UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 381-2000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati
Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company. Information contained herein relating to any individual registrant
is filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its
company specific information with the reduced disclosure format.
As of October 31, 1995, shares of Common Stock outstanding for each company
were as listed:
<TABLE>
<CAPTION>
Company Shares
<S> <C>
Cinergy Corp., par value $.01 per share 157,209,942
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
</TABLE
TABLE OF CONTENTS
Item
Number
Glossary of Terms
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Common
Stock Equity
Consolidated Statements of Cash Flows
Results of Operations
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Common
Stock Equity
Consolidated Statements of Cash Flows
Results of Operations
PSI Energy, Inc.
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Common
Stock Equity
Consolidated Statements of Cash Flows
Results of Operations
The Union Light, Heat and Power Company
Balance Sheets
Statements of Income
Statements of Changes in Common Stock Equity
Statements of Cash Flows
Results of Operations
Notes to Financial Statements
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
1 Legal Proceedings
6 Exhibits and Reports on Form 8-K
Signatures
<PAGE>
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q have the meanings set forth below:
TERM DEFINITION
AEP American Electric Power Company, Inc., collectively with its
utility subsidiaries
AFUDC Allowance for funds used during construction
Articles Amended Articles of Incorporation
August 1993 A Public Utilities Commission of Ohio order issued in
Order August 1993
Cayuga Cayuga Generating Station
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy Corp.)
CG&E's 1994 CG&E's 1994 Annual Report on Form 10-K (Commission File
Form 10-K Number 1-1232)
Cinergy Cinergy Corp.
Cinergy's 1994 Cinergy's 1994 Annual Report on Form 10-K, as amended
Form 10-K (Commission File Number 1-11377)
Cinergy Cinergy Investments, Inc. (a subsidiary of Cinergy), the
Investments holding company for Cinergy's non-utility businesses
Clean Coal A joint arrangement by PSI and Destec for a 262-mw clean
Project coal power generating facility, which is expected to be
placed in service in November 1995, located at Wabash
River.
CWIP Construction work in progress
D&P Duff & Phelps Credit Rating Co.
Destec Destec Energy, Inc.
District Court United States District Court for the Southern District of
Indiana, Indianapolis Division
DSM Demand-side management
February 1995 An Indiana Utility Regulatory Commission order issued in
Order February 1995
FERC Federal Energy Regulatory Commission
Gibson Gibson Generating Station
IDEM Indiana Department of Environmental Management
IGC Indiana Gas Company (formerly Indiana Gas and Water Company,
Inc.)
IPALCO IPALCO Enterprises, Inc.
IURC Indiana Utility Regulatory Commission
KPSC Kentucky Public Service Commission
kwh Kilowatt-hour
Lawrenceburg Lawrenceburg Gas Company (a wholly-owned subsidiary of CG&E)
May 1992 Order A Public Utility Commission of Ohio order issued in May
1992
Mcf Thousand cubic feet
Mega-Nopr This FERC Notice of Proposed Rulemaking on Open Access,
issued on March 29, 1995, is another step in the
transition towards potentially full-scale competition in
the electric utility industry. Essentially, the proposed
rule is the electric industry's equivalent of the FERC's
Order 636 which is applicable to the natural gas industry.
Merger Order The FERC's order approving the merger of CG&E and PSI to
form Cinergy.
MGP From the 1830's to the 1940's, it was common for gas to be
produced at Manufactured Gas Plants through a process that
involved the heating of coal or oil. The gas that was
released from such a process was then cleaned and stored
at the manufacturing plant for future sale or use.
mw Megawatt
NIPSCO Northern Indiana Public Service Company
Order 636 Issued in April 1992, this FERC order mandated changes to
the way local gas distribution companies purchase gas
supplies and contract for transportation and storage
services.
Power Inter- Power International, Inc. (a subsidiary of Cinergy
national Investments)
PRP Potentially Responsible Party
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
PSI's 1994 PSI's 1994 Annual Report on Form 10-K (Commission File
Form 10-K Number 1-3543)
PUCO Public Utilities Commission of Ohio
PUHCA Public Utility Holding Company Act of 1935
Resources PSI Resources, Inc. (former parent company of PSI)
S&P Standard & Poor's
scrubber A chemical plant that removes sulfur dioxide from the gas
produced by burning coal
SEC Securities and Exchange Commission
SFAS 121 Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", issued in March
1995 by the Financial Accounting Standards Board, is a new
accounting standard requiring impairment losses on long-
lived assets be recognized when an asset's book value
exceeds its expected future cash flows.
UCC Indiana Office of the Utility Consumer Counselor
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
ULH&P's Form ULH&P's 1994 Annual Report on Form 10-K (Commission File
10-K Number 2-7793)
Wabash River Wabash River Generating Station
Woodsdale Woodsdale Generating Station
Zimmer William H. Zimmer Generating Station
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Utility Plant - original cost
In service
Electric $8 469 669 $8 292 625
Gas 672 755 645 602
Common 185 886 185 718
9 328 310 9 123 945
Accumulated depreciation 3 317 021 3 163 802
6 011 289 5 960 143
Construction work in progress 213 922 238 750
Total utility plant 6 225 211 6 198 893
Current Assets
Cash and temporary cash investments 87 443 71 880
Restricted deposits 86 596 11 288
Accounts receivable less accumulated provision
of $10,636,000 at September 30, 1995, and
$9,716,000 at December 31, 1994 for doubtful
accounts 267 475 299 509
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 133 787 156 028
Gas stored for current use 29 484 31 284
Other materials and supplies 90 704 92 880
Property taxes applicable to subsequent year 136 773 112 420
Prepayments and other 30 178 36 416
862 440 811 705
Other Assets
Regulatory assets
Post-in-service carrying costs and deferred
operating expenses 187 780 185 280
Phase-in deferred return and depreciation 101 663 100 943
Deferred demand-side management costs 121 483 104 127
Amounts due from customers - income taxes 390 602 408 514
Deferred merger costs 54 900 49 658
Unamortized costs of reacquiring debt 73 766 70 424
Other 77 001 86 017
Other 149 085 134 281
1 156 280 1 139 244
$8 243 931 $8 149 842
<FN>
The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CAPITALIZATION AND LIABILITIES
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares -
157,139,786 at September 30, 1995, and
155,198,038 at December 31, 1994 $ 1 572 $ 1 552
Paid-in capital 1 585 470 1 535 658
Retained earnings 941 652 877 061
Total common stock equity 2 528 694 2 414 271
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 227 913 267 929
Subject to mandatory redemption 160 000 210 000
Long-term Debt 2 694 676 2 715 269
Total capitalization 5 611 283 5 607 469
Current Liabilities
Long-term debt due within one year 134 400 60 400
Notes payable 284 000 228 900
Accounts payable 173 054 266 467
Refund due to customers 12 878 15 482
Litigation settlement 80 000 80 000
Accrued taxes 292 677 258 041
Accrued interest 52 091 58 504
Other 43 156 36 610
1 072 256 1 004 404
Other Liabilities
Deferred income taxes 1 085 703 1 071 104
Unamortized investment tax credits 188 222 195 878
Accrued pension and other postretirement
benefit costs 161 675 133 578
Other 124 792 137 409
1 560 392 1 537 969
$8 243 931 $8 149 842
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Electric $734 042 $651 354 $1 979 685 $1 874 040 $2 561 182 $2 470 522
Gas 33 591 40 481 265 777 331 197 376 978 495 690
767 633 691 835 2 245 462 2 205 237 2 938 160 2 966 212
Operating Expenses
Fuel used in electric production 190 445 195 287 545 548 539 634 718 907 712 612
Gas purchased 13 155 16 013 130 235 189 059 189 469 288 279
Purchased and exchanged power 15 685 7 494 32 992 42 728 39 346 53 809
Other operation 134 517 136 489 381 221 379 839 565 032 507 831
Maintenance 39 851 48 684 127 834 143 862 184 931 195 405
Depreciation 68 680 73 419 210 351 218 442 286 304 289 880
Amortization of phase-in deferrals 3 409 - 5 682 - 5 682 -
Post-in-service deferred operating
expenses - net (71) (1 661) (2 140) (4 638) (3 500) (6 009)
Phase-in deferred depreciation - - - (2 161) - (3 770)
Income taxes 69 574 38 318 172 415 134 389 190 207 177 986
Taxes other than income taxes 64 449 60 033 192 354 184 773 251 632 242 069
599 694 574 076 1 796 492 1 825 927 2 428 010 2 458 092
Operating Income 167 939 117 759 448 970 379 310 510 150 508 120
Other Income and Expenses - Net
Allowance for equity funds used during
construction (1 159) 2 443 726 6 774 153 12 156
Post-in-service carrying costs 602 2 452 3 183 6 758 6 205 8 874
Phase-in deferred return 2 135 1 947 6 403 13 405 8 349 20 823
Write-off of a portion of Zimmer Station - - - - - (234 844)
Income taxes
Related to write-off of a portion of
Zimmer Station - - - - - 12 085
Other 1 988 2 234 5 195 6 396 9 408 12 159
Other - net 1 701 (3 717) 1 010 (11 243) (16 191) (24 998)
5 267 5 359 16 517 22 090 7 924 (193 745)
Income Before Interest and Other Charges 173 206 123 118 465 487 401 400 518 074 314 375
Interest and Other Charges
Interest on long-term debt 54 154 54 257 160 654 164 257 215 645 220 573
Other interest 5 392 6 042 16 520 13 901 22 989 15 879
Allowance for borrowed funds used during
construction (2 027) (3 378) (6 324) (9 465) (9 191) (12 196)
Preferred dividend requirements of
subsidiaries 6 770 8 658 24 084 26 901 32 742 37 058
64 289 65 579 194 934 195 594 262 185 261 314
Net Income $108 917 $ 57 539 $ 270 553 $ 205 806 $ 255 889 $ 53 061
Average Common Shares Outstanding 156 945 147 162 156 324 146 470 154 797 146 104
Earnings Per Common Share $.69 $.40 $1.73 $1.41 $1.62 $.36
Dividends Declared Per Common Share $.43 $.38 $1.29 $1.14 $1.65 $1.51
<FN>
The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Quarter Ended September 30, 1995
Balance July 1, 1995 $1 566 $1 570 873 $ 900 094 $2 472 533
Net income 108 917 108 917
Issuance of 572,455 shares of common stock 6 14 597 14 603
Common stock issuance expenses (2) (2)
Dividends on common stock (67 359) (67 359)
Other 2 2
Balance September 30, 1995 $1 572 $1 585 470 $ 941 652 $2 528 694
Quarter Ended September 30, 1994
Balance July 1, 1994 $1 466 $1 345 023 $ 943 659 $2 290 148
Net income 57 539 57 539
Issuance of 657,339 shares of common stock 7 14 546 14 553
Common stock issuance expenses (92) (92)
Dividends on common stock (55 519) (55 519)
Balance September 30, 1994 $1 473 $1 359 477 $ 945 679 $2 306 629
Nine Months Ended September 30, 1995
Balance January 1, 1995 $1 552 $1 535 658 $ 877 061 $2 414 271
Net income 270 553 270 553
Issuance of 1,941,748 shares of common stock 20 48 734 48 754
Common stock issuance expenses (191) (191)
Dividends on common stock (201 251) (201 251)
Other 1 269 (4 711) (3 442)
Balance September 30, 1995 $1 572 $1 585 470 $ 941 652 $2 528 694
Nine Months Ended September 30, 1994
Balance January 1, 1994 $1 453 $1 312 426 $ 907 802 $2 221 681
Net income 205 806 205 806
Issuance of 2,066,436 shares of common stock 20 46 616 46 636
Common stock issuance expenses (118) (118)
Dividends on common stock (166 976) (166 976)
Other 553 (953) (400)
Balance September 30, 1994 $1 473 $1 359 477 $ 945 679 $2 306 629
Twelve Months Ended September 30, 1995
Balance October 1, 1994 $1 473 $1 359 477 $ 945 679 $2 306 629
Net income 255 889 255 889
Issuance of 9,705,354 shares of common stock 99 230 000 230 099
Common stock issuance expenses (5 298) (5 298)
Dividends on common stock (255 637) (255 637)
Other 1 291 (4 279) (2 988)
Balance September 30, 1995 $1 572 $1 585 470 $ 941 652 $2 528 694
Twelve Months Ended September 30, 1994
Balance October 1, 1993 $1 446 $1 298 567 $1 114 759 $2 414 772
Net income 53 061 53 061
Issuance of 2,726,790 shares of common stock 27 62 224 62 251
Common stock issuance expenses (209) (209)
Dividends on common stock (221 264) (221 264)
Other (1 105) (877) (1 982)
Balance September 30, 1994 $1 473 $1 359 477 $ 945 679 $2 306 629
<FN>
The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating Activities
Net income $108 917 $ 57 539 $ 270 553 $ 205 806 $ 255 889 $ 53 061
Items providing (using) cash currently:
Depreciation 68 680 73 419 210 351 218 442 286 304 289 880
Amortization of phase-in deferrals 3 409 - 5 682 - 5 682 -
Deferred income taxes and investment tax
credits - net 39 420 1 606 27 836 30 172 28 590 27 804
Allowance for equity funds used during
construction 1 159 (2 443) (726) (6 774) (153) (12 156)
Regulatory assets
Post-in-service and phase-in cost
deferrals (3 630) (6 882) (14 193) (29 429) (21 344) (20 683)
Deferred merger costs (6 359) (11 815) (8 928) (22 444) (8 825) (28 941)
Other 4 163 (3 537) 10 162 4 805 1 837 3 785
Write-off of a portion of Zimmer Station - - - - - 234 844
Changes in current assets and current
liabilities
Restricted deposits (6) 1 547 8 1 421 8 633 1 344
Accounts receivable (15 587) 40 439 32 034 74 464 (1 880) 11 123
Materials, supplies, and fuel 21 297 (16 799) 26 217 (42 409) 22 677 (48 446)
Accounts payable (11 346) (27 540) (93 413) (73 234) (28 370) (19 744)
Refund due to customers (2 918) (2 999) (2 604) (47 223) (21 731) (115 391)
Advance under accounts receivable
purchase agreement - - - (49 940) - -
Accrued taxes and interest 26 241 (6 103) 28 223 (22 064) 56 040 10 594
Other items - net (18 610) 38 880 (6 696) 70 852 29 120 73 524
Net cash provided by (used in)
operating activities 214 830 135 312 484 506 312 445 612 469 460 598
Financing Activities
Issuance of common stock 14 601 14 461 48 563 46 518 224 801 62 042
Issuance of preferred stock of subsidiaries - - - - - 59 475
Issuance of long-term debt 195 255 59 910 344 280 420 935 344 280 717 935
Funds on deposit from issuance of long-term
debt (81 944) 8 810 (75 316) 21 211 (68 630) 33 039
Retirement of preferred stock of
subsidiaries (93 451) - (93 458) (40 410) (93 474) (100 516)
Redemption of long-term debt (81 302) - (298 553) (313 247) (298 988) (696 484)
Change in short-term debt 40 000 5 801 55 100 147 800 (41 514) 260 839
Dividends on common stock (67 359) (55 519) (201 251) (166 976) (255 637) (221 264)
Net cash provided by (used in)
financing activities (74 200) 33 463 (220 635) 115 831 (189 162) 115 066
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (71 379) (115 345) (231 943) (325 395) (386 233) (470 566)
Deferred demand-side management costs (7 014) (11 711) (16 365) (29 927) (33 706) (43 907)
Equity investment in Argentine utility - 32 - 32 (32) -
Net cash provided by (used in)
investing activities (78 393) (127 024) (248 308) (355 290) (419 971) (514 473)
Net increase (decrease) in cash and
temporary cash investments 62 237 41 751 15 563 72 986 3 336 61 191
Cash and temporary cash investments at
beginning of period 25 206 42 356 71 880 11 121 84 107 22 916
Cash and temporary cash investments at
end of period $ 87 443 $ 84 107 $ 87 443 $ 84 107 $ 87 443 $ 84 107
<FN>
The accompanying notes as they relate to Cinergy are an integral part of these consolidated financial statements.
</TABLE
<PAGE>
CINERGY CORP.
Below is information concerning the consolidated results of operations for
Cinergy for the quarter, nine months, and twelve months ended September 30,
1995. For information concerning the results of operations for each of the
other registrants, see the discussion under the heading RESULTS OF OPERATIONS
following the financial statements of each company.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the quarter ended September 30, 1995, increased 11.7% as
compared to the same period last year. This increase was primarily
attributable to higher kwh sales to retail customers. Increased domestic and
commercial sales were due in large part to the warmer weather during the
period. Sales to industrial customers increased due to growth primarily in
the chemicals and food products sectors. Increased non-firm power sales for
resale also contributed to the higher kwh sales levels.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the third quarter of 1995
increased 2.7% as compared to the third quarter of 1994, reflecting higher gas
transportation volumes as industrial customers continued to purchase directly
from gas suppliers, creating a significant increase in demand for
transportation services. The increased transportation volume, primarily in
the primary metals, paper products, and food products sectors, more than
offset a decline in industrial sales volumes. Also, partially offsetting the
increase in transportation volumes were decreased sales to domestic and
commercial customers.
Operating Revenues
Electric Operating Revenues
Electric operating revenues for the quarter ended September 30, 1995,
increased $83 million (12.7%) as compared to the same period last year. This
increase primarily resulted from increased kwh sales, as previously discussed.
In addition, PSI's 4.3% retail rate increase approved in the February 1995
Order and a 1.9% rate increase for carrying costs on CWIP property which was
approved by the IURC on March 9, 1995, also contributed to the increase.
An analysis of electric operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Electric operating revenues - September 30, 1994 $651
Increase due to change in:
Price per kwh
Retail 6
Sales for resale
Non-firm power transactions 4
Total change in price per kwh 10
Kwh sales
Retail 62
Sales for resale
Firm power obligations 6
Non-firm power transactions 4
Total change in kwh sales 72
Other 1
Electric operating revenues - September 30, 1995 $734
Gas Operating Revenues
Gas operating revenues declined $7 million (17.0%) in the third quarter of
1995 when compared to the same period last year, primarily as a result of the
previously discussed decrease in total retail sales volumes. An increase in
the relative volume of gas transported to gas sold, as previously discussed,
also contributed to the decrease. Providing transportation services does not
necessitate the recovery of gas purchased costs by CG&E. Consequently, the
revenue per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs, Cinergy's largest operating expense, decreased $5 million
(2.5%) for the quarter as compared to the same period of 1994.
An analysis of fuel costs is shown below:
Quarter
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $195
Increase (Decrease) due to change in:
Price of fuel (24)
Kwh generation 19
Fuel expense - September 30, 1995 $190
Gas Purchased
Gas purchased for the quarter declined $3 million (17.8%) when compared to the
same period last year. This decrease was attributable to a decrease in
volumes purchased associated with the aforementioned changes in volumes sold
and transported.
Purchased and Exchanged Power
Purchased and exchanged power increased $8 million for the third quarter
when compared to the same period last year, reflecting increased purchases
due to the warmer weather conditions during the period.
Maintenance
The decrease in maintenance expense of $9 million (18.1%) for the third
quarter of 1995 as compared to the same period last year was primarily due to
improved scheduling of routine maintenance on electric generating units.
Lower maintenance costs on gas and electric distribution facilities also
contributed to the decline.
Depreciation
Depreciation expense decreased $5 million (6.5%) for the quarter ended
September 30, 1995, as compared to the same period last year. This decrease
primarily reflects the adoption of lower depreciation rates for PSI effective
in March 1995, pursuant to the February 1995 Order. The decrease was
partially offset by the effect of additions to utility plant in service.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals, which began in May 1995, reflects the
amortization of previously deferred depreciation and deferred return resulting
from CG&E's three-year rate phase-in plan for Zimmer included in the May 1992
Order. These deferrals will be recovered over a seven-year period as
contemplated in the May 1992 Order.
Taxes Other than Income Taxes
Taxes other than income taxes increased $4 million (7.4%) over the same period
of 1994 primarily due to increased property taxes resulting from higher
property tax rates applicable to CG&E.
Other Income and Expenses - Net
Allowance for Equity Funds Used During Construction
The equity component of AFUDC decreased $4 million for the three months
ended September 30, 1995, as compared to the same period last year. This
decrease was due primarily to an increase in PSI's average short-term debt
outstanding. The quarter ended September 30, 1995, reflects application of
the lower rate retroactively for the year-to-date period. In addition,
PSI's scrubber at Gibson was placed in service in September 1994 which
resulted in a large decrease in the average balance of CWIP.
Other - net
Other - net increased $5 million for the quarter ended September 30, 1995,
when compared to the same period last year. This increase was due to a number
of factors, including interest associated with a refund of an overpayment of
Federal income taxes for 1987 and 1990, and an increase in carrying costs on
DSM expenses which resulted from a higher AFUDC rate used to compute carrying
costs.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales increased 1.8% for the nine months ended September 30, 1995, when
compared to the same period last year, attributable primarily to higher
industrial sales resulting from growth in the primary metals and chemicals
sectors. Also contributing to the increase were higher domestic and
commercial sales which were the result of warmer weather during the summer
cooling season. These increases were partially offset by a decline in non-
firm power sales for resale.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the nine months ended September
30, 1995, decreased slightly when compared to the same period of 1994.
Decreases in domestic and commercial sales volumes were attributable to milder
weather during the 1995 heating season. The decrease in industrial sales was
attributable to the trend of industrial customers electing to purchase
directly from suppliers, creating additional demand for transportation
services. The additional transportation volumes more than offset the decrease
in industrial sales and resulted from growth in the primary metals sector.
Operating Revenues
Electric Operating Revenues
As compared to the same period last year, electric operating revenues
increased $106 million (5.6%) for the nine months ended September 30, 1995.
This increase was due to higher retail sales volumes in addition to three rate
increases - CG&E's retail electric rate increase which became effective May
1994 and two PSI electric rate increases which became effective in February
1995 and March 1995, as previously discussed.
An analysis of electric operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1994 $1 874
Increase (Decrease) due to change in:
Price per kwh
Retail 49
Sales for resale
Non-firm power transactions 4
Total change in price per kwh 53
Kwh sales
Retail 61
Sales for resale
Non-firm power transactions (9)
Total change in kwh sales 52
Other 1
Electric operating revenues - September 30, 1995 $1 980
Gas Operating Revenues
Gas operating revenues declined $65 million (19.8%) in the first nine months
of 1995 when compared to the same period last year. This decrease reflects
the previously discussed decline in total retail volumes sold and the
operation of adjustment clauses reflecting a lower average cost of gas
purchased. An increase in the relative volume of gas transported to gas sold
also contributed to the decrease. Providing transportation services does not
necessitate the recovery of gas purchased costs. Consequently, the revenue
per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs increased $6 million (1.1%) for the nine months ended
September 30, 1995, when compared to the same period last year.
An analysis of fuel costs is shown below:
Nine Months
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $540
Increase (Decrease) due to change in:
Price of fuel (11)
Kwh generation 17
Fuel expense - September 30, 1995 $546
Gas Purchased
Gas purchased for the nine months ended September 30, 1995, decreased $59
million (31.1%) when compared to the same period last year. This decrease was
attributable to a 13.5% decline in volumes purchased and a 20.3% lower average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power decreased $10 million (22.8%) for the nine
months ended September 30, 1995, when compared to the same period last year,
as the coordination of CG&E's and PSI's electric dispatch systems enabled
Cinergy to service more of its native load with its own generating units.
Maintenance
The decrease in maintenance of $16 million (11.1%) for the nine months ended
September 30, 1995, as compared to the same period last year was primarily due
to improved scheduling of routine maintenance on electric generating units.
Lower maintenance costs on gas and electric distribution facilities also
contributed to the decline.
Depreciation
Depreciation expense for the nine months ended September 30, 1995,
decreased $8 million (3.7%) when compared to the same period last year.
This decrease was primarily driven by the adoption of lower depreciation
rates for PSI effective in March 1995 pursuant to the February 1995 Order.
The decrease was partially offset by the effect of additions to utility
plant in service.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals, which began in May 1995, reflects the
amortization of previously deferred depreciation and deferred return resulting
from CG&E's three-year rate phase-in plan for Zimmer included in the May 1992
Order. These deferrals will be recovered over a seven-year period as
contemplated in the May 1992 Order.
Taxes Other than Income Taxes
Taxes other than income taxes increased $8 million (4.1%) over the same period
of 1994 primarily due to increased property taxes resulting from higher
property tax rates applicable to CG&E.
Other Income and Expenses - Net
Allowance for Equity Funds Used During Construction
The equity component of AFUDC decreased $6 million for the nine months
ended September 30, 1995, as compared to the same period last year. As
previously discussed, this decrease was due primarily to an increase in
PSI's average short-term debt outstanding. In addition, PSI's scrubber at
Gibson was placed in service in September 1994 which resulted in a large
decrease in the average balance of CWIP.
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $4 million (52.9%) for the nine
months ended September 30, 1995, from the comparable period of 1994. The
decrease was a result of discontinuing accrual of post-in-service carrying
costs on qualified environmental projects upon the inclusion in rates of
the costs of the projects per the February 1995 Order.
Phase-in Deferred Return
Phase-in deferred return decreased $7 million (52.2%) for the first nine
months of 1995 from the comparable period of 1994, as a result of implementing
the final increase of the three-year rate phase-in plan in May 1994.
Other - net
Other - net increased $12 million for the nine months ended September 30,
1995, when compared to the same period last year. This increase was due to
a number of factors, including interest associated with a refund of an
overpayment of Federal income taxes for 1987 and 1990, an increase in
carrying costs on DSM expenses which resulted from a higher AFUDC rate used
to compute carrying costs, and increased DSM expenses to which the rate is
applied. Also contributing to the increase was the write-off during 1994
of approximately $4 million related to the defense of the IPALCO takeover
attempt.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales increased .3% for the twelve months ended September 30, 1995, as the
increase in total retail sales was partially offset by a decline in sales for
resale. The increase in retail sales reflected higher commercial and
industrial sales. The commercial sales increase reflects a higher average
number of customers, while the industrial sales increase reflects growth in
the primary metals and chemicals sectors. Sales for resale reflected a
decrease in both firm and non-firm power sales.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the twelve months ended September
30, 1995, decreased 4.2% when compared to the same period of 1994. Decreases
in domestic and commercial sales volumes were attributable to milder weather
during the winter heating season. A decrease in industrial sales was
attributable to the continuing trend of industrial customers electing to
purchase directly from suppliers, creating additional demand for
transportation services. The increased transportation volumes were due, in
large part, to growth in the primary metals, food products, and paper products
sectors.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the
twelve months ended September 30, 1995, increased $91 million (3.7%) due to a
number of rate increases and the increased kwh sales, as previously discussed.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended September 30
(in millions)
Electric operating revenues - September 30, 1994 $2 470
Increase (Decrease) due to change in:
Price per kwh
Retail 51
Sales for resale
Firm power obligations 2
Non-firm power transactions 3
Total change in price per kwh 56
Kwh sales
Retail 50
Sales for resale
Firm power obligations (3)
Non-firm power transactions (14)
Total change in kwh sales 33
Other 2
Electric operating revenues - September 30, 1995 $2 561
Gas Operating Revenues
Gas operating revenues declined $119 million (23.9%) for the twelve months
ended September 30, 1995, when compared to the same period last year. This
decrease was primarily the result of decreases in sales volumes and the
operation of adjustment clauses reflecting a decline in the average cost of
gas purchased. An increase in the relative volume of gas transported to gas
sold also contributed significantly to the decrease. Providing transportation
services does not necessitate the recovery of gas purchased costs.
Consequently, the revenue per Mcf transported is below the revenue per Mcf
sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs increased $6 million (.9%) for the twelve months ended
September 30, 1995, when compared to the same period last year.
An analysis of fuel costs is shown below:
Twelve Months
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $713
Increase (Decrease) due to change in:
Price of fuel (9)
Kwh generation 15
Fuel expense - September 30, 1995 $719
Gas Purchased
Gas purchased for the twelve months ended September 30, 1995, decreased $99
million (34.3%) when compared to the same period last year. This decrease was
attributable to a 17.7% decline in volumes purchased associated with the
previously discussed changes in gas sales volumes and a 20.1% lower average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power decreased $14 million (26.9%) for the twelve
months ended September 30, 1995, when compared to the same period last year,
as the coordination of CG&E's and PSI's electric dispatch systems enabled
Cinergy to service more of its native load through its own generating units.
Other Operation
Other operation expenses for the twelve months ended September 30, 1995,
increased $57 million (11.3%) as compared to the same period of 1994. The
primary factor contributing to this increase was charges of approximately $51
million in December 1994 for merger-related costs and other expenditures which
cannot be recovered from customers under the merger savings sharing mechanisms
authorized by regulators. In addition, the accrual of postretirement benefit
costs, the amortization of deferred postretirement benefit costs, deferred
merger costs, deferred DSM costs, and an increase in the level of ongoing DSM
expenses, all of which are being recovered in revenues pursuant to the
February 1995 Order, contributed to the increase. The period to period
comparison also reflects the write-off of expenses related to CG&E's workforce
reduction in September 1994 and the write-off of previously deferred
litigation expenses during 1994.
Maintenance
The decrease in maintenance expense of $10 million (5.4%) for the twelve
months ended September 30, 1995, as compared to the same period last year, was
primarily due to improved scheduling of routine maintenance on electric
generating units and lower maintenance costs on gas and electric distribution
facilities.
Amortization of Phase-in Deferrals
Amortization of phase-in deferrals, which began in May 1995, reflects the
amortization of previously deferred depreciation and deferred return resulting
from CG&E's three-year rate phase-in plan for Zimmer included in the May 1992
Order. These deferrals will be recovered over a seven-year period as
contemplated in the May 1992 Order.
Taxes Other than Income Taxes
Taxes other than income taxes increased $10 million (4.0%) over the same
period of 1994 primarily due to increased property taxes resulting from higher
property tax rates applicable to CG&E.
Other Income and Expenses - Net
Allowance for Equity Funds Used During Construction
The equity component of AFUDC decreased $12 million for the twelve month
period ended September 30, 1995, as compared to the same period last year.
As previously discussed, this decrease was due primarily to an increase in
PSI's average short-term debt outstanding. In addition, a scrubber at
Gibson was placed in service in September 1994 which resulted in a large
decrease in the average balance of CWIP.
Phase-in Deferred Return
Phase-in deferred return decreased $12 million (59.9%) for the twelve months
ended September 30, 1995, from the comparable period of 1994, as a result of
implementing the final increase of the three-year rate phase-in plan in May
1994.
Write-off of a Portion of Zimmer
In November 1993, CG&E wrote off Zimmer costs disallowed from rates in the May
1992 Order.
Other - net
Other - net increased $9 million (35.2%) for the twelve months ended September
30, 1995, when compared to the same period last year. This increase was due
to a number of factors, including interest associated with a refund of an
overpayment of Federal income taxes for 1987 and 1990, an increase in carrying
costs on DSM expenses which resulted from a higher AFUDC rate used to compute
carrying costs, and increased DSM expenses to which the rate is applied. Also
contributing to the increase was the write-off during the twelve month period
ended September 30, 1994, of approximately $8 million related to the defense
of the IPALCO takeover attempt.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Utility Plant - original cost
In service
Electric $4 547 019 $4 502 840
Gas 672 755 645 602
Common 184 661 185 718
5 404 435 5 334 160
Accumulated depreciation 1 699 538 1 613 505
3 704 897 3 720 655
Construction work in progress 73 294 74 989
Total utility plant 3 778 191 3 795 644
Current Assets
Cash and temporary cash investments 66 545 52 516
Restricted deposits 84 101 98
Accounts receivable less accumulated
provision of $10,116,000 at September 30,
1995, and $8,999,000 at December 31, 1994
for doubtful accounts 214 887 269 020
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 37 770 42 167
Gas stored for current use 29 484 31 284
Other materials and supplies 54 562 57 864
Property taxes applicable to subsequent year 136 773 112 420
Prepayments and other 26 276 31 327
650 398 596 696
Other Assets
Regulatory assets
Post-in-service carrying costs and deferred
operating expenses 150 021 155 138
Phase-in deferred return and depreciation 101 663 100 943
Deferred demand-side management costs 16 317 10 002
Amounts due from customers - income taxes 364 065 381 380
Deferred merger costs 13 588 12 013
Unamortized costs of reacquiring debt 38 660 33 426
Other 45 552 55 987
Other 57 023 40 436
786 889 789 325
$5 215 478 $5 181 665
<FN>
The accompanying notes as they relate to CG&E are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CAPITALIZATION AND LIABILITIES
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Common Stock Equity
Common stock - $8.50 par value; authorized shares -
120,000,000; outstanding shares - 89,663,086 at
September 30, 1995, and December 31, 1994 $ 762 136 $ 762 136
Paid-in capital 339 135 337 874
Retained earnings 437 706 432 962
Total common stock equity 1 538 977 1 532 972
Cumulative Preferred Stock
Not subject to mandatory redemption 40 000 80 000
Subject to mandatory redemption 160 000 210 000
Long-term Debt 1 866 431 1 837 757
Total capitalization 3 605 408 3 660 729
Current Liabilities
Long-term debt due within one year 84 000 -
Notes payable 26 500 14 500
Accounts payable 79 707 120 817
Accrued taxes 245 106 227 651
Accrued interest 39 561 31 902
Other 39 329 32 658
514 203 427 528
Other Liabilities
Deferred income taxes 758 243 747 060
Unamortized investment tax credits 130 907 135 417
Accrued pension and other postretirement
benefit costs 113 294 102 254
Other 93 423 108 677
1 095 867 1 093 408
$5 215 478 $5 181 665
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Electric $401 174 $368 470 $1 087 653 $1 031 535 $1 401 905 $1 349 198
Gas 33 591 40 481 265 777 331 197 376 978 495 690
434 765 408 951 1 353 430 1 362 732 1 778 883 1 844 888
Operating Expenses
Fuel used in electric production 84 101 91 062 252 638 252 491 325 617 337 218
Gas purchased 13 155 16 013 130 235 189 059 189 469 288 279
Purchased and exchanged power 15 094 1 781 36 511 13 312 44 131 15 477
Other operation 69 834 81 304 204 557 218 757 321 830 296 509
Maintenance 18 994 23 271 63 973 76 073 94 710 106 976
Depreciation 39 836 39 210 119 060 117 030 158 706 155 420
Amortization of phase-in deferrals 3 409 - 5 682 - 5 682 -
Post-in-service deferred operating
expenses - net 823 823 2 468 2 468 3 290 3 302
Phase-in deferred depreciation - - - (2 161) - (3 770)
Income taxes 40 730 27 190 108 293 91 859 120 562 115 159
Taxes other than income taxes 50 358 47 049 151 345 146 186 202 540 191 851
336 334 327 703 1 074 762 1 105 074 1 466 537 1 506 421
Operating Income 98 431 81 248 278 668 257 658 312 346 338 467
Other Income and Expenses - Net
Allowance for equity funds used during
construction 269 630 1 146 1 522 1 595 2 007
Post-in-service carrying costs - - - - - 18
Phase-in deferred return 2 135 1 947 6 403 13 405 8 349 20 823
Write-off of a portion of Zimmer
Station - - - - - (234 844)
Income taxes
Related to write-off of a portion
of Zimmer Station - - - - - 12 085
Other (31) 2 201 2 796 5 734 3 681 9 715
Other - net 4 446 (1 711) 4 851 (1 577) (298) (8 325)
6 819 3 067 15 196 19 084 13 327 (198 521)
Income Before Interest 105 250 84 315 293 864 276 742 325 673 139 946
Interest
Interest on long-term debt 36 507 36 974 107 108 113 352 144 142 153 282
Other interest 679 585 2 926 2 287 3 470 2 783
Allowance for borrowed funds used
during construction (894) (839) (2 774) (2 149) (3 602) (2 799)
36 292 36 720 107 260 113 490 144 010 153 266
Net Income (Loss) 68 958 47 595 186 604 163 252 181 663 (13 320)
Preferred Dividend Requirement 3 475 5 362 14 199 17 014 19 562 23 304
Net Income (Loss) on Common Shares $ 65 483 $ 42 233 $ 172 405 $ 146 238 $ 162 101 $ (36 624)
<FN>
The accompanying notes as they relate to CG&E are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Quarter Ended September 30, 1995
Balance July 1, 1995 $762 136 $339 135 $ 427 623 $1 528 894
Net income 68 958 68 958
Dividends on preferred stock (3 475) (3 475)
Dividends on common stock (55 400) (55 400)
Balance September 30, 1995 $762 136 $339 135 $ 437 706 $1 538 977
Quarter Ended September 30, 1994
Balance July 1, 1994 $757 084 $329 712 $ 483 564 $1 570 360
Net income 47 595 47 595
Issuance of 543,089 shares of common stock 4 616 7 483 12 099
Common stock issuance expenses (30) (30)
Dividends on preferred stock (5 362) (5 362)
Dividends on common stock (38 358) (38 358)
Balance September 30, 1994 $761 700 $337 165 $ 487 439 $1 586 304
Nine Months Ended September 30, 1995
Balance January 1, 1995 $762 136 $337 874 $ 432 962 $1 532 972
Net income 186 604 186 604
Dividends on preferred stock (14 199) (14 199)
Dividends on common stock (162 950) (162 950)
Other 1 261 (4 711) (3 450)
Balance September 30, 1995 $762 136 $339 135 $ 437 706 $1 538 977
Nine Months Ended September 30, 1994
Balance January 1, 1994 $748 528 $314 218 $ 456 511 $1 519 257
Net income 163 252 163 252
Issuance of 1,549,671 shares of common stock 13 172 22 432 35 604
Common stock issuance expenses (38) (38)
Dividends on preferred stock (17 014) (17 014)
Dividends on common stock (114 357) (114 357)
Other 553 (953) (400)
Balance September 30, 1994 $761 700 $337 165 $ 487 439 $1 586 304
Twelve Months Ended September 30, 1995
Balance October 1, 1994 $761 700 $337 165 $ 487 439 $1 586 304
Net income 181 663 181 663
Issuance of 51,332 shares of common stock 436 710 1 146
Common stock issuance expenses (1) (1)
Dividends on preferred stock (19 562) (19 562)
Dividends on common stock (207 563) (207 563)
Other 1 261 (4 271) (3 010)
Balance September 30, 1995 $762 136 $339 135 $ 437 706 $1 538 977
Twelve Months Ended September 30, 1994
Balance October 1, 1993 $745 063 $306 644 $ 677 093 $1 728 800
Net income (loss) (13 320) (13 320)
Issuance of 1,957,324 shares of common stock 16 637 30 006 46 643
Common stock issuance expenses (38) (38)
Dividends on preferred stock (23 304) (23 304)
Dividends on common stock (152 077) (152 077)
Other 553 (953) (400)
Balance September 30, 1994 $761 700 $337 165 $ 487 439 $1 586 304
<FN>
The accompanying notes as they relate to CG&E are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating Activities
Net income (loss) $ 68 958 $ 47 595 $ 186 604 $ 163 252 $ 181 663 $ (13 320)
Items providing (using) cash currently:
Depreciation 39 836 39 210 119 060 117 030 158 706 155 420
Amortization of phase-in deferrals 3 409 - 5 682 - 5 682 -
Deferred income taxes and investment tax
credits - net 40 556 2 766 24 597 15 336 22 941 4 568
Allowance for equity funds used during
construction (269) (630) (1 146) (1 522) (1 595) (2 007)
Regulatory assets
Post-in-service and phase-in cost
deferrals (2 134) (1 946) (6 402) (15 565) (8 349) (2 515)
Deferred merger costs (1 151) (10 575) (1 575) (14 026) 13 410 (18 307)
Other 4 341 (3 415) 10 435 380 2 164 1 526
Write-off of a portion of Zimmer Station - - - - - 234 844
Changes in current assets and current
liabilities
Restricted deposits (1) - (3) 24 (5) 68
Accounts receivable 2 887 23 553 54 133 77 983 19 295 7 240
Materials, supplies, and fuel (1 924) (14 343) 9 499 15 865 14 836 9 511
Accounts payable (6 123) (17 977) (41 110) (42 830) (6 373) (10 066)
Accrued taxes and interest 19 486 16 090 25 114 (4 441) 37 766 (14 013)
Other items - net (23 448) 31 395 (28 066) 45 667 6 925 59 372
Net cash provided by (used in)
operating activities 144 423 111 723 356 822 357 153 447 066 412 321
Financing Activities
Issuance of common stock - 12 069 - 35 566 1 145 46 605
Issuance of long-term debt 195 255 - 344 280 311 957 344 280 608 957
Funds on deposit from issuance of long-term
debt (84 000) - (84 000) - (84 000) -
Retirement of preferred stock (93 450) - (93 450) (40 400) (93 450) (40 400)
Redemption of long-term debt (21 302) - (238 498) (313 247) (238 773) (601 189)
Change in short-term debt 13 000 7 000 12 000 (18 500) 14 000 (6 080)
Dividends on preferred stock (3 475) (5 362) (14 199) (17 942) (18 634) (24 233)
Dividends on common stock (55 400) (38 358) (162 950) (114 357) (207 563) (152 077)
Net cash provided by (used in)
financing activities (49 372) (24 651) (236 817) (156 923) (282 995) (168 417)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (29 935) (44 015) (99 661) (123 026) (166 589) (175 769)
Deferred demand-side management costs (2 071) (1 882) (6 315) (4 584) (8 127) (5 419)
Net cash provided by (used in)
investing activities (32 006) (45 897) (105 976) (127 610) (174 716) (181 188)
Net increase (decrease) in cash and
temporary cash investments 63 045 41 175 14 029 72 620 (10 645) 62 716
Cash and temporary cash investments at
beginning of period 3 500 36 015 52 516 4 570 77 190 14 474
Cash and temporary cash investments at
end of period $ 66 545 $ 77 190 $ 66 545 $ 77 190 $ 66 545 $ 77 190
<FN>
The accompanying notes as they relate to CG&E are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the quarter ended September 30, 1995, increased 22.1% over the
same period of 1994 due in large part to increased sales to retail customers.
Higher domestic and commercial sales resulted primarily from warmer weather.
The increased industrial sales primarily reflect growth in the chemicals and
food products sectors. Also significantly contributing to the higher total
kwh sales levels were increased non-firm power sales for resale reflecting
higher short-term power sales and sales to PSI.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the third quarter of 1995
increased 2.7% as compared to the third quarter of 1994, reflecting higher gas
transportation volumes as industrial customers continued to purchase directly
from gas suppliers, creating a significant increase in demand for
transportation services. The increased transportation volume, primarily in
the primary metals, paper products, and food products sectors, more than
offset a decline in industrial sales volumes. Also, partially offsetting the
increase in transportation volumes were decreased sales to domestic and
commercial customers.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $33 million (8.9%) for the quarter ended
September 30, 1995, over the comparable period of 1994. This increase
reflects the higher kwh sales, as previously discussed.
An analysis of electric operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Operating revenues - September 30, 1994 $368
Increase (Decrease) due to change in:
Price per kwh
Retail (9)
Sales for Resale
Non-firm power transactions (12)
Total change in price per kwh (21)
Kwh sales
Retail 34
Sales for Resale
Firm Power Obligations 1
Non-firm power transactions 19
Total change in kwh sales 54
Operating revenues - September 30, 1995 $401
Gas Operating Revenues
Gas operating revenues declined $7 million (17.0%) in the third quarter of
1995 when compared to the same period last year, primarily as a result of the
previously discussed decrease in total retail sales volumes. An increase in
the relative volume of gas transported to gas sold, as previously discussed,
also contributed to the decrease. Providing transportation services does not
necessitate the recovery of gas purchased costs by CG&E. Consequently, the
revenue per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs decreased $7 million (7.6%) for the quarter as compared to
last year.
An analysis of fuel costs is shown below:
Quarter
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $91
Increase (Decrease) due to change in:
Price of fuel (11)
Kwh generation 4
Fuel expense - September 30, 1995 $84
Gas Purchased
Gas purchased for the quarter declined $3 million (17.8%) when compared to the
same period last year. This decrease was attributable to a decrease in
volumes purchased associated with the aforementioned changes in volumes sold
and transported.
Purchased and Exchanged Power
Purchased and exchanged power for the quarter ended September 30, 1995,
increased $13 million over the comparable period of 1994. This increase
primarily reflects purchases from PSI.
Other Operation
Other operation expenses decreased $11 million (14.1%) for the quarter ended
September 30, 1995, as compared to the same period last year. The decrease
was primarily attributable to the recognition in September 1994 of costs
related to a workforce reduction program which cannot be recovered from
customers under the merger savings sharing mechanisms authorized by
regulators. Also contributing to the decrease were lower gas and electric
distribution expenses.
Maintenance
The decrease in maintenance expense of $4 million (18.4%) for the third
quarter of 1995 as compared to the same period last year was primarily due to
improved scheduling of routine maintenance on electric generating units.
Lower maintenance costs on gas and electric distribution facilities also
contributed to the decline.
Amortization of Phase-In Deferrals
Amortization of phase-in deferrals, which began in May 1995, reflects the
amortization of previously deferred depreciation and deferred return resulting
from the three-year rate phase-in plan for Zimmer included in the May 1992
Order. These deferrals will be recovered over a seven-year period as
contemplated in the May 1992 Order.
Taxes Other than Income Taxes
Taxes other than income taxes increased $3 million (7.0%) over the same period
of 1994. The increase was primarily attributable to increased property taxes
resulting from higher property tax rates.
Other Income and Expenses - Net
Other - Net
Other - net increased $6 million over the same period of 1994. The increase
was primarily attributable to interest associated with a refund of an
overpayment of Federal income taxes for 1987 and 1990.
Preferred Dividend Requirement
The decrease in CG&E's preferred dividend requirement of $2 million
(35.2%) for the three months ended September 30, 1995, from the same period of
1994 was attributable to the early redemption of 400,000 and 500,000 shares of
$100 par value, Cumulative Preferred Stock, 7.44% Series and 9.15% Series,
respectively, on July 1, 1995.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the nine months ended September 30, 1995, increased 13.1% over
the same period of 1994 due in part to an increase in non-firm power sales for
resale reflecting higher short-term power sales and sales to PSI. Also
contributing to the higher total kwh sales levels were increased sales to
domestic, commercial, and industrial customers. The increase in domestic and
commercial sales was mostly due to warmer weather during the summer cooling
season. The increase in industrial sales was primarily due to growth in the
chemicals and primary metals sectors.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the nine months ended September
30, 1995, decreased slightly when compared to the same period of 1994.
Decreases in domestic and commercial sales volumes were attributable to milder
weather during the 1995 heating season. The decrease in industrial sales was
attributable to the trend of industrial customers electing to purchase
directly from suppliers, creating additional demand for transportation
services. The additional transportation volumes more than offset the decrease
in industrial sales and resulted from growth in the primary metals sector.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $56 million (5.4%) for the nine months
ended September 30, 1995, over the comparable period of 1994. This increase
primarily reflects the higher kwh sales discussed above and the retail
electric rate increase which became effective May 1994 pursuant to the May
1992 Order. This increase was partially offset by the operation of fuel
adjustment clauses reflecting a lower average cost of fuel used in electric
production.
An analysis of electric operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Operating revenues - September 30, 1994 $1 032
Increase (Decrease) due to change in:
Price per kwh
Retail (4)
Sales for resale
Firm power obligations 1
Non-firm power transactions (12)
Total change in price per kwh (15)
Kwh sales
Retail 29
Sales for resale
Non-firm power transactions 43
Total change in kwh sales 72
Other (1)
Operating revenues - September 30, 1995 $1 088
Gas Operating Revenues
Gas operating revenues declined $65 million (19.8%) in the first nine months
of 1995 when compared to the same period last year. This decrease reflects
the previously discussed decline in total retail volumes sold and the
operation of adjustment clauses reflecting a lower average cost of gas
purchased. An increase in the relative volume of gas transported to gas sold
also contributed to the decrease. Providing transportation services does not
necessitate the recovery of gas purchased costs. Consequently, the revenue
per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs remained relatively constant for the first nine months of
1995 as compared to the same period last year.
An analysis of fuel costs is shown below:
Nine Months
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $252
Increase (Decrease) due to change in:
Price of fuel (12)
Kwh generation 13
Fuel expense - September 30, 1995 $253
Gas Purchased
Gas purchased for the nine months ended September 30, 1995, decreased $59
million (31.1%) when compared to the same period last year. This decrease was
attributable to a 13.5% decline in volumes purchased and a 20.3% lower average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power for the nine months ended September 30, 1995,
increased $23 million over the comparable period of 1994. This increase
primarily reflects purchases from PSI.
Other Operation
Other operation expenses decreased $14 million (6.5%) for the nine months
ended September 30, 1995, as compared to the same period last year. The
decrease was primarily attributable to the recognition of costs related to a
workforce reduction program in September 1994 which cannot be recovered from
customers under the merger savings sharing mechanisms authorized by
regulators. Also contributing to the decrease were reduced gas production
expenses and lower electric distribution expenses.
Maintenance
The decrease in maintenance expense of $12 million (15.9%) for the nine month
period ended September 30, 1995, as compared to the same period last year was
primarily due to improved scheduling of routine maintenance on generating
units. Lower maintenance costs on gas and electric distribution facilities
also contributed to the decline.
Amortization of Phase-In Deferrals
Amortization of phase-in deferrals, which began in May 1995, reflects the
amortization of previously deferred depreciation and deferred return resulting
from the three-year rate phase-in plan for Zimmer included in the May 1992
Order. These deferrals will be recovered over a seven-year period as
contemplated in the May 1992 Order.
Taxes Other than Income Taxes
Taxes other than income taxes increased $5 million (3.5%) over the same period
of 1994. The increase was primarily attributable to increased property taxes
resulting from higher property tax rates.
Other Income And Expenses - Net
Phase-in Deferred Return
Phase-in deferred return decreased $7 million (52.2%) for the first nine
months of 1995 from the comparable period of 1994, as a result of implementing
the final increase of the three-year rate phase-in plan in May 1994.
Other - Net
Other - net increased $6 million over the same period of 1994. The increase
was primarily attributable to interest associated with a refund of an
overpayment of Federal income taxes for 1987 and 1990.
Interest
Interest decreased $6 million (5.5%) for the nine months ended September 30,
1995, from the same period of 1994. This decrease was due to reductions in
interest on long-term debt resulting from the refinancing of $235 million
principal amount of first mortgage bonds during 1995.
Preferred Dividend Requirement
CG&E's preferred dividend requirement decreased $3 million (16.5%) for the
nine months ended September 30, 1995, from the same period of 1994. The
decrease was attributable to the early redemption of 400,000 shares of $100
par value, 9.28% Series Cumulative Preferred Stock in April 1994, along with
the early redemption of 400,000 and 500,000 shares of $100 par value
Cumulative Preferred Stock, 7.44% Series and 9.15% Series, respectively, on
July 1, 1995.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the twelve months ended September 30, 1995, increased 9.0% when
compared to the same period of 1994 due in part to an increase in non-firm
sales for resale reflecting higher short-term power sales and sales to PSI.
In addition, industrial sales increased due, in large part, to growth in the
primary metals and chemicals sectors.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the twelve months ended September
30, 1995, decreased 4.2% when compared to the same period of 1994. Decreases
in domestic and commercial sales volumes were attributable to milder weather
during the winter heating season. A decrease in industrial sales was
attributable to the continuing trend of industrial customers electing to
purchase directly from suppliers, creating additional demand for
transportation services. The increased transportation volumes were due, in
large part, to growth in the primary metals, food products, and paper products
sectors.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $53 million (3.9%) for the twelve months
ended September 30, 1995, over the comparable period of 1994. This increase
primarily reflects the higher kwh sales, as previously discussed. Also
contributing to the increase was the May 1994 electric retail rate increase
related to the phase-in plan included in the May 1992 Order. The operation of
fuel adjustment clauses reflecting a lower average cost of fuel used in
electric production partially offset these increases.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended September 30
(in millions)
Operating revenues - September 30, 1994 $1 349
Increase (Decrease) due to change in:
Price per kwh
Retail (1)
Sales for Resale
Firm power obligations 1
Non-firm power transactions (10)
Total change in price per kwh (10)
Kwh sales
Retail 27
Sales for Resale
Non-firm power transactions 37
Total change in kwh sales 64
Other (1)
Operating revenues - September 30, 1995 $1 402
Gas Operating Revenues
Gas operating revenues declined $119 million (23.9%) for the twelve months
ended September 30, 1995, when compared to the same period last year. This
decrease was primarily the result of decreases in sales volumes and the
operation of adjustment clauses reflecting a decline in the average cost of
gas purchased. An increase in the relative volume of gas transported to gas
sold also contributed significantly to the decrease. Providing transportation
services does not necessitate the recovery of gas purchased costs.
Consequently, the revenue per Mcf transported is below the revenue per Mcf
sold.
Operating Expenses
Fuel Used in Electric Production
Electric fuel costs decreased $11 million (3.4%) for the twelve months ended
September 30, 1995, as compared to the same period last year.
An analysis of fuel costs is shown below:
Twelve Months
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $337
Increase (Decrease) due to change in:
Price of fuel (16)
Kwh generation 5
Fuel expense - September 30, 1995 $326
Gas Purchased
Gas purchased for the twelve months ended September 30, 1995, decreased $99
million (34.3%) when compared to the same period last year. This decrease was
attributable to a 17.7% decline in volumes purchased associated with the
previously discussed changes in gas sales volumes and a 20.1% lower average
cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power for the twelve months ended September 30, 1995,
increased $29 million over the comparable period of 1994. This increase
primarily reflects purchases from PSI.
Other Operation
Other operation expenses increased $25 million (8.5%) for the twelve months
ended September 30, 1995, as compared to the same period last year. The
primary factor contributing to this increase was charges of approximately $41
million in December 1994 for merger-related costs and other expenditures which
cannot be recovered from customers under the merger savings sharing mechanisms
authorized by regulators. The period to period comparison also reflects the
recognition in September 1994 of costs related to a workforce reduction
program and a decrease in gas and electric distribution expenses.
Maintenance
The decrease in maintenance expense of $12 million (11.5%) for the twelve
months ended September 30, 1995, as compared to the same period last year, was
due to a number of factors. Improved scheduling of routine maintenance on
electric generating units, lower maintenance costs on gas and electric
distribution facilities, and reduced maintenance expenditures for facilities
used in general and administrative functions all contributed to the decrease.
Amortization of Phase-In Deferrals
Amortization of phase-in deferrals, which began in May 1995, reflects the
amortization of previously deferred depreciation and deferred return resulting
from the three-year rate phase-in plan for Zimmer included in the May 1992
Order. These deferrals will be recovered over a seven-year period as
contemplated in the May 1992 Order.
Phase-in Deferred Depreciation
Phase-in deferred depreciation resulted from the three-year rate phase-in plan
for Zimmer included in the May 1992 Order. The change of $4 million (59.9%)
for phase-in deferred depreciation for the twelve months ended September 30,
1995, versus the same period of 1994, reflects discontinuance of the deferral
of depreciation when the final increase of the three-year rate phase-in plan
became effective in May 1994.
Taxes Other than Income Taxes
Taxes other than income taxes increased $11 million (5.6%) for the twelve
months ended September 30, 1995, over the comparable period of 1994, primarily
due to increased property taxes resulting from higher property tax rates.
Other Income And Expenses - Net
Phase-in Deferred Return
Phase-in deferred return decreased $12 million for the twelve months ended
September 30, 1995, from the comparable period of 1994, as a result of
implementing the final increase of the three-year rate phase-in plan in May
1994.
Write-off of a Portion of Zimmer
In November 1993, CG&E wrote off Zimmer costs disallowed from rates in the May
1992 Order.
Other - Net
Other - net increased $8 million over the same period of 1994. The increase
was due to a number of factors, foremost of which was interest associated with
a refund of an overpayment of Federal income taxes for 1987 and 1990.
Interest
Interest charges decreased $9 million (6.0%) for the twelve months ended
September 30, 1995, from the same period of 1994. The decrease was due to
reductions in interest on long-term debt resulting from the refinancing of
$235 million principal amount of long-term debt during 1995 and $305 million
principal amount of long-term debt during the first quarter of 1994.
Preferred Dividend Requirement
CG&E's preferred dividend requirement decreased $4 million (16.1%) for the
twelve months ended September 30, 1995, compared to the same period of 1994.
The decrease was attributable to the early redemption of 400,000 shares of
$100 par value, 9.28% Series Cumulative Preferred Stock in April 1994, along
with the early redemption of 400,000 and 500,000 shares of $100 par value
Cumulative Preferred Stock, 7.44% Series and 9.15% Series, respectively, on
July 1, 1995.
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Electric Utility Plant - original cost
In service $3 922 650 $3 789 785
Accumulated depreciation 1 617 483 1 550 297
2 305 167 2 239 488
Construction work in progress 140 628 163 761
Total electric utility plant 2 445 795 2 403 249
Current Assets
Cash 3 607 6 341
Restricted deposits 2 490 11 190
Accounts receivable less accumulated provision of
$369,000 at September 30, 1995, and $440,000 at
December 31, 1994 for doubtful accounts 71 503 36 061
Materials, supplies, and fuel - at average cost
Fuel for use in electric production 96 017 113 861
Other materials and supplies 30 897 29 363
Prepayments and other 3 539 4 758
208 053 201 574
Other Assets
Regulatory assets
Post-in-service carrying costs and deferred
operating expenses 37 759 30 142
Deferred demand-side management costs 105 166 94 125
Amounts due from customers - income taxes 26 537 27 134
Deferred merger costs 41 312 37 645
Unamortized costs of reacquiring debt 35 106 36 998
Other 31 449 30 030
Other 87 331 84 027
364 660 340 101
$3 018 508 $2 944 924
<FN>
The accompanying notes as they relate to PSI are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CAPITALIZATION AND LIABILITIES
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Common Stock Equity
Common stock - without par value; $.01 stated
value; authorized shares - 60,000,000;
outstanding shares - 53,913,701
at September 30, 1995, and
December 31, 1994 $ 539 $ 539
Paid-in capital 402 038 389 309
Accumulated earnings subsequent to
November 30, 1986, quasi-reorganization 595 803 493 103
Total common stock equity 998 380 882 951
Cumulative Preferred Stock
Not subject to mandatory redemption 187 913 187 929
Long-term Debt 828 245 877 512
Total capitalization 2 014 538 1 948 392
Current Liabilities
Long-term debt due within one year 50 400 60 400
Notes payable 236 500 193 573
Accounts payable 92 133 142 775
Refund due to customers 12 878 15 482
Litigation settlement 80 000 80 000
Accrued taxes 48 583 30 784
Accrued interest 12 376 25 685
Other 3 003 3 202
535 873 551 901
Other Liabilities
Deferred income taxes 331 815 324 738
Unamortized investment tax credits 57 315 60 461
Accrued pension and other postretirement
benefit costs 48 381 31 324
Other 30 586 28 108
468 097 444 631
$3 018 508 $2 944 924
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $343 297 $283 569 $932 088 $843 856 $1 201 744 $1 120 332
Operating Expenses
Fuel used in electric production 106 344 104 225 292 910 287 143 393 290 375 394
Purchased and exchanged power 13 159 8 052 42 829 36 278 47 951 45 361
Other operation 61 595 51 724 167 354 152 339 228 137 199 520
Maintenance 20 857 25 413 63 861 67 789 90 221 88 429
Depreciation 28 844 34 209 91 291 101 412 127 598 134 460
Post-in-service deferred operating
expenses - net (894) (2 484) (4 608) (7 106) (6 790) (9 311)
Income taxes 29 222 11 880 64 877 44 581 70 662 65 291
Taxes other than income taxes 14 022 12 884 40 721 38 355 48 701 49 960
273 149 245 903 759 235 720 791 999 770 949 104
Operating Income 70 148 37 666 172 853 123 065 201 974 171 228
Other Income and Expenses - Net
Allowance for equity funds used during
construction (1 428) 1 813 (420) 5 252 (1 442) 10 149
Post-in-service carrying costs 602 2 452 3 183 6 758 6 205 8 856
Income taxes 705 (221) 751 102 (663) 96
Other - net 545 (1 908) (1 751) (7 423) (2 221) (9 599)
424 2 136 1 763 4 689 1 879 9 502
Income Before Interest 70 572 39 802 174 616 127 754 203 853 180 730
Interest
Interest on long-term debt 17 647 17 283 53 546 50 905 71 503 67 291
Other interest 4 162 4 820 12 035 10 202 17 125 11 304
Allowance for borrowed funds used during
construction (1 133) (2 539) (3 550) (7 316) (5 589) (9 397)
20 676 19 564 62 031 53 791 83 039 69 198
Net Income 49 896 20 238 112 585 73 963 120 814 111 532
Preferred Dividend Requirement 3 295 3 296 9 885 9 887 13 180 13 754
Net Income on Common Shares $ 46 601 $ 16 942 $102 700 $ 64 076 $ 107 634 $ 97 778
<FN>
The accompanying notes as they relate to PSI are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Quarter Ended September 30, 1995
Balance July 1, 1995 $539 $389 316 $549 202 $939 057
Net income 49 896 49 896
Dividends on preferred stock (3 295) (3 295)
Capital contribution from parent company 12 721 12 721
Other 1 1
Balance September 30, 1995 $539 $402 038 $595 803 $998 380
Quarter Ended September 30, 1994
Balance July 1, 1994 $539 $229 287 $497 784 $727 610
Net income 20 238 20 238
Dividends on preferred stock (3 295) (3 295)
Dividends on common stock (16 174) (16 174)
Balance September 30, 1994 $539 $229 287 $498 553 $728 379
Nine Months Ended September 30, 1995
Balance January 1, 1995 $539 $389 309 $493 103 $882 951
Net income 112 585 112 585
Dividends on preferred stock (9 885) (9 885)
Capital contribution from parent company 12 721 12 721
Other 8 8
Balance September 30, 1995 $539 $402 038 $595 803 $998 380
Nine Months Ended September 30, 1994
Balance January 1, 1994 $539 $229 288 $483 242 $713 069
Net income 73 963 73 963
Dividends on preferred stock (9 886) (9 886)
Dividends on common stock (48 766) (48 766)
Other (1) (1)
Balance September 30, 1994 $539 $229 287 $498 553 $728 379
Twelve Months Ended September 30, 1995
Balance October 1, 1994 $539 $229 287 $498 553 $728 379
Net income 120 814 120 814
Dividends on preferred stock (13 181) (13 181)
Dividends on common stock (10 376) (10 376)
Capital contribution from parent company 172 720 172 720
Other 31 (7) 24
Balance September 30, 1995 $539 $402 038 $595 803 $998 380
Twelve Months Ended September 30, 1994
Balance October 1, 1993 $539 $230 945 $467 444 $698 928
Net income 111 532 111 532
Dividends on preferred stock (13 835) (13 835)
Dividends on common stock (66 664) (66 664)
Other (1 658) 76 (1 582)
Balance September 30, 1994 $539 $229 287 $498 553 $728 379
<FN>
The accompanying notes as they relate to PSI are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating Activities
Net income $ 49 896 $ 20 238 $ 112 585 $ 73 963 $ 120 814 $ 111 532
Items providing (using) cash currently:
Depreciation 28 844 34 209 91 291 101 412 127 598 134 460
Deferred income taxes and investment tax
credits - net (1 255) (1 145) 5 342 19 558 9 911 23 038
Allowance for equity funds used during
construction 1 428 (1 813) 420 (5 252) 1 442 (10 149)
Regulatory assets
Post-in-service carrying costs and
deferred operating expenses (1 496) (4 936) (7 791) (13 864) (12 995) (18 168)
Deferred merger costs (5 208) (1 240) (7 353) (8 418) (22 235) (10 634)
Other (178) (122) (273) 4 425 (327) 2 259
Changes in current assets and current
liabilities
Restricted deposits - 1 547 16 1 397 8 643 1 276
Accounts receivable (23 391) 17 202 (35 442) (2 276) (40 570) 16 166
Income tax refunds - 3 800 - 28 900 - 10 000
Materials, supplies, and fuel 23 089 (2 403) 16 310 (57 753) 7 366 (57 449)
Accounts payable (14 667) (9 309) (50 642) (30 234) (21 726) (9 717)
Refund due to customers (2 918) (2 999) (2 604) (47 223) (21 731) (115 391)
Advance under accounts receivable
purchase agreement - - - (49 940) - -
Accrued taxes and interest 7 071 (21 169) 4 490 (19 598) 21 160 15 404
Other items - net 5 192 2 416 18 865 (2 408) 16 301 5 129
Net cash provided by (used in)
operating activities 66 407 34 276 145 214 (7 311) 193 651 97 756
Financing Activities
Issuance of preferred stock - - - - - 59 475
Issuance of long-term debt - 59 910 - 108 978 - 108 978
Funds on deposit from issuance of long-term
debt 2 056 8 810 8 684 21 211 15 370 33 039
Retirement of preferred stock (1) - (8) (10) (24) (60 116)
Redemption of long-term debt (60 000) - (60 055) - (60 215) (95 295)
Change in short-term debt 27 000 (1 199) 42 927 165 100 (55 301) 268 301
Dividends on preferred stock (3 295) (3 295) (9 885) (9 886) (13 181) (13 835)
Dividends on common stock - (16 174) - (48 766) (10 376) (66 664)
Donation of capital by Cinergy Corp. 12 721 - 12 721 - 172 720 -
Net cash provided by (used in)
financing activities (21 519) 48 052 (5 616) 236 627 48 993 233 883
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (41 444) (71 330) (132 282) (202 369) (219 644) (294 797)
Deferred demand-side management costs (4 943) (9 829) (10 050) (25 343) (25 579) (38 488)
Net cash provided by (used in)
investing activities (46 387) (81 159) (142 332) (227 712) (245 223) (333 285)
Net increase (decrease) in cash and
temporary cash investments (1 499) 1 169 (2 734) 1 604 (2 579) (1 646)
Cash and temporary cash investments at
beginning of period 5 106 5 017 6 341 4 582 6 186 7 832
Cash and temporary cash investments at
end of period $ 3 607 $ 6 186 $ 3 607 $ 6 186 $ 3 607 $ 6 186
<FN>
The accompanying notes as they relate to PSI are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the quarter ended September 30, 1995, increased 23.5% when
compared to the same period last year due in part to non-firm power sales
for resale reflecting an increase in sales to CG&E. Higher kwh sales to
domestic and commercial customers as a result of warmer weather also
significantly contributed to this increase.
Operating Revenues
Total operating revenues increased $60 million (21.1%) in the third quarter
of 1995 as compared to the same period last year. This increase primarily
reflects the higher kwh sales, as previously discussed. The increase also
reflects a 4.3% retail rate increase approved in the February 1995 Order
and a 1.9% rate increase for carrying costs on CWIP property which was
approved by the IURC in March 1995.
An analysis of operating revenues is shown below:
Quarter
Ended September 30
(in millions)
Operating revenues - September 30, 1994 $283
Increase (Decrease) due to change in:
Price per kwh
Retail 17
Sales for resale
Non-firm power transactions (7)
Total change in price per kwh 10
Kwh sales
Retail 27
Sales for resale
Firm power obligations 5
Non-firm power transactions 18
Total change in kwh sales 50
Operating revenues - September 30, 1995 $343
Operating Expenses
Fuel Used in Electric Production
Fuel costs, PSI's largest operating expense, increased $2 million (2.0%)
for the quarter as compared to the same period last year.
An analysis of fuel costs is shown below:
Quarter
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $104
Increase (Decrease) due to change in:
Price of fuel (13)
Kwh generation 15
Fuel expense - September 30, 1995 $106
Purchased and Exchanged Power
For the quarter ended September 30, 1995, purchased and exchanged power
increased $5 million (63.4%) as compared to the same period last year,
reflecting increased purchases of available low cost power.
Other Operation
Other operation expenses for the quarter ended September 30, 1995,
increased $10 million (19.1%) as compared to the same period last year.
This increase was due to a number of factors, including the accrual of
postretirement benefit costs, the amortization of deferred postretirement
benefit costs, an increase in the level of ongoing DSM expenses, and the
amortization of deferred DSM costs, all of which are being recovered in
revenues pursuant to the February 1995 Order.
Maintenance
Maintenance expenses for the quarter ended September 30, 1995, as compared
to the same period last year decreased $5 million (17.9%) primarily as a
result of reductions in maintenance costs on electric production and
distribution facilities.
Depreciation
Depreciation expense decreased $5 million (15.7%) for the quarter ended
September 30, 1995, as compared to the same period last year. This
decrease primarily reflects the adoption of lower depreciation rates
effective in March 1995 pursuant to the February 1995 Order. The decrease
was partially offset by the effect of additions to utility plant in
service.
Post-in-service Deferred Operating Expenses - Net
Post-in-service deferred operating expenses decreased $2 million (64.0%)
for the quarter ended September 30, 1995, from the comparable period of
1994 as a result of ceasing deferral of depreciation on qualified
environmental projects upon the inclusion in rates of the costs of the
projects per the February 1995 Order.
Other Income and Expenses - Net
Allowance for Equity Funds Used During Construction
The equity component of AFUDC decreased $3 million for the three months
ended September 30, 1995, as compared to the same period last year. This
decline was due primarily to an increase in the average short-term debt
outstanding. The quarter ended September 30, 1995, reflects application of
the lower rate retroactively for the year-to-date period. In addition, a
scrubber at Gibson was placed in service in September 1994 which resulted
in a large decrease in the average balance of CWIP.
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $2 million (75.4%) for the quarter
ended September 30, 1995, from the comparable period of 1994 as a result of
discontinuing accrual of post-in-service carrying costs on qualified
environmental projects upon the inclusion in rates of the costs of the
projects per the February 1995 Order.
Other - net
Other - net increased $2 million for the quarter ended September 30, 1995,
when compared to the same period last year. This increase is primarily due
to an increase in carrying costs on DSM expenses which resulted from a
higher debt component of the AFUDC rate used to compute carrying costs.
Interest
Allowance for Borrowed Funds Used During Construction
The debt component of AFUDC decreased $1 million (55.4%) for the quarter
ended September 30, 1995, as compared to the same period last year. This
decrease was due primarily to a decrease in the average balance of CWIP and
was partially offset by an increase in the debt component of the AFUDC
rate.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
For the nine months ended September 30, 1995, kwh sales increased 4.1% when
compared to the same period last year primarily due to increased kwh sales
to domestic, commercial, and industrial customers. The higher domestic and
commercial sales resulted from warmer weather during the summer cooling
period and an increase in the average number of customers, while higher
industrial sales reflected growth in the primary metals and chemicals
sectors. Also contributing to the increase were higher non-firm power
sales for resale reflecting an increase in sales to CG&E . These increases
were partially offset by a decline in third party short-term power sales to
other utilities.
Operating Revenues
Total operating revenues increased $88 million (10.5%) for the nine months
ended September 30, 1995, when compared to the same period last year. This
increase primarily reflects the 4.3% retail rate increase and 1.9% rate
increase for carrying costs on CWIP property as previously discussed. The
previously discussed increase in kwh sales also contributed to the increase
in revenues.
An analysis of operating revenues is shown below:
Nine Months
Ended September 30
(in millions)
Operating revenues - September 30, 1994 $844
Increase (Decrease) due to change in:
Price per kwh
Retail 55
Sales for resale
Non-firm power transactions (1)
Total change in price per kwh 54
Kwh sales
Retail 29
Sales for resale
Non-firm power transactions 4
Total change in kwh sales 33
Other 1
Operating revenues - September 30, 1995 $932
Operating Expenses
Fuel Used in Electric Production
Fuel costs for the nine months ended September 30, 1995, increased $6
million (2.0%) when compared to the same period last year.
An analysis of fuel costs is shown below:
Nine Months
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $287
Increase due to change in:
Price of fuel 1
Kwh generation 5
Fuel expense - September 30, 1995 $293
Purchased and Exchanged Power
For the nine months ended September 30, 1995, purchased and exchanged power
increased $7 million (18.1%) as compared to the same period last year,
reflecting increased purchases from CG&E and purchases of available low
cost power. This increase was partially offset by a decline in third party
short-term power sales to other utilities.
Other Operation
Other operation expenses increased $15 million (9.9%) for the nine months
ended September 30, 1995, as compared to the same period last year. This
increase was due to a number of factors, including the accrual of
postretirement benefit costs, the amortization of deferred postretirement
benefit costs, an increase in the level of ongoing DSM expenses, the
amortization of deferred DSM costs, and the amortization of merger costs,
all of which are being recovered in revenues pursuant to the February 1995
Order. The period to period comparison reflects the write-off of
previously deferred litigation expenses during 1994.
Maintenance
Maintenance expenses for the nine months ended September 30, 1995, as
compared to the same period last year decreased $4 million (5.8%) primarily
as a result of decreased electric distribution costs.
Depreciation
Depreciation expense for the nine months ended September 30, 1995,
decreased $10 million (10.0%) when compared to the same period last year.
This decrease was primarily driven by the adoption of lower depreciation
rates effective in March 1995 pursuant to the February 1995 Order. The
decrease was partially offset by the effect of additions to utility plant
in service.
Post-in-service Deferred Operating Expenses - Net
Post-in-service deferred operating expenses decreased $2 million (35.2%)
for the nine months ended September 30, 1995, from the comparable period of
1994 as a result of ceasing deferral of depreciation on qualified
environmental projects upon the inclusion in rates of the costs of the
projects per the February 1995 Order.
Other Income and Expenses - Net
Allowance for Equity Funds Used During Construction
The equity component of AFUDC decreased $6 million for the nine months
ended September 30, 1995, as compared to the same period last year. As
previously discussed, this decrease was due primarily to an increase in the
average short-term debt outstanding. In addition, a scrubber was placed in
service at Gibson in September 1994 which resulted in a large decrease in
the average balance of CWIP.
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $4 million (52.9%) for the nine
months ended September 30, 1995, from the comparable period of 1994 as a
result of discontinuing accrual of post-in-service carrying costs on
qualified environmental projects upon the inclusion in rates of the costs
of the projects per the February 1995 Order.
Other - net
Other - net increased $6 million (76.4%) for the nine months ended
September 30, 1995, when compared to the same period last year. This
increase is primarily due to an increase in carrying costs on DSM expenses
which resulted from a higher AFUDC rate used to compute carrying costs and
increased DSM expenses to which the rate is applied.
Interest
Interest on Long-term Debt
Interest on long-term debt increased $3 million (5.2%) for the nine months
ended September 30, 1995, as compared to the same period in 1994. The
increase was primarily a result of the issuance of $60 million principal
amount of 5.75% Series B medium-term notes in August 1994, which matured in
August 1995.
Other Interest
Other interest increased $2 million (18.0%) over the same period last year.
The increase was driven by higher interest rates and an increase in the
average short-term debt outstanding.
Allowance for Borrowed Funds Used During Construction
The debt component of AFUDC decreased $4 million (51.5%) for the nine
months ended September 30, 1995, as compared to the same period last year.
This decrease was due primarily to a decrease in the average balance of
CWIP and was partially offset by an increase in the debt component of the
AFUDC rate.
RESULTS OF OPERATIONS FOR TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the twelve months ended September 30, 1995, increased 3.4%
when compared to the same period last year mostly due to non-firm power
sales for resale reflecting an increase in sales to CG&E. In addition,
increased kwh sales to industrial customers, resulting from growth in the
primary metals, transportation equipment, and chemicals sectors, also
contributed to this increase. Higher domestic and commercial sales
resulting from increases in the average number of customers were also a
factor. These increases were partially offset by a decline in short-term
power sales to other utilities.
Operating Revenues
Total operating revenues increased $82 million (7.3%) for the twelve months
ended September 30, 1995, as compared to the same period last year. This
increase was driven, in part, by the 4.3% retail rate increase and the 1.9%
rate increase for carrying costs on CWIP property as previously discussed.
Increased kwh sales, as discussed above, also contributed to the increase
in revenues.
An analysis of operating revenues is shown below:
Twelve Months
Ended September 30
(in millions)
Operating revenues - September 30, 1994 $1 120
Increase (Decrease) due to change in:
Price per kwh
Retail 53
Sales for resale
Firm power obligations 1
Non-firm power transactions (3)
Total change in price per kwh 51
Kwh sales
Retail 22
Sales for resale
Firm power obligations (3)
Non-firm power transactions 11
Total change in kwh sales 30
Other 1
Operating revenues - September 30, 1995 $1 202
Operating Expenses
Fuel Used in Electric Production
Fuel costs for the twelve months ended September 30, 1995, increased $18
million (4.8%) as compared to the same period last year.
An analysis of fuel costs is shown below:
Twelve Months
Ended September 30
(in millions)
Fuel expense - September 30, 1994 $375
Increase due to change in:
Price of fuel 7
Kwh generation 11
Fuel expense - September 30, 1995 $393
Other Operation
Other operation expenses for the twelve months ended September 30, 1995,
increased $29 million (14.3%) as compared to the same period last year.
This increase was due to a number of factors, including the accrual of
postretirement benefit costs, the amortization of deferred postretirement
benefit costs, an increase in the level of ongoing DSM expenses, the
amortization of deferred DSM costs, and the amortization of merger costs,
all of which are being recovered in revenues pursuant to the February 1995
Order. In addition, charges of approximately $10 million for severance
benefits to former officers were expensed in December 1994. The period to
period comparison also reflects the write-off of previously deferred
litigation expenses during 1994.
Depreciation
Depreciation expense for the twelve months ended September 30, 1995,
decreased $7 million (5.1%) when compared to the same period last year.
This decrease was primarily driven by the adoption of lower depreciation
rates effective in March 1995 pursuant to the February 1995 Order. The
decrease was partially offset by the effect of additions to utility plant
in service.
Other Income and Expenses - Net
Allowance for Equity Funds Used During Construction
The equity component of AFUDC decreased $12 million for the twelve month
period ended September 30, 1995, as compared to the same period last year.
As previously discussed, this decrease was due primarily to an increase in
the average short-term debt outstanding. In addition, a scrubber at Gibson
was placed in service in September 1994 which resulted in a large decrease
in the average balance of CWIP.
Other - net
Other - net increased $7 million (76.9%) for the nine months ended
September 30, 1995, when compared to the same period last year. This
increase is primarily due to an increase in carrying costs on DSM expenses
which resulted from a higher AFUDC rate used to compute carrying costs and
increased DSM expenses to which the rate is applied.
Interest
Interest on Long-term Debt
Interest on long-term debt increased $4 million (6.3%) for the twelve
months ended September 30, 1995, as compared to the same period in 1994.
The increase was primarily a result of the issuance of $60 million
principal amount 5.75% Series B medium-term notes in August 1994, which
matured in August 1995.
Other Interest
Other interest increased $6 million (51.5%) over the same period last year.
The increase was driven, in part, by higher interest rates and an increase in
the average short-term debt outstanding.
Allowance for Borrowed Funds Used During Construction
The debt component of AFUDC decreased $4 million (40.5%) for the twelve
months ended September 30, 1995, as compared to the same period last year.
This decrease was due primarily to a decrease in the average balance of
CWIP and was partially offset by an increase in the debt component of the
AFUDC rate.
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
(unaudited)
ASSETS
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Utility Plant - original cost
In service
Electric $185 701 $179 098
Gas 139 083 134 103
Common 19 121 19 122
343 905 332 323
Accumulated depreciation 110 256 104 113
233 649 228 210
Construction work in progress 8 257 8 638
Total utility plant 241 906 236 848
Current Assets
Cash 1 502 1 071
Accounts receivable less accumulated provision
of $1,140,000 at September 30, 1995, and
$457,000 at December 31, 1994, for doubtful
accounts 22 858 33 892
Materials, supplies, and fuel - at average cost
Gas stored for current use 5 774 6 216
Other materials and supplies 1 240 1 406
Property taxes applicable to subsequent year 2 287 2 200
Prepayments and other 637 593
34 298 45 378
Other Assets
Regulatory assets
Deferred merger costs 1 785 1 785
Unamortized costs of reacquiring debt 2 544 -
Other 2 590 2 718
Other 1 689 399
8 608 4 902
$284 812 $287 128
<FN>
The accompanying notes as they relate to ULH&P are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
CAPITALIZATION AND LIABILITIES
September 30 December 31
1995 1994
(dollars in thousands)
<S> <C> <C>
Common Stock Equity
Common stock - $15.00 par value; authorized
shares - 1,000,000; outstanding shares -
585,333 at September 30, 1995 and
December 31, 1994 $ 8 780 $ 8 780
Paid-in capital 18 839 18 839
Retained earnings 80 450 74 203
Total common stock equity 108 069 101 822
Long-term Debt 69 362 89 238
Total capitalization 177 431 191 060
Current Liabilities
Notes payable 26 500 14 500
Accounts payable 21 903 21 655
Accrued taxes (1 082) 2 876
Accrued interest 2 157 2 123
Other 4 461 4 123
53 939 45 277
Other Liabilities
Deferred income taxes 24 536 23 226
Unamortized investment tax credits 5 151 5 364
Accrued pension and other postretirement
benefit costs 11 838 10 356
Income taxes refundable through rates 4 887 4 282
Other 7 030 7 563
53 442 50 791
$284 812 $287 128
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Electric $51 203 $49 354 $138 585 $138 280 $177 869 $180 019
Gas 5 995 6 678 45 870 53 065 64 776 79 185
Total operating revenues 57 198 56 032 184 455 191 345 242 645 259 204
Operating Expenses
Electricity purchased from parent
company for resale 40 750 37 289 107 725 105 396 137 216 137 031
Gas purchased 2 168 2 727 23 884 29 936 34 456 44 837
Other operation 7 428 7 764 22 481 23 105 31 665 31 435
Maintenance 903 1 424 3 040 4 166 4 347 6 216
Depreciation 2 907 2 643 8 553 7 892 11 305 10 509
Income taxes (242) 461 3 719 4 688 4 373 6 748
Taxes other than income taxes 986 930 2 965 2 945 4 022 3 660
54 900 53 238 172 367 178 128 227 384 240 436
Operating Income 2 298 2 794 12 088 13 217 15 261 18 768
Other Income And Expenses - Net
Allowance for equity funds used
during construction 22 50 78 61 95 53
Income taxes (10) (101) (48) (57) 65 (56)
Other - net (8) 82 59 417 (122) 361
4 31 89 421 38 358
Income Before Interest 2 302 2 825 12 177 13 638 15 299 19 126
Interest
Interest on long-term debt 1 721 2 039 5 674 6 121 7 714 8 160
Other interest 157 79 376 296 475 460
Allowance for borrowed funds used
during construction (24) (59) (120) (134) (169) (162)
1 854 2 059 5 930 6 283 8 020 8 458
Net Income $ 448 $ 766 $ 6 247 $ 7 355 $ 7 279 $ 10 668
<FN>
The accompanying notes as they relate to ULH&P are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(unaudited)
Common Paid-in Retained Total Common
Stock Capital Earnings Stock Equity
(dollars in thousands)
<S> <C> <C> <C> <C>
Quarter Ended September 30, 1995
Balance July 1, 1995 $8 780 $18 839 $80 002 $107 621
Net income 448 448
Balance September 30, 1995 $8 780 $18 839 $80 450 $108 069
Quarter Ended September 30, 1994
Balance July 1, 1994 $8 780 $18 839 $75 916 $103 535
Net income 766 766
Balance September 30, 1994 $8 780 $18 839 $76 682 $104 301
Nine Months Ended September 30, 1995
Balance January 1, 1995 $8 780 $18 839 $74 203 $101 822
Net income 6 247 6 247
Balance September 30, 1995 $8 780 $18 839 $80 450 $108 069
Nine Months Ended September 30, 1994
Balance January 1, 1994 $8 780 $18 839 $69 327 $ 96 946
Net income 7 355 7 355
Balance September 30, 1994 $8 780 $18 839 $76 682 $104 301
Twelve Months Ended September 30, 1995
Balance October 1, 1994 $8 780 $18 839 $76 682 $104 301
Net income 7 279 7 279
Dividends on common stock (3 511) (3 511)
Balance September 30, 1995 $8 780 $18 839 $80 450 $108 069
Twelve Months Ended September 30, 1994
Balance October 1, 1993 $8 780 $18 839 $68 941 $ 96 560
Net income 10 668 10 668
Dividends on common stock (2 927) (2 927)
Balance September 30, 1994 $8 780 $18 839 $76 682 $104 301
<FN>
The accompanying notes as they relate to ULH&P are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Quarter Ended Nine Months Ended Twelve Months Ended
September 30 September 30 September 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating Activities
Net income $ 448 $ 766 $ 6 247 $ 7 355 $ 7 279 $ 10 668
Items providing (using) cash currently:
Depreciation 2 907 2 643 8 553 7 892 11 305 10 509
Deferred income taxes and investment tax
credits - net 2 044 1 588 1 702 1 798 1 946 669
Allowance for equity funds used during
construction (22) (50) (78) (61) (95) (53)
Regulatory assets
Deferred merger costs - (1 785) - (1 785) - (1 785)
Other 43 43 128 128 170 170
Changes in current assets and current
liabilities
Accounts receivable 2 943 3 982 11 034 12 367 7 468 2 099
Materials, supplies, and fuel (1 476) (1 974) 608 436 1 215 358
Accounts payable (992) (3 512) 248 (7 434) 5 305 (1 085)
Accrued taxes and interest (6 083) (1 868) (3 924) 1 736 (2 353) 1 313
Other items - net (3 378) (1 097) 595 2 491 884 4 305
Net cash provided by (used in)
operating activities (3 566) (1 264) 25 113 24 923 33 124 27 168
Financing Activities
Issuance of long-term debt 14 704 - 14 704 - 14 704 -
Redemption of long-term debt (21 302) - (37 036) - (37 036) -
Change in short-term debt 13 000 7 000 12 000 (12 500) 14 000 (6 000)
Dividends on common stock - - - - (3 511) (2 927)
Net cash provided by (used in)
financing activities 6 402 7 000 (10 332) (12 500) (11 843) (8 927)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (4 582) (5 070) (14 350) (13 564) (21 115) (18 655)
Net cash provided by (used in)
investing activities (4 582) (5 070) (14 350) (13 564) (21 115) (18 655)
Net increase (decrease) in cash and
temporary cash investment (1 746) 666 431 (1 141) 166 (414)
Cash and temporary cash investments at
beginning of period 3 248 670 1 071 2 477 1 336 1 750
Cash and temporary cash investments at
end of period $ 1 502 $ 1 336 $ 1 502 $ 1 336 $ 1 502 $ 1 336
<FN>
The accompanying notes as they relate to ULH&P are an integral part of these financial statements.
</TABLE>
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales increased 7.2% for the quarter ended September 30, 1995, as a result
of increased sales to domestic and commercial customers. The increase in
domestic and commercial sales resulted from warmer weather during the period
and increases in the average number of customers.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the third quarter of 1995
decreased .6% as compared to the third quarter of 1994. The decline was
attributable to decreased sales volumes to domestic, commercial, and
industrial customers. Warmer weather contributed to the decrease in domestic
and commercial sales. The decrease in industrial sales was attributable to
the trend of industrial customers electing to purchase directly from
suppliers, creating additional demand for transportation services provided by
ULH&P. The resulting significant increase in transportation volumes more than
offset the decline in industrial sales and was primarily attributable to
growth in the chemicals and paper products sectors.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $1.8 million (3.7%) for the quarter
ended September 30, 1995, over the comparable period of 1994. This increase
reflects the previously discussed increases in kwh sales.
Gas Operating Revenues
Gas operating revenues decreased $.7 million (10.2%) for the quarter ended
September 30, 1995, over the comparable period of 1994. This decrease was the
result of the previously discussed decline in total volumes sold and the
operation of adjustment clauses reflecting a decline in the average cost of
gas purchased. An increase in the relative volume of gas transported to gas
sold also contributed to the decrease. Providing transportation services does
not necessitate the recovery of gas purchased costs. Consequently, the
revenue per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased expense, ULH&P's largest operating expense, increased
$3.5 million (9.3%) for the quarter as compared to the same period last year.
An analysis of electricity purchased costs is shown below:
Quarter
Ended September 30
(in thousands)
Electricity purchased expense - September 30, 1994 $37 289
Increase due to change in:
Price of electricity 565
Kwh purchased 2 896
Electricity purchased expense - September 30, 1995 $40 750
Gas Purchased
Gas purchased for the quarter decreased $.6 million (20.5%) when compared to
the same period last year. This decrease was attributable to a 15.5% decline
in the average cost per Mcf purchased and a 5.9% decrease in volumes
purchased.
Other Operation
Other operation expense decreased $.3 million (4.3%) for the quarter ended
September 30, 1995, as compared to the same period last year. The decrease
was primarily attributable to decreased gas and electric distribution
expenses.
Maintenance
The decrease in maintenance expense of $.5 million (36.6%) for the third
quarter of 1995 as compared to the same period last year was primarily due to
lower maintenance costs on gas and electric distribution facilities.
Depreciation
The increase in depreciation expense of $.3 million (10.0%) for the third
quarter of 1995 as compared to the same period last year was primarily due to
additions to electric and gas plant in service.
Interest
Interest charges for the three month period ended September 30, 1995,
decreased $.2 million (10.0%) from the comparable period of 1994, primarily
due to the refinancing of $35 million of long-term debt during 1995.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the nine months ended September 30, 1995, increased 3.5% over
the same period of 1994, primarily as a result of increased commercial and
industrial sales volumes. The higher commercial sales were the result of
warmer weather during the latter part of the summer cooling season and an
increase in the average number of customers. The increased industrial sales
reflect continued growth in the paper products and primary metals sectors.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the nine months ended September
30, 1995, decreased 2.3% as compared to the same period of 1994, as a result
of decreased sales volumes to domestic, commercial, and industrial customers.
Milder weather during the winter heating season contributed to the decrease in
domestic and commercial sales. The decrease in industrial sales was
attributable to the trend of industrial customers electing to purchase
directly from suppliers, creating additional demand for transportation
services provided by ULH&P. The resulting increase in transportation volumes
more than offset the decline in industrial sales.
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $.3 million (.2%) for the nine months
ended September 30, 1995, over the comparable period of 1994. This increase
reflects the previously discussed increases in kwh sales, the effects of which
were partially offset by decreases in fuel adjustment clauses reflecting a
decline in the average cost of electricity purchased.
An analysis of electric operating revenues is shown below:
Nine Months
Ended September 30
(in thousands)
Operating revenues - September 30, 1994 $138 280
Increase (Decrease) due to change in:
Price per kwh (4 508)
Kwh sales 4 840
Other (27)
Operating revenues - September 30, 1995 $138 585
Gas Operating Revenues
Gas operating revenues decreased $7.2 million (13.6%) in the first nine months
of 1995 when compared to the same period last year. This decrease was the
result of the previously discussed decline in total volumes sold and the
operation of adjustment clauses reflecting a decline in the average cost of
gas purchased. An increase in the relative volume of gas transported to gas
sold also contributed to the decrease. Providing transportation services does
not necessitate the recovery of gas purchased costs. Consequently, the
revenue per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased expense increased $2.3 million (2.2%) for the first nine
months of 1995 as compared to last year.
An analysis of electricity purchased costs is shown below:
Nine Months
Ended September 30
(in thousands)
Electricity purchased expense - September 30, 1994 $105 396
Increase (Decrease) due to change in:
Price of electricity (4 995)
Kwh purchased 7 324
Electricity purchased expense - September 30, 1995 $107 725
Gas Purchased
Gas purchased expense for the first nine months decreased $6.1 million (20.2%)
when compared to the same period last year. The decrease was attributable to
a 7.7% decline in volumes purchased and a 13.5% decrease in the average cost
per Mcf of gas purchased.
Other Operation
Other operation expenses decreased $.6 million (2.7%) for the nine months
ended September 30, 1995, as compared to the same period last year. The
decrease was attributable to decreased gas and electric distribution expenses
and reduced gas production costs.
Maintenance
The decrease in maintenance expense of $1.1 million (27.0%) for the nine
months ended September 30, 1995, as compared the same period last year was due
primarily to lower maintenance costs on gas and electric distribution
facilities and reduced maintenance on facilities used for administrative and
general functions.
Depreciation
The increase in depreciation expense of $.7 million (8.4%) for the nine
months ended September 30, 1995, as compared the same period last year was
primarily due to additions to electric and gas plant in service.
Interest
Interest charges for the nine month period ended September 30, 1995, decreased
$.4 million (5.6%) from the comparable period of 1994, primarily due to the
refinancing of $35 million of long-term debt during 1995.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Kwh Sales
Kwh sales for the twelve months ended September 30, 1995, increased 2.7% when
compared to the same period of 1994. A decline in domestic sales volumes due
to milder weather during the winter heating season was more than offset by
increases in commercial and industrial sales and sales to public authorities.
The higher commercial sales and sales to public authorities resulted from
warmer weather during the summer cooling season and increases in the average
number of both customer groups. The increased industrial sales primarily
reflect growth in the primary metals sector.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the twelve months ended September
30, 1995, decreased 7.4% when compared to the same period of 1994, as a result
of lower domestic, commercial, and industrial sales. Milder weather during
the winter heating season contributed to the decrease in domestic and
commercial sales, while industrial sales decreased as customers elected to
purchase directly from suppliers, creating additional demand for
transportation services provided by ULH&P. The resulting increase in
transportation volumes more than offset the lower industrial sales and was
primarily due to growth in the paper products and primary metals sectors.
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $2.2 million (1.2%) for the twelve
months ended September 30, 1995, over the comparable period of 1994. The
decrease was attributable to the operation of adjustment clauses reflecting a
decline in the average cost of electricity purchased and was partially offset
by the previously discussed increases in sales volumes.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended September 30
(in thousands)
Operating revenues - September 30, 1994 $180 019
Increase (Decrease) due to change in:
Price per kwh (6 896)
Kwh sales 4 833
Other (87)
Operating revenues - September 30, 1995 $177 869
Gas Operating Revenues
Gas operating revenues declined $14.4 million (18.2%) for the twelve months
ended September 30, 1995, when compared to the same period last year. This
decrease was the result of the aforementioned decline in volumes sold and the
operation of adjustment clauses reflecting a lower average cost of gas
purchased. An increase in the relative volume of gas transported to gas sold
also contributed to the decrease. Providing transportation services does not
necessitate the recovery of gas purchased costs. Consequently, the revenue
per Mcf transported is below the revenue per Mcf sold.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased expense increased slightly for the twelve months ended
September 30, 1995, as compared to last year.
An analysis of electricity purchased costs is shown below:
Twelve Months
Ended September 30
(in thousands)
Electricity purchased expense - September 30, 1994 $137 031
Increase (Decrease) due to change in:
Price of electricity (7 151)
Kwh purchased 7 336
Electricity purchased expense - September 30, 1995 $137 216
Gas Purchased
Gas purchased expense for the twelve months ended September 30, 1995,
decreased $10.4 million (23.2%) when compared to the same period last year.
This decrease was attributable to a 12.1% decline in volumes purchased and a
12.6% decrease in the average cost per Mcf of gas purchased.
Other Operation
Other operation expenses increased $.2 million (.7%) for the twelve months
ended September 30, 1995, as compared to the same period last year, primarily
due to recognition of nonrecurring charges in December 1994 for merger-related
costs and other costs ULH&P does not expect to recover from customers. These
nonrecurring charges were partially offset by a number of items, including
decreased gas production and distribution expenses and reductions in
administrative and general expenses.
Maintenance
The decrease in maintenance expense of $1.9 million (30.1%) for the twelve
months ended September 30, 1995, as compared the same period last year was due
primarily to lower maintenance costs on gas and electric distribution
facilities.
Depreciation
The increase in depreciation expense of $.8 million (7.6%) for the twelve
months ended September 30, 1995, as compared the same period last year was
primarily due to additions to electric and gas plant in service.
Taxes Other than Income Taxes
Taxes other than income taxes increased $.4 million (9.9%) for the twelve
months ended September 30, 1995, over the same period of 1994, primarily due
to increased property taxes as a result of higher property tax rates.
Interest
Interest charges for the twelve month period ended September 30, 1995,
decreased $.4 million (5.2%) from the comparable period of 1994, primarily due
to the refinancing of $35 million of long-term debt during 1995.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include only
normal, recurring adjustments) necessary in the opinion of these companies for
a fair presentation of the interim results. These statements should be read
in conjunction with the Financial Statements and the notes thereto included in
each registrant's 1994 Form 10-K. Certain amounts in the 1994 Financial
Statements have been reclassified to conform to the 1995 presentation.
Cinergy and PSI
2. As discussed in Cinergy's and PSI's 1994 Form 10-K, in July 1994, PSI
filed a petition with the IURC for a retail rate increase, and in May 1995,
filed testimony supporting a 12.8% ($127.9 million) annual increase. In an
October 1995 update filing with the IURC, PSI lowered its rate increase
request to 11.5% ($115.6 million) reflecting updated revenue and expense
items. Major components of the increase include, among other things, the
costs of the Clean Coal Project and a scrubber at Gibson. On November 1,
1995, the UCC filed testimony with the IURC recommending a 3.7% ($36.9
million) retail rate increase. The primary differences between PSI's case and
the UCC's filing are the requested rate of return and other expense items,
including DSM costs. An order is anticipated in the second quarter of 1996.
PSI cannot predict what action the IURC may take with respect to this proposed
rate increase.
Cinergy and CG&E
3. In July 1995, CG&E filed a request with the PUCO to begin settlement
discussions on a gas rate increase with intervenors who have participated in
previous rate applications and represent the various classes of gas customers
served by CG&E. The proposed annual increase, estimated to be $30.8 million,
would increase annual revenues approximately 8.8%. The proposed increase, to
be effective in late 1996, is being requested, in part, to recover capital
investments made since the last gas rate increase in 1993. Also, the request
includes a proposal to initiate a pilot program that would allow residential
customers to choose their gas supplier and have CG&E transport the gas for
them. A full rate application is expected to be filed with the PUCO in
December 1995. CG&E cannot predict the outcome of these settlement
discussions nor what actions the PUCO may take with respect to the proposed
rate increase.
Cinergy, CG&E, PSI, and ULH&P
4. SFAS 121, which is effective for Cinergy and its subsidiaries in January
1996, is not expected to have an adverse impact on financial condition or
results of operations upon adoption, based on the regulatory environment in
which Cinergy currently operates. However, this may change in the future as
deregulation, competitive factors, and potential restructuring influence the
electric utility industry.
Cinergy and CG&E
5. All outstanding shares of CG&E's Cumulative Preferred Stock, 7.44%
Series and 9.15% Series, totaling $90 million, were redeemed at a per share
price of $101 and $106.10, respectively, on July 1, 1995.
Cinergy and CG&E
6.(a) As previously discussed in Cinergy's and CG&E's 1994 Form 10-K, CG&E
redeemed $59 million principal amount of its 9.70% first mortgage bonds (due
June 15, 2019) on April 30, 1995, and $55 million principal amount of its 10
1/8% first mortgage bonds (due May 1, 2020) on May 1, 1995. Additionally, $41
million principal amount of the 9.70% first mortgage bonds and $45 million
principal amount of the 10 1/8% first mortgage bonds were retired on March 31,
1995.
Cinergy, CG&E, and ULH&P
(b) In June 1995, ULH&P redeemed $5 million principal amount of its 10
1/4% first mortgage bonds (due June 1, 2020) at par with cash deposited in the
Maintenance and Replacement Fund, and the remaining $10 million principal
amount of such bonds at the redemption price of 107.34%.
Additionally, on September 1, 1995, ULH&P redeemed all of its 9.70% first
mortgage bonds (due July 1, 2019) at a redemption price of 106.51%.
Cinergy and CG&E
7.(a) CG&E issued $150 million principal amount of 6.90% debentures (due
June 1, 2025) and $100 million principal amount of 8.28% junior
subordinated deferrable interest debentures (due June 30, 2025) in June and
July 1995, respectively. The proceeds from these issuances were used in
conjunction with the early redemption of preferred stock and long-term debt.
Cinergy, CG&E, and ULH&P
(b) On July 25, 1995, ULH&P issued $15 million of 7.65% debentures (due July
15, 2025). The proceeds from the issuance were used in conjunction with the
early redemption of long-term debt.
Cinergy and CG&E
(c) On September 13, 1995, CG&E issued Series A and Series B ($42 million each
series) of State of Ohio, Air Quality Development Revenue Refunding Bonds (due
September 1, 2030). The bonds were issued at a variable interest rate,
determined daily, and will continue to bear interest at such rate until
converted by CG&E to a different interest rate mode as permitted by the
respective indentures. Proceeds from the sales are being held in escrow and
will be used to redeem on December 1, 1995, $84 million of State of Ohio 10
1/8% Pollution Control Revenue Bonds, 1985 Series (due December 1, 2015) at a
redemption price of 102.5%. The amount being held in escrow is reflected in
the consolidated balance sheets as a restricted deposit.
Cinergy and PSI
8.(a) Coal tar residues, related hydrocarbons, and various metals have been
found at former MGP sites in Indiana, including, but not limited to, several
sites previously owned by PSI. PSI has identified at least 21 MGP sites which
it previously owned, including 19 it sold in 1945 to IGC. IGC has informed
PSI of the basis for its position that PSI, as a PRP under the CERCLA, should
contribute to IGC's response costs related to investigating and remediating
contamination at MGP sites which PSI sold to IGC.
In February 1995, PSI received notification from NIPSCO alleging PSI is a
PRP under the CERCLA with respect to contamination associated with MGP sites
previously owned and/or operated by both PSI and NIPSCO (or their
predecessors). The notification included seven sites, five of which PSI
acquired from NIPSCO and subsequently sold to IGC.
PSI has placed its insurance carriers on notice of IGC's and NIPSCO's
claims.
In May 1995, the IURC denied IGC's request for recovery of costs incurred
in complying with Federal, state, and local environmental regulations related
to MGP sites in which IGC has an interest, including sites acquired from PSI.
IGC has appealed this decision, which IGC contends is contrary to decisions
made by other state utility commissions with respect to this issue. In August
1995, the IURC granted PSI's motion to establish a sub-docket to PSI's pending
retail rate case in order to consider PSI's rate recovery of any MGP site-
related costs it may incur.
At this time, PSI is unable to predict the nature, extent, and costs of,
or PSI's responsibility for, any future environmental investigations and
remediations which may be required at MGP sites owned or previously owned by
PSI; however, any costs that ultimately are incurred may be material. In
addition, PSI is unable to predict, at this time, the extent to which the IURC
may allow rate recovery of such costs.
Cinergy and CG&E
(b) Lawrenceburg also has an MGP site which is under investigation to
determine a remediation strategy. Lawrenceburg had applied to have the site
included in the IDEM's voluntary cleanup program. In May 1995, Lawrenceburg
and the IDEM reached an agreement to include the Lawrenceburg MGP site in such
voluntary cleanup program. A proposed remediation plan will be submitted in
the near future. The remediation and cleanup costs for this site are not
expected to have a material impact on results of operations or financial
condition.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Senior Security Ratings
Cinergy, CG&E, PSI, and ULH&P
In July 1995, S&P Ratings Group raised its ratings of Cinergy's operating
units' senior secured debt to A- from BBB+, removing the companies from its
credit watch list. The companies had been on credit watch since October 31,
1994. S&P also raised the ratings of the operating units' senior unsecured
debt and preferred stock from BBB to BBB+. The ratings group indicated these
actions are a result of lower combined power production costs, reduced
operation and maintenance expenses, and deferral of capital expenditures
brought about as a result of the merger.
In addition, in August 1995, D&P raised Cinergy's operating units' credit
ratings. The ratings of CG&E's first mortgage bonds and collateralized
pollution control revenue bonds were raised to A- from BBB+ while the ratings
of CG&E's unsecured debentures were raised to BBB+ from BBB. PSI's first
mortgage bonds and medium term notes were upgraded to A- from BBB+. The
preferred stock ratings of both companies were reaffirmed at BBB. ULH&P's
first mortgage bonds were assigned a new rating of A-. In assigning these
ratings, D&P stated the merger will result in lower new capacity needs and
electric production costs and enhanced transmission capabilities.
Regulatory Matters
Cinergy, CG&E, PSI, and ULH&P
PUHCA Reform
In June 1995, after a year-long review of its continuing regulation of public
utility holding companies under the PUHCA, the SEC endorsed recommendations
for reform of the PUHCA. The recommendations call for repeal and, pending
repeal, significant administrative reform of the 60 year old statute. While
the report offers three alternative approaches to repeal and legislative
reform, the report's preferred option is repeal coupled with a transition
period of one year or longer and a transfer of certain consumer-protection
provisions of PUHCA to the FERC. The report further recommends that, pending
consideration of legislative options, the SEC take prompt administrative
action, by rulemaking and on a case-by-case basis, to modernize and simplify
regulation under PUHCA, with particular reference to financing transactions,
diversification into nonutility businesses, utility mergers and acquisitions
and PUHCA's "integration" standards. In the latter regard, the report
recommends a changed interpretation of PUHCA to permit registered holding
companies to own combination electric and gas utility companies provided the
affected states agree. Subsequent to the report's issuance, the SEC adopted
rule changes exempting various types of financing transactions by utility and
nonutility subsidiaries of registered holding companies. The SEC also
proposed a rule that would exempt investments by registered systems in
specified "energy-related companies" subject to certain conditions.
In October 1995, a bill was introduced in the U.S. Senate providing for the
repeal of PUHCA. The bill is pending before Congress.
Cinergy and PSI
PSI's July 1994 Retail Rate Petition
As discussed in Cinergy's and PSI's 1994 Form 10-K, in July 1994, PSI filed a
petition with the IURC for a retail rate increase, and in May 1995, filed
testimony supporting a 12.8% ($127.9 million) annual increase. In an
October 1995 update filing with the IURC, PSI lowered its rate increase
request to 11.5% ($115.6 million) reflecting updated revenue and expense
items. Major components of the increase include, among other things, the
costs of the Clean Coal Project and a scrubber at Gibson. On November 1,
1995, the UCC filed testimony with the IURC recommending a 3.7% ($36.9
million) retail rate increase. The primary differences between PSI's case and
the UCC's filing are the requested rate of return and other expense items,
including DSM costs. An order is anticipated in the second quarter of 1996.
Assuming this petition is satisfactorily addressed by the IURC, Cinergy's
objective is to manage costs in order to delay the need for additional rate
relief by PSI. PSI cannot predict what action the IURC may take with respect
to this proposed rate increase.
Cinergy and CG&E
CG&E Rate Matters
In July 1995, CG&E filed a request with the PUCO to begin settlement
discussions on a gas rate increase involving intervenors who have participated
in previous rate applications and represent the various classes of gas
customers served by CG&E. The proposed annual increase, estimated to be $30.8
million, would increase annual revenues approximately 8.8%. The proposed
increase, anticipated to be effective in late 1996, is being requested, in
part, to recover capital investments made since the last gas rate increase in
1993. Also, the request includes a proposal to initiate a pilot program that
would allow residential customers to choose their gas supplier and have CG&E
transport the gas for them. A full rate application is expected to be filed
with the PUCO in December 1995. CG&E cannot predict the outcome of these
settlement discussions nor what actions the PUCO may take with respect to the
proposed rate increase.
Cinergy, CG&E, PSI, and ULH&P
MEGA-NOPR
The FERC's MEGA-NOPR on open access as proposed would, among other things,
provide for mandatory filing of open access/comparability transmission
tariffs, provide for functional unbundling of all services, require utilities
to use the filed tariffs for their own bulk power transactions, establish an
electronic bulletin board, and establish a contract-based approach to stranded
costs.
Cinergy filed comments in June 1995 in response to the MEGA-NOPR. In the
filing, Cinergy reaffirmed support for FERC's authority to order utilities
owning transmission systems to provide access to other entities at rates and
terms comparable to those they provide affiliated companies. In August 1995,
Cinergy filed additional comments concerning the transmission pricing aspects
of the MEGA-NOPR. A final order is expected to be issued during the first
half of 1996.
Environmental Issues
Cinergy, CG&E, and PSI
MGP Sites
Coal tar residues, related hydrocarbons, and various metals have been found at
former MGP sites in Indiana, including, but not limited to, several sites
previously owned by PSI. PSI has identified at least 21 MGP sites which it
previously owned, including 19 it sold in 1945 to IGC. IGC has informed PSI
of the basis for its position that PSI, as a PRP under the CERCLA, should
contribute to IGC's response costs related to investigating and remediating
contamination at MGP sites which PSI sold to IGC.
In February 1995, PSI received notification from NIPSCO alleging PSI is a PRP
under the CERCLA with respect to contamination associated with MGP sites
previously owned and/or operated by both PSI and NIPSCO (or their
predecessors). The notification included seven sites, five of which PSI
acquired from NIPSCO and subsequently sold to IGC.
PSI has placed its insurance carriers on notice of IGC's and NIPSCO's claims.
In May 1995, the IURC denied IGC's request for recovery of costs incurred in
complying with Federal, state, and local environmental regulations related to
MGP sites in which IGC has an interest, including sites acquired from PSI.
IGC has appealed this decision, which IGC contends is contrary to decisions
made by other state utility commissions with respect to this issue. In August
1995, the IURC granted PSI's motion to establish a sub-docket to the pending
retail rate case in order to consider PSI's rate recovery of any MGP site-
related costs it may incur.
At this time, PSI is unable to predict the nature, extent, and costs of, or
PSI's responsibility for, any future environmental investigations and
remediations which may be required at MGP sites owned or previously owned by
PSI; however, any costs that ultimately are incurred may be material. In
addition, PSI is unable to predict, at this time, the extent to which the IURC
may allow rate recovery of such costs.
Lawrenceburg also has an MGP site which is under investigation to determine a
remediation strategy. Lawrenceburg had applied to have the site included in
the IDEM's voluntary cleanup program. In May 1995, Lawrenceburg and the IDEM
reached an agreement to include the Lawrenceburg MGP site in such voluntary
cleanup program. A proposed remediation plan will be submitted in the near
future. The remediation and cleanup costs for this site are not expected to
have a material impact on results of operations or financial condition.
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standard
SFAS 121, which is effective for Cinergy and its subsidiaries in January 1996,
is not expected to have an adverse impact on financial condition or results of
operations upon adoption, based on the regulatory environment in which Cinergy
currently operates. However, this may change in the future as deregulation,
competitive factors, and potential restructuring influence the electric
utility industry.
CAPITAL REQUIREMENTS
Cinergy and PSI
New Generation
PSI's 25-year contractual agreement with Destec will commence upon commercial
operation of the Clean Coal Project. The agreement requires PSI to pay Destec
a fixed monthly fee plus certain monthly operating expenses. Over the next
five years, the fixed fee is expected to total $56 million, and the variable
fee is estimated at $95 million. As discussed in Cinergy's and PSI's 1994
Form 10-K, PSI received authorization in the February 1995 Order to defer
these costs for subsequent recovery in an IURC order associated with PSI's
July 1994 retail rate petition. Additionally, PSI's portion of the Clean Coal
Project's operating costs is estimated to be approximately $9 million,
including fuel, during the one-year demonstration period.
CAPITAL RESOURCES
Cinergy, CG&E, PSI, and ULH&P
Long-term Debt
Currently, Cinergy's utility subsidiaries have state utility commission
regulatory authority for securities issuances as follows:
CG&E $250 million
PSI 298 million
ULH&P 40 million
For information regarding recent securities redemptions and issuances, see
Notes 6 and 7 of the "Notes to Financial Statements".
Cinergy, CG&E, and PSI
Preferred Stock
Currently, PSI has IURC authority to issue up to $40 million of preferred
stock.
For information regarding recent redemptions of preferred stock by CG&E, see
Note 5 of the "Notes to Financial Statements".
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt
The operating subsidiary companies of Cinergy have the following short-term
debt authorizations and lines of credit:
Committed Unused
Authorized Lines Lines
(in millions)
Cinergy & Subsidiaries $783 $343 $113
CG&E & Subsidiaries 435 112 91
PSI 338 230 21
ULH&P 35 30 9
Additionally, Cinergy has a $100 million credit facility, which expires
September 27, 1997, of which $79 million remained unused at September 30,
1995.
Cinergy and CG&E
Other
In September 1995, CG&E began soliciting proxies from the holders of preferred
stock and from Cinergy, as the holder of all outstanding shares of common
stock, for a special meeting of shareholders to be held November 20, 1995, for
the purpose of amending CG&E's Articles. The proposed amendment would, if
adopted, eliminate a restriction on the amount of unsecured debt that CG&E can
issue, or, if such proposal is not adopted, an alternate proposal, if adopted,
would amend the Articles by suspending, for a 10-year period, the restriction
on the amount of unsecured debt CG&E can issue.
<PAGE>
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "ITEM 1. FINANCIAL STATEMENTS" in "PART I - Financial
Information".
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
Power International Litigation
On October 25, 1995, a suit was filed in the Federal District Court for the
Southern District of Ohio by three former employees of Power International,
naming as defendants Power International, Cinergy, Cinergy Investments,
CG&E, PSI, James E. Rogers, and William J. Grealis. The lawsuit, which
stems from the termination of employment of the three former employees,
alleges that they entered into employment contracts with Power
International based on the opportunity to participate in potential profits
from future investments in energy projects in central and eastern Europe.
The suit alleges causes of action based upon, among other theories, breach
of contract related to the events surrounding the termination of their
employment and fraud and misrepresentation related to the level of
financial support for future projects. The suit alleges compensatory
damages of $154 million based upon assumed future success of potential
future investments and punitive damages of three times that amount. All
defendants intend to vigorously defend against the charges based upon
meritorious defenses. Cinergy, CG&E, and PSI are currently unable to
predict the outcome of the litigation.
Cinergy, CG&E, and PSI
Merger Litigation
In August 1995, AEP filed a petition in the United States Court of Appeals
for the District of Columbia Circuit for review of the FERC's Merger Order.
AEP has objected to the Merger Order alleging that the post-merger
operations of Cinergy would require the use of AEP's transmission
facilities on a continuous basis without compensation. AEP contends that
the FERC, in issuing the Merger Order, did not adequately evaluate the
impact on AEP or whether the need to use AEP's transmission facilities
would interfere with Cinergy achieving merger benefits. In addition, AEP
claims that the FERC failed to evaluate the extent to which the merged
facilities' operations would be consistent with the integrated public
utility concept of the PUHCA. CG&E and PSI have intervened in this action
and have filed a Motion to Dismiss. At this time, Cinergy, CG&E, and PSI
cannot predict the outcome of the appeal.
Cinergy, CG&E, and PSI
Shareholder Litigation
As previously reported in Cinergy's, CG&E's, and PSI's 1994 Form 10-K, in
March 1993, in conjunction with a proposed tender offer for Resources,
IPALCO filed suit in District Court against Resources, Cinergy, and James
E. Rogers, which was subsequently dismissed in November 1993. In March
1993 and in the weeks following, six suits with claims similar to those of
IPALCO were filed by purported shareholders of Resources. Four of the
suits were filed in District Court, and two were filed in state courts,
although one of those two was subsequently consolidated with the four in
the District Court.
In January 1994, the parties to this shareholder litigation executed a
Stipulation and Agreement of Dismissal settling and dismissing with
prejudice all of the parties' claims except for plaintiffs' petitions for
fees and expenses and defendants' right to object thereto. An agreement in
principle has been reached which contemplates that counsel for all
plaintiffs will receive from PSI a portion of the fees and expenses
claimed. The parties have provided notice to affected shareholders of a
hearing to be held on November 9, 1995, during which the order on the fees
and expenses will be considered by the District Court. Pending such order,
the agreed upon fees and expenses have been deposited into an interest-
bearing escrow account.
Cinergy, CG&E, and PSI
Also, see Notes 2, 3, and 8 of the "Notes to Financial Statements" in "Part
I - Financial Information".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit
Designation Nature of Exhibit
Cinergy and CG&E
4-a Loan Agreement between CG&E and the
State of Ohio Air Quality Development
Authority dated as of September 13,
1995.
Cinergy and CG&E
4-b Loan Agreement between CG&E and the
State of Ohio Air Quality Development
Authority dated as of September 13,
1995.
Cinergy, CG&E, PSI, and ULH&P
27 Financial Data Schedules (included in
electronic submission only).
Cinergy, CG&E, PSI, and ULH&P
(b) No reports on Form 8-K were filed during the quarter ended September
30, 1995.
<PAGE>
SIGNATURES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although Cinergy, CG&E, PSI, and ULH&P believe that the
disclosures are adequate to make the information presented not misleading. In
the opinion of Cinergy, CG&E, PSI, and ULH&P, these statements reflect all
adjustments (which include only normal, recurring adjustments) necessary to
reflect the results of operations for the respective periods. The unaudited
statements are subject to such adjustments as the annual audit by independent
public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed by an
officer and the chief accounting officer on their behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
The Cincinnati Gas & Electric Company
PSI Energy, Inc.
The Union Light, Heat and Power Company
Registrants
Date: November 8, 1995 /S/J. Wayne Leonard
Duly Authorized Officer
Date: November 8, 1995 /S/Charles J. Winger
Chief Accounting Officer
LOAN AGREEMENT
between
OHIO AIR QUALITY DEVELOPMENT AUTHORITY
and
THE CINCINNATI GAS & ELECTRIC COMPANY
_______________________________
$42,000,000
State of Ohio
Air Quality Development
Revenue Refunding Bonds, 1995 Series A
(The Cincinnati Gas & Electric Company Project)
_______________________________
Dated
as of
September 1, 1995
<PAGE>
INDEX
(This Index is not a part of the Agreement
but rather is for convenience of reference only.)
Preambles 1
ARTICLE I
DEFINITIONS
Section 1.1 Use of Defined Terms
Section 1.2 Definitions
Section 1.3 Interpretation
Section 1.4 Captions and Headings
ARTICLE II
REPRESENTATIONS
Section 2.1 Representations of the Authority
Section 2.2 No Warranty by Authority of Condition or
Suitability of the Project
Section 2.3 Representations and Covenants of the Company
ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 3.1 Acquisition, Construction and Installation
Section 3.2 Project Description
Section 3.3 Issuance of the Bonds; Application of
Proceeds
Section 3.4 Investment of Fund Moneys
Section 3.5 Rebate Fund
ARTICLE IV
LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND CREDIT FACILITY
Section 4.1 Loan Repayment
Section 4.2 Additional Payments
Section 4.3 Place of Payments
Section 4.4 Obligations Unconditional
Section 4.5 Assignment of Revenues and Agreement
Section 4.6 Credit Facility; Alternate Credit Facility; Cancellation
Section 4.7 Company's Option to Elect Rate Periods
Section 4.8 Company's Obligation to Purchase Bonds
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1 Right of Inspection
Section 5.2 Maintenance
Section 5.3 Removal of Portions of the Project Facilities
Section 5.4 Operation of Project Facilities
Section 5.5 Insurance
Section 5.6 Workers' Compensation Coverage
Section 5.7 Damage; Destruction and Eminent Domain
Section 5.8 Company to Maintain its Corporate Existence;
Conditions Under Which Exceptions Permitted
Section 5.9 Indemnification
Section 5.10 Company Not to Adversely Affect Exclusion of
Interest on Bonds From Gross Income For Federal
Income Tax Purposes
Section 5.11 Use of Project Facilities
Section 5.12 Assignment by Company
ARTICLE VI
REDEMPTION
Section 6.1 Optional Redemption
Section 6.2 Extraordinary Optional Redemption
Section 6.3 Mandatory Redemption
Section 6.4 Notice of Redemption
Section 6.5 Actions by Authority
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default
Section 7.2 Remedies on Default
Section 7.3 No Remedy Exclusive
Section 7.4 Agreement to Pay Attorneys' Fees and Expenses
Section 7.5 No Waiver
Section 7.6 Notice of Default
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Term of Agreement
Section 8.2 Amounts Remaining in Funds
Section 8.3 Notices
Section 8.4 Extent of Covenants of the Authority; No Personal
Liability
Section 8.5 Binding Effect
Section 8.6 Amendments and Supplements
Section 8.7 References to Credit Facility
Section 8.8 Execution Counterparts
Section 8.9 Severability
Section 8.10 Governing Law
Signatures
Exhibit A - DESCRIPTION OF AIR QUALITY FACILITIES AT WILLIAM H. ZIMMER
ELECTRIC GENERATING STATION
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of September 1, 1995
between the OHIO AIR QUALITY DEVELOPMENT AUTHORITY (the "Authority"), a body
politic and corporate organized and existing under the laws of the State of
Ohio, and THE CINCINNATI GAS & ELECTRIC COMPANY (the "Company"), a public
utility and corporation duly organized and validly existing under the laws of
the State of Ohio. Capitalized terms used in the following recitals are used
as defined in Article I of this Agreement.
Pursuant to Section 13 of Article VIII of the Ohio Constitution and the
Act, the Authority has determined to issue, sell and deliver the Bonds,
together with another issue of bonds in the amount of $42,000,000 to be issued
and secured under a separate loan agreement and a separate trust indenture,
each dated the same date as this Agreement, and to lend the proceeds derived
from the sale thereof to the Company to assist in the refunding of the
Refunded Bonds as defined below. The Refunded Bonds were originally issued to
provide funds to make loans to the Company to assist in the financing of its
portion of the costs of the Project as defined below.
The Company and the Authority each have full right and lawful authority
to enter into this Agreement and to perform and observe the provisions hereof
on their respective parts to be performed and observed.
NOW THEREFORE, in consideration of the premises and the mutual
representations and agreements hereinafter contained, the Authority and the
Company agree as follows (provided that any obligation of the Authority or the
State created by or arising out of this Agreement shall never constitute a
general debt of the Authority or the State or give rise to any pecuniary
liability of the Authority or the State but shall be payable solely out of
Revenues, including the Loan Payments made pursuant hereto and moneys drawn
under any Credit Facility):
ARTICLE I
DEFINITIONS
Section 1.1. Use of Defined Terms. In addition to the words and terms
defined elsewhere in this Agreement or by reference to another document, the
words and terms set forth in Section 1.2 hereof shall have the meanings set
forth therein unless the context or use clearly indicates another meaning or
intent. Such definitions shall be equally applicable to both the singular and
plural forms of any of the words and terms defined therein.
Section 1.2. Definitions. As used herein:
"Act" means Chapter 3706, Ohio Revised Code, as enacted and amended from
time to time pursuant to Section 13 of Article VIII of the Ohio Constitution.
"Additional Payments" means the amounts required to be paid by the
Company pursuant to the provisions of Section 4.2 hereof.
"Administration Expenses" means the compensation (which compensation
shall not be greater than that typically charged in similar circumstances) and
reimbursement of reasonable expenses and advances payable to the Trustee, the
Registrar, the Remarketing Agent, any Paying Agent and any Authenticating
Agent.
"Agreement" means this Loan Agreement, as amended or supplemented from
time to time.
"Air Quality Facility" or "Air Quality Facilities" means those facilities
which are air quality facilities as defined in Section 3706.01, Ohio Revised
Code.
"Alternate Credit Facility" means an Alternate Credit Facility as defined
in the Indenture.
"Authenticating Agent" means the Authenticating Agent as defined in the
Indenture.
"Authority Fee" means the aggregate fee of $131,250 due to the Authority
from the Company in connection with the issuance of the Bonds hereunder and
the $42,000,000 of bonds to be issued and sold on the same date as the Bonds
by the Authority under a separate loan agreement and a separate trust
indenture, each dated the same date as this Agreement, all for the same
purpose as set forth in Section 3.3 hereof for the Bonds.
"Bank" means the Bank as defined in the Indenture.
"Bond Fund" means the Bond Fund created in the Indenture.
"Bond Purchase Fund" means the Bond Purchase Fund as defined in the
Indenture.
"Bond Resolution" means the resolution of the Authority providing for the
issuance of the Bonds and approving this Agreement, the Indenture and related
matters, as amended or supplemented from time to time.
"Bond Service Charges" means, for any period or time, the principal of,
premium, if any, and interest due on the Bonds for that period or payable at
that time whether due at maturity or upon acceleration or redemption or
otherwise.
"Bonds" means the $42,000,000 Air Quality Development Revenue Refunding
Bonds, 1995 Series A (The Cincinnati Gas & Electric Company Project), issued
by the Authority pursuant to the Bond Resolution and the Indenture.
"Bonds Outstanding" or "Outstanding Bonds" means Outstanding Bonds as
defined in the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code and Sections of the Code include relevant
applicable regulations and proposed regulations thereunder and under the
Internal Revenue Code of 1954, as amended, and any successor provisions to
those Sections, regulations or proposed regulations and, in addition, all
applicable official rulings and judicial determinations under the foregoing
applicable to the Bonds.
"Conversion Date" means the Conversion Date as defined in the Indenture.
"Credit Facility" means a Credit Facility as defined in the Indenture.
"Credit Facility Account" means the Credit Facility Account as defined in
the Indenture.
"Credit Facility Issuer" means a Credit Facility Issuer as defined in the
Indenture.
"Eligible Investments" means Eligible Investments as defined in the
Indenture.
"Engineer" means an engineer (who may be an employee of the Company) or
engineering firm qualified to practice the profession of engineering under the
laws of the State and who or which is acceptable to the Trustee.
"EPA" means the Environmental Protection Agency of the State and any
successor body, agency, commission or department.
"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events
described as constituting Force Majeure in Section 7.1 hereof.
"Government Obligations" means Government Obligations as defined in the
Indenture.
"Holder" or "Holder of a Bond" means the Person in whose name a Bond is
registered on the Register.
"Indenture" means the Trust Indenture, dated as of the same date as this
Agreement, between the Authority and the Trustee, as amended or supplemented
from time to time.
"Interest Rate for Advances" means the interest rate per year payable on
the Bonds.
"Letter of Credit" means the Letter of Credit as defined in the
Indenture.
"Loan" means the loan by the Authority to the Company of the proceeds
received from the sale of the Bonds.
"Loan Payment Date" means any date on which any Bond Service Charges are
due and payable.
"Loan Payments" means the amounts required to be paid by the Company in
repayment of the Loan pursuant to Section 4.1 hereof.
"1954 Code" means the Internal Revenue Code of 1954 as amended from time
to time through the date of enactment of the Code. References to the 1954
Code and Sections of the 1954 Code include relevant applicable regulations
(including temporary regulations) and proposed regulations thereunder and any
successor provisions to those Sections, regulations or proposed regulations.
"Notice Address" means:
(a) As to the Authority: Ohio Air Quality Development Authority
1901 LeVeque Tower
50 West Broad Street
Columbus, Ohio 43215
Attention: Executive Director
(b) As to the Company: The Cincinnati Gas & Electric Company
P. O. Box 960
Cincinnati, Ohio 45201
Attention: Treasurer
(c) As to the Trustee: The Fifth Third Bank
Fifth Third Center
38 Fountain Square
Cincinnati, Ohio 45263
Attention: Corporate Trust Administration
or such additional or different address, notice of which is given under
Section 8.3 hereof.
"Opinion of Bond Counsel" means a written opinion of nationally
recognized bond counsel selected by the Company and acceptable to the Trustee
who is experienced in matters relating to the exclusion from gross income for
federal income tax purposes of interest on obligations issued by states and
their political subdivisions. Bond Counsel may be counsel to the Trustee or
the Company.
"Original Purchaser" means the Original Purchaser as defined in the
Indenture.
"Paying Agent" means the Paying Agent as defined in the Indenture.
"Person" or words importing persons mean firms, associations,
partnerships (including without limitation, general and limited partnerships),
limited liability entities, joint ventures, societies, estates, trusts,
corporations, public or governmental bodies, other legal entities and natural
persons.
"Plant" means the William H. Zimmer Electric Generating Station.
"Project" or "Project Facilities" means the real, personal or real and
personal property, including undivided or other interests therein, identified
in the Project Description.
"Project Description" means the description of the Project Facilities
attached hereto as Exhibit A, as the same may be amended in accordance with
this Agreement.
"Project Purposes" means the purposes of Air Quality Facilities as
described in the Act and as particularly described in Exhibit A hereto.
"Project Site" means the William H. Zimmer Electric Generating Station in
Clermont County, Ohio.
"Rate Period" means a Rate Period as defined in the Indenture.
"Rebate Fund" means the Rebate Fund created in the Indenture.
"Refunded Bonds" means the $84,000,000 State of Ohio 10-1/8% Pollution
Control Revenue Bonds, 1985 Series (The Cincinnati Gas & Electric Company
Project) dated as of December 1, 1985.
"Refunded Bonds Indenture" means the Trust Indenture for the Refunded
Bonds between the Authority and the Refunded Bonds Trustee dated as of
December 1, 1985.
"Refunded Bonds Loan Agreement" means the Loan Agreement between the
Authority and the Company dated as of December 1, 1985 entered into in
connection with the Refunded Bonds.
"Refunded Bonds Trustee" means The Bank of New York (formerly Irving
Trust Company), New York, New York, as trustee under the Refunded Bonds
Indenture.
"Refunding Fund" means the Refunding Fund created in the Indenture.
"Register" means the books kept and maintained for the registration and
transfer of Bonds pursuant to Section 3.05 of the Indenture.
"Registrar" means the Registrar as defined in the Indenture.
"Reimbursement Agreement" means the Reimbursement Agreement as defined in
the Indenture.
"Remarketing Agent" means the Remarketing Agent as defined in the
Indenture.
"Revenues" means (a) the Loan Payments, (b) all other moneys received or
to be received by the Authority (excluding the Authority Fee) or the Trustee
in respect of repayment of the Loan, including without limitation, all moneys
and investments in the Bond Fund, (c) any moneys and investments in the
Refunding Fund, and (d) all income and profit from the investment of the
foregoing moneys. The term "Revenues" does not include any moneys or
investments in the Rebate Fund or the Bond Purchase Fund.
"State" means the State of Ohio.
"Term Rate Period" means a Term Rate Period as defined in the Indenture.
"Trustee" means The Fifth Third Bank, Cincinnati, Ohio, a corporation
duly organized and validly existing under the laws of the State, until a
successor Trustee shall have become such pursuant to the applicable provisions
of the Indenture, and thereafter "Trustee" shall mean the successor Trustee.
"Principal Office" of the Trustee shall mean the principal corporate trust
office of the Trustee, which office at the date of issuance of the Bonds is
located at its Notice Address.
"Unassigned Authority Rights" means all of the rights of the Authority to
receive Additional Payments under Section 4.2 hereof, to inspection pursuant
to Section 5.1 hereof, to be held harmless and indemnified under Section 5.9
hereof, to be reimbursed for attorney's fees and expenses under Section 7.4
hereof and to give or withhold consent to amendments, changes, modifications,
alterations and termination of this Agreement under Section 8.6 hereof and its
right to enforce such rights.
"Variable Rate" means a Variable Rate as defined in the Indenture.
Section 1.3. Interpretation. Any reference herein to the State, to the
Authority or to any member or officer of either includes entities or officials
succeeding to their respective functions, duties or responsibilities pursuant
to or by operation of law or lawfully performing their functions.
Any reference to a section or provision of the Constitution of the State
or the Act, or to a section, provision or chapter of the Ohio Revised Code, or
to any statute of the United States of America, includes that section,
provision or chapter as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision or chapter shall be applicable
solely by reason of this provision, if it constitutes in any way an impairment
of the rights or obligations of the Authority, the State, the Holders, the
Trustee, the Registrar, an Authenticating Agent, a Paying Agent, the Credit
Facility Issuer, the Remarketing Agent, or the Company under this Agreement,
the Indenture or the Bonds.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof",
"hereby", "herein", "hereto", "hereunder" and similar terms refer to this
Agreement; and the term "hereafter" means after, and the term "heretofore"
means before, the date of delivery of the Bonds. Words of any gender include
the correlative words of the other genders, unless the sense indicates
otherwise.
Section 1.4. Captions and Headings. The captions and headings in this
Agreement are used solely for convenience of reference and in no way define,
limit or describe the scope or intent of any Articles, Sections, subsections,
paragraphs or subparagraphs or clauses hereof.
(End of Article I)
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations of the Authority. The Authority
represents that: (a) it is a body politic and corporate duly organized and
validly existing under the laws of the State; (b) it has duly accomplished all
conditions necessary to be accomplished by it prior to the issuance and
delivery of the Bonds and the execution and delivery of this Agreement and the
Indenture; (c) it is not in violation of or in conflict with any provisions of
the laws of the State which would impair its ability to carry out its
obligations contained in this Agreement or the Indenture; (d) it is empowered
to enter into the transactions contemplated by this Agreement and the
Indenture; (e) it has duly authorized the execution, delivery and performance
of this Agreement and the Indenture; (f) it will do all things in its power in
order to maintain its existence or assure the assumption of its obligations
under this Agreement and the Indenture by any successor public body; and (g)
following reasonable notice, a public hearing was held on August 8, 1995 with
respect to the issuance of the Bonds as required by Section 147(f) of the
Code.
Section 2.2. No Warranty by Authority of Condition or Suitability of
the Project. The Authority makes no warranty, either express or implied, as
to the suitability or utilization of the Project for the Project Purposes, or
as to the condition of the Project Facilities or that the Project Facilities
are or will be suitable for the Company's purposes or needs.
Section 2.3. Representations and Covenants of the Company. The Company
represents that:
(a) The Company has been duly incorporated and is
validly existing as a corporation in good standing under
the laws of the State, with power and authority (corporate
and other) to own its properties and conduct its business,
to execute and deliver this Agreement and to perform its
obligations under this Agreement.
(b) This Agreement has been duly authorized,
executed and delivered by the Company and this Agreement
constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles.
(c) The execution, delivery and performance by the
Company of this Agreement and the consummation of the
transactions contemplated hereby will not violate any
provision of law or regulation applicable to the Company,
or of any writ or decree of any court or governmental
instrumentality, or of the Articles of Incorporation, as
amended, or the Regulations of the Company, or of any
mortgage, indenture, contract, agreement or other
undertaking to which the Company is a party or which
purports to be binding upon the Company or upon any of its
assets.
(d) Substantially all (at least 90%) of the proceeds
of the Refunded Bonds were used to provide "pollution
control facilities" within the meaning of Sections
103(b)(4)(F) of the 1954 Code, the original use of which
facilities commenced with the Company, the construction of
which facilities began before September 26, 1985 and was
completed on or after such date, and which facilities were
described in an inducement resolution adopted by the
Authority before September 26, 1985, and all of the
proceeds of the Refunded Bonds have been spent for the
Project pursuant to the Refunded Bonds Loan Agreement or
to pay costs of issuance of the Refunded Bonds. The
proceeds of the Bonds (other than any accrued interest
thereon) will be used exclusively to refund the Refunded
Bonds, any investment earnings thereon will be used to pay
principal, premium or interest on the Refunded Bonds, and
none of the proceeds of the Bonds will be used to pay for
any costs of issuance of the Bonds. The Refunded Bonds
were issued prior to August 16, 1986. The principal
amount of the Bonds does not exceed the outstanding
principal amount of the Refunded Bonds. The proceeds of
the Bonds will be used to retire the Refunded Bonds not
later than 90 days after the date of issuance of the
Bonds.
(e) It has caused the Project to be substantially
completed. The Project constitutes Air Quality Facilities
under the Act and is consistent with the purposes of
Section 13 of Article VIII of the Ohio Constitution and of
the Act. The Project is being, and the Company will cause
the Project to be, operated and maintained in such manner
to conform with all applicable zoning, planning, building,
environmental and other applicable governmental
regulations and all permits, variances and orders issued
or granted pursuant thereto, including the
permit-to-install for the Project, which permits,
variances and orders have not been withdrawn or otherwise
suspended, and to be consistent with the Act.
(f) It has used or operated or has caused to be used
or operated, and presently intends to use or operate or
cause to be used or operated the Project Facilities in a
manner consistent with the Project Purposes until the date
on which the Bonds have been fully paid and knows of no
reason why the Project Facilities will not be so operated.
The Company does not intend to sell or otherwise dispose
of the Project or any portion thereof.
(g) None of the proceeds of the Refunded Bonds were
used and none of the proceeds of the Bonds will be used to
provide any private or commercial golf course, country
club, massage parlor, tennis club, skating facility
(including roller skating, skateboard and ice skating),
racquet sports facility (including handball or racquetball
court), hot tub facility, suntan facility, racetrack,
airplane, skybox or other private luxury box, or health
club facility; any facility primarily used for gambling;
any store the principal business of which is the sale of
alcoholic beverages for consumption off premises; or any
facilities for retail food and beverage services (except
grocery stores), automobile sales or service, or the
provision of recreation or entertainment.
(h) Less than 25% of the proceeds of the Refunded
Bonds have been used and less than 25% of the proceeds of
the Bonds will be used directly or indirectly to acquire
land or any interest therein, and none of such proceeds
has been or will be used to provide land which is to be
used for farming purposes.
(i) No portion of the proceeds of the Refunded Bonds
has been used and no portion of the proceeds of the Bonds
will be used to acquire existing property or any interest
therein unless the first use of such property was by the
Company and was pursuant to and followed such acquisition.
(j) After the expiration of any applicable temporary
period under Section 148(d)(3) of the Code, at no time
during any bond year will the aggregate amount of gross
proceeds of the Bonds invested in higher yielding
investments (within the meaning of Section 148(b) of the
Code) exceed 150 percent of the debt service on the Bonds
for such bond year and the aggregate amount of gross
proceeds of the Bonds invested in higher yielding
investments, if any, will be promptly and appropriately
reduced as the outstanding amount of the Bonds is reduced,
provided however that the foregoing shall not require the
sale or disposition of any investments in higher yielding
investments if such sale or disposition would result in a
loss which exceeds the amount which would be paid to the
United States (but for such sale or disposition) at the
time of such sale or disposition if a payment were due at
such time. At no time will any funds constituting gross
proceeds of the Bonds be used in a manner as would
constitute failure of compliance with Section 148 of the
Code.
The terms "bond year", "gross proceeds", "higher
yielding investments", "yield", and "debt service" have
the meanings assigned to them for purposes of Section 148
of the Code.
(k) The Refunded Bonds were not, and the Bonds will
not be, "federally guaranteed" within the meaning of
Section 149(b) of the Code.
(l) It is not anticipated that as of the date
hereof, there will be created any "replacement proceeds",
within the meaning of Section 1.148-1(c) of the Treasury
Regulations, with respect to the Bonds; however, in the
event that any such replacement proceeds are deemed to
have been created, such amounts will be invested in
compliance with Section 148 of the Code.
(m) On the date of issuance and delivery of the
Refunded Bonds, the Company reasonably expected that at
least 85% of the spendable proceeds of such Refunded Bonds
would be expended to carry out the governmental purposes
of such issue within the 5-year period beginning on the
date such issue was issued but did not reasonably expect
that 85% of such spendable proceeds would be so expended
within the 3-year period beginning on such date. All of
the spendable proceeds of the Refunded Bonds have been
expended as of the date of issuance of the Bonds. None of
the proceeds of such issue, if any, were invested in
nonpurpose investments having a substantially guaranteed
yield for 4 years or more.
(n) The respective average maturities of the
Refunded Bonds and the Bonds do not exceed 120% of the
respective average reasonably expected economic life of
the Project Facilities financed by the proceeds of the
Refunded Bonds and the Bonds (determined under Section
147(b) of the Code).
(o) The information furnished by the Company and
used by the Authority in preparing the certifications and
statements pursuant to Sections 148 and 149(e) of the Code
or their statutory predecessors with respect to the
Refunded Bonds was accurate and complete as of the date of
issuance of the Refunded Bonds, and the information
furnished by the Company and used by the Authority in
preparing the certification pursuant to Section 148 of the
Code and in preparing the information statement pursuant
to Section 149(e) of the Code, both referred to in the
Bond Resolution, will be accurate and complete as of the
date of issuance of the Bonds.
(p) The Project Facilities do not include any office
except for offices (i) located on the Project Site and
(ii) not more than a de minimis amount of the functions to
be performed at which is not directly related to the
day-to-day operations of the Project Facilities.
(End of Article II)
ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 3.1. Acquisition, Construction and Installation. The Company
represents that it and the other public utility companies which own undivided
interests in the Project Facilities with the Company as tenants-in-common have
caused the Project Facilities to be acquired, constructed and installed on the
Project Site, substantially in accordance with the Project Description and in
conformance with all applicable zoning, planning, building and other similar
regulations of all governmental authorities having jurisdiction over the
Project and all permits, variances and orders issued in respect of the Project
by EPA, and that the proceeds derived from the Refunded Bonds, including any
investment thereof, were expended in accordance with the Refunded Bonds
Indenture and the Refunded Bonds Loan Agreement.
Section 3.2. Project Description. The Project Description may be
changed from time to time by, or with the consent of, the Company provided
that any such change shall also be filed with the Authority and provided
further that no change in the Project Description shall materially change the
function of the Project Facilities unless the Trustee shall have received (i)
an Engineer's certificate that such changes will not impair the significance
or character of the Project Facilities as Air Quality Facilities and (ii) an
Opinion of Bond Counsel or ruling of the Internal Revenue Service to the
effect that such amendment will not adversely affect the exclusion of interest
on the Bonds from gross income for federal income tax purposes.
Section 3.3. Issuance of the Bonds; Application of Proceeds. To
provide funds to make the Loan to the Company to assist the Company in the
refunding of the Refunded Bonds, the Authority will issue, sell and deliver
the Bonds to the Original Purchaser. The Bonds will be issued pursuant to the
Indenture in the aggregate principal amount, will bear interest, will mature
and will be subject to redemption as set forth therein. The Company hereby
approves the terms and conditions of the Indenture and the Bonds, and the
terms and conditions under which the Bonds will be issued, sold and delivered.
The Company hereby requests that the Authority notify the Refunded Bonds
Trustee (unless the Refunded Bonds Trustee has already received such notice),
pursuant to Section 4.03 of the Refunded Bonds Indenture, that the entire
outstanding principal amount of the Refunded Bonds is to be redeemed on
December 1, 1995 at a redemption price of 102-1/2% of the principal amount
thereof plus accrued interest to that redemption date.
The proceeds from the sale of the Bonds (other than any accrued interest)
shall be loaned to the Company to assist the Company in refunding the Refunded
Bonds in order to reduce the interest cost payable by the Company; those
proceeds shall be deposited in the Refunding Fund. On November 30, 1995 all
moneys on deposit in the Refunding Fund shall be disbursed by the Trustee as
provided in Section 5.02 of the Indenture to the Refunded Bonds Trustee for
deposit in the Bond Fund created in the Refunded Bonds Indenture and applied
by the Refunded Bonds Trustee to the payment of principal of and interest on
the Refunded Bonds on their redemption on December 1, 1995.
Pending disbursement pursuant to this Section, the proceeds so deposited
in the Refunding Fund, together with any investment earnings thereon, shall
constitute a part of the Revenues assigned by the Authority to the Trustee for
the payment of Bond Service Charges. Any accrued interest shall be deposited
in the Bond Fund.
Section 3.4. Investment of Fund Moneys. At the oral (confirmed
promptly in writing) or written request of the Company, any moneys held as
part of the Bond Fund, the Refunding Fund or the Rebate Fund shall be invested
or reinvested by the Trustee in Eligible Investments; provided, that such
moneys shall be invested or reinvested by the Trustee only in Eligible
Investments which shall mature, or which shall be subject to redemption by the
holder thereof at the option of such holder, not later than the date upon
which the moneys so invested are needed to make payments from those Funds.
The Authority (to the extent it retained or retains direction or control) and
the Company each hereby represents that the investment and reinvestment and
the use of the proceeds of the Refunded Bonds were restricted in such manner
and to such extent as was necessary so that the Refunded Bonds would not
constitute arbitrage bonds under the statutory predecessor of the Code and
each hereby covenants that it will restrict that investment and reinvestment
and the use of the proceeds of the Bonds in such manner and to such extent, if
any, as may be necessary so that the Bonds will not constitute arbitrage bonds
under Section 148 of the Code.
The Company shall provide the Authority with, and the Authority may base
its certificate and statement, each as authorized by the Bond Resolution, on a
certificate of an appropriate officer, employee or agent of or consultant to
the Company for inclusion in the transcript of proceedings for the Bonds,
setting forth the reasonable expectations of the Company on the date of
delivery of and payment for the Bonds regarding the amount and use of the
proceeds of the Bonds and the facts, estimates and circumstances on which
those expectations are based.
Section 3.5. Rebate Fund. To the extent required by Section 5.09 of
the Indenture, within five days after the end of the fifth Bond Year (as
defined in the Indenture) and every fifth Bond Year thereafter, and within
five days after payment in full of all outstanding Bonds, the Company shall
calculate the amount of Excess Earnings (as defined in the Indenture) as of
the end of that Bond Year or the date of such payment and shall notify the
Trustee of that amount. If the amount then on deposit in the Rebate Fund
created under the Indenture is less than the amount of Excess Earnings
(computed by taking into account the amount or amounts, if any, previously
paid to the United States pursuant to Section 5.09 of the Indenture and this
Section), the Company shall, within five days after the date of the aforesaid
calculation, pay to the Trustee for deposit in the Rebate Fund an amount
sufficient to cause the Rebate Fund to contain an amount equal to the Excess
Earnings. The obligation of the Company to make such payments shall remain in
effect and be binding upon the Company notwithstanding the release and
discharge of the Indenture. The Company shall obtain and keep such records of
the computations made pursuant to this Section as are required under Section
148(f) of the Code.
(End of Article III)
ARTICLE IV
LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND CREDIT FACILITY
Section 4.1. Loan Repayment. Upon the terms and conditions of this
Agreement, the Authority agrees to make the Loan to the Company. The proceeds
of the Loan shall be deposited with the Trustee pursuant to Section 3.3
hereof. In consideration of and in repayment of the Loan, the Company shall
make, as Loan Payments, to the Trustee for the account of the Authority,
payments which correspond, as to time, and are equal in amount, to the Bond
Service Charges payable on the Bonds. All Loan Payments received by the
Trustee shall be held and disbursed in accordance with the provisions of the
Indenture and this Agreement for application to the payment of Bond Service
Charges.
The Company shall be entitled to a credit against the Loan Payments
required to be made on any Loan Payment Date to the extent that the balance of
the Bond Fund is then in excess of amounts required (a) for the payment of
Bonds theretofore matured or theretofore called for redemption, or to be
called for redemption pursuant to Section 6.1 hereof (b) for the payment of
interest for which checks or drafts have been drawn and mailed by the Trustee
or Paying Agent, and (c) to be deposited in the Bond Fund by the Indenture for
use other than for the payment of Bond Service Charges due on that Loan
Payment Date.
The Company's obligation to make Loan Payments shall be reduced to the
extent of any payments made by any Credit Facility Issuer to the Trustee in
respect of the principal of, premium, if any, or interest on the Bonds when
due pursuant to any Credit Facility, provided, that the Credit Facility Issuer
has been reimbursed for such payments in accordance with the terms of the
Reimbursement Agreement.
Except for such interest of the Company as may hereafter arise pursuant
to Section 8.2 hereof or Sections 5.07 or 5.08 of the Indenture, the Company
and the Authority each acknowledge that neither the Company, the State nor the
Authority has any interest in the Bond Fund or the Bond Purchase Fund, and any
moneys deposited therein shall be in the custody of and held by the Trustee in
trust for the benefit of the Holders.
Section 4.2. Additional Payments. The Company shall pay to the
Authority, the Authority Fee and, as Additional Payments hereunder, any and
all costs and expenses incurred or to be paid by the Authority in connection
with the issuance and delivery of the Bonds or otherwise related to actions
taken by the Authority under this Agreement or the Indenture.
The Company shall pay the Administration Expenses to the Trustee, the
Registrar, the Remarketing Agent, and any Paying Agent or Authenticating
Agent, as appropriate, as Additional Payments hereunder.
The Company may, without creating a default hereunder, contest in good
faith the reasonableness of any such cost or expense incurred or to be paid by
the Authority and any Administration Expenses claimed to be due to the
Trustee, the Registrar, the Remarketing Agent, any Paying Agent or any
Authenticating Agent.
In the event the Company should fail to pay any Loan Payments, Additional
Payments or Administration Expenses when due, the payment in default shall
continue as an obligation of the Company until the amount in default shall
have been fully paid together with interest thereon during the default period
at the Interest Rate for Advances.
Section 4.3. Place of Payments. The Company shall make all Loan
Payments directly to the Trustee at its Principal Office. Additional Payments
shall be made directly to the person or entity to whom or to which they are
due.
Section 4.4. Obligations Unconditional. The obligations of the Company
to make Loan Payments, Additional Payments and any payments required of the
Company under Section 5.09 of the Indenture shall be absolute and
unconditional, and the Company shall make such payments without abatement,
diminution or deduction regardless of any cause or circumstances whatsoever
including, without limitation, any defense, set-off, recoupment or
counterclaim which the Company may have or assert against the Authority, the
Trustee, the Registrar, the Remarketing Agent or any other Person.
Section 4.5. Assignment of Revenues and Agreement. To secure the
payment of Bond Service Charges, the Authority shall, by the Indenture, (a)
absolutely and irrevocably assign to the Trustee, its successors in trust and
its and their assigns forever, (1) all right, title and interest of the
Authority in and to all moneys and investments (including, without limitation,
the proceeds of the Credit Facility) in the Bond Fund and (2) all of the
Authority's rights and remedies under this Agreement (except for the
Unassigned Authority Rights), and (b) grant a security interest to the
Trustee, its successors in trust and its and their assigns forever, in all of
its rights to and interest in the Revenues including, without limitation, all
Loan Payments and other amounts receivable by or on behalf of the Authority
under the Agreement in respect of repayment of the Loan (other than the Credit
Facility Account, all moneys and investments therein and the proceeds of the
Credit Facility). The Company hereby agrees and consents to those assignments
and that grant of a security interest.
Section 4.6. Credit Facility; Alternate Credit Facility; Cancellation.
(a) The Company agrees to provide for the payment of the principal of and
interest on the Bonds and for payment of the purchase price of Bonds delivered
to the Trustee or Paying Agent pursuant to the Indenture by causing the Letter
of Credit to be delivered to the Trustee on the date of the delivery of the
Bonds. The Company hereby authorizes and directs the Trustee to draw moneys
under the Letter of Credit, in accordance with its terms and the terms of the
Indenture, to the extent necessary to pay the principal of and interest on the
Bonds when due and to pay the purchase price of Bonds as provided in the
Indenture. The Company may, at its election and with the consent of the Bank,
provide for one or more extensions of the Letter of Credit beyond its then
stated date of expiration.
(b) Upon satisfaction of the requirements contained in Section 14.03 of
the Indenture, the Company may provide for the delivery of an Alternate
Credit Facility.
(c) Upon satisfaction of the conditions contained in Section 14.02 of
the Indenture, the Company may cancel any Credit Facility in effect at such
time and direct the Trustee in writing to surrender such Credit Facility to
the Credit Facility Issuer by which it was issued in accordance with the
Indenture; provided, that no such cancellation shall become effective and no
such surrender shall take place until all Bonds subject to purchase pursuant
to Section 4.07(d) of the Indenture have been so purchased or redeemed with
the proceeds of such Credit Facility.
Section 4.8. Company's Option to Elect Rate Period. The Company shall
have, and is hereby granted, the option to elect to convert on any Conversion
Date the interest rate borne by the Bonds to another Variable Rate to be
effective for a Rate Period pursuant to the provisions of Article II of the
Indenture and subject to the terms and conditions set forth therein. To
exercise such options, the Company shall give the written notice required by
the Indenture.
Section 4.9. Company's Obligation to Purchase Bonds. The Company hereby
agrees to pay or cause to be paid to the Trustee or the Paying Agent, on or
before each day on which Bonds may be or are required to be tendered for
purchase, amounts equal to the amounts to be paid by the Trustee or the Paying
Agent with respect to the Bonds tendered for purchase on such dates pursuant
to Article IV of the Indenture; provided, however, that the obligation of the
Company to make any such payment under this Section shall be reduced by the
amount of (A) moneys paid by the Remarketing Agent as proceeds of the
remarketing of such Bonds by the Remarketing Agent, (B) moneys drawn under any
Credit Facility, for the purpose of paying such purchase price and (C) other
moneys made available by the Company, as set forth in Section 4.08(b)(ii) of
the Indenture.
(End of Article IV)
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. Right of Inspection. The Company agrees that, subject to
reasonable security and safety regulations and to reasonable requirements as
to notice, the Authority and the Trustee and their or any of their respective
duly authorized agents shall have the right at all reasonable times to enter
upon the Project Site to examine and inspect the Projects.
Section 5.2. Maintenance. The Company shall use its best efforts to
keep and maintain the Project Facilities, including all appurtenances thereto
and any personal property therein or thereon, in good repair and good
operating condition so that the Project Facilities will continue to constitute
Air Quality Facilities, for the purposes of the operation thereof as required
by Section 5.4 hereof.
So long as such shall not be in violation of the Act or impair the
character of the Project Facilities as Air Quality Facilities, and provided
there is continued compliance with applicable laws and regulations of
governmental entities having jurisdiction thereof, the Company shall have the
right to remodel the Project Facilities or make additions, modifications and
improvements thereto, from time to time as it, in its discretion, may deem to
be desirable for its uses and purposes, the cost of which remodeling,
additions, modifications and improvements shall be paid by the Company and the
same shall, when made, become a part of the Project Facilities.
Section 5.3. Removal of Portions of the Project Facilities. The
Company shall not be under any obligation to renew, repair or replace any
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary
portions of the Project Facilities, except that, subject to Section 5.4
hereof, it will use its best efforts to ensure the continued character of the
Project Facilities as Air Quality Facilities. The Company shall have the
right from time to time to substitute personal property or fixtures for any
portions of the Project Facilities, provided that the personal property or
fixtures so substituted shall not impair the character of the Project
Facilities as Air Quality Facilities. Any such substituted property or
fixtures shall, when so substituted, become a part of the Project Facilities.
The Company shall also have the right to remove any portion of the Project
Facilities, without substitution therefor; provided, that the Company shall
deliver to the Trustee a certificate signed by an Engineer describing said
portion of the Project Facilities and stating that the removal of such
property or fixtures will not impair the character of the Project Facilities
as Air Quality Facilities.
Section 5.4. Operation of Project Facilities. The Company will,
subject to its obligations and rights to maintain, repair or remove portions
of the Project Facilities, as provided in Sections 5.2 and 5.3 hereof, use its
best efforts to continue operation of the Project Facilities so long as and to
the extent that operation thereof is required to comply with laws or
regulations of governmental entities having jurisdiction thereof or unless the
Authority shall have approved the discontinuance of such operation (which
approval shall not be unreasonably withheld). The Company agrees that it
will, within the design capacities thereof, use its best efforts to operate
and maintain the Project Facilities in accordance with all applicable, valid
and enforceable rules and regulations of governmental entities having
jurisdiction thereof; provided, that the Company reserves the right to contest
in good faith any such laws or regulations.
Nothing in this Agreement shall prevent or restrict the Company, in its
sole discretion, at any time, from discontinuing or suspending either
permanently or temporarily its use of any facility of the Company served by
the Project Facilities and in the event such discontinuance or suspension
shall render unnecessary the continued operation of the Project Facilities,
the Company shall have the right to discontinue the operation of the Project
Facilities during the period of any such discontinuance or suspension.
Section 5.5. Insurance. The Company shall cause the Project Facilities
to be kept insured against fire or other casualty to the extent that property
of similar character is usually so insured by companies similarly situated and
operating like properties, to a reasonable amount by reputable insurance
companies or, in lieu of or supplementing such insurance in whole or in part,
adopt some other method or plan of protection against loss by fire or other
casualty at least equal in protection to the method or plan of protection
against loss by fire or other casualty of companies similarly situated and
operating properties subject to similar or greater fire or other hazards or on
which properties an equal or higher primary fire or other casualty insurance
rate has been set by reputable insurance companies.
Section 5.6. Workers' Compensation Coverage. Throughout the term of
this Agreement, the Company shall comply, or cause compliance, with applicable
workers' compensation laws of the State.
Section 5.7. Damage; Destruction and Eminent Domain. If, during the
term of this Agreement, the Project Facilities or any portion thereof is
destroyed or damaged in whole or in part by fire or other casualty, or title
to, or the temporary use of, the Project Facilities or any portion thereof
shall have been taken by the exercise of the power of eminent domain, the
Company (unless it shall have exercised its option to prepay the Loan Payments
pursuant to Section 6.2 hereof) shall promptly repair, rebuild or restore the
portion of the Project Facilities so damaged, destroyed or taken with such
changes, alterations and modifications (including the substitution and
addition of other property) as may be necessary or desirable for the
administration and operation of the Project Facilities as Air Quality
Facilities and as shall not impair the character or significance of the
Project Facilities as furthering the purposes of the Act.
Section 5.8. Company to Maintain its Corporate Existence; Conditions
Under Which Exceptions Permitted. The Company agrees that, during the term of
this Agreement, it will maintain its corporate existence, will not dissolve or
otherwise dispose of all or substantially all of its assets and will not
consolidate with or merge into another corporation or permit one or more other
corporations to consolidate with or merge into it; provided that the Company
may, without violating its agreement contained in this Section, consolidate
with or merge into another corporation, or permit one or more other
corporations to consolidate with or merge into it, or sell or otherwise
transfer to another corporation all or substantially all of its assets as an
entirety and thereafter dissolve, provided the surviving, resulting or
transferee corporation, as the case may be (if other than the Company), is a
corporation organized and existing under the laws of one of the states of the
United States, and assumes in writing all of the obligations of the Company
herein, and, if not an Ohio corporation, is qualified to do business in the
State.
If consolidation, merger or sale or other transfer is made as provided in
this Section, the provisions of this Section shall continue in full force and
effect and no further consolidation, merger or sale or other transfer shall be
made except in compliance with the provisions of this Section.
Section 5.9. Indemnification. The Company releases the Authority from,
agrees that the Authority shall not be liable for, and indemnifies the
Authority against, all liabilities, claims, costs and expenses imposed upon or
asserted against the Authority on account of: (a) any loss or damage to
property or injury to or death of or loss by any person that may be occasioned
by any cause whatsoever pertaining to the construction, maintenance, operation
and use of the Project Facilities; (b) any breach or default on the part of
the Company in the performance of any covenant or agreement of the Company
under this Agreement or any related document, or arising from any act or
failure to act by the Company, or any of its agents, contractors, servants,
employees or licensees; (c) the authorization, issuance and sale of the Bonds,
and the provision of any information furnished in connection therewith
concerning the Project Facilities or the Company (including, without
limitation, any information furnished by the Company for inclusion in any
certifications made by the Authority under Section 3.4 hereof or for inclusion
in, or as a basis for preparation of, the information statements filed by the
Authority pursuant to Section 8(a)(ii) of the Bond Resolution); and (d) any
claim or action or proceeding with respect to the matters set forth in (a),
(b) and (c) above brought thereon.
The Company agrees to indemnify the Trustee, the Paying Agent, the
Remarketing Agent and the Registrar (each hereinafter referred to in this
section as an "indemnified party") for and to hold each of them harmless
against all liabilities, claims, costs and expenses incurred without
negligence or willful misconduct on the part of the indemnified party, on
account of any action taken or omitted to be taken by the indemnified party in
accordance with the terms of this Agreement, the Bonds or the Indenture or any
action taken at the request of or with the consent of the Company, including
the costs and expenses of the indemnified party in defending itself against
any such claim, action or proceeding brought in connection with the exercise
or performance of any of its powers or duties under this Agreement, the Bonds
or the Indenture.
In case any action or proceeding is brought against the Authority or an
indemnified party in respect of which indemnity may be sought hereunder, the
party seeking indemnity promptly shall give notice of that action or
proceeding to the Company, and the Company upon receipt of that notice shall
have the obligation and the right to assume the defense of the action or
proceeding; provided, that failure of a party to give that notice shall not
relieve the Company from any of its obligations under this Section unless that
failure prejudices the defense of the action or proceeding by the Company. At
its own expense, an indemnified party may employ separate counsel and
participate in the defense; provided, however, where it is ethically
inappropriate for one firm to represent the interests of the Authority and any
other indemnified party or parties, the Company shall pay the Authority's
legal expenses in connection with the Authority's retention of separate
counsel. The Company shall not be liable for any settlement made without its
consent.
The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers and employees
of the Authority, the Trustee, the Paying Agent, the Remarketing Agent and the
Registrar, respectively. That indemnification is intended to and shall be
enforceable by the Authority, the Trustee, the Paying Agent, the Remarketing
Agent and the Registrar, respectively, to the full extent permitted by law.
Section 5.10. Company Not to Adversely Affect Exclusion of Interest on
Bonds From Gross Income For Federal Income Tax Purposes. The Company hereby
covenants and represents that it has taken and caused to be taken and shall
take and cause to be taken all actions that may be required of it for the
interest on the Bonds to be and remain excluded from the gross income of the
Holders for federal income tax purposes, and that it has not taken or
permitted to be taken on its behalf, and covenants that it will not take, or
permit to be taken on its behalf, any action which, if taken, would adversely
affect that exclusion under the provisions of the Code.
Section 5.11. Use of Project Facilities. The Authority agrees that it
will not take any action, or cause any action to be taken on its behalf, to
interfere with the Company's ownership interest in the Project or to prevent
the Company from having possession, custody, use and enjoyment of the Project
other than pursuant to Article VII of this Agreement or Article VII of the
Indenture.
Section 5.12. Assignment by Company. This Agreement may be assigned in
whole or in part by the Company without the necessity of obtaining the consent
of either the Authority or the Trustee, subject, however, to each of the
following conditions:
(a) No assignment (other than pursuant to Section
5.8 hereof) shall relieve the Company from primary
liability for any of its obligations hereunder, and in the
event of any such assignment the Company shall continue to
remain primarily liable for the payment of the Loan
Payments and Additional Payments and for performance and
observance of the agreements on its part herein provided
to be performed and observed by it.
(b) Any assignment by the Company must retain for
the Company such rights and interests as will permit it to
perform its obligations under this Agreement, and any
assignee from the Company shall assume the obligations of
the Company hereunder to the extent of the interest
assigned.
(c) The Company shall, within 30 days after
execution thereof, furnish or cause to be furnished to the
Authority and the Trustee a true and complete copy of each
such assignment together with any instrument of
assumption.
(d) Any assignment from the Company shall not
materially impair fulfillment of the Project Purposes to
be accomplished by operation of the Project as herein
provided.
(End of Article V)
ARTICLE VI
REDEMPTION
Section 6.1. Optional Redemption. Provided no Event of Default shall
have occurred and be subsisting, at any time and from time to time, the
Company may deliver moneys to the Trustee in addition to Loan Payments or
Additional Payments required to be made and direct the Trustee to use the
moneys so delivered for the purpose of calling Bonds for optional redemption
in accordance with the applicable provisions of the Indenture providing for
optional redemption at the redemption price stated in the Indenture. Pending
application for those purposes, any moneys so delivered shall be held by the
Trustee in a special account in the Bond Fund and delivery of those moneys
shall not, except as set forth in Section 4.1 hereof, operate to abate or
postpone Loan Payments or Additional Payments otherwise becoming due or to
alter or suspend any other obligations of the Company under this Agreement.
Section 6.2. Extraordinary Optional Redemption. The Company shall
have, subject to the conditions hereinafter imposed, the option during a Term
Rate Period to direct the redemption of the Bonds in whole in accordance with
the applicable provisions of the Indenture upon the occurrence of any of the
following events:
(a) The Project or the Plant shall have been damaged
or destroyed to such an extent that (1) the Project or the
Plant cannot reasonably be expected to be restored, within
a period of six consecutive months, to the condition
thereof immediately preceding such damage or destruction
or (2) the Company is reasonably expected to be prevented
from carrying on its normal use and operation of the
Project or the Plant for a period of six consecutive
months.
(b) Title to, or the temporary use of, all or a
significant part of the Project or the Plant shall have
been taken under the exercise of the power of eminent
domain to such an extent (1) that the Project or the Plant
cannot reasonably be expected to be restored within a
period of six consecutive months to a condition of
usefulness comparable to that existing prior to the taking
or (2) the Company is reasonably expected to be prevented
from carrying on its normal use and operation of the
Project or the Plant for a period of six consecutive
months.
(c) As a result of any changes in the Constitution
of the State, the Constitution of the United States of
America or any state or federal laws or as a result of
legislative or administrative action (whether state or
federal) or by final decree, judgment or order of any
court or administrative body (whether state or federal)
entered after any contest thereof by the Authority or the
Company in good faith, this Agreement shall have become
void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as
expressed in this Agreement.
(d) Unreasonable burdens or excessive liabilities
shall have been imposed upon the Authority or the Company
with respect to the Project or the Plant or the operation
thereof, including, without limitation, the imposition of
federal, state or other ad valorem, property, income or
other taxes other than ad valorem taxes at the rates
presently levied upon privately owned property used for
the same general purpose as the Project or the Plant.
(e) Changes in the economic availability of raw
materials, operating supplies, energy sources or supplies
or facilities (including, but not limited to, facilities
in connection with the disposal of industrial wastes)
necessary for the operation of the Project or the Plant
for the Project Purposes occur or technological or other
changes occur which the Company cannot reasonably overcome
or control and which in the Company's reasonable judgment
render the Project or the Plant uneconomic or obsolete for
the Project Purposes.
(f) Any court or administrative body shall enter a
judgment, order or decree, or shall take administrative
action, requiring the Company to cease all or any
substantial part of its operations served by the Project
or the Plant to such extent that the Company is or will be
prevented from carrying on its normal operations at the
Project or the Plant for a period of six consecutive
months.
(g) The termination by the Company of operations at
the Plant.
The amount payable by the Company in the event of its exercise of the
option granted in this Section shall be the sum of the following:
(i) An amount of money which, when added to the
moneys and investments held to the credit of the Bond
Fund, will be sufficient pursuant to the provisions of the
Indenture to pay, at 100% of the principal amount thereof
plus accrued interest to the redemption date, and
discharge, all Outstanding Bonds on the earliest
applicable redemption date, that amount to be paid to the
Trustee, plus
(ii) An amount of money equal to the Additional
Payments relating to those Bonds accrued and to accrue
until actual final payment and redemption of those Bonds,
that amount or applicable portions thereof to be paid to
the Trustee or to the Persons to whom those Additional
Payments are or will be due.
The requirement of (ii) above with respect to Additional Payments to accrue
may be met if provisions satisfactory to the Trustee and the Authority are
made for paying those amounts as they accrue.
The rights and options granted to the Company in this Section may be
exercised whether or not the Company is in default hereunder; provided, that
such default will not relieve the Company from performing those actions which
are necessary to exercise any such right or option granted hereunder.
Section 6.3. Mandatory Redemption. The Company shall deliver to the
Trustee the moneys needed to redeem the Bonds in accordance with any mandatory
redemption provisions relating thereto as may be set forth in Section 4.01(b)
of the Indenture.
Section 6.4. Notice of Redemption. In order to exercise an option
granted in, or to consummate a redemption required by, this Article VI, the
Company shall, within 180 days following the event authorizing the exercise of
such option, or at any time during the continuation of the condition referred
to in paragraphs (c), (d) or (e) of Section 6.2 hereof, or at any time that
optional redemption of the Bonds is permitted under the Indenture as provided
in Section 6.1 hereof, or promptly upon the occurrence of a Determination of
Taxability (as defined in the Indenture), give written notice to the Authority
and the Trustee that it is exercising its option to direct the redemption of
Bonds, or that the redemption thereof is required by Section 4.01(b) of the
Indenture due to the occurrence of a Determination of Taxability, as the case
may be, in accordance with the Agreement and the Indenture, and shall specify
therein the date on which such redemption is to be made, which date shall not
be more than 180 days from the date such notice is mailed. The Company shall
make arrangements satisfactory to the Trustee for the giving of the required
notice of redemption to the Holders of the Bonds, in which arrangements the
Authority shall cooperate.
Section 6.5. Actions by Authority. At the request of the Company or
the Trustee, the Authority shall take all steps required of it under the
applicable provisions of the Indenture or the Bonds to effect the redemption
of all or a portion of the Bonds pursuant to this Article VI.
(End of Article VI)
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Each of the following shall be an
Event of Default:
(a) The occurrence of an event of default as defined
in Section 7.01 (a), (b), (c) or (d) of the Indenture;
(b) The Company shall fail to observe and perform
any other agreement, term or condition contained in this
Agreement, other than such failure as will have resulted
in an event of default described in (a) above and the
continuation of that failure for a period of 90 days after
notice thereof shall have been given to the Company by the
Authority or the Trustee, or for such longer period as the
Authority and the Trustee may agree to in writing;
provided, that failure shall not constitute an Event of
Default so long as the Company institutes curative action
within the applicable period and diligently pursues that
action to completion within 150 days after the expiration
of initial cure period as determined above, or within such
longer period as the Authority and the Trustee may agree
to in writing; and
(c) By decree of a court of competent jurisdiction
the Company shall be adjudicated a bankrupt, or an order
shall be made approving a petition or answer filed seeking
reorganization or readjustment of the Company under the
federal bankruptcy laws or other law or statute of the
United States of America or of the state of incorporation
of the Company or of any other state, or, by order of such
a court, a trustee in bankruptcy, a receiver or receivers
shall be appointed of all or substantially all of the
property of the Company, and any such decree or order
shall have continued unstayed on appeal or otherwise and
in effect for a period of sixty (60) days; and
(d) The Company shall file a petition in voluntary
bankruptcy or shall make an assignment for the benefit of
creditors or shall consent to the appointment of a
receiver or receivers of all or any part of its property,
or shall file a petition seeking reorganization or
readjustment under the Federal bankruptcy laws or other
law or statute of the United States of America or any
state thereof, or shall file a petition to take advantage
of any debtors' act.
Notwithstanding the foregoing, if, by reason of Force Majeure, the
Company is unable to perform or observe any agreement, term or condition
hereof which would give rise to an Event of Default under subsection (b)
hereof, the Company shall not be deemed in default during the continuance of
such inability. However, the Company shall promptly give notice to the
Trustee and the Authority of the existence of an event of Force Majeure and
shall use its best efforts to remove the effects thereof; provided that the
settlement of strikes or other industrial disturbances shall be entirely
within its discretion.
The term Force Majeure shall mean the following:
(i) acts of God; strikes, lockouts or
other industrial disturbances; acts of public
enemies; orders or restraints of any kind of the
government of the United States of America or of
the State or any of their departments, agencies,
political subdivisions or officials, or any
civil or military authority; insurrections;
civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires;
hurricanes; tornados; storms; droughts; floods;
arrests; restraint of government and people;
explosions; breakage, nuclear accidents or other
malfunction or accident to facilities,
machinery, transmission pipes or canals;
partial or entire failure of a utility serving
the Project; shortages of labor, materials,
supplies or transportation; or
(ii) any cause, circumstance or event
not reasonably within the control of the
Company.
The exercise of remedies hereunder shall be subject to any applicable
limitations of federal bankruptcy law affecting or precluding that declaration
or exercise during the pendency of or immediately following any bankruptcy,
liquidation or reorganization proceedings.
Section 7.2. Remedies on Default. Whenever an Event of Default shall
have happened and be subsisting, either or both of the following remedial
steps may be taken:
(a) The Authority or the Trustee may have access to,
inspect, examine and make copies of the books, records,
accounts and financial data of the Company, only, however,
insofar as they pertain to the Project; or
(b) The Authority or the Trustee may pursue all
remedies now or hereafter existing at law or in equity to
recover all amounts, including all Loan Payments and
Additional Payments and under Section 4.9 hereof the
purchase price of Bonds tendered for purchase, then due
and thereafter to become due under this Agreement, or to
enforce the performance and observance of any other
obligation or agreement of the Company under this
Agreement.
Notwithstanding the foregoing, the Authority shall not be obligated to take
any step which in its opinion will or might cause it to expend time or money
or otherwise incur liability unless and until a satisfactory indemnity bond
has been furnished to the Authority at no cost or expense to the Authority.
Any amounts collected as Loan Payments or applicable to Loan Payments and any
other amounts which would be applicable to payment of Bond Service Charges
collected pursuant to action taken under this Section shall be paid into the
Bond Fund and applied in accordance with the provisions of the Indenture or,
if the outstanding Bonds have been paid and discharged in accordance with the
provisions of the Indenture, shall be paid as provided in Section 5.08 of the
Indenture for transfers of remaining amounts in the Bond Fund.
The provisions of this Section are subject to the further limitation that
the rescission and annulment by the Trustee of its declaration that all of the
Bonds are immediately due and payable also shall constitute a rescission and
annulment of any corresponding declaration made pursuant to this Section and a
rescission and annulment of the consequences of that declaration and of the
Event of Default with respect to which that declaration has been made,
provided that no such rescission and annulment shall extend to or affect any
subsequent or other default or impair any right consequent thereon.
Section 7.3. No Remedy Exclusive. No remedy conferred upon or reserved
to the Authority or the Trustee by this Agreement is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Agreement, or now or hereafter existing at law, in equity or by statute.
No delay or omission to exercise any right or power accruing upon any default
shall impair that right or power or shall be construed to be a waiver thereof,
but any such right or power may be exercised from time to time and as often as
may be deemed expedient. In order to entitle the Authority or the Trustee to
exercise any remedy reserved to it in this Article, it shall not be necessary
to give any notice, other than any notice required by law or for which express
provision is made herein.
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. If an
Event of Default should occur and the Authority or the Trustee should incur
expenses, including attorneys' fees, in connection with the enforcement of
this Agreement or the collection of sums due hereunder, the Company shall be
required, to the extent permitted by law, to reimburse the Authority and the
Trustee, as applicable, for the expenses so incurred upon demand.
Section 7.5. No Waiver. No failure by the Authority or the Trustee to
insist upon the strict performance by the Company of any provision hereof
shall constitute a waiver of their right to strict performance and no express
waiver shall be deemed to apply to any other existing or subsequent right to
remedy the failure by the Company to observe or comply with any provision
hereof.
Section 7.6. Notice of Default. The Company shall notify the Trustee
immediately if it becomes aware of the occurrence of any Event of Default
hereunder or of any fact, condition or event which, with the giving of notice
or passage of time or both, would become an Event of Default.
(End of Article VII)
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Term of Agreement. This Agreement shall be and remain in
full force and effect from the date of delivery of the Bonds to the Original
Purchaser until such time as (i) all of the Bonds shall have been fully paid
(or provision made for such payment) and the Indenture has been released
pursuant to Section 9.01 thereof and (ii) all other sums payable by the
Company under this Agreement shall have been paid.
Section 8.2. Amounts Remaining in Funds. Any amounts in the Bond Fund
remaining unclaimed by the Holders of Bonds for four years after the due date
thereof (whether at stated maturity, by redemption, upon acceleration or
otherwise), at the option of the Company, shall be deemed to belong to and
shall be paid, subject to Section 5.07 of the Indenture, at the written
request of the Company, to the Company by the Trustee. With respect to that
principal of and any premium and interest on the Bonds to be paid from moneys
paid to the Company pursuant to the preceding sentence, the Holders of the
Bonds entitled to those moneys shall look solely to the Company for the
payment of those moneys. Further, any amounts remaining in the Bond Fund and
any other special funds or accounts created under this Agreement or the
Indenture, except the Rebate Fund, after all of the Bonds shall be deemed to
have been paid and discharged under the provisions of the Indenture and all
other amounts required to be paid under this Agreement and the Indenture have
been paid, shall be paid to the Company to the extent that those moneys are in
excess of the amounts necessary to effect the payment and discharge of the
Outstanding Bonds.
Section 8.3. Notices. All notices, certificates, requests or other
communications hereunder shall be in writing, except as provided in Section
3.4 hereof, and shall be deemed to be sufficiently given when mailed by
registered or certified mail, postage prepaid, and addressed to the
appropriate Notice Address. A duplicate copy of each notice, certificate,
request or other communication given hereunder to the Authority, the Company,
any Credit Facility Issuer or the Trustee shall also be given to the others.
The Company, the Authority, any Credit Facility Issuer and the Trustee, by
notice given hereunder, may designate any further or different addresses to
which subsequent notices, certificates, requests or other communications shall
be sent.
Section 8.4. Extent of Covenants of the Authority; No Personal
Liability. All covenants, obligations and agreements of the Authority
contained in this Agreement or the Indenture shall be effective to the extent
authorized and permitted by applicable law. No such covenant, obligation or
agreement shall be deemed to be a covenant, obligation or agreement of any
present or future member, officer, agent or employee of the Authority in other
than his official capacity, and neither the members of the Authority nor any
official executing the Bonds shall be liable personally on the Bonds or be
subject to any personal liability or accountability by reason of the issuance
thereof or by reason of the covenants, obligations or agreements of the
Authority contained in this Agreement or in the Indenture.
Section 8.5. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding in accordance with its terms upon the Authority, the
Company and their respective permitted successors and assigns provided that
this Agreement may not be assigned by the Company (except as permitted under
Sections 5.8 or 5.12 hereof) and may not be assigned by the Authority except
to (i) the Trustee pursuant to the Indenture or as otherwise may be necessary
to enforce or secure payment of Bond Service Charges or (ii) any successor
public body to the Authority.
Section 8.6. Amendments and Supplements. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Bonds and prior to all conditions provided for in the Indenture for release of
the Indenture having been met, this Agreement may not be effectively amended,
changed, modified, altered or terminated by the parties hereto except with the
consents required by, and in accordance with, the provisions of Article XI of
the Indenture, as applicable.
Section 8.7. References to Credit Facility. During such time or times
as no Credit Facility is in effect, and during the continuation of any event
of default under the Indenture due to a failure by the Credit Facility Issuer
to honor a drawing by the Trustee under the Credit Facility then in effect in
accordance with the terms thereof, references herein to the Credit Facility
Issuer shall be ineffective.
Section 8.8. Execution Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
Section 8.9. Severability. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a judicial
or administrative authority to be invalid or unenforceable, that determination
shall not affect any other provision, covenant, obligation or agreement, each
of which shall be construed and enforced as if the invalid or unenforceable
portion were not contained herein. That invalidity or unenforceability shall
not affect any valid and enforceable application thereof, and each such
provision, covenant, obligation or agreement shall be deemed to be effective,
operative, made, entered into or taken in the manner and to the full extent
permitted by law.
Section 8.10. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be
governed by and construed in accordance with the laws of the State.
(End of Article VIII)
IN WITNESS WHEREOF, the Authority and the Company have caused this
Agreement to be duly executed in their respective names, all as of the date
hereinbefore written.
OHIO AIR QUALITY DEVELOPMENT
AUTHORITY
By:
Executive Director
THE CINCINNATI GAS & ELECTRIC
COMPANY
By:
Treasurer
<PAGE> Exhibit A
DESCRIPTION OF AIR QUALITY FACILITIES
AT
WILLIAM H. ZIMMER ELECTRIC
GENERATING STATION
The Project consists of:
(A) a high efficiency electrostatic
precipitator system designed to remove
particulates from the flue gas,
(B) a flue gas desulfurization ("scrubber")
system designed to remove sulfur dioxide from
the flue gas,
(C) a stack,
(D) a coal dust control system,
(E) a nitrous oxide control system, and
(F) a cooling tower and circulating water
system.
The precipitator system includes electrostatic precipitators and a fly
ash handling system, as well as all other necessary earthwork, piling,
foundations, structural and miscellaneous steel, supports, siding, enclosures,
electrical equipment, instrumentation and controls, mechanical equipment,
related pumps and tanks, hoppers and storage silos, and associated equipment
required for the foregoing and used exclusively in connection therewith. The
precipitator system includes related drains, sumps and piping necessary to
transmit collected waste waters to the waste water pond. The Project also
includes precipitator inlet and outlet ductwork.
The scrubber system includes an inlet plenum, six induced draft fans,
ductwork to and including six absorber modules, ductwork to the stack, FGD
reagent and lime unloading and handling system including required river cells,
FGD reagent and lime silos, an FGD reagent and lime preparation facility,
slurry tanks, scrubber sludge handling facilities which include thickener
tanks, a sludge pond underflow and overflow tanks, a sludge handling building,
stockpile facilities and auxiliary facilities. The scrubber system includes
all earthwork including stream relocation, piling, foundations, structural and
miscellaneous steel, siding, painting, electrical and mechanical components
and associated equipment required for the scrubber system and used exclusively
in connection therewith. The scrubber system includes related drains, sumps
and piping necessary to transmit collected waste waters to the waste water
pond, and also includes all pipes, pumps and associated mechanical and
electrical components to supply and recycle water for the scrubber system
operation. The scrubber system also includes a disposal area and the roads
and bridges used exclusively for the transportation of scrubber sludge, bottom
ash and other solid waste along with truck wash facilities and truck scales.
The stack includes the stack shell and brick liner, as well as earthwork,
piling, foundation and associated components.
The coal dust control systems include a coal dust collection system, a
coal dust suppression system and a coal wetting system.
The cooling tower and circulating water system includes a natural draft
cooling tower, a cooling tower basin, a cooling water flume, three circulating
water pumps, circulating water pipes and valves, the make-up water subsystem,
the blowdown subsystem, the cooling water chemical conditioning subsystem,
mechanical and electrical auxiliaries, and related controls and
instrumentation. The cooling water system also includes all related site
development and earthwork, piling, foundations, structural and miscellaneous
steel, siding, painting, electrical and mechanical components and associated
equipment required for the cooling tower and circulating water system and used
exclusively in connection therewith.
LOAN AGREEMENT
between
OHIO AIR QUALITY DEVELOPMENT AUTHORITY
and
THE CINCINNATI GAS & ELECTRIC COMPANY
_______________________________
$42,000,000
State of Ohio
Air Quality Development
Revenue Refunding Bonds, 1995 Series B
(The Cincinnati Gas & Electric Company Project)
_______________________________
Dated
as of
September 1, 1995
<PAGE>
INDEX
(This Index is not a part of the Agreement
but rather is for convenience of reference only.)
Preambles
ARTICLE I
DEFINITIONS
Section 1.1 Use of Defined Terms
Section 1.2 Definitions
Section 1.3 Interpretation
Section 1.4 Captions and Headings
ARTICLE II
REPRESENTATIONS
Section 2.1 Representations of the Authority
Section 2.2 No Warranty by Authority of Condition or
Suitability of the Project
Section 2.3 Representations and Covenants of the Company
ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 3.1 Acquisition, Construction and Installation
Section 3.2 Project Description
Section 3.3 Issuance of the Bonds; Application of
Proceeds
Section 3.4 Investment of Fund Moneys
Section 3.5 Rebate Fund
ARTICLE IV
LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND CREDIT FACILITY
Section 4.1 Loan Repayment
Section 4.2 Additional Payments
Section 4.3 Place of Payments
Section 4.4 Obligations Unconditional
Section 4.5 Assignment of Revenues and Agreement
Section 4.6 Credit Facility; Alternate Credit Facility; Cancellation
Section 4.7 Company's Option to Elect Rate Periods
Section 4.8 Company's Obligation to Purchase Bonds
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1 Right of Inspection
Section 5.2 Maintenance
Section 5.3 Removal of Portions of the Project Facilities
Section 5.4 Operation of Project Facilities
Section 5.5 Insurance
Section 5.6 Workers' Compensation Coverage
Section 5.7 Damage; Destruction and Eminent Domain
Section 5.8 Company to Maintain its Corporate Existence;
Conditions Under Which Exceptions Permitted
Section 5.9 Indemnification
Section 5.10 Company Not to Adversely Affect Exclusion of
Interest on Bonds From Gross Income For Federal
Income Tax Purposes
Section 5.11 Use of Project Facilities
Section 5.12 Assignment by Company
ARTICLE VI
REDEMPTION
Section 6.1 Optional Redemption
Section 6.2 Extraordinary Optional Redemption
Section 6.3 Mandatory Redemption
Section 6.4 Notice of Redemption
Section 6.5 Actions by Authority
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default
Section 7.2 Remedies on Default
Section 7.3 No Remedy Exclusive
Section 7.4 Agreement to Pay Attorneys' Fees and Expenses
Section 7.5 No Waiver
Section 7.6 Notice of Default
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Term of Agreement
Section 8.2 Amounts Remaining in Funds
Section 8.3 Notices
Section 8.4 Extent of Covenants of the Authority; No Personal
Liability
Section 8.5 Binding Effect
Section 8.6 Amendments and Supplements
Section 8.7 References to Credit Facility
Section 8.8 Execution Counterparts
Section 8.9 Severability
Section 8.10 Governing Law
Signatures
Exhibit A - DESCRIPTION OF AIR QUALITY FACILITIES AT WILLIAM H. ZIMMER
ELECTRIC GENERATING STATION
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of September 1, 1995
between the OHIO AIR QUALITY DEVELOPMENT AUTHORITY (the "Authority"), a body
politic and corporate organized and existing under the laws of the State of
Ohio, and THE CINCINNATI GAS & ELECTRIC COMPANY (the "Company"), a public
utility and corporation duly organized and validly existing under the laws of
the State of Ohio. Capitalized terms used in the following recitals are used
as defined in Article I of this Agreement.
Pursuant to Section 13 of Article VIII of the Ohio Constitution and the
Act, the Authority has determined to issue, sell and deliver the Bonds,
together with another issue of bonds in the amount of $42,000,000 to be issued
and secured under a separate loan agreement and a separate trust indenture,
each dated the same date as this Agreement, and to lend the proceeds derived
from the sale thereof to the Company to assist in the refunding of the
Refunded Bonds as defined below. The Refunded Bonds were originally issued to
provide funds to make loans to the Company to assist in the financing of its
portion of the costs of the Project as defined below.
The Company and the Authority each have full right and lawful authority
to enter into this Agreement and to perform and observe the provisions hereof
on their respective parts to be performed and observed.
NOW THEREFORE, in consideration of the premises and the mutual
representations and agreements hereinafter contained, the Authority and the
Company agree as follows (provided that any obligation of the Authority or the
State created by or arising out of this Agreement shall never constitute a
general debt of the Authority or the State or give rise to any pecuniary
liability of the Authority or the State but shall be payable solely out of
Revenues, including the Loan Payments made pursuant hereto and moneys drawn
under any Credit Facility):
ARTICLE I
DEFINITIONS
Section 1.1. Use of Defined Terms. In addition to the words and terms
defined elsewhere in this Agreement or by reference to another document, the
words and terms set forth in Section 1.2 hereof shall have the meanings set
forth therein unless the context or use clearly indicates another meaning or
intent. Such definitions shall be equally applicable to both the singular and
plural forms of any of the words and terms defined therein.
Section 1.2. Definitions. As used herein:
"Act" means Chapter 3706, Ohio Revised Code, as enacted and amended from
time to time pursuant to Section 13 of Article VIII of the Ohio Constitution.
"Additional Payments" means the amounts required to be paid by the
Company pursuant to the provisions of Section 4.2 hereof.
"Administration Expenses" means the compensation (which compensation
shall not be greater than that typically charged in similar circumstances) and
reimbursement of reasonable expenses and advances payable to the Trustee, the
Registrar, the Remarketing Agent, any Paying Agent and any Authenticating
Agent.
"Agreement" means this Loan Agreement, as amended or supplemented from
time to time.
"Air Quality Facility" or "Air Quality Facilities" means those facilities
which are air quality facilities as defined in Section 3706.01, Ohio Revised
Code.
"Alternate Credit Facility" means an Alternate Credit Facility as defined
in the Indenture.
"Authenticating Agent" means the Authenticating Agent as defined in the
Indenture.
"Authority Fee" means the aggregate fee of $131,250 due to the Authority
from the Company in connection with the issuance of the Bonds hereunder and
the $42,000,000 of bonds to be issued and sold on the same date as the Bonds
by the Authority under a separate loan agreement and a separate trust
indenture, each dated the same date as this Agreement, all for the same
purpose as set forth in Section 3.3 hereof for the Bonds.
"Bank" means the Bank as defined in the Indenture.
"Bond Fund" means the Bond Fund created in the Indenture.
"Bond Purchase Fund" means the Bond Purchase Fund as defined in the
Indenture.
"Bond Resolution" means the resolution of the Authority providing for the
issuance of the Bonds and approving this Agreement, the Indenture and related
matters, as amended or supplemented from time to time.
"Bond Service Charges" means, for any period or time, the principal of,
premium, if any, and interest due on the Bonds for that period or payable at
that time whether due at maturity or upon acceleration or redemption or
otherwise.
"Bonds" means the $42,000,000 Air Quality Development Revenue Refunding
Bonds, 1995 Series B (The Cincinnati Gas & Electric Company Project), issued
by the Authority pursuant to the Bond Resolution and the Indenture.
"Bonds Outstanding" or "Outstanding Bonds" means Outstanding Bonds as
defined in the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code and Sections of the Code include relevant
applicable regulations and proposed regulations thereunder and under the
Internal Revenue Code of 1954, as amended, and any successor provisions to
those Sections, regulations or proposed regulations and, in addition, all
applicable official rulings and judicial determinations under the foregoing
applicable to the Bonds.
"Conversion Date" means the Conversion Date as defined in the Indenture.
"Credit Facility" means a Credit Facility as defined in the Indenture.
"Credit Facility Account" means the Credit Facility Account as defined in
the Indenture.
"Credit Facility Issuer" means a Credit Facility Issuer as defined in the
Indenture.
"Eligible Investments" means Eligible Investments as defined in the
Indenture.
"Engineer" means an engineer (who may be an employee of the Company) or
engineering firm qualified to practice the profession of engineering under the
laws of the State and who or which is acceptable to the Trustee.
"EPA" means the Environmental Protection Agency of the State and any
successor body, agency, commission or department.
"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events
described as constituting Force Majeure in Section 7.1 hereof.
"Government Obligations" means Government Obligations as defined in the
Indenture.
"Holder" or "Holder of a Bond" means the Person in whose name a Bond is
registered on the Register.
"Indenture" means the Trust Indenture, dated as of the same date as this
Agreement, between the Authority and the Trustee, as amended or supplemented
from time to time.
"Interest Rate for Advances" means the interest rate per year payable on
the Bonds.
"Letter of Credit" means the Letter of Credit as defined in the
Indenture.
"Loan" means the loan by the Authority to the Company of the proceeds
received from the sale of the Bonds.
"Loan Payment Date" means any date on which any Bond Service Charges are
due and payable.
"Loan Payments" means the amounts required to be paid by the Company in
repayment of the Loan pursuant to Section 4.1 hereof.
"1954 Code" means the Internal Revenue Code of 1954 as amended from time
to time through the date of enactment of the Code. References to the 1954
Code and Sections of the 1954 Code include relevant applicable regulations
(including temporary regulations) and proposed regulations thereunder and any
successor provisions to those Sections, regulations or proposed regulations.
"Notice Address" means:
(a) As to the Authority: Ohio Air Quality Development Authority
1901 LeVeque Tower
50 West Broad Street
Columbus, Ohio 43215
Attention: Executive Director
(b) As to the Company: The Cincinnati Gas & Electric Company
P. O. Box 960
Cincinnati, Ohio 45201
Attention: Treasurer
(c) As to the Trustee: The Fifth Third Bank
Fifth Third Center
38 Fountain Square
Cincinnati, Ohio 45263
Attention: Corporate Trust Administration
or such additional or different address, notice of which is given under
Section 8.3 hereof.
"Opinion of Bond Counsel" means a written opinion of nationally
recognized bond counsel selected by the Company and acceptable to the Trustee
who is experienced in matters relating to the exclusion from gross income for
federal income tax purposes of interest on obligations issued by states and
their political subdivisions. Bond Counsel may be counsel to the Trustee or
the Company.
"Original Purchaser" means the Original Purchaser as defined in the
Indenture.
"Paying Agent" means the Paying Agent as defined in the Indenture.
"Person" or words importing persons mean firms, associations,
partnerships (including without limitation, general and limited partnerships),
limited liability entities, joint ventures, societies, estates, trusts,
corporations, public or governmental bodies, other legal entities and natural
persons.
"Plant" means the William H. Zimmer Electric Generating Station.
"Project" or "Project Facilities" means the real, personal or real and
personal property, including undivided or other interests therein, identified
in the Project Description.
"Project Description" means the description of the Project Facilities
attached hereto as Exhibit A, as the same may be amended in accordance with
this Agreement.
"Project Purposes" means the purposes of Air Quality Facilities as
described in the Act and as particularly described in Exhibit A hereto.
"Project Site" means the William H. Zimmer Electric Generating Station in
Clermont County, Ohio.
"Rate Period" means a Rate Period as defined in the Indenture.
"Rebate Fund" means the Rebate Fund created in the Indenture.
"Refunded Bonds" means the $84,000,000 State of Ohio 10-1/8% Pollution
Control Revenue Bonds, 1985 Series (The Cincinnati Gas & Electric Company
Project) dated as of December 1, 1985.
"Refunded Bonds Indenture" means the Trust Indenture for the Refunded
Bonds between the Authority and the Refunded Bonds Trustee dated as of
December 1, 1985.
"Refunded Bonds Loan Agreement" means the Loan Agreement between the
Authority and the Company dated as of December 1, 1985 entered into in
connection with the Refunded Bonds.
"Refunded Bonds Trustee" means The Bank of New York (formerly Irving
Trust Company), New York, New York, as trustee under the Refunded Bonds
Indenture.
"Refunding Fund" means the Refunding Fund created in the Indenture.
"Register" means the books kept and maintained for the registration and
transfer of Bonds pursuant to Section 3.05 of the Indenture.
"Registrar" means the Registrar as defined in the Indenture.
"Reimbursement Agreement" means the Reimbursement Agreement as defined in
the Indenture.
"Remarketing Agent" means the Remarketing Agent as defined in the
Indenture.
"Revenues" means (a) the Loan Payments, (b) all other moneys received or
to be received by the Authority (excluding the Authority Fee) or the Trustee
in respect of repayment of the Loan, including without limitation, all moneys
and investments in the Bond Fund, (c) any moneys and investments in the
Refunding Fund, and (d) all income and profit from the investment of the
foregoing moneys. The term "Revenues" does not include any moneys or
investments in the Rebate Fund or the Bond Purchase Fund.
"State" means the State of Ohio.
"Term Rate Period" means a Term Rate Period as defined in the Indenture.
"Trustee" means The Fifth Third Bank, Cincinnati, Ohio, a corporation
duly organized and validly existing under the laws of the State, until a
successor Trustee shall have become such pursuant to the applicable provisions
of the Indenture, and thereafter "Trustee" shall mean the successor Trustee.
"Principal Office" of the Trustee shall mean the principal corporate trust
office of the Trustee, which office at the date of issuance of the Bonds is
located at its Notice Address.
"Unassigned Authority Rights" means all of the rights of the Authority to
receive Additional Payments under Section 4.2 hereof, to inspection pursuant
to Section 5.1 hereof, to be held harmless and indemnified under Section 5.9
hereof, to be reimbursed for attorney's fees and expenses under Section 7.4
hereof and to give or withhold consent to amendments, changes, modifications,
alterations and termination of this Agreement under Section 8.6 hereof and its
right to enforce such rights.
"Variable Rate" means a Variable Rate as defined in the Indenture.
Section 1.3. Interpretation. Any reference herein to the State, to the
Authority or to any member or officer of either includes entities or officials
succeeding to their respective functions, duties or responsibilities pursuant
to or by operation of law or lawfully performing their functions.
Any reference to a section or provision of the Constitution of the State
or the Act, or to a section, provision or chapter of the Ohio Revised Code, or
to any statute of the United States of America, includes that section,
provision or chapter as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision or chapter shall be applicable
solely by reason of this provision, if it constitutes in any way an impairment
of the rights or obligations of the Authority, the State, the Holders, the
Trustee, the Registrar, an Authenticating Agent, a Paying Agent, the Credit
Facility Issuer, the Remarketing Agent, or the Company under this Agreement,
the Indenture or the Bonds.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof",
"hereby", "herein", "hereto", "hereunder" and similar terms refer to this
Agreement; and the term "hereafter" means after, and the term "heretofore"
means before, the date of delivery of the Bonds. Words of any gender include
the correlative words of the other genders, unless the sense indicates
otherwise.
Section 1.4. Captions and Headings. The captions and headings in this
Agreement are used solely for convenience of reference and in no way define,
limit or describe the scope or intent of any Articles, Sections, subsections,
paragraphs or subparagraphs or clauses hereof.
(End of Article I)
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations of the Authority. The Authority
represents that: (a) it is a body politic and corporate duly organized and
validly existing under the laws of the State; (b) it has duly accomplished all
conditions necessary to be accomplished by it prior to the issuance and
delivery of the Bonds and the execution and delivery of this Agreement and the
Indenture; (c) it is not in violation of or in conflict with any provisions of
the laws of the State which would impair its ability to carry out its
obligations contained in this Agreement or the Indenture; (d) it is empowered
to enter into the transactions contemplated by this Agreement and the
Indenture; (e) it has duly authorized the execution, delivery and performance
of this Agreement and the Indenture; (f) it will do all things in its power in
order to maintain its existence or assure the assumption of its obligations
under this Agreement and the Indenture by any successor public body; and (g)
following reasonable notice, a public hearing was held on August 8, 1995 with
respect to the issuance of the Bonds as required by Section 147(f) of the
Code.
Section 2.2. No Warranty by Authority of Condition or Suitability of
the Project. The Authority makes no warranty, either express or implied, as
to the suitability or utilization of the Project for the Project Purposes, or
as to the condition of the Project Facilities or that the Project Facilities
are or will be suitable for the Company's purposes or needs.
Section 2.3. Representations and Covenants of the Company. The Company
represents that:
(a) The Company has been duly incorporated and is
validly existing as a corporation in good standing under
the laws of the State, with power and authority (corporate
and other) to own its properties and conduct its business,
to execute and deliver this Agreement and to perform its
obligations under this Agreement.
(b) This Agreement has been duly authorized,
executed and delivered by the Company and this Agreement
constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles.
(c) The execution, delivery and performance by the
Company of this Agreement and the consummation of the
transactions contemplated hereby will not violate any
provision of law or regulation applicable to the Company,
or of any writ or decree of any court or governmental
instrumentality, or of the Articles of Incorporation, as
amended, or the Regulations of the Company, or of any
mortgage, indenture, contract, agreement or other
undertaking to which the Company is a party or which
purports to be binding upon the Company or upon any of its
assets.
(d) Substantially all (at least 90%) of the proceeds
of the Refunded Bonds were used to provide "pollution
control facilities" within the meaning of Sections
103(b)(4)(F) of the 1954 Code, the original use of which
facilities commenced with the Company, the construction of
which facilities began before September 26, 1985 and was
completed on or after such date, and which facilities were
described in an inducement resolution adopted by the
Authority before September 26, 1985, and all of the
proceeds of the Refunded Bonds have been spent for the
Project pursuant to the Refunded Bonds Loan Agreement or
to pay costs of issuance of the Refunded Bonds. The
proceeds of the Bonds (other than any accrued interest
thereon) will be used exclusively to refund the Refunded
Bonds, any investment earnings thereon will be used to pay
principal, premium or interest on the Refunded Bonds, and
none of the proceeds of the Bonds will be used to pay for
any costs of issuance of the Bonds. The Refunded Bonds
were issued prior to August 16, 1986. The principal
amount of the Bonds does not exceed the outstanding
principal amount of the Refunded Bonds. The proceeds of
the Bonds will be used to retire the Refunded Bonds not
later than 90 days after the date of issuance of the
Bonds.
(e) It has caused the Project to be substantially
completed. The Project constitutes Air Quality Facilities
under the Act and is consistent with the purposes of
Section 13 of Article VIII of the Ohio Constitution and of
the Act. The Project is being, and the Company will cause
the Project to be, operated and maintained in such manner
to conform with all applicable zoning, planning, building,
environmental and other applicable governmental
regulations and all permits, variances and orders issued
or granted pursuant thereto, including the
permit-to-install for the Project, which permits,
variances and orders have not been withdrawn or otherwise
suspended, and to be consistent with the Act.
(f) It has used or operated or has caused to be used
or operated, and presently intends to use or operate or
cause to be used or operated the Project Facilities in a
manner consistent with the Project Purposes until the date
on which the Bonds have been fully paid and knows of no
reason why the Project Facilities will not be so operated.
The Company does not intend to sell or otherwise dispose
of the Project or any portion thereof.
(g) None of the proceeds of the Refunded Bonds were
used and none of the proceeds of the Bonds will be used to
provide any private or commercial golf course, country
club, massage parlor, tennis club, skating facility
(including roller skating, skateboard and ice skating),
racquet sports facility (including handball or racquetball
court), hot tub facility, suntan facility, racetrack,
airplane, skybox or other private luxury box, or health
club facility; any facility primarily used for gambling;
any store the principal business of which is the sale of
alcoholic beverages for consumption off premises; or any
facilities for retail food and beverage services (except
grocery stores), automobile sales or service, or the
provision of recreation or entertainment.
(h) Less than 25% of the proceeds of the Refunded
Bonds have been used and less than 25% of the proceeds of
the Bonds will be used directly or indirectly to acquire
land or any interest therein, and none of such proceeds
has been or will be used to provide land which is to be
used for farming purposes.
(i) No portion of the proceeds of the Refunded Bonds
has been used and no portion of the proceeds of the Bonds
will be used to acquire existing property or any interest
therein unless the first use of such property was by the
Company and was pursuant to and followed such acquisition.
(j) After the expiration of any applicable temporary
period under Section 148(d)(3) of the Code, at no time
during any bond year will the aggregate amount of gross
proceeds of the Bonds invested in higher yielding
investments (within the meaning of Section 148(b) of the
Code) exceed 150 percent of the debt service on the Bonds
for such bond year and the aggregate amount of gross
proceeds of the Bonds invested in higher yielding
investments, if any, will be promptly and appropriately
reduced as the outstanding amount of the Bonds is reduced,
provided however that the foregoing shall not require the
sale or disposition of any investments in higher yielding
investments if such sale or disposition would result in a
loss which exceeds the amount which would be paid to the
United States (but for such sale or disposition) at the
time of such sale or disposition if a payment were due at
such time. At no time will any funds constituting gross
proceeds of the Bonds be used in a manner as would
constitute failure of compliance with Section 148 of the
Code.
The terms "bond year", "gross proceeds", "higher
yielding investments", "yield", and "debt service" have
the meanings assigned to them for purposes of Section 148
of the Code.
(k) The Refunded Bonds were not, and the Bonds will
not be, "federally guaranteed" within the meaning of
Section 149(b) of the Code.
(l) It is not anticipated that as of the date
hereof, there will be created any "replacement proceeds",
within the meaning of Section 1.148-1(c) of the Treasury
Regulations, with respect to the Bonds; however, in the
event that any such replacement proceeds are deemed to
have been created, such amounts will be invested in
compliance with Section 148 of the Code.
(m) On the date of issuance and delivery of the
Refunded Bonds, the Company reasonably expected that at
least 85% of the spendable proceeds of such Refunded Bonds
would be expended to carry out the governmental purposes
of such issue within the 5-year period beginning on the
date such issue was issued but did not reasonably expect
that 85% of such spendable proceeds would be so expended
within the 3-year period beginning on such date. All of
the spendable proceeds of the Refunded Bonds have been
expended as of the date of issuance of the Bonds. None of
the proceeds of such issue, if any, were invested in
nonpurpose investments having a substantially guaranteed
yield for 4 years or more.
(n) The respective average maturities of the
Refunded Bonds and the Bonds do not exceed 120% of the
respective average reasonably expected economic life of
the Project Facilities financed by the proceeds of the
Refunded Bonds and the Bonds (determined under Section
147(b) of the Code).
(o) The information furnished by the Company and
used by the Authority in preparing the certifications and
statements pursuant to Sections 148 and 149(e) of the Code
or their statutory predecessors with respect to the
Refunded Bonds was accurate and complete as of the date of
issuance of the Refunded Bonds, and the information
furnished by the Company and used by the Authority in
preparing the certification pursuant to Section 148 of the
Code and in preparing the information statement pursuant
to Section 149(e) of the Code, both referred to in the
Bond Resolution, will be accurate and complete as of the
date of issuance of the Bonds.
(p) The Project Facilities do not include any office
except for offices (i) located on the Project Site and
(ii) not more than a de minimis amount of the functions to
be performed at which is not directly related to the
day-to-day operations of the Project Facilities.
(End of Article II)
ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 3.1. Acquisition, Construction and Installation. The Company
represents that it and the other public utility companies which own undivided
interests in the Project Facilities with the Company as tenants-in-common have
caused the Project Facilities to be acquired, constructed and installed on the
Project Site, substantially in accordance with the Project Description and in
conformance with all applicable zoning, planning, building and other similar
regulations of all governmental authorities having jurisdiction over the
Project and all permits, variances and orders issued in respect of the Project
by EPA, and that the proceeds derived from the Refunded Bonds, including any
investment thereof, were expended in accordance with the Refunded Bonds
Indenture and the Refunded Bonds Loan Agreement.
Section 3.2. Project Description. The Project Description may be
changed from time to time by, or with the consent of, the Company provided
that any such change shall also be filed with the Authority and provided
further that no change in the Project Description shall materially change the
function of the Project Facilities unless the Trustee shall have received (i)
an Engineer's certificate that such changes will not impair the significance
or character of the Project Facilities as Air Quality Facilities and (ii) an
Opinion of Bond Counsel or ruling of the Internal Revenue Service to the
effect that such amendment will not adversely affect the exclusion of interest
on the Bonds from gross income for federal income tax purposes.
Section 3.3. Issuance of the Bonds; Application of Proceeds. To
provide funds to make the Loan to the Company to assist the Company in the
refunding of the Refunded Bonds, the Authority will issue, sell and deliver
the Bonds to the Original Purchaser. The Bonds will be issued pursuant to the
Indenture in the aggregate principal amount, will bear interest, will mature
and will be subject to redemption as set forth therein. The Company hereby
approves the terms and conditions of the Indenture and the Bonds, and the
terms and conditions under which the Bonds will be issued, sold and delivered.
The Company hereby requests that the Authority notify the Refunded Bonds
Trustee (unless the Refunded Bonds Trustee has already received such notice),
pursuant to Section 4.03 of the Refunded Bonds Indenture, that the entire
outstanding principal amount of the Refunded Bonds is to be redeemed on
December 1, 1995 at a redemption price of 102-1/2% of the principal amount
thereof plus accrued interest to that redemption date.
The proceeds from the sale of the Bonds (other than any accrued interest)
shall be loaned to the Company to assist the Company in refunding the Refunded
Bonds in order to reduce the interest cost payable by the Company; those
proceeds shall be deposited in the Refunding Fund. On November 30, 1995 all
moneys on deposit in the Refunding Fund shall be disbursed by the Trustee as
provided in Section 5.02 of the Indenture to the Refunded Bonds Trustee for
deposit in the Bond Fund created in the Refunded Bonds Indenture and applied
by the Refunded Bonds Trustee to the payment of principal of and interest on
the Refunded Bonds on their redemption on December 1, 1995.
Pending disbursement pursuant to this Section, the proceeds so deposited
in the Refunding Fund, together with any investment earnings thereon, shall
constitute a part of the Revenues assigned by the Authority to the Trustee for
the payment of Bond Service Charges. Any accrued interest shall be deposited
in the Bond Fund.
Section 3.4. Investment of Fund Moneys. At the oral (confirmed
promptly in writing) or written request of the Company, any moneys held as
part of the Bond Fund, the Refunding Fund or the Rebate Fund shall be invested
or reinvested by the Trustee in Eligible Investments; provided, that such
moneys shall be invested or reinvested by the Trustee only in Eligible
Investments which shall mature, or which shall be subject to redemption by the
holder thereof at the option of such holder, not later than the date upon
which the moneys so invested are needed to make payments from those Funds.
The Authority (to the extent it retained or retains direction or control) and
the Company each hereby represents that the investment and reinvestment and
the use of the proceeds of the Refunded Bonds were restricted in such manner
and to such extent as was necessary so that the Refunded Bonds would not
constitute arbitrage bonds under the statutory predecessor of the Code and
each hereby covenants that it will restrict that investment and reinvestment
and the use of the proceeds of the Bonds in such manner and to such extent, if
any, as may be necessary so that the Bonds will not constitute arbitrage bonds
under Section 148 of the Code.
The Company shall provide the Authority with, and the Authority may base
its certificate and statement, each as authorized by the Bond Resolution, on a
certificate of an appropriate officer, employee or agent of or consultant to
the Company for inclusion in the transcript of proceedings for the Bonds,
setting forth the reasonable expectations of the Company on the date of
delivery of and payment for the Bonds regarding the amount and use of the
proceeds of the Bonds and the facts, estimates and circumstances on which
those expectations are based.
Section 3.5. Rebate Fund. To the extent required by Section 5.09 of
the Indenture, within five days after the end of the fifth Bond Year (as
defined in the Indenture) and every fifth Bond Year thereafter, and within
five days after payment in full of all outstanding Bonds, the Company shall
calculate the amount of Excess Earnings (as defined in the Indenture) as of
the end of that Bond Year or the date of such payment and shall notify the
Trustee of that amount. If the amount then on deposit in the Rebate Fund
created under the Indenture is less than the amount of Excess Earnings
(computed by taking into account the amount or amounts, if any, previously
paid to the United States pursuant to Section 5.09 of the Indenture and this
Section), the Company shall, within five days after the date of the aforesaid
calculation, pay to the Trustee for deposit in the Rebate Fund an amount
sufficient to cause the Rebate Fund to contain an amount equal to the Excess
Earnings. The obligation of the Company to make such payments shall remain in
effect and be binding upon the Company notwithstanding the release and
discharge of the Indenture. The Company shall obtain and keep such records of
the computations made pursuant to this Section as are required under Section
148(f) of the Code.
(End of Article III)
ARTICLE IV
LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND CREDIT FACILITY
Section 4.1. Loan Repayment. Upon the terms and conditions of this
Agreement, the Authority agrees to make the Loan to the Company. The proceeds
of the Loan shall be deposited with the Trustee pursuant to Section 3.3
hereof. In consideration of and in repayment of the Loan, the Company shall
make, as Loan Payments, to the Trustee for the account of the Authority,
payments which correspond, as to time, and are equal in amount, to the Bond
Service Charges payable on the Bonds. All Loan Payments received by the
Trustee shall be held and disbursed in accordance with the provisions of the
Indenture and this Agreement for application to the payment of Bond Service
Charges.
The Company shall be entitled to a credit against the Loan Payments
required to be made on any Loan Payment Date to the extent that the balance of
the Bond Fund is then in excess of amounts required (a) for the payment of
Bonds theretofore matured or theretofore called for redemption, or to be
called for redemption pursuant to Section 6.1 hereof (b) for the payment of
interest for which checks or drafts have been drawn and mailed by the Trustee
or Paying Agent, and (c) to be deposited in the Bond Fund by the Indenture for
use other than for the payment of Bond Service Charges due on that Loan
Payment Date.
The Company's obligation to make Loan Payments shall be reduced to the
extent of any payments made by any Credit Facility Issuer to the Trustee in
respect of the principal of, premium, if any, or interest on the Bonds when
due pursuant to any Credit Facility, provided, that the Credit Facility Issuer
has been reimbursed for such payments in accordance with the terms of the
Reimbursement Agreement.
Except for such interest of the Company as may hereafter arise pursuant
to Section 8.2 hereof or Sections 5.07 or 5.08 of the Indenture, the Company
and the Authority each acknowledge that neither the Company, the State nor the
Authority has any interest in the Bond Fund or the Bond Purchase Fund, and any
moneys deposited therein shall be in the custody of and held by the Trustee in
trust for the benefit of the Holders.
Section 4.2. Additional Payments. The Company shall pay to the
Authority, the Authority Fee and, as Additional Payments hereunder, any and
all costs and expenses incurred or to be paid by the Authority in connection
with the issuance and delivery of the Bonds or otherwise related to actions
taken by the Authority under this Agreement or the Indenture.
The Company shall pay the Administration Expenses to the Trustee, the
Registrar, the Remarketing Agent, and any Paying Agent or Authenticating
Agent, as appropriate, as Additional Payments hereunder.
The Company may, without creating a default hereunder, contest in good
faith the reasonableness of any such cost or expense incurred or to be paid by
the Authority and any Administration Expenses claimed to be due to the
Trustee, the Registrar, the Remarketing Agent, any Paying Agent or any
Authenticating Agent.
In the event the Company should fail to pay any Loan Payments, Additional
Payments or Administration Expenses when due, the payment in default shall
continue as an obligation of the Company until the amount in default shall
have been fully paid together with interest thereon during the default period
at the Interest Rate for Advances.
Section 4.3. Place of Payments. The Company shall make all Loan
Payments directly to the Trustee at its Principal Office. Additional Payments
shall be made directly to the person or entity to whom or to which they are
due.
Section 4.4. Obligations Unconditional. The obligations of the Company
to make Loan Payments, Additional Payments and any payments required of the
Company under Section 5.09 of the Indenture shall be absolute and
unconditional, and the Company shall make such payments without abatement,
diminution or deduction regardless of any cause or circumstances whatsoever
including, without limitation, any defense, set-off, recoupment or
counterclaim which the Company may have or assert against the Authority, the
Trustee, the Registrar, the Remarketing Agent or any other Person.
Section 4.5. Assignment of Revenues and Agreement. To secure the
payment of Bond Service Charges, the Authority shall, by the Indenture, (a)
absolutely and irrevocably assign to the Trustee, its successors in trust and
its and their assigns forever, (1) all right, title and interest of the
Authority in and to all moneys and investments (including, without limitation,
the proceeds of the Credit Facility) in the Bond Fund and (2) all of the
Authority's rights and remedies under this Agreement (except for the
Unassigned Authority Rights), and (b) grant a security interest to the
Trustee, its successors in trust and its and their assigns forever, in all of
its rights to and interest in the Revenues including, without limitation, all
Loan Payments and other amounts receivable by or on behalf of the Authority
under the Agreement in respect of repayment of the Loan (other than the Credit
Facility Account, all moneys and investments therein and the proceeds of the
Credit Facility). The Company hereby agrees and consents to those assignments
and that grant of a security interest.
Section 4.6. Credit Facility; Alternate Credit Facility; Cancellation.
(a) The Company agrees to provide for the payment of the principal of and
interest on the Bonds and for payment of the purchase price of Bonds delivered
to the Trustee or Paying Agent pursuant to the Indenture by causing the Letter
of Credit to be delivered to the Trustee on the date of the delivery of the
Bonds. The Company hereby authorizes and directs the Trustee to draw moneys
under the Letter of Credit, in accordance with its terms and the terms of the
Indenture, to the extent necessary to pay the principal of and interest on the
Bonds when due and to pay the purchase price of Bonds as provided in the
Indenture. The Company may, at its election and with the consent of the Bank,
provide for one or more extensions of the Letter of Credit beyond its then
stated date of expiration.
(b) Upon satisfaction of the requirements contained in Section 14.03 of
the Indenture, the Company may provide for the delivery of an Alternate
Credit Facility.
(c) Upon satisfaction of the conditions contained in Section 14.02 of
the Indenture, the Company may cancel any Credit Facility in effect at such
time and direct the Trustee in writing to surrender such Credit Facility to
the Credit Facility Issuer by which it was issued in accordance with the
Indenture; provided, that no such cancellation shall become effective and no
such surrender shall take place until all Bonds subject to purchase pursuant
to Section 4.07(d) of the Indenture have been so purchased or redeemed with
the proceeds of such Credit Facility.
Section 4.8. Company's Option to Elect Rate Period. The Company shall
have, and is hereby granted, the option to elect to convert on any Conversion
Date the interest rate borne by the Bonds to another Variable Rate to be
effective for a Rate Period pursuant to the provisions of Article II of the
Indenture and subject to the terms and conditions set forth therein. To
exercise such options, the Company shall give the written notice required by
the Indenture.
Section 4.9. Company's Obligation to Purchase Bonds. The Company hereby
agrees to pay or cause to be paid to the Trustee or the Paying Agent, on or
before each day on which Bonds may be or are required to be tendered for
purchase, amounts equal to the amounts to be paid by the Trustee or the Paying
Agent with respect to the Bonds tendered for purchase on such dates pursuant
to Article IV of the Indenture; provided, however, that the obligation of the
Company to make any such payment under this Section shall be reduced by the
amount of (A) moneys paid by the Remarketing Agent as proceeds of the
remarketing of such Bonds by the Remarketing Agent, (B) moneys drawn under any
Credit Facility, for the purpose of paying such purchase price and (C) other
moneys made available by the Company, as set forth in Section 4.08(b)(ii) of
the Indenture.
(End of Article IV)
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. Right of Inspection. The Company agrees that, subject to
reasonable security and safety regulations and to reasonable requirements as
to notice, the Authority and the Trustee and their or any of their respective
duly authorized agents shall have the right at all reasonable times to enter
upon the Project Site to examine and inspect the Projects.
Section 5.2. Maintenance. The Company shall use its best efforts to
keep and maintain the Project Facilities, including all appurtenances thereto
and any personal property therein or thereon, in good repair and good
operating condition so that the Project Facilities will continue to constitute
Air Quality Facilities, for the purposes of the operation thereof as required
by Section 5.4 hereof.
So long as such shall not be in violation of the Act or impair the
character of the Project Facilities as Air Quality Facilities, and provided
there is continued compliance with applicable laws and regulations of
governmental entities having jurisdiction thereof, the Company shall have the
right to remodel the Project Facilities or make additions, modifications and
improvements thereto, from time to time as it, in its discretion, may deem to
be desirable for its uses and purposes, the cost of which remodeling,
additions, modifications and improvements shall be paid by the Company and the
same shall, when made, become a part of the Project Facilities.
Section 5.3. Removal of Portions of the Project Facilities. The
Company shall not be under any obligation to renew, repair or replace any
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary
portions of the Project Facilities, except that, subject to Section 5.4
hereof, it will use its best efforts to ensure the continued character of the
Project Facilities as Air Quality Facilities. The Company shall have the
right from time to time to substitute personal property or fixtures for any
portions of the Project Facilities, provided that the personal property or
fixtures so substituted shall not impair the character of the Project
Facilities as Air Quality Facilities. Any such substituted property or
fixtures shall, when so substituted, become a part of the Project Facilities.
The Company shall also have the right to remove any portion of the Project
Facilities, without substitution therefor; provided, that the Company shall
deliver to the Trustee a certificate signed by an Engineer describing said
portion of the Project Facilities and stating that the removal of such
property or fixtures will not impair the character of the Project Facilities
as Air Quality Facilities.
Section 5.4. Operation of Project Facilities. The Company will,
subject to its obligations and rights to maintain, repair or remove portions
of the Project Facilities, as provided in Sections 5.2 and 5.3 hereof, use its
best efforts to continue operation of the Project Facilities so long as and to
the extent that operation thereof is required to comply with laws or
regulations of governmental entities having jurisdiction thereof or unless the
Authority shall have approved the discontinuance of such operation (which
approval shall not be unreasonably withheld). The Company agrees that it
will, within the design capacities thereof, use its best efforts to operate
and maintain the Project Facilities in accordance with all applicable, valid
and enforceable rules and regulations of governmental entities having
jurisdiction thereof; provided, that the Company reserves the right to contest
in good faith any such laws or regulations.
Nothing in this Agreement shall prevent or restrict the Company, in its
sole discretion, at any time, from discontinuing or suspending either
permanently or temporarily its use of any facility of the Company served by
the Project Facilities and in the event such discontinuance or suspension
shall render unnecessary the continued operation of the Project Facilities,
the Company shall have the right to discontinue the operation of the Project
Facilities during the period of any such discontinuance or suspension.
Section 5.5. Insurance. The Company shall cause the Project Facilities
to be kept insured against fire or other casualty to the extent that property
of similar character is usually so insured by companies similarly situated and
operating like properties, to a reasonable amount by reputable insurance
companies or, in lieu of or supplementing such insurance in whole or in part,
adopt some other method or plan of protection against loss by fire or other
casualty at least equal in protection to the method or plan of protection
against loss by fire or other casualty of companies similarly situated and
operating properties subject to similar or greater fire or other hazards or on
which properties an equal or higher primary fire or other casualty insurance
rate has been set by reputable insurance companies.
Section 5.6. Workers' Compensation Coverage. Throughout the term of
this Agreement, the Company shall comply, or cause compliance, with applicable
workers' compensation laws of the State.
Section 5.7. Damage; Destruction and Eminent Domain. If, during the
term of this Agreement, the Project Facilities or any portion thereof is
destroyed or damaged in whole or in part by fire or other casualty, or title
to, or the temporary use of, the Project Facilities or any portion thereof
shall have been taken by the exercise of the power of eminent domain, the
Company (unless it shall have exercised its option to prepay the Loan Payments
pursuant to Section 6.2 hereof) shall promptly repair, rebuild or restore the
portion of the Project Facilities so damaged, destroyed or taken with such
changes, alterations and modifications (including the substitution and
addition of other property) as may be necessary or desirable for the
administration and operation of the Project Facilities as Air Quality
Facilities and as shall not impair the character or significance of the
Project Facilities as furthering the purposes of the Act.
Section 5.8. Company to Maintain its Corporate Existence; Conditions
Under Which Exceptions Permitted. The Company agrees that, during the term of
this Agreement, it will maintain its corporate existence, will not dissolve or
otherwise dispose of all or substantially all of its assets and will not
consolidate with or merge into another corporation or permit one or more other
corporations to consolidate with or merge into it; provided that the Company
may, without violating its agreement contained in this Section, consolidate
with or merge into another corporation, or permit one or more other
corporations to consolidate with or merge into it, or sell or otherwise
transfer to another corporation all or substantially all of its assets as an
entirety and thereafter dissolve, provided the surviving, resulting or
transferee corporation, as the case may be (if other than the Company), is a
corporation organized and existing under the laws of one of the states of the
United States, and assumes in writing all of the obligations of the Company
herein, and, if not an Ohio corporation, is qualified to do business in the
State.
If consolidation, merger or sale or other transfer is made as provided in
this Section, the provisions of this Section shall continue in full force and
effect and no further consolidation, merger or sale or other transfer shall be
made except in compliance with the provisions of this Section.
Section 5.9. Indemnification. The Company releases the Authority from,
agrees that the Authority shall not be liable for, and indemnifies the
Authority against, all liabilities, claims, costs and expenses imposed upon or
asserted against the Authority on account of: (a) any loss or damage to
property or injury to or death of or loss by any person that may be occasioned
by any cause whatsoever pertaining to the construction, maintenance, operation
and use of the Project Facilities; (b) any breach or default on the part of
the Company in the performance of any covenant or agreement of the Company
under this Agreement or any related document, or arising from any act or
failure to act by the Company, or any of its agents, contractors, servants,
employees or licensees; (c) the authorization, issuance and sale of the Bonds,
and the provision of any information furnished in connection therewith
concerning the Project Facilities or the Company (including, without
limitation, any information furnished by the Company for inclusion in any
certifications made by the Authority under Section 3.4 hereof or for inclusion
in, or as a basis for preparation of, the information statements filed by the
Authority pursuant to Section 8(a)(ii) of the Bond Resolution); and (d) any
claim or action or proceeding with respect to the matters set forth in (a),
(b) and (c) above brought thereon.
The Company agrees to indemnify the Trustee, the Paying Agent, the
Remarketing Agent and the Registrar (each hereinafter referred to in this
section as an "indemnified party") for and to hold each of them harmless
against all liabilities, claims, costs and expenses incurred without
negligence or willful misconduct on the part of the indemnified party, on
account of any action taken or omitted to be taken by the indemnified party in
accordance with the terms of this Agreement, the Bonds or the Indenture or any
action taken at the request of or with the consent of the Company, including
the costs and expenses of the indemnified party in defending itself against
any such claim, action or proceeding brought in connection with the exercise
or performance of any of its powers or duties under this Agreement, the Bonds
or the Indenture.
In case any action or proceeding is brought against the Authority or an
indemnified party in respect of which indemnity may be sought hereunder, the
party seeking indemnity promptly shall give notice of that action or
proceeding to the Company, and the Company upon receipt of that notice shall
have the obligation and the right to assume the defense of the action or
proceeding; provided, that failure of a party to give that notice shall not
relieve the Company from any of its obligations under this Section unless that
failure prejudices the defense of the action or proceeding by the Company. At
its own expense, an indemnified party may employ separate counsel and
participate in the defense; provided, however, where it is ethically
inappropriate for one firm to represent the interests of the Authority and any
other indemnified party or parties, the Company shall pay the Authority's
legal expenses in connection with the Authority's retention of separate
counsel. The Company shall not be liable for any settlement made without its
consent.
The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers and employees
of the Authority, the Trustee, the Paying Agent, the Remarketing Agent and the
Registrar, respectively. That indemnification is intended to and shall be
enforceable by the Authority, the Trustee, the Paying Agent, the Remarketing
Agent and the Registrar, respectively, to the full extent permitted by law.
Section 5.10. Company Not to Adversely Affect Exclusion of Interest on
Bonds From Gross Income For Federal Income Tax Purposes. The Company hereby
covenants and represents that it has taken and caused to be taken and shall
take and cause to be taken all actions that may be required of it for the
interest on the Bonds to be and remain excluded from the gross income of the
Holders for federal income tax purposes, and that it has not taken or
permitted to be taken on its behalf, and covenants that it will not take, or
permit to be taken on its behalf, any action which, if taken, would adversely
affect that exclusion under the provisions of the Code.
Section 5.11. Use of Project Facilities. The Authority agrees that it
will not take any action, or cause any action to be taken on its behalf, to
interfere with the Company's ownership interest in the Project or to prevent
the Company from having possession, custody, use and enjoyment of the Project
other than pursuant to Article VII of this Agreement or Article VII of the
Indenture.
Section 5.12. Assignment by Company. This Agreement may be assigned in
whole or in part by the Company without the necessity of obtaining the consent
of either the Authority or the Trustee, subject, however, to each of the
following conditions:
(a) No assignment (other than pursuant to Section
5.8 hereof) shall relieve the Company from primary
liability for any of its obligations hereunder, and in the
event of any such assignment the Company shall continue to
remain primarily liable for the payment of the Loan
Payments and Additional Payments and for performance and
observance of the agreements on its part herein provided
to be performed and observed by it.
(b) Any assignment by the Company must retain for
the Company such rights and interests as will permit it to
perform its obligations under this Agreement, and any
assignee from the Company shall assume the obligations of
the Company hereunder to the extent of the interest
assigned.
(c) The Company shall, within 30 days after
execution thereof, furnish or cause to be furnished to the
Authority and the Trustee a true and complete copy of each
such assignment together with any instrument of
assumption.
(d) Any assignment from the Company shall not
materially impair fulfillment of the Project Purposes to
be accomplished by operation of the Project as herein
provided.
(End of Article V)
ARTICLE VI
REDEMPTION
Section 6.1. Optional Redemption. Provided no Event of Default shall
have occurred and be subsisting, at any time and from time to time, the
Company may deliver moneys to the Trustee in addition to Loan Payments or
Additional Payments required to be made and direct the Trustee to use the
moneys so delivered for the purpose of calling Bonds for optional redemption
in accordance with the applicable provisions of the Indenture providing for
optional redemption at the redemption price stated in the Indenture. Pending
application for those purposes, any moneys so delivered shall be held by the
Trustee in a special account in the Bond Fund and delivery of those moneys
shall not, except as set forth in Section 4.1 hereof, operate to abate or
postpone Loan Payments or Additional Payments otherwise becoming due or to
alter or suspend any other obligations of the Company under this Agreement.
Section 6.2. Extraordinary Optional Redemption. The Company shall
have, subject to the conditions hereinafter imposed, the option during a Term
Rate Period to direct the redemption of the Bonds in whole in accordance with
the applicable provisions of the Indenture upon the occurrence of any of the
following events:
(a) The Project or the Plant shall have been damaged
or destroyed to such an extent that (1) the Project or the
Plant cannot reasonably be expected to be restored, within
a period of six consecutive months, to the condition
thereof immediately preceding such damage or destruction
or (2) the Company is reasonably expected to be prevented
from carrying on its normal use and operation of the
Project or the Plant for a period of six consecutive
months.
(b) Title to, or the temporary use of, all or a
significant part of the Project or the Plant shall have
been taken under the exercise of the power of eminent
domain to such an extent (1) that the Project or the Plant
cannot reasonably be expected to be restored within a
period of six consecutive months to a condition of
usefulness comparable to that existing prior to the taking
or (2) the Company is reasonably expected to be prevented
from carrying on its normal use and operation of the
Project or the Plant for a period of six consecutive
months.
(c) As a result of any changes in the Constitution
of the State, the Constitution of the United States of
America or any state or federal laws or as a result of
legislative or administrative action (whether state or
federal) or by final decree, judgment or order of any
court or administrative body (whether state or federal)
entered after any contest thereof by the Authority or the
Company in good faith, this Agreement shall have become
void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as
expressed in this Agreement.
(d) Unreasonable burdens or excessive liabilities
shall have been imposed upon the Authority or the Company
with respect to the Project or the Plant or the operation
thereof, including, without limitation, the imposition of
federal, state or other ad valorem, property, income or
other taxes other than ad valorem taxes at the rates
presently levied upon privately owned property used for
the same general purpose as the Project or the Plant.
(e) Changes in the economic availability of raw
materials, operating supplies, energy sources or supplies
or facilities (including, but not limited to, facilities
in connection with the disposal of industrial wastes)
necessary for the operation of the Project or the Plant
for the Project Purposes occur or technological or other
changes occur which the Company cannot reasonably overcome
or control and which in the Company's reasonable judgment
render the Project or the Plant uneconomic or obsolete for
the Project Purposes.
(f) Any court or administrative body shall enter a
judgment, order or decree, or shall take administrative
action, requiring the Company to cease all or any
substantial part of its operations served by the Project
or the Plant to such extent that the Company is or will be
prevented from carrying on its normal operations at the
Project or the Plant for a period of six consecutive
months.
(g) The termination by the Company of operations at
the Plant.
The amount payable by the Company in the event of its exercise of the
option granted in this Section shall be the sum of the following:
(i) An amount of money which, when added to the
moneys and investments held to the credit of the Bond
Fund, will be sufficient pursuant to the provisions of the
Indenture to pay, at 100% of the principal amount thereof
plus accrued interest to the redemption date, and
discharge, all Outstanding Bonds on the earliest
applicable redemption date, that amount to be paid to the
Trustee, plus
(ii) An amount of money equal to the Additional
Payments relating to those Bonds accrued and to accrue
until actual final payment and redemption of those Bonds,
that amount or applicable portions thereof to be paid to
the Trustee or to the Persons to whom those Additional
Payments are or will be due.
The requirement of (ii) above with respect to Additional Payments to accrue
may be met if provisions satisfactory to the Trustee and the Authority are
made for paying those amounts as they accrue.
The rights and options granted to the Company in this Section may be
exercised whether or not the Company is in default hereunder; provided, that
such default will not relieve the Company from performing those actions which
are necessary to exercise any such right or option granted hereunder.
Section 6.3. Mandatory Redemption. The Company shall deliver to the
Trustee the moneys needed to redeem the Bonds in accordance with any mandatory
redemption provisions relating thereto as may be set forth in Section 4.01(b)
of the Indenture.
Section 6.4. Notice of Redemption. In order to exercise an option
granted in, or to consummate a redemption required by, this Article VI, the
Company shall, within 180 days following the event authorizing the exercise of
such option, or at any time during the continuation of the condition referred
to in paragraphs (c), (d) or (e) of Section 6.2 hereof, or at any time that
optional redemption of the Bonds is permitted under the Indenture as provided
in Section 6.1 hereof, or promptly upon the occurrence of a Determination of
Taxability (as defined in the Indenture), give written notice to the Authority
and the Trustee that it is exercising its option to direct the redemption of
Bonds, or that the redemption thereof is required by Section 4.01(b) of the
Indenture due to the occurrence of a Determination of Taxability, as the case
may be, in accordance with the Agreement and the Indenture, and shall specify
therein the date on which such redemption is to be made, which date shall not
be more than 180 days from the date such notice is mailed. The Company shall
make arrangements satisfactory to the Trustee for the giving of the required
notice of redemption to the Holders of the Bonds, in which arrangements the
Authority shall cooperate.
Section 6.5. Actions by Authority. At the request of the Company or
the Trustee, the Authority shall take all steps required of it under the
applicable provisions of the Indenture or the Bonds to effect the redemption
of all or a portion of the Bonds pursuant to this Article VI.
(End of Article VI)
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Each of the following shall be an
Event of Default:
(a) The occurrence of an event of default as defined
in Section 7.01 (a), (b), (c) or (d) of the Indenture;
(b) The Company shall fail to observe and perform
any other agreement, term or condition contained in this
Agreement, other than such failure as will have resulted
in an event of default described in (a) above and the
continuation of that failure for a period of 90 days after
notice thereof shall have been given to the Company by the
Authority or the Trustee, or for such longer period as the
Authority and the Trustee may agree to in writing;
provided, that failure shall not constitute an Event of
Default so long as the Company institutes curative action
within the applicable period and diligently pursues that
action to completion within 150 days after the expiration
of initial cure period as determined above, or within such
longer period as the Authority and the Trustee may agree
to in writing; and
(c) By decree of a court of competent jurisdiction
the Company shall be adjudicated a bankrupt, or an order
shall be made approving a petition or answer filed seeking
reorganization or readjustment of the Company under the
federal bankruptcy laws or other law or statute of the
United States of America or of the state of incorporation
of the Company or of any other state, or, by order of such
a court, a trustee in bankruptcy, a receiver or receivers
shall be appointed of all or substantially all of the
property of the Company, and any such decree or order
shall have continued unstayed on appeal or otherwise and
in effect for a period of sixty (60) days; and
(d) The Company shall file a petition in voluntary
bankruptcy or shall make an assignment for the benefit of
creditors or shall consent to the appointment of a
receiver or receivers of all or any part of its property,
or shall file a petition seeking reorganization or
readjustment under the Federal bankruptcy laws or other
law or statute of the United States of America or any
state thereof, or shall file a petition to take advantage
of any debtors' act.
Notwithstanding the foregoing, if, by reason of Force Majeure, the
Company is unable to perform or observe any agreement, term or condition
hereof which would give rise to an Event of Default under subsection (b)
hereof, the Company shall not be deemed in default during the continuance of
such inability. However, the Company shall promptly give notice to the
Trustee and the Authority of the existence of an event of Force Majeure and
shall use its best efforts to remove the effects thereof; provided that the
settlement of strikes or other industrial disturbances shall be entirely
within its discretion.
The term Force Majeure shall mean the following:
(i) acts of God; strikes, lockouts or
other industrial disturbances; acts of public
enemies; orders or restraints of any kind of the
government of the United States of America or of
the State or any of their departments, agencies,
political subdivisions or officials, or any
civil or military authority; insurrections;
civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires;
hurricanes; tornados; storms; droughts; floods;
arrests; restraint of government and people;
explosions; breakage, nuclear accidents or other
malfunction or accident to facilities,
machinery, transmission pipes or canals;
partial or entire failure of a utility serving
the Project; shortages of labor, materials,
supplies or transportation; or
(ii) any cause, circumstance or event
not reasonably within the control of the
Company.
The exercise of remedies hereunder shall be subject to any applicable
limitations of federal bankruptcy law affecting or precluding that declaration
or exercise during the pendency of or immediately following any bankruptcy,
liquidation or reorganization proceedings.
Section 7.2. Remedies on Default. Whenever an Event of Default shall
have happened and be subsisting, either or both of the following remedial
steps may be taken:
(a) The Authority or the Trustee may have access to,
inspect, examine and make copies of the books, records,
accounts and financial data of the Company, only, however,
insofar as they pertain to the Project; or
(b) The Authority or the Trustee may pursue all
remedies now or hereafter existing at law or in equity to
recover all amounts, including all Loan Payments and
Additional Payments and under Section 4.9 hereof the
purchase price of Bonds tendered for purchase, then due
and thereafter to become due under this Agreement, or to
enforce the performance and observance of any other
obligation or agreement of the Company under this
Agreement.
Notwithstanding the foregoing, the Authority shall not be obligated to take
any step which in its opinion will or might cause it to expend time or money
or otherwise incur liability unless and until a satisfactory indemnity bond
has been furnished to the Authority at no cost or expense to the Authority.
Any amounts collected as Loan Payments or applicable to Loan Payments and any
other amounts which would be applicable to payment of Bond Service Charges
collected pursuant to action taken under this Section shall be paid into the
Bond Fund and applied in accordance with the provisions of the Indenture or,
if the outstanding Bonds have been paid and discharged in accordance with the
provisions of the Indenture, shall be paid as provided in Section 5.08 of the
Indenture for transfers of remaining amounts in the Bond Fund.
The provisions of this Section are subject to the further limitation that
the rescission and annulment by the Trustee of its declaration that all of the
Bonds are immediately due and payable also shall constitute a rescission and
annulment of any corresponding declaration made pursuant to this Section and a
rescission and annulment of the consequences of that declaration and of the
Event of Default with respect to which that declaration has been made,
provided that no such rescission and annulment shall extend to or affect any
subsequent or other default or impair any right consequent thereon.
Section 7.3. No Remedy Exclusive. No remedy conferred upon or reserved
to the Authority or the Trustee by this Agreement is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Agreement, or now or hereafter existing at law, in equity or by statute.
No delay or omission to exercise any right or power accruing upon any default
shall impair that right or power or shall be construed to be a waiver thereof,
but any such right or power may be exercised from time to time and as often as
may be deemed expedient. In order to entitle the Authority or the Trustee to
exercise any remedy reserved to it in this Article, it shall not be necessary
to give any notice, other than any notice required by law or for which express
provision is made herein.
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. If an
Event of Default should occur and the Authority or the Trustee should incur
expenses, including attorneys' fees, in connection with the enforcement of
this Agreement or the collection of sums due hereunder, the Company shall be
required, to the extent permitted by law, to reimburse the Authority and the
Trustee, as applicable, for the expenses so incurred upon demand.
Section 7.5. No Waiver. No failure by the Authority or the Trustee to
insist upon the strict performance by the Company of any provision hereof
shall constitute a waiver of their right to strict performance and no express
waiver shall be deemed to apply to any other existing or subsequent right to
remedy the failure by the Company to observe or comply with any provision
hereof.
Section 7.6. Notice of Default. The Company shall notify the Trustee
immediately if it becomes aware of the occurrence of any Event of Default
hereunder or of any fact, condition or event which, with the giving of notice
or passage of time or both, would become an Event of Default.
(End of Article VII)
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Term of Agreement. This Agreement shall be and remain in
full force and effect from the date of delivery of the Bonds to the Original
Purchaser until such time as (i) all of the Bonds shall have been fully paid
(or provision made for such payment) and the Indenture has been released
pursuant to Section 9.01 thereof and (ii) all other sums payable by the
Company under this Agreement shall have been paid.
Section 8.2. Amounts Remaining in Funds. Any amounts in the Bond Fund
remaining unclaimed by the Holders of Bonds for four years after the due date
thereof (whether at stated maturity, by redemption, upon acceleration or
otherwise), at the option of the Company, shall be deemed to belong to and
shall be paid, subject to Section 5.07 of the Indenture, at the written
request of the Company, to the Company by the Trustee. With respect to that
principal of and any premium and interest on the Bonds to be paid from moneys
paid to the Company pursuant to the preceding sentence, the Holders of the
Bonds entitled to those moneys shall look solely to the Company for the
payment of those moneys. Further, any amounts remaining in the Bond Fund and
any other special funds or accounts created under this Agreement or the
Indenture, except the Rebate Fund, after all of the Bonds shall be deemed to
have been paid and discharged under the provisions of the Indenture and all
other amounts required to be paid under this Agreement and the Indenture have
been paid, shall be paid to the Company to the extent that those moneys are in
excess of the amounts necessary to effect the payment and discharge of the
Outstanding Bonds.
Section 8.3. Notices. All notices, certificates, requests or other
communications hereunder shall be in writing, except as provided in Section
3.4 hereof, and shall be deemed to be sufficiently given when mailed by
registered or certified mail, postage prepaid, and addressed to the
appropriate Notice Address. A duplicate copy of each notice, certificate,
request or other communication given hereunder to the Authority, the Company,
any Credit Facility Issuer or the Trustee shall also be given to the others.
The Company, the Authority, any Credit Facility Issuer and the Trustee, by
notice given hereunder, may designate any further or different addresses to
which subsequent notices, certificates, requests or other communications shall
be sent.
Section 8.4. Extent of Covenants of the Authority; No Personal
Liability. All covenants, obligations and agreements of the Authority
contained in this Agreement or the Indenture shall be effective to the extent
authorized and permitted by applicable law. No such covenant, obligation or
agreement shall be deemed to be a covenant, obligation or agreement of any
present or future member, officer, agent or employee of the Authority in other
than his official capacity, and neither the members of the Authority nor any
official executing the Bonds shall be liable personally on the Bonds or be
subject to any personal liability or accountability by reason of the issuance
thereof or by reason of the covenants, obligations or agreements of the
Authority contained in this Agreement or in the Indenture.
Section 8.5. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding in accordance with its terms upon the Authority, the
Company and their respective permitted successors and assigns provided that
this Agreement may not be assigned by the Company (except as permitted under
Sections 5.8 or 5.12 hereof) and may not be assigned by the Authority except
to (i) the Trustee pursuant to the Indenture or as otherwise may be necessary
to enforce or secure payment of Bond Service Charges or (ii) any successor
public body to the Authority.
Section 8.6. Amendments and Supplements. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Bonds and prior to all conditions provided for in the Indenture for release of
the Indenture having been met, this Agreement may not be effectively amended,
changed, modified, altered or terminated by the parties hereto except with the
consents required by, and in accordance with, the provisions of Article XI of
the Indenture, as applicable.
Section 8.7. References to Credit Facility. During such time or times
as no Credit Facility is in effect, and during the continuation of any event
of default under the Indenture due to a failure by the Credit Facility Issuer
to honor a drawing by the Trustee under the Credit Facility then in effect in
accordance with the terms thereof, references herein to the Credit Facility
Issuer shall be ineffective.
Section 8.8. Execution Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
Section 8.9. Severability. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a judicial
or administrative authority to be invalid or unenforceable, that determination
shall not affect any other provision, covenant, obligation or agreement, each
of which shall be construed and enforced as if the invalid or unenforceable
portion were not contained herein. That invalidity or unenforceability shall
not affect any valid and enforceable application thereof, and each such
provision, covenant, obligation or agreement shall be deemed to be effective,
operative, made, entered into or taken in the manner and to the full extent
permitted by law.
Section 8.10. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be
governed by and construed in accordance with the laws of the State.
(End of Article VIII)
IN WITNESS WHEREOF, the Authority and the Company have caused this
Agreement to be duly executed in their respective names, all as of the date
hereinbefore written.
OHIO AIR QUALITY DEVELOPMENT
AUTHORITY
By:
Executive Director
THE CINCINNATI GAS & ELECTRIC
COMPANY
By:
Treasurer
<PAGE>
Exhibit A
DESCRIPTION OF AIR QUALITY FACILITIES
AT
WILLIAM H. ZIMMER ELECTRIC
GENERATING STATION
The Project consists of:
(A) a high efficiency electrostatic
precipitator system designed to remove
particulates from the flue gas,
(B) a flue gas desulfurization ("scrubber")
system designed to remove sulfur dioxide from
the flue gas,
(C) a stack,
(D) a coal dust control system,
(E) a nitrous oxide control system, and
(F) a cooling tower and circulating water
system.
The precipitator system includes electrostatic precipitators and a fly
ash handling system, as well as all other necessary earthwork, piling,
foundations, structural and miscellaneous steel, supports, siding, enclosures,
electrical equipment, instrumentation and controls, mechanical equipment,
related pumps and tanks, hoppers and storage silos, and associated equipment
required for the foregoing and used exclusively in connection therewith. The
precipitator system includes related drains, sumps and piping necessary to
transmit collected waste waters to the waste water pond. The Project also
includes precipitator inlet and outlet ductwork.
The scrubber system includes an inlet plenum, six induced draft fans,
ductwork to and including six absorber modules, ductwork to the stack, FGD
reagent and lime unloading and handling system including required river cells,
FGD reagent and lime silos, an FGD reagent and lime preparation facility,
slurry tanks, scrubber sludge handling facilities which include thickener
tanks, a sludge pond underflow and overflow tanks, a sludge handling building,
stockpile facilities and auxiliary facilities. The scrubber system includes
all earthwork including stream relocation, piling, foundations, structural and
miscellaneous steel, siding, painting, electrical and mechanical components
and associated equipment required for the scrubber system and used exclusively
in connection therewith. The scrubber system includes related drains, sumps
and piping necessary to transmit collected waste waters to the waste water
pond, and also includes all pipes, pumps and associated mechanical and
electrical components to supply and recycle water for the scrubber system
operation. The scrubber system also includes a disposal area and the roads
and bridges used exclusively for the transportation of scrubber sludge, bottom
ash and other solid waste along with truck wash facilities and truck scales.
The stack includes the stack shell and brick liner, as well as earthwork,
piling, foundation and associated components.
The coal dust control systems include a coal dust collection system, a
coal dust suppression system and a coal wetting system.
The cooling tower and circulating water system includes a natural draft
cooling tower, a cooling tower basin, a cooling water flume, three circulating
water pumps, circulating water pipes and valves, the make-up water subsystem,
the blowdown subsystem, the cooling water chemical conditioning subsystem,
mechanical and electrical auxiliaries, and related controls and
instrumentation. The cooling water system also includes all related site
development and earthwork, piling, foundations, structural and miscellaneous
steel, siding, painting, electrical and mechanical components and associated
equipment required for the cooling tower and circulating water system and used
exclusively in connection therewith.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<C> <S>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,778,191
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 650,398
<TOTAL-DEFERRED-CHARGES> 729,866
<OTHER-ASSETS> 57,023
<TOTAL-ASSETS> 5,215,478
<COMMON> 762,136
<CAPITAL-SURPLUS-PAID-IN> 339,135
<RETAINED-EARNINGS> 437,706
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,538,977
160,000
40,000
<LONG-TERM-DEBT-NET> 1,866,431
<SHORT-TERM-NOTES> 26,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
84,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,499,570
<TOT-CAPITALIZATION-AND-LIAB> 5,215,478
<GROSS-OPERATING-REVENUE> 1,353,430
<INCOME-TAX-EXPENSE> 108,293
<OTHER-OPERATING-EXPENSES> 966,469
<TOTAL-OPERATING-EXPENSES> 1,074,762
<OPERATING-INCOME-LOSS> 278,668
<OTHER-INCOME-NET> 15,196
<INCOME-BEFORE-INTEREST-EXPEN> 293,864
<TOTAL-INTEREST-EXPENSE> 107,260
<NET-INCOME> 186,604
14,199
<EARNINGS-AVAILABLE-FOR-COMM> 172,405
<COMMON-STOCK-DIVIDENDS> 162,950
<TOTAL-INTEREST-ON-BONDS> 107,108
<CASH-FLOW-OPERATIONS> 356,822
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
