SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of the Report
(date of earliest event reported):
June 20, 1996
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-10628 CIPSCO INCORPORATED 37-1260920
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
<PAGE>
Item 5. Other Events.
Reference is made to Item 1. Business under the captions Utility
Subsidiary - Central Illinois Public Service Company,
Construction Program and Financing, Fuel and Environmental
Matters, to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations under the captions
Capital and Financing Requirements and Fuel Strategies, and to
Note 4. Commitments and Contingencies - Clean Air Act, Fuel
Strategies and Environmental Matters in the Consolidated Notes to
Financial Statements all as shown in the 1995 CIPSCO and CIPS
combined Annual Report on Form 10-K for information regarding
fuel strategies, capital requirements and environmental matters.
On June 20, 1996 CIPS and Amax Coal Company, a Cyprus Amax
Minerals company ("Cypress Amax"), a coal supplier for CIPS'
Newton Power Station Unit 1, executed a letter of intent which
contemplates that the parties will enter into an amendment to
their existing contract. Under the amendment, CIPS would make a
$70 million prepayment to Cyprus Amax (scheduled for November
1996) rather than buy high-cost, high-sulfur coal under the
existing contract. CIPS will cease taking delivery of high-
sulfur coal from the Delta mine of Cyprus Amax, located near
Harrisburg in southern Illinois. CIPS will make certain
alternate low-sulfur, out-of-state coal purchases from Cyprus
Amax or its affiliates during 1996. The final agreement is to
provide options for future low-sulfur, out-of-state coal
purchases by CIPS from Cyprus Amax or its affiliates in 1997,
1998 and 1999.
CIPS issued a press release describing further details of the
transaction which is filed herewith as an exhibit and
incorporated herein by reference.
Effectiveness of the coal switching plan is subject to execution
of definitive agreements by the parties. Under the letter of
intent, CIPS would not be required to proceed with the proposed
amendments to the existing contract if CIPS determines that the
regulatory treatment of the transaction is unsatisfactory. CIPS
cannot predict the outcome of such regulatory review.
Management anticipates that future compliance with applicable
environmental regulations will be met through use of low-sulfur
coal.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements - None
(b) Pro Forma Financial Information - None
(c) Exhibits
Exhibit 99 Press release of Central Illinois Public
Service Company, dated June 21, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants CIPSCO Incorporated and Central Illinois
Public Service Company have duly caused this report to be signed
on each registrant's behalf by the undersigned hereunto duly
authorized.
CIPSCO Incorporated
(Registrant)
Central Illinois Public Service Company
(Registrant)
/s/ W. A. Koertner
Date: June 21, 1996 _______________________________________
W. A. Koertner
Vice President of each Registrant
-4-<PAGE>
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
EXHIBIT INDEX TO FORM 8-K
WHICH REPORTS THE EVENT DATED JUNE 20, 1996
Page Number in
Sequentially
Exhibit No. Description Numbered System
___________ ___________ _______________
99 Press release announcing, among 6-7
other things, fuel contract
modification with Amax Coal
Company, switching fuels at
Newton Unit 1 and discontinued
use of the scrubber.
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EXHIBIT 99
CIPS NEWS FROM/Central Illinois Public Service Company
____
Central Illinois Public Service Company
Public Relations Contacts
Ed Cobau Lynne Galia
Office 217/525-5238 Office 217/525-5232
Home 217/793-1615 Home 217/698-9210
FOR IMMEDIATE RELEASE
Springfield, IL (Friday, June 21) - Central Illinois Public Service Co.
Friday announced a plan to switch fuels at its Newton Power Station Unit 1
in Jasper County. The fuel switch is expected to benefit all customers by
lowering electricity costs, said Clifford L. Greenwalt, the utility's
president and chief executive officer. He estimated all-in total savings
in excess of $100 million over a 10-year period.
"CIPS plans to begin burning low-cost, low-sulfur coal from out of state at
Newton Unit 1, thereby avoiding the need for substantial renovation to the
flue gas desulfurization equipment (scrubber) in use at the station since
1979," said Greenwalt. "When the fuel switch is made, we will cease taking
delivery of high-sulfur coal from the Delta mine, located near Harrisburg
in southern Illinois."
For many years CIPS has purchased 1.3 to 1.5 million tons of high-sulfur
coal annually from the Delta mine of Amax Coal Co., a Cyprus Amax Minerals
company, under a contract which expires at the end of 2002. CIPS and
Cyprus Amax have signed a letter of intent which calls for the parties to
enter into an amendment to their existing contract. Under this amendment,
CIPS would make a $70 million prepayment later this year and not continue
to buy high-cost, high-sulfur coal under the existing contract.
"We analyzed many options, including continuing to burn Illinois coal and
renovating the scrubber," Greenwalt said. "The decision to switch to out-
of-state, low-sulfur coal, which will not require use of the scrubber, will
result in substantial savings for all CIPS customers."
The anticipated $100 million in savings is the net result of payment of the
prepaid charge, significantly lower delivered coal costs, elimination of
costs to renovate the scrubber and avoidance of its related operation and
maintenance expenses, Greenwalt said. "It is essential for us to keep our
costs as low as possible to maintain the economic vitality of our service
area as we compete with other power suppliers," he emphasized.
Plans are to purchase low-sulfur, out-of-state coal to supply Newton Unit 1
through the remainder of 1996. The initial coal switch is not expected to
require any significant additional capital expenditures. The final
agreement will provide options for future purchases of low-sulfur coal from
Cyprus Amax by CIPS in 1997, 1998 and 1999.<PAGE>
CIPS will request the Illinois Commerce Commission to review certain
aspects of the proposal, including recovery of the $70 million prepayment
over a number of years, the purchases of out-of-state coal, continued
recovery of the investment in the scrubber, and the proper accounting
treatment for the transaction.
Under the proposal with Cyprus Amax, CIPS would not be required to proceed
with the transaction if CIPS determines that the regulatory treatment is
unsatisfactory.
"This is a complex proposal," said Greenwalt, "and while we cannot predict
what the regulatory treatment will be, we believe we can demonstrate that
the fuel switch will produce significant overall benefits for our
customers. If the transaction is fully implemented as proposed, customers
will begin to realize modest savings immediately, with greater benefits
realized over the longer term."
He pointed out CIPS will continue to be a large purchaser of Illinois coal
even after the fuel switch at Newton. Nearly 2.7 million tons of Illinois
coal would be purchased annually for the utility's other generating
stations.
The utility expects external financing in 1996 to be less than $100 million
to fund the prepaid charge due Cyprus Amax and for other previously planned
financings.
CIPS provides electric service to about 317,000 customers in 557
communities within a 20,000 square mile area in central and southern
Illinois.
# # #
PLEASE NOTE: Press inquiries concerning the Delta mine may be directed to
Mike Rounds of Cyprus Amax at (303) 643-5186.
