" letter for the second
site. An environmental site assessment and an investigative
sampling plan of the third site were completed in 1999. Further
work on the third site is planned for 2000. CILCO has not
determined the ultimate extent of its liability for, or the
ultimate cost of any remediation of, the remaining two sites,
pending further studies.
In 1999, CILCO spent approximately $1.5 million for former gas
manufacturing plant site monitoring, legal fees and feasibility
studies and has received some recovery from insurance
settlements. A $1.2 million liability is recorded on the Balance
Sheet, representing its minimum obligation expected for coal tar
investigation and remediation. Coal tar remediation costs
incurred through December 1999, less amounts recovered from
customers, have been deferred as a regulatory asset of $174,000
on the Balance Sheet.
Through December 31, 1999, CILCO has recovered approximately
$6.9 million in coal tar remediation costs from its customers
through a gas rate rider approved by the 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.
MARKET RISK SENSITIVE INSTRUMENTS
CILCORP is exposed to non-trading risks through its daily
business activities. These non-trading activities may include
the market or commodity price risk related to CILCO's retail
tariff activity and CILCORP's non-regulated commodity marketing
activities.
The majority of CILCORP's energy sales at the end of 1999 were to
CILCO retail customers in Illinois under tariffs regulated by the
ICC. Although the Illinois retail electric market is becoming
deregulated (see Item 1. Business of CILCO - Regulation and Item
7. Management's Discussion and Analysis of
31
Financial Condition and Results of Operations - Competition),
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 December 31, 1999, QST's non-Illinois electric
operations and gas trading activities have been accounted for as
discontinued operations (see Management's Discussion and Analysis
of Financial Condition and Results of Operations - QST
Enterprises Discontinued Operations).
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 December 31, 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 52,256 MWh
of electricity and .17 Bcf of natural gas. A market price
sensitivity of 10% applied to these positions is not material to
the Company. At December 31, 1999, QST's discontinued operations
had no net open market price risk in electricity. See CILCORP
Note 9 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 instrument positions held
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.
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 National Conference of Firemen and
Oilers Local 8. 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 the second
quarter of 1999.
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 141 of the 156 eligible employees accepted the
offer to retire under this program, effective as early as
October 1, 1999.
These programs resulted in an after-tax charge to earnings of
approximately $16.6 million in the third quarter of 1999.
IMPACT OF ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133). 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. The statement establishes accounting and reporting
standards for derivative instruments and for hedging activities.
It requires that an entity recognize all derivatives (including
certain derivative instruments embedded in other
32
contracts) as either assets or liabilities on the balance sheet
and measure those instruments at fair value. Changes in the
derivative's fair value are to be recognized currently in
earnings, unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's
gains or losses to offset related results of the hedged item in
the income statement and requires that a company must formally
document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
SFAS 133 cannot be applied retroactively. SFAS 133 must be
applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts. With respect to
hybrid instruments, a company may elect to apply SFAS 133, as
amended, to (1) all hybrid contracts, (2) only those hybrid
instruments that were issued, acquired, or substantively
modified after December 31, 1997, or (3) only those hybrid
instruments that were issued, acquired, or substantively
modified after December 31, 1998.
The fair value of these derivatives would be recognized as
assets or liabilities on the balance sheet, consistent with the
current accounting treatment for certain freestanding
derivatives. The Company has not yet quantified the other
effects on the financial statements of adopting SFAS 133. The
final adoption could increase volatility in earnings and other
comprehensive income. CILCORP continues to analyze the effects
of adoption of the rules promulgated by SFAS 133. The Company
is in the process of preparing a comprehensive inventory of all
derivatives that will be subject to disclosure under SFAS 133
and developing procedures for the determination and valuation of
hedge relationships that may exist, and their effectiveness.
33
RESULTS OF OPERATIONS - CILCORP INC. AND SUBSIDIARIES
CILCO ELECTRIC OPERATIONS
The following table summarizes electric operating revenue and
expenses by component.
<TABLE>
<CAPTION>
Components of Electric Income
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Revenue:
Electric retail $63,740 |$287,768 $341,143 $318,130
Sales for resale 1,866 | 19,340 18,866 19,966
------- |-------- -------- --------
Total revenue 65,606 | 307,108 360,009 338,096
------- |-------- -------- --------
Cost of sales: |
Cost of fuel 20,798 | 56,950 94,490 92,230
Purchased power expense 3,012 | 57,239 29,568 22,851
Revenue taxes 3,324 | 15,406 18,581 15,388
------- |-------- -------- --------
Total cost of sales 27,134 | 129,595 142,639 130,469
------- |-------- -------- --------
Gross margin 38,472 | 177,513 217,370 207,627
------- |-------- -------- --------
Operating expenses: |
Operation and maintenance |
expenses 17,146 | 94,395 84,502 78,648
Depreciation and amortization 9,202 | 37,868 46,017 43,858
Other taxes 2,164 | 8,063 8,660 8,583
------- |-------- -------- --------
Total operating expenses 28,512 | 140,326 139,179 131,089
------- |-------- -------- --------
Fixed charges and other: |
Cost of equity funds |
capitalized -- | -- -- (35)
Interest on long-term debt 2,777 | 10,995 13,921 14,317
Cost of borrowed funds |
capitalized (71) | (86) (34) (99)
Other interest 685 | 2,286 2,340 1,875
------- |-------- -------- --------
Total 3,391 | 13,195 16,227 16,058
------- |-------- -------- --------
Income before taxes 6,569 | 23,992 61,964 60,480
Income taxes 2,071 | 8,369 21,645 21,901
------- |-------- -------- --------
Electric income $ 4,498 |$ 15,623 $ 40,319 $ 38,579
======= |======== ======== ========
</TABLE>
Electric gross margin declined slightly while retail kilowatt-
hour (kWh) sales increased 2% in 1999. Residential sales
remained relatively constant while commercial sales increased 2%.
Cooling degree days were 15% lower in 1999 than in 1998.
Although total cooling degree days were lower in 1999, extremely
warm weather in July 1999 resulted in greater demands for
electricity. Industrial sales volumes increased 5% compared to
1998.
34
Industrial sales were favorably impacted by customers returning
to retail supply due to the completion of CILCO's Power Quest
pilot program.
Electric gross margin increased 5% in 1998 and retail kWh sales
increased 6%. Residential sales volumes increased 4% while
commercial sales volumes increased 6%. Cooling degree days were
28% higher in 1998 than in 1997. Industrial sales volumes
increased 8% compared to 1997.
Sales for resale increased 12% in 1999 due to increased sales
volumes resulting from higher available capacity and increased
prices per kWh due to industry-wide demand in July. Sales for
resale decreased 6% in 1998 as a result of lower available
capacity for bulk sales due to unscheduled generating station
outages. 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. CILCO's activity in the
sales for resale and purchased power markets will continue to
increase as a result of retail deregulation in the Illinois
market.
In 1999, 67% of CILCO's total operating revenue was derived from
the sale of electricity. Approximately 36% of electric revenue
resulted from residential sales, 31% from commercial sales, 25%
from industrial sales, 6% from sales for resale and 2% 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>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Residential $22,909 |$110,396 $133,687 $125,071
Commercial 22,708 | 94,336 111,830 103,747
Industrial 17,018 | 78,114 87,895 82,318
Sales for resale 1,866 | 19,340 18,866 19,966
Street lighting 305 | 1,111 1,385 1,343
Other revenue 800 | 3,811 6,346 5,651
------- |-------- -------- --------
Total electric revenue $65,606 |$307,108 $360,009 $338,096
======= |======== ======== ========
</TABLE>
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.
Purchased power increased 104% in 1999. As a result of
abnormally warm weather during July 1999, CILCO incurred
$33 million of generation and purchased power costs which are
subject to recovery from customers through the fuel adjustment
clause (FAC). Of this amount, $10 million was recovered in July
and $23 million remained unrecovered at the end of July. CILCO's
FAC allows it to pass on to customers the cost of unrecovered
fuel and purchased power costs in the next calculated month's FAC
factor. In this instance, on September 1, 1999, the Illinois
Commerce Commission (ICC) approved a request
35
by CILCO to charge certain customers over a 12-month period
(without interest), beginning in September 1999. In addition, to
avoid the potential loss of purchased power cost recovery from
customers eligible to choose their electricity supplier on
October 1, 1999, CILCO requested and received ICC permission to
charge the larger industrial and commercial customers their share
of this underrecovery in a single month. These customers may
elect to pay over a period of up to 12 months after making
appropriate arrangements with CILCO. Also, under the FAC, the
underrecovered costs of fuel and purchased power for a particular
month are both treated as adjustments to cost of fuel expense;
thus, the cost of fuel decreased in 1999 compared to 1998. At
December 31, 1999, underrecovered fuel and purchased power costs,
including the unbilled portion of the July purchased power,
totaled $12 million.
The ICC will conduct its routine review of the FAC in early 2000
and will determine the prudency of CILCO's electricity purchases.
Any amount of the additional $23 million of electricity purchases
ultimately determined to be imprudent by the ICC would not be
recoverable from CILCO's customers, and therefore would be
expensed by CILCO on its income statement. CILCO currently
believes these costs to be recoverable through the FAC. A
significant disallowance of these costs by the ICC would be
material to CILCO's results of operations.
Electric operations and maintenance expenses increased 32% in
1999 compared to 1998. The increases were mainly due to a
$10.1 million second quarter charge and an $18.4 million third
quarter charge to pension and benefits expense as a result of the
Voluntary Early Retirement Programs offered to Management, Office
and Technical (MOT) employees and to employees in CILCO's
electric power generation area (see Item 7: Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Voluntary Early Retirement Programs). Electric
operations and maintenance expenses increased 7% in 1998
primarily due to increases in generation expenses arising from
outages at CILCO's E. D. Edwards facility, and increased electric
distribution overhead line maintenance expense due to a severe
storm in June, which, at its peak, affected power delivery to
approximately half of CILCO's electric customers. Also
contributing to the increases were higher information technology
costs. The increases were partially offset by lower outside
service costs and decreases in the actuarially-determined costs
for pensions and post-employment benefits.
The increase in depreciation and amortization expense in 1999 and
1998 reflects additions and replacements of utility plant at
costs in excess of the original cost of the property retired and
increased amortization associated with the implementation of new
computer systems.
Fixed charges and other expenses increased 2% in 1999 compared
to 1998.
The decrease in taxes in 1999 was primarily due to lower pre-tax
income as a result of pension and benefit expenses relating to
the Voluntary Early Retirement Programs.
36
CILCO GAS OPERATIONS
The following table summarizes gas operating revenue and
expenses by component.
<TABLE>
<CAPTION>
Components of Gas Income
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Revenue:
Sale of gas $48,750 |$126,845 $166,416 $202,274
Transportation services 1,110 | 4,055 5,911 6,484
------- |-------- -------- --------
Total revenue 49,860 | 130,900 172,327 208,758
------- |-------- -------- --------
Cost of sales: |
Cost of gas 30,237 | 69,056 93,586 123,531
Revenue taxes 1,608 | 6,592 7,921 7,079
------- |-------- -------- --------
Total cost of sales 31,845 | 75,648 101,507 130,610
------- |-------- -------- --------
Gross margin 18,015 | 55,252 70,820 78,148
------- |-------- -------- --------
Operating expenses: |
Operation and maintenance |
expenses 6,259 | 36,085 34,205 31,185
Depreciation and amortization 3,745 | 15,871 19,256 17,647
Other taxes 666 | 2,442 2,747 3,225
------- |-------- -------- --------
Total operating expenses 10,670 | 54,398 56,208 52,057
------- |-------- -------- --------
Fixed charges and other: |
Cost of equity funds |
capitalized -- | -- -- --
Interest on long-term debt 1,101 | 4,361 5,577 5,707
Cost of borrowed funds |
capitalized -- | (1) -- --
Other interest 272 | 907 937 747
------- |-------- -------- --------
Total 1,373 | 5,267 6,514 6,454
------- |-------- -------- --------
Income before taxes 5,972 | (4,413) 8,098 19,637
Income taxes 2,402 | (1,566) 3,443 7,416
------- |-------- -------- --------
Gas income $ 3,570 |$ (2,847) $ 4,655 $ 12,221
======= |======== ======== ========
</TABLE>
Gas gross margin increased 3% in 1999 compared to 1998.
Residential sales volumes increased 10%. Commercial sales
volumes remained relatively constant. Heating degree days were
7% higher in 1999 than in 1998.
Gas gross margin decreased 9% in 1998 compared to 1997.
Residential and commercial sales volumes decreased 17% and 12%,
respectively, primarily due to warmer weather during the heating
season. Heating degree days were 19% lower in 1998 than in
1997.
37
Revenue from gas transportation services decreased 13% in 1999
and 9% in 1998, while the volume of gas transported decreased 8%
in 1999 and 2% in 1998. The decreases were primarily due to
reduced industrial and residential gas transportation sales in
1999, and reduced commercial gas transportation sales in 1998.
In 1999, 33% of CILCO's total operating revenue was derived from
the sale or transportation of natural gas. Approximately 60% of
gas revenue resulted from residential sales, 25% from commercial
sales, 5% from industrial sales, 3% from transportation and 7%
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>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Residential $31,553 | $ 77,823 $100,010 $124,440
Commercial 12,071 | 32,461 42,713 51,204
Industrial 2,330 | 6,489 6,627 8,276
Transportation of gas 1,110 | 4,055 5,911 6,484
Other revenue 2,796 | 10,072 17,066 18,354
------- | -------- -------- --------
Total gas revenue $49,860 | $130,900 $172,327 $208,758
======= | ======== ======== ========
</TABLE>
The overall level of business activity in CILCO's service
territory and weather conditions are expected 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.
The cost of gas increased 6% in 1999 primarily due to increased
gas sales and higher natural gas prices. The cost of gas
decreased 24% in 1998, primarily due to decreased gas sales and
lower natural gas prices. These changes were passed through to
customers via the PGA.
Gas operations and maintenance expenses increased 24% in 1999
and 10% in 1998. The 1999 increase was mainly due to a
$9.1 million charge to pension and benefits expense in the third
quarter as a result of the Voluntary Early Retirement Program
offered to MOT employees (see Item 7: Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Voluntary Early Retirement Programs). The increase for 1998 was
due to higher maintenance and information technology costs,
partially offset by lower outside service costs and decreases in
the actuarially-determined costs for pension and post-employment
benefits.
The increase in depreciation and amortization expenses in 1999
and 1998 reflect additions and replacements of utility plant at
costs in excess of the original cost of the property retired.
Fixed charges and other expenses increased 2% in 1999, compared
to 1998.
The decrease in income taxes in 1999 was due to lower pre-tax
operating income as a result of pension and benefit expenses
relating to the Voluntary Early Retirement Program.
38
CILCO OTHER
The following table summarizes other income and deductions:
<TABLE>
<CAPTION>
Components of Other
Income and Deductions
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Revenue $ 2,430 |$ 2,969 $ 1,864 $ 272
Expense (2,185) | (4,807) (1,711) (619)
------- |------- ------- -------
Gross margin 245 | (1,838) 153 (347)
------- |------- ------- -------
|
Other income and deductions: |
Interest income 72 | 153 251 266
Amortization -- | (505) (713) (713)
Operating expenses (654) | (928) (2,025) (2,497)
Other taxes (1) | (3) (8) (14)
Preferred stock dividends (558) | (2,650) (3,194) (3,216)
Other (274) | (763) (1,013) (1,177)
------- |------- ------- -------
Total other income |
and deductions (1,415) | (4,696) (6,702) (7,351)
------- |------- ------- -------
Income (loss) before taxes (1,170) | (6,534) (6,549) (7,698)
------- |------- ------- -------
|
Income taxes (benefit) (466) | (2,435) (2,616) (3,049)
------- |------- ------- -------
|
Other income (loss) $ (704) |$(4,099) $(3,933) $(4,649)
======= |======= ======= =======
</TABLE>
Gross margin decreased in 1999 due to costs of non-regulated
service programs. These include start-up costs for the energy
consulting and performance audit programs as well as on-going
costs for the outdoor lighting program. The margin on non-
regulated electricity sales in Illinois, outside of CILCO's
service territory, remained relatively constant. These sales of
electricity are to eligible customers of other utilities' pilot
programs formerly served by CILCO affiliate QST and to other
customers eligible under the Customer Choice Law.
39
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, and CVI.
<TABLE>
<CAPTION>
Components of Other Businesses
Net Loss
Oct. 19 to Jan. 1 to
Dec. 31 Oct. 18
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Revenue:
Leveraged lease revenue $ 1,258 |$ 5,504 $11,002 $ 6,539
Interest income 21 | 99 75 58
Other revenue 1,342 | 13,528 13,640 4,270
-------- |-------- ------- -------
Total revenue 2,621 | 19,131 24,717 10,867
-------- |-------- ------- -------
Expenses: |
Gas purchased for resale 2,310 | 10,712 12,502 2,446
Operating expenses 738 | 15,413 11,071 10,146
Depreciation and amortization 2,916 | 139 202 207
Interest expense 9,504 | 4,080 6,482 4,403
Other taxes 7 | 32 56 26
-------- |-------- ------- -------
Total expenses 15,475 | 30,376 30,313 17,228
-------- |-------- ------- -------
Loss before income taxes (12,854) | (11,245) (5,596) (6,361)
Income taxes (4,958) | (3,255) (2,773) (3,919)
-------- |-------- ------- -------
Other businesses net loss $ (7,896) |$ (7,990) $(2,823) $(2,442)
======== |======== ======= =======
</TABLE>
Leveraged lease revenue decreased in 1999, compared to 1998, due
to a $3.9 million pre-tax gain in 1998 resulting from CIM's
refinancing of a leveraged lease investment. The income tax
expense related to leveraged lease income was $2.5 million, $4.4
million, and $2.4 million for 1999, 1998, and 1997,
respectively.
Other revenue was favorably affected by revenue from CILCORP
Infraservices Inc. partially offset by lower earnings from CIM
Energy Investments Inc.'s (CEII) investments in the Energy
Investors Fund, L.P., and decreased gas marketing revenue.
CEII, a subsidiary of CIM, holds a 2.5% limited partnership
interest in this fund, which invests in non-regulated,
non-utility, facilities for the production of electricity or
thermal energy. CIM's total initial investment in this fund was
$5 million.
Interest expense was adversely affected during the October 19
through December 31, 1999, period by the senior notes and bonds
issued to acquire CILCORP. Depreciation and amortization
expense was higher during this period due to $2.9 million
amortization of goodwill resulting from AES' acquisition price
in excess of the fair value of CILCORP's assets and liabilities.
40
Operating expenses increased in 1999 during the period of
January 1 through October 18, compared to 1998, primarily due to
$5.1 million of merger transaction expenses and $4.9 million of
CILCORP Shareholder Return Incentive Compensation Plan expenses
at the Holding Company (see CILCORP Note 15).
The income tax benefit was impacted during the October 19
through December 31 period due to lower net income resulting
from acquisition debt interest expense. The income tax benefit
increased in 1999 during the January 1 through October 18
period, compared to 1998, due to lower net income related to the
merger transaction costs.
41
QST ENTERPRISES DISCONTINUED OPERATIONS
Due to uncertainties related to energy deregulation across the
country, the illiquidity of certain energy markets and the
Company's acquisition by AES, the Company is now focusing 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 of
this decision, QST Enterprises Inc. and QST Energy ceased
operations during the fourth quarter of 1998, except for
fulfillment of contractual commitments for 1999 and beyond, and
recorded loss provisions for the discontinued energy operations.
The results of QST and its past and present subsidiaries - QST
Communications, QST Environmental and QST Energy - are reported
in 1999 and prior periods as discontinued operations. The tables
below show the components of the discontinued operations.
Loss from operations of discontinued businesses, net of tax:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
<S> <C> <C> <C> <C>
QST Communications, net of tax of |
$(463) and $(576) $ -- | $ -- $ (704) $ (876)
QST Enterprises (excluding QST |
Environmental and QST |
Communications), net of tax of |
$(140), $(15,331) and $(5,893) (213) | -- (23,369) (8,967)
QST Environmental, net of tax of |
$(221), $(484) and $(829) -- | (407) (952) (24,283)
----- | ----- -------- --------
$(213) | $(407) $(25,025) $(34,126)
===== | ===== ======== ========
</TABLE>
Estimated (loss) realized gain on sale/disposal of assets of
discontinued businesses, net of tax:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
<S> <C> <C> <C> <C>
QST Enterprises (excluding QST |
Environmental), net of tax of |
$4,640 $ -- | $ -- $ 7,057 $ --
QST Environmental, net of tax |
of $(2,626) and $1,889 -- | -- (3,940) 2,712
---- | ---- ------- -------
$ -- | $ -- $ 3,117 $ 2,712
==== | ==== ======= =======
</TABLE>
42
QST Enterprises' (excluding QST Environmental) financial results
for the period from January 1, 1999, through October 18, 1999,
were reflected in the discontinued operations liability which was
accrued at the end of 1998, resulting in no net income or loss.
Results from October 19, 1999, through December 31, 1999, were in
excess of the liability and are shown as a loss for that period.
In August 1998, QST Enterprises 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 which is included in the second table
above. Operating losses incurred by QST Communications prior to
the sale are shown in the first table. The gain from the sale of
QST Communications is partially offset by the estimated loss on
discontinuance of QST Energy.
In June 1999, QST Enterprises sold the outstanding common stock
of QST Environmental to MACTEC, Inc. for approximately
$18 million in cash. 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 included in the January 1 through October 18 loss from
operations of discontinued businesses.
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
December 31, 1999, for these two customers, totaled
$15.4 million, excluding interest of approximately $1.3 million.
Under the terms of the contracts, QST Energy has terminated
delivery of electricity to the two customers.
In June 1999, QST Energy agreed to pay $3 million to the
remaining California commercial customers to discontinue
electricity service. These payments, as well as losses on
energy sales during 1999 (primarily electricity to the
California commercial customers) were included in QST's estimate
for loss related to discontinued operations recorded in December
1998.
The 1998 loss from operations of QST Enterprises (excluding QST
Environmental and QST Communications) shown in the first table
primarily results from energy trading operations, negative
electric margin generated by QST Energy's commercial customers,
and the marking to market at December 31, 1998, of QST's
contractual commitments to supply electricity or natural gas to
customers after 1998. Other factors affecting the 1998 loss were
an unprecedented sudden increase in wholesale electricity prices
during June 1998 and increased administrative and general costs.
As shown in the second table above, QST Environmental recorded an
after-tax charge to income of $3.9 million in 1998 to record
estimated losses related to the sale or discontinuance of its
business, including estimated losses related to assets and
obligations, such as the laboratories, not integral to the
environmental consulting business activities sold in 1999. QST
43
Environmental's 1998 loss from operations of discontinued
businesses, as shown in the first table, resulted primarily from
losses at its analytical laboratory operations, partially offset
by approximately $.6 million earned by its consulting business.
An after-tax gain of $2.7 million from the sale of the
discontinued operations of QST Environmental's subsidiary, ESE
Land, is shown for 1997 in the second table above.
44
RESULTS OF OPERATIONS - CENTRAL ILLINOIS LIGHT COMPANY
CILCO ELECTRIC OPERATIONS
The following table summarizes electric operating revenue and
expenses by component.
<TABLE>
<CAPTION>
Components of Electric Income
1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Revenue:
Electric retail $351,508 $341,143 $318,130
Sales for resale 21,206 18,866 19,966
-------- -------- --------
Total revenue 372,714 360,009 338,096
-------- -------- --------
Cost of sales:
Cost of fuel 77,748 94,490 92,230
Purchased power expense 60,251 29,568 22,851
Revenue taxes 18,730 18,581 15,388
-------- -------- --------
Total cost of sales 156,729 142,639 130,469
-------- -------- --------
Gross margin 215,985 217,370 207,627
-------- -------- --------
Operating expenses:
Operation & maintenance expenses 111,541 84,502 78,648
Depreciation and amortization 47,070 46,017 43,858
Other taxes 10,227 8,660 8,583
-------- -------- --------
Total operating expenses 168,838 139,179 131,089
-------- -------- --------
Fixed charges and other:
Cost of equity funds capitalized -- -- (35)
Interest on long-term debt 13,772 13,921 14,317
Cost of borrowed funds
capitalized (157) (34) (99)
Other interest 2,971 2,340 1,875
-------- -------- --------
Total 16,586 16,227 16,058
-------- -------- --------
Income before taxes 30,561 61,964 60,480
Income taxes 10,440 21,645 21,901
-------- -------- --------
Electric income $ 20,121 $ 40,319 $ 38,579
======== ======== ========
</TABLE>
Electric gross margin declined slightly while retail kilowatt
hour (kWh) sales increased 2% in 1999 compared to 1998.
Residential sales remained relatively constant while commercial
sales increased 2%. Cooling degree days were 15% lower in 1999
than in 1998. Although total cooling degree days were lower in
1999, extremely warm weather in July 1999 resulted in greater
demand for electricity. Industrial sales volumes increased 5%
compared to 1998. Industrial sales were favorably impacted by
customers returning to retail supply due to the completion of
CILCO's Power Quest pilot program.
Electric gross margin increased 5% in 1998 and retail kWh sales
increased 6%. Residential sales volumes increased 4% while
commercial sales volumes
45
increased 6%. Cooling degree days were 28% higher in 1998 than
in 1997. Industrial sales volumes increased 8% compared to 1997.
Sales for resale increased 12% in 1999 due to increased sales
volumes resulting from higher available capacity and increased
prices per kWh due to higher industry-wide demand in July. Sales
for resale decreased 6% in 1998 as a result of lower available
capacity for bulk sales due to unscheduled generating station
outages. 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. CILCO's activity in the
sales for resale and purchased power markets will continue to
increase as a result of retail deregulation in the Illinois
market.
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.
Purchased power increased 104% in 1999. As a result of
abnormally warm weather during July 1999, CILCO incurred
$33 million of generation and purchased power costs which are
subject to recovery from customers through the fuel adjustment
clause (FAC). Of this amount, $10 million was recovered in July
and $23 million remained unrecovered at the end of July. CILCO's
FAC allows it to pass on to customers the cost of unrecovered
fuel and purchased power costs in the next calculated month's FAC
factor. In this instance, on September 1, 1999, the ICC approved
a request by CILCO to charge certain customers over a 12-month
period (without interest), beginning in September 1999. In
addition, to avoid the potential loss of purchased power cost
recovery from customers eligible to choose their electricity
supplier on October 1, 1999, CILCO requested and received ICC
permission to charge the larger industrial and commercial
customers their share of this underrecovery in a single month.
These customers may elect to pay over a period of up to 12 months
after making appropriate arrangements with CILCO. Also, under
the FAC, the underrecovered costs of fuel and purchased power for
a particular month are both treated as adjustments to cost of
fuel expense; thus, the cost of fuel decreased in 1999 compared
to 1998. At December 31, 1999, underrecovered fuel and purchased
power costs, including the unbilled portion of the July purchased
power, totaled $12 million.
The ICC will conduct its routine review of the FAC in 2000 and
will determine the prudency of CILCO's electricity purchases.
Any amount of the additional $23 million of electricity purchases
ultimately determined to be imprudent by the ICC would not be
recoverable from CILCO's customers, and therefore would be
expensed by CILCO on its income statement. CILCO currently
believes these costs to be recoverable through the FAC. A
significant disallowance of these costs by the ICC would be
material to CILCO's results of operations.
Electric operations and maintenance expenses increased 32% in
1999 compared to 1998. The increases were mainly due to a
$10.1 million second quarter charge and an $18.4 million third
quarter charge to pension and benefits expense as a result of the
Voluntary Early Retirement Programs offered to Management, Office
and Technical (MOT) employees and to employees in CILCO's
electric power generation area (see Item 7: Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Voluntary Early Retirement Programs). Electric
operations and maintenance expenses increased 7% in 1998
primarily due to increases in generation expenses arising from
outages at CILCO's E. D. Edwards facility, and increased electric
distribution overhead line maintenance expense due to a severe
storm in June, which, at its peak, affected power delivery to
approximately half of CILCO's electric customers.
46
Also contributing to the increases were higher information
technology costs. The increases were partially offset by lower
outside service costs and decreases in the actuarially-determined
costs for pensions and post-employment benefits.
The increase in depreciation and amortization expense in 1999 and
1998 reflects additions and replacements of utility plant at
costs in excess of the original cost of the property retired and
increased amortization associated with the implementation of new
computer systems.
Fixed charges and other expenses increased 2% in 1999 compared to
1998.
The decrease in income taxes in 1999 was primarily due to lower
pre-tax income as a result of pension and benefit expenses
relating to the Voluntary Early Retirement Programs.
47
CILCO GAS OPERATIONS
The following table summarizes gas operating revenue and
expenses by component.
<TABLE>
<CAPTION>
Components of Gas Income
1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Revenue:
Sale of gas $175,595 $166,416 $202,274
Transportation services 5,165 5,911 6,484
-------- -------- --------
Total revenue 180,760 172,327 208,758
-------- -------- --------
Cost of sales:
Cost of gas 99,293 93,586 123,531
Revenue taxes 8,200 7,921 7,079
-------- -------- --------
Total cost of sales 107,493 101,507 130,610
-------- -------- --------
Gross margin 73,267 70,820 78,148
-------- -------- --------
Operating expenses:
Operation & maintenance expenses 42,344 34,205 31,185
Depreciation and amortization 19,616 19,256 17,647
Other taxes 3,108 2,747 3,225
-------- -------- --------
Total operating expenses 65,068 56,208 52,057
-------- -------- --------
Fixed charges and other:
Interest on long-term debt 5,462 5,577 5,707
Cost of borrowed funds
capitalized (1) -- --
Other interest 1,179 937 747
-------- -------- --------
Total 6,640 6,514 6,454
-------- -------- --------
Income before taxes 1,559 8,098 19,637
Income taxes 836 3,443 7,416
-------- -------- --------
Gas income $ 723 $ 4,655 $ 12,221
======== ======== ========
</TABLE>
Gas gross margin increased 3% in 1999 compared to 1998.
Residential sales volumes increased 10%. Commercial sales
volumes remained relatively constant. Heating degree days were
7% higher in 1999 than in 1998.
Gas gross margin decreased 9% in 1998 compared to 1997.
Residential and commercial sales volumes decreased 17% and 12%,
respectively, primarily due to warmer weather during the heating
season. Heating degree days were 19% lower in 1998 than in
1997.
Revenue from gas transportation services decreased 13% in 1999
and 9% in 1998, while the volume of gas transported decreased 8%
in 1999 and 2% in 1998. The decreases were primarily due to
reduced industrial and residential gas transportation sales in
1999, and reduced commercial gas transportation sales in 1998.
48
The overall level of business activity in CILCO's service
territory and weather conditions are expected 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.
The cost of gas increased 6% in 1999 primarily due to increased
gas sales and higher natural gas prices. The cost of gas
decreased 24% in 1998, primarily due to decreased gas sales and
lower natural gas prices. These changes were passed through to
customers via the PGA.
Gas operations and maintenance expenses increased 24% in 1999
and 10% in 1998. The 1999 increase was mainly due to a
$9.1 million charge to pension and benefits expense in the third
quarter as a result of the Voluntary Early Retirement Program
offered to MOT employees (see Item 7: Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Voluntary Early Retirement Programs). The increase for 1998 was
due to higher maintenance and information technology costs,
partially offset by lower outside service costs and decreases in
the actuarially-determined costs for pension and post-employment
benefits.
The increase in depreciation and amortization expenses in 1999
and 1998 reflect additions and replacements of utility plant at
costs in excess of the original cost of the property retired.
Fixed charges and other expenses increased 2% in 1999, compared
to 1998.
The decrease in income taxes in 1999 was due to lower pre-tax
operating income as a result of pension and benefit expenses
relating to the Voluntary Early Retirement Program.
49
CILCO OTHER
The following table summarizes other income and deductions:
<TABLE>
<CAPTION>
Components of Other
Income and Deductions
1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Revenue $ 5,399 $ 1,864 $ 272
Expense (6,992) (1,711) (619)
------- ------- -------
Gross margin (1,593) 153 (347)
------- ------- -------
Other income and deductions:
Interest income 225 251 266
Amortization (505) (713) (713)
Operating expenses (1,582) (2,025) (2,497)
Other taxes (4) (8) (14)
Preferred stock dividends (3,208) (3,194) (3,216)
Other (1,037) (1,013) (1,177)
------- ------- -------
Total other income & deductions (6,111) (6,702) (7,351)
------- ------- -------
Income (loss) before taxes (7,704) (6,549) (7,698)
------- ------- -------
Income taxes (benefit) (2,901) (2,616) (3,049)
------- ------- -------
Other income (loss) $(4,803) $(3,933) $(4,649)
======= ======= =======
</TABLE>
Gross margin decreased in 1999 due to costs of non-regulated
service programs. Theses include start-up costs for the energy
consulting and performance audit programs as well as on-going
costs for the outdoor lighting program. The margin on non-
regulated electricity sales in Illinois, outside of CILCO's
service territory, remained relatively constant. These sales of
electricity are to eligible customers of other utilities' pilot
programs formerly served by CILCO affiliate QST and to other
customers eligible under the Customer Choice Law.
50
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements:
Page
----
CILCORP
Management's Report 52
Report of Independent Public Accountants 53
Consolidated Statements of Income 54-55
Consolidated Balance Sheets 56-57
Consolidated Statements of Cash Flows 58-59
Statements of Segments of Business 60-63
Consolidated Statements of Stockholders' Equity 64-65
Notes to Consolidated Financial Statements 66-87
CILCO
Management's Report 88
Report of Independent Public Accountants 89
Consolidated Statements of Income 90
Consolidated Balance Sheets 91-92
Consolidated Statements of Cash Flows 93-94
Statements of Segments of Business 95-97
Consolidated Statements of Retained Earnings 98
Notes to Consolidated Financial Statements 99-114
51
MANAGEMENT'S REPORT
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 and the selection and training of qualified
personnel.
The financial statements have been audited by CILCORP'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.
P. D. Stinson
President
T. D. Hutchinson
Controller and Chief
Financial Officer
52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of CILCORP Inc.:
We have audited the accompanying consolidated balance sheets of
CILCORP Inc. (an Illinois corporation) and subsidiaries as of
December 31, 1999, and 1998, and the related consolidated
statements of income, cash flows, stockholders' equity and
segments of business for the periods October 19, 1999, through
December 31, 1999, and January 1, 1999, through October 18, 1999,
and the years ended December 31, 1998 and 1997. These financial
statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. 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, 1999, and
1998, and the results of their operations and their cash flows
for the periods October 19, 1999, through December 31, 1999, and
January 1, 1999, through October 18, 1999, and the years ended
December 31, 1998 and 1997, in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The financial
statement schedules listed in Item 14(a)2 are presented for
purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic
financial statements. These schedules have been subjected to the
auditing procedures applied in our 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
January 28, 2000
53
<TABLE>
CILCORP Inc. and Subsidiaries
Consolidated Statements of Income
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Revenue:
CILCO Electric $ 65,606 |$307,108 $360,009 $338,096
CILCO Gas 49,860 | 130,900 172,327 208,758
CILCO Other 2,502 | 3,122 2,115 538
Other Businesses 2,621 | 19,131 24,717 10,867
-------- |-------- -------- --------
Total 120,589 | 460,261 559,168 558,259
-------- |-------- -------- --------
Operating Expenses: |
Fuel for Generation and |
Purchased Power 23,810 | 114,189 124,058 115,081
Gas Purchased for Resale 32,547 | 79,768 106,088 125,977
Other Operations and Maintenance 26,982 | 151,628 133,514 123,095
Depreciation and Amortization 15,863 | 54,383 66,188 62,425
State and Local Revenue Taxes 4,932 | 21,998 26,502 22,467
Other Taxes 2,838 | 10,540 11,471 11,848
-------- |-------- -------- -------
Total 106,972 | 432,506 467,821 460,893
-------- |-------- -------- -------
Fixed Charges and Other: |
Interest Expense 14,339 | 22,629 29,257 27,049
Preferred Stock Dividends |
of Subsidiary 558 | 2,650 3,194 3,216
Allowance for Funds Used During |
Construction (71) | (87) (34) (134)
Other 274 | 763 1,013 1,177
-------- |-------- -------- --------
Total 15,100 | 25,955 33,430 31,308
-------- |-------- -------- --------
Income from Continuing Operations |
Before Income Taxes (1,483) | 1,800 57,917 66,058
Income Taxes (951) | 1,113 19,699 22,349
-------- |-------- -------- --------
Net Income from Continuing |
Operations Before |
Extraordinary Item (532) | 687 38,218 43,709
Loss from Operations of |
Discontinued Businesses, Net of |
Tax of $(140), $(221), $(16,278) |
and $(7,298) (213) | (407) (25,025) (34,126)
Gain on Sale/Disposal of Assets |
of Discontinued Businesses, Net |
of Tax of $2,014 and $1,889 -- | -- 3,117 2,712
Extraordinary Item -- | -- -- 4,100
-------- |-------- -------- --------
Net Income $ (745) |$ 280 $ 16,310 $ 16,395
|
Other Comprehensive Income -- | -- (169) (317)
-------- |-------- -------- --------
Comprehensive Income $ (745) |$ 280 $ 16,141 $ 16,078
======== |======== ======== ========
54
<FN>
The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>
55
<TABLE>
CILCORP Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
Assets (As of December 31) 1999 1998
(In thousands)
<S> <C> <C>
Current Assets:
Cash and Temporary Cash Investments $ 11,220 | $ 1,669
Receivables, Less Reserves |
of $1,296 and $3,411 60,072 | 134,548
Accrued Unbilled Revenue 35,526 | 39,339
Fuel, at Average Cost 14,392 | 13,431
Materials and Supplies, at Average Cost 16,165 | 15,435
Gas in Underground Storage, at Avg. Cost 21,196 | 20,494
FAC Underrecoveries 12,024 | --
Prepayments and Other 8,946 | 7,646
---------- | ----------
Total Current Assets 179,541 | 232,562
---------- | ----------
Investments and Other Property: |
Investment in Leveraged Leases 143,697 | 146,977
Other Investments 27,219 | 25,037
---------- | ----------
Total Investments and Other Property 170,916 | 172,014
---------- | ----------
Property, Plant and Equipment: |
Utility Plant, at Original Cost |
Electric 624,889 | 1,237,885
Gas 208,520 | 417,585
---------- | ----------
833,409 | 1,655,470
Less-Accumulated Provision for Depr. 8,898 | 812,630
---------- | ----------
824,511 | 842,840
Construction Work in Progress 38,068 | 30,075
Other, Net of Depreciation 298 | 7,755
---------- | ----------
Total Property, Plant and Equipment 862,877 | 880,670
---------- | ----------
Other Assets: |
Goodwill, Net of Accumulated |
Amortization of $2,881 569,983 | --
Other 47,636 | 27,694
---------- | ----------
Total Other Assets 617,619 | 27,694
---------- | ----------
|
Total Assets $1,830,953 | $1,312,940
========== | ==========
<FN>
The accompanying Notes to Financial Statements are an integral
part of these balance sheets.
</TABLE>
56
<TABLE>
CILCORP Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
Liabilities and Stockholders' Equity (As of December 31)
1999 1998
(In thousands)
<S> <C> <C>
Current Liabilities:
Current Portion of Long-Term Debt $ 30,000 |$ 13,027
Notes Payable 91,900 | 96,200
Accounts Payable 41,429 | 128,845
Accrued Taxes 14,670 | 8,262
Accrued Interest 18,296 | 9,994
FAC/PGA Overrecoveries 127 | 304
Other 5,742 | 14,316
---------- |----------
Total Current Liabilities 202,164 | 270,948
---------- |----------
Long-Term Debt 730,434 | 285,552
---------- |----------
Deferred Credits and Other Liabilities: |
Deferred Income Taxes 237,557 | 239,305
Regulatory Liab. of Regulated Sub. 31,367 | 46,346
Deferred Investment Tax Credit 17,791 | 19,450
Other 77,432 | 49,681
---------- |----------
Total Deferred Credits 364,147 | 354,782
---------- |----------
Preferred Stock of Subsidiary 66,120 | 66,120
---------- |----------
Stockholders' Equity: |
Common Stock, no par value; |
Authorized 10,000 and |
50,000,000 shares - Outstanding 1,000 |
and 13,610,680 shares -- | 192,853
Additional Paid-in Capital 468,833 | --
Retained Earnings (745) | 143,530
Accumulated Other Comprehensive Income -- | (845)
---------- |----------
Total Stockholders' Equity 468,088 | 335,538
---------- |----------
Total Liabilities and |
Stockholders' Equity $1,830,953 |$1,312,940
========== |==========
<FN>
The accompanying Notes to Financial Statements are an integral
part of these balance sheets.
</TABLE>
57
<TABLE>
CILCORP Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net Income from Continuing |
Operations Before Preferred |
Dividends $ 26 | $ 3,337 $ 41,412 $ 46,925
--------- | -------- -------- --------
|
Adjustments to Reconcile Net Income |
to Net Cash Provided by Operating |
Activities: |
Non-Cash Income (996) | (4,830) (6,150) (4,102)
Cash Receipts in Excess of Debt |
Service on Leases 1,099 | 8,943 5,518 --
Depreciation and Amortization 15,863 | 54,383 66,188 62,416
Deferred Income Taxes, |
Investment Tax Credit and |
Regulatory Liability of |
Subsidiary, Net (1,445) | (20,419) (7,742) (3,342)
Changes in Operating Assets and |
Liabilities: |
Decrease (Increase) in Accounts |
Receivable and Accrued |
Unbilled Revenue (16,488) | 10,527 5,418 (74)
(Increase) Decrease in |
Inventories 2,379 | (4,873) (5,093) 3,294
Increase (Decrease) in Accounts |
Payable (13,300) | (6,276) 12,938 (1,961)
Increase in Accrued Taxes 2,749 | 8,372 46 3,893
(Increase) Decrease in Other |
Assets (10,619) | (29,807) 2,019 (17,027)
Increase (Decrease)in Other |
Liabilities 3 | 36,076 (197) (9,039)
--------- | -------- -------- --------
Total Adjustments (20,755) | 52,096 72,945 34,058
--------- | -------- -------- --------
Net Cash Provided by Operating |
Activities (20,729) | 55,433 114,357 80,983
Net Cash Provided by (Used in) |
Operating Activities of |
Discontinued Operations (447) | 10,187 (30,123) 10,031
--------- | -------- -------- --------
Cash Flow from Operations (21,176) | 65,620 84,234 91,014
--------- | -------- -------- --------
58
Cash Flows from Investing |
Activities: |
Additions to Plant (9,662) | (45,473) (67,112) (55,055)
Purchase of Long-Term Investments -- | -- -- (6,933)
Other (1,120) | (2,454) (6,703) (1,242)
--------- | -------- -------- --------
Net Cash Used in Investing |
Activities (10,782) | (47,927) (73,815) (63,230)
Net Cash Provided by (Used in) |
Investing Activities of |
Discontinued Operations -- | 17,376 9,107 3,310
--------- | -------- -------- --------
Cash Flow from Investing |
Activities (10,782) | (30,551) (64,708) (59,920)
--------- | -------- -------- --------
Cash Flows from Financing |
Activities: |
Net Increase (Decrease) in |
Short-Term Debt (10,177) | 5,877 34,050 34,250
Net Increase (Decrease) in |
Long-Term Debt 461,577 | (980) (25,807) (22,954)
Common Dividends Paid -- | (29,813) (33,482) (33,482)
Preferred Dividends Paid (836) | (2,372) (3,194) (3,216)
Common Stock Issued (Redeemed) (885,669) | -- -- --
Additional Paid-in Capital 468,833 | -- -- --
--------- | -------- -------- --------
Net Cash Provided by (Used in) |
Financing Activities of |
Continuing Operations 33,728 | (27,288) (28,433) (25,402)
Net Cash Provided by (Used in) |
Financing Activities of |
Discontinued Operations -- | -- -- (57)
--------- | -------- -------- --------
Net Cash Used in Financing |
Activities 33,728 | (27,288) (28,433) (25,459)
--------- | -------- -------- --------
Net Increase (Decrease) in Cash |
and Temporary Cash Investments 1,770 | 7,781 (8,907) 5,635
Cash and Temp. Cash Investments |
at Beginning of Period 9,450 | 1,669 10,576 4,941
--------- | -------- -------- --------
Cash and Temporary Cash |
Investments at End of Period $ 11,220 | $ 9,450 $ 1,669 $ 10,576
========= | ======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral
part of these statements.
</TABLE>
59
<TABLE>
CILCORP Inc. and Subsidiaries
Statements of Segments of Business
<CAPTION>
October 19 to December 31, 1999
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Operatns. Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 65,606 $ 49,860 $ 2,430 $ 2,600 $ -- $ 120,496
Interest income -- -- 72 21 -- 93
-------- -------- -------- ---------- -------- ----------
Total 65,606 49,860 2,502 2,621 -- 120,589
-------- -------- -------- ---------- -------- ----------
Operating
Expenses 46,444 38,770 2,840 3,055 -- 91,109
Depreciation and
Amortization 9,202 3,745 -- 2,916 -- 15,863
-------- -------- -------- ---------- -------- ----------
Total 55,646 42,515 2,840 5,971 -- 106,972
-------- -------- -------- ---------- -------- ----------
Interest expense 3,462 1,373 -- 9,504 -- 14,339
Preferred stock
Dividends -- -- 558 -- -- 558
Fixed charges and
other expenses (71) -- 274 -- -- 203
-------- -------- -------- ---------- -------- ----------
Total 3,391 1,373 832 9,504 -- 15,100
-------- -------- -------- ---------- -------- ----------
Income from
continuing
oper. before
income taxes 6,569 5,972 (1,170) (12,854) -- (1,483)
Income taxes 2,071 2,402 (466) (4,958) -- (951)
-------- -------- -------- ---------- -------- ----------
Net income from
continuing
operations 4,498 3,570 (704) (7,896) -- (532)
Effect of
discontinued
operations -- -- -- -- (213) (213)
-------- -------- -------- ---------- -------- ----------
Segment net
income $ 4,498 $ 3,570 $ (704) $ (7,896) $ (213) $ (745)
======== ======== ======== ========== ======== ==========
Capital
expenditures $ 7,071 $ 2,591 $ -- $ -- $ -- $ 9,662
Revenue from
major customer
Caterpillar
Inc. $ 7,423 $ 251 $ 231 $ 649 $ -- $ 8,554
Segment assets $754,961 $290,107 $ 5,048 $1,177,144 $ 29,542 $2,256,802
Consolidation
adjustments (2,121) (825) -- (422,767) (136) (425,849)
-------- -------- -------- ---------- -------- ----------
Total assets $752,840 $289,282 $ 5,048 $ 754,377 $ 29,406 $1,830,953
======== ======== ======== ========== ======== ==========
</TABLE>
60
<TABLE>
<CAPTION>
January 1 to October 18, 1999
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Operatns. Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $307,108 $130,900 $ 2,969 $ 19,032 $ -- $ 460,009
Interest income -- -- 153 99 -- 252
-------- -------- -------- ---------- -------- ----------
Total 307,108 130,900 3,122 19,131 -- 460,261
-------- -------- -------- ---------- -------- ----------
Operating
Expenses 232,053 114,175 5,738 26,157 -- 378,123
Depreciation and
Amortization 37,868 15,871 505 139 -- 54,383
-------- -------- ------- --------- -------- ----------
Total 269,921 130,046 6,243 26,296 -- 432,506
-------- -------- ------- --------- -------- ----------
Interest expense 13,281 5,268 -- 4,080 -- 22,629
Preferred stock
Dividends -- -- 2,650 -- -- 2,650
Fixed charges and
other expenses (86) (1) 763 -- -- 676
-------- -------- ------- --------- -------- ----------
Total 13,195 5,267 3,413 4,080 -- 25,955
-------- -------- ------- --------- -------- ----------
Income from
continuing
oper. before
income taxes 23,992 (4,413) (6,534) (11,245) -- 1,800
Income taxes 8,369 (1,566) (2,435) (3,255) -- 1,113
-------- -------- ------- --------- -------- ----------
Net income from
continuing
operations 15,623 (2,847) (4,099) (7,990) -- 687
Effect of
discontinued
operations -- -- -- -- (407) (407)
-------- -------- ------- --------- -------- ----------
Segment net
income $ 15,623 $ (2,847) $(4,099) $ (7,990) $ (407) $ 280
======== ======== ======= ========== ======== ==========
Capital
expenditures $ 31,914 $ 13,559 $ -- $ -- $ -- $ 45,473
Revenue from
major customer
Caterpillar
Inc. $ 31,335 $ 868 $ 282 $ 6,284 $ -- $ 38,769
Segment assets $743,441 $281,241 $ 4,512 $ 572,250 $ 32,666 $1,634,110
Consolidation
adjustments 2,678 1,042 -- (403,852) (136) (400,268)
-------- -------- ------- ---------- -------- ----------
Total assets $746,119 $282,283 $ 4,512 $ 168,398 $ 32,530 $1,233,842
======== ======== ======= ========== ======== ==========
</TABLE>
61
<TABLE>
<CAPTION>
1998
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Operatns. Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $360,009 $172,327 $ 1,864 $ 24,642 $ -- $ 558,842
Interest income -- -- 251 75 -- 326
-------- -------- ------- --------- ---------- ----------
Total 360,009 172,327 2,115 24,717 -- 559,168
-------- -------- ------- --------- ---------- ----------
Operating
expenses 235,801 138,459 3,744 23,629 -- 401,633
Depreciation and
amortization 46,017 19,256 713 202 -- 66,188
-------- -------- ------- --------- ---------- ----------
Total 281,818 157,715 4,457 23,831 -- 467,821
-------- -------- ------- --------- ---------- ----------
Interest expense 16,261 6,514 -- 6,482 -- 29,257
Preferred stock
dividends -- -- 3,194 -- -- 3,194
Fixed charges and
other expenses (34) -- 1,013 -- -- 979
-------- -------- ------- --------- ---------- ----------
Total 16,227 6,514 4,207 6,482 -- 33,430
-------- -------- ------- --------- ---------- ----------
Income from
continuing
oper. before
income taxes 61,964 8,098 (6,549) (5,596) -- 57,917
Income taxes 21,645 3,443 (2,616) (2,773) -- 19,699
-------- -------- ------- --------- ---------- ----------
Net income from
continuing
operations 40,319 4,655 (3,933) (2,823) -- 38,218
Effect of
discontinued
operations -- -- -- -- (21,908) (21,908)
-------- -------- ------- --------- ---------- ----------
Segment net
income $ 40,319 $ 4,655 $(3,933) $ (2,823) $ (21,908) $ 16,310
======== ======== ======= ========= ========== ==========
Capital
expenditures $ 44,213 $ 22,889 $ -- $ 10 $ 8,916 $ 76,028
Revenue from
major customer
Caterpillar
Inc. $ 39,354 $ 948 $ 88 $ 7,669 $ -- $ 48,059
Segment assets $733,805 $283,286 $ 5,072 $ 594,734 $ 121,647 $1,738,544
Consolidation
adjustments (1,304) (507) -- (423,789) (4) (425,604)
-------- -------- ------- --------- ---------- ----------
Total assets $732,501 $282,779 $ 5,072 $ 170,945 $ 121,643 $1,312,940
======== ======== ======= ========= ========== ==========
</TABLE>
62
<TABLE>
<CAPTION>
1997
CILCO CILCO CILCO Other Discont.
Electric Gas Other Businesses Operatns. Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $338,096 $208,758 $ 272 $ 10,809 $ -- $ 557,935
Interest income -- -- 266 58 -- 324
-------- -------- ------- --------- -------- -----------
Total 338,096 208,758 538 10,867 -- 558,259
-------- -------- ------- --------- -------- -----------
Operating
expenses 217,700 165,020 3,130 12,618 -- 398,468
Depreciation and
amortization 43,858 17,647 713 207 -- 62,425
-------- -------- ------- --------- -------- -----------
Total 261,558 182,667 3,843 12,825 -- 460,893
-------- -------- ------- --------- -------- -----------
Interest expense 16,192 6,454 -- 4,403 -- 27,049
Preferred stock
dividends -- -- 3,216 -- -- 3,216
Fixed charges and
other expenses (134) -- 1,177 -- -- 1,043
-------- -------- ------- --------- -------- -----------
Total 16,058 6,454 4,393 4,403 -- 31,308
-------- -------- ------- --------- -------- -----------
Income from
continuing
oper. before
income taxes 60,480 19,637 (7,698) (6,361) -- 66,058
Income taxes 21,901 7,416 (3,049) (3,919) -- 22,349
-------- -------- ------- --------- -------- -----------
Net income from
cont. oper.
before
extraord. item 38,579 12,221 (4,649) (2,442) -- 43,709
Effect of
discontinued
operations and
extraord. item 4,100 -- -- -- (31,414) (27,314)
-------- -------- ------- --------- -------- -----------
Segment net
income $ 42,679 $ 12,221 $(4,649) $ (2,442) $(31,414) $ 16,395
======== ======== ======= ========= ======== ===========
Capital
expenditures $ 35,196 $ 19,830 $ -- $ 29 $ 6,188 $ 61,243
Revenue from
major customer
Caterpillar
Inc. $ 40,106 $ 934 $ -- $ 1,208 $ -- $ 42,248
Segment assets $724,869 $290,958 $ 5,639 $ 606,786 $144,412 $ 1,772,664
Consolidation
adjustments (1,070) (416) -- (436,345) (14) (437,845)
-------- -------- ------- --------- -------- -----------
Total assets $723,799 $290,542 $ 5,639 $ 170,441 $144,398 $ 1,334,819
======== ======== ======= ========= ======== ===========
</TABLE>
63
<TABLE>
CILCORP Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<CAPTION>
Other
Add'l Compre-
Common Stock Paid in Retained hensive
Shares Amount Capital Earnings Income Total
(In thousands except share amounts)
<S> <C> <C> <C> <C> <C> <C>
Balance 12/31/96 13,610,680 $ 190,760 $ 0 $ 177,804 $(359) $368,205
CILCORP Shareholder
Return Incentive
Compensatio 1,807 1,807
Cash Dividend
Declared on Common
Stock ($2.46/share) (33,482) (33,482)
Additional Minimum
Liability of
Non-Qualified
Pension Plan
12/31/97, net of
$(208) taxes (317) (317)
Other (15) (15)
Net Income 16,395 16,395
---------- --------- ---------- -------- ----- --------
Balance 12/31/97 13,610,680 $ 192,567 $ 0 $160,702 $(676) $352,593
Cash Dividend
Declared on Common
Stock ($2.46/share) (33,482) (33,482)
Additional Minimum
Liability of
Non-Qualified
Pension Plan
12/31/98, net of
$(111) taxes (169) (169)
Other 286 286
Net Income 16,310 16,310
---------- --------- ---------- -------- ----- --------
Balance 12/31/98 13,610,680 $ 192,853 $ 0 $143,530 $(845) $335,538
CILCORP Shareholder
Return Incentive
Compensation 15,000 -- --
Shares Forfeited (1,842) (1,842)
Cash Dividend
Declared on Common
Stock ($2.46/share) (29,813) (29,813)
Other 662 662
Net Income 280 280
---------- --------- ---------- -------- ----- --------
Balance 10/18/99 13,625,680 $ 191,011 $ 0 $114,659 $(845) $304,825
========== ========= ========== ======== ===== ========
64
- - - - --------------------------------------------------------------------------------
Balance 10/18/99 13,625,680 $ 191,011 $ 0 $114,659 $(845) $304,825
AES Acquisition (13,625,680) (191,011) 463,000 (114,659) 845 158,175
AES Equity
Contribution 5,833 5,833
Net Income (745) (745)
---------- --------- ---------- -------- ----- --------
Balance 12/31/99 0 $ 0 $ 468,833 $ (745) $ 0 $468,088
========== ========= ========== ======== ===== ========
<FN>
The accompanying Notes to Financial Statements are an integral
part of these statements.
</TABLE>
65
CILCORP INC.
NOTES TO THE CONSOLIDATED 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 Holding Company), Central Illinois
Light Company (CILCO), QST Enterprises Inc. (QST) and its
subsidiaries QST Environmental Inc. (QST Environmental), QST
Energy Inc. (QST Energy) and CILCORP Infraservices Inc. (CILCORP
Infraservices), and CILCORP's other subsidiaries (collectively,
the Company) after elimination of significant intercompany
transactions. In the fourth quarter of 1998, the operations of
QST and its subsidiaries (excluding ESE Land Corporation and
CILCORP Infraservices - see Management's Discussion and
Analysis) were discontinued and, therefore, are being reported
as discontinued operations in the financial statements. QST
completed the sale of subsidiary QST Environmental 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.
CILCORP, a public utility holding company, is a wholly-owned
subsidiary of The AES Corporation. CILCO, 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. Other CILCORP first-
tier subsidiaries are CILCORP Investment Management Inc. (CIM),
which manages the Company's investment portfolio and CILCORP
Ventures Inc. (CVI), which pursues investment opportunities in
energy-related products and services.
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. AES
completed the acquisition of the Company on October 18, 1999.
Approximately $886 million was required to complete the merger,
which involved the purchase of 13,625,680 shares of CILCORP's
common stock. Currently, there are 10,000 authorized shares of
CILCORP common stock, 1,000 of which are issued. AES owns 100%
of the 1,000 issued shares.
The merger was accounted for using the purchase method of
accounting. Under this method, the purchase price was allocated
to the fair market value of the assets acquired and the
liabilities assumed. The excess purchase price over the fair
value of the assets acquired and the liabilities assumed was
allocated to goodwill at CILCORP.
Following the acquisition, results of operations for CILCORP
Inc. are presented for the period January 1, 1999, through
October 18, 1999, and for the period after the acquisition of
October 19, 1999, through December 31, 1999, separated by a
heavy black line.
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.
66
See Management's Discussion and Analysis of Financial Condition
and Results of Operations - Impact of Accounting Standards for a
discussion of accounting pronouncements issued by the Financial
Accounting Standards Board which are effective in 2000 or
thereafter.
REGULATION
CILCO is a public utility subject to regulation by the Illinois
Commerce Commission (ICC) and the Federal Energy Regulatory
Commission (FERC) with respect to accounting matters, and
maintains its accounts in accordance with the Uniform System of
Accounts prescribed by these agencies.
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) for certain of its
regulated public utility operations. Under SFAS 71, assets and
liabilities are recorded to represent probable future increases
and decreases, respectively, of revenues to CILCO resulting from
the ratemaking action of regulatory agencies.
The Electric Service Customer Choice and Rate Relief Law of 1997
(Customer Choice Law) became effective in Illinois in December
1997. Among other provisions, this law begins a nine-year
transition process to a fully competitive market for electricity
in Illinois. Electric transmission and distribution activities
are expected to continue to be regulated, but a customer may
choose to purchase electricity from another supplier (see Item
1. Business - Competition).
Due to the Customer Choice Law, CILCO's electric generation
activities are no longer subject to the provisions of SFAS 71.
Accordingly, regulatory assets of $1.5 million and liabilities
of $5.6 million associated with electric generating plant were
written-off or credited, respectively, to income in 1997 as a
net $4.1 million after-tax extraordinary item. Regulatory
assets included on the Consolidated Balance Sheets at December
31, 1999, and 1998, are as follows:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Included in prepayments and other: |
Fuel and gas cost adjustments $15,614 | $ 4,740
Coal tar remediation cost - estimated current 720 | 609
------- | -------
Current costs included in prepayments and |
other 16,334 | 5,349
------- | -------
Included in other assets: |
Coal tar remediation cost, net of recoveries 674 | 1,281
Regulatory tax asset 7,334 | 5,723
Deferred gas costs 4,368 | 4,039
Unamortized loss on reacquired debt 2,941 | 3,261
------- | -------
Future costs included in other assets 15,317 | 14,304
------- | -------
Total regulatory assets $31,651 | $19,653
======= | =======
</TABLE>
67
Regulatory assets at December 31, 1999, are related to CILCO's
regulated electric and gas distribution activities. Regulatory
liabilities, consisting of deferred tax items of approximately
$31.4 million and $46.3 million at December 31, 1999, and 1998,
respectively, and investment tax credits of approximately $11.2
million and $12.8 million at December 31, 1999 and 1998,
respectively, primarily related to CILCO's electric and gas
tramsmission and distribution operations.
CILCO's electric generation-related identifiable assets included
in the balance sheet at December 31, 1999 were:
<TABLE>
<CAPTION> 1999
(In thousands)
<S> <C>
Property, Plant and Equipment $ 257,449
Less: Accumulated Depreciation (3,334)
---------
254,115
Construction Work in Progress 9,215
---------
Net Property, Plant and Equipment 263,330
Fuel, at Average Cost 14,392
Materials and Supplies, at Average Cost 9,901
---------
Total Identifiable Electric Generation Assets $ 287,623
=========
</TABLE>
Accumulated deferred income taxes and investment tax credits
associated with electric generation property at December 31,
1999, were approximately $61 million and $6.8 million,
respectively.
OPERATING REVENUES, FUEL COSTS AND COST OF GAS
Electric, gas, and non-regulated energy and energy services
revenues include service provided but unbilled at year end.
Substantially all electric energy 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, 1999, CILCO had net receivables of
$42.4 million, of which approximately $1.2 million was due from
its major customer.
See CILCORP Note 13 for a discussion of receivables related to
CILCORP Investment Management Inc.'s leveraged lease portfolio.
68
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of Cash and Temporary Cash Investments,
Other Investments, and Notes Payable approximates fair value.
The estimated fair value of CILCO's Preferred Stock with
Mandatory Redemption was $19.9 million at December 31, 1999, and
$23 million at December 31, 1998, based on current market
interest rates for other companies with comparable credit
ratings, capital structure, and size. The estimated fair value
of Long-Term Debt, including current maturities, was
$755 million at December 31, 1999, and $339 million at
December 31, 1998. The fair market value of these instruments
was based on current market interest rates for other companies
with comparable credit ratings, capital structures, and size,
but does not reflect effects of regulatory treatment accorded
the instruments related to the regulated portions of CILCO's
business. See CILCORP Note 9 for fair value of derivative
financial instruments.
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 3 to 15 years.
GOODWILL
Utilizing purchase accounting, the excess purchase price over
the fair value of the assets acquired and the liabilities
assumed by AES in its acquisition of CILCORP and its
subsidiaries was allocated to CILCORP goodwill. Goodwill is
being amortized using the straight-line method over a 40-year
period. The continuing monopoly status for electric and gas
distribution and the favorable regulatory climate in Illinois
resulting from the Customer Choice Law warrants the use of the
maximum period for goodwill amortization.
As a result of significant downsizing of QST Environmental
during 1996 and 1997 and continuing overcapacity and competition
in the environmental segment in the fourth quarter of 1997, the
Company determined that an impairment to goodwill associated
with QST Environmental existed. As a result, the Company wrote
off the $22.6 million unamortized goodwill balance. In late
1998, the Company decided to sell its 100% ownership interest in
QST Environmental and has classified its results as discontinued
(see Results of Operations - QST Enterprises Discontinued
Operations).
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 will file a consolidated federal income tax return
with AES. Income taxes are allocated to the individual
companies based on their respective taxable income or loss.
69
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>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Interest $5,032 | $21,412 $26,067 $28,710
Income taxes $ -- | $10,828 $19,611 $28,537
</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>
1999 1998
(In thousands)
<S> <C> <C>
Cash surrender value of contracts $ 56,664 | $ 50,786
Borrowings against contracts (53,558) | (48,132)
-------- | --------
Net investment $ 3,106 | $ 2,654
======== | ========
</TABLE>
Interest expense related to borrowings against Company-owned
life insurance, included in "Other" on the Consolidated
Statements of Income, was $4 million, $3.6 million, and $3.5
million for 1999, 1998, and 1997, respectively.
NOTE 2 - INCOME TAXES
The Company uses 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 asset and liability to account for the 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
deferred income tax asset and liability at December 31, 1999,
1998, and 1997, were as follows:
70
<TABLE>
<CAPTION>
December 31 1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Deferred tax assets:
Deferred tax asset $28,085 | $20,742 $18,347
Adjustment to reflect regulatory asset (7,334) | (5,723) (7,578)
------- | ------- -------
Net deferred tax asset $20,751 | $15,019 $10,769
======= | ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31 1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Deferred tax liability-property $188,404 | $196,300 $207,460
Adjustment to reflect regulatory liability (31,367) | (46,346) (56,807)
-------- | -------- --------
Net deferred tax liability-property 157,037 | 149,954 150,653
Deferred tax liability-leases 105,625 | 103,566 101,005
Deferred tax liability-other (4,354) | 804 124
-------- | -------- --------
Accumulated deferred income tax liability $258,308 | $254,324 $251,782
======== | ======== ========
Accumulated deferred income tax liability, |
net of deferred tax assets $237,557 | $239,305 $241,013
======== | ======== ========
</TABLE>
The following table reconciles the change in the accumulated
deferred income tax liability to the deferred income tax expense
included in the income statement:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18, Dec. 31,
1999 1999 1998
(Inthousands)
<S> <C> <C> <C>
Net change in deferred income tax liability |
per above table $ 5,731 | $ (7,479) $ (1,707)
Change in tax effects of income tax related |
regulatory assets and liabilities (9,024)| (7,567) (8,606)
Other 1,384 | (5,171) (106)
------- | -------- --------
Deferred income tax benefit for the period (1,909)| (20,217) (10,419)
Less: Deferred income tax benefit for the |
period from discontinued operations -- | (830) (6,115)
------- | -------- --------
Deferred income tax benefit for the period |
from continuing operations $(1,909)| $(19,387) $ (4,304)
======= | ======== ========
</TABLE>
71
Income tax expenses were as follows:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Current income taxes |
Federal $ 1,481 | $ 18,073 $ 13,731 $17,814
State (329) | 4,360 3,791 3,836
------- | -------- -------- -------
Total current taxes 1,152 | 22,433 17,522 21,650
------- | -------- -------- -------
Deferred income taxes, net |
Property-related deferred income |
taxes (3,653) | (4,150) (11,262) (841)
Leveraged leases 1,271 | 500 2,602 3,040
Unbilled revenue -- | (94) (287) (885)
Gas take-or-pay settlements 40 | -- 522 (339)
Environmental remediation costs 196 | 8 (58) 46
Pension expenses 132 | (10,057) 869 (1,798)
Other post-employment benefits |
expenses 61 | (5,144) (847) (617)
Customer advances (170) | 26 478 (438)
Gas in underground storage 1,194 | 801 (1,681) (191)
Amortization of debt discounts, |
premiums and expenses 504 | (631) (790) (179)
CILCO Executive Deferred |
Compensation Plan (429) | (338) (671) (191)
CILCORP Shareholder Return |
Incentive Comp. Plan (694) | -- (717) --
QST gas derivatives mark to market -- | -- 948 --
Pension shortfall & VEBA (174) | (534) (252) 44
Other (187) | (604) 727 (677)
------- | -------- -------- -------
Total deferred income taxes, net (1,909) | (20,217) (10,419) (3,026)
------- | -------- -------- -------
Investment tax credit amortization (334) | (1,324) (1,668) (1,684)
------- | -------- -------- -------
Total income tax provisions |
Before extraordinary item (1,091) | 892 5,435 16,940
Deferred taxes related to |
extraordinary item -- | -- -- (5,634)
------- | -------- -------- -------
Total income tax provisions $(1,091) | $ 892 $ 5,435 $11,306
======= | ======== ======== =======
</TABLE>
72
Total income tax provisions are presented within the Income
Statement as follows:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Income taxes from continuing |
operations $ (951) | $1,113 $ 19,699 $22,349
Tax on income (loss) from |
operations of discontinued |
businesses (140) | (221) (16,278) (7,298)
Tax on gain (loss) on |
sale/disposal of discontinued |
businesses -- | -- 2,014 1,889
Deferred taxes related to |
extraordinary item -- | -- -- (5,634)
------- | ------ -------- -------
Total income tax provisions $(1,091) | $ 892 $ 5,435 $11,306
======= | ====== ======== =======
</TABLE>
The 1997 income tax provision has been reduced to reflect the
crediting to income as an extraordinary item the regulatory
liability related to electric generation property deferred taxes
which were recorded at tax rates in excess of the current rate.
Total deferred income taxes, net, includes deferred state income
taxes of $324,000, $(3,395,000), $(1,635,000), and $(229,000)
for the periods October 19, 1999, through December 31, 1999, and
January 1, 1999, through October 18, 1999, and the years 1998
and 1997, respectively.
73
The following table represents a reconciliation of the effective
tax rate with the statutory federal income tax rate.
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
<S> <C> <C> <C> <C>
Statutory federal income tax 35.0% | 35.0% 35.0% 35.0%
----- | ------ ----- -----
Amortization of property related |
deferred taxes provided at tax |
rates in excess of current rate (4.1) | 45.1 (8.3) (3.9)
Amortization of investment tax |
credit 18.2 | (113.1) (7.6) (6.1)
State income taxes 6.0 | (37.4) 5.5 9.0
Goodwill amortization and write-off (55.3) | -- -- 29.2
Amortization of Lincoln acquisition |
adjustment -- | 15.1 1.1 0.9
Preferred dividends of subsidiary and |
other permanent differences (9.5) | 73.0 4.7 2.7
Tax provision adjustment 37.9 | 79.2 -- (1.6)
Affordable housing tax credits 21.4 | (139.8) (6.1) (3.4)
Corporate-owned life insurance 11.0 | (74.4) (4.2) (2.9)
AES transaction costs (2.3) | 140.5 3.3 --
Lobbying expenses and nondeductible |
meals (6.9) | 24.6 2.5 1.8
Taxable salvage 1.7 | 7.8 (0.6) 0.7
Other differences 6.3 | 20.6 - (0.2)
----- | ----- ----- -----
Total 24.4 | 41.2 (9.7) 26.2
----- | ----- ----- -----
Effective income tax rate before |
effect of extraordinary item 59.4 | 76.2 25.3 61.2
Tax effect of extraordinary item -- | -- - (20.4)
----- | ----- ----- -----
Effective income tax rate 59.4% | 76.2% 25.3% 40.8%
===== | ===== ===== =====
</TABLE>
NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
In accordance with the purchase of CILCORP by AES on October 18,
1999, and as described in Management's Discussion and Analysis,
CILCORP's Balance Sheet amounts were adjusted to reflect market
values of the assets and liabilities, with corresponding
adjustments to goodwill. Adjustments were made to the balance
sheet amounts recognized for pension and postretirement health
care benefit costs, resulting in a reduction of the net liability
of those balance sheet amounts of $26.2 million. Following the
market value adjustments, the net periodic benefit costs were
actuarially calculated for the time period October 19 through
December 31, 1999, and appropriately included only the components
of service cost, interest cost and expected return on plan
assets.
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE
CILCO has recorded a liability of approximately $1.3 million and
$1.5 million at December 31, 1999, and 1998, respectively, for
benefits other than pensions or health care provided to former
or inactive employees. The liability for these benefits
(primarily long-term and short-term disability payments under
plans self-insured by CILCO) is actuarially determined.
74
PENSION BENEFITS
Substantially all of CILCO's full-time employees 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> Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Operating expenses $ (499) | $26,464 $ (893) $ 493
Utility plant and other -- | -- 6 125
------ | ------- ------- -------
Net pension costs (income) $ (499) | $26,464 $ (887) $ 618
====== | ======= ======= =======
</TABLE>
The components of net periodic benefit costs follow:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998
(In thousands)
<S> <C> <C> <C>
Service cost $ 900 |$ 3,821 $ 5,410
Interest cost 5,260 | 14,537 19,024
Expected return on plan assets (6,659) | (20,323) (25,304)
Amortization of transition asset -- | (666) (888)
Amortization of past service cost -- | 785 1,068
Recognized actuarial gain -- | (328) (197)
Loss recognized due to curtailment and |
special termination benefits -- | 28,638 --
------- |-------- --------
Net benefit cost (income) $ (499) |$ 26,464 $ (887)
======= |======== ========
</TABLE>
During 1999, CILCO recognized $28.6 million of net pension costs
associated with additional benefits extended in connection with
voluntary early retirement programs.
75
Information on the plans' funded status follows:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998
(In thousands)
<S> <C> <C> <C>
Change in Benefit Obligations |
Benefit obligation at begin. of period $ -- |$285,646 $254,929
Service cost 900 | 3,821 5,410
Interest cost 5,260 | 14,537 19,024
Acquisition 291,506 | -- --
Amendments -- | 31,774 --
Actuarial (gain) loss (9,473) | (29,792) 22,521
Benefits paid (7,040) | (14,098) (16,238)
-------- |-------- --------
Benefit obligation at end of period $281,153 |$291,888 $285,646
======== |======== ========
Change in Plan Assets |
Fair value of assets at |
beginning of period $ -- |$309,483 $289,091
Actual return on assets 46,713 | 11,230 36,467
Company contributions 93 | 134 163
Acquisition 306,749 | -- --
Benefits paid (7,040) | (14,098) (16,238)
-------- |-------- --------
Fair value of assets at end of period $346,515 |$306,749 $309,483
======== |======== ========
|
Funded status at end of period $ 65,362 |$ 14,861 $ 23,837
Unrecognized net transition asset -- | (3,345) (4,011)
Unrecognized actuarial gain (49,528) | (57,546) (35,875)
Unrecognized prior service cost -- | 6,560 6,365
-------- |-------- --------
Net amount recognized $ 15,834 |$(39,470)$ (9,684)
======== |======== ========
Amounts recognized in the statement of financial position
consist of:
Prepaid benefit cost/(Accrued
benefit liability) $ 15,834 |$(39,959)$(11,500)
Intangible asset -- | 264 415
Accumulated other comprehensive income -- | 225 1,401
-------- |-------- --------
Net amount recognized $ 15,834 |$(39,470)$ (9,684)
======== |======== ========
Assumptions as of end of period |
Discount rate 7.75% | 7.50% 6.75%
Expected return on plan assets 9.00% | 9.00% 9.00%
Rate of compensation increase 3.50% | 3.50% 3.50%
</TABLE>
At October 18, 1999, and December 31, 1998, CILCO recognized an
additional minimum liability on the Balance Sheets for a plan in
which the accumulated benefit obligation exceeds the fair value
of plan assets. The projected benefit obligation, accumulated
benefit obligation, and fair value of plan assets for the
pension plan with accumulated benefit obligations in excess of
plan assets were $4,481, $3,797, and $0, respectively, as of
December 31, 1999; $4,615, $3,911, and $0, respectively, as of
October 18, 1999; and $4,191, $3,582, and $0, respectively, as
of December 31, 1998.
76
POSTRETIREMENT HEALTH CARE BENEFITS
Substantially all of CILCO's full-time employees are currently
covered by a trusteed, 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>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Operating expenses $1,038 | $12,904 $3,904 $3,989
Utility plant and other 63 | 897 1,260 1,825
------ | ------- ------ ------
Net postretirement health care |
Benefit costs $1,101 | $13,801 $5,164 $5,814
====== | ======= ====== ======
</TABLE>
The components of net periodic benefit costs follow:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998
(In thousands)
<S> <C> <C> <C>
Service cost $ 382 |$ 1,515 $ 1,417
Interest cost 1,799 | 4,635 5,371
Expected return on plan assets (1,080) | (3,409) (4,388)
Amortization of transition liability -- | 2,144 2,858
Amortization of past service cost -- | -- --
Recognized actuarial gain -- | -- (94)
Loss recognized due to curtailment and |
special termination benefits -- | 8,916 --
------- |------- -------
Net benefit cost $ 1,101 |$13,801 $ 5,164
======= |======= =======
</TABLE>
During 1999, CILCO recognized $8.9 million of net postretirement
health care benefit costs associated with additional benefits
extended in connection with voluntary early retirement programs.
77
Information on the plans' funded status follows:
<TABLE>
<CAPTION>
Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18,
1999 1999 1998
(In thousands)
<S> <C> <C> <C>
Change in Benefit Obligations |
Benefit obligation at beginning of period $ -- |$ 82,316 $ 72,542
Service cost 382 | 1,515 1,417
Interest cost 1,799 | 4,635 5,371
Acquisition 98,654 | -- --
Amendments -- | 11,027 --
Actuarial (gain) loss (2,686)| 3,287 7,500
Benefits paid (1,670)| (4,032) (4,514)
-------- |-------- --------
Benefit obligation at end of period $ 96,479 |$ 98,748 $ 82,316
======== |======== ========
Change in Plan Assets |
Fair value of assets at begin. of period $ -- |$ 54,393 $ 52,263
Actual return on assets 5,242 | 291 5,781
Company contributions 1,121 | 30 863
Acquisition 50,682 | -- --
Benefits paid (1,670)| (4,032) (4,514)
-------- |-------- --------
Fair value of assets at end of period $ 55,375 |$ 50,682 $ 54,393
======== |======== ========
|
Funded Status at end of period $(41,104)|$(48,066)$(27,923)
Unrecognized net transition liability -- | 28,153 30,297
Unrecognized actuarial (gain) loss (6,848)| 1,739 (6,777)
Unrecognized prior service cost -- | -- --
-------- |-------- --------
Accrued benefit cost $(47,952)|$(18,174)$ (4,403)
======== |======== ========
Assumptions as of end of period |
Discount rate 7.75% | 7.50% 6.75%
Expected return on plan assets 9.00% | 9.00% 8.50%
</TABLE>
For measurement purposes, a 7.2 percent annual rate of increase
in the per capita cost of covered health care benefits was
assumed for 2000. The rate was assumed to decrease gradually to
5.0 percent for 2006 and remain level thereafter.
78
Assumed health care cost trend rates have a significant effect on
the amounts reported for health care plans. A one-percentage-
point change in assumed health care cost trend rates would have
the following effects (in thousands):
<TABLE>
<CAPTION>
1-Percentage-Point 1-Percentage-Point
Increase Decrease
----------------------- ---------------------
Oct. 19 to Jan. 1 to Oct. 19 to Jan. 1 to
Dec. 31, Oct. 18, Dec.31, Oct. 18,
1999 1999 1999 1999
<S> <C> <C> <C> <C>
Effect on total of service and | |
interest cost components $ 81 | $ 228 $ (98) | $ (217)
Effect on postretirement benefit | |
obligation $3,406 | $4,473 $(3,830) | $(3,920)
</TABLE>
NOTE 4 - SHORT-TERM DEBT
Short-term debt at December 31, 1999, consisted of $45.0 million
of Holding Company bank borrowings and $46.9 million of CILCO
commercial paper. Short-term debt at December 31, 1998,
included $55.6 million of Holding Company bank borrowings and
$40.6 million of CILCO commercial paper.
The Holding Company had arrangements for bank lines of credit
totaling $60 million at December 31, 1999, of which
$45.0 million was used. These lines were maintained by
commitment fees of 1/8 of 1% per annum in lieu of balances.
CILCO had arrangements for bank lines of credit totaling
$55 million, all of which were unused at December 31, 1999.
These lines of credit were maintained by commitment fees of .05
of 1% per annum for $35 million and .07 of 1% per annum for
$20 million in lieu of balances. These bank lines of credit
support CILCO's issuance of commercial paper.
79
NOTE 5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31 1999 1998
(In thousands)
<S> <C> <C>
CILCO first mortgage bonds |
7 1/2% series due 2007 $ 50,000 | $ 50,000
8 1/5% series due 2022 65,000 | 65,000
Medium-term notes |
6.4% series due 2000 -- | 30,000
6.82% series due 2003 25,350 | 25,350
6.13% series due 2005 16,000 | 16,000
7.8% series due 2023 10,000 | 10,000
7.73% series due 2025 20,000 | 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
-------- | --------
238,550 | 268,550
Unamortized premium and discount on |
long-term debt, net (616) | (666)
-------- | --------
Total CILCO $237,934 | $267,884
-------- | --------
|
CILCORP Senior Notes 8.7% due 2009 225,000 | --
CILCORP Senior Bonds 9.375% due 2029 250,000 | --
CILCORP Inc. Unsecured medium-term |
notes; various maturities in 2001; |
interest rates ranging from 8.52% |
to 9.10% 17,500 | 17,500
Other -- | 168
-------- | --------
Total long-term debt $730,434 | $285,552
======== | ========
</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 regulated
utility long-term debt are being amortized over the lives of the
respective issues.
Total consolidated maturities of long-term debt (exclusive of
"Other") for 2001-2003 are as follows: $17.5 million in 2001,
no debt due in 2002, and $25.4 million in 2003. The remaining
maturities of long-term debt of $688.2 million, occur in 2004
and beyond.
The 2000 and 1999 maturities of long-term borrowings have been
classified as current liabilities.
80
NOTE 6 - PREFERRED STOCK
PREFERRED STOCK OF SUBSIDIARY
<TABLE>
<CAPTION>
At December 31 1999 1998
(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 (*) 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>
(*) Dividend rates at December 31, 1999, and 1998, were 4.75%
and 4.04%, 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, 1999, is $3.3 million, assuming a
continuation of the auction dividend rate at December 31, 1999,
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, 1999, 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.
81
PREFERRED STOCK OF HOLDING COMPANY
Per the Articles of Amendment to the Articles of Incorporation
of CILCORP Inc., CILCORP Inc. no longer has preferred stock
authorized at the Holding Company. None of the previously
authorized 4,000,000, no par value, shares had been outstanding.
NOTE 7 - COMMITMENTS & CONTINGENCIES
CILCO's 2000 capital expenditures are estimated to be
$53.6 million in connection with which CILCO has normal and
customary purchase commitments at December 31, 1999.
CILCO acts as a self-insurer for certain insurable risks
resulting from employee health and life insurance programs.
The International Brotherhood of Electrical Workers Local 51
(IBEW) ratified its current agreement on October 10, 1997. The
contract expires on July 1, 2000. The IBEW represents
approximately 374 CILCO gas and electric department people. The
National Conference of Firemen and Oilers Local 8 (NCF&O)
ratified its current contract with the Company on October 23,
1998. The current contract expires on July 1, 2001. The NCF&O
represents approximately 177 CILCO power plant people.
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 amended 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 provides 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 had no capacity payment obligations to CIPS
for February through December 1999, resulting in 1999 capacity
reservation savings of approximately $6 million, compared to the
previous agreement. The settlement also obligates both parties
to withdraw from regulatory action pertaining to related
contract issues. On November 12, 1999, the settlement document
was filed with the FERC. FERC approval of the settlement was
received on February 10, 2000, and CILCO is receiving power from
CIPS in accordance with the terms of the agreement.
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.
82
NOTE 8 - 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, 1999, are $12.3 million in total. Payments due
during the years ending December 31, 2000, through December 31,
2004, are $4.8 million, $3.1 million, $2.1 million, $1.1 million
and $.7 million, respectively.
NOTE 9 - ACCOUNTING FOR PRICE RISK MANAGEMENT ACTIVITIES
CILCORP utilizes commodity futures contracts, options and swaps
in the normal course of its natural gas and electric business
activities to reduce market or price risk. 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 and electricity. 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 for the period January 1, 1999, through
October 18, 1999, was $577,600 for natural gas and $287,100 for
electricity. The net loss reflected in operating results from
derivative financial instruments for the period October 19, 1999,
through December 31, 1999, was approximately $8,000 for natural
gas and $0 for electricity.
As of December 31, 1999, CILCORP had fixed-price derivative
financial instruments representing hedges of natural gas
purchases of .5 Bcf and natural gas sales of 1.0 Bcf for
commitments through February 2000. The net deferred loss and
carrying amount on these fixed-price derivatives at December 31,
1999, was approximately $134,000. At December 31, 1999, CILCORP
had open positions in derivative financial instruments used to
hedge natural gas basis of .4 Bcf for commitments through March
2000. The net deferred gain on these basis derivatives at
December 31, 1999, was approximately $4,000.
As of December 31, 1999, CILCORP had fixed-price derivative
financial instruments representing hedges of electricity
purchases of 31,648 megawatts and electricity sales of
83,904 megawatts for commitments through August 2000. The net
deferred loss and carrying amount on these fixed-price
derivatives at December 31, 1999, was approximately $1.2 million.
83
NOTE 10 - IMPACT OF ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133). 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. The statement establishes accounting and reporting
standards for derivative instruments and for hedging activities.
It requires that an entity recognize all derivatives (including
certain derivative instruments embedded in other contracts) as
either assets or liabilities on the balance sheet and measure
those instruments at fair value. Changes in the derivative's
fair value are to be recognized currently in earnings, unless
specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains or losses to
offset related results of the hedged item in the income
statement and requires that a company must formally document,
designate, and assess the effectiveness of transactions that
receive hedge accounting.
SFAS 133 cannot be applied retroactively. SFAS 133 must be
applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts. With respect to
hybrid instruments, a company may elect to apply SFAS 133, as
amended, to (1) all hybrid contracts, (2) only those hybrid
instruments that were issued, acquired, or substantively
modified after December 31, 1997, or (3) only those hybrid
instruments that were issued, acquired, or substantively
modified after December 31, 1998.
The fair value of these derivatives would be recognized as
assets or liabilities on the balance sheet, consistent with the
current accounting treatment for certain freestanding
derivatives. The Company has not yet quantified the other
effects on the financial statements of adopting SFAS 133. The
final adoption could increase volatility in earnings and other
comprehensive income. CILCORP continues to analyze the effects
of adoption of the rules promulgated by SFAS 133. The Company
is in the process of preparing a comprehensive inventory of all
derivatives that will be subject to disclosure under SFAS 133
and developing procedures for the determination and valuation of
hedge relationships that may exist, and their effectiveness.
84
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 the Company'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>
1999 Jan. 1 April 1 July 1 Oct. 1 Oct. 19
For the Periods to to to to to
March 31 June 30 Sept. 30 Oct.18 Dec. 31
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenue $168,238 $120,267 $155,531 $ 16,225 $120,589
Income (loss) from continuing
operations before income
taxes 18,656 2,150 (4,604) (14,402) (1,483)
Income taxes 6,049 1,066 (2,247) (3,755) (951)
Net income (loss) from
continuing operations 12,607 1,084 (2,357) (10,647) (532)
Gain (loss) from operations of
discontinued business,
net of tax of $45, $(266),
$(140) 28 (435) -- -- (213)
Net income (loss) $ 12,635 $ 649 $ (2,357)$(10,647)$ (745)
1998
For the Three Months Ended March 31 June 30 Sept. 30 Dec. 31
Revenue $154,314 $121,762 $140,896 $142,196
Income from continuing
operations before income
taxes 17,566 10,254 29,019 1,078
Income taxes 6,250 2,519 10,982 (52)
Net income (loss) from
continuing operations 11,316 7,735 18,037 1,130
Loss from operations of
discontinued business,
net of tax of $(2,355),
$(5,512), $(2,354), $(6,057) (3,622) (8,423) (3,620) (9,360)
Gain (loss) on sale/disposal
of assets of discontinued
business, net of tax of
$5,425, $(3,411) -- -- 8,252 (5,135)
Net income (loss) $ 7,694 $ (688) $ 22,669 $(13,365)
</TABLE>
85
NOTE 12 - RETAINED EARNINGS
The Bond Indenture for CILCORP's 8.7% (due 2009) and 9.375% (due
2029) senior notes provides that CILCORP may pay dividends or
make other distributions on its capital stock only if it has an
assigned rating on its long-term secured debt of at least BB+
from Standard & Poor's, at least Baa2 from Moody's and at least
BBB from Duff & Phelps. If the assigned ratings are lower,
CILCORP must satisfy a leverage ratio and an interest coverage
ratio test of .67 to 1 and 2.0 to 1, respectively.
NOTE 13 - LEVERAGED LEASE INVESTMENTS
The Company, through subsidiaries of CILCORP Investment
Management Inc. (CIM), is a lessor in eight 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
$350 million at December 31, 1999, and 1998.
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
$227 million at December 31, 1999, and $232 million at
December 31, 1998. Leveraged lease residual value assumptions,
which are conservative in relation to independently appraised
residual values of the lease portfolio, are tested on a periodic
basis. (In 1998, CIM decreased the estimated residual value of
one of its leases by approximately $6.8 million to reflect
current conditions in the secondary market for the asset.)
CIM's net investment in leveraged leases at December 31, 1999,
and 1998, is shown below:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Minimum lease payments receivable $132,255 | $142,094
Estimated residual value 87,557 | 87,557
Less: Unearned income 76,115 | 82,674
-------- | --------
Investment in lease financing receivables 143,697 | 146,977
Less: Deferred taxes arising from |
leveraged leases 105,625 | 103,566
-------- | --------
Net investment in leveraged leases $ 38,072 | $ 43,411
======== | ========
</TABLE>
NOTE 14 - QST ENTERPRISES DISCONTINUED OPERATIONS
(See Management's Discussion and Analysis of Financial Condition
and Results of Operations - QST Enterprises Discontinued
Operations.)
86
NOTE 15 - CILCORP SHAREHOLDER RETURN INCENTIVE COMPENSATION PLAN
Under the Company's Shareholder Return Incentive Compensation
Plan (the Plan), eligible key employees of the Company and its
subsidiaries were entitled to receive shares of the Company's
common stock based on a performance methodology established and
periodically amended by the Compensation Committee of the
Company's Board of Directors. During 1997, 350,000 fully-vested
performance shares were distributed. Such shares were
convertible into common stock with the number of shares received
based upon the number of performance shares exercised multiplied
by the difference between the average market price of the
Company's common stock for the fifteen days prior to exercise
and $36, divided by the market price of common stock at the
exercise date.
The compensation expense recognized under this Plan, based on
the provisions of Statement of Financial Accounting Standards
No. 123, (SFAS 123) was $1.8 million in 1997 when the
performance shares were distributed. These shares were
convertible into common stock at any time until December 31,
1998, (the Performance Period). The fair value of each
performance share granted under the Plan was $5.98 - estimated
using the Black-Scholes option-pricing model assuming a risk-
free interest rate of 5.7%, dividend yield of 5.9%, expected
life of one year and volatility of 16.1%.
In 1998, the Performance Period for the originally granted
performance shares was extended to December 31, 1999. No
additional expense was recorded following this extension, as a
revaluation of the fair value of the performance shares per the
provisions of SFAS 123 yielded no material valuation difference
due to the one-year extension.
To the extent that the market price exceeded $56, the Plan
participants were entitled to receive cash in lieu of common
stock. Consequently, the Company recognized expense of $1.75
million in the fourth quarter 1998 to reflect a share price
approximating $61.
In August 1999, one of the Plan's participants exercised his
right to convert his performance shares to common stock and
received 15,000 shares of CILCORP common stock representing the
difference between $56 and $36 multiplied by 42,000 performance
shares divided by $56 per share, and $232,000 in cash,
representing the difference between $56 and the market price at
the time of exercise.
Pursuant to the terms of the merger agreement, the acquisition of
CILCORP Inc. by AES triggered the Company's obligation to
compensate the remaining three individuals included under the
Plan who had not converted their performance shares into common
stock. Consequently, the Company recognized additional
compensation expense of $4.9 million in 1999, prior to the
acquisition date. These three individuals received or otherwise
deferred compensation of $8.9 million in the fourth quarter of
1999 (including amounts expensed by the Company prior to 1999),
representing the difference between $65 and $36 multiplied by the
remaining 308,000 performance shares.
NOTE 16 - EARNINGS PER SHARE
The AES Corporation (AES) completed the acquisition of CILCORP
Inc. and its subsidiaries (the Company) on October 18, 1999. As
a wholly-owned subsidiary of AES, the Company will no longer
present earnings per share information as part of its financial
statement disclosures.
87
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.
P. D. Stinson
President
T. D. Hutchinson
Controller and Chief
Financial Officer
88
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of 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, 1999, and 1998, 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, 1999. 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 auditing standards
generally accepted in the United States. 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, 1999, and 1998, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
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
January 28, 2000
89
Central Illinois Light Company
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended December 31 1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Operating Revenues:
Electric $372,714 $360,009 $338,096
Gas 180,760 172,327 208,758
-------- -------- --------
Total Operating Revenues 553,474 532,336 546,854
-------- -------- --------
Operating Expenses:
Cost of Fuel 77,748 94,490 92,230
Cost of Gas 99,293 93,586 123,531
Purchased Power 60,251 29,568 22,851
Other Operations and Maintenance 153,885 118,707 109,833
Depreciation and Amortization 66,686 65,273 61,505
Income Taxes 11,276 25,088 29,317
State and Local Taxes on Revenue 26,930 26,502 22,467
Other Taxes 13,335 11,407 11,808
-------- -------- --------
Total Operating Expenses 509,404 464,621 473,542
-------- -------- --------
Operating Income 44,070 67,715 73,312
-------- -------- --------
Other Income and Deductions:
Cost of Equity Funds Capitalized -- -- 35
CILCO-owned Life Insurance, Net (1,037) (1,013) (1,177)
Other, Net (558) 274 (256)
-------- -------- --------
Total Other Income & (Deds.) (1,595) (739) (1,398)
-------- -------- --------
Income Before Interest Expenses 42,475 66,976 71,914
-------- -------- --------
Interest Expenses:
Interest on Long-term Debt 19,234 19,498 20,024
Cost of Borrowed Funds Capitalized (158) (34) (99)
Other 4,150 3,277 2,622
-------- -------- --------
Total Interest Expenses 23,226 22,741 22,547
-------- -------- --------
Net Income Before Extraordinary
Item & Preferred Dividends 19,249 44,235 49,367
Extraordinary Item -- -- 4,100
-------- -------- --------
Net Income Before Pref. Dividends 19,249 44,235 53,467
Dividends on Preferred Stock 3,208 3,194 3,216
-------- -------- --------
Net Inc. Available for Common Stk.$ 16,041 $ 41,041 $ 50,251
-------- -------- --------
Other Comprehensive Income 785 (169) (317)
Comprehensive Income $ 16,826 $ 40,872 $ 49,934
======== ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
90
<TABLE>
Central Illinois Light Company
Consolidated Balance Sheets
Assets
<CAPTION>
As of December 31 1999 1998
(In thousands)
<S> <C> <C>
Utility Plant, At Original Cost:
Electric $1,263,190 $1,237,885
Gas 431,887 417,585
---------- ----------
1,695,077 1,655,470
Less-Accum. Provision for Depr. 870,566 812,630
---------- ----------
824,511 842,840
Construction Work in Progress 38,068 30,075
Plant Acquisition Adjustments, Net of
Amortization -- 505
---------- ----------
Total Utility Plant 862,579 873,420
---------- ----------
Other Property and Investments:
Cash Surrender Value of Company-owned
Life Insurance (Net of Related
Policy Loans of
$53,558 in 1999 and $48,132 in 1998) 3,106 2,655
Other 1,179 1,176
---------- ----------
Total Other Property and Invest. 4,285 3,831
---------- ----------
Current Assets:
Cash and Temporary Cash Investments 8,548 1,362
Receivables, Less Reserves
of $1,296 and $1,106 42,410 35,767
Accrued Unbilled Revenue 35,071 31,315
Fuel, at Average Cost 14,392 13,431
Materials and Supplies, at Avg. Cost 15,967 15,062
Gas in Underground Storage, at
Average Cost 21,196 20,494
Prepaid Taxes 6,165 2,265
FAC Underrecoveries 12,024 --
Other 8,854 6,626
---------- ----------
Total Current Assets 164,627 126,322
---------- ----------
Deferred Debits:
Unamortized Loss on Reacquired Debt 2,941 3,261
Unamortized Debt Expense 1,552 1,852
Prepaid Pension Cost 259 417
Other 20,037 15,325
---------- ----------
Total Deferred Debits 24,789 20,855
---------- ----------
Total Assets $1,056,280 $1,024,428
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
91
<TABLE>
Central Illinois Light Company
Consolidated Balance Sheets
Capitalization and Liabilities
<CAPTION>
As of December 31 1999 1998
(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
Additional Paid in Capital 27,000 --
Retained Earnings 121,564 135,315
Accumulated Other Comprehensive Income (60) (845)
---------- ----------
Total Common Shareholder's Equity 334,165 320,131
Preferred Stock Without Mandatory
Redemption 44,120 44,120
Preferred Stock With Mandatory Redemption 22,000 22,000
Long-term Debt 237,934 267,884
---------- ----------
Total Capitalization 638,219 654,135
---------- ----------
Current Liabilities:
Current Maturities of Long-Term Debt 30,000 --
Notes Payable 46,900 40,600
Accounts Payable 35,859 53,260
Accrued Taxes 25,520 7,303
Accrued Interest 9,485 9,394
PGA Over-Recoveries 127 304
Level Payment Plan 956 1,519
Other 4,714 5,261
---------- ----------
Total Current Liabilities 153,561 117,641
---------- ----------
Deferred Liabilities and Credits:
Accumulated Deferred Income Taxes 136,077 141,746
Regulatory Liability 31,367 46,346
Investment Tax Credits 17,792 19,450
Capital Lease Obligation 1,183 1,703
Other 78,081 43,407
---------- ----------
Total Deferred Liabilities and Credits 264,500 252,652
---------- ----------
Total Capitalization and Liabilities $1,056,280 $1,024,428
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
92
<TABLE>
Central Illinois Light Company
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31 1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Before Extraordinary Item
And Preferred Dividends $ 19,249 $ 44,235 $ 49,367
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation and Amortization 67,191 65,986 62,217
Deferred Taxes, Investment Tax
Credits and Regulatory Liability,
Net (22,307) (7,690) (6,585)
Decrease(Increase) in Accounts
Receivable (6,643) 8,328 (946)
(Increase)Decrease in Fuel,
Materials and Supplies, and Gas
in Underground Storage (2,569) (5,368) 3,372
Increase in Unbilled Revenue (3,756) (67) (369)
Increase(Decrease) in Accounts
Payable (17,400) 8,416 (1,282)
Increase(Decrease) in Accrued Taxes
and Interest 18,308 4,870 (4,947)
Capital Lease Payments 645 645 645
(Increase)Decrease in Other Current
Assets (18,152) (1,372) 3,331
Decrease in Other Current Liabilities (1,288) (1,627) (458)
(Increase)Decrease in Other
Non-Current Assets (1,913) 2,328 6,372
Increase in Other Non-Current
Liabilities 34,403 3,571 1,273
-------- -------- --------
Net Cash Provided by Operating
Activities 65,768 122,255 111,990
-------- -------- --------
Cash Flows from Investing Activities:
Capital Expenditures (55,135) (67,102) (55,026)
Cost of Equity Funds Capitalized -- -- (35)
Other (3,081) (5,817) (5,950)
-------- -------- --------
Net Cash Used in Investing
Activities (58,216) (72,919) (61,011)
-------- -------- --------
Cash Flows from Financing Activities:
Common Dividends Paid (29,813) (53,483) (39,482)
Preferred Dividends Paid (3,208) (3,194) (3,216)
Long-Term Debt Retired -- (10,650) (20,000)
Payments on Capital Lease Obligation (645) (645) (645)
Increase(Decrease) in Short-Term
Borrowing 6,300 19,300 11,400
Additional Paid in Capital 27,000 -- --
-------- -------- --------
Net Cash Provided from (Used in)
Financing Activities (366) (48,672) (51,943)
-------- -------- --------
93
Net Increase(Decrease) in Cash and
Temporary Cash Investments 7,186 664 (964)
Cash and Temporary Cash Investments at
Beginning of Year 1,362 698 1,662
-------- -------- --------
Cash and Temporary Cash Investments at
December 31 $ 8,548 $ 1,362 $ 698
======== ======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (Net of Cost of Borrowed
Funds Capitalized) $ 23,870 $ 23,200 $ 24,148
Income Taxes $ 19,308 $ 30,421 $ 37,907
<FN>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of these statements.
</TABLE>
94
<TABLE>
Central Illinois Light Company
Statements of Segments of Business
<CAPTION>
1999
CILCO CILCO CILCO Total
Electric Gas Other CILCO
(In thousands)
<S> <C> <C> <C> <C>
Revenues $372,714 $180,760 $ 5,399 $ 558,873
Interest Income -- -- 225 225
-------- -------- ------- ----------
Total 372,714 180,760 5,624 559,098
-------- -------- ------- ----------
Operating Expenses 278,497 152,945 8,578 440,020
Depreciation and
Amortization 47,070 19,616 505 67,191
-------- -------- ------- ----------
Total 325,567 172,561 9,083 507,211
-------- -------- ------- ----------
Interest Expense 16,743 6,641 -- 23,384
Preferred Stock Div. -- -- 3,208 3,208
Fixed Charges and Other
Expenses (157) (1) 1,037 879
-------- -------- ------- ----------
Total 16,586 6,640 4,245 27,471
-------- -------- ------- ----------
Income from Continuing
Operations Before
Income Taxes 30,561 1,559 (7,704) 24,416
Income Taxes 10,440 836 (2,901) 8,375
-------- -------- ------- ----------
Segment Net Income $ 20,121 $ 723 $(4,803)$ 16,041
======== ======== ======= ==========
Capital Expenditures $ 38,985 $ 16,150 $ -- $ 55,135
Revenue from major
customer
Caterpillar Inc. $ 38,758 $ 1,119 $ 513 $ 40,390
Segment Assets $759,399 $291,833 $ 5,048 $1,056,280
</TABLE>
95
<TABLE>
<CAPTION>
1998
CILCO CILCO CILCO Total
Electric Gas Other CILCO
(In thousands)
<S> <C> <C> <C> <C>
Revenues $360,009 $172,327 $ 1,864 $ 534,200
Interest Income -- -- 251 251
-------- -------- -------- ----------
Total 360,009 172,327 2,115 534,451
-------- -------- -------- ----------
Operating Expenses 235,801 138,459 3,744 378,004
Depreciation and
Amortization 46,017 19,256 713 65,986
-------- -------- -------- ----------
Total 281,818 157,715 4,457 443,990
-------- -------- -------- ----------
Interest Expense 16,261 6,514 -- 22,775
Preferred Stock Div. -- -- 3,194 3,194
Fixed Charges and Other
Expenses (34) -- 1,013 979
-------- -------- -------- ----------
Total 16,227 6,514 4,207 26,948
-------- -------- -------- ----------
Income from Continuing
Operations Before
Income Taxes 61,964 8,098 (6,549) 63,513
Income Taxes 21,645 3,443 (2,616) 22,472
-------- -------- -------- ----------
Segment Net Income $ 40,319 $ 4,655 $ (3,933)$ 41,041
======== ======== ======== ==========
Capital Expenditures $ 44,213 $ 22,889 $ -- $ 67,102
Revenue from major
customer
Caterpillar Inc. $ 39,354 $ 948 $ 88 $ 40,390
Segment Assets $735,436 $283,920 $ 5,072 $1,024,428
</TABLE>
96
<TABLE>
<CAPTION>
1997
CILCO CILCO CILCO Total
Electric Gas Other CILCO
(In thousands)
<S> <C> <C> <C> <C>
Revenues $338,096 $208,758 $ 272 $ 547,126
Interest Income -- -- 266 266
-------- -------- -------- ----------
Total 338,096 208,758 538 547,392
-------- -------- -------- ----------
Operating Expenses 217,700 165,020 3,130 385,850
Depreciation and
Amortization 43,858 17,647 713 62,218
-------- -------- -------- ----------
Total 261,558 182,667 3,843 448,068
-------- -------- -------- ----------
Interest Expense 16,192 6,454 -- 22,646
Preferred Stock Div. -- -- 3,216 3,216
Fixed Charges and Other
Expenses (134) -- 1,177 1,043
-------- -------- -------- ----------
Total 16,058 6,454 4,393 26,905
-------- -------- -------- ----------
Income from Continuing
Operations Before
Income Taxes 60,480 19,637 (7,698) 72,419
Income Taxes 21,901 7,416 (3,049) 26,268
-------- -------- -------- ----------
Income from Continuing
Operations before
Extraordinary Item 38,579 12,221 (4,649) 46,151
Extraordinary Item 4,100 -- -- 4,100
-------- -------- -------- ----------
Segment Net Income $ 42,679 $ 12,221 $ (4,649)$ 50,251
======== ======== ======== ==========
Capital Expenditures $ 35,196 $ 19,830 $ -- $ 55,026
Revenue from major
customer
Caterpillar Inc. $ 40,106 $ 934 $ -- $ 41,040
Segment Assets $725,725 $291,291 $ 5,639 $1,022,655
</TABLE>
97
<TABLE>
Central Illinois Light Company
Consolidated Statements of Retained Earnings
<CAPTION>
For the Years Ended December 31 1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Balance Beginning of Year $134,470 $147,081 $136,629
Add:
Other 20 -- --
Net Income Before Preferred Dividends 19,249 44,235 53,467
-------- -------- --------
Total 153,739 191,316 190,096
-------- -------- --------
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 1,287
Auction Rate Series (rate at
December 31, 1999 was 4.75%) 1,049 1,035 1,057
Common Stock, No Par Value 29,812 53,483 39,482
-------- -------- --------
Total Dividends Declared 33,020 56,677 42,698
-------- -------- --------
Additional Minimum Liability for
Non-Qualified Pension Plan at
December 31, 1999, 1998, and 1997
net of taxes of $516, $(111) and
$(208), respectively (785) 169 317
-------- -------- --------
32,235 56,846 43,015
-------- -------- --------
Balance End of Year $121,504 $134,470 $147,081
======== ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
98
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 1999 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 (ICC) and the Federal Energy Regulatory
Commission (FERC) with respect to accounting matters, and
maintains its accounts in accordance with the Uniform System of
Accounts prescribed by these agencies.
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) for certain of its
regulated public utility operations. Under SFAS 71, assets and
liabilities are recorded to represent probable future increases
and decreases, respectively, of revenues to CILCO resulting from
the ratemaking action of regulatory agencies.
The Electric Service Customer Choice and Rate Relief Law of 1997
(Customer Choice Law) became effective in Illinois in December
1997. Among other provisions, this law begins a nine-year
transition process to a fully competitive market for electricity
in Illinois. Electric transmission and distribution activities
are expected to continue to be regulated, but a customer may
choose to purchase electricity from another supplier (see Item 1.
Business - Competition).
The Customer Choice Law contains many other provisions affecting
how CILCO will or may conduct its business in the future. The
Customer Choice Law also requires the ICC to promulgate rules
pertaining to various matters, including accounting and
recordkeeping requirements, electric reliability standards, and
affiliated interest rules. CILCO will adapt its business plans
to take advantage of the competitive opportunities afforded by
the new law.
99
Due to the Customer Choice Law, CILCO's electric generation
activities are no longer subject to the provisions of SFAS 71.
Accordingly, regulatory assets of $1.5 million and liabilities of
$5.6 million associated with electric generating plant were
written-off or credited, respectively, to income in 1997 as a net
$4.1 million after-tax extraordinary item. Regulatory assets
included on the Consolidated Balance Sheets at December 31, 1999,
and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Included in prepayments and other:
Fuel and gas cost adjustments $15,614 $ 4,740
Coal tar remediation cost-estimated current 720 609
------- -------
Current costs included in prepayments and
other 16,334 5,349
------- -------
Included in other assets:
Coal tar remediation cost, net of recoveries 674 1,281
Regulatory tax asset 7,334 5,723
Deferred gas costs 4,368 4,039
Unamortized loss on reacquired debt 2,941 3,261
------- -------
Future costs included in other assets 15,317 14,304
------- -------
Total regulatory assets $31,651 $19,653
======= =======
</TABLE>
Regulatory assets at December 31, 1999, are related to CILCO's
regulated electric and gas distribution activities. Regulatory
liabilities, consisting of deferred tax items primarily related
to CILCO's electric and gas transmission and distribution
operations, are approximately $31.4 million and $46.3 million at
December 31, 1999, and 1998, respectively.
100
CILCO's electric generation-related identifiable assets included
in the balance sheet at December 31, 1999, and 1998 were:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Property, Plant and Equipment $ 538,316 $ 537,358
Less: Accumulated Depreciation (284,201) (266,461)
--------- ---------
254,115 270,897
Construction Work in Progress 9,215 3,268
--------- ---------
Net Property, Plant and Equipment 263,330 274,165
Fuel, at Average Cost 14,392 13,431
Materials and Supplies, at Average Cost 9,901 9,189
--------- ---------
Total Identifiable Electric Generation
Assets $ 287,623 $ 296,785
========= =========
</TABLE>
Accumulated deferred income taxes associated with electric
generation property at December 31, 1999, and 1998 were
approximately $61 million and $72 million, respectively.
UTILITY OPERATING REVENUES, FUEL COSTS AND COST OF GAS
Electric and gas revenues include service provided but unbilled
at year end. Substantially all electric energy 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. For further discussion, refer to
the caption, "Electric Fuel and Purchased Gas Adjustment Clauses"
of Item 1. Business.
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, 1999, CILCO had net receivables of $42.4 million, of
which approximately $1.2 million was due from its major customer.
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. Also, beginning in 1997,
CILCO sold natural gas to its affiliate CESI, in conjunction with
CESI's gas marketing program. 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
101
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
$14.0 million, $11.6 million, and $7.5 million in 1999, 1998, and
1997, 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 1999,
1998, and 1997 were 5.9%, 5.9%, and 7.2%, 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 will file a consolidated federal income tax return
with AES. 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.
102
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>
1999 1998
(In thousands)
<S> <C> <C>
Cash surrender value of contracts $ 56,664 $ 50,786
Borrowings against contracts (53,558) (48,132)
-------- --------
Net investment $ 3,106 $ 2,654
======== ========
</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 $4 million, $3.6 million,
and $3.5 million for 1999, 1998, and 1997, respectively.
103
NOTE 2 - INCOME TAXES
CILCO uses 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 has recorded a regulatory asset and liability
to account for the 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 AFUDC and other items for which
deferred taxes had not previously been provided. The temporary
differences related to the consolidated deferred income tax asset
and liability at December 31, 1999, 1998, and 1997 were as
follows:
<TABLE>
<CAPTION>
December 31 1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Deferred Tax Assets:
Deferred Tax Asset $ 26,036 $ 20,307 $ 16,752
Adjustment to reflect regulatory asset (7,334) (5,723) (7,578)
-------- -------- --------
Net deferred tax asset $ 18,702 $ 14,584 $ 9,174
======== ======== ========
Deferred Tax Liabilities:
Deferred Tax Liability-property $194,267 $201,872 $205,777
Adjustment to reflect regulatory
liability (31,367) (46,346) (56,807)
-------- -------- --------
Net Deferred Tax Liability-property 162,900 155,526 148,970
Deferred Tax Liability-other (8,121) 804 (522)
-------- -------- --------
Accumulated Deferred Income Tax
Liability $154,779 $156,330 $148,448
======== ======== ========
Accumulated Deferred Income Tax
Liab., net of deferred tax assets $136,077 $141,746 $139,274
======== ======== ========
</TABLE>
The following table reconciles the change in the accumulated
deferred income tax liability to the deferred income tax expense
included in the income statement for the period:
104
<TABLE>
<CAPTION>
December 31 1999 1998
(In thousands)
<S> <C> <C>
Net change in deferred income tax liability
per above table $ (5,669) $ 2,472
Change in tax effects of income tax related
regulatory assets and liabilities (16,590) (8,606)
Deferred taxes related to extraordinary item -- --
Other (516) 111
-------- --------
Deferred income tax expense (benefit) for
the period $(22,775) $ (6,023)
======== ========
</TABLE>
Income tax expenses were as follows:
<TABLE>
<CAPTION>
Years Ended December 31 1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Current income taxes
Federal $ 29,615 $26,278 $29,244
State 5,805 6,260 6,350
-------- ------- -------
Total operating current taxes 35,420 32,538 35,594
-------- ------- -------
Deferred oper. income taxes, net
Depreciation and amortization (1,089) (955) (6,080)
Repair allowance (1,121) 158 1,384
Borrowed component of AFUDC (3) 37 80
Capitalized overhead costs (789) (783) (807)
Removal costs (6,444) (3,189) 2,515
Gas take-or-pay settlements 40 522 (339)
Gas storage field 1,996 (1,681) (191)
Taxable salvage 394 599 220
Environmental remediation costs 317 55 46
Pension expense (9,925) 869 (1,798)
Other (5,862) (1,415) 377
-------- ------- -------
Total operating deferred income
taxes, net (22,486) (5,783) (4,593)
Investment tax credit amortization (1,658) (1,667) (1,684)
-------- ------- -------
Total operating income taxes 11,276 25,088 29,317
Income tax reduction for
disallowed plant costs 123 133 144
Other, net (3,023) (2,749) (3,192)
-------- ------- -------
Total income taxes before
extraordinary item 8,376 22,472 26,269
Deferred taxes related to
extraordinary item -- -- (5,634)
-------- ------- -------
Total income taxes $ 8,376 $22,472 $20,635
======== ======= =======
</TABLE>
105
The 1997 income tax provision has been reduced to reflect the
crediting to income as an extraordinary item the regulatory
liability related to electric generation property deferred taxes
which were recorded at tax rates in excess of the current rate
(see Note 1).
Total operating deferred income taxes, net, includes deferred
state income taxes of $(3,162,000), $(848,000), and $(65,000) for
1999, 1998, and 1997, respectively. Other, net, includes
deferred state income taxes of $(52,000), $(43,000), and
$(18,000) for 1999, 1998, and 1997, respectively.
The following table represents a reconciliation of the effective
tax rate with the statutory federal income tax rate:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
==== ==== ====
Equity component of AFUDC not subject to
taxation -- -- --
Amortization of property-related deferred
taxes provided at tax rates in excess of
the current rate 2.8 (2.7) (1.4)
Amortization of investment tax credit (6.8) (2.6) (2.4)
CILCO-owned life insurance (4.4) (1.4) (1.1)
State income taxes 0.7 5.2 5.0
Preferred dividends and other permanent
differences 6.0 2.1 2.1
Other differences 1.0 (0.1) (0.2)
---- ---- ----
Total (0.7) 0.5 2.0
---- ---- ----
Effective income tax rate before effect of
extraordinary item 34.3 35.5 37.0
Tax effect of extraordinary item -- -- (7.9)
---- ---- ----
Effective income tax rate 34.3% 35.5% 29.1%
==== ==== ====
</TABLE>
106
NOTE 3 - POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE
CILCO has recorded a liability of approximately $1.3 million and
$1.5 million at December 31, 1999, and 1998, respectively, for
benefits other than pensions or health care provided to former
or inactive employees. The liability for these benefits
(primarily long-term and short-term disability payments under
plans self-insured by CILCO) is actuarially determined.
PENSION BENEFITS
Substantially all of CILCO's full-time employees 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>
1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Operating expenses $25,544 $(893) $493
Utility plant and other -- 6 125
------- ----- ----
Net pension costs (income) $25,544 $(887) $618
======= ===== ====
</TABLE>
The components of net periodic benefit costs follow:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Service cost $ 4,721 $ 5,410
Interest cost 19,797 19,024
Expected return on plan assets (26,982) (25,304)
Amortization of transition asset (888) (888)
Amortization of past service cost 1,049 1,068
Recognized actuarial gain (791) (197)
Loss recognized due to curtailment and
special termination benefits 28,638 --
-------- --------
Net benefit cost (income) $ 25,544 $ (887)
======== ========
</TABLE>
During 1999, CILCO recognized $28.6 million of net pension costs
associated with additional benefits extended in connection with
voluntary early retirement programs.
107
Information on the plans' funded status follows:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Change in Benefit Obligations
Benefit obligation at January 1, $ 285,646 $254,929
Service cost 4,721 5,410
Interest cost 19,797 19,024
Amendments 31,774 --
Actuarial (gain) loss (39,647) 22,521
Benefits paid (21,138) (16,238)
--------- --------
Benefit obligation at December 31, $ 281,153 $285,646
========= ========
Change in Plan Assets
Fair value of assets at January 1, $ 309,483 $289,091
Actual return on assets 57,943 36,467
Company contributions 227 163
Benefits paid (21,138) (16,238)
--------- --------
Fair value of assets at December 31, $ 346,515 $309,483
========= ========
Funded Status at December 31, $ 65,362 $ 23,837
Unrecognized net transition asset (3,123) (4,011)
Unrecognized actuarial gain (106,991) (35,875)
Unrecognized prior service cost 6,295 6,365
--------- --------
Net amount recognized $ (38,457) $ (9,684)
========= ========
Amounts recognized in the statement of financial position
consist of:
Accrued benefit liability $ (38,813) $(11,500)
Intangible asset 257 415
Accumulated other comprehensive income 99 1,401
--------- --------
Net amount recognized $ (38,457) $ (9,684)
========= ========
Assumptions as of December 31,
Discount rate 7.75% 6.75%
Expected return on plan assets 9.00% 9.00%
Rate of compensation increase 3.50% 3.50%
</TABLE>
At December 31, 1999, and 1998, CILCO recognized an additional
minimum liability on the Balance Sheets for a plan in which the
accumulated benefit obligation exceeds the fair value of plan
assets. The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension plan
with accumulated benefit obligations in excess of plan assets
were $4,481, $3,797, and $0, respectively, as of December 31,
1999, and $4,191, $3,582, and $0, respectively, as of
December 31, 1998.
108
POSTRETIREMENT HEALTH CARE BENEFITS
Substantially all of CILCO's full-time employees are currently
covered by a trusteed, 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>
1999 1998 1997
(In thousands)
<S> <C> <C> <C>
Operating expenses $14,656 $3,904 $3,989
Utility plant and other 960 1,260 1,825
------- ------ ------
Net postretirement health care
benefit costs $15,616 $5,164 $5,814
======= ====== ======
</TABLE>
The components of net periodic benefit costs follow:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Service cost $ 1,896 $ 1,417
Interest cost 6,434 5,371
Expected return on plan assets (4,488) (4,388)
Amortization of transition liability 2,858 2,858
Amortization of past service cost -- --
Recognized actuarial gain -- (94)
Loss recognized due to curtailment and
special termination benefits 8,916 --
------- -------
Net benefit cost $15,616 $ 5,164
======= =======
</TABLE>
During 1999, CILCO recognized $8.9 million of net postretirement
health care benefit costs associated with additional benefits
extended in connection with voluntary early retirement programs.
109
Information on the plans' funded status follows:
<TABLE>
<CAPTION>
1999 1998
(In thousands)
<S> <C> <C>
Change in Benefit Obligations
Benefit obligation at January 1, $ 82,316 $ 72,542
Service cost 1,896 1,417
Interest cost 6,434 5,371
Amendments 11,027 --
Actuarial loss 508 7,500
Benefits paid (5,702) (4,514)
-------- --------
Benefit obligation at December 31, $ 96,479 $ 82,316
======== ========
Change in Plan Assets
Fair value of assets at January 1, $ 54,393 $ 52,263
Actual return on assets 5,533 5,781
Company contributions 1,151 863
Benefits paid (5,702) (4,514)
-------- --------
Fair value of assets at December 31, $ 55,375 $ 54,393
======== ========
Funded Status at December 31, $(41,104) $(27,923)
Unrecognized net transition liability 27,439 30,297
Unrecognized actuarial gain (5,203) (6,777)
Unrecognized prior service cost -- --
-------- --------
Accrued benefit cost $(18,868) $ (4,403)
======== ========
Assumptions as of December 31,
Discount rate 7.75% 6.75%
Expected return on plan assets 9.00% 8.50%
</TABLE>
For measurement purposes, a 7.2 percent annual rate of increase
in the per capita cost of covered health care benefits was
assumed for 2000. The rate was assumed to decrease gradually to
5.0 percent for 2006 and remain level thereafter.
Assumed health care cost trend rates have a significant effect on
the amounts reported for health care plans. A one-percentage-
point change in assumed health care cost trend rates would have
the following effects (in thousands):
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and
interest cost components $ 309 $ (377)
Effect on postretirement benefit
obligation $3,406 $(3,830)
</TABLE>
110
NOTE 4 - SHORT-TERM DEBT
CILCO had arrangements for bank lines of credit totaling
$55 million at December 31, 1999, all of which were unused.
These lines of credit were maintained by commitment fees of .05
of 1% per annum for $35 million and .07 of 1% per annum for
$20 million in lieu of balances. These bank lines of credit
support CILCO's issuance of commercial paper. Short-term
borrowings consisted of commercial paper totaling $46.9 million
and $40.6 million at December 31, 1999, and 1998, respectively.
NOTE 5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31 1999 1998
(In thousands)
<S> <C> <C>
First Mortgage Bonds
7 1/2% series due 2007 $ 50,000 $ 50,000
8 1/5% series due 2022 65,000 65,000
Medium-Term Notes
6.4% series due 2000 -- 30,000
6.82% series due 2003 25,350 25,350
6.13% series due 2005 16,000 16,000
7.8% series due 2023 10,000 10,000
7.73% series due 2025 20,000 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
-------- --------
238,550 268,550
Unamortized premium and discount on
long-term debt, net (616) (666)
-------- --------
Total CILCO long-term debt $237,934 $267,884
======== ========
</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 are $25.4 million for 2003
and $16 million for 2005. There are no scheduled maturities of
long-term debt for 2001 or 2002. The remaining maturities of
long-term debt of $197.2 million occur in 2007 and beyond.
111
NOTE 6 - PREFERRED STOCK
<TABLE>
<CAPTION>
At December 31 1999 1998
(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 (*) 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>
(*) Dividend rates at December 31, 1999, and 1998, were 4.75% and 4.04%,
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, 1999, is $3.3 million, assuming a
continuation of the auction dividend rate at December 31, 1999,
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, 1999, 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.
112
NOTE 7 - COMMITMENTS & CONTINGENCIES
For a discussion of CILCO commitments and contingencies, refer to
Note 7 of the CILCORP Inc. Notes to the Consolidated Financial
Statements contained herein.
NOTE 8 - LEASES
CILCO leases certain equipment, buildings and other facilities
under capital and operating leases. Minimum future rental
payments under non-cancellable capital and operating leases
having remaining terms in excess of one year as of December 31,
1999, are $11.5 million in total. Payments due during the years
ending December 31, 2000, through December 31, 2004, are $4.4
million, $2.7 million, $2.1 million, $1.1 million and $.7
million, respectively.
NOTE 9 - ACCOUNTING FOR PRICE RISK MANAGEMENT ACTIVITIES
CILCO utilizes commodity futures contracts, options and swaps in
the normal course of its natural gas and electric business
activities to reduce market or price risk. 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 and electricity. CILCO 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
CILCO 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 loss reflected in operating results from derivative
financial instruments was $264,800 for gas and a gain of $287,100
for electric for the year 1999. As of December 31, 1999, CILCO
had fixed-price derivative financial instruments representing
hedges of natural gas purchases of .5 Bcf and natural gas sales
of .3 Bcf for commitments through February 2000. The net
deferred loss and carrying amount on these fixed-price
derivatives at December 31, 1999, was $160,400. At December 31,
1999, CILCO had open positions in derivative financial
instruments used to hedge natural gas basis of .2 Bcf for
commitments through February 2000. The net deferred gain on
these basis derivatives at December 31, 1999, was approximately
$4,000.
As of December 31, 1999, CILCO had fixed-price derivative
financial instruments representing hedges of electricity
purchases of 31,648 megawatts and electricity sales of 83,904
megawatts for commitments through August 2000. The net deferred
loss and carrying amount on these fixed-price derivatives at
December 31, 1999, was approximately $1.2 million.
NOTE 10 - IMPACT OF ACCOUNTING STANDARDS
For a discussion of New Accounting Pronouncements which may
impact CILCO, refer to Note 10 of the CILCORP Inc. Notes to the
Consolidated Financial Statements contained herein.
113
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 Sept. 30 Dec. 31
(In thousands)
<S> <C> <C> <C> <C>
1999
Operating revenue $157,759 $113,613 $151,545 $130,557
Operating income 18,784 9,768 6,063 9,455
Net income 12,507 3,683 (339) 3,398
1998
Operating revenue $149,080 $116,614 $136,506 $130,136
Operating income 18,324 14,593 24,815 9,983
Net income 12,316 8,929 19,064 3,926
</TABLE>
NOTE 12 - 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, 1999, was $6.7 million.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
CILCORP
Not applicable.
CILCO
Not applicable.
114
PART III
Item 10. Directors and Executive Officers of the Registrant
CILCORP
CILCORP Directors
Mark A. Ferrucci
Director of CILCORP since 1999
Mr. Ferrucci is 47 years old and graduated from Delaware
Technical and Community College in 1973 with a major in
Accounting. He is employed by The Corporation Trust Company in
Wilmington, Delaware, where he prepares and files charter
documents for corporations in the State of Delaware and
throughout the United States. Mr. Ferrucci is also responsible
for maintaining the good standing of corporations, including
preparing and filing their annual reports and franchise tax
returns as well as other corporate functions. Mr. Ferrucci has
been with the Corporation Trust Company since 1977. CILCORP's
bylaws require that one of its directors be independent and not
be affiliated with The AES Corporation. The AES Corporation has
an agreement with The Corporation Trust Company to provide such
an independent director, and Mr. Ferrucci provides CILCORP its
independent director. Mr. Ferrucci also is a director of other
publicly traded companies, including public utilities.
Paul D. Stinson
Director of CILCORP since 1999
Mr. Stinson is 43 years old and received a B.S. degree in
Chemical Engineering from Texas A&M University in 1979. He
joined The AES Corporation in 1986. In 1993, Mr. Stinson became
plant manager of the 700 megawatt Medway Power Station in
England. In 1997, he became manager of AES's Silk Road Group
where he was responsible for business development and operations
in the countries of the former Soviet Union. In April 1999, Mr.
Stinson became manager of the new AES Great Plains Group formed
in the Central United States. Also in 1999, Mr. Stinson assumed
the responsibilities of president and director of both CILCORP
and CILCO.
Thomas A. Tribone
Director of CILCORP since 1999
Mr. Tribone is 47 years old and is currently executive vice
president of The AES Corporation, which is CILCORP's parent
company. Prior to his election as executive vice president in
1998, he had been senior vice president of AES since 1990. Mr.
Tribone leads AES Americas, a group responsible for power
marketing, project development, construction and plant operations
in the northern portions of South America including much of
Brazil. From 1987 to 1990 he served as vice president for
project development, and from 1985 to 1987 he served as project
director of AES Shady Point.
CILCORP Officers
The information required by Item 10 relating to CILCORP officers
is set forth in Item 4, Executive Officers of CILCORP, in this 10-K.
115
CILCO
The information required by Item 10 relating to directors is set
forth in CILCO's definitive proxy statement for its 2000 Annual
Meeting of Stockholders, to be filed soon 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.
116
Item 11. Executive Compensation
CILCORP
Executive Compensation
The following table sets forth the annual and long-term
compensation earned for the years 1999, 1998 and 1997 for the
former Chairman and Chief Executive Officer, the current
President, two highly compensated executive officers and two
former executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Other Securities All
Annual Underlying LTIP Other
Name and Comp. Options Payouts Comp.
Principal Position Year Salary($) Bonus($) ($) (#)(1) ($)(2) ($)(3)
- - - - ------------------ ---- --------- -------- --- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul D. Stinson (4) 1999 185,000 175,000 71,892 7,369 -- 15,966
President 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Scott A. Cisel (5) 1999 135,954 53,394 -- 1,318 -- 55,736
Vice President 1998 133,000 65,208 -- -- -- 5,749
1997 131,375 -- -- -- 92,513 5,491
Robert J. Sprowls 1999 150,997 57,661 -- 1,867 -- 57,625
Vice President (6) 1998 150,177 100,000 -- -- -- 8,985
1997 135,916 65,000 -- -- 61,428 8,369
Robert O. Viets (7) 1999 491,460 84,795 -- -- -- 6,097,871
Former Chairman, 1998 432,292 -- -- -- 251,345 42,334
President and Chief 1997 406,423 -- -- -- 61,272 37,817
Executive Officer
William M. Shay (8) 1999 215,867 42,488 -- -- -- 1,745,957
Former Senior Vice 1998 217,458 -- -- -- 203,651 29,856
President 1997 207,737 -- -- -- 66,497 26,844
James F. Vergon (9) 1999 212,387 42,488 -- -- -- 1,731,456
Former Senior Vice 1998 210,002 -- -- -- 197,664 18,506
President 1997 207,738 -- -- -- 65,616 16,831
</TABLE>
(1) The number of options shown as compensation as of December
31, 1999, were for services rendered for 1999. Stock options
were awarded in November of 1999 to Mr. Cisel and Mr. Sprowls,
and stock options were awarded to Messrs. Stinson, Cisel and
Sprowls by the Compensation Committee of the AES Board of
Directors in February of 2000.
(2) LTIP payments reported previously include payments made to
Messrs. Cisel, Sprowls, Viets, Shay and Vergon pursuant to
CILCORP Inc.'s EVAr-Based Incentive Compensation Plan. For
Messrs. Cisel and Sprowls, the Plan was terminated in 1997. For
Messrs. Viets, Shay and Vergon, the Plan was terminated in 1998.
117
(3) For Mr. Stinson, this column reports contributions to The AES
Corporation's Profit-Sharing and Stock Ownership Plan and the
Employee Stock Ownership Plan of AES and allocations to AES's
Supplemental Retirement Plan. Specifically, for Mr. Stinson
in 1999, the amount contributed to the AES Profit-Sharing and
Stock Ownership Plan and Employee Stock Ownership Plan was
$8,782, and the amount allocated to the Supplemental
Retirement Plan was $7,184. For Messrs. Viets, Cisel,
Sprowls, Shay and Vergon, amounts shown in this column
represent employer contributions to the CILCO Employees'
Savings Plan and earnings on deferred compensation. For the
CILCO Employees' Savings Plan, the amounts contributed in
1999 were as follows: Mr. Viets $4,800; Mr. Shay $4,800; Mr.
Vergon $4,800; Mr. Sprowls $4,321; and Mr. Cisel $4,300. For
Messrs. Viets, Shay and Vergon, this column also includes
compensation paid or entitled to be received in 1999 from the
CILCORP Shareholder Return Incentive Compensation Plan. The
Plan was terminated in 1999 and all compensation from the
Plan was paid pursuant to the merger agreement among The AES
Corporation, CILCORP and Midwest Energy Inc. as follows: Mr.
Viets $5,510,000; Mr. Shay $1,711,000; and Mr. Vergon
$1,711,000. For Mr. Viets, this column also includes
$536,250 paid in 1999 upon liquidation of his account under
the Company's deferred compensation stock plans. For Messrs.
Cisel and Sprowls, this column also includes a $50,000
payment in 1999 which was made pursuant to the merger among
AES, CILCORP and Midwest Energy Inc.
(4) Mr. Stinson is a vice president of The AES Corporation,
which owns all the outstanding common stock of CILCORP Inc.
CILCORP owns all the common stock of Central Illinois Light
Company. Mr. Stinson is president of both CILCO and CILCORP. In
that Mr. Stinson also provides services to The AES Corporation,
his salary is allocated among CILCO, CILCORP and AES. Mr.
Stinson's salary is determined by The AES Corporation.
(5) Mr. Cisel is a vice president of CILCORP and a vice
president of CILCO. Mr. Cisel's compensation is determined by
CILCO except for Securities Underlying the Options, which is
determined by The AES Corporation.
(6) Mr. Sprowls is a vice president of CILCORP and is also a
vice president of CILCO. Mr. Sprowls' compensation is determined
by CILCO except for Securities Underlying the Options, which is
determined by The AES Corporation.
(7) Mr. Viets' compensation related to his position as president
and chief executive officer of CILCORP. He was also chairman,
president and chief executive officer of CILCO until his
resignation on October 18, 1999, the effective date of the merger
among The AES Corporation, CILCORP Inc. and Midwest Energy Inc.
Mr. Viets retired from CILCO on November 30, 1999.
(8) Mr. Shay served as senior vice president of CILCO until his
resignation on October 18, 1999, the effective date of the merger
among The AES Corporation, CILCORP Inc. and Midwest Energy Inc.
Mr. Shay left the employment of CILCO on October 31, 1999.
(9) Mr. Vergon served as senior vice president of CILCO until
his resignation on October 18, 1999, the effective date of the
merger among The AES Corporation, CILCORP Inc. and Midwest Energy
Inc. Mr. Vergon retired from CILCO on October 31, 1999.
118
Option Grants in Last Fiscal Year
The following table provides information on options granted for
1999 to the named executive officers.
<TABLE>
<CAPTION>
% of Total
Number of Options
Securities Granted
Underlying to all AES Exercise
Options People or Base Grant Date
Name and Granted for Fiscal Price Expiration Present Value
Principal Position (#) (1) Year ($/Sh) Date ($) (2)
- - - - ------------------ ------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Paul D. Stinson 7,369 .29% 72.63 02/04/10 350,027
Scott A. Cisel 560 .03% 57.94 11/30/09 21,706
758 .03% 72.63 02/04/10 36,005
Robert J. Sprowls 642 .03% 57.94 11/30/09 24,884
1,225 .05% 72.63 02/04/10 58,188
</TABLE>
(1) All options are for shares of Common Stock of The AES
Corporation. Options granted for services performed in 1999 were
granted at the fair market value on the date of grant, and vest
at the rate of 50% per year through December 2001.
(2) The Black-Scholes stock option pricing model was used to
value the stock options on the grant dates (February 4, 2000 and
November 30, 1999). AES's assumptions under this model include
an expected volatility of 46.76%, a 6.63% risk free rate of
return, no dividends, and a vesting adjustment of 4.5%. The
options have 10 year terms and vest at 50% per year. No
adjustments were made for non-transferability or risk of
forfeiture.
The use of such amounts and assumptions are not intended to
forecast any possible future appreciation of AES's stock price
or dividend policy.
119
Aggregated Option Exercises in Last Fiscal Year, and Fiscal
Year-End Option Value
The following table provides information on option exercises in
1999 by the named executive officers and the value of such
officers' unexercised options at December 31, 1999.
<TABLE>
<CAPTION>
Number of Dollar
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Number of Options at Options at
Shares Dollar FY-End FY-End
Acquired on Value Exercisable/ Exercisable/
Exercise Realized (1) Unexercisable Unexercisable (2)
-------- ------------ ------------- -----------------
<S> <C> <C> <C> <C>
Paul D. Stinson 13,814 763,454 93,695/ 5,277,382/
11,111 449,996
Scott A. Cisel -- -- 0/ 0/
560 9,415
Robert J. Sprowls -- -- 0/ 0/
642 10,793
</TABLE>
(1) The amounts in this column have been calculated based upon
the difference between the fair market value of the securities
underlying each stock option on the date of exercise and its
exercise price.
(2) The amounts in this column have been calculated based on the
difference between the fair market value on December 31, 1999, of
$74.75 per share for each security underlying such stock option
and the per share exercise price.
120
Management Continuity Agreements
The Company, with the approval of the Board of Directors, entered
into management continuity agreements with Mr. Sprowls and Mr.
Cisel. The agreements provide that, in the event of a change in
control of CILCORP Inc. (as defined in the agreement) and a
subsequent termination of employment within two years of the
change in control, CILCORP Inc., or its successor, is obligated
to pay termination benefits for a period of up to two years. As a
result of the change in control of CILCORP Inc. pertaining to its
merger with The AES Corporation on October 18, 1999, the two-year
period following said change in control will expire on October
17, 2001. Termination benefits include the continuation of
salary, incentive compensation and certain employee benefits.
Under the agreement, compensation and benefits are payable for a
period not to exceed two years and termination must be
involuntary or due to material changes in the terms of
employment.
Certain Plans
Benefit Replacement Plan. The Board of Directors has established
a Benefit Replacement Plan (the "Benefit Replacement Plan"). The
Benefit Replacement Plan provides for payments to participants
from the Company's general funds to restore the retirement
benefit under the Company's non-contributory Pension Plan for
Management, Office and Technical Employees (the "Pension Plan")
when such benefit is restricted by (1) the maximum defined
benefit limitation of Section 415(b) of the Internal Revenue Code
of 1986, as amended (the "Code"), (2) the indexed compensation
limitation of Code Section 401(a)(17), and (3) participation in
certain of the Company's deferred compensation plans. The
Benefit Replacement Plan generally covers all Pension Plan
participants affected by these restrictions and provides for
payment at the times and in the forms of the Pension Plan.
Pension Plan. Pension benefits are provided through the Pension
Plan. Pension benefits are determined using a formula based on
years of service and highest average rate of monthly earnings for
any sixty consecutive month period. The normal retirement age
specified in the Pension Plan is age 65. Retirement between the
ages of 55 and 62 results in an appropriate reduction in pension
benefits.
121
The following table shows the aggregate annual benefits payable
on a straight life annuity basis upon retirement at normal
retirement age under the Pension Plan and under the Benefit
Replacement Plan discussed above. The amounts shown are not
subject to any deduction for Social Security benefits or other
offset amounts other than that for an optional survivorship
provision.
Pension Plan Table
Years of Service
<TABLE>
<CAPTION>
Remuneration 15 years 20 years 25 years 30 years 35 years
------------ -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C>
$200,000 42,750 57,000 71,250 85,500 99,750
225,000 48,096 64,128 80,160 96,192 112,224
250,000 53,442 71,250 89,064 106,878 124,692
275,000 58,781 78,375 97,969 117,563 137,156
300,000 64,128 85,500 106,878 128,250 149,628
400,000 85,500 114,000 142,500 171,000 199,500
500,000 106,878 142,500 178,128 213,715 249,378
</TABLE>
The sum of annual and long-term compensation shown for the
individuals listed in the above Summary Compensation Table is
substantially compensation as covered by the Pension Plan and the
Benefit Replacement Plan. At January 2000, the credited years of
service under the Pension Plan for such individuals are as
follows: R. O. Viets - 26 years, R. J. Sprowls - 18 years, S.A.
Cisel - 25 years, W.M. Shay - 17 years, J. F. Vergon - 28 years.
Mr. Stinson does not participate in the Pension Plan.
Report on Executive Compensation
Compensation Prior to the Merger. Prior to the closure of the
merger, the compensation of the Company's chief executive officer
was determined by the Board of Directors of CILCORP Inc. The
compensation of all other executive officers of the Company was
determined by CILCO's Board of Directors. The compensation
policies with respect to the executive officers were as follows:
1. Compensation levels should be established which are
internally fair and equitable, bearing in mind (a) past
practices, patterns and relationships, and (b) the
relationship between officer level compensation and the
compensation provided for top level managers throughout
the Company.
2. Compensation should be comparable and reasonable in
relation to similar positions in other utility companies
of like size, structure and characteristics.
3. Compensation of the executive officers should be
directly related to the economic value created for
shareholders.
4. A compensation program should be designed to attract and
retain superior management.
Pre-Merger Compensation. Robert O. Viets served as president and
chief executive officer of CILCORP Inc. in addition to serving
as chairman and chief executive officer of CILCO until the
effective date of the Merger on October 18, 1999. His
compensation in his capacities as an officer of both companies
was determined by the Board of Directors of CILCORP upon
recommendation of its Compensation Committee. The Board of
Directors of CILCO endorsed and adopted the recommendation and
determination for 1999 of
122
the CILCORP Board of Directors and its Compensation Committee
whereby Mr. Viets was awarded a salary of $453,200 commencing
April 1, 1999, representing an increase of 3.0% over his prior
salary level. The increase was determined on the basis of the
corporate-wide payroll increase authorized by the Merger
Agreement among AES, CILCORP and Midwest Energy, Inc. dated as
of November 22, 1998. The Agreement limited the aggregate
annual increase in the payroll of CILCORP and its subsidiaries
to 3%.
Post-Merger Compensation. The Company's current executive
officer compensation program is modeled after The AES
Corporation compensation program.
The guidelines for compensation of executive officers are
designed by The AES Corporation (AES) to provide fair and
competitive levels of total compensation while integrating pay
with performance. Executive officers are evaluated annually on
the basis of both individual responsibilities and contributions,
as well as AES company-wide results in two related areas: (i)
corporate culture (or principles) and (ii) business or functional
area performance.
There are three elements in AES's executive officer compensation
program, which is consistent with how most people who work for
AES are compensated. These elements are base salary, annual
incentive compensation and stock option program.
Base salary is adjusted annually to account for general economic
and cost of living changes. Adjustments are also made
periodically to recognize significant new or additional
responsibilities of individual executive officers. The
guidelines provide base salary compensation generally consistent
with AES's interpretation of industry averages for individuals
with similar responsibility levels.
Annual incentive compensation is based upon both objective and
subjective measures in the areas of corporate culture and
business or functional area performance, and generally takes the
form of bonuses payable after year-end. With respect to
corporate culture, AES's shared principles of fairness,
integrity, fun and social responsibility are integral to its
operations and serve as its founding principles. These
principles apply equally to the internal activities of AES as
well as its external relationships. Each executive officer's
individual contribution to demonstrating and nurturing these
shared values is reviewed and considered as a factor in
determining annual incentive compensation. Evaluations in this
area are inherently subjective.
The second area considered in the determination of annual
incentive compensation is the individual executive officer's
performance with respect to his or her related business
responsibilities and/or functional area. Although all aspects
of an individual's responsibilities are considered in
determining annual incentive compensation, several quantitative
measures of annual performance are considered significant,
including operating margin improvements, operating reliability,
earnings per share contributions, environmental performance, and
plant and AES company-wide safety. The qualitative factors
considered significant include business and project development
progress, effective strategic planning and implementation, AES
company-wide support, understanding of and adherence to AES's
values, and community relations and people development.
123
Important strategic successes or failures can take several years
to translate into objectively measurable results. Annual
incentive compensation is not computed using a mathematical
formula of pre-determined performance goals and objective
criteria. As a result, the ultimate determination of the amount,
if any, of annual incentive compensation is made at the end of
each year based on a subjective evaluation of several
quantitative and qualitative factors, with primary emphasis given
this year to those factors listed in the preceding paragraph.
There are no targeted, minimum or maximum levels of annual
incentive compensation, and such compensation does not
necessarily bear any consistent relationship to salary amounts or
total compensation.
The AES stock option program is used to reward people for the
corporate responsibilities they undertake, their performance of
those duties and to help them to think and act like owners. All
executive officers and approximately 51% of the total people in
the AES company located in the United States participate in this
program. Historically, because of differing legal environments
in many countries, options had been primarily granted to U.S.
people. However, AES has taken steps to incorporate those
people who reside outside of the United States into this program
by qualifying its stock option plan in each country where AES
people currently reside or work, and AES expects the total
participation to increase in the future. Stock options are
usually granted annually at the fair market value on the date of
grant and provide vesting periods to reward people for continued
service to AES. The determination of the number of options to
be granted to executive officers is based upon the same factors
as such officer's annual incentive compensation discussed above,
with additional consideration given to the number of options
previously granted.
Since 1994, AES has participated in an annual survey conducted by
an outside consulting firm which encompasses over 400 public
companies. Based in part on the survey results, guidelines were
established for suggested ranges of option grants to executive
officers as well as the rest of the people at AES. Based on the
survey, the guidelines were established at ranges for eligible
participants between the 50th and 90th percentile of similar
companies. As with annual incentive compensation, the
determination of an individual's grant is subjective and,
although AES has established suggested guidelines, the grants are
not formula-based.
Total compensation is reviewed to determine whether amounts are
competitive with other companies whose operations are similar in
type, size and complexity with those of AES, as well as a broad
range of similarly sized companies. Comparisons are made with
published amounts, where available, and, from time to time, AES
also participates in various industry-sponsored compensation
surveys in addition to the public-company survey described above.
AES also has, in the past, engaged an independent compensation
consultant to specifically review the level and appropriateness
of executive officer compensation. Other than as described
above, AES uses the results of surveys, when available, for
informational purposes only and does not target individual
elements of or total compensation to any specific range of survey
results (i.e., high, low or median) other than the suggested
guidelines for stock option grants as discussed in the previous
paragraph. Because each individual's compensation is determined,
in part, by experience and performance, actual compensation
generally varies from industry averages.
Executive officers also participate in AES's profit sharing plan
(or deferred compensation plan for executive officers) on the
same terms as all other people at AES, subject to any legal
limitations on amounts that may be contributed or benefits that
may be payable under the plan. Matching contributions and
annual profit sharing contributions are made with the common
stock of AES to further encourage long-term performance. In
addition, certain individuals at AES participate in AES's
supplemental retirement plan,
124
which provides supplemental retirement benefits to "highly
compensated employees" (as defined in the Internal Revenue Code)
of any amount which would be contributed on such individual's
behalf under the profit sharing plan (or the deferred
compensation plan for executive officers) but is not so
contributed because of the limitations contained in the Internal
Revenue Code.
In most cases, AES has taken steps to qualify income paid to any
officer as a deductible business expense pursuant to regulations
issued by the Internal Revenue Service pursuant to Section 162(m)
of the Internal Revenue Code with respect to qualifying
compensation paid to executive officers in excess of $1 million.
Compensation earned pursuant to the exercise of options granted
under AES's former stock option plan (which was discontinued in
1991) is not considered for purposes of the $1 million aggregate
limit, and exercises under the 1991 Plan are similarly excluded.
AES will continue to consider the implications of qualifying all
compensation as a deductible expense under Section 162 (m), but
retains the discretion to pay bonuses commensurate with an
executive officer's contributions to the success to AES,
irrespective of whether such amounts are entirely deductible.
CILCO
CILCO will soon file 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
(1)Title of class (2)Name and (3)Amount and (4)Percent of class
address of nature of
beneficial owner beneficial
ownership
Common The AES Corporation 1,000 shares* 100%
1001 North 19th St.
Arlington, VA 22209
*The AES Corporation acquired all of the common stock of CILCORP
in 1999.
CILCO
CILCO will soon file 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.
125
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), and QST Enterprises Inc. (QST). 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.
CILCORP has been authorized by the Board of Directors to
guarantee up to $30 million of obligations incurred by QST
(excluding QST Environmental). Through December 31, 1999,
CILCORP guaranteed $12.5 million of the obligations of QST
(excluding QST Environmental). CILCORP received a fee for
providing these guarantees. This guarantee expired in January
2000.
CIM had outstanding debt of $31.4 million (all to the Holding
Company) at the end of 1999.
Through December 31, 1999, CIM has paid $15.3 million to fund
affordable housing commitments, $1.3 million of which was paid
during 1999. CIM funded these commitments with cash borrowed
from the Holding Company.
CIM has guaranteed the performance of CIM Leasing Inc., CIM Air
Leasing Inc. and CLM Inc. VI (a second tier subsidiary) with
respect to certain obligations arising from the leveraged lease
investments held by these subsidiaries.
CILCO
One member of the Board of Directors of CILCORP Inc. is also a
member of the Board of Directors of CILCO. The President, four
of the Vice Presidents, the Controller and Chief Financial
Officer, and Treasurer of CILCORP serve in the same positions as
officers of CILCO.
126
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
CILCORP
Page No.
Form 10-K
---------
(a) 1. Financial Statements
The following statements are included herein:
Management's Report 52
Report of Independent Public Accountants 53
Consolidated Statements of Income for the periods
October 19, 1999, through December 31, 1999, and
January 1, 1999, through October 18, 1999, and the
years ended December 31, 1998 and 1997 54-55
Consolidated Balance Sheets as of
December 31, 1999, and December 31, 1998 56-57
Consolidated Statements of Cash Flows for the periods
October 19, 1999, through December 31, 1999, and
January 1, 1999, through October 18, 1999, and the
years ended December 31, 1998 and 1997 58-59
Consolidated Statements of Segments of Business for
the periods October 19, 1999, through December 31,
1999, and January 1, 1999, through October 18, 1999,
and the years ended December 31, 1998 and 1997 60-63
Consolidated Statements of Common Stockholders' Equity
for the periods October 19, 1999, through December
31, 1999, and January 1, 1999, through October 18,
1999, and the years ended December 31, 1998
and 1997 64-65
Notes to the Consolidated Financial Statements 66-87
(a) 2. Financial Statement Schedules
The following schedules are included herein:
Schedule II - Valuation and Qualifying Accounts
and Reserves 131
Schedule XIII -Investment in Leveraged Leases at
December 31, 1999 133
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.
127
(a) 3. Exhibits
(3) Articles of Incorporation as amended effective
November 15, 1999.
(3)a By-laws as amended and restated effective October 18, 1999.
* (4) Indenture, dated as of October 18, 1999, between Midwest Energy, Inc.
and The Bank of New York, as Trustee; First Supplemental Indenture,
dated as of October 18, 1999, between CILCORP Inc. and The Bank of
New York. (Designated in registration statement Form S-4 filed
by CILCORP on November 4, 1999, as exhibits 4.1 and 4.2.)
**(4)a Instruments defining the rights of security holders.
(10) CILCO Executive Deferral Plan. As amended effective
August 15, 1999.
(10)a CILCO Executive Deferral Plan II. As amended effective
April 1, 1999.
(10)b CILCO Benefit Replacement Plan (as amended effective
August 15, 1999).
*(10)c Management Continuity Agreement between CILCORP and
various subsidiary officers [Designated in Form 10-K for
the year ended December 31, 1998, File No. 1-8946, as
Exhibit 10(h)].
*(10)d CILCO Compensation Protection Plan [Designated in Form 10-K
for the year ended December 31, 1998, File No. 1-8946,
as Exhibit 10(i)].
(10)e CILCO Restructured Executive Deferral Plan (approved
August 15, 1999).
Page No.
Form 10-K
----------
(12) Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends 136
(23) Consent of Arthur Andersen LLP 139
(24) Power of Attorney 140
(27) CILCORP Inc. Consolidated Financial Data Schedule
(b) 3. Reports on Form 8-K
A Form 8-K was filed on November 2, 1999, regarding
the completion on October 18, 1999, of the merger
transaction pursuant to the Agreement and Plan of Merger
between CILCORP Inc. and The AES Corporation.
* 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.
128
CILCO
Page No.
Form 10-K
----------
(a) 1. Financial Statements
The following are included herein:
Management's Report 88
Report of Independent Public Accountants 89
Consolidated Statements of Income for the three years
ended December 31, 1999 90
Consolidated Balance Sheets as of December 31, 1999,
and December 31, 1998 91-92
Consolidated Statements of Cash Flows for the three
years ended December 31, 1999 93-94
Consolidated Statements of Segments of Business for
the three years ended December 31, 1999 95-97
Consolidated Statements of Retained Earnings for the
three years ended December 31, 1999 98
Notes to the Consolidated Financial Statements 99-114
(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, 1999 132
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 April 28, 1998.
(3) a Bylaws. As amended effective April 1, 1999.
*(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-
129
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. 1-2732, as
Exhibit (4).)
(10) CILCO Executive Deferral Plan. As amended
effective August 15, 1999.
(10)a CILCO Executive Deferral Plan II. As amended
effective April 1, 1999.
(10)b Benefit Replacement Plan (as amended effective
April 1, 1999).
*(10)c Management Continuity Agreement between CILCORP and various
subsidiary officers. [Designated in Form 10-K for the year ended
December 31, 1998, File No. 1-2732, as Exhibit 10(g).]
*(10)d CILCO Compensation Protection Plan. [Designated in Form 10-K for
the year ended December 31, 1998, File No. 1-2732, as Exhibit 10(h).]
(10)e CILCO Restructured Executive Deferral Plan (approved August 15, 1999).
Page No.
Form 10-K
---------
(12) Computation of Ratio of Earnings to Fixed Charges 137
(24) Power of Attorney 141
(27) Central Illinois Light Company Financial Data
Schedule
(b) 3. Reports on Form 8-K
None
* 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.
130
<TABLE>
SCHEDULE II
CILCORP INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts and Reserves
Periods October 19 through December 31, 1999, and January 1 through
October 18, 1999, and the Years Ended December 31, 1998, and 1997
(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>
Period from October 19, 1999
through December 31, 1999
Accumulated Provisions
Deducted from Assets-
Doubtful Accounts $1,810 $ (449) $ -- $ 65 $1,296
Accumulated Provisions
Not Deducted from Assets-
Injuries and Damages 1,926 27 -- 555 1,398
Discontinued Operations
Reserve -- 500 -- -- 500
Period from January 1, 1999
through October 18, 1999
Accumulated Provisions
Deducted from Assets-
Doubtful Accounts $3,411 $1,916 $ -- $3,517 $1,810
Accumulated Provisions
Not Deducted from Assets-
Injuries and Damages 1,602 482 -- 158 1,926
Discontinued Operations
Reserve 8,581 -- -- 8,581 --
Year ended December 31, 1998
Accumulated Provisions
Deducted from Assets-
Doubtful Accounts $2,518 $3,356 $ -- $2,463 $3,411
Accumulated Provisions
Not Deducted from Assets-
Injuries and Damages 1,210 768 -- 376 1,602
Discontinued Operations
Reserve -- 8,581 -- -- 8,581
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets-
Doubtful Accounts $2,600 $2,867 $ -- $2,949 $2,518
Accumulated Provisions
Not Deducted from Assets-
Injuries and Damages 1,381 814 -- 985 1,210
</TABLE>
131
<TABLE>
SCHEDULE II
CENTRAL ILLINOIS LIGHT COMPANY
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1999, 1998, and 1997
(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, 1999
Accumulated Provisions
Deducted from Assets-
Doubtful Accounts $1,106 $1,467 $ -- $1,277 $1,296
Accumulated Provisions
Not Deducted from Assets-
Injuries and Damages 1,602 509 -- 713 1,398
Year ended December 31, 1998
Accumulated Provisions
Deducted from Assets-
Doubtful Accounts $ 703 $2,500 $ -- $2,097 $1,106
Accumulated Provisions
Not Deducted from Assets-
Injuries and Damages 1,210 768 -- 376 1,602
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets-
Doubtful Accounts $1,000 $2,438 $ -- $2,735 $ 703
Accumulated Provisions
Not Deducted from Assets-
Injuries and Damages 1,381 814 -- 985 1,210
</TABLE>
132
<TABLE>
SCHEDULE XIII
CILCORP INC. AND SUBSIDIARY COMPANIES
Investment in Leveraged Leases
<CAPTION>
Year Ended December 31, 1999
(Thousands of dollars)
Amount
Cost of each carried on
lease(A) Balance Sheet(B)
<S> <C> <C>
Office buildings $23,130 $ 63,458
Warehouses 11,746 19,855
Mining equipment 10,244 7,503
Generating stations 21,890 31,398
Passenger railway equipment 3,805 6,441
Cargo aircraft 9,583 15,042
------- --------
Totals $80,398 $143,697
======= ========
<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. The
investment in leveraged leases balance does not include
deferred taxes of $(105,625).
</TABLE>
133
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.
CILCORP INC.
March 29, 2000 By
P. D. Stinson
President
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:
P. D. Stinson President and March 29, 2000
Director
(ii) and (iii) Principal Financial Officer and Controller:
T. D. Hutchinson Controller and March 29, 2000
Chief Financial
Officer
(iv) A majority of the Directors
(including the Director named above):
T. A. Tribone* Director March 29, 2000
M. A. Ferrucci* Director March 29, 2000
P. D. Stinson Director March 29, 2000
*By
P. D. Stinson
Attorney-in-fact
134
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 29, 2000 By
P. D. Stinson
President
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:
P. D. Stinson President and March 29, 2000
Director
(ii) and (iii) Principal Financial Officer and Controller:
T. D. Hutchinson Controller and March 29, 2000
Chief Financial
Officer
(iv) A majority of the Directors
(including the Director named above):
J. Cagle Director March 29, 2000
S. A. Cisel Director March 29, 2000
J. L. Luckey, III Director March 29, 2000
G. T. Russell Director March 29, 2000
R. J. Sprowls Director March 29, 2000
P. D. Stinson Director March 29, 2000
135
<TABLE>
EXHIBIT (12)
CILCORP INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
<CAPTION>
Oct. 19 Jan. 1
to to
Dec. 31, Oct. 18, Twelve Months Ended
1999 1999 1998 1997 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Earnings, as Defined:
Net Income from
Continuing
Operations $ (532) $ 687 $38,218 $ 43,709 $37,940 $38,469
Income Taxes (951) 1,113 19,699 22,349 20,702 22,427
Interest 14,339 22,629 29,257 27,049 28,964 29,861
COLI Interest Expense 850 3,181 3,624 3,491 2,731 2,349
Interest Portion of
Rentals 116 1,808 1,903 1,877 1,726 2,020
Preferred Dividends 558 2,650 3,194 3,216 3,188 3,299
------- ------- ------- -------- ------- -------
Total Earnings,
As Defined $14,380 $32,068 $95,895 $101,691 $95,251 $98,425
======= ======= ======= ======== ======= =======
Fixed Charges, as
Defined:
Interest Expense $14,339 $22,629 $29,257 $ 27,049 $28,964 $29,861
Interest Expense
on COLI 850 3,181 3,624 3,491 2,731 2,349
Interest Portion of
Rentals 116 1,808 1,903 1,877 1,726 2,020
Tax Effected
Preferred
Dividends 925 4,393 5,294 5,331 5,284 5,468
------- ------- ------- -------- ------- -------
Total Fixed
Charges, as
Defined $16,230 $32,011 $40,078 $ 37,748 $38,705 $39,698
======= ======= ======= ======== ======= =======
Ratio of Earnings to
Fixed Charges 0.9 1.0 2.4 2.7 2.5 2.5
=== === === === === ===
</TABLE>
136
<TABLE>
EXHIBIT (12)
CENTRAL ILLINOIS LIGHT COMPANY
Computation of Ratio of Earnings
to Fixed Charges
<CAPTION>
Twelve Months Ended 1999 1998 1997 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Earnings, as Defined:
Net Income $19,249 $44,235 $ 53,467 $45,127 $42,398
Income Taxes 8,376 22,472 20,633 24,082 22,534
Fixed Charges, as Below 29,224 28,187 29,434 28,504 27,876
------- ------- -------- ------- -------
Total Earnings, as
Defined $56,849 $94,894 $103,534 $97,713 $92,808
======= ======= ======== ======= =======
Fixed Charges, as Defined:
Interest on COLI $ 4,031 $ 3,624 $ 3,491 $ 2,731 $ 2,349
Interest on Short-term
Debt 2,015 962 281 149 744
Interest on Long-term
Debt 19,234 19,498 20,024 21,012 20,242
Amortization of Debt
Discount & Expense,
Premium and Reacquired
Loss 668 535 2,218 681 669
Miscellaneous Interest
Expense 1,467 1,780 1,658 2,320 1,967
Interest Portion of
Rentals 1,809 1,788 1,762 1,611 1,905
------- ------- -------- ------- -------
Total Fixed Charges,
as Defined $29,224 $28,187 $ 29,434 $28,504 $27,876
======= ======= ======== ======= =======
Ratio of Earnings to
Fixed Charges 1.9 3.4 3.5 3.4 3.3
=== === === === ===
</TABLE>
137
NOTICE
Telephone:
In Peoria 675-8826
Elsewhere in Illinois 1-800-322-3569
Outside Illinois 1-800-622-5514
TDD 1-309-675-8892
Or you can write to us at:
CILCORP Inc.
Attn: Craig Stensland
300 Liberty Street
Peoria, IL 61602
138
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports, dated January 28,
2000, included in this Form 10-K, into CILCORP Inc.'s previously
filed Registration Statements File No. 33-45318, 33-51241, and 33-
62105.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 29, 2000
139
EXHIBIT 24
CILCORP Inc.
Power of Attorney
-------------------------
We hereby make, constitute and appoint Paul D. Stinson, Robert J.
Sprowls, John G. Sahn and Craig W. Stensland 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, 1999, and any appropriate amendment or
amendments to said report and any necessary exhibits.
The undersigned also authorize 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.
Mark A. Ferrucci
Paul D. Stinson
Thomas A. Tribone
140
EXHIBIT 24
CILCO
Power of Attorney
-------------------------
We hereby make, constitute and appoint Paul D. Stinson, Robert J.
Sprowls, John G. Sahn and Craig W. Stensland 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 (CILCO), to sign and cause to be filed with the
Securities and Exchange Commission CILCO's annual report on Form
10-K for the fiscal year ended December 31, 1999, and any
appropriate amendment or amendments to said report and any
necessary exhibits.
The undersigned, CILCO, 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.
Jerry D. Cagle
Scott A. Cisel
James L. Luckey, III
Greg T. Russell
Robert J. Sprowls
Paul D. Stinson
141
File Number 5370-721-1
State of Illinois
Office of
The Secretary of State
WHEREAS, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF
CILCORP INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN
FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE
BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984.
Now Therefore, I, Jesse White, Secretary of State of the State of
Illinois, by virtue of the powers vested in me by law, do hereby
issue this certificate and attach hereto a copy of the
Application of the aforesaid corporation.
In Testimony Whereof, I hereto set my hand and cause to be
affixed the Great Seal of the State of Illinois, at the City of
Springfield, this 15th day of November A.D. 1999 and of the
Independence of the United States the two hundred and 24th.
/s/Jesse White
Secretary of State
Form BCA-10.30 ARTICLES OF AMENDMENT File #
(Rev. Jan. 1999)
Jesse White
Secretary of State
Department of Business Services
Springfield, IL 62756
Telephone (217) 782-1832
Remit payment in check or money order, payable to "Secretary of
State."
The filing fee for restated articles of amendment - $100.00
http://www.sos-state.il.us
Submit In Duplicate
This space for use by
Secretary of State
Date
Franchise Tax $
Filing Fee* $25.00
Penalty $
Approved:
1. CORPORATE NAME: CILCORP Inc.
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was
adopted on October 18
1999 in the manner indicated below.
By the shareholders, in accordance with Sections 10.20 and 7.10,
a resolution of the board of directors having been duly adopted
and submitted to the shareholders. A consent in writing has been
signed by all the shareholders entitled to vote on this
amendment.
3. TEXT OF AMENDMENT:
a.When amendment effects a name change, insert the new
corporate name below. Use Page 2 for all others amendments.
Article 1: The name of the corporation is: No change
All changes other than name, include on page 2
(over)
Text of Amendment
b.(If amendment affects the corporate purpose, the amended
purpose is required to be set forth in its entirety. If there
is not sufficient space to do so, add one or more sheets of
this size.)
1. Article Four shall be amended and restated in its entirety as
follows:
ARTICLE FOUR
"The authorized shares shall consist of 10,000 shares of common
stock, without par value."
2.Article Six shall be amended and restated in its entirety as
follows:
ARTICLE SIX
"The number of directors of the corporation shall be such number
as may from time to time be fixed by or pursuant to the By-laws."
4.The manner, if not set forth in Article 3b, in which any
exchange, reclassification or cancellation of issued shares or
a reduction of the number of authorized shares of any class
below the number of issued shares of that class, provided for
or affected by this amendment, is as follows: (If not
applicable, insert "No change")
No change.
5.(a) The manner, if not set forth in Article 3b, in which said
amendment effects a change in the amount of paid-in capital
(Paid-in capital replaces the terms Stated Capital and Paid-in
Surplus and is equal to the total of these accounts) is as
follows: (If not applicable, insert "No change")
No change.
(b) The amount of paid-in capital (Paid-in Capital replaces
the terms Stated Capital and Paid-in Surplus and is equal to
the total of these accounts) as changed by this amendment is
as follows: (If not applicable, insert "No change")
No change.
(Complete either Item 6 or 7 below. ALL signatures must be in
BLACK INK.)
6.The undersigned corporation has caused this statement to be
signed by its duly authorized officers, each of whom affirms
under penalties of perjury, that the facts stated herein are
true.
Dated November 1, 1999 CILCORP Inc.
(Month & Day) (Exact Name of Corporation at date of
execution)
Attested by: /s/John G. Sahn by: /s/Robert J. Sprowls
Secretary Vice President
-1-
BY-LAWS
OF
CILCORP INC.
AMENDED AND RESTATED AS OF OCTOBER 18, 1999
ARTICLE I.
OFFICES
Section 1. The registered office of the Corporation required
by the Illinois Business Corporation Act of 1983, as amended (the
"Act"), to be maintained in the State of Illinois shall be in the
City of Chicago, County of Cook, State of Illinois. The
Corporation may also have offices at such other places both
within and without the State of Illinois as the Board of
Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II.
SHAREHOLDERS
Section 1. Time and Place of Meetings. All meetings of the
shareholders for the election of directors or for any other
purpose shall be held at such time and place, within or without
the State of Illinois, as shall be designated by the Board of
Directors. In the absence of a designation of a place for any
such meeting by the Board of Directors, each such meeting shall
be held at the principal office of the Corporation.
Section 2. Annual Meetings. An annual meeting of
shareholders shall be held for the purpose of electing directors
and transacting such other business as may properly be brought
before the meeting. The date of the annual meeting shall be
determined by the Board of Directors.
Section 3. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise
prescribed by law, may be called by the Chief Executive Officer,
by the President, by the Chairman of the Board, by a majority of
the Board of Directors, or by the holders of not less than twenty
percent of the outstanding shares entitled to vote on the matter
for which the meeting is called by written request executed by
such holders and delivered to the President or the Secretary of
the Corporation.
Section 4. Notice of Meetings. Written notice of each
meeting of the shareholders stating the place, date and time 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 date of the
meeting, either personally or by mail, by the President, or by
the Secretary at the direction of the President or the person or
persons calling the meeting, 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 address as it appears
on the records of the Corporation, with postage thereon prepaid.
Any shareholder entitled to receive notice may waive notice of
any meeting by a writing executed and delivered to the
Corporation either before or after the meeting. Attendance of a
shareholder at any meeting shall constitute a waiver of notice of
such meeting, unless the shareholder attends such meeting for the
express purpose of objecting to the holding of such meeting
because proper notice was not given and at the beginning of such
meeting records such objection with the person acting as
secretary of the meeting and does not thereafter vote on any
action taken at the meeting.
Section 5. Quorum. The holders of record of a majority of
the shares issued and outstanding and entitled to vote thereat,
represented in person or by proxy, shall constitute a quorum at
all meetings of the shareholders for the transaction of business,
except as otherwise provided by the Act or by the Articles of
Incorporation. If a quorum is not represented, the holders of
record of the shares represented in person or by proxy at the
meeting and entitled to vote thereat shall have power, by the
affirmative vote of the holders of a majority of such shares, to
adjourn the meeting to another time and/or place, without notice
other than announcement at the meeting, except as hereinafter
provided, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting. Withdrawal of shareholders from
any meeting shall not cause the failure of a duly constituted
quorum at such meeting.
Section 6. Voting. At all meetings of the shareholders, each
shareholder shall be entitled to vote, in person or by proxy,
each share owned by such shareholder of record on the record date
for the meeting. Each outstanding share shall be entitled to one
vote on each matter submitted to a vote at a meeting of
shareholders, unless otherwise provided in the Act or in the
Articles of Incorporation. When a quorum is present at any
meeting, the affirmative vote of the holders of record of a
majority of the shares having voting power represented in person
or by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express
provision of the Act or of the Articles of Incorporation, a
different vote is required, in which case such express provision
shall govern and control the decision of such question. A
shareholder who is in attendance at a meeting of shareholders in
person or by proxy, but who abstains from the vote on any matter,
shall not be deemed to be represented at such meeting for
purposes of the preceding sentence with respect to such vote, but
shall be deemed to be represented at such meeting for all other
purposes.
Section 7. Informal Action by Shareholders. Unless otherwise
provided by the Act or by the Articles of Incorporation, any
action required to be taken at a meeting of the shareholders, or
any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting and without a vote,
if a consent in writing, setting forth the action so taken, shall
be signed by (a) the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voting, provided, that
(i) at least five days prior to the execution of the consent a
notice in writing is delivered to all of the shareholders
entitled to vote with respect to the subject matter thereof, and
(ii) those shareholders who have not consented in writing are
notified in writing of the taking of the corporate action
promptly after the effective date of such action; or (b) all of
the shareholders entitled to vote with respect to the subject
matter thereof.
Section 8. Proxies. At all meetings of shareholders, a
shareholder may vote in person or vote by proxy which is executed
by the shareholder or his duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary or other person
authorized to tabulate votes at any time prior to the
commencement of the meeting. No proxy shall be valid after
eleven months from the date of its execution unless otherwise
provided in the proxy.
ARTICLE III.
DIRECTORS
Section 1. General Powers. The business and affairs of the
Corporation shall be managed and controlled by or under the
direction of its Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things
as are not by law or by the Articles of Incorporation or by these
By-laws directed or required to be exercised or done by the
shareholders.
Section 2. Number, Qualification and Tenure. The Board of
Directors of the Corporation shall consist of not less than three
(3) members and not more than twelve (12) members, as may be
determined by the Board of Directors from time to time. Within
the limits above specified, the number of directors shall be
determined from time to time by resolution of the Board of
Directors. The directors shall be elected at the annual meeting
of the shareholders, except as provided in the Articles of
Incorporation or Section 3 of this Article, and each director
elected shall hold office until his successor is elected and
qualified or until his earlier death, termination, resignation or
removal from office. Any decrease in the number of directors
shall not have the effect of shortening the term of any incumbent
director.
Section 3. Vacancies and Newly Created Directorships.
Vacancies and newly created directorships resulting from any
increase in the number of directors may be filled by the
appointment of a majority of the directors then in office though
less than a quorum, and each director so appointed shall hold
office until the next annual meeting of shareholders and until
his successor is elected and qualified or until the earlier
death, termination, resignation or removal from office of such
director.
Section 4. Independent Director.
(a) The Corporation shall have at all times one indi
vidual who is an Independent Director (as defined below). If the
Independent Director resigns, dies or becomes incapacitated, or
such position is otherwise vacant, no action requiring the
unanimous affirmative vote of the directors shall be taken until
a successor Independent Director is appointed and qualified and
approves such action.
(b) Notwithstanding any other provision of these
By-laws and any provision of law that otherwise so empowers the
Corporation, the Corporation shall not, without the prior
unanimous consent of the Board of Directors, including the
Independent Director, do any of the following: (i) make a general
assignment for the benefit of creditors; (ii) file a voluntary
petition in bankruptcy; (iii) file a petition or answer seeking
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law
or regulation; (iv) file an answer or other pleading admitting or
failing to contest the material allegations of a petition filed
against it in any proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, or the entry of any
order appointing a trustee, liquidator or receiver of it or of
its assets or any substantial portion thereof; or (v) seek,
consent to or acquiesce in the appointment of a trustee, receiver
or liquidator of it or of all or any substantial part of its
assets. With regard to any action contemplated by the preceding
sentence, or with regard to any action taken or determination
made at any time when the Corporation is insolvent, each director
will owe its primary fiduciary duty to the Corporation (including
the creditors of the Corporation).
(c) For purposes of these By-laws of the Corporation,
"Independent Director" shall mean, with respect to the
Corporation, a director who is not, and within the last five
years was not (except solely by virtue of such person's serving
as, or affiliation with any other person serving as, an
independent director of The AES Corporation ("Parent") or any of
its affiliates, (i) a stockholder, member, partner, director,
officer, employee, affiliate, customer, supplier, creditor or
independent contractor of, or any person that has received any
benefit in any form whatever from, or any person that has provid
ed any service in any form whatever to, or any major creditor (or
any affiliate of any major creditor) of, the Parent or any of its
affiliates, or (ii) any person owning beneficially, directly or
indirectly, any outstanding shares of common stock, any limited
liability corporation interests or any partnership interests, as
applicable, of the Parent or any of its affiliates, or of any
major creditor (or any affiliate of any major creditor) of any of
the foregoing, or a stockholder, member, partner, director, offi
cer, employee, affiliate, customer, supplier, creditor or inde
pendent contractor of, or any person that has received any bene
fit in any form whatever from, or any person that has provided
any service in any form whatever to, such beneficial owner or any
of such beneficial owner's affiliates, or (iii) a member of the
immediate family of any person described above; provided that the
indirect or beneficial ownership of stock through a mutual fund
or similar diversified investment vehicle with respect to which
the owner does not have discretion or control over the
investments held by such diversified investment vehicle shall not
preclude such owner from being an Independent Director. For
purposes of this definition, "major creditor" shall mean a
natural person or business entity to which the Parent or any of
its affiliates has outstanding indebtedness for borrowed money or
credit on open account in a sum sufficiently large as would
reasonably be expected to influence the judgment of the proposed
Independent Director adversely to the interests of the
Corporation when the interests of that person or entity are
adverse to those of the Corporation.
Section 5. Directors' Duties. The directors, including the
Independent Director, will act in good faith in accordance with
the terms of the organizational documents and applicable law, and
make decisions with respect to the business and operations of the
Corporation independent of, and not dictated by, the Parent, or
any other affiliate thereof, and any director shall bear a
fiduciary duty to the Corporation (including its creditors).
Section 6. Place of Meetings. The Board of Directors may
hold meetings, both regular and special, either within or without
the State of Illinois.
Section 7. Meetings. The Board of Directors shall hold a
regular meeting, to be known as the annual meeting, immediately
following each annual meeting of the shareholders without any
notice being given. Other regular meetings of the Board of
Directors shall be held at such time and place as the Board of
Directors may designate from time to time. No notice of regular
meetings need be given, other than by announcement at the
immediately preceding regular meeting. Special meetings of the
Board of Directors may be called by or at the request of the
Chairman of the Board or a majority of the Board of Directors.
Notice of any special meeting of the Board shall be given at
least two days prior thereto, either in writing, or
telephonically if confirmed promptly in writing, to each director
at the address shown for such director on the records of the
Corporation.
Section 8. Waiver of Notice; Business and Purpose. Notice of
any meeting of the Board of Directors may be waived in writing
signed by the person or persons entitled to such notice either
before or after the time of the meeting. 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 transaction of any business
because the meeting is not lawfully called or convened and at the
beginning of such meeting records such objection with the person
acting as secretary of the meeting and does not thereafter vote
on any action taken at the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the Board need be specified in the notice or waiver of notice
of such meeting, unless specifically required by the Act.
Section 9. Quorum and Voting. At all meetings of the Board
of Directors a majority of the total number of directors then in
office shall constitute a quorum for the transaction of business.
If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting
without notice other than announcement at the meeting, to any
other date, time and place until a quorum shall be present. The
act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of
Directors, unless the act of a greater number is required by the
Act or by the Articles of Incorporation. Withdrawal of directors
from any meeting shall not cause the failure of a duly
constituted quorum at such meeting. A director who is in
attendance at a meeting of the Board of Directors but who
abstains from the vote on any matter by announcing his abstention
to the person acting as secretary of the meeting and not voting
on such matter shall not be deemed to be present at such meeting
for purposes of the preceding sentence or Section 15 of this
Article with respect to such vote, but shall be deemed to be
present at such meeting for all other purposes.
Section 10. Organization. The Chairman of the Board, if
elected, shall act as chairman at all meetings of the Board of
Directors. If the Chairman of the Board is not elected or if
elected, is not present, the Vice Chairman, if any, or, if no
such Vice Chairman is present, a director chosen by a majority of
the directors present, shall act as chairman at such meeting of
the Board of Directors.
Section 11. Committees. The Board of Directors, by
resolution adopted by a majority of the whole Board, may
designate two or more directors to constitute an Executive
Committee. The Board of Directors, by resolution adopted by a
majority of the whole Board, may create one or more other
committees and appoint two or more directors to serve on such
committee or committees. Each director appointed to serve on any
such committee shall serve, unless the resolution designating the
respective committee is sooner amended or rescinded by the Board
of Directors, until the next annual meeting of the Board or until
his respective successor is designated. The Board of Directors,
by resolution adopted by a majority of the whole Board, may also
designate additional directors as alternate members of any
committee to serve as members of such committee in the place and
stead of any regular member or members thereof who may be unable
to attend a meeting or otherwise unavailable to act as a member
of such committee. In the absence or disqualification of a
member and all alternate members designated to serve in the place
and stead of such member, the member or members thereof present
at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously
appoint another director to act at the meeting in the place and
stead of such absent or disqualified member.
The Executive Committee may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Corporation between the meetings of
the Board of Directors, and any other committee may exercise the
power and authority of the Board of Directors to the extent
specified by the resolution designating such committee, or the
Articles of Incorporation or these By-laws; provided, however,
that no committee may take any action that is expressly required
by the Act or the Articles of Incorporation or these By-laws to
be taken by the Board of Directors and not by a committee
thereof. Each committee shall keep a record of its acts and
proceedings, which shall form a part of the records of the
Corporation in the custody of the Secretary, and all actions of
each committee shall be reported to the Board of Directors at the
next meeting of the Board.
Meetings of committees may be called at any time by the
Chairman of the Board, if any, or the chairman of the respective
committee. A majority of the members of the committee shall
constitute a quorum for the transaction of business and, except
as expressly limited by this section, the act of a majority of
the members present at any meeting at which there is a quorum
shall be the act of such committee. Except as expressly provided
in this section or in the resolution designating the committee, a
majority of the members of any such committee may select its
chairman, fix its rules of procedure, fix the time and place of
its meetings and specify what notice of meetings, if any, shall
be given.
Section 12. Action without Meeting. Unless otherwise
specifically prohibited by the Articles of Incorporation or these
By-laws, any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be
taken without a meeting, if all members of the Board of Directors
or such committee, as the case may be, execute a consent thereto
in writing setting forth the action so taken, and the writing or
writings are filed with the minutes of proceedings of the Board
of Directors or such committee.
Section 13. Attendance by Telephone. Members of the Board
of Directors or any committee thereof may participate in and act
at any meeting of the Board of Directors or such committee, as
the case may be, through the use of a conference telephone or
other communications 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 14. Compensation. By resolution of the Board of
Directors, irrespective of any personal interest of any of the
members thereof, the directors may be paid their reasonable
expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at meetings
or a stated salary as directors, payable in cash or securities.
These payments shall not preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 15. Presumption of Assent. A director who is present
at a meeting of the Board of Directors or any committee thereof
when corporate action is taken shall be deemed to have assented
to the action taken unless: (1) he objects at the beginning of
the meeting to holding such meeting or transacting business at
such meeting; (2) his dissent from the action taken is entered in
the minutes of such meeting; or (3) he delivers written notice of
his dissent to the person acting as the secretary of the meeting
before the adjournment thereof or forwards such dissent by
registered or certified mail to the Secretary immediately after
the adjournment of such meeting. The right of dissent is not
available to a director who votes in favor of the action taken.
ARTICLE IV.
OFFICERS
Section 1. Enumeration. The officers of the Corporation
shall be chosen by the Board of Directors and shall include a
President and a Secretary. The Board of Directors may also elect
a Chairman of the Board, a Vice Chairman, one or more Vice
Presidents, a Treasurer, one or more Assistant Secretaries and
Assistant Treasurers and such other officers and agents as it may
deem appropriate. Any number of offices may be held by the same
person.
Section 2. Term of Office. The officers of the Corporation
shall be elected at the annual meeting of the Board of Directors
and shall hold office until their successors are elected and
qualified or until their earlier death, termination, resignation
or removal from office. Any officer or agent of the Corporation
may be removed, with or without cause, by the Board of Directors
whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall
not of itself create contract rights. Any vacancy in any office
because of death, resignation, termination, removal,
disqualification or otherwise, may be filled by the Board of
Directors for the unexpired portion of the term.
Section 3. Chief Executive Officer. The Chief Executive
Officer of the Corporation, if elected, shall have general
supervision, direction and control of the business and affairs of
the Corporation, subject to the control of the Board of
Directors, and shall have such other functions, authority and
duties as customarily appertain to the office of the chief
executive officer of a business corporation or as may be
prescribed by the Board of Directors.
Section 4. President. During any period when there shall
be an office of Chief Executive Officer, the President shall be
the chief operating officer of the Corporation and shall have
such functions, authority and duties as may be prescribed by the
Board of Directors or the Chief Executive Officer. During any
period when there shall not be an office of Chief Executive
Officer, the President shall be the chief executive officer of
the Corporation, and, as such, shall have the functions,
authority and duties provided for the Chief Executive Officer.
Section 5. Vice President. The Vice President or, if there
shall be more than one, each Vice President, in the absence of
the President or in the event of the President's inability or
refusal to act (and if there be no Chief Executive Officer),
shall have the authority to perform the duties of the President,
subject to such limitations thereon as may be imposed by the
Board of Directors, and such other duties as may from time to
time be prescribed by the Board of Directors, the Chief Executive
Officer or the President.
Section 6. Secretary. The Secretary shall: (a) keep a
record of all proceedings of the shareholders, the Board of
Directors and any committees thereof in one of more books
provided for that purpose; (b) give, or cause to be given, all
notices that are required by law or these By-laws to be given by
the Secretary; (c) be custodian of the corporate records and, if
the Corporation has a corporate seal, of the seal of the
Corporation; (d) have authority to affix the seal of the
Corporation to all instruments the execution of which requires
such seal and to attest such affixing of the seal; (e) keep a
register of the post office address of each shareholder which
shall be furnished to the Secretary by such shareholder; (f)
sign, with the Chief Executive Officer, if any, or President or
any Vice President, or any other officer thereunto authorized by
the Board of Directors, any certificates for shares of the
Corporation, or any deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be
executed by the signature of more than one officer; (g) have
general charge of the share transfer books of the Corporation;
(h) have authority to certify as true and correct copies of the
By-laws, or resolutions of the shareholders, the Board of
Directors and committees thereof, and of other documents of the
Corporation; and (i) in general, perform the duties incident to
the office of secretary and such other duties as from time to
time may be prescribed by the Board of Directors, the Chief
Executive Officer or the President. The Board of Directors may
give general authority to any other officer to affix the seal of
the Corporation and to attest such affixing of the seal.
Section 7. Assistant Secretary. The Assistant Secretary,
or if there shall be more than one, each Assistant Secretary in
the absence of the Secretary or in the event of the Secretary's
inability or refusal to act, shall have the authority to perform
the duties of the Secretary, subject to such limitations thereon
as may be imposed by the Board of Directors, and such other
duties as may from time to time be prescribed by the Board of
Directors, the Chief Executive Officer, the President or the
Secretary.
Section 8. Treasurer. The Treasurer shall be the principal
accounting and financial officer of the Corporation. The
Treasurer shall: (a) have charge of and be responsible for the
maintenance of adequate books of account for the Corporation; (b)
have charge and custody of all funds and securities of the
Corporation, and be responsible therefor and for the receipt and
disbursement thereof; and (c) perform the duties incident to the
office of treasurer and such other duties as may from time to
time be prescribed by the Board of Directors, the Chief Executive
Officer or the President. The Treasurer may sign with the Chief
Executive Officer, if any, or the President, or any Vice
President, or any other officer thereunto authorized by the Board
of Directors, certificates for shares of the Corporation. If
required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and
with such surety or sureties as the Board of Directors may
determine.
Section 9. Assistant Treasurer. The Assistant Treasurer,
or if there shall be more than one, each Assistant Treasurer, in
the absence of the Treasurer or in the event of the Treasurer's
inability or refusal to act, shall have the authority to perform
the duties of the Treasurer, subject to such limitations thereon
as may be imposed by the Board of Directors, and such other
duties as may from time to time be prescribed by the Board of
Directors, the Chief Executive Officer, the President or the
Treasurer.
Section 10. Other Officers and Agents. Any officer or
agent who is elected or appointed from time to time by the Board
of Directors and whose duties are not specified in these By-laws
shall perform such duties and have such powers as may from time
to time be prescribed by the Board of Directors, the Chief
Executive Officer or the President.
ARTICLE V.
CERTIFICATES FOR SHARES
Section 1. Form. The shares of the Corporation shall be
represented by certificates; provided, however, the Board of
Directors may provide by resolution or resolutions that some or
all of any or all classes or series of the Corporation's shares
shall be uncertificated shares. Each certificate for shares
shall be consecutively numbered or otherwise identified.
Certificates representing shares in the Corporation shall be
signed by or in the name of the Corporation by the Chief
Executive Officer or the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation. Where a certificate is
countersigned by a transfer agent, other than the Corporation or
an employee of the Corporation, or by a registrar, the signatures
of one or more officers of the Corporation may be facsimiles. In
case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, the certificate may be issued
by the Corporation with the same effect as if such officer,
transfer agent or registrar were such officer, transfer agent or
registrar at the date of its issue.
Section 2. Transfer. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate or uncertificated shares
in place of any certificate therefor issued by the Corporation to
the person entitled thereto, cancel the old certificate and
record the transaction in its share book.
Section 3. Replacement. In case of the loss, destruction,
mutilation or theft of a certificate representing shares of the
Corporation, a new certificate may be issued upon the surrender
of the mutilated certificate or, in the case of loss, destruction
or theft of a certificate, upon satisfactory proof of such loss,
destruction or theft and upon such terms as the Board of
Directors may prescribe. The Board of Directors may in its
discretion require the owner of the lost, destroyed or stolen
certificate, or his legal representative, to give the Corporation
a bond, in such sum and in such form and with such surety or
sureties as it may direct, to indemnify the Corporation against
any claim that may be made against it with respect to the
certificate alleged to have been lost, destroyed or stolen.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 1. Third Party Actions. 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, including all appeals (other than an action, suit
or proceeding by or in the right of the Corporation) by reason of
the fact that he is or was a director or officer of the
Corporation (and the Corporation, in the discretion of the Board
of Directors, may so indemnify a person by reason of the fact
that he is or was an employee or agent of the Corporation or is
or was serving at the request of the Corporation, another
corporation, partnership, joint venture, trust or other
enterprise in any capacity), against expenses (including
attorneys' fees), judgments, decrees, fines, penalties and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he 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 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 or in a manner he 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 reasonable cause to believe his conduct was
unlawful.
Section 2. Actions By or in the Right of the Corporation.
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, including all appeals, by or in the
right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director or officer of the
Corporation (and the Corporation, in the discretion of the Board
of Directors, may so indemnify a person by reason of the fact
that he is or was an employee or agent of the Corporation or is
or was serving at the request of the Corporation in any other
capacity for or on behalf of the Corporation), against expenses
(including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person
shall have been finally adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation
unless and only to the extent that the court in which such action
or suit was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to
indemnity for such expenses as such court shall deem proper.
Notwithstanding the foregoing, the Corporation shall be required
to indemnify an officer or director in connection with an action,
suit or proceeding initiated by such person only if such action,
suit or proceeding was authorized by the Board of Directors.
Section 3. Indemnity if Successful. To the extent that a
director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section 1 or 2 of this Article,
or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
Section 4. Standard of Conduct. Except in a situation
governed by Section 3 of this Article, any indemnification under
Section 1 or 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 or
officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in
Section 1 or 2, as applicable, of this Article. Such
determination shall be made (i) by a majority vote of directors
acting at a meeting at which a quorum consisting of directors who
were not parties to such action, suit or proceeding is present,
or (ii) if such a quorum is not obtainable, or even if
obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the
shareholders.
Section 5. Expenses. Expenses of each officer and director
hereunder indemnified actually and reasonably incurred in
defending a civil or criminal action, suit or proceeding or
threat thereof shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt
of any undertaking by or on behalf of such person to repay such
amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in
this Article. Such expenses incurred by employees and agents may
be so paid upon receipt of the aforesaid undertaking and such
other terms and conditions, if any, as the Board of Directors
deems appropriate.
Section 6. Nonexclusivity. The indemnification and
advancement of expenses provided by, or granted pursuant to other
Sections of this Article, shall not be deemed exclusive of any
other rights to which those seeking indemnification or
advancement of expenses may now or hereafter be entitled under
any law, by-law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such
office.
Section 7. Insurance. The Corporation may 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 him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability
under the provisions of the Act.
Section 8. Definitions. 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 any or all of its
directors, officers, employees and 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 in any other capacity, shall stand in the same
position under the provisions of this Article with respect to the
surviving corporation as such person would have had with respect
to such merging corporation if its separate existence had
continued as such corporation was constituted immediately prior
to such merger.
For purposes of this Article, references to "other
capacities" shall include serving as a trustee or agent for any
employee benefit plan; 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 reasonably believed to be in the best interests 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.
Section 9. Reports to Shareholders. If required by the
Act, the Corporation shall report any indemnity payment or
advancement of expenses by the Corporation to any director,
officer, employee or agent provided for in this Article to the
shareholders in writing either with or before the distribution of
the notice of the next shareholders' meeting.
Section 10. Severability. If any provision hereof is
invalid or unenforceable in any jurisdiction, the other
provisions hereof shall remain in full force and effect in such
jurisdiction, and the remaining provisions hereof shall be
liberally construed to effectuate the provisions hereof, and the
invalidity of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any
other jurisdiction.
Section 11. Amendment. The right to indemnification
conferred by this Article shall be deemed to be a contract
between the Corporation and each person referred to herein until
amended or repealed, but no amendment to or repeal of these
provisions shall apply to or have any effect on the right to
indemnification of any person with respect to any liability or
alleged liability of such person for or with respect to any act
or omission of such person occurring prior to such amendment or
repeal.
ARTICLE VII.
SEPARATENESS
Section 1. Funds, Assets and Accounts. The funds and other
assets of the Corporation shall not be commingled with those of
any other entity, and the Corporation shall maintain its accounts
separate from any other person or entity.
Section 2. Liability for Debts and Name. The Corporation
shall not hold itself out as being liable for the debts of any
other entity, and shall conduct its own business in its own name.
Section 3. Action through Agents and Identity. The
Corporation shall act solely in its own name and through its duly
authorized directors, officers or agents in the conduct of its
business, and shall conduct its business so as not to mislead
others as to the identity of the entity or assets with which they
are concerned.
Section 4. Separate Records. The Corporation shall maintain
separate records, books of account and financial statements, and
shall not commingle its records and books of account with the
records and books of account of any other entity.
Section 5. Formalities. The Corporation shall observe in all
material respects all formalities required by its organizational
documents and applicable law.
Section 6. Capitalization. The Corporation shall at all
times ensure that its capitalization is adequate in light of its
business and purpose.
Section 7. Debts of Affiliates. Subject to the last sentence
of this Section 7, (i) neither the Parent nor any affiliate of
the Parent (other than the Corporation) shall guaranty, become
liable on or hold itself out as being liable for the debts of the
Corporation; (ii) the Corporation shall not guarantee or become
obligated for the debts of the Parent or any affiliate thereof
(other than the Corporation), or otherwise hold out its credit as
being available to satisfy the obligations of the Parent or any
affiliate thereof (other than the Corporation); (iii) the
Corporation shall not pledge its assets for the benefit of Parent
or any of its affiliates; (iv) the Corporation shall not make
loans or advances to Parent or any of its affiliates, and shall
not acquire obligations or securities of the Parent or any
affiliate thereof (other than the Corporation), other than the
settlement of purchase contracts with respect to any Premium
Income Equity Securities or similar securities issued by the
Corporation. Notwithstanding the foregoing, the Corporation may
take any action otherwise prohibited under this Section 7 if such
action is taken with respect to its own subsidiaries, and its own
subsidiaries may take any action otherwise prohibited under this
Section 7 if such action is taken with respect to the
Corporation.
Section 8. Payment of Liabilities. The Corporation shall pay
its own liabilities out of its own funds.
Section 9. Arm's Length Relationship with Affiliates. The
Corporation shall maintain an arm's-length relationship with its
affiliates.
Section 10. Overhead and Office Space. The Corporation shall
allocate fairly and reasonably any overhead for office space
shared with the Parent or any affiliate thereof.
Section 11. Separate Business Forms. The Corporation shall
use its own separate stationery, invoices, checks and other
business forms.
Section 12. Correction of Misunderstandings. The Corporation
shall correct any known misunderstanding regarding its separate
identity.
ARTICLE VIII.
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation
shall be fixed from time to time by resolution of the Board of
Directors.
Section 2. Corporation Seal. The corporate seal, if any,
of the Corporation shall be in such form as may be approved from
time to time by the Board of Directors. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
Section 3. Notices and Mailing. Except as otherwise
provided in the Act, the Articles of Incorporation or these By-
laws, all notices required to be given by any provision of these
By-laws shall be deemed to have been given (i) when received, if
given in person, (ii) on the date of acknowledgment of receipt,
if sent by telex, facsimile or other wire transmission, (iii) one
day after delivery, properly addressed, to a reputable courier
for same day or overnight delivery, or (iv) three days after
being deposited, properly addressed, in the U.S. mail, certified
or registered mail, postage prepaid.
Section 4. Waiver of Notice. Whenever any notice is
required to be given under the Act or the provisions of the
Articles of Incorporation or these By-laws, a waiver thereof in
writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed
equivalent to notice.
Section 5. Interpretation. In these By-laws, unless a
clear contrary intention appears, the singular number includes
the plural number and vice versa, and reference to either gender
includes the other gender.
ARTICLE IX.
AMENDMENTS
Unless the power to make, alter, amend or repeal these By-
laws is reserved to the shareholders by the Articles of
Incorporation, these By-laws, including any By-law adopted by the
shareholders, may be made, altered, amended or repealed by the
shareholders or the Board of Directors, provided, that (i) the
unanimous consent of the Board of Directors, including the
Independent Director, shall be required to alter, amend or repeal
(a) Section 4 and Section 5 of Article III hereof; (b) Article
VII hereof; and (c) this Article IX; and (ii) subject to
paragraph (i) above, the fact that the power to make, alter,
amend or repeal these By-laws has been conferred upon the Board
of Directors shall not divest the shareholders of the same
powers.
CENTRAL ILLINOIS LIGHT COMPANY
EXECUTIVE DEFERRAL PLAN
(EDP)
December 1, 1985
as amended
February 22, 1994
January 29, 1996
August 17, 1998
April 1, 1999
August 15, 1999
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - ELIGIBILITY 3
2.1SELECTION BY COMMITTEE 3
2.2PLAN AGREEMENT OF EXECUTIVE 3
ARTICLE 3 - DEFERRAL COMMITMENTS 3
3.1MINIMUM DEFERRAL 3
3.2MAXIMUM DEFERRAL 4
3.3SPECIAL DEFERRAL 4
3.4WITHHOLDING OF DEFERRAL AMOUNTS 4
3.5ANNUAL RATE 4
3.6DEFERRAL PERIOD 4
3.7DEFAULT 4
3.8DEFERRAL PENALTY IN THE EVENT OF DEFAULT 4
3.9NO WAIVER OF DEFAULT 4
3.10CREDITING OF DEFERRAL AMOUNTS, COMPANY
CONTRIBUTIONS AND ROLLOVER ESPP AMOUNTS 5
3.11TERMINATION OF PARTICIPATION 5
ARTICLE 4 - 7TH YEAR DISTRIBUTION 5
4.17TH-YEAR DISTRIBUTION 5
4.2SUPPLEMENTAL PLAN AGREEMENTS 5
4.3HARDSHIP WITHDRAWALS 5
ARTICLE 5 - RETIREMENT BENEFIT 6
5.1RETIREMENT BENEFIT 6
5.2RATE OF INTEREST FOR RETIREMENT BENEFITS 6
5.3FORM AND COMMENCEMENT OF RETIREMENT BENEFITS 6
5.4POST-RETIREMENT PLAN AGREEMENTS 7
5.5AMOUNT OF RETIREMENT BENEFIT 7
5.6DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFITS 7
ARTICLE 6 - ROLLOVER ESPP 7
6.1PARTICIPANTS ELIGIBLE FOR ESPP ROLLOVER 7
6.2ESPP VESTING CREDIT 7
ARTICLE 7 - SURVIVOR BENEFITS 8
7.1PRE-RETIREMENT SURVIVOR BENEFIT 8
7.2AMOUNT OF SURVIVOR BENEFITS 8
7.3ELIGIBILITY REQUIREMENTS FOR SURVIVOR BENEFIT 8
7.4RESTRICTION IN THE EVENT OF SUICIDE 8
ARTICLE 8 - TERMINATION BENEFIT 9
8.1TERMINATION BENEFITS 9
8.2TERMINATION PRIOR TO 7 YEARS OF PLAN
PARTICIPATION AND PRIOR TO AGE 55 9
8.3TERMINATION AFTER 7 YEARS OF PLAN
PARTICIPATION AND PRIOR TO AGE 55 9
8.4INVOLUNTARY TERMINATION WITHOUT CAUSE FOLLOWING
A CHANGE IN CONTROL OF CILCORP INC. 9
ARTICLE 9 - DISABILITY BENEFIT 9
9.1AMOUNT OF DISABILITY BENEFIT 9
9.2COMMENCEMENT AND TERMINATION OF DISABILITY BENEFITS 9
9.3MAXIMUM AGE FOR DISABILITY BENEFITS 9
ARTICLE 10 - BENEFICIARY DESIGNATION 9
10.1 BENEFICIARY DESIGNATION 9
10.2 CHANGE OF BENEFICIARY DESIGNATION 9
10.3 NO PARTICIPANT DESIGNATION 9
10.4 EFFECT OF PAYMENT 9
ARTICLE 11 - LEAVE OF ABSENCE 9
11.1 PAID LEAVE OF ABSENCE 9
11.2 UNPAID LEAVE OF ABSENCE 9
ARTICLE 12 - OTHER BENEFITS AND AGREEMENTS 9
12.1 COORDINATION WITH OTHER BENEFITS 9
12.2 RESTORATION OF PENSION BENEFITS 9
ARTICLE 13 - DISCONTINUANCE, AMENDMENT OR TERMINATION 9
13.1 DISCONTINUANCE 9
13.2 AMENDMENT 9
13.3 TERMINATION 9
ARTICLE 14 - MISCELLANEOUS 9
14.1 UNSECURED GENERAL CREDITOR 9
14.2 NONASSIGNABILITY 9
14.3 NOT A CONTRACT OF EMPLOYMENT 9
14.4 PROTECTIVE PROVISIONS 9
14.5 TERMS 9
14.6 CAPTIONS 9
14.7 GOVERNING LAW 9
14.8 VALIDITY 9
14.9 NOTICE 9
14.10 SUCCESSORS 9
14.11 HOSTILE TAKEOVER 9
14.12 ATTORNEY FEES 9
14.13 LATE PAYMENT PENALTY 9
14.14 INCOMPETENT 9
ARTICLE 15 - ADMINISTRATION 9
15.1 COMMITTEE/INDEPENDENT AGENT DUTIES 9
15.2 AGENTS 16
15.3 BINDING EFFECT OF DECISION 16
15.4 INDEMNITY OF COMMITTEE 16
15.5 EMPLOYER INFORMATION 16
ARTICLE 16 - REDP PARTICIPATION 16
16.1 REDP PARTICIPATION 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 Deferral 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 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 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 conditions 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 occupation; 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 determination 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) is the
rate published in Moody's Bond Record under the heading of
"Moody's Corporate Bond Yield Averages - Av Corp." and is
equal to the average corporate yield calculated for the
month of November that immediately precedes the Plan Year
for which the rate is to be used.
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 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. 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 participate 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 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 participation 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 Participant 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
Committee 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 dependent, or
(2) 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 immediate 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 Participant'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 following 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 preceding
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 benefits 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
Participant 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
Participant 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 commencement 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
Account. 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 Survivor 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 eligibility 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 Participant's suicide, the amount of the
Survivor Benefit which the Employer 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
completing 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%
8.4 Involuntary Termination Without Cause Following A Change in
Control of CILCORP Inc.
a. A Participant who incurs a Termination of Employment
involuntarily and other than for Cause within two years after a
Change in Control of CILCORP Inc. will be eligible to make an
irrevocable election to receive either a termination benefit as
set forth in this Article 8 or retirement benefits as provided at
Article 5, as if the Participant retired from the Company. In
addition, the Participant shall, at the time of the involuntary
termination, be considered to be 100% vested in the Participant's
Secondary Account Balance.
b. If, at the time of a Termination of Employment, a
Participant elects to receive a termination benefit in the form
of a lump sum payment, such payment shall be made to the
Participant no earlier than 60 days from the date the Participant
made an irrevocable election provided for under this Section 8.4
(a).
c. The following definitions shall be applicable to the terms
used in this Section 8.4:
i. "Change in Control" shall be deemed to have occurred:
(a) if CILCORP Inc. ("CILCORP") merges or consolidates with or
into another corporation in a transaction in which neither
CILCORP nor any member of a controlled group of corporations as
defined in Article I, Section 1.4 is the surviving corporation;
or upon a sale or other disposition of all or substantially all
of CILCORP's assets to any corporation, person, other entity or
group (other than to an entity whose stock is owned or controlled
by CILCORP or any qualified or non-qualified plan maintained by
CILCORP or an affiliate); or
(b) if any corporation, person, other entity or group (other
than CILCORP or any affiliate) becomes the Beneficial Owner (as
defined in CILCORP's Articles of Incorporation) of 30% or more of
the voting stock of CILCORP; or
(c) if, during any period of two consecutive years, Continuing
Directors, as hereinafter defined, cease to comprise a majority
of CILCORP's Board of Directors. Continuing Directors are:
(i) Members of the Board of Directors of CILCORP at the
beginning of such period of two consecutive years; and
(ii) Any person who subsequently becomes a member of the Board of
Directors if such person's nomination for election or election
to the Board of Directors of CILCORP is recommended or approved
by resolution of a majority of the Continuing Directors or such
person is included as a nominee in a proxy statement of CILCORP
distributed when a majority of the Board of Directors of
CILCORP consists of Continuing Directors.
ii. "Cause" shall mean:
(a) the Participant has willfully and continually failed to
perform substantially his/her duties with the Company other than
such failure resulting from disability (as herein defined), after
a written demand for substantial performance is delivered to the
Participant by his/her supervisor which specifically identifies
the manner in which the supervisor believes that the Participant
has not substantially performed his/her duties; or
(b) the Participant's willfully engaging in illegal conduct or
gross misconduct which his/her supervisor believes is materially
and demonstrably injurious to the Company.
For purposes of this definition, no act or failure to
act on the Participant's part shall be considered
"willful" unless it is done, or omitted to be done, by
the Participant in bad faith or without reasonable
belief that his/her action or omission was in the best
interests of the Company. Any act or failure to act,
based on authority given pursuant to a resolution duly
adopted by the Board or on the instructions of the CEO
or a senior officer of the Company or based on the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the
Participant in good faith and in the best interests of
the Company.
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 commencing 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
designations 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 representative
(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
obligations 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 suspended 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 otherwise 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. 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
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 payments which
would otherwise have been made under the Pension
Plan. The amount of pension restoration benefit
payments provided for herein shall be calculated by
professional, independent actuaries selected by the
Company.
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
modification 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 Beneficiary 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 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 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 insolvency.
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.
14.10Successors
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 corpo
rate 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.
14.11Hostile 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.
14.12Attorney 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.
14.13Late 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, plus 10%, from the date such
payment was due until the date such payment is made by the
Company.
14.14Incompetent
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 15 - Administration
15.1 Committee/Independent Agent Duties
This Plan shall be administered by either (1) a Committee
consisting of persons appointed by the Board of Directors
of the Company, or (2) an Independent Agent appointed by
the Board of Directors of the Company. The Independent
Agent shall be a bank, not an affiliate of the Company,
having a market capitalization exceeding $100,000,000. The
appointment of an Independent Agent shall be irrevocable
and shall preclude further administration by a Committee
provided, however, that upon resignation or removal of an
Independent Agent, the Company shall appoint a successor
Independent Agent who shall also satisfy the foregoing
qualifications. Members of the Committee may be
Participants under this Plan. The Committee or the
Independent Agent, as appropriate, (the Administrator"),
shall have the authority to amend, interpret and enforce
all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and
all questions including interpretations of the Plan, as may
arise in connection with the Plan.
15.2 Agents
In the administration of this Plan, the Administrator may,
from time to time, employ agents and delegate to them such
administration 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 Administrator 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
an interest in the Plan.
15.4 Indemnity of Committee/Independent Agent
The Employer shall indemnify and hold harmless the members
of the Committee or the Independent Agent 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 or the Independent Agent.
15.5 Employer Information
To enable the Administrator to perform their functions, the
Employer shall supply full and timely information to the
Committee or Independent Agent on all matters relating to
the Covered Salary of all Participants, the date and
circumstances of the Retirement, Disability, or death or
Termination of Employment of all Participants, and such
other pertinent information as the Committee or Independent
Agent may reasonably require.
Article 16 - REDP Participation
16.1 REDP Participation
Each individual who elects to participate in the
Restructured Executive Deferral Plan of Central
Illinois Light Company (the "REDP"), as listed in
Schedule I to the REDP, shall cease to be a
Participant under this Plan effective August 15,
1999. Such individual's REDP participation shall
be in lieu of any benefits previously accrued under
this Plan with respect to the individual.
Consequently, the rights of an individual who
elects to participate in the REDP and any
beneficiary of such individual shall be determined
solely under the provisions of the REDP and shall
not be affected by any provision of this Plan.
CENTRAL ILLINOIS LIGHT COMPANY
EXECUTIVE DEFERRAL PLAN II
(EDP II)
December 1, 1989
as amended
January 29, 1996
August 17, 1998
April 1, 1999
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - ELIGIBILITY 3
2.1 SELECTION BY COMMITTEE 3
2.2 PLAN AGREEMENT OF EXECUTIVE 3
ARTICLE 3 - DEFERRAL COMMITMENTS 3
3.1 MINIMUM DEFERRAL 3
3.2 MAXIMUM DEFERRAL 3
3.3 DEFERRAL ELECTION 3
3.4 CHANGING DEFERRAL ELECTION 4
3.5 WITHHOLDING OF DEFERRAL AMOUNTS 4
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 4 - 5TH YEAR DISTRIBUTIONS 5
4.1 5TH-YEAR DISTRIBUTION 5
ARTICLE 5 - RETIREMENT BENEFIT 5
5.1 RETIREMENT BENEFIT 5
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 6
5.6 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFITS 6
ARTICLE 6 - SURVIVOR BENEFITS 6
6.1 SURVIVOR BENEFIT 6
6.2 AMOUNT OF SURVIVOR BENEFITS 6
ARTICLE 7 - TERMINATION BENEFIT 6
7.1 TERMINATION BENEFITS 6
7.2 INVOLUNTARY TERMINATION WITHOUT CAUSE FOLLOWING A
CHANGE IN CONTROL OF CILCORP INC. 6
ARTICLE 8 - DISABILITY BENEFIT 8
8.1 AMOUNT OF DISABILITY BENEFIT 8
ARTICLE 9 - BENEFICIARY DESIGNATION 8
9.1 BENEFICIARY DESIGNATION 8
9.2 CHANGE OF BENEFICIARY DESIGNATION 8
9.3 NO PARTICIPANT DESIGNATION 8
9.4 EFFECT OF PAYMENT 8
ARTICLE 10 - LEAVE OF ABSENCE 8
10.1 PAID LEAVE OF ABSENCE 8
10.2 UNPAID LEAVE OF ABSENCE 9
ARTICLE 11 - OTHER BENEFITS AND AGREEMENTS 9
11.1 COORDINATION WITH OTHER BENEFITS 9
11.2 RESTORATION OF PENSION BENEFITS 9
ARTICLE 12 - DISCONTINUANCE, AMENDMENT OR TERMINATION 9
12.1 DISCONTINUANCE 9
12.2 AMENDMENT 9
12.3 TERMINATION 10
ARTICLE 13 - MISCELLANEOUS 10
13.1 UNSECURED GENERAL CREDITOR 10
13.2 NONASSIGNABILITY 10
13.3 NOT A CONTRACT OF EMPLOYMENT 10
13.4 PROTECTIVE PROVISIONS 10
13.5 TERMS 11
13.6 CAPTIONS 11
13.7 GOVERNING LAW 11
13.8 VALIDITY 11
13.9 NOTICE 11
13.10 SUCCESSORS 11
13.11 ATTORNEY FEES 11
13.12 LATE PAYMENT PENALTY 12
13.13 INCOMPETENT 12
ARTICLE 14 - ADMINISTRATION 12
14.1 COMMITTEE DUTIES 12
14.2 AGENTS 12
14.3 BINDING EFFECT OF DECISION 12
14.4 INDEMNITY OF COMMITTEE 12
14.5 EMPLOYER INFORMATION 13
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., elected
officers, department heads, and other key employees reporting to
executive officers) will be allowed to participate in the
Executive Deferral 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) is the rate
published in Moody's Bond Record under the heading of
"Moody's Corporate Bond Yield Averages - Av Corp." and is
equal to the average corporate yield calculated for the
month of November that immediately precedes the Plan Year
for which the rate is to be used.
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 Moody's rate for any Plan Year shall be fixed 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.
3.6 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 percentage 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
7.2 Involuntary Termination Without Cause Following A Change in
Control of CILCORP Inc.
a. A Participant who incurs a Termination of Employment
involuntarily and other than for Cause within two years after a
Change in Control of CILCORP Inc. will be eligible to make an
irrevocable election to receive either a termination benefit as
set forth in this Article 7 or retirement benefits as provided at
Article 5, as if the Participant retired from the Company.
b. If, at the time of a Termination of Employment, a
Participant elects to receive a termination benefit in the form
of a lump sum payment, such payment shall be made to the
Participant no earlier than 60 days from the date the Participant
made an irrevocable election provided for under this Section 7.2
(a).
c. The following definitions shall be applicable to the terms
used in this Section 7.2:
i. "Change in Control" shall be deemed to have
occurred:
(a) if CILCORP Inc. ("CILCORP") merges or consolidates with or
into another corporation in a transaction in which neither
CILCORP nor any member of a controlled group of corporations as
defined in Article I, Section 1.4 is the surviving corporation;
or upon a sale or other disposition of all or substantially all
of CILCORP's assets to any corporation, person, other entity or
group (other than to an entity whose stock is owned or
controlled by CILCORP or any qualified or non-qualified
plan maintained by CILCORP or an affiliate); or
(b) if any corporation, person, other entity or group (other
than CILCORP or any affiliate) becomes the Beneficial Owner (as
defined in CILCORP's Articles of Incorporation) of 30% or
more of the voting stock of CILCORP; or
(c) if, during any period of two consecutive years, Continuing
Directors, as hereinafter defined, cease to comprise a majority
of CILCORP's Board of Directors. Continuing Directors are:
(i) Members of the Board of Directors of CILCORP at the
beginning of such period of two consecutive years; and
(ii) Any person who subsequently becomes a member of the
Board of Directors if such person's nomination for election
or election to the Board of Directors of CILCORP is
recommended or approved by resolution of a majority of
the Continuing Directors or such
person is included as a nominee in a proxy statement
of CILCORP distributed when a majority of the Board of
Directors of CILCORP
consists of Continuing Directors.
ii. "Cause" shall mean:
(a) the Participant has willfully and continually failed to
perform substantially his/her duties with the Company other
than such failure resulting from disability (as herein
defined), after a written demand for substantial performance is
delivered to the
Participant by his/her supervisor which specifically identifies
the manner in which the supervisor believes that the
Participant
has not substantially performed his/her duties; or
(b) the Participant's willfully engaging in illegal conduct or
gross misconduct which his/her supervisor believes is
materially and demonstrably injurious to the Company.
For purposes of this definition, no act or failure
to act on the Participant's part shall be considered
"willful" unless it is done, or omitted to be done,
by the Participant in bad faith or without
reasonable belief that his/her action or omission
was in the best interests of the Company. Any act
or failure to act, based on authority given pursuant
to a resolution duly adopted by the Board or on the
instructions of the CEO or a senior officer of the
Company or based on the advice of counsel for the
Company shall be conclusively presumed to be done,
or omitted to be done, by the Participant in good
faith and in the best interests of the Company.
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.
The amount of pension restoration benefit payments provided
for herein shall be calculated by professional, independent
actuaries selected by the Company.
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.
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.
13.10Successors
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.
13.11Attorney 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.
13.12Late 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.
13.13Incompetent
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.
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.
CENTRAL ILLINOIS LIGHT COMPANY
BENEFIT REPLACEMENT PLAN
(Effective January 1, 1991)
Amended Effective
November 12, 1998
August 15, 1999
CENTRAL ILLINOIS LIGHT COMPANY
BENEFIT REPLACEMENT PLAN
(Amended Effective August 15, 1999)
TABLE OF CONTENTS
Article I. Establishment and Construction
1.1 The Plan and its Effective Date 1
1.2 Purpose 1
1.3 Application of the Plan 1
Article II. Definitions and Construction
2.1 Definitions 1
2.2 Gender and Number 5
2.3 Severability 5
2.4 Applicable Law 5
Article III. Participation
3.1 Eligibility 5
3.2 Participation in the Plan 5
Article IV. Benefits
4.1 Benefits 6
4.2 Vesting 7
4.3 Timing and Form of Retirement Benefits 7
4.4 Death Benefits 8
Article V. Financing
5.1 Unfunded Plan 9
5.2 Grantor Trust 9
5.3 Unsecured Interest 9
5.4 Nonalienation 9
Article VI. Administration
6.1 Administration 9
6.2 No Enlargement of Employee Rights 10
6.3 Appeals from Denial of Claim 10
6.4 Notice of Address and Missing Persons 11
6.5 Data and Information for Benefits 11
6.6 Indemnity for Liability 11
6.7 Tax Liability 12
CENTRAL ILLINOIS LIGHT COMPANY
BENEFIT REPLACEMENT PLAN
TABLE OF CONTENTS
(Continued)
Article VII. Amendment and Termination
7.1 Amendment 12
7.2 Termination 12
7.3 Change in Control 12
Article VIII. Participation in and Withdrawal
from the Plan by an Employer
8.1 Participation in the Plan Withdrawal from the Plan 12
8.2 Withdrawal from the Plan 13
CENTRAL ILLINOIS LIGHT COMPANY
BENEFIT REPLACEMENT PLAN
(Amended Effective August 15, 1999)
Article I. Establishment and Construction
1.1 The Plan and its Effective Date. The CENTRAL ILLINOIS
LIGHT COMPANY BENEFIT REPLACEMENT PLAN (the "Plan") is hereby
established by Central Illinois Light Company (the "Company")
effective January 1, 1991.
1.2 Purpose. The purpose of the Plan is to provide each
Eligible Employee of the Employer with additional retirement
income that, when combined with retirement benefits payable from
the Pension Plan For Management, Office and Technical Employees
of Central Illinois Light Company ("MOT Plan"), will equal the
retirement benefit such Eligible Employee would have received if
he continued to accrue benefits under the MOT Plan through the
date of his actual retirement, but without regard to(a)the
limitations imposed under Code sections 415 and 401(a)(17), or
(b) the exclusion of amounts deferred under the Central Illinois
Light Company Executive Deferral Plan and the Central Illinois
Light Company Executive Deferral Plan II (collectively "EDP
Plans"), and the Central Illinois Light Company Deferred
Compensation Stock Plan from the definition of "Earnings" under
the MOT Plan.
1.3 Application of the Plan. The provisions of this Plan are
applicable only to those Eligible Employees who, on or after
January 1, 1991, are either (a) in the active employ of the
Employer or (b) retired key management and executive staff who
are receiving or who are eligible to receive benefit payments
under the EDP Plans. Any other Eligible Employee who retired or
whose active employment relationship with the Employer was
terminated prior to January 1, 1991 shall not be covered under
this Plan.
Article II. Definitions and Construction
2.1 Definitions. The terms used in this Plan shall have the
same meaning set forth below, except as otherwise indicated
herein. The definition of any term in the singular shall also
include the plural.
(a) "Actuarial Equivalent" means a benefit having the same
value as the benefit which it replaces, computed on the
basis of the factors specified in the definition of
"Actuarial Equivalent" in the MOT Plan.
(b) "Affiliate" means any subsidiary or affiliated or
associated corporation of the Company that is an
"Affiliate" within the meaning of that term in the MOT
Plan.
(c) "Average Monthly Earnings" means "Average Monthly
Earnings" as defined under the MOT Plan.
(d) "Change in Control" means the occurrence of any of the
following:
(1) the sale or transfer of the business of the
Company or a Unit of the company to a person or
entity not controlled, directly or indirectly, by
CILCORP, whether such sale of the business of the
Company or a Unit of the company, as the case may
be, is effected through the (A) sale, directly or
indirectly, of the voting stock of the Company,
(B)merger or consolidation of the company,
(C)sale, lease, exchange, or transfer of all or
substantially all of the assets of the company or
of a Unit of the Company, or (D) a combination of
the foregoing;
(2) a merger or consolidation of CILCORP with one or
more corporations, as a result of which CILCORP is
not the surviving corporation or pursuant to which
substantially all shares of CILCORP's common stock
are converted into cash, securities, or other
property;
(3) the acquisition of beneficial ownership, directly or
indirectly, of more than 30 percent of the voting power of the
outstanding stock of CILCORP by any "Person" (as such term is
used in Section 13(d) of the Securities Exchange Act of 1934, as
amended, and as in effect on the date of adoption of the Plan)
coupled with or followed by the failure of Continuing Directors
to constitute a majority of the board of directors of CILCORP; or
(4) the sale, lease, exchange, or transfer of all or
substantially all the assets of CILCORP;
provided, however, that the term "Change in Control"
shall not apply to any merger, consolidation, internal
reorganization, or recapitalization of CILCORP
initiated voluntarily by CILCORP in which Continuing
Directors constitute a majority of the members of the
board of directors of CILCORP or any successor thereto
and the holders of CILCORP's common stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
after the merger.
(e) "CILCORP" means CILCORP Inc., an Illinois corporation,
and any successor thereto.
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Company" means the Central Illinois Light Company, an
Illinois corporation, and any successor thereto.
(h) "Continuing Director" means any member of the board of
directors of CILCORP, while such person is a member of
such board of directors, who was a member of such board
of directors prior to the date of adoption of this
Plan. A "Continuing Director" also means any person
who subsequently becomes a member of the board of
directors of CILCORP, while such person is a member of
such board of directors, if such person's nomination
for election or election to such board of directors is
recommended or approved by resolution of a majority of
the Continuing Directors.
(i) "Deferred Compensation Stock Plan" means the Central
Illinois Light Company Deferred Compensation Stock
Plan.
(j) "EDP Plans" means, individually or collectively (as the
context requires), the Central Illinois Light Company
Executive Deferral Plan and the Central Illinois Light
Company Executive Deferral Plan II.
(k) "Effective Date" means January 1, 1991.
(l) "Eligible Employee" means--
(1) an employee of the Employer who is in a select
group of management or highly compensated
employees, participates in the MOT Plan, and has
his benefits limited under the MOT Plan by:
(A) the limits under Code section 415 or
401(a)(17); or
(B) the "Earnings" definition which excludes
deferrals under the EDP Plans or the Deferred
Compensation Stock Plan;
and is designated as an Eligible Employee by the
Employer's board of directors;
(2) any retired key management and executive employee
of the Employer who, as of the Effective Date, is
receiving or is eligible to receive benefit
payments under the EDP Plans; and
(3) any other highly compensated, key employee
of the Employer's management staff who may be
designated, from time to time, by the Employer's
board of directors.
(m) "Employer" means the Company and any Affiliate that,
with the consent of the Company, has adopted the MOT
Plan and this Plan for the benefit of its Eligible
Employees.
(n) "Grantor Trust Agreement" means an agreement
establishing a grantor trust referred to in section
5.2.
(o) "MOT Plan" means the Pension Plan for Management,
Office and Technical Employees of Central Illinois
Light Company. Unless otherwise specified, any
reference in the Plan to benefits provided under the
MOT Plan shall mean the aggregate of benefits provided
under the MOT Plan and the Retirement Plan.
(p) "Participant" means an Eligible Employee of the
Employer who meets the participation requirements set
forth in section 3.1.
(q) "Plan" means the Central Illinois Light Company
Benefit Replacement Plan.
(r) "Plan Year" means the calendar year.
(s) "Service" means "Service" as defined under the MOT
Plan.
(t) "Trustee" means the trustee or trustees of a
Grantor Trust.
(u) "Unit of the Company" means an organizational department of
the Company as may be so designated from time to time on the
official organizational chart of the Company.
(v) "Article XVIII Benefits" means the Cash Balance Benefits
provided pursuant to Article XVIII of the MOT Plan.
Notwithstanding Plan Section 2.1(o), "Article XVIII Benefits"
shall not be deemed to include any Retirement Plan benefits.
(w) "Retirement Plan" means the Retirement Plan for
Management, Office and Technical Employees of Central
Illinois Light Company.
2.2 Gender and Number. Except when otherwise indicated by
the context, words in the masculine gender shall include the
feminine and neuter genders; the plural shall include the
singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan
shall be held invalid or illegal for any reason, any illegality
or invalidity shall not affect the remaining parts of the Plan,
but the Plan shall be construed and enforced as if the illegal or
invalid provision had never been inserted, and the Company shall
have the privilege and opportunity to correct and remedy such
questions of illegality or invalidity by amendment as provided in
the Plan.
2.4 Applicable Law. The Plan shall be governed and construed
in accordance with the laws of the State of Illinois to the
extent not superseded by the laws of the United States.
Article III. Participation
3.1 Eligibility. An Eligible Employee of the Employer
shall become a Participant if benefits under the MOT Plan are
limited, on or after the Effective Date, due to any of the
following limitations:
(a) Limit on Compensation under Code Section 401(a)(17).
The Eligible Employee's benefits under the MOT Plan are
limited to ensure compliance with Code section
401(a)(17).
(b) Limit on Accruals under Code Section 415. The Eligible
Employee's benefits under the MOT Plan (disregarding
Article XVIII Benefits) are limited to ensure
compliance with Code section 415.
(c) Limit on "Earnings" Considered under the MOT Plan. The
Eligible Employee's Average Monthly Earnings under the
MOT Plan are limited because (1) the Eligible Employee
participates in the MOT Plan and in the EDP Plans or
the Deferred Compensation Stock Plan, and (2)
"Earnings" under the MOT Plan formula is defined to
exclude deferrals made under the EDP Plans or the
Deferred Compensation Stock Plan, thus reducing Average
Monthly Earnings.
3.2 Participation in the Plan. An Eligible Employee shall
become a Participant as of the later of--
(a) the first day as of which it is determined that his
benefit under the MOT Plan, which would be payable at
or after the earliest date on which he could receive a
retirement benefit under the MOT Plan, is limited by
the limitations described in section 3.1; or
(b) the Effective Date.
Article IV. Benefits
4.1 Benefits. When a Participant's benefits under the MOT
Plan are limited in accordance with the limits described in
section 3.1(a),(b), or (c) for Plan Years beginning on or after
January 1, 1991, this Plan shall provide a benefit determined as
follows:
(a) General Rule. This Plan shall provide a benefit equal
to the excess of (1) over (2) below:
(1) The benefit which, but for the limitations
described in section 3.1(a), (b), or (c) of this
Plan, would have been provided under the MOT Plan,
calculated as of the determination date and
payable at the time and in the form payable
pursuant to section 4.3.
(2) The benefit which has actually been provided under
the MOT Plan, calculated as of the determination
date, and expressed as a benefit payable at the
time and in the form payable pursuant to section
4.3.
In calculating the benefit described in (1) and (2)
above, all Article XVIII Benefits shall be disregarded.
(b) Exception. Notwithstanding the foregoing, if payment of
the Participant's benefit under the MOT Plan
commences prior to the date his benefit under this Plan
is made or commences, this Plan shall provide a benefit
equal to the sum of (1) and (2) below:
(1) The amount determined as described in (a) above as
if the Participant had elected, pursuant to
section 4.3 of this Plan, the same benefit
commencement date as he elected under the MOT Plan
(the MOT Plan benefit commencement date).
(2) An annuity which is payable at the time actually
elected pursuant to section 4.3 (this Plan's
benefit commencement date) and in the form elected
pursuant to section 4.3 and which is the Actuarial
Equivalent of the benefits which would have been
paid under this Plan between the MOT Plan benefit
commencement date and this Plan's
benefit commencement date, had the Participant
elected, pursuant to section 4.3 of this Plan, to
commence receiving benefits under this Plan on the
MOT Plan benefit commencement date.
If payments of the Participant's benefit under the
MOT Plan begin at a different time than his or her
benefit under the Retirement Plan and benefit
payments under one or both Plans begin before benefit
payments under this Plan begin, the application of
this section 4.1(b) shall be appropriately adjusted
to take into account that the early commencement date
or dates apply only to a portion of the general Plan
benefit described in 4.1(a).
4.2 Vesting. A Participant who completes at least five years
of Service for purposes of vesting under the MOT Plan shall
be fully vested in his benefit under this Plan. In addition, a
Participant who attains age 65 while employed by an Employer
shall be fully vested in his benefit under this Plan. Subject to
the special Service rules for rehired Participants, any other
Participant shall forfeit his benefit upon termination of
employment with the Employer.
4.3 Timing and Form of Retirement Benefits. No payments shall be
made to a Participant under this Plan prior to the Participant's
termination of employment with the Company and all Affiliates.
After such termination of employment, benefits under section 4.1
shall become payable, at the Participant's election, in one of
the forms available to the Participant under the MOT Plan, equal
to the Actuarial Equivalent of his benefit under this Plan;
provided, however, that upon becoming a Participant (or as soon
as practicable after it is ascertained that he is a Participant)
he shall elect-
(a) the form in which his benefits under this Plan will be
paid if he is married on the date as of which such
benefits become payable; and
(b) the form in which his benefits under this Plan will be
paid if he is unmarried on the date as of which such
benefits become payable.
For purposes of the preceding sentence-
(1) If the Participant is married at the time he elects the
form of payment under this Plan, the normal form of
payment if he is married when his benefits under this
Plan become payable shall be a joint and 100 percent
spouse's annuity determined on the same basis as the
annuity described in section 4.7(b) of the MOT Plan,
and his spouse's consent, as described in section
4.9(a) of the MOT Plan, shall be required for the
Participant to reject such joint and 100 percent
spouse's annuity;
(2) At the time he elects the form of payment under this
Plan, the Participant shall elect the date as of which
such payment will be made or commence, provided that
(A) such date shall not be before the earliest date as
of which the Participant can begin receiving benefit
payments under the MOT Plan and (B) such payment will
not commence before the Participant's employment with
the Employer is terminated;
(3) Once the Participant has elected the timing of his
benefit payments as described in this section 4.3, he
shall not be permitted to change such election;
(4) Once the Participant has elected the form of his
benefit payments as described in this section 4.3, he
shall not be permitted to change such election,
provided that if his final election on form of payment
made pursuant to sections 4.7, 4.8, and 4.9 of the
MOT Plan differs from his election on form of payment
made pursuant to the preceding provisions of this
section 4.3, his election pursuant to this section 4.3
shall automatically be changed to match said final
election under the MOT Plan; and
(5) Notwithstanding the preceding provisions of this
section 4.3, no election will be available to any
Participant who is a retired employee described in
section 2.1(1)(2); instead, such Participant's benefits
under this Plan shall be payable in the same form and
at the same times as the benefits the Participant was
receiving under the MOT Plan immediately prior to the
Effective Date.
4.4 Death Benefits. Upon the death of a Participant
(including a Participant who has suffered a Disability) before
payment of his benefits under this Plan has commenced, if the
Participant leaves a surviving spouse to whom he had been
continuously married for the one-year period ending on the date
of his death, this Plan shall provide a benefit to such spouse
equal to the excess of (a) over (b), where--
(a) is the monthly benefit which would have been payable
for the life of the surviving spouse under section 4.6
of the MOT Plan, but for the limitations described in
section 3.1(a), (b), and (c) of this Plan; and
(b) is the monthly benefit actually payable for the life of
the surviving spouse under section 4.6 of the MOT Plan.
Benefit payments under this section 4.4 shall commence as of the
earliest date on which the surviving spouse is entitled to
receive benefit payments under section 4.6 of the MOT Plan,
regardless of the date on which the spouse actually begins to
receive payments under said section 4.6. The amount of such
payments shall be adjusted for the timing of the payments, in
accordance with Article IV of the MOT Plan. In calculating the
benefit described in 4.4(a) and 4.4(b) above, all Article XVIII
Benefits shall be disregarded.
Article V. Financing
5.1 Unfunded Plan. Except as otherwise provided pursuant
to section 5.2, the benefits under this Plan shall be paid in
cash out of the general assets of the Company.
5.2 Grantor Trust. Notwithstanding section 5.1, the
Company and each other Employer may establish a trust for the
purpose of accumulating assets to assist it in fulfilling its
obligations under the Plan, provided that--
(a) such trust shall be a "grantor trust" with the result
that the corpus and income of the trust be treated as
assets and income of the Employer pursuant to sections
671 through 679 of the Code; and
(b) the Plan shall be an "unfunded plan" within the meaning
of that term under the Code and the Employee Retirement
Income Security Act of 1974 as amended.
5.3 Unsecured Interest. No Participant hereunder shall
have any interest whatsoever in any specific asset of the
Employer. To the extent that any person acquires a right to
receive payments under this Plan, such right shall be no greater
than the right of any unsecured general creditor of the Employer.
5.4 Nonalienation. Except as otherwise provided by law, no
Participant entitled to receive benefits in accordance with the
provisions hereof shall have power to sell, assign, transfer,
pledge, or mortgage the benefits so payable to the Participant,
nor shall benefits be subject to levy, sale, seizure, attachment,
garnishment, or any other judicial process issued by or on behalf
of any creditor of a Participant.
Article VI. Administration
6.1 Administration. The Company shall be responsible for
the administration of the Plan. The Company shall have all such
powers as may be necessary to carry out the provisions hereof and
may, from time to time, establish rules for the administration of
the Plan and the transaction of the Plan's business. The Company
shall have the exclusive right to make any finding of fact
necessary or appropriate for any purpose under the Plan
including, but not limited to, the determination of the eligi
bility for and the amount of any benefit payable under the Plan.
The Company shall have the exclusive right to interpret the terms
and provisions of the Plan and to determine any and all questions
arising under the Plan or in connection with the administration
thereof, including, without limitation, the right to remedy or
resolve possible ambiguities, inconsistencies, or omissions, by
general rule or particular decision. The Company shall make, or
cause to be made, all reports or other filings, if any, necessary
to meet the reporting and disclosure requirement of ERISA. To
the extent permitted by law, all findings of fact, determin
ations, interpretations, and decisions of the Company shall be
conclusive and binding upon all persons having or claiming to
have any interest or right under the Plan.
6.2 No Enlargement of Employee Rights. Nothing contained in
the Plan shall be deemed to give any employee the right to be
retained in the service of the Employer or to interfere with the
right of the Employer to discharge or retire any employee at any
time.
6.3 Appeals from Denial of Claim. If any claim for benefits
under the Plan is wholly or partially denied, the claimant
shall be given notice in writing within a reasonable period of
time after receipt of the claim by the Plan (not to exceed 90
days after receipt of the claim or, if special circumstances
require an extension of time, written notice of the extension
shall be furnished to the claimant and an additional 90 days will
be considered reasonable) by registered or certified mail of such
denial, written in a manner calculated to be understood by the
claimant, setting forth the following information:
(a) the specific reasonings for such denial;
(b) specific reference to pertinent Plan provisions on
which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
(d) an explanation of the Plan's claim review procedure.
The claimant also shall be advised that he or his duly authorized
representative may request a review by the Company of the deci
sion denying the claim by filing with the Company, within 60 days
after such notice has been received by the claimant, a written
request for such review, and that he may review pertinent docu
ments, and submit issues and comments in writing within the same
60-day period. If such request is so filed, such review shall be
made by the Company within 60 days after receipt for such
request, unless special circumstances require an extension of
time for processing, in which case the claimant shall be so
notified and a decision shall be rendered as soon as possible,
but not later than 120 days after receipt of the request for
review. The Participant or beneficiary shall be given written
notice of the decision resulting from such review, which notice
shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant, and specific
references to the pertinent Plan provisions on which the decision
is based.
6.4 Notice of Address and Missing Persons. Each person
entitled to benefits under the Plan must file with the Company,
in writing, his post office address and each change of post
office address. Any communication, statement, or notice
addressed to such a person at his latest reported post office
address will be binding upon him for all purposes of the Plan and
neither the Company nor any Trustee shall be obliged to search
for or ascertain his whereabouts. In the event that such person
cannot be located, the Company may direct that such benefit and
all further benefits with respect to such person shall be
discontinued and all liability for the payment thereof shall
terminate; provided, however, that in the event of the subsequent
reappearance of the Participant or beneficiary prior to the
termination of the Plan, the benefits which were due and payable
and which such person missed shall be paid in a single sum, and
the future benefits due such person shall be reinstated in full.
6.5 Data and Information for Benefits. All persons
claiming benefits under the Plan must furnish to the Company or
its designated agent such documents, evidence, or information as
the Company or its designated agent consider necessary or
desirable for the purpose of administering the Plan, and such
person must furnish such information promptly and sign such
documents as the Company or its designated agent may require
before any benefits become payable under the Plan.
6.6 Indemnity for Liability. The Company shall indemnify
any individual who is directed by the Company to carry out
responsibilities and duties imposed by this Plan against any and
all claims, losses, damages, and expenses, including counsel
fees, approved by the Company, and any liability, including any
amounts paid in settlement with the Company's approval, arising
from the individual's action or failure to act, in connection
with such person's responsibilities and duties under the Plan,
except when the same is judicially determined to be attributable
to the gross negligence or willful misconduct of such person.
6.7 Tax Liability. The Company may withhold from any
payment of benefits hereunder any taxes required to be withheld
and such sum as the Company may reasonably estimate to be neces
sary to cover any taxes for which the Employer may be liable and
Which may be assessed with regard to such payment.
Article VII. Amendment and Termination
7.1 Amendment. The Company reserves the right to amend the
Plan at any time by action of its board of directors, provided
that retroactive Plan amendments may not decrease the accrued
benefits of any Participant determined as of the time the
amendment is adopted.
7.2 Termination. The Company reserves the right to
terminate the Plan at any time by action of its Board of
Directors.
7.3 Change in Control. Notwithstanding the preceding
provisions of this Article VII, no termination, amendment, or
change to this Plan which would have the effect of reducing
benefits or benefit accruals hereunder, which would rescind an
alternative procedure for accelerated payment previously adopted,
or which would otherwise have an adverse effect on the
determination of benefits hereunder shall be made after a Change
in Control occurs, and this Plan shall be, and the Company shall
require this Plan to be, a continuing obligation of the surviving
entity resulting from any Change in Control. Participants shall
be given written notice of any such termination, amendment, or
change within a reasonable time after any such action is taken.
Article VIII. Participation in and Withdrawal
from the Plan by an Employer
8.1 Participation in the Plan. Any Affiliate which desires
to become an Employer hereunder may elect, with the consent of
the Company's board of directors, to become a party to the Plan
and any Grantor Trust Agreement by adopting the Plan for the
benefit of its eligible employees, effective as of the date
specified in such adoption--
(a) by filing with the Company a certified copy of a
resolution of its board of directors to that effect,
and such other instruments as the Company may require;
and
(b) by the Company's filing with the then Trustee (if any)
a copy of such resolution, together with a certified
copy of resolutions of the Company's board of directors
approving such adoption.
The adoption resolution or decision may contain such specific
changes and variations in Plan or Grantor Trust Agreement terms
and provisions applicable to such adopting Employer and its
employees as may be acceptable to the Company and the Trustee.
However, the sole, exclusive right of any other amendment of
whatever kind or extent to the Plan or any Grantor Trust
Agreement is reserved by the Company. The Company may not amend
specific changes and variations in the Plan or any Grantor Trust
Agreement terms and provisions as adopted by the Employer in its
adoption resolution without the consent of such Employer. The
adoption resolution or decision shall become, as to such adopting
organization and its employees, a part of this Plan as then
amended or thereafter amended and any related Grantor Trust
Agreement. It shall not be necessary for the adopting
organization to sign or execute the original or then amended Plan
or any Grantor Trust Agreement documents. The coverage date of
the Plan for any such adopting organization shall be that stated
in the resolution or decision of adoption, and from and after
such effective date, such adopting organization shall assume all
the rights, obligations, and liabilities of an individual
employer entity hereunder and under any Grantor Trust Agreement.
The administrative powers and control of the Company, as provided
in the Plan and any Grantor Trust Agreement, including the sole
right to amendment, and of appointment and removal of the Trustee
and successor Trustees, shall not be diminished by reason of the
participation of any such adopting organization in the Plan and
any Grantor Trust Agreement.
8.2 Withdrawal from the Plan. Any Employer, by action of its
board of directors or other governing authority, may withdraw
from the Plan and any Grantor Trust Agreement after giving 90
days' notice to the Company's board of directors, provided the
Company's board of directors consents to such withdrawal.
Distribution of vested benefits (if any) to Participants affected
by such a withdrawal may be implemented through any method
determined by the Company and agreed to by the withdrawing
Employer.
CENTRAL ILLINOIS LIGHT COMPANY
RESTRUCTURED EXECUTIVE DEFERRAL PLAN
August 15, 1999
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - ELIGIBILITY 3
ARTICLE 3 - BASIC ACCOUNTS 3
ARTICLE 4 - WRAP-AROUND ACCOUNTS 3
ARTICLE 5 - TIMING AND FORM OF PAYMENT 4
ARTICLE 6 - BENEFICIARY DESIGNATION 5
ARTICLE 7 - DISCONTINUANCE, AMENDMENT OR TERMINATION 6
ARTICLE 8 - MISCELLANEOUS 7
ARTICLE 9 - ADMINISTRATION 9
RESTRUCTURED EXECUTIVE DEFERRAL PLAN
OF
CENTRAL ILLINOIS LIGHT COMPANY
History
Pursuant to the Executive Deferral Plan of Central Illinois
Light Company as established December 1, 1985 (the "EDP"),
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) were allowed to defer receipt of a portion of their
salary. Effective June 15, 1994, participation in the EDP was
frozen and salary deferrals ceased. However, the EDP accounts of
participants continue to be maintained under the EDP, growing
with interest credits, to be paid to participants as they
terminate employment, retire or otherwise become entitled to a
distribution under the EDP's provisions. Effective August 2,
1999, EDP participants have been given an opportunity to elect to
have their EDP benefits transferred to this plan, the
Restructured Executive Deferral Plan of Central Illinois Light
Company (the "Plan"). The names and social security numbers of
those EDP participants who have elected to transfer to the Plan
(the "Participants") are listed in Schedule I attached hereto.
Effective August 15, 1999, Participants' EDP accounts shall cease
to be governed by the provisions of the EDP and shall instead be
governed, for all purposes, by the provisions of this Plan.
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 "Account" shall mean a Participant's entire interest under
the Plan which shall consist of the Participant's Basic
Account and, if applicable, the Participant's Wrap-Around
Account.
1.2 "Applicable Interest Rate" means (a) effective January 1,
2000, with respect to a Plan Year, the average annual yield on 30-
year Treasury securities for the month immediately preceding the
first month of such Plan Year, and (b) prior to January 1, 2000,
with respect to each Plan Year, the interest rate that would be
used by the Pension Benefit Guaranty Corporation for determining
lump-sum distributions for plan terminations as of the first day
of the Plan Year.
1.3 "Basic Account" shall mean a Participant's Initial
Basic Account as specified in Schedule I increased by
interest credits and otherwise adjusted as provided in
Article 3. A Basic Account shall be maintained for each
Participant. A Participant's Basic 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 Basic Account shall
not constitute or be treated as a trust fund.
1.4 "Beneficiary" shall mean the person or 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.
1.5 "Committee" shall mean the administrative committee
appointed to manage and administer the Plan in accordance
with its provisions pursuant to Article 9.
1.6 "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, as amended, and all successor
companies thereto.
1.7 "Employer" shall mean the Company.
1.8 "Moody's Rate" shall mean the Moody's Seasoned Corporate
Bond Rate, which is an arithmetic average of yields of
representative bonds: industrials, public utilities, Aaa,
Aa, A, and Baa, increased by five percentage points. The
Moody's Rate for the Plan Year beginning August 15, 1999
shall be the Moody's Seasoned Corporate Bond Rate as
published in September 1998 increased by five percentage
points. The Moody's Rate for the Plan Year beginning
January 1, 2000 and each subsequent Plan Year shall be the
Moody's Seasoned Corporate Bond Rate published in the
November preceding the beginning of such Plan Year
increased by five percentage points.
1.9 "MOT Plan" shall mean the Pension Plan for Management,
Office and Technical Employees of Central Illinois Light Company.
1.10 "Participant" shall mean each individual listed in Schedule
I.
1.11 "Plan" shall mean the Restructured Executive Deferral Plan
as evidenced by this instrument.
1.12 "Plan Anniversary Date" shall mean the last day of the Plan
Year.
1.13 "Plan Year" shall mean (a) the period beginning August 15,
1999 and ending December 31, 1999, (b) calendar year 2000
and (c) each calendar year thereafter until all Plan
obligations have been satisfied.
1.14 "Termination Date" shall mean the date a Participant ceases
employment with the Company, voluntarily or involuntarily, for
any reason including retirement, disability, death, resignation
or discharge.
1.15 "Trustee" shall mean the trustee of a grantor ("rabbi")
trust established by the Company to whom the Company has
delegated the responsibility for Plan administration in
accordance with Article 9.
1.16 "Wrap-Around Account" shall mean a Participant's Initial
Wrap-Around Account, if any, as specified in Schedule II
increased by interest credits as provided in Article 4. A
Participant's Wrap-Around 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 Wrap-Around Account shall not
constitute or be treated as a trust fund.
Article 2 - Eligibility
As a condition of participation, each Participant shall complete,
execute and return to the Committee, prior to August 15, 1999, an
affirmative election (in the form attached hereto) to have his
EDP Account transferred to the Plan.
Article 3 - Basic Account
A Participant's Basic Account shall equal the Participant's
Initial Basic Account as stated in Schedule I increased each Plan
Anniversary Date on which the Participant remains employed by the
Company and on the Participant's Termination Date to reflect
simple interest based on the Applicable Interest Rate for the
Plan Year (or portion of the Plan Year preceding the
Participant's Termination Date). Notwithstanding the foregoing,
prior to determining any interest accrual for the Plan Year that
includes the Participant's Termination Date, a Participant's
Basic Account shall be reduced (but not below zero) by the
Participant's Account Balance, if any, under Article XVIII of the
MOT Plan. For this purpose, the Participant's Basic Account and
MOT Plan Account Balance shall be determined as of the first day
of the Plan Year that includes the Participant's Termination
Date. If the Participant's Account Balance under the MOT Plan
equals or exceeds the Participant's Basic Account, the
Participant shall cease to have a Basic Account as of the
Participant's Termination Date and shall receive no further
interest credits thereafter. If the Participant's Basic Account
exceeds the Participant's MOT Plan Account Balance, the
difference shall be credited with interest (at the Applicable
Interest Rate) for the period beginning on the first day of the
Plan Year that includes the Participant's Termination Date and
ending on the Participant's Termination Date. Under such
circumstances, post-Termination Date interest credits shall be
determined as provided in Article 5.
Article 4 - Wrap-Around Account
A Participant's Wrap-Around Account shall equal the Participant's
Initial Wrap-Around Account as stated in Schedule II increased
each Plan Anniversary Date on which the Participant remains
employed by the Company and on the Participant's Termination Date
to reflect simple interest based on the Moody's Rate for the Plan
Year or portion of the Plan Year preceding the Participant's
Termination Date.
Article 5 - Timing and Form of Benefit
5.1 Termination Benefit
Subject to the provisions of Section 5.3 below, a
Participant may elect to receive or begin receiving payment
of his Account as of the first day of any month following
the month in which the Participant's Termination Date
occurs.
5.2 Rate of Interest During Payment Period
For the period beginning on the Participant's Termination
Date and ending on either the date the Participant is to
receive a lump sum payment of his Account or the date the
last scheduled installment payment is to be made with
respect to the Participant's Account (the "Payment
Period"), the interest rate used for determining the amount
of any distribution from the Participant's Wrap-Around
Account shall 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 termination of employment occurs and the
four (4) immediately preceding Plan Years with an
additional five percentage points credited to such fixed
rate.
For the Payment Period, the interest rate used for
determining the amount of any distribution from the
Participant's Basic Account shall be based on the
Applicable Interest Rate for the Plan Year in which the
Participant's Termination Date occurs.
5.3 Form and Commencement of Benefits
At least thirty (30) days before his Termination Date, the
Participant must inform the Committee in writing of the
form in which his Account is to be paid, either in a lump
sum or in equal monthly installments over a specified
period, and the date as of which such lump sum payment is
to be made or as of which such monthly installments are to
begin. If no election is timely made, the Plan will pay
benefits in 240 equal monthly installments beginning on the
first day of the month following the month in which the
Participant's Termination Date occurs. In lieu of the 240
installment form, the Participant may elect 180 equal
monthly payments or may elect any number of equal monthly
payments to be made over a period of up to 120 months,
provided such election is filed with the Committee at least
thirty days before the Participant's Termination Date.
A Participant may elect to defer benefit commencement
beyond his Termination Date to a date certain selected by
the Participant. The deferral election must be executed by
the Participant in writing in a form acceptable to the
Committee and delivered to the Committee at least thirty
(30) days prior to the Participant's Termination Date.
Plan benefits which are deferred by reason of a
Participant's timely-filed deferral election 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 Plan benefits to a date beyond the latest of
(1) ten years following the Participant's commencement of
participation in the EDP, (2) the first day of the month
following the month in which the Participant's Termination
Date occurs, or (3) age 65.
5.4 Death Prior to Completion of Benefits
If a Participant who has elected the monthly installment
form of payment dies after the commencement of Plan benefit
payments but before the applicable Plan benefit is paid in
full, the Participant's unpaid Plan benefit payments shall
continue and be paid to that Participant's Beneficiary in
the same manner as selected by the Participant. If a
Participant dies prior to the commencement of Plan
benefits, his Beneficiary shall be paid benefits in a lump
sum on the first day of the month following the death of
the Participant. The aggregate benefits to be paid to the
Participant's Beneficiary will be in an amount equal to the
balance of the Participant's Account as of the date of the
Participant's death.
Article 6 - Beneficiary Designation
6.1 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).
6.2 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.
6.3 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).
6.4 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 7 - Discontinuance, Amendment or Termination
7.1 Discontinuance
The Company reserves the right to discontinue the Plan at
any time. Upon discontinuance of the Plan, the Partici
pants' Accounts shall be paid out according to the
provisions of Article 5. 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.
7.2 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 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.
7.3 Termination
The Company reserves the right to terminate the Plan and to
distribute Participants' Accounts to them as soon as
practicable thereafter. Notwithstanding the foregoing,
upon Plan termination, each Participant who has a Wrap-
Around Account balance shall receive an additional amount
equal to the difference between the present value of the
stream of future payments the Participant would have
received if the Plan had not been terminated (calculated as
described below) and the amount credited to the
Participant's Wrap-Around Account on the Plan's termination
date. For each such Participant who, as of the Plan's
termination date, is no longer employed by the Company
(i.e., has incurred a Termination Date), the present value
calculation shall be based on the stream of future payments
the Participant would have received pursuant to the
Participant's distribution election (or default election)
in effect on the Participant's Termination Date. For any
Participant with a Wrap-Around Account balance who is an
active employee on the Plan's termination date, the present
value calculation shall be based on the stream of future
payments the Participant would have received if the
Participant had terminated employment on the Plan's
termination date with a valid distribution election in
place providing for 240 installment payments to begin as of
the latest of (1) ten years following the Participant's
commencement of participation in the EDP, (2) the first day
of the month following the Participant's deemed Termination
Date, or (3) age 65.
Article 8 - Miscellaneous
8.1 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. 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.
8.2 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 insolvency.
8.3 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.
8.4 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.
8.5 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.
8.6 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.
8.7 Governing Law
The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Illinois.
8.8 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.
8.9 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
Restructured 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.
8.10 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 corpo
rate 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.
8.11 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.
8.12 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 the Moody's Rate from the date such
payment was due until the date such payment is made by the
Company.
8.13 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 9 - Administration
9.1 Administrator Duties
This Plan shall be administered by either (1) a Committee
which shall consist of persons appointed by the Board of
Directors of the Company or (2) an Independent Agent
appointed by the Board of Directors of the Company. The
Independent Agent shall be a bank, not an affiliate of the
Company, having a market capitalization exceeding
$100,000,000. The appointment of an Independent Agent
shall be irrevocable and shall preclude further
administration by a Committee provided, however, that upon
resignation or removal of an Independent Agent, the Company
shall appoint a successor Independent Agent who shall
satisfy the foregoing qualifications. Members of the
Committee may be Participants under this Plan. The
Committee or the Independent Agent, as appropriate, (the
"Administrator") 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.
9.2 Agents
In the administration of this Plan, the Administrator 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 also be counsel to the
Employer. The relationship between the Company and the
Trustee shall be set forth in the trust agreement by and
between the parties.
9.3 Binding Effect of Decision
The decision or action of the Administrator 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.
9.4 Indemnity of Administrator
The Employer shall indemnify and hold harmless the members
of the Committee or the Independent Agent, as appropriate,
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 or the
Independent Agent.
9.5 Employer Information
To enable the Administrator to perform its functions, the
Employer shall supply full and timely information to the
Administrator on all matters relevant to Participants' Plan
benefits and participation, including the date and
circumstances of the retirement, disability, death or
termination of employment of each Participant, and such
other pertinent information as the Administrator may
reasonably require.
9.6 Change in Payments
The Administrator 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.
BYLAWS
of
CENTRAL ILLINOIS LIGHT COMPANY
As Amended Effective April 1, 1999
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: An annual meeting of the
shareholders for the purpose of electing directors and for
the transaction of such other business as may come before
the meeting shall be held as determined by the Board of
Directors in accordance with the applicable provisions of
the Illinois Business Corporation Act.
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 between three and seven members.
"Section 2 - Election: 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. 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 immediately upon his or her retirement
or other termination of employment by the Company.
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.
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 862,579
<OTHER-PROPERTY-AND-INVEST> 171,214
<TOTAL-CURRENT-ASSETS> 179,541
<TOTAL-DEFERRED-CHARGES> 47,636
<OTHER-ASSETS> 569,983
<TOTAL-ASSETS> 1,830,953
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 468,833
<RETAINED-EARNINGS> (745)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 468,088
22,000
44,120
<LONG-TERM-DEBT-NET> 730,434
<SHORT-TERM-NOTES> 45,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 46,900
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 1,183
<LEASES-CURRENT> 520
<OTHER-ITEMS-CAPITAL-AND-LIAB> 442,708
<TOT-CAPITALIZATION-AND-LIAB> 1,830,953
<GROSS-OPERATING-REVENUE> 605,093
<INCOME-TAX-EXPENSE> (199)
<OTHER-OPERATING-EXPENSES> 564,461
<TOTAL-OPERATING-EXPENSES> 564,262
<OPERATING-INCOME-LOSS> 40,831
<OTHER-INCOME-NET> (1,037)
<INCOME-BEFORE-INTEREST-EXPEN> 39,794
<TOTAL-INTEREST-EXPENSE> 37,051
<NET-INCOME> 2,743
3,208
<EARNINGS-AVAILABLE-FOR-COMM> (465)
<COMMON-STOCK-DIVIDENDS> 29,813
<TOTAL-INTEREST-ON-BONDS> 30,530
<CASH-FLOW-OPERATIONS> 44,122
<EPS-BASIC> 0
<EPS-DILUTED> 0
</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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 862,579
<OTHER-PROPERTY-AND-INVEST> 4,285
<TOTAL-CURRENT-ASSETS> 164,627
<TOTAL-DEFERRED-CHARGES> 24,789
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,056,280
<COMMON> 185,661
<CAPITAL-SURPLUS-PAID-IN> 27,000
<RETAINED-EARNINGS> 121,504
<TOTAL-COMMON-STOCKHOLDERS-EQ> 334,165
22,000
44,120
<LONG-TERM-DEBT-NET> 237,934
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 46,900
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 1,183
<LEASES-CURRENT> 520
<OTHER-ITEMS-CAPITAL-AND-LIAB> 339,458
<TOT-CAPITALIZATION-AND-LIAB> 1,056,280
<GROSS-OPERATING-REVENUE> 553,474
<INCOME-TAX-EXPENSE> 11,276
<OTHER-OPERATING-EXPENSES> 498,128
<TOTAL-OPERATING-EXPENSES> 509,404
<OPERATING-INCOME-LOSS> 44,070
<OTHER-INCOME-NET> (1,595)
<INCOME-BEFORE-INTEREST-EXPEN> 42,475
<TOTAL-INTEREST-EXPENSE> 23,226
<NET-INCOME> 19,249
3,208
<EARNINGS-AVAILABLE-FOR-COMM> 16,041
<COMMON-STOCK-DIVIDENDS> 29,813
<TOTAL-INTEREST-ON-BONDS> 19,234
<CASH-FLOW-OPERATIONS> 65,768
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
