UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 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, 1997
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.
1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title Of Class
Cumulative Preferred Stock, par value $100 per share
Depositary Shares, each representing one-fourth of a share of 6.625%
Cumulative Preferred Stock, par value $100 per share
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
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)
Aggregate market value at February 1, 1998 of the voting stock held by
non-affiliates of Central Illinois Public Service Company (CIPS) -
$22,626,000 - Cumulative Preferred Stock (par value $100 per share) [Note:
Excludes value of 400,000 shares of Cumulative Preferred Stock for which
CIPS has been unable to determine market value.] Number of shares
outstanding of each of CIPS' classes of common stock at February 1, 1998:
25,452,373 shares of Common Stock, without par value (all owned by Ameren
Corporation).
Documents Incorporated By Reference:
A portion of CIPS' Proxy Statement relating to its 1998 Annual Meeting
of Shareholders is incorporated by reference in Part III.
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business
Merger . . . . . . . . . . . . . . . . . . . . . . .
General. . . . . . . . . . . . . . . . . . . . . . .
Construction Program and Financing . . . . . . . . .
Rate Matters . . . . . . . . . . . . . . . . . . . .
Electric Operations. . . . . . . . . . . . . . . . .
Gas Operations . . . . . . . . . . . . . . . . . . .
Fuel . . . . . . . . . . . . . . . . . . . . . . . .
Regulation . . . . . . . . . . . . . . . . . . . . .
Environmental Matters. . . . . . . . . . . . . . . .
Competition -- Electric Business . . . . . . . . . .
Competition -- Gas Business. . . . . . . . . . . . .
Utility Industry . . . . . . . . . . . . . . . . . .
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . .
Item 4. Submission of Matters to a Vote of Security Holders . . .
PART II
Item 5. Market for Registrants' Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . .
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . .
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . .
Item 8. Financial Statements and Supplementary Data . . . . . . .
Report of Independent Public Accountants. . . . . . . . .
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . .
PART III
Item 10. Directors and Executive Officers of the Registrant . . .
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions. . . . . .
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . . .
Exhibits. . . . . . . . . . . . . . . . . . . . . . . . .
PART I
Item 1. Business
MERGER. Central Illinois Public Service Company ("CIPS", the
"Company" or "AmerenCIPS", as noted) became a subsidiary of Ameren
Corporation ("Ameren"), following completion of the merger between CIPSCO
Incorporated (formerly the parent holding company of CIPS) and Union
Electric Company ("UE") on December 31, 1997.
GENERAL. The Company, an Illinois corporation, was organized in 1902.
CIPS is a public utility operating company engaged in the sale of
electricity and natural gas in portions of central and southern Illinois.
CIPS generates, transmits and distributes electricity and, through
interchange agreements with other utility systems, purchases and sells
power on a firm basis, in emergency situations or when economical to do so.
CIPS sells and distributes natural gas which it purchases from natural gas
producers and other suppliers and transports natural gas purchased by end-
users directly from suppliers. The principal executive offices of CIPS are
located in Springfield, Illinois.
CIPS furnishes electric service to about 323,000 retail customers in
557 incorporated and unincorporated communities and adjacent suburban and
rural areas.
CIPS also furnishes natural gas service to about 170,000 retail
customers in 267 incorporated and unincorporated communities and adjacent
suburban and rural areas and provides gas transportation service to end-
users. CIPS furnishes both electric and natural gas service in 236 of the
communities served by it.
The territory served by CIPS, located in 66 counties in Illinois, has
an estimated population of 820,000 and is devoted principally to
agriculture and diversified industrial operations. Key industries include
petroleum and petrochemical industries, food processing, metal fabrication
and coal mining.
CIPS recorded an extraordinary charge to earnings in the fourth quarter
of 1997 for the write-off of generation-related regulatory assets and
liabilities as a result of electric industry restructuring legislation
enacted in Illinois in December 1997. The write-off reduced earnings $25
million, net of income taxes. (See Note 2 to the "Notes to Financial
Statements" under Item 8 herein.)
For the year ended December 31, 1997, the Company derived approximately
82% of its operating revenues from its electric business and 18% from its
natural gas business. For 1996 and 1995, the corresponding percentages were
82% electric and 18% natural gas, and 84% electric and 16% natural gas,
respectively.
The total number of active employees of the Company was 2,230 at the
payroll period nearest year-end 1997. Of these, 1,325 employees are
represented by unions under collective bargaining agreements. All labor
agreements expire on June 30, 1999 with the exception of one agreement which
expires February 28, 2001. Effective with the merger, approximately 325
employees transferred to Ameren's subsidiary, Ameren Services Company.
CONSTRUCTION PROGRAM AND FINANCING. Total construction expenditures
for CIPS for 1998 through 2002 are estimated at $420 million. Capital
expenditures for compliance with the Clean Air Act Amendments of 1990 are
included in the construction program, but the estimate does not include
expenditures which may be incurred to meet new air quality standards - -
also see "Environmental Matters" below. (See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources.)
CIPS has no electric generating units under construction. (See Item
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources.)
CIPS has filed shelf registration statements with the Securities and
Exchange Commission, covering up to $200 million of first mortgage bonds
and medium-term notes. The authority remaining under the shelf
registration is $75 million. CIPS currently has authority from the
Illinois commission to issue or incur up to $200 million of first mortgage
bonds, medium-term notes and bank borrowings outstanding at any time
through December 31, 1998. Pursuant to this authority, in February 1997
CIPS entered into long-term credit facilities with banks which currently
provide for up to $42 million of borrowings. The authority remaining at
the Illinois commission will allow the incurrence of $54 million of long-
term debt.
The issuance by CIPS of first mortgage bonds, medium-term notes and/or
other secured debt securities, common stock, preferred stock and certain
unsecured debt securities is subject to the receipt of necessary regulatory
approvals. (See Business - Regulation.)
The Mortgage Indenture of CIPS, as presently operative, permits the
issuance of additional first mortgage bonds up to 60% of available net
expenditures for bondable property, provided the "net earnings" of CIPS
(before income taxes and otherwise as provided in the Mortgage Indenture)
for a recent 12-month period equal at least twice the annual interest
requirements on all first mortgage bonds outstanding (and on all equally
secured and prior lien indebtedness) and on the bonds then to be issued.
At December 31, 1997, the more restrictive of these requirements was the
"net earnings" test. The "net earnings" of CIPS for the year ended
December 31, 1997, so computed, were equal to 5.27 times the interest for
one year on the aggregate amount of bonds outstanding under the Mortgage
Indenture at December 31, 1997. Based on the "net earnings" of CIPS (so
computed) for the year ended December 31, 1997, and the bonds outstanding
under the Mortgage Indenture at December 31, 1997, CIPS could have issued
about $603 million of additional first mortgage bonds under the foregoing
interest coverage provision (assuming an annual interest rate of 7.02% on
such bonds).
The Articles of Incorporation of CIPS provide, in effect, that so long
as any CIPS preferred stock is outstanding, CIPS shall not, without the
requisite vote of the holders of preferred stock, unless the retirement of
such stock is provided for, (a) issue any preferred or equal ranking stock
(except to retire or in exchange for an equal amount thereof) unless the
"gross income available for interest" of CIPS for a recent 12-month period
is at least one and one-half (1-1/2) times the sum of (i) one year's
interest on all funded debt and notes maturing more than 12 months after
the date of issuance of such shares and (ii) one year's dividend
requirement on all preferred stock to be outstanding after such issue, or
(b) issue or assume any unsecured debt securities maturing less than two
years from the date of issuance or assumption (except for certain refunding
or retirement purposes) if immediately after such issuance or assumption
the total amount of all such unsecured debt securities would exceed 20% of
the sum of all secured debt securities and the capital and surplus of CIPS.
For the year ended December 31, 1997, the "gross income available for
interest" of CIPS equalled 2.38 times the sum of the annual interest
charges and dividend requirements on all such funded debt, notes and
preferred stock outstanding at December 31, 1997. Such "gross income
available for interest" was sufficient under the test to support the
issuance of additional preferred stock (assuming an annual dividend rate on
such preferred stock of 7.00%) in an amount in excess of the maximum amount
($185 million) of authorized and unissued preferred stock under the
Articles.
RATE MATTERS. In April 1993, CIPS began recovering amounts under
environmental adjustment clause riders for the cleanup and restoration of
former manufactured gas plant sites (environmental remediation sites). The
Illinois commission has instituted a reconciliation proceeding to review
CIPS' environmental remediation activities in 1993, 1994 and 1995 and to
determine whether the revenues collected under the riders in 1993 were
consistent with the amount of remediation costs prudently incurred. The
Illinois commission also has instituted a reconciliation proceeding to
review CIPS' environmental activities in 1996. The initial proceeding for
the years 1993-1995 has been completed and is awaiting Illinois commission
action. The second proceeding, for the year 1996, is ongoing. (See Note 8
of Notes to Financial Statements included under Item 8 of this report.)
The retail fuel adjustment clause (FAC) of CIPS was consistent with
the uniform FAC mandated by the Illinois commission for all electric
utilities as applicable to retail electric sales in Illinois. The FAC
provided for the recovery of changes in electric fuel costs, including
certain transportation costs of coal, in billings to retail customers. On
February 13, 1998, CIPS filed with the Illinois commission to eliminate its
retail FAC and to roll-in the average FAC amounts for the years 1995 and
1996 into its base rate energy charges, and the request has been approved.
The Illinois commission conducts annual proceedings to determine
whether the electric fuel and purchased gas charges collected by CIPS in
each year pursuant to the applicable fuel adjustment and purchased gas
adjustment clauses reflect the actual costs of electric fuel and natural
gas prudently purchased in that year and to reconcile revenues collected
under the clauses during the year with actual costs incurred. The Illinois
commission can order refunds to customers if it determines that actual
costs of fuel or purchased gas were less than the amounts charged to
customers pursuant to the clauses or if it finds that CIPS was imprudent in
its purchases of fuel or gas. The Illinois commission has completed its
review of fuel adjustment and purchased gas adjustment charges for all
years prior to 1997. No significant refunds or adjustments were required
for those years. A fuel reconciliation proceeding for the year 1997 is
pending. (See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Outlook and Note 2 of Notes to
Financial Statements included under Item 8 of this report.)
ELECTRIC OPERATIONS. Since 1977 CIPS has been a net off-system seller
of electricity and during 1997 it generated 135% of its system
requirements.
GAS OPERATIONS. CIPS distributes and sells natural gas to 267
incorporated and unincorporated communities located in 41 counties of
central and southern Illinois. The CIPS service territory is predominantly
made up of small towns and rural areas. Of the communities served, only 5
have populations greater than 15,000. Customer density on the CIPS gas
system is approximately 35 customers per mile of main.
The rate schedules of CIPS applicable to all of its gas sales include
a uniform purchased gas adjustment clause, which permits CIPS to adjust its
rates to its customers to reflect substantially all changes in the cost of
purchased gas. (See Note 1 of Notes to Financial Statements included under
Item 8 of this report. See Business - Rate Matters.)
FUEL. Over 99% of the net kilowatthour generation of CIPS in 1997 was
provided by coal-fired generating units and the remainder by an oil-fired
unit.
The average costs of fuel consumed by CIPS, per ton and per million
Btu, for the periods shown were as follows:
1997 1996 1995
Per ton ($) . . . . . . . . . . . . 33.22 36.16 37.69
Per million Btu ($) . . . . . . . . 1.63 1.71 1.76
In 1997, approximately 21.2% of the coal purchased for electric
generation was purchased on a spot basis at average delivered costs of
$26.61 per ton and $1.20 per million Btu.
The amount of coal supplies on hand at the generating stations of CIPS
varies from time to time. CIPS generally attempts to maintain a 65-day
supply. Approximately 80% of the annual coal requirements of the
generating facilities of CIPS are being met by long-term coal contracts
expiring at various dates from 1998 to 2010. As contracts approach their
expiration, or when appropriate, CIPS evaluates alternative supply
arrangements based on then current and expected market conditions for coal.
CIPS believes there are adequate reserves reasonably available to supply
its existing generating units with the quantity and quality of coal
required for the foreseeable future.
See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources and
Note 8 to "Notes to Financial Statements" under Item 8.
REGULATION. As a subsidiary of Ameren, CIPS is subject to the
provisions of the Public Utility Holding Company Act of 1935. CIPS is
subject to regulation by the Illinois commission as to rates, accounting
practices, issuance of certain securities and in other respects as provided
by Illinois law. The Electric Supplier Act of Illinois permits utilities
and electric cooperatives to delineate their respective service areas,
subject to the approval of the Illinois commission, and gives the Illinois
commission power to determine, pursuant to guidelines provided in the Act,
whether a prospective electric customer will be furnished service by a
public utility or by a cooperative.
The FERC has jurisdiction under the Federal Power Act over certain of
the electric utility facilities and operations, accounting practices,
issuance or acquisition of certain securities and electric rates of CIPS
for resale and interchange customers. CIPS has been classified as a
"public utility" within the meaning of that Act. CIPS has been declared
exempt from the federal Natural Gas Act.
In December 1997, the Governor of Illinois signed the Electric Service
Customer Choice and Rate Relief Law of 1997 providing for electric utility
restructuring in Illinois. This legislation introduces competition into
the supply of electric energy in Illinois and, as a result, prices for the
retail supply of electric generation are expected to transition from cost-
based regulated rates to rates determined in large part by competitive
market forces. For a discussion of the legislation, see Note 2 to the
"Notes to Financial Statements" under Item 8.
ENVIRONMENTAL MATTERS. CIPS is subject to regulation with respect to
air and water quality standards, standards relating to the discharge and
disposal of solid and hazardous wastes and other environmental matters by
various federal, state and local authorities. The Illinois Pollution
Control Board (the "Board") has jurisdiction over all phases of
environmental control by the State of Illinois and has authority to grant
variances from environmental requirements. The Illinois Environmental
Protection Agency (the "Agency") has authority to issue permits,
investigate violations and recommend enforcement cases. The Illinois
Attorney General has the authority to prosecute enforcement cases. The
United States Environmental Protection Agency (the "USEPA") has
jurisdiction to promulgate and enforce air and water quality standards in
addition to those standards which relate to the discharge and disposal of
solid and hazardous wastes.
Air pollution control regulations promulgated by the Board impose
restrictions on emissions of particulate, sulfur dioxide, nitrogen oxides
and other air pollutants and require that CIPS obtain permits from the
Agency for the construction and operation of its generating facilities in
compliance with these regulations. CIPS has secured all necessary
operating permits for all of its existing generating facilities and is in
substantial compliance with the provisions contained therein. Future
construction projects may require additional construction permits.
Under Title IV of the Clean Air Act Amendments of 1990, the Company is
required to significantly reduce total annual sulfur dioxide emissions by
the year 2000. Significant reductions in nitrogen oxide are also required.
By switching to low-sulfur coal, the Company anticipates that it can comply
with the requirements of the law without significant revenue increases
because the related capital costs are largely offset by lower fuel costs.
As of year-end 1997, estimated remaining capital costs expected to be
incurred pertaining to Clean Air Act-related projects totaled $72 million.
In July 1997, the United States Environmental Protection Agency (EPA)
issued final regulations revising the National Ambient Air Quality
Standards for ozone and particulate matter. Although specific emission
control requirements are still being developed, it is believed that the
revised standards will require significant additional reductions in
nitrogen oxide and sulfur dioxide emissions from coal-fired boilers. In
October 1997, the EPA announced that Illinois is included in the area
targeted for nitrogen oxide emissions reductions as part of the EPA's
regional control program. Reduction requirements in nitrogen oxide
emissions from the Company's coal-fired boilers could exceed 80% from 1990
levels by the year 2002. Reduction requirements in sulfur dioxide
emissions may be up to 50% beyond that already required by Phase II acid
rain control provisions of the 1990 Clean Air Act Amendments and could be
required by 2007. Because of the magnitude of these additional reductions,
the Company could be required to incur significantly higher capital costs
to meet future compliance obligations for its coal-fired boilers or
purchase power from other sources, either of which could have significantly
higher operations and maintenance expenditures associated with compliance.
At this time, the Company is unable to determine the impact of the revised
air quality standards on its future financial condition, results of
operations or liquidity.
In December 1997, the United States and numerous other countries
agreed to certain environmental provisions (the Kyoto Protocol), which
would require decreases in greenhouse gases in an effort to address the
"global warming" issue. The Company is unable to predict what
requirements, if any, will be adopted in this country. However,
implementation of the Kyoto Protocol in its present form would likely
result in significantly higher capital costs and operations and maintenance
expenditures by the Company. At this time, the Company is unable to
determine the impact of these proposals on its future financial condition,
results of operations or liquidity.
Water pollution control regulations promulgated by the Board impose
restrictions on effluent discharges, set water quality standards and
require CIPS to obtain construction permits for certain facilities and
National Pollutant Discharge Elimination System ("NPDES") permits for
discharges into public waters. CIPS has secured all necessary NPDES
permits for all of its generating units and is in substantial compliance
with the currently effective provisions contained therein, except as noted
in the following paragraph.
On August 2, 1996, the Company received notice that the Illinois
Attorney General had filed a complaint with the Board alleging various
violations of wastewater discharge permit conditions at the Hutsonville
Power Station. The allegations had been the subject of prior pre-
enforcement conference letters. The complaint seeks monetary penalties and
the award of attorney fees. The Company, the Agency, and the Attorney
General are continuing to work on a plan to resolve these issues. While
the Company cannot predict the final outcome of this matter, it does not
believe that the final resolution will have a material adverse effect on
financial position, results of operations or liquidity of the Company.
Pollution control regulations promulgated by the Board impose
restrictions on the discharge and disposal of solid and hazardous waste,
and determine design standards to prevent contamination of groundwater.
CIPS has secured all necessary permits and authorizations for disposal and
is in substantial compliance with the provisions contained therein. Future
construction projects may require additional authorizations or permits.
On January 16, 1997, the Agency issued CIPS a notice of violation
concerning an incident at the Newton Power Station. On September 9, 1996,
a truck driver delivering sodium hydroxide mistakenly unloaded the caustic
material into an acid storage tank. When the two chemicals mixed, a
violent reaction occurred and the ensuing explosion discharged acid and
caustic material into the environment. The Agency is seeking a thorough
site investigation followed up by appropriate remedial actions. The site
has been extensively cleaned up. The Company believes that sole
responsibility for this incident rests with the trucking company and will
vigorously defend any further action by the Agency.
As of December 31, 1997, CIPS has been designated as a potentially
responsible party (PRP) by federal and state environmental protection
agencies at three hazardous waste sites. Other hazardous waste sites have
been identified for which CIPS may be responsible but has not been designated
a PRP. Cost relating to studies and remediation and associated legal and
litigation expenses are being accrued and deferred rather than expensed
currently, pending recovery through rates. Through December 31, 1997, the
total of the costs deferred, net of recoveries from insurers and through
environmental adjustment clause rate riders approved by the ICC, was $13
million.
See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources and
Note 8 to Notes to Financial Statements under Item 8.
COMPETITION -- ELECTRIC BUSINESS. Competition is increasing in the
electric utility business. A description of some of the competitive
factors, including state and federal restructuring efforts, and the
potential impact of such matters on CIPS, are described in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Electric Industry Restructuring and Note 2 to the "Notes to the
Financial Statements" under Item 8. Future regulatory, legislative,
technological and economic changes can be expected to further increase
competition in wholesale as well as retail markets. (See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Outlook.)
COMPETITION -- GAS BUSINESS. Competition in the natural gas industry
is increasing. For a number of years, CIPS customers have had the ability
to purchase natural gas from producers or other suppliers and transport
that gas through the interstate pipelines and the CIPS system. CIPS
collects a rate for transportation through its system. Policies of the
FERC have increased the competitive nature of the gas business. In certain
cases customers have the ability to receive their gas supply directly from
pipelines and bypass the CIPS system. Illinois utilities, under special
rate provisions authorized by the Illinois Commerce Commission (the
"Illinois commission"), are authorized to negotiate special contractual
sales arrangements with their larger natural gas customers as a means of
retaining such customers. CIPS has negotiated or is currently negotiating
with a number of its larger industrial gas customers regarding flexible
rates to address the more competitive environment in which CIPS is
operating. While CIPS has had to provide lower rates to retain some
customers, CIPS has used this same flexibility to obtain some new loads.
UTILITY INDUSTRY. CIPS is experiencing some of the problems common to
electric and gas utility companies, namely, increased competition for
customers, increased construction costs, delays and uncertainties in the
regulatory process and costs of compliance with environmental and other
laws and regulations. (See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Outlook.)
Item 2. Properties.
CIPS owns 20%, (Union Electric owns 40% and two other utilities own
the remaining 40%) of the common stock of Electric Energy, Inc. (EEI). The
owners, including CIPS, are entitled to receive from EEI varying amounts of
power. Electric Energy, Inc. owns and operates a 1,015,000 kilowatt coal-
fired power station located in Joppa, Illinois.
CIPS is a member of the Mid-America Interconnected Network reliability
council made up of utilities, public power generators, power marketers and
others, which has as its purpose the promotion of maximum coordination of
planning, construction and utilization of generation and transmission
facilities on a regional basis in order to assure the reliability of
electric bulk power supply in the area served.
The electric generating facilities of CIPS consist of the following:
Estimated
1998 Summer
Year Capability
Station and Unit Fuel Installed (KW)
Newton
Unit 1 . . . . . . . . . Coal 1977 555,000
Unit 2 . . . . . . . . . Coal 1982 555,000
Coffeen
Unit 1 . . . . . . . . . Coal 1965 340,000
Unit 2 . . . . . . . . . Coal 1972 560,000
Grand Tower
Unit 3 . . . . . . . . . Coal 1951 82,000
Unit 4 . . . . . . . . . Coal 1958 104,000
Hutsonville
Unit 3 . . . . . . . . . Coal 1953 76,000
Unit 4 . . . . . . . . . Coal 1954 77,000
Diesel Unit. . . . . . . Oil 1968 3,000
Meredosia
Unit 1 . . . . . . . . . Coal 1948 62,000
Unit 2 . . . . . . . . . Coal 1949 62,000
Unit 3 . . . . . . . . . Coal 1960 215,000
Unit 4 . . . . . . . . . Oil 1975 168,000
Total . . . . . . . . 2,859,000
=========
All of the generating stations are located in Illinois on land owned
in fee by CIPS.
CIPS maintains a diversified portfolio of gas supply, transportation,
leased storage and no-notice service contracts to reliably serve its gas
customers. In addition, CIPS' owned storage and propane-air facilities
provide additional reliability and flexibility to meet peak day and peak
season requirements. In recent years CIPS has made investments to
construct additional pipeline interconnections, increase CIPS owned storage
capacity, improve reliability of existing storage facilities, modernize
propane-air facilities and improve data acquisition capabilities. At the
same time CIPS has reorganized and enhanced its gas supply planning and
procurement functions.
At December 31, 1997, CIPS owned about 13,100 pole miles of overhead
electric lines and about 1,000 miles of underground electric lines. At
that date, CIPS also owned 4,800 miles of natural gas transmission and
distribution mains, four underground gas storage fields and one propane-air
gas plant used to supplement the available pipeline supply of natural gas
during periods of abnormally high demands.
Substantially all of the permanent fixed utility property of CIPS is
subject to the lien of the Mortgage Indenture securing CIPS first mortgage
bonds.
Item 3. Legal Proceedings.
On December 22, 1995, a complaint was filed in the Circuit Court for
the Seventh Judicial Circuit, Sangamon County, Illinois against CIPS and
several other defendants. The complaint seeks unspecified monetary damages
and alleges that, as a result of exposure to carcinogens contained in coal
tar at the CIPS Taylorville gas plant site, plaintiffs' children had
suffered from a rare form of childhood cancer known as "neuroblastoma."
The plaintiffs in this complaint are the plaintiffs who on October 5, 1995
voluntarily dismissed claims in a similar complaint in the Circuit Court
for the Fourth Judicial Circuit, Christian County, Illinois. On April 17,
1996, the Seventh Judicial Circuit Court, Sangamon County, Illinois granted
approval of the petition by CIPS requesting transfer of this case to the
Circuit Court for the Fourth Judicial Circuit, Christian County, Illinois.
On March 27 1998, a jury awarded plaintiffs $3.2 million. CIPS continues to
believe it has meritorious defenses and plans to appeal the verdict.
Management believes that final disposition of this matter will not have a
material adverse effect on financial position, results of operations or
liquidity of the Company.
Reference is made to Note 8 of Notes to Financial Statements for a
discussion of the order of the Illinois commission approving a coal
contract restructuring, including recovery through the automatic fuel
adjustment clause ("FAC"), over a period estimated to be 72 months, of a
$70 million restructuring charge and associated carrying costs. On
February 28, 1997, a group of industrial customers who had intervened in
the proceeding before the Illinois commission filed an appeal of the order
with the Illinois Third District Appellate Court. The industrial customers
asked the court to reverse or remand that portion of the order authorizing
CIPS to recover the restructuring charge through the FAC. On November 24,
1997, the Court reversed the Illinois commission's order, finding that the
restructuring charges were not direct costs of fuel that may be recovered
through the retail FAC, but rather should be considered as a part of a
review of CIPS' aggregate revenue requirements in a full rate case.
Restructuring charges allocated to wholesale customers (about $7 million of
the total) are not in question as a result of the opinion of the Court. In
December 1997, the Company requested a rehearing by the Court; that request
was denied. However, the Court did rule that all revenues collected under
the retail FAC in 1997 would not have to be refunded to customers. The
Company has appealed to the Illinois Supreme Court the Court's decision
that restructuring charges may not be recovered through the retail FAC.
CIPS is involved in other legal and administrative proceedings before
various courts and agencies with respect to matters arising in the ordinary
course of business, some of which involve substantial amounts. CIPS believes
that the final disposition of these proceedings will not have a material
adverse effect on its financial position, results of operations or liquidity.
Statements made in this report which are not based on historical
facts, are forward-looking and, accordingly, involve risks and
uncertainties that could cause actual results to differ materially from
those discussed. Although such forward-looking statements have been made
in good faith and are based on reasonable assumptions, there is no
assurance that the expected results will be achieved. These statements
include (without limitation) statements as to future expectations, beliefs,
plans, strategies, objectives, events, conditions and financial
performance. In connection with the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company is providing
this cautionary statement to identify important factors that could cause
actual results to differ materially from those anticipated. Factors
include, but are not limited to, the effects of regulatory actions; changes
in laws and other governmental actions; competition; future market prices
for electricity; average rates for electricity in the Midwest; business and
economic conditions; weather conditions; fuel prices and availability;
generation plant performance; monetary and fiscal policies; and legal and
administrative proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders of CIPS
during the three months ended December 31, 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
All the common stock of CIPS, 25,452,373 shares, is owned by Ameren
Corporation and is not publicly traded.
Item 6. Selected Financial Data.
For the Years Ended
December 31, 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(in thousands)
Operating Revenues $ 852,075 $ 881,102 $ 828,073 $ 835,882 $ 834,556
Operating Income 102,495 116,531 106,029 110,678 113,651
Net Income 38,620 77,393 70,631 81,913 84,011
Preferred Stock Dividends 3,715 3,721 3,850 3,510 3,718
Net Income after Dividends
on Preferred Stock 34,905 73,672 66,781 78,403 80,293
Common Stock Dividends 43,300 62,950 71,000 68,600 33,500*
As of December 31,
Total Assets $1,788,707 $1,795,353 $1,759,838 $1,726,540 $1,720,367
Long-Term Debt** 558,474 421,228 478,926 474,619 494,323
*Reflects the repurchase of common shares of CIPS.
**Excludes current portion of long-term debt.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
Central Illinois Public Service Company (AmerenCIPS or the Company) is a
subsidiary of Ameren Corporation (Ameren), a newly created holding company,
which is registered under the Public Utility Holding Company Act of 1935
(PUHCA). In December 1997, Union Electric Company (AmerenUE) and CIPSCO
Incorporated (CIPSCO) combined to form Ameren, with AmerenUE and CIPSCO's
subsidiaries, the Company and CIPSCO Investment Company (CIC), becoming
wholly-owned subsidiaries of Ameren (the Merger).
RESULTS OF OPERATIONS
Earnings
Earnings for 1997, 1996, and 1995 were $35 million, $74 million, and $67
million, respectively. Earnings fluctuated due to many conditions,
primarily: weather variations, competitive market forces, sales growth,
fluctuating operating costs, merger-related expenses, changes in interest
expense, changes in income and property taxes and an extraordinary charge.
The Company recorded an extraordinary charge to earnings in the fourth
quarter of 1997 for the write-off of generation-related regulatory assets
and liabilities as a result of electric industry restructuring legislation
enacted in Illinois in December 1997. The write-off reduced earnings $25
million, net of income taxes. (See Note 2 - Regulatory Matters under Notes
to Financial Statements for further information.)
Electric Operations
The impacts of the more significant items affecting electric revenues and
operating expenses during the past three years are analyzed and discussed
below:
Electric Revenues Variations from Prior Year
(Millions of Dollars) 1997 1996 1995
---- ---- ----
Growth and other $ 5 $ 12 $ 7
Effect of abnormal weather (1) (5) 10
Interchange sales (29) 20 (16)
---- ---- ----
$(25) $ 27 $ 1
---- ---- ----
The decrease in 1997 electric revenues was primarily attributable to a 19%
decrease in interchange sales due to market conditions and differences in
the classification of certain interchange and purchase power transactions
resulting from Federal Energy Regulatory Commission (FERC) Order 888, as
well as a 3% decline in industrial sales. Residential sales remained
constant with prior year levels, while commercial sales increased 2% over
the same period.
The increase in 1996 electric revenues was primarily the result of a 5%
increase in kilowatthour sales from the prior year. The kilowatthour sales
increase stemmed from colder weather early in the year which increased
sales to residential and commercial customers and a 14% increase in
interchange sales.
The increase in 1995 electric revenues was primarily attributable to warmer
weather during July and August, creating increased residential and
commercial sales.
Fuel and Purchased Power Variations from Prior Year
(Millions of Dollars) 1997 1996 1995
---- ---- ----
Fuel:
Variation in generation $ 7 $ 29 $(11)
Price (8) 3 3
Generation efficiencies
and other (4) - -
Purchased power variation (27) (6) 4
---- ---- ----
$(32) $ 26 $ (4)
---- ---- ----
The decrease in 1997 fuel and purchased power costs was driven mainly by a
decrease in interchange sales and lower fuel prices due to the use of lower
cost coal. The increase in 1996 fuel and purchased power costs reflected
increased kilowatthour sales. The decrease in 1995 fuel and purchased
power costs reflected decreased kilowatthour sales, offset slightly by
higher fuel prices.
Gas Operations
Gas revenues in 1997 decreased $4 million primarily due to a milder winter.
The introduction of off-system gas sales in 1997 offset the decrease in
total sales to ultimate customers. Weather-sensitive residential and
commercial dekatherm sales decreased 14% and 18%, respectively, from 1996.
Industrial dekatherm sales increased 31% from the same period. Overall,
total energy sales were 1% lower than last year. Gas revenues grew $26
million in 1996 as a result of colder weather and higher gas costs.
Residential, commercial and industrial dekatherm sales increased 13%, 17%
and 9%, respectively, in 1996 versus 1995. Gas revenues decreased $9
million in 1995 as a result of lower gas prices and lower commercial and
industrial dekatherm sales of 3% and 27%, respectively, from the prior
year. These decreases were partly offset by a 2% increase in weather-
sensitive residential dekatherm sales from colder weather in 1995 versus
1994.
Gas costs for 1997 remained relatively flat when compared to 1996 costs.
Gas costs increased $22 million between 1996 and 1995 due to increased
demand related to cooler weather and an increase in gas prices from
suppliers. 1995 gas costs, when compared to 1994, decreased $11 million
primarily due to lower gas prices.
Other Operating Expenses
Other operating expense variations in 1995 through 1997 reflected recurring
factors such as growth, inflation, labor and employee benefit increases.
In 1997, other operations expenses increased $15 million primarily due to
increases in labor, various equipment purchases and rentals and information
system-related costs. In 1996, other operations expenses decreased $9
million mainly due to several nonrecurring costs incurred in 1995 (see
below). The increase of $15 million in other operations expenses in 1995
resulted from the occurrence of several nonrecurring costs, including $6
million related to a voluntary separation program and $6 million related to
write-offs of system development costs.
Maintenance expense changes between years are due to normal planning and
scheduling of major power plant maintenance outages. The 1997 maintenance
expense increase of 23% from prior year can be attributed to scheduled
outages at three generating plants during 1997.
1997, 1996 and 1995 depreciation and amortization expense fluctuations
relate primarily to property additions.
Taxes
Income tax expense from operations decreased $14 million in 1997
principally due to lower pretax income and a lower effective tax rate.
Income tax expense from operations increased $4 million in 1996 due
primarily to higher pretax income. Income tax expense from operation
decreased $4 million in 1995 due primarily to lower pretax income.
Other Income and Deductions
Miscellaneous, net decreased $2 million from the prior year primarily due
to increased merger-related expenses. In 1996 and 1995, miscellaneous,
net, reflects $5 million of merger costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $66 million for 1997,
compared to $138 million and $147 million in 1996 and 1995, respectively.
Cash flows used in investing activities totaled $111 million, $80 million,
and $109 million for the years ended December 31, 1997, 1996, and 1995,
respectively. Expenditures in 1997 for constructing new or to improve
existing facilities and complying with the Clean Air Act were $116 million.
Construction expenditures are expected to be about $80 million in 1998.
For the five-year period 1998-2002, construction expenditures are estimated
at $420 million. This estimate does not include any construction
expenditures which may be incurred by the Company to meet new air quality
standards for ozone and particulate matter, as discussed below.
The Company's need for additional base load electric generating capacity is
not anticipated until after the year 2013. Under Title IV of the Clean Air
Act Amendments of 1990, the Company is required to significantly reduce
total annual sulfur dioxide emissions by the year 2000. Significant
reductions in nitrogen oxide are also required. By switching to low-sulfur
coal, the Company anticipates that it can comply with the requirements of
the law without significant revenue increases because the related capital
costs are largely offset by lower fuel costs. As of year-end 1997,
estimated remaining capital costs expected to be incurred pertaining to
Clean Air Act-related projects totaled $72 million.
In July 1997, the United States Environmental Protection Agency (EPA)
issued final regulations revising the National Ambient Air Quality
Standards for ozone and particulate matter. Although specific emission
control requirements are still being developed, it is believed that the
revised standards will require significant additional reductions in
nitrogen oxide and sulfur dioxide emissions from coal-fired boilers. In
October 1997, the EPA announced that Illinois is included in the area
targeted for nitrogen oxide emissions reductions as part of the EPA's
regional control program. Reduction requirements in nitrogen oxide
emissions from the Company's coal-fired boilers could exceed 80% from 1990
levels by the year 2002. Reduction requirements in sulfur dioxide
emissions may be up to 50% beyond that already required by Phase II acid
rain control provisions of the 1990 Clean Air Act Amendments and could be
required by 2007. Because of the magnitude of these additional reductions,
the Company could be required to incur significantly higher capital costs
to meet future compliance obligations for its coal-fired boilers or
purchase power from other sources, either of which could have significantly
higher operations and maintenance expenditures associated with compliance.
At this time, the Company is unable to determine the impact of the revised
air quality standards on its future financial condition, results of
operations or liquidity.
In December 1997, the United States and numerous other countries agreed to
certain environmental provisions (the Kyoto Protocol), which would require
decreases in greenhouse gases in an effort to address the "global warming"
issue. The Company is unable to predict what requirements, if any, will be
adopted in this country. However, implementation of the Kyoto Protocol in
its present form would likely result in significantly higher capital costs
and operations and maintenance expenditures by the Company. At this time,
the Company is unable to determine the impact of these proposals on its
future financial condition, results of operations or liquidity.
Cash flows provided by financing activities were $48 million for 1997.
This compares to cash flows used in financing activities of $57 million and
$38 million for 1996 and 1995, respectively. The Company's principal
financing activities during 1997 included the issuance of $152 million of
long-term debt, offset by the redemption of $64 million of long-term debt
and dividend payments of $47 million.
The Company plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Company is authorized by
the FERC to have up to $150 million of short-term unsecured debt
instruments outstanding at any one time. Short-term borrowings consist of
bank loans (maturities generally on an overnight basis) and commercial
paper (maturities generally within 10 to 45 days). At December 31, 1997,
the Company had committed bank lines of credit aggregating $80 million (of
which $80 million were unused and $15 million were available at such date)
which make available interim financing at various rates of interest based
on LIBOR, the bank certificate of deposit rate or other options. The lines
of credit are renewable annually at various dates throughout the year. At
year-end, the Company had $65 million of short-term borrowings.
RATE MATTERS
See Note 2 - Regulatory Matters under Notes to Financial Statements for a
discussion of rate matters.
CONTINGENCIES
See Note 8 - Commitments and Contingencies under Notes to Financial
Statements for material issues existing at December 31, 1997.
ELECTRIC INDUSTRY RESTRUCTURING
Changes enacted and being considered at the federal and state levels
continue to change the structure of the electric industry and utility
regulation, as well as encourage increased competition. At the federal
level, the Energy Policy Act of 1992 reduced various restrictions on the
operation and ownership of independent power producers and gave the FERC
the authority to order electric utilities to provide transmission access to
third parties.
In April 1996, the FERC issued Order 888 and Order 889, which are intended
to promote competition in the wholesale electric market. The FERC requires
transmission-owning public utilities, such as AmerenCIPS, to provide
transmission access and service to others in a manner similar and
comparable to that which the utilities have by virtue of ownership. Order
888 requires that a single tariff be used by the utility in providing
transmission service. Order 888 also provides for the recovery of stranded
costs, under certain conditions, related to the wholesale business.
Order 889 established the standards of conduct and information requirements
that transmission owners must adhere to in doing business under the open
access rule. Under Order 889, utilities must obtain transmission service
for their own use in the same manner their customers will obtain service,
thus mitigating market power through control of transmission facilities.
In addition, under Order 889, utilities must separate their merchant
function (buying and selling wholesale power) from their transmission and
reliability functions.
The Company believes that Order 888 and Order 889, which relate to its
wholesale business, will not have a material adverse effect on its
financial condition, results of operations or liquidity.
In addition, certain states are considering proposals or have adopted
legislation that will promote competition at the retail level. In December
1997, the Governor of Illinois signed the Electric Service Customer Choice
and Rate Relief Law of 1997 (the Act) providing for electric utility
restructuring in Illinois. This legislation introduces competition into
the supply of electric energy in Illinois. (See Note 2 - Regulatory
Matters under Notes to Financial Statements for further information.)
After evaluating the impact of this legislation, the Company determined
that it was necessary to write-off the generation-related regulatory assets
and liabilities of its retail electric business. This extraordinary charge
reduced 1997 earnings $25 million, net of income taxes. The Company has
also concluded that its remaining net generation-related assets are not
impaired and that no plant write-downs are necessary at this time. The
provisions of the Act could also result in lower revenues, reduced profit
margins and increased costs of capital. At this time, the Company is
unable to determine any further impact of the Act on its future financial
condition, results of operations or liquidity. (See Note 2 - Regulatory
Matters under Notes to Financial Statements for further information.)
INFORMATION SYSTEMS
The Year 2000 issue relates to computer systems and applications that
currently use two-digit date fields to designate a year. As the century
date change occurs, date-sensitive systems will recognize the year 2000 as
1900, or not at all. This inability to recognize or properly treat the
year 2000 may cause systems to process critical financial and operational
information incorrectly.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test information systems for Year 2000
compliance. The Company estimates that its costs for addressing the Year
2000 issue will range from $3 million to $5 million. These costs will be
expensed as incurred.
OUTLOOK
Significant changes are taking place in the electric utility industry. The
Company's management and Board of Directors recognize that competition will
likely continue to increase in the future, especially in the energy supply
portion of the business. New air quality standards are being considered
which could significantly increase capital costs, purchased power expenses
and other operations and maintenance expenditures. In addition, electric
revenues will be lowered due to a rate decrease in the Company's
jurisdiction (See Note 2 - Regulatory Matters under Notes to Financial
Statements for further information) and expenditures for information
systems are increasing (including those costs associated with the Year 2000
issue). These issues will result in numerous challenges and uncertainties
for AmerenCIPS and the utility industry. At this time, management cannot
predict the ultimate timing or impact of these matters on its future
financial condition, results of operations or liquidity.
AmerenCIPS' management and its Board of Directors are taking actions to
address these challenges. Efforts are underway to accelerate merger cost
savings and other expense reductions. The Company is also analyzing the
potential benefits associated with the Illinois electric industry
restructuring legislation, including the elimination of the fuel adjustment
clause and securitizing certain future revenues. In addition, the Company
will continue to focus on developing its core energy business for
additional growth opportunities. Through these initiatives and other
strategies, the Company intends to address these challenges, maximize the
value of its strategic generating assets and enhance stockholder value.
ACCOUNTING MATTERS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS 130 establishes standards for reporting and
displaying comprehensive income. SFAS 131 establishes standards for
reporting information about operating segments in annual financial
statements and interim reports to stockholders. SFAS 130 and SFAS 131 are
effective for fiscal years beginning after December 15, 1997. SFAS 130 and
SFAS 131 are not expected to have a material effect on the Company's
financial position or results of operations upon adoption.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's rates for retail electric and gas service are regulated by
the Illinois Commerce Commission. Non-retail electric rates are regulated
by the FERC.
The current replacement cost of the Company's utility plant substantially
exceeds its recorded historical cost. Under existing regulatory practice,
only the historical cost of plant is recoverable from customers. As a
result, cash flows designed to provide recovery of historical costs through
depreciation may not be adequate to replace plant in future years.
However, existing regulatory practice may be modified for the Company's
generation portion of its business (see Note 2 - Regulatory Matters under
Notes to Financial Statements for further information).
Changes in the cost of fuel for electric generation and gas costs are
generally reflected in billings to customers through fuel and purchased gas
adjustment clauses. However, existing regulatory practice may be modified
for changes in the cost of fuel for electric generation (see Note 2 -
Regulatory Matters under Notes to Financial Statements for further
information).
Inflation continues to be a factor affecting operations, earnings,
stockholder's equity and financial performance.
SAFE HARBOR STATEMENT
Statements made in this report which are not based on historical facts, are
forward-looking and, accordingly, involve risks and uncertainties that
could cause actual results to differ materially from those discussed.
Although such forward-looking statements have been made in good faith and
are based on reasonable assumptions, there is no assurance that the
expected results will be achieved. These statements include (without
limitation) statements as to future expectations, beliefs, plans,
strategies, objectives, events, conditions and financial performance. In
connection with the "Safe Harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is providing this cautionary
statement to identify important factors that could cause actual results to
differ materially from those anticipated. Factors include, but are not
limited to, the effects of regulatory actions; changes in laws and other
governmental actions; competition; future market prices for electricity;
average rates for electricity in the Midwest; business and economic
conditions; weather conditions; fuel prices and availability; generation
plant performance; monetary and fiscal policies; and legal and
administrative proceedings.
Item 8. Financial Statements and Supplementary Data.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
(Thousands of Dollars, Except Shares)
<TABLE>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Property and plant, at original
cost:
Electric $2,311,364 $2,244,571
Gas 249,499 242,664
---------- ----------
2,560,863 2,487,235
Less accumulated depreciation
and amortization 1,132,591 1,099,261
---------- ----------
1,428,272 1,387,974
Construction work in progress 59,531 70,150
---------- ----------
Total property and plant,
net 1,487,803 1,458,124
---------- ----------
Other assets 30,476 27,488
Current assets:
Cash and cash equivalents 6,040 2,261
Accounts receivable - trade
(less allowance for doubtful
accounts of $1,200 and $600,
respectively) 67,495 56,627
Unbilled revenue 31,708 30,126
Other accounts and notes
receivable 7,760 18,134
Materials and supplies, at
average cost -
Fossil fuel 24,919 21,610
Gas Stored Underground 14,275 13,361
Other 32,334 38,806
Other 32,637 22,027
---------- ----------
Total current assets 217,168 202,952
---------- ----------
Regulatory assets:
Deferred income taxes 28,052 42,035
Other 25,208 64,754
---------- ----------
Total regulatory assets 53,260 106,789
---------- ----------
Total Assets $1,788,707 $1,795,353
========== ==========
CAPITAL AND LIABILITIES
Capitalization:
Common stock, no par value,
authorized 45,000,000 shares -
outstanding 25,452,373 shares $121,282 $121,282
Retained earnings 451,477 459,942
---------- ----------
Total common stockholder's
equity 572,759 581,224
Preferred stock not subject to
mandatory redemption 80,000 80,000
Long-term debt 558,474 421,228
---------- ----------
Total capitalization 1,211,233 1,082,452
---------- ----------
Current liabilities:
Current maturity of long-term
debt 9,000 58,000
Short-term debt 64,966 57,768
Accounts and wages payable 89,362 72,522
Taxes accrued 15,869 13,943
Other 21,937 21,996
---------- ----------
Total current liabilities 201,134 224,229
---------- ----------
Accumulated deferred income taxes 257,914 303,700
Accumulated deferred investment tax
credits 40,369 48,885
Regulatory liability 48,587 100,350
Other deferred credits and
liabilities 29,470 35,737
---------- ----------
Total Capital and Liabilities $1,788,707 $1,795,353
========== ==========
</TABLE>
See Notes to Financial Statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
(Thousands of Dollars)
<TABLE>
December 31, December 31, December 31,
For the year ended 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUES:
Electric $700,517 $725,750 $698,463
Gas 151,558 155,352 129,610
-------- -------- --------
Total operating revenues 852,075 881,102 828,073
OPERATING EXPENSES:
Operations:
Fuel and purchased power 242,256 274,215 248,226
Gas 97,226 96,228 74,054
Other 160,201 145,332 154,014
-------- -------- --------
499,683 515,775 476,294
Maintenance 75,652 61,458 67,994
Depreciation and
amortization 82,689 81,853 77,626
Income taxes 33,661 47,693 43,542
Other taxes 57,895 57,792 56,588
-------- -------- --------
Total operating expenses 749,580 764,571 722,044
OPERATING INCOME 102,495 116,531 106,029
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds
used during construction 783 378 889
Miscellaneous, net (3,800) (2,245) (2,636)
-------- -------- --------
Total other income and
deductions (3,017) (1,867) (1,747)
INCOME BEFORE INTEREST CHARGES 99,478 114,664 104,282
INTEREST CHARGES:
Interest 36,791 37,754 33,724
Allowance for borrowed funds
used during construction (786) (483) (73)
-------- -------- --------
Net interest charges 36,005 37,271 33,651
INCOME BEFORE EXTRAORDINARY
CHARGE 63,473 77,393 70,631
-------- -------- --------
EXTRAORDINARY CHARGE, NET OF
INCOME TAXES (NOTE 2) (24,853) - -
-------- -------- --------
NET INCOME 38,620 77,393 70,631
-------- -------- --------
PREFERRED STOCK DIVIDENDS 3,715 3,721 3,850
-------- -------- --------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $ 34,905 $ 73,672 $ 66,781
======== ======== ========
</TABLE>
See Notes to Financial Statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
December 31, December 31, December 31,
For the year ended 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating:
Income before
extraordinary charge $63,473 $77,393 $70,631
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 82,689 81,853 77,626
Allowance for funds
used during construction (1,569) (861) (962)
Deferred income taxes, net (1,686) 1,600 4,575
Deferred investment
tax credits, net (8,516) (3,349) (3,361)
Changes in assets and
liabilities:
Temporary investments (14,396) 522 (5,634)
Receivables, net (2,076) (12,079) 5,362
Material and supplies 2,249 18,877 (9,365)
Regulatory assets - other (50,693) (44,903) (1,494)
Accounts and wages payable 16,840 2,411 6,378
Taxes accrued 1,926 2,788 (1,808)
Other, net (21,922) 13,609 5,115
-------- -------- --------
Net cash provided by operating
activities 66,319 137,861 147,063
Cash Flows From Investing:
Construction expenditures (115,551) (106,601) (103,782)
Allowance for funds used
during construction 1,569 861 962
Other 3,182 25,874 (6,537)
-------- -------- --------
Net cash used in investing
activities (110,800) (79,866) (109,357)
Cash Flows From Financing:
Dividends on common stock (43,300) (62,950) (71,000)
Dividends on preferred stock (3,638) (3,637) (3,956)
Redemptions -
Long-term debt (64,000) - (16,000)
Issuances -
Short-term debt 7,198 9,847 32,936
Long-term debt 152,000 - 20,000
-------- -------- --------
Net cash provided by (used
in) financing activities 48,260 (56,740) (38,020)
Net change in cash and cash
equivalents 3,779 1,255 (314)
Cash and cash equivalents
at beginning of year 2,261 1,006 1,320
-------- -------- --------
Cash and cash equivalents
at end of year $6,040 $2,261 $1,006
===========================================================================
Cash paid during the periods:
- ---------------------------------------------------------------------------
Interest (net of amount
capitalized) $35,363 $36,512 $31,490
Income taxes $36,763 $50,960 $45,550
- ---------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION:
An extraordinary charge to earnings was recorded in the fourth quarter of
1997 for the write-off of generation-related regulatory assets and
liabilities of the Company's retail electric business as a result of
electric industry restructuring legislation enacted in Illinois in December
1997. The write-off reduced earnings $25 million, net of income taxes.
(See Note 2 - Regulatory Matters for further information.)
</TABLE>
See Notes to Financial Statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
<TABLE>
Year Ended December 31, 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at Beginning of
Period $459,942 $449,137 $453,463
Add:
Net income 38,620 77,393 70,631
-------- -------- --------
498,562 526,530 524,094
-------- -------- --------
Deduct:
Common stock cash
dividends 43,300 62,950 71,000
Preferred stock cash
dividends 3,638 3,637 3,956
Other 147 1 1
-------- -------- --------
47,085 66,588 74,957
-------- -------- --------
Balance at End of Period $451,477 $459,942 $449,137
-------- -------- --------
</TABLE>
SELECTED QUARTERLY INFORMATION (Unaudited)
(Thousands of Dollars)
Net Income
after
dividends on
Operating Operating Preferred
Quarter Ended Revenues Income Stock
- ------------- --------- --------- ------------
March 31, 1997 $220,692 $22,528 $ 13,453
March 31, 1996 234,519 29,758 19,653
June 30, 1997 190,931 21,713 10,902
June 30, 1996 189,668 20,680 10,271
September 30, 1997 224,245 42,923 31,816
September 30, 1996 233,529 45,282 34,029
December 31, 1997 (a) 216,207 15,331 (21,266)
December 31, 1996 223,386 20,811 9,719
(a) Loss included an extraordinary charge of $25 million, net of income
taxes, and merger costs of $4.6 million.
Other changes in quarterly earnings are due to the effect of weather on
sales and other factors that are characteristic of public utility
operations.
See Notes to Financial Statements.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Central Illinois Public
Service Company:
We have audited the accompanying balance sheets of Central Illinois Public
Service Company (an Illinois corporation and a wholly-owned subsidiary of
Ameren Corporation) as of December 31, 1997 and 1996, and the related
statements of income, retained earnings and cash flows for each of the
three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Central Illinois Public
Service Company as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 30, 1998
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - Summary of Significant Accounting Policies
Merger and Basis of Presentation
Effective December 31, 1997, following the receipt of all required state
and federal regulatory approvals, Union Electric Company (AmerenUE) and
CIPSCO Incorporated (CIPSCO) combined to form Ameren Corporation
(Ameren)(the Merger).
Central Illinois Public Service Company (AmerenCIPS or the Company) is a
wholly-owned subsidiary of Ameren Corporation, which is the parent company
of two utility operating companies, the Company and AmerenUE. Ameren
Corporation is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Ameren Corporation and its
subsidiaries are subject to the regulatory provisions of the PUHCA. The
operating companies are engaged principally in the generation,
transmission, distribution and sale of electric energy and the purchase,
distribution, transportation and sale of natural gas in the states of
Illinois and Missouri. Contracts among the companies--dealing with jointly-
owned generating facilities, interconnecting transmission lines, and the
exchange of electric power-- are regulated by the Federal Energy Regulatory
Commission (FERC) or the Securities and Exchange Commission.
The Company also has a 20% interest in Electric Energy, Inc. (EEI), which
is accounted for under the equity method of accounting. EEI owns and
operates an electric generating and transmission facility in Illinois that
supplies electric power primarily to a uranium enrichment plant located in
Paducah, Kentucky.
Regulation
The Company is regulated by the Illinois Commerce Commission (ICC) and the
FERC. The accounting policies of the Company conform to generally accepted
accounting principles (GAAP).
Property and Plant
The cost of additions to and betterments of units of property and plant is
capitalized. Cost includes labor, material, applicable taxes and
overheads, plus an allowance for funds used during construction.
Maintenance expenditures and the renewal of items not considered units of
property are charged to income as incurred. When units of depreciable
property are retired, the original cost and removal cost, less salvage, are
charged to accumulated depreciation.
Depreciation
Depreciation is provided over the estimated lives of the various classes of
depreciable property by applying composite rates on a straight-line basis.
The provision for depreciation in 1997, 1996, and 1995 was approximately 3%
of the average depreciable cost.
Fuel and Gas Costs
Changes in the cost of fuel for electric generation and gas costs are
generally reflected in billings to customers through fuel and purchased gas
adjustment clauses. However, existing regulatory practice may be modified
for changes in the cost of fuel for electric generation (see Note 2 -
Regulatory Matters for further information).
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and temporary investments
purchased with a maturity of three months or less.
Income Taxes
The Company is included in the consolidated federal income tax return filed
by Ameren. Income taxes are allocated to the individual companies based on
their respective taxable income or loss. Deferred tax assets and
liabilities are recognized for the tax consequences of transactions that
have been treated differently for financial reporting and tax return
purposes, measured using statutory tax rates.
Investment tax credits utilized in prior years were deferred and are being
amortized over the useful lives of the related properties.
Allowance for Funds Used During Construction
Allowance for funds used during construction (AFC) is a utility industry
accounting practice whereby the cost of borrowed funds and the cost of
equity funds (preferred and common stockholder's equity) applicable to the
Company's construction program are capitalized as a cost of construction.
AFC does not represent a current source of cash funds. This accounting
practice offsets the effect on earnings of the cost of financing current
construction, and treats such financing costs in the same manner as
construction charges for labor and materials.
Under accepted rate-making practice, cash recovery of AFC, as well as other
construction costs, occurs when completed projects are placed in service
and reflected in customer rates. The AFC rates used were 8% in 1997 and
1996 and 9% in 1995.
Unamortized Debt Discount, Premium and Expense
Discount, premium, and expense associated with long-term debt are amortized
over the lives of the related issues.
Revenue
The Company accrues an estimate of electric and gas revenues for service
rendered but unbilled at the end of each accounting period.
Long-Lived Assets
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" became effective on January 1, 1996. SFAS 121 prescribes
general standards for the recognition and measurement of impairment losses.
SFAS 121 requires that regulatory assets which are no longer probable of
recovery through future revenues be charged to earnings (see Note 2 -
Regulatory Matters for further information).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions. Such estimates and
assumptions may affect 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 reported period. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications have been made to prior-years financial
statements to conform with 1997 reporting.
NOTE 2 - Regulatory Matters
In September 1997, the ICC approved the Merger subject to certain
conditions. The conditions included the requirement for AmerenCIPS to file
electric and gas rate cases or alternative regulatory plans within six
months after the Merger became final to determine how net merger savings
would be shared between the ratepayers and stockholders.
In December 1997, the Governor of Illinois signed the Electric Service
Customer Choice and Rate Relief Law of 1997 (the Act) providing for
electric utility restructuring in Illinois. This legislation introduces
competition into the supply of electric energy in Illinois. The Act
includes a 5% rate decrease for the Company's residential electric
customers, effective August 1, 1998. The Company may be subject to
additional 5% residential electric rate decreases in each of 2000 and 2002
to the extent its rates exceed the Midwest utility average at that time.
The Company's rates are currently below the Midwest utility average. The
Company estimates that the initial 5% rate decrease will result in a
decrease in annual electric revenues of about $10 million, based on
estimated levels of sales and assuming normal weather conditions. Retail
direct access, which allows customers to choose their electric generation
supplier, will be phased in over several years. Access for commercial and
industrial customers will occur over a period from October 1999 to December
2000, and access for residential customers will occur after May 1, 2002.
The Act also relieves the Company of the requirement in the ICC's Order
issued in September 1997 (which approved the Merger), requiring AmerenCIPS
to file an electric rate case or alternative regulatory plan in Illinois
following consummation of the Merger to reflect the effects of net merger
savings. Other provisions of the Act include (1) potential recovery of
stranded costs through a transition charge collected from customers who
choose another electric supplier, (2) the option to eliminate the retail
uniform fuel adjustment clause (FAC) and to roll into base rates a
historical level of fuel expense and (3) a mechanism to securitize certain
future revenues.
The Company's accounting policies and financial statements conform to GAAP
applicable to rate-regulated enterprises and reflect the effects of the
ratemaking process in accordance with SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation." Such effects concern mainly the
time at which various items enter into the determination of net income in
order to follow the principle of matching costs and revenues. For example,
SFAS 71 allows the Company to record certain assets and liabilities
(regulatory assets and regulatory liabilities) which are expected to be
recovered or settled in future rates and would not be recorded under GAAP
for nonregulated entities. In addition, reporting under SFAS 71 allows
companies whose service obligations and prices are regulated to maintain
assets on their balance sheets representing costs they reasonably expect to
recover from customers, through inclusion of such costs in future rates.
SFAS 101, "Accounting for the Discontinuance of Application of FASB
Statement No. 71," specifies how an enterprise that ceases to meet the
criteria for application of SFAS 71 for all or part of its operations
should report that event in its financial statements. In general, SFAS 101
requires that the enterprise report the discontinuance of SFAS 71 by
eliminating from its balance sheet all regulatory assets and liabilities
related to the applicable portion of the business which no longer meets
SFAS 71 criteria. At its July 24, 1997 meeting, the Emerging Issues Task
Force of the Financial Accounting Standards Board (EITF) concluded that
application of SFAS 71 accounting should be discontinued once sufficiently
detailed deregulation legislation is issued for a separable portion of a
business for which a plan of deregulation has been established. However,
the EITF further concluded that regulatory assets associated with the
deregulated portion of the business, which will be recovered through
tariffs charged to customers of a regulated portion of the business, should
be associated with the regulated portion of the business from which future
cash recovery is expected (not the portion of the business from which the
costs originated), and can therefore continue to be carried on the
regulated entity's balance sheet to the extent such assets are recovered.
In addition, SFAS 121 establishes accounting standards for the impairment
of long lived assets (see Note 1 - Summary of Significant Accounting
Policies for further information).
Due to the enactment of the Act, prices for the retail supply of electric
generation are expected to transition from cost-based, regulated rates to
rates determined in large part by competitive market forces in the state of
Illinois. As a result, the Company discontinued application of SFAS 71 for
its generating business (i.e., the portion of the Company's business
related to the supply of electric energy) in the fourth quarter of 1997.
The Company has evaluated the impact of the Act on the future
recoverability of its regulatory assets and liabilities related to the
generation portion of its business and has determined that it is not
probable that such assets and liabilities will be recovered through cash
flows from the regulated portion of its business. Accordingly, the
Company's generation-related regulatory assets and liabilities of its
retail electric business were written off in the fourth quarter of 1997,
resulting in an extraordinary charge to earnings of $25 million, net of
income taxes. These regulatory assets and liabilities included previously
incurred costs originally expected to be collected/refunded in future
revenues, such as fuel contract restructuring costs, costs associated with
an abandoned scrubber at a fossil fuel plant, and income tax-related
regulatory assets and liabilities. In addition, the Company has evaluated
whether the recoverability of the costs associated with its remaining net
generation-related assets have been impaired as defined under SFAS 121.
The Company has concluded that impairment, as defined under SFAS 121, does
not exist and that no plant write-downs are necessary at this time. At
December 31, 1997, the Company's net investment in generation facilities
approximated $602 million and was included in electric plant in-service on
the Company's balance sheet.
The provisions of the Act could also result in lower revenues, reduced
profit margins and increased costs of capital. At this time, the Company
is unable to determine the impact of the Act on its future financial
condition, results of operations or liquidity.
In accordance with SFAS 71, the Company has deferred certain costs pursuant
to actions of its regulators, and is currently recovering such costs in
electric rates charged to customers.
At December 31, the Company had recorded the following regulatory assets
and regulatory liability:
(in millions) 1997 1996
---- ----
Regulatory Assets:
Income taxes $28 $ 42
Undepreciated plant costs - 41
Unamortized loss on
reacquired debt 6 12
Deferred environmental
remediation costs 13 11
Other 6 1
---- ----
Regulatory Assets $53 $107
---- ----
Regulatory Liability:
Income taxes 49 100
---- ----
Regulatory Liability $49 $100
---- ----
Income Taxes: See Note 6 - Income Taxes.
Undepreciated Plant Costs: Represents the unamortized cost of a generating
plant's scrubber costs plus costs of removal.
Unamortized Loss on Reacquired Debt: Represents losses related to refunded
debt. These amounts are being amortized over the lives of the related new
debt issues or the remaining lives of the old debt issues if no new debt
was issued.
Deferred Environmental Remediation Costs: Represents costs, net of
recoveries from insurers, relating to studies and remediation at
manufactured gas sites which may be recovered through environmental rate
riders. (See Note 8 - Commitments and Contingencies for further
information.)
The Company continually assesses the recoverability of its regulatory
assets. Under current accounting standards, regulatory assets are written
off to earnings when it is no longer probable that such amounts will be
recovered through future revenues.
In April 1996, the FERC issued Order 888 and Order 889 related to the
industry's wholesale electric business. In January 1998, Ameren filed a
combined open access tariff which conforms to the FERC's orders.
NOTE 3 - Preferred Stock
At December 31, 1997 and 1996, AmerenCIPS had 4.6 million shares of
authorized preferred stock. There were 2 million shares of cumulative
preferred and 2.6 million shares of preferred without par value (aggregate
stated value not to exceed $65 million) authorized, of which 800,000 shares
of cumulative preferred stock are outstanding.
Outstanding preferred stock is redeemable at the redemption prices shown
below:
December 31, 1997 1996
(in millions) ---- ----
Preferred Stock Not Subject
to Mandatory Redemption:
Preferred stock outstanding,
par value $100 (entitled to
cumulative dividends)
Redemption
Price
Series (per share)
4.00% - 150,000 shares $101.00 $15 $15
4.25% - 50,000 shares 102.00 5 5
4.90% - 75,000 shares 102.00 8 8
4.92% - 50,000 shares 103.50 5 5
5.16% - 50,000 shares 102.00 5 5
1993 Auction - 300,000 shares 100.00 - note(a) 30 30
6.625% - 125,000 shares 100.00 - note(b) 12 12
---- ----
Total Preferred Stock Not
Subject to Mandatory
Redemption $80 $80
---- ----
(a) Dividend rates, and periods during which such rates apply, vary
depending on the Company's selection of certain dividend period
lengths. The average dividend rate during 1997 was 3.98%.
(b) Not redeemable prior to October 1, 1998.
NOTE 4 - Short-Term Borrowings
Short-term borrowings of the Company consist of bank loans (maturities
generally on an overnight basis) and commercial paper (maturities generally
within 10-45 days). At December 31, 1997 and 1996, $65 million and $58
million of short-term borrowings were outstanding, respectively. The
weighted average interest rates on borrowings outstanding at December 31,
1997 and 1996 were 6.3% and 5.7%, respectively.
At December 31, 1997, the Company had committed bank lines of credit
aggregating $80 million (of which $80 million were unused and $15 million
were available) which make available interim financing at various rates of
interest based on LIBOR, the bank certificate of deposit rate, or other
options. These lines of credit are renewable annually at various dates
throughout the year.
NOTE 5 - Long-Term Debt
Long-term debt outstanding at December 31, was:
(in millions)
1997 1996
---- ----
First Mortgage Bonds -
Series L 5 7/8% paid in 1997 $ - $ 15
Series X 6 1/8% paid in 1997 - 43
Series W 7 1/8% due 1999 50 50
Series Z 6.00% due 2000 25 25
Series 1997-2 6.73% due 2001 20 -
Series Y 6 3/4% due 2002 23 23
Series Z 6 3/8% due 2003 40 40
Series 1995-1 6.49% due 2005 20 20
Series 1997-2 7.05% due 2006 20 -
Series X 7 1/2% due 2007 50 50
Series 1997-2 7.61% due 2017 40 -
Series W 8 1/2% due 2022 33 33
Other 6.52% - 6.99% due 1999 through 2003 45 -
---- ----
$366 $299
---- ----
Pollution Control Loan Obligations
1990 Series B 7.60% due 2013 32 32
1990 Series A 7.60% due 2014 20 20
1993 Series C-1 due 2026 - note (a) 35 35
1993 Series C-2 due 2026 - note (b) 25 25
1993 Series A 6 3/8% due 2028 35 35
Other 4.375% - 5.9% due 2028 35 35
---- ----
$182 $182
Unsecured Loans - note (c) 21 -
Unamortized Discount and Premium on
Debt (2) (2)
Maturities Due Within One Year (9) (58)
---- ----
Total Long-Term Debt $558 $421
(a) The interest rate for the year 1997 was 4.20%. This interest rate
will be adjusted to a then-current market rate on August 15, 1998.
Actual interest rates, and the periods during which such rates apply,
vary depending on the Company's selection of certain defined rate modes.
(b) The interest rate for the year 1997 was 5.70%. This interest rate is
subject to redetermination at the option of the Company commencing
August 15, 2003. Actual interest rates, and the periods during which
such rates apply, vary depending on the Company's selection of certain
defined rate modes.
(c) Bank credit agreements, due 2002, permit the Company to borrow up to
$42 million. Interest rates vary depending on market conditions and
the Company's selection of various options under the agreements. At
December 31, 1997, the average annualized interest rate was 6.15%.
Maturities of long-term debt through 2002 are as follows:
(in millions) Principal
Amount
---------
1998 $ 9
1999 60
2000 35
2001 30
2002 45
NOTE 6 - Income Taxes
Total income tax expense for 1997 resulted in an effective tax rate of 35%
on earnings before income taxes (38% in 1996 and 37% in 1995).
Principal reasons such rates differ from the statutory federal rate:
1997 1996 1995
---- ---- ----
Statutory federal income 35 % 35 % 35 %
tax rate
Increases (Decreases) from:
Amortization of Investment
Tax Credit (3)% (3)% (3)%
State tax 5 % 5 % 5 %
Other (2)% 1 % -
---- ---- ----
Effective income tax rate 35 % 38 % 37 %
---- ---- ----
Income tax expense components:
(in millions) 1997 1996 1995
---- ---- ----
Taxes currently payable
(principally federal):
Included in operating
expenses $39 $54 $41
Included in other income--
Miscellaneous, net - - 2
---- ---- ----
$39 $54 $43
---- ---- ----
Deferred taxes (principally
federal):
Included in operating
expenses--
Depreciation differences $(4) $ - $ 6
Other 2 (3) -
Included in other income--
Other - - (1)
---- ---- ----
$(2) $(3) $ 5
Deferred investment tax
credits, amortization
Included in operating
expenses $(3) $(3) $(3)
---- ---- ----
Total income tax expense $34 $48 $45
---- ---- ----
In accordance with SFAS 109, "Accounting for Income Taxes," a regulatory
asset, representing the probable recovery from customers of future income
taxes, which is expected to occur when temporary differences reverse, was
recorded along with a corresponding deferred tax liability. Also, a
regulatory liability, recognizing the lower expected revenue resulting from
reduced income taxes associated with amortizing accumulated deferred
investment tax credits, was recorded. Investment tax credits have been
deferred and will continue to be credited to income over the lives of the
related property.
The Company adjusts its deferred tax liabilities for changes enacted in tax
laws or rates. Recognizing that regulators will probably reduce future
revenues for deferred tax liabilities initially recorded at rates in excess
of the current statutory rate, reductions in the deferred tax liability
were credited to the regulatory liability.
Temporary differences gave rise to the following deferred tax assets and
deferred tax liabilities at December 31:
(in millions) 1997 1996
---- ----
Accumulated Deferred Income Taxes:
Accelerated Depreciation $235 $246
Capitalized taxes and expenses 96 107
Disallowed plant costs - (3)
Regulatory liabilities, net (42) (46)
Prepayments (32) (11)
Other 1 -
---- ----
Total net accumulated deferred
income tax liabilities $258 $293
---- ----
NOTE 7 - Retirement Benefits
The Company has a defined-benefit pension plan covering substantially all
of its employees. Benefits are based on the employees' years of service
and compensation. The Company's plan is funded in compliance with income
tax regulations and federal funding requirements. The Company uses a
September 30 measurement date for its valuation of pension plan assets and
liabilities.
Pension costs for the years 1997, 1996 and 1995, were $5 million, $4
million and $6 million, respectively, of which approximately 15% in 1997
and 1996 and 18% in 1995 was charged to construction accounts.
Funded Status of Pension Plan:
(in millions) 1997 1996 1995
---- ---- ----
Actuarial present value
of benefit obligation:
Vested benefit obligation $164 $148 $121
Accumulated benefit
obligation $190 $171 $142
Projected benefit
obligation for service
rendered to date $234 $211 $181
Less: Plan assets at
fair value* 315 253 221
---- ---- ----
(Excess) of plan assets
versus projected benefit
obligation (81) (42) (40)
Unrecognized net gain 76 40 33
Unrecognized prior service
cost (11) (11) (5)
Unrecognized net assets at
transition 3 3 4
---- ---- ----
Prepaid pension costs at
September 30 (13) (10) (8)
Expense, net of funding
October to December (2) (1) -
---- ---- -----
Prepaid pension cost at
December 31 $(15) $(11) $ (8)
---- ---- -----
* Plan assets consist principally of common and preferred stocks, bonds,
money market instruments and real estate.
Components of Net Pension Expense:
(in millions) 1997 1996 1995
---- ---- ----
Service cost - benefits
earned during the period $ 7 $ 7 $ 7
Interest cost on projected
benefit obligation 16 13 12
Actual return on plan
assets (60) (30) (34)
Net amortization and
deferral 42 14 21
---- ---- ----
Pension Cost $ 5 $ 4 $ 6
---- ---- ----
Assumptions for Actuarial Present Value of Projected Benefit Obligations:
1997 1996 1995
---- ---- ----
Discount rate at
measurement date 7.5% 7.5% 7.5%
Increase in future
compensation 4.5% 4.5% 4.5%
Plan assets long-term rate
of return 8.5% 8.5% 8.0%
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees.
Substantially all of the Company's employees may become eligible for those
benefits if they reach retirement age while working for the Company. The
Company accrues the expected postretirement benefit costs during employees'
years of service.
The Company's funding policy is to fund two Voluntary Employee Beneficiary
Association trusts (VEBA) and the 401(h) account established within the
Company retirement income trust with the lessor of the net periodic cost or
the amount deductible for federal income tax purposes. The Company uses a
September 30 measurement date for its valuation of postretirement assets
and liabilities.
Postretirement benefit costs were $12 million for 1997, $16 million for
1996 and $17 million for 1995, of which approximately 17% was charged to
construction accounts in 1997 and 15% in each of 1996 and 1995. The
Company's transition obligation at December 31, 1997, is being amortized
over the next 15 years.
Funded Status of the Plans:
(in millions) 1997 1996 1995
---- ---- ----
Accumulated postretirement
benefit obligation:
Active employees eligible
for benefits $ 23 $ 20 $ 17
Retired employees 47 54 50
Other active employees 67 65 76
---- ---- ----
Total benefit obligation 137 139 143
Less: Plan assets at
fair market value* 106 71 49
---- ---- ----
Accumulated postretirement
benefit obligation in
excess of plan assets 31 68 94
Unrecognized - transition
obligation (84) (89) (99)
- gain 64 38 24
---- ---- ----
Accrued postretirement
benefit cost at September 30 11 17 19
Expense, net of funding,
October to December (7) (14) (15)
---- ---- ----
Postretirement benefit
liability at December 31 $ 4 $ 3 $ 4
---- ---- ----
* Plan assets consist principally of common and preferred stocks, bonds,
money market instruments and real estate.
Components of Postretirement Benefit Cost:
(in millions) 1997 1996 1995
---- ---- ----
Service cost - benefits
earned during the period $ 4 $ 4 $ 4
Interest cost on projected
benefit obligation 10 11 10
Actual return on plan
assets (21) (9) (8)
Amortization of transition
obligation 6 6 6
Deferred gains 13 4 5
---- ---- ----
Net periodic cost $ 12 $16 $17
---- ---- ----
Assumptions for the Obligation Measurements:
1997 1996 1995
---- ---- ----
Discount rate at measurement
date 7.25% 7.5% 7.5%
Plan assets long-term rate
of return 8.5% 8.5% 8.0%
Medical cost trend rate
- initial 8.5% 9.8% 10.6%
- ultimate 5.5% 4.5% 4.0%
Ultimate medical cost trend
rate expected in year 2005 2005 2007
A 1% increase in the medical cost trend rate is estimated to increase the
net periodic cost and the accumulated postretirement benefit obligation as
of September 30, 1997 approximately $3 million and $22 million,
respectively.
NOTE 8 - Commitments and Contingencies
The Company is engaged in a construction program under which expenditures
averaging approximately $84 million, including AFC, are anticipated during
each of the next five years. This estimate does not include any
construction expenditures which may be incurred by the Company to meet new
air quality standards for ozone and particulate matter, as discussed later
in this Note.
The Company has commitments for the purchase of coal under long-term
contracts. Coal contract commitments, including transportation costs, for
1998 through 2002 are estimated to total $602 million. Total coal
purchases, including transportation costs, for 1997, 1996 and 1995 were
$209 million, $217 million and $189 million, respectively. The Company
also has existing contracts with pipeline and natural gas suppliers to
provide natural gas for distribution and electric generation. Gas-related
contract commitments for 1998 through 2002 are estimated at $133 million.
Total delivered natural gas costs for 1997, 1996 and 1995 were $97 million,
$97 million and $67 million, respectively.
During 1996, the Company restructured its contract with one of its major
coal suppliers. In 1997, the Company paid a $70 million restructuring
payment to the supplier, which allows it to purchase at market prices low-
sulfur, non-Illinois coal through the supplier (in substitution for the
high-sulfur Illinois coal the Company was obligated to purchase under the
original contract); and would receive options for future purchases of low-
sulfur, non-Illinois coal from the supplier through 1999 at set negotiated
prices.
By switching to low-sulfur coal, the Company was able to discontinue
operating a generating station scrubber. The benefits of the restructuring
include lower cost coal, avoidance of significant capital expenditures to
renovate the scrubber and elimination of scrubber operations and
maintenance costs (offset by scrubber retirement expenses). The net
benefits of restructuring are expected to exceed $100 million over the next
10 years. In December 1996, the ICC entered an order approving the switch
to non-Illinois coal, recovery of the restructuring payment plus associated
carrying costs (Restructuring Charges) through the retail FAC over six
years, and continued recovery in rates of the undepreciated scrubber
investment plus costs of removal. Additionally, in May 1997 the FERC
approved recovery of the wholesale portion of the Restructuring Charges
through the wholesale FAC. As a result of the ICC and FERC orders, the
Company classified the $72 million of the Restructuring Charges made to the
coal supplier in February 1997 as a regulatory asset and, through December
1997, recovered approximately $10 million of the Restructuring Charges
through the retail FAC and from wholesale customers.
A group of industrial customers filed with the Illinois Third District
Appellate Court (the Court) in February 1997 an appeal of the December 1996
order of the ICC. On November 24, 1997, the Court reversed the ICC's
December 1996 order, finding that the Restructuring Charges were not direct
costs of fuel that may be recovered through the retail FAC, but rather
should be considered as a part of a review of aggregate revenue
requirements in a full rate case. Restructuring Charges allocated to
wholesale customers (approximately $7 million) are not in question as a
result of the opinion of the Court. In December 1997, the Company
requested a rehearing by the Court; that request was denied. However, the
Court did rule that all revenues collected under the retail FAC in 1997
would not have to be refunded to customers. The Company has appealed to
the Illinois Supreme Court the Court's decision that Restructuring Charges
may not be recovered through the retail FAC.
The recoverability of the restructuring charges under the retail FAC was
also impacted by the Electric Service Customer Choice and Rate Relief Law
of 1997 (the Act). Among other things, the Act provides utilities with the
option to eliminate the retail FAC and limits the ability of utilities to
file a full rate case for its aggregate revenue requirements. After
evaluating the impact of the Act on the future recoverability of the
Company's Restructuring Charges through future rates, the Company concluded
that the unamortized balance of the retail portion of its Restructuring
Charges as of December 31, 1997, should be written off ($34 million, net of
income taxes). See Note 2 - Regulatory Matters for further information.
Under Title IV of the Clean Air Act Amendments of 1990, the Company is
required to significantly reduce total annual sulfur dioxide emissions by
the year 2000. Significant reductions in nitrogen oxide are also required.
By switching to low-sulfur coal and early banking of emission credits, the
Company anticipates that it can comply with the requirements of the law
without significant revenue increases because the related capital costs are
largely offset by lower fuel costs. As of year-end 1997, estimated
remaining capital costs expected to be incurred pertaining to Clean Air Act-
related projects totaled $72 million.
In July 1997, the United States Environmental Protection Agency (EPA)
issued final regulations revising the National Ambient Air Quality
Standards for ozone and particulate matter. Although specific emission
control requirements are still being developed, it is believed that the
revised standards will require significant additional reductions in
nitrogen oxide and sulfur dioxide emissions from coal-fired boilers. In
October 1997, the EPA announced that Illinois is included in the area
targeted for nitrogen oxide emissions reductions as part of the EPA's
regional control program. Reduction requirements in nitrogen oxide
emissions from the Company's coal-fired boilers could exceed 80% from 1990
levels by the year 2002. Reduction requirements in sulfur dioxide
emissions may be up to 50% beyond that already required by Phase II acid
rain control provisions of the 1990 Clean Air Act Amendments and are
anticipated to be required by 2007. Because of the magnitude of these
additional reductions, the Company could be required to incur
significantly higher capital costs to meet future compliance obligations
for its coal-fired boilers or purchase power from other sources, either of
which could have significantly higher operations and maintenance
expenditures associated with compliance. At this time, the Company is
unable to determine the impact of the revised air quality standards on its
future financial condition, results of operations or liquidity.
In December 1997, the United States and numerous other countries agreed to
certain environmental provisions (the Kyoto Protocol), which would require
decreases in greenhouse gases in an effort to address the "global warming"
issue. The Company is unable to predict what requirements, if any, will be
adopted in this country. However, implementation of the Kyoto Protocol in
its present form would likely result in significantly higher capital costs
and operations and maintenance expenditures by the Company. At this time,
the Company is unable to determine the impact of these proposals on the
Company's future financial condition, results of operations or liquidity.
As of December 31, 1997, the Company has been designated as a potentially
responsible party (PRP) by federal and state environmental protection
agencies at three hazardous waste sites. Other hazardous waste sites have
been identified for which the Company may be responsible but has not been
designated a PRP. Costs relating to studies and remediation and associated
legal and litigation expenses are being accrued and deferred rather than
expensed currently, pending recovery through rates. Through December 31,
1997, the total of the costs deferred, net of recoveries from insurers and
through environmental adjustment clause rate riders approved by the ICC,
was $13 million.
The ICC has instituted a reconciliation proceeding to review the Company's
environmental remediation activities in 1993, 1994 and 1995 and to
determine whether the revenues collected under the riders in 1993 were
consistent with the amount of remediation costs prudently and properly
incurred. Amounts found to have been incorrectly included under the riders
would be subject to refund. In mid-1997, the Company and the ICC Staff
submitted a stipulation with regard to all matters at issue which concluded
that the amounts collected under the environmental rate riders were
appropriate in all material respects. A ruling from the ICC is still
pending.
The Company continually reviews remediation costs that may be required for
all of these sites. Any unrecovered environmental costs are not expected
to have a material adverse effect on the Company's financial position,
results of operations or liquidity.
The International Union of Operating Engineers Local 148 and the
International Brotherhood of Electrical Workers Local 702 filed unfair
labor practice charges with the National Labor Relations Board (NLRB)
relating to the legality of the lockout by the Company of both unions
during 1993. The NLRB has issued complaints against the Company concerning
its lockout. Both unions seek, among other things, back pay and other
benefits for the period of the lockout. The Company estimates the amount
of back pay and other benefits for both unions to be less than $17 million.
An administrative law judge of the NLRB has ruled that the lockout was
unlawful. On July 23, 1996, the Company appealed to the NLRB. The Company
believes the lockout was both lawful and reasonable and that the final
resolution of the disputes will not have a material adverse effect on its
financial position, results of operations or liquidity.
Regulatory changes enacted and being considered at the federal and state
levels continue to change the structure of the utility industry and utility
regulation, as well as encourage increased competition. At this time, the
Company is unable to predict the impact of these changes on its future
financial condition, results of operations or liquidity. (See Note 2 -
Regulatory Matters for further information.)
The Company is involved in other legal and administrative proceedings
before various courts and agencies with respect to matters arising in the
ordinary course of business, some of which involve substantial amounts.
The Company believes that the final disposition of these proceedings will
not have a material adverse effect on its financial position, results of
operations or liquidity.
NOTE 9 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value.
Cash and Temporary Investments/Short-Term Borrowings
The carrying amounts approximate fair value because of the short-term
maturity of these instruments.
Preferred Stock
The fair value is estimated based on the quoted market prices for the same
or similar issues.
Long-Term Debt
The fair value is estimated based on the quoted market prices for same or
similar issues or on the current rates offered to the Company for debt of
comparable maturities.
Carrying amounts and estimated fair values of the Company's financial
instruments at December 31:
1997 1996
---- ----
(in millions) Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
Preferred stock $ 80 $ 71 $ 80 $ 65
Long-term debt (including
current portion) 567 600 479 488
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
DIRECTORS
Paul A. Agathen, Senior Vice Richard A. Lumpkin, Chairman
President - Energy Supply Services and Chief Executive Officer of
of UE Illinois Consolidated Telephone
Company, and Vice Chairman of
Donald E. Brandt, Senior Vice McLeod USA Inc.
President - Finance of Ameren
Corporation and UE Hanne M. Merriman, Principal in
Hanne Merriman Associates, retail
Clifford L. Greenwalt, Retired business consultants
President and Chief Executive
Officer of CIPSCO and CIPS Charles W. Mueller, Chairman,
President and Chief Executive
John L. Heath, Retired Chairman Officer of Ameren Corporation and
and President of L.S. Heath & President and Chief Executive
Sons, Inc., candy manufacturer Officer of UE
Robert W. Jackson, Retired Senior Gary L. Rainwater, President and
Vice President - Finance and Chief Executive Officer
Secretary of CIPS
Thomas L. Shade, Retired Chairman of
Gordon R. Lohman, Chairman and the Board and Chief Executive Officer
Chief Executive Officer of of Moorman Manufacturing Company
AMSTED Industries Incorporated
James W. Wogsland, Retired Vice
Chairman of Caterpillar, Inc.
EXECUTIVE OFFICERS
Executive Officers of the Registrant (ages at December 31, 1997).
Name Age Positions Held
- ----- --- --------------
G. L. Rainwater 51 President and Chief Executive Officer
W. A. Koertner 48 Vice President Finance & Administration
and Secretary
J. T. Birkett 60 Vice President Power Operations
D. R. Patterson 61 Vice President Regional Operations
G. W. Moorman 54 Vice President Regional Operations
W. L. Baxter 36 Controller
J. E. Birdsong 43 Treasurer
The present term of office of the above executive officers extends to
the first meeting of the Board of Directors of CIPS after the next annual
election of Directors, scheduled to be held on April 28, 1998. There is no
family relationship between any executive officer and any other executive
officer or any director.
Except for Mr. Baxter, each of the officers named above has been
employed by CIPS or its affiliates in executive or management positions for
more than five years. Mr. Baxter was previously employed by Price Waterhouse
LLP.
Item 11. Executive Compensation.
The information required by Item 11 is to be set forth in the Proxy
Statement. Such information is incorporated herein by reference to the
material appearing under the caption "Election of Directors -- Executive
Compensation" and -- "Directors' Compensation" appearing in the Proxy
Statement; provided, however, that no part of the information appearing
under the portion of the Proxy Statement entitled "Election of Directors --
Compensation Committee Report on Executive Compensation" or -- "5 Year
Cumulative Total Return" is deemed to be filed as part of this Form 10-K
Annual Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 is to be set forth in the Proxy
Statement. Such information is incorporated herein by reference to the
material appearing under the captions "Voting Securities Beneficially Owned
by Principal Holders, Directors, Nominees and Executive Officers" and
"Election of Directors -- Director Information" appearing in the Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page of this report
on Form 10-K
(a) 1. Financial statements
Balance Sheet - December 31, 1997 and 1996 . .
Statement of Income for the years ended
December 31, 1997, 1996 and 1995. . . . . . . .
Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995. . . . . . . .
Statement of Retained Earnings for the years
ended December 31, 1997, 1996 and 1995. . . . .
Report of Independent Public Accountants. . . .
Notes to Financial Statements . . . . . . . . .
(a) 2. Schedules supporting financial statements:
All Financial Statement Schedules have
been omitted as not applicable or not required
or because the information required to be
shown therein is included in the financial
statements or notes thereto.
(a) 3. Exhibits
2.01 Agreement and Plan of Merger, dated as
of August 11, 1995, by and among CIPSCO
Incorporated, Union Electric Company,
Ameren Corporation and Arch Merger Inc.
(Exhibit 2(a) filed with CIPSCO's and
CIPS' Form 10-Q/A (Amendment No. 1) for
the quarter ended June 30, 1995.)
Incorporated by Reference . .. . . . . . .
3.01 Restated Articles of Incorporation of
CIPS. (Exhibit 3(b) filed with CIPS'
Form 10-Q for the quarter ended March 31,
1994.) Incorporated by Reference. . . . .
3.02 Bylaws of CIPS (Exhibit 3(c) filed with
CIPS' Form 10-Q for the quarter ended
March 31, 1994.) Incorporated by
Reference. . . . . . . . . . . . . . . . .
3.03 By laws of CIPS dated February 13, 1998. .
Page of this report
on Form 10-K
Exhibits (Continued)
4 Indenture of Mortgage or Deed of Trust dated
October 1, 1941, from CIPS to Continental
Illinois National Bank and Trust Company of
Chicago and Edmond B. Stofft, as Trustees.
(Exhibit 2.01 in File No. 2-60232.)
Supplemental Indentures dated, respectively
September 1, 1947, January 1, 1949, February 1,
1952, September 1, 1952, June 1, 1954, February
1, 1958, January 1, 1959, May 1, 1963, May 1,
1964, June 1, 1965, May 1, 1967, April 1, 1970,
April 1, 1971, September 1, 1971, May 1, 1972,
December 1, 1973, March 1, 1974, April 1, 1975,
October 1, 1976, November 1, 1976, October 1,
1978, August 1, 1979, February 1, 1980,
February 1, 1986, May 15, 1992, July 1, 1992,
September 15, 1992, April 1, 1993, and June 1,
1995 between CIPS and the Trustees under the
Indenture of Mortgage or Deed of Trust referred
to above (Amended Exhibit 7(b) in File No. 2-7341;
Second Amended Exhibit 7.03 in File No. 2-7795;
Second Amended Exhibit 4.07 in File No. 2-9353;
Amended Exhibit 4.05 in file No. 2-9802; Amended
Exhibit 4.02 in File No. 2-10944; Amended Exhibit
2.02 in File No. 2-13866; Amended Exhibit 2.02 in
File No. 2-14656; Amended Exhibit 2.02 in File No.
2-21345; Amended Exhibit 2.02 in File No. 2-22326;
Amended Exhibit 2.02 in File No. 2-23569; Amended
Exhibit 2.02 in File No. 2-26284; Amended Exhibit
2.02 in File No. 2-36388; Amended Exhibit 2.02 in
File No. 2-39587; Amended Exhibit 2.02 in File No.
2-41468; Amended Exhibit 2.02 in File No. 2-43912;
Exhibit 2.03 in File No. 2-60232; Amended Exhibit
2.02 in File No. 2-50146; Amended Exhibit 2.02 in
File No. 2-52886; Second Amended Exhibit 2.04 in
File No. 2-57141; Amended Exhibit 2.04 in File No.
2-57557; Amended Exhibit 2.06 in File No. 2-62564;
Exhibit 2.02(a) in File No. 2-65914; Amended
Exhibit 2.02(a) in File No. 2-66380; and Amended
Exhibit 4.02 in File No. 33-3188; Exhibit 4.02 to
Form 8-K dated May 15, 1992; Exhibit 4.02 to Form
8-K dated July 1, 1992; Exhibit 4.02 to Form 8-K
dated September 15, 1992; Exhibit 4.02 to Form
8-K dated March 30, 1993; Exhibit 4.03 to Form 8-K
dated June 5, 1995; Exhibit 4.03 to Form 8-K dated
March 15, 1997; Exhibit 4.03 to Form 8-K dated June 1,
1997.) Incorporated by Reference. . . . . . . . . . . . .
Page of this report
on Form 10-K
Exhibits (Continued)
10.01 Form of Deferred Compensation
Agreement for Directors (Exhibit 10.01
filed with 1990 Annual Report on Form
10-K) Incorporated by Reference. . . . . .
10.02 Amended Form of Deferred Compensation
Agreement for Directors (Exhibit 10.02
filed with 1993 Annual Report on Form
10-K) Incorporated by Reference. . . . . .
10.03 Form of Management Continuity Agreement
(Exhibit 10.05 filed with CIPSCO's and
CIPS' 1994 Annual Report on Form 10-K)
Incorporated by Reference. . . . . . . . .
10.04 Form of Director's Retirement Income Plan
(Exhibit 10.04 filed with 1990 Annual
Report on Form 10-K) Incorporated by
Reference. . . . . . . . . . . . . . . . .
10.05 Form of Management Incentive Plan (Exhibit
10.06 filed with 1991 Annual Report on
Form 10-K) Incorporated by Reference. . .
10.06 Form of Excess Benefit Plan (Exhibit 10.10
filed with CIPSCO's and CIPS' 1994 Annual
Report on Form 10-K) Incorporated by
Reference. . . . . . . . . . . . . . . . .
10.07 Amendment to Form of Excess Benefit Plan
(Exhibit 10.07 filed with CIPSCO's and
CIPS' 1995 Annual Report on Form 10-K)
Incorporated by Reference. . . . . . . . .
10.08 Form of Special Executive Retirement Plan
(Exhibit 10.11 filed with CIPSCO's and
CIPS' 1994 Annual Report on Form 10-K)
Incorporated by Reference. . . . . . . . .
10.09 Amendment to Form of Special Executive
Retirement Plan(Exhibit 10.09 filed with
CIPSCO's and CIPS' 1995 Annual Report on
Form 10-K.) Incorporated by Reference . .
10.10 Stock Option Agreement, dated as of August
11, 1995, by and between CIPSCO Incorporated
and Union Electric Company. (Exhibit 10(a)
filed with CIPSCO's and CIPS' Form 10-Q for
the quarter ended June 30, 1995.)
Incorporated by Reference. . . . . . . . .
Page of this report
on Form 10-K
Exhibits (Continued)
10.11 Stock Option Agreement, dated as of August
11, 1995, by and between Union Electric
Company and CIPSCO Incorporated. (Exhibit
10(b) filed with CIPSCO's and CIPS' Form
10-Q for the quarter ended June 30, 1995.)
Incorporated by Reference. . . . . . . . .
12 Computation of Ratio of Earnings to Fixed
Charges. . . . . . . . . . . . . . . . . .
21 Subsidiaries of CIPS . . . . .. . . . . .
23 Consent of Independent Public Accountants
24 Powers of Attorney . . . . . . . . . . . .
27 Financial Data Schedule* . . . . . . . . .
99 Description of Capital Stock - CIPS. . . .
Exhibits 10.01 through 10.11 are management contracts or compensatory
plans or arrangements required to be filed as exhibits pursuant to Item
14(c) hereof.
* Included in electronic filing only.
The following instruments defining the rights of holders of certain
unregistered long-term debt of CIPS have not been filed with the Securities
and Exchange Commission but will be furnished upon request.
1. Loan Agreement dated as of March 1, 1990, between CIPS and
the Illinois Development Finance Authority (IDFA) in connection
with the IDFA's $20,000,000 Pollution Control Revenue Refunding
Bonds, 1990 Series A due March 1, 2014 and $32,000,000 Pollution
Control Revenue Refunding Bonds, 1990 Series B due September 1,
2013.
2. Loan Agreement dated January 1, 1993, between CIPS and IDFA
in connection with IDFA's $35,000,000, 6-3/8% Pollution Control
Revenue Refunding Bonds (Central Illinois Public Service Company
Project) 1993 Series A, due January 1, 2028.
3. Loan Agreement dated June 1, 1993, between CIPS and IDFA in
connection with IDFA's $17,500,000 Pollution Control Revenue
Refunding Bonds, 1993 Series B-1 due June 1, 2028 and $17,500,000
Pollution Control Revenue Refunding Bonds, 1993 Series B-2 due
June 1, 2028.
4. Loan Agreement dated August 15, 1993, between CIPS and IDFA
in connection with IDFA's $35,000,000 Pollution Control Revenue
Refunding Bonds, 1993 Series C-1 due August 15, 2026 and
$25,000,000 Pollution Control Revenue Refunding Bonds, 1993
Series C-2 due August 15, 2026.
5. CIPS Credit Agreements (effective February 12, 1997) with
various banks currently providing $42,000,000 of unsecured long-
term lines of credit.
(b) Reports on Form 8-K
November 24, 1997 Item 5. Other Events:
Third District Appellate Court reverses
Illinois commission order in coal contract
restructuring.
December 16, 1997 Item 5. Other Events:
Governor signs Electric Service Customer
Choice and Rate Relief Law of 1997.
December 31, 1997 Item 2. Acquisition or Disposition of Assets
and Item 7. Financial Statements and Exhibits:
Information and financial data related to
completion of the merger.
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 PUBLIC SERVICE COMPANY
(Registrant)
By /s/ G. L. RAINWATER
_____________________________________
G. L. RAINWATER
President and Chief Executive Officer
Date: March 27, 1998
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 in the capacities and on the date indicated.
Signature Title
Principal Executive Officer:
/s/ G. L. RAINWATER
G. L. RAINWATER President and Chief Executive Officer
and Director
Principal Financial Officer:
/s/ W. A. KOERTNER
W. A. KOERTNER Vice President and Secretary, and as
Attorney-in-Fact*
Principal Accounting Officer:
/s/ W. L. BAXTER
W. L. BAXTER Controller
PAUL A. AGATHEN* Director
DONALD E. BRANDT* Director
CLIFFORD L. GREENWALT* Director
JOHN L. HEATH* Director
ROBERT W. JACKSON* Director
GORDON R. LOHMAN* Director
RICHRD A. LUMPKIN* Director
HANNE M. MERRIMAN* Director
CHARLES W. MUELLER* Director
THOMAS L. SHADE* Director
JAMES W. WOGSLAND* Director
Date: March 27, 1998
Exhibit 12
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE FIVE YEARS ENDED DECEMBER 31, 1997
(in thousands)
<TABLE>
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net income. . . . $ 38,620 $ 77,393 $ 70,631 $ 81,913 $ 84,011
Add--Extraordinary
items net of tax 24,853 - - - -
--------- --------- --------- --------- ---------
Net income from
continuing
operations . . $ 63,473 $ 77,393 $ 70,631 $ 81,913 $ 84,011
Add--Federal and
state income
taxes:
Current . . . . 38,660 53,847 41,276 38,097 50,441
Deferred (net). (1,665) (2,805) 5,627 13,190 1,674
Investment
tax credit
amortization . (3,334) (3,349) (3,361) (3,367) (3,366)
Income tax
applicable to
nonoperating
activities . . 261 (407) 941 603 631
--------- --------- --------- ---------- ---------
33,922 47,286 44,483 48,523 49,380
--------- --------- --------- ---------- ---------
Net income
before income
taxes. . . . . . 97,395 124,679 115,114 130,436 133,391
--------- --------- --------- ---------- ---------
Add--Fixed charges
Interest on
long-term
debt (a) . . . 32,271 31,409 31,168 31,164 32,823
Other interest. 2,875 4,636 853 358 479
Amortization of
net debt premium,
discount, expense
and loss (a) . 1,643 1,709 1,703 1,678 1,598
--------- --------- --------- ---------- ---------
36,789 37,754 33,724 33,200 34,900
--------- --------- --------- ---------- ---------
Earnings as
defined. . . . . $ 134,184 $ 162,433 $ 148,838 $ 163,636 $ 168,291
========= ========= ========= ========== =========
Ratio of
earnings
to fixed charges 3.65 4.30 4.41 4.93 4.82
Earnings required
for preferred
dividends:
Preferred stock
dividends. . . $ 3,715 $ 3,721 $ 3,850 $ 3,510 $ 3,718
Adjustment to
pre-tax basis. 1,985 2,273 2,425 2,079 2,185
--------- --------- --------- ---------- ---------
$ 5,700 $ 5,994 $ 6,275 $ 5,589 $ 5,903
Fixed charges
plus preferred
stock dividend
requirements . . $ 42,489 $ 43,748 $ 39,999 $ 38,789 $ 40,803
========= ========= ========= ========== =========
Ratio of earnings
to fixed charges
plus preferred
stock dividend
requirements . . 3.16 3.71 3.72 4.22 4.12
_________________________
</TABLE>
(a) Combined as interest charges on long-term debt on Statement of Income.
Exhibit 21
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
SUBSIDIARIES OF REGISTRANT
State or Jurisdiction
of Incorporation
Subsidiary _____________________
Illinois Steam Inc. Illinois
CIPS Energy Inc. Illinois
Electric Energy, Inc.* Illinois
* Central Illinois Public Service Company owns 20% of the common stock
of EEI.
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in and incorporated by reference in this Form 10-K,
into Central Illinois Public Service Company's previously filed
Registration Statements File Nos. 33-59674, 33-45506, 33-56063 and 333-18473.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 27, 1998
Exhibit 99
DESCRIPTION OF CAPITAL STOCK - CIPS
General. The authorized capital stock of Central Illinois Public
Service Company (CIPS) consists of 2,000,000 shares of Cumulative Preferred
Stock, par value $100 per share, issuable in series, of which 800,000
shares are outstanding; 2,600,000 shares of Cumulative Preferred Stock
without par value, issuable in series, of which no shares are outstanding
(both such classes of preferred stock being hereinafter collectively
referred to as the "Preferred Stock"); and 45,000,000 shares of Common
Stock without par value of which 25,452,373 shares were outstanding (all of
which were held by Ameren Corporation) at December 31, 1997.
The following statements, unless the context otherwise indicates, are
brief summaries of the substance or general effect of certain provisions of
CIPS' Restated Articles of Incorporation and the resolutions establishing
series of Preferred Stock (collectively, the "Articles"), and of its
Mortgage Indenture securing its outstanding First Mortgage Bonds. Such
statements make use of defined terms and are not complete; they are subject
to all the provisions of the Articles or the Mortgage Indenture, as the
case may be.
Dividend Rights. Whenever dividends on all outstanding shares of the
Preferred Stock of all series for all previous quarter-yearly dividend
periods and the current quarter-yearly dividend period shall have been paid
or declared and set apart for payment, and whenever all amounts required to
be set aside for any sinking fund for the redemption or purchase of shares
of the Preferred Stock for all previous periods or dates shall have been
paid or set aside, and subject to the limitations summarized below, the
Board of Directors of CIPS may declare dividends on the CIPS Common Stock
out of any surplus or net profits of CIPS legally available for the
purpose. Currently, none of the series of the Preferred Stock have a
sinking fund for the redemption or purchase of shares of such series. The
Mortgage Indenture provides, in effect, that CIPS will not declare or pay
any dividends (other than in stock) on CIPS Common Stock, or make any other
distribution on or purchase any Common Stock, unless the total amount
charged or provided for maintenance, repairs and depreciation of the
mortgaged properties subsequent to December 31, 1940, plus the surplus
earned during the period and remaining after any such dividend,
distribution or purchase, shall equal at least 15% of CIPS' total utility
operating revenues for the period, after deducting from such revenues the
cost of electricity and gas purchased for resale. The Articles provide in
effect that, so long as any Preferred Stock is outstanding, the total
amount of all dividends or other distributions on CIPS Common Stock (other
than in stock) that may be paid, and purchases of Common Stock that may be
made, during any 12-month period shall not exceed (a) 75% of CIPS' net
income (as defined) for the 12-month period next preceding each such
dividend, distribution or purchase, if the ratio of "common stock equity"
to "total capital" (as defined) is 20% to 25%, or (b) 50% of such net
income if such ratio is less than 20%. If such ratio is in excess of 25%,
no such dividends may be paid or distributions or purchases made that would
reduce such ratio to less than 25% except to the extent permitted by
clauses (a) and (b). At December 31, 1997, no amount of retained earnings
was restricted as to the payment of dividends on CIPS Common Stock under
the foregoing provisions of the Mortgage Indenture or the Articles.
Voting Rights. Under Illinois law, each share of stock of CIPS,
common and preferred, is entitled to one vote on each matter voted on at
all meetings of shareholders, with the right of cumulative voting in the
election of directors and the right to vote as a class on certain
questions. The Articles give to holders of Preferred Stock certain special
voting rights designed to protect their interests with respect to specified
corporate action, including certain amendments to the Articles, the
issuance of Preferred Stock or parity stock, the issuance or assumption of
certain unsecured indebtedness, and mergers, consolidations or sales or
leases of substantially all of CIPS' assets.
Preemptive Rights. Holders of CIPS Common Stock have no preemptive
subscription rights.
Liquidation Rights. In the event of any liquidation or dissolution of
CIPS, holders of Common Stock are entitled to share ratably in the net
assets and profits of CIPS remaining after the payment in full to the
holders of the CIPS Preferred Stock of the aggregate preferential amount
payable in respect of the Preferred Stock in any such event.
Miscellaneous. The Transfer Agent and Registrar for the CIPS Common
Stock is Ameren Services Company, St. Louis, Missouri.
CIPS reserves the right to increase, decrease or reclassify its
authorized capital stock or any class or series thereof, and to amend or
repeal any provisions in the Articles; and all rights conferred on
shareholders in the Articles are subject to this reservation.
Exhibit 24
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Paul A. Agathen
_______________________________
(SEAL)
Paul A. Agathen
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Donald E. Brandt
_______________________________
(SEAL)
Donald E. Brandt
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Clifford L. Greenwalt
_______________________________
(SEAL)
Clifford L. Greenwalt
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ John L. Heath
_______________________________
(SEAL)
John L. Heath
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Robert W. Jackson
_______________________________
(SEAL)
Robert W. Jackson
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Gordon R. Lohman
_______________________________
(SEAL)
Gordon R. Lohman
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Richard A. Lumpkin
_______________________________
(SEAL)
Richard A. Lumpkin
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Hanne M. Merriman
_____________________________
(SEAL)
Hanne M. Merriman
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Charles W. Mueller
_______________________________
(SEAL)
Charles W. Mueller
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exechange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ Thomas L. Shade
___________________________
(SEAL)
Thomas L. Shade
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
__________________________
Notary Public
My commission expires:
March 27, 1999
POWER OF ATTORNEY
_________________
The undersigned, as a director of Central Illinois Public Service
Company, does hereby constitute and appoint G. L. Rainwater and W. A.
Koertner, and each of them, his or her true and lawful attorneys and
agents, each with full power and authority (acting alone and without the
other) to execute in the name and on behalf of the undersigned, in his or
her capacity, the Central Illinois Public Service Company Annual Report on
Form 10-K for 1997, and any amendments thereto, to be filed under the
Securities Exchange Act of 1934, as amended; hereby granting to such
attorneys and agents, and each of them, full power of substitution and
revocation in the premises; and hereby ratifying and confirming all that
such attorneys and agents, or either of them, may do or cause to be done by
virtue of this Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th
day of March, 1998.
/s/ James W. Wogsland
______________________________
(SEAL)
James W. Wogsland
Subscribed and sworn to
before me this 27th day
of March, 1998.
/s/ Janet K. Cooper
_________________________
Notary Public
My Commission expires:
March 27, 1999
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STATEMENT OF INCOME, STATEMENT OF
CASH FLOWS, BALANCE SHEET AND IS QUALIFIED IN ITS
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<PERIOD-END> DEC-31-1997
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<TOTAL-CURRENT-ASSETS> 217,168
<TOTAL-DEFERRED-CHARGES> 30,476<F1>
<OTHER-ASSETS> 53,260
<TOTAL-ASSETS> 1,788,707
<COMMON> 121,282
<CAPITAL-SURPLUS-PAID-IN> 0
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0
80,000
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0
<CAPITAL-LEASE-OBLIGATIONS> 0
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<TOT-CAPITALIZATION-AND-LIAB> 1,788,707
<GROSS-OPERATING-REVENUE> 852,075
<INCOME-TAX-EXPENSE> 33,661
<OTHER-OPERATING-EXPENSES> 715,919
<TOTAL-OPERATING-EXPENSES> 749,580<F2>
<OPERATING-INCOME-LOSS> 102,495
<OTHER-INCOME-NET> (3,017)
<INCOME-BEFORE-INTEREST-EXPEN> 99,478
<TOTAL-INTEREST-EXPENSE> 36,005
<NET-INCOME> 38,620
3,715
<EARNINGS-AVAILABLE-FOR-COMM> 34,905
<COMMON-STOCK-DIVIDENDS> 43,300
<TOTAL-INTEREST-ON-BONDS> 33,914
<CASH-FLOW-OPERATIONS> 66,319
<EPS-PRIMARY> 0<F1>
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<FN>
<F1> INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS AND NOTES.
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</TABLE>
BYLAWS Exhibit 3.03
AS AMENDED
TO AND INCLUDING
FEBRUARY 13, 1998
CENTRAL ILLINOIS
PUBLIC SERVICE
COMPANY
BYLAWS
OF
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
ARTICLE I
SHARES AND TRANSFERS
Section 1. Each holder of duly paid shares of the Company shall be
entitled to a certificate or certificates stating the number and class of
shares owned by such holder. Such certificates shall be signed by the
appropriate officers of the Company (which, in the absence of contrary
action by the Board, shall be the President or any Vice President and the
Secretary or any Assistant Secretary of the Company); shall be sealed with
the corporate seal of the Company, which seal may be facsimile; and shall
be countersigned by a Transfer Agent, and countersigned and registered by a
Registrar, appointed by the Board. If a certificate is countersigned by a
Transfer Agent and countersigned and registered by a Registrar, other (in
each case) than the Company itself or its employee, the signature of either
or both of such officers of the Company, and the countersignature of any
such Transfer Agent or its officer or employee, may be facsimiles. In case
any officer of the Company, or any officer or employee of a Transfer Agent,
who has signed or whose facsimile signature has been placed upon any such
certificate shall cease to be an officer of the Company or an officer or an
employee of the Transfer Agent, as the case may be, before such certificate
is issued, the certificate may be issued by the Company with the same
effect as if such officer of the Company or such officer or employee of the
Transfer Agent had not ceased to be such at the date of issue of such
certificate.
Section 2. Shares shall be transferable only on the books of the
Company and upon proper endorsement and surrender of the outstanding
certificate or certificates representing such shares. If an outstanding
certificate shall be lost, destroyed or stolen, the holder thereof may have
a new certificate upon producing evidence satisfactory to the Company of
such loss, destruction or theft and upon furnishing to the Company, the
Transfer Agent and the Registrar indemnity deemed sufficient by the
Company.
Section 3. Notwithstanding the foregoing provisions of this Article
I, the Board of Directors may also provide by resolution that some or all
of any or all classes and series of its shares shall be uncertificated
shares, provided that such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the Company.
Except as otherwise provided by statute, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of the
holders of certificates representing shares of the same class and series
shall be identical.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. The annual meeting of the shareholders shall be held on
the fourth Tuesday in April of each year (or if such day shall be a legal
holiday then upon the next succeeding day not a legal holiday) or upon such
other day determined by resolution of the Board of Directors. Each such
regular annual meeting shall be held at such time and at such location,
within or without the State of Illinois, as the Board of Directors shall
order. At such annual meeting, a board of directors shall be elected and
such other business shall be transacted as may properly come before such
meeting.
Section 2. Special meetings of the shareholders may be called by the
President, by the Board of Directors, by the holders of not less than one-
fifth of all the outstanding shares entitled to vote on the matter for
which the meeting is called, or in such other manner as may be provided by
statute. Each such special meeting shall be held at such location, within
or without the State of Illinois, as the Board of Directors shall order.
Section 3. Written notice of the place, day and hour of each meeting
of shareholders and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given to each
shareholder of record entitled to vote at such meeting. Such notice shall
be sent by mail to each such shareholder, at the address of such
shareholder as it appears on the records of the Company, not less than ten
days or more than sixty days before the date of the meeting, except in
cases where some other special method of notice may be required by statute,
in which case the statutory method shall be followed. Notice of any
meeting of the shareholders may be waived by any shareholder. Attendance of
a shareholder (either in person or by proxy) at any meeting shall
constitute waiver of notice thereof unless the shareholder (in person or by
proxy, as the case may be) at the meeting objects to the holding of the
meeting because proper notice was not given.
Section 4. At any shareholders' meeting a majority of the shares
outstanding and entitled to vote on the matter (excluding such shares as
may be owned by the Company) must be represented (either in person or by
proxy) in order to constitute a quorum for consideration of such matter,
but the shareholders represented at any meeting, though less than a quorum,
may adjourn the meeting to some other day or sine die. If a quorum is
present (either in person or by proxy) at a shareholders' meeting, the
affirmative vote of the holders of the majority of shares represented at
the meeting and entitled to vote on a matter shall be the act of the
shareholders, unless the vote of a greater number or voting by classes
shall be required by law or the Articles of Incorporation.
Section 5. The President and Secretary of the Company shall act as
Chairman and Secretary, respectively, of each shareholders' meeting, unless
the shareholders represented at the meeting shall otherwise decide.
ARTICLE III
BOARD OF DIRECTORS
Section 1. The business and affairs of the Company shall be managed
by or under the direction of the Board of Directors consisting of not less
than seven or more than twelve members. The exact number of directors
within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by the Board of Directors
pursuant to a resolution adopted by a majority of the entire Board of
Directors. The Board of Directors shall be elected at each annual meeting
of the shareholders, but, if for any reason the election shall not be held
at an annual meeting, it may be subsequently held at any special meeting of
the shareholders after proper notice. Directors so elected shall hold
office until the next succeeding annual meeting of shareholders or until
their respective successors, willing to serve, shall have been elected and
qualified. Any vacancy occurring in the Board of Directors arising between
meetings of shareholders by reason of an increase in the number of
directors or otherwise may be filled by a majority of the members of the
Board.
Section 2. A meeting of the Board of Directors shall be held on the
same date as the annual meeting of shareholders in each year, at the same
place where such annual meeting shall have been held or at such other place
as shall be determined by the Board. Regular meetings of the Board shall be
held in such place, within or without the State of Illinois, and on such
dates each year as shall be established from time to time by the Board.
Notice of every such regular meeting of the Board, stating the place, day
and hour of the meeting, shall be given to each director personally, or by
telegraph or other written means of electronic communication, or by
depositing the same in the mails properly addressed, at least two days
before the date of such meeting. Except where required by statute, 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.
Section 3. Special meetings of the Board of Directors may be called
at any time by the President, or by a Vice President, when acting as
President, or by any two directors. Notice of such meeting, stating the
place, day and hour of the meeting shall be given to each director
personally in writing, or by telegraph or other written means of electronic
communication, or by depositing the same in the mails properly addressed,
or orally promptly confirmed by written notice in any one of the aforesaid
forms, not less than the day prior to the date of such meeting.
Section 4. Notice of any meeting of the Board may be waived by any
director. Attendance of a director at any meeting shall constitute 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 at the
meeting because the meeting is not lawfully called or convened.
Section 5. A majority of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board, but
less than a majority of the Board may adjourn the meeting to some other day
or sine die. The act of the majority of the directors present at a meeting
at which a quorum is present shall be the act of the Board unless the vote
of a greater number or the vote of any class of directors shall be required
by the Articles of Incorporation. The President of the Company shall act
as Chairman at each meeting of the Board but, in the President's absence,
one of the directors present at the meeting who shall have been elected for
the purpose by majority vote of those directors in attendance shall act as
Chairman; and the Secretary of the Company, or in the Secretary's stead, an
Assistant Secretary shall act as Secretary at each such meeting. The
members of the Board shall receive such compensation as the Board may from
time to time by resolution determine.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. A majority of directors may appoint committees, standing
or special, from time to time from among members of the Board, and confer
powers on such committees and revoke such powers and terminate the
existence of such committees at its pleasure.
Section 2. Meetings of any committee may be called in such manner and
may be held at such times and places as such committee may by resolution
determine, provided that a meeting of any committee may be called at any
time by the President of the Company. Members of all committees shall
receive such compensation as the Board of Directors may from time to time
by resolution determine.
Section 3. Each committee shall have such authority of the Board of
Directors as shall be granted to it by the Board; provided, however, a
committee may not take any action not permitted to be taken by a committee
pursuant to the Business Corporation Act of 1983, as amended from time to
time.
ARTICLE V
OFFICERS
Section 1. There shall be elected by the Board of Directors (if
practicable at its first meeting after the annual election of directors in
each year) the following principal officers, namely: A President, such
number of Vice Presidents as the Board may from time to time decide upon
(any one or more of whom may be designated as Executive Vice President,
Senior Vice President or otherwise), a Secretary, a Treasurer and a
Controller. References in these Bylaws to Vice Presidents shall include
any such Executive Vice President, Senior Vice President or other Vice
President, however denominated. The Board may in its discretion also elect
such other officers as may from time to time be provided for by the Board.
Any two or more offices may be held by the same person. All officers,
unless sooner removed, shall hold their respective offices until the first
meeting of the Board of Directors after the next succeeding annual election
of directors and until their successors, willing to serve, shall have been
elected, but any officer, including any officer appointed by the President
as provided in Section 2 of this Article V, may be removed from office at
the pleasure of the Board. Election or appointment of an officer shall not
of itself create contract rights.
Section 2. The President shall be the chief executive officer of the
Company and shall have the general management and direction, subject to the
control of the Board of Directors, of the business of the Company,
including the power to appoint and to remove and discharge any and all
assistant officers, agents and employees of the Company not elected or
appointed directly by the Board of Directors. The President may execute
for and on behalf of the Company any contracts, deeds, mortgages, leases,
bonds, or other instruments and may accomplish such execution either under
or without the seal of the Company and either individually or with the
Secretary, any Assistant Secretary, or any other officer or person
thereunto authorized by the Board of Directors, according to the
requirements of the form of the instrument. The President shall have such
other powers and duties as usually devolve upon the president of a
corporation, and such further powers and duties as may from time to time be
prescribed by the Board of Directors. The President may delegate any part
of the duties of that office to one or more of the Vice Presidents of the
Company.
Section 3. Each of the Vice Presidents shall have such powers and
duties as may be prescribed for such office by the Board of Directors or as
may be prescribed for or delegated to such officer by the President. Each
Vice President may execute for and on behalf of the Company any contracts,
deeds, mortgages, leases, bonds, or other instruments in each case in
accordance with the authority therefor granted by the President or the
Board of Directors, which authority may be general or confined to specific
instances. Such execution may be accomplished either individually or with
any other officer or person thereunto authorized by the President or the
Board of Directors, according to the requirements of the form of the
instrument. In the absence or inability of the President or in case of the
President's death, resignation or removal from office, the powers and
duties of the President shall temporarily devolve upon such one of the Vice
Presidents as the Board shall have designated or shall designate for the
purpose 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. Each Vice
President may delegate any part of the duties of that office to employees
of the Company under such Vice President's supervision.
Section 4. The Secretary shall attend all meetings of the Board of
Directors, shall keep a true and faithful record thereof in proper books to
be provided for that purpose, and shall have the custody and care of the
corporate seal, records, minutes and stock books of the Company. The
Secretary shall also act as Secretary of all shareholders' meetings, and
keep a record thereof, except to the extent some other person may have been
selected to act as Secretary by such meeting. The Secretary shall keep a
suitable record of the addresses of shareholders, shall have general charge
of the stock transfer books of the Company, and shall, except as may be
otherwise required by statute or by the Bylaws, sign, issue and publish all
notices required for meetings of shareholders and for meetings of the Board
of Directors. The Secretary shall sign all share certificates, bonds and
mortgages, and all other documents and papers to which the Secretary's
signature may be necessary or appropriate, shall affix the seal, and shall
have such other powers and duties as are commonly incidental to the office
of Secretary or as may be prescribed for or delegated to that office by the
Board of Directors, by the President, or, if authorized by the Board or the
President to prescribe such powers and duties, by a Vice President. The
Secretary may delegate any part of the duties of that office to employees
of the Company under the Secretary's supervision.
Section 5. The Treasurer shall have charge of, and be responsible
for, the collection, receipt, custody and disbursement of the funds of the
Company, and the deposit of its funds in the name of the Company in such
banks, trust companies or safety vaults as the Board of Directors may
direct which direction may be general or confined to specific depositories.
The Treasurer shall have custody of such books, receipted vouchers and
other papers and records as in the practical business operations of the
Company shall naturally belong in the office or custody of the Treasurer or
as shall be placed in the custody of the Treasurer by the Board of
Directors, by the President, or, if authorized by the Board or the
President, by a Vice President. The Treasurer shall have such other powers
and duties as are commonly incidental to the office of Treasurer or as may
be prescribed for or delegated to that office by the Board of Directors, by
the President, or, if authorized by the Board or the President to prescribe
such powers and duties, by a Vice President. The Treasurer may be required
to give a bond to the Company for the faithful discharge of the Treasurer's
duties, in such form and in such amount and with such sureties as shall be
determined by the Board of Directors. The Treasurer may delegate any part
of the Treasurer's duties to employees of the Company under the Treasurer's
supervision.
Section 6. The Controller shall be the principal accounting officer
of the Company. Except as otherwise provided in these Bylaws and except as
otherwise provided by the Board of Directors, the Controller will be
responsible for the direction of the auditing organization of the Company
(other than the Internal Audit function), the establishment and maintenance
of accounting procedures, the interpretation of all financial statements
and accounting reports of the Company and functional supervision over the
records of all other departments of the Company pertaining to revenues,
expenses, moneys, securities, properties, materials and supplies. The
Controller shall have such other powers and duties as are commonly
incidental to the office of Controller or as may be prescribed for or
delegated to the Controller by the Board of Directors, by the President,
or, if authorized by the Board or the President to prescribe such powers
and duties, by a Vice President. The Controller may be required to give a
bond to the Company for the faithful discharge of the Controller's duties,
in such form and in such amount and with such sureties as shall be
determined by the Board of Directors. The Controller may delegate any part
of the Controller's duties to employees of the Company under the
Controller's supervision.
Section 7. The Assistant Vice Presidents, Assistant Secretaries,
Assistant Treasurers and Assistant Controllers shall, respectively, assist
the Vice Presidents, the Secretary, the Treasurer and the Controller of the
Company in the performance of the respective duties assigned to such
principal officers and, in assisting the respective principal officer, each
assistant officer shall, for such purposes, have the same powers as the
respective principal officer. The powers and duties of any principal
officer shall, except as otherwise ordered by the Board of Directors,
temporarily devolve upon the respective assistant in case of the absence,
disability, death, resignation or removal from office of such principal
officer.
ARTICLE VI
MISCELLANEOUS
Section 1. The funds of the Company shall be deposited to its credit
in such banks or trust companies as the Board of Directors from time to
time shall approve, which approval may be general or confined to specific
instances. Such funds shall be withdrawn only on checks or drafts of the
Company or by direct, wire or other electronic transfer of funds for the
purposes of the Company in accordance with procedures relating to
signatures and authorizations by officers of the Company which are approved
by the Board of Directors from time to time, which approval may be general
or confined to specific instances.
Section 2. No debts shall be contracted except for current expenses
unless authorized by the Board of Directors, and no bills shall be paid by
the Treasurer unless audited and approved by the Controller or by some
other person or committee authorized by the Board of Directors to audit and
approve bills for payment.
Section 3. All distributions to shareholders and all acquisitions by
the Company of its own shares shall be authorized by the Board of
Directors.
Section 4. The fiscal year of the Company shall close at the end of
December annually.
Section 5. All or any shares of stock of any corporation owned by the
Company may be voted at any meeting of the shareholders of such corporation
by the President, any Vice President or the Secretary of the Company upon
any question that may be presented at such meeting, and any such officer
may, on behalf of the Company, waive any notice of the calling of such
meeting required by any statute or bylaw and consent to the holding of any
such meeting without notice. The President, any Vice President or the
Secretary of the Company shall have authority to give to any person a
written proxy in the name of the Company and under its corporate seal to
vote at any meeting of the shareholders of any corporation all or any
shares of stock of such corporation owned by the Company upon any question
that may be presented at such meeting, with full power to waive any notice
of the calling of such meeting required by any statute or bylaw and to
consent to the holding of any such meeting without notice.
Section 6. (a) 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 such person 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 such person reasonably believed to be in, or not opposed
to, the best interests of the Company and, with respect to any criminal
action or proceeding, if such person had no reasonable cause to believe
such person's 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
such person reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or
proceeding, that the person had reasonable cause to believe that such
person's conduct was unlawful.
(b) 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 being indemnified acted in good faith and in a manner
such person reasonably believed to be in, or not opposed to, the best
interests of the Company, provided that no indemnification shall be made
with respect to any claim, issue, or matter as to which such person has
been adjudged to have been liable 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 the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the court shall deem
proper.
(c) To the extent that a director, officer, employee or agent has
been successful, on the merits or otherwise, in the defense of any action,
suit or proceeding referred to in paragraph (a) or (b), 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.
(d) Any indemnification under paragraph (a) or (b) (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 such person has
met the applicable standard of conduct set forth in paragraph (a) or (b).
Such determination shall be made (1) 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 (2) 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 (3) by the
shareholders of the Company.
(e) 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, upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Company as authorized in this Section
6.
(f) The indemnification and advancement of expenses provided by or
granted under the other subsections of this Section 6 shall be effective
with respect to acts, errors or omissions occurring prior to, on or
subsequent to the date of adoption hereof and such indemnification shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise,
both as to action by a director, officer, employee or agent in such
person's official capacity and as to action in another capacity while
holding such office.
(g) The Company may purchase and maintain insurance on behalf of any
person who 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 any liability asserted against
such person and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the Company would have
the power to indemnify such person against such liability under the
provisions of this Section 6.
(h) 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.
(i) For purposes of this Section 6 references to "the Company" shall
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation)
absorbed in a merger which, if its separate existence had continued, would
have had the power and authority to indemnify its directors, officers, and
employees or agents, so that any person who was a director, officer,
employee or agent of such merging corporation, or was serving at the
request of such merging corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Section 6 with respect to the surviving corporation as such person would
have with respect to such merging corporation if its separate existence had
continued.
(j) For purposes of this Section 6, references to "other enterprise"
shall include employee benefit plans, 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 such person 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 Company" as referred to in this Section 6.
(k) The indemnification and advancement of expenses provided by or
granted under this Section 6 shall, unless otherwise provided when
authorized or ratified, 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 that person.
ARTICLE VII
AMENDMENT OR REPEAL OF BYLAWS
These Bylaws may be added to, amended or repealed by the Board of
Directors at any regular or special meeting of the Board.
STATE OF ILLINOIS )
)SS.
COUNTY OF SANGAMON )
I, the undersigned, hereby certify that I am
Secretary of Central Illinois Public Service Company and the Custodian of
the books and records of said Company.
I further certify that the above and foregoing is a true copy of
the Bylaws of said Company in effect on , 19 .
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said Company this day of ,
A.D. 19 .
(CORPORATE SEAL)
