SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 12, 1997
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-10944 KU Energy Corporation 61-1141273
(A Kentucky Corporation)
One Quality Street
Lexington, Kentucky 40507-1428
(606) 255-2100
1-3464 Kentucky Utilities Company 61-0247570
(A Kentucky and Virginia Corporation)
One Quality Street
Lexington, Kentucky 40507-1428
(606) 255-2100
NOT APPLICABLE
(Former name or former address, if changed since last report)
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KU ENERGY CORPORATION
Item 5. Other Events
On September 12, 1997 the Kentucky Public Service Commission
(Kentucky PSC) entered an Order (Kentucky Order) approving the proposed
merger of KU Energy Corporation (KU Energy) with LG&E Energy Corp.
(LG&E Energy). The companies entered into an Agreement and Plan of
Merger (the Merger Agreement) on May 20, 1997. Pursuant to the Merger
Agreement, holders of KU Energy will receive 1.67 shares of LG&E Energy
common stock for each share of KU Energy common stock held at the
effective date of the merger. As a result of the merger, LG&E Energy
will become the parent holding company of Kentucky Utilities Company
(KU) and Louisville Gas and Electric Company (LG&E) and the non-utility
subsidiaries of each party.
In the application filed with the Kentucky PSC, the utilities
proposed that net non-fuel cost savings expected to result from the
merger be spread among the shareholders, wholesale requirements
customers and the retail electric customers in each state jurisdiction.
The Kentucky Order approved this regulatory plan submitted by the
companies. Fuel cost savings will be passed on to Kentucky retail
customers through fuel adjustment clauses. In the Kentucky Order, the
Kentucky PSC approved the proposed surcredit tariffs which will result
in reductions in Kentucky retail electric customers' bills in amounts
based on 50% of the currently estimated gross non-fuel cost savings to
be achieved as a result of the merger during the first five years, less
50% of the actual costs to achieve such savings (but not in excess of
the currently estimated costs to achieve), in each of the five years
following effectiveness of the merger . Under the surcredit tariffs, as
approved by the Kentucky PSC, Kentucky retail customers will be entitled
to such reductions whether or not such level of cost savings is actually
achieved.
Total currently estimated merger savings for the 10 years
following the merger are $765 million, with costs to achieve estimated
at $77.2 million.
The Kentucky Order requires KU and LG&E to initiate a formal
proceeding no later than midway through the fifth year following the
merger to present a plan for sharing with ratepayers the then projected
levels of merger savings for periods following the initial five years.
In addition, the parties have proposed a base rate cap for five years
after consummation of the merger, except in the event of extraordinary
circumstances such as a significant increase in the federal corporate
tax rate. The Kentucky Order notes that the Kentucky PSC has the
statutory jurisdiction to regulate utility rates including the authority
to investigate and review LG&E's and KU's earnings at any time.
The Kentucky Order also requires KU and LG&E to file by
September 14, 1998, or the consummation of the merger, whichever is
later, detailed plans to address any future rate regulation that may be
adopted in the state. If either utility elects to remain under
traditional rate of return regulation, it must state the reasons and
include an analysis and proposals relative to its earnings at that time.
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Alternatively, the Kentucky Order provides that if either utility elects
non-traditional regulation, the reasons for this choice must be
disclosed, along with details of a proposal and how it will achieve the
Kentucky PSC's goals of providing incentives to utilities and a sharing
of resulting benefits with ratepayers. The Kentucky Order further
provides that the Kentucky PSC will at that time determine on the basis
of the described filings and other information whether changes should be
made to the existing regulation of KU and LG&E.
The Kentucky Order also imposes certain routine record keeping and
reporting requirements on KU and LG&E, including quarterly financial
analyses to be submitted to the Kentucky PSC beginning with the last
quarter of 1997. The Kentucky Order is subject to petition for
rehearing until October 6, 1997, or appeal until October 15, 1997.
The merger is also subject to approval by KU Energy's and LG&E
Energy's shareholders. Special meetings of shareholder are scheduled for
October 14, 1997. Approvals are also required from the Federal Energy
Regulatory Commission, the Virginia State Corporation Commission and the
Securities and Exchange Commission under the Public Utility Holding
Company Act of 1935. Notices will be filed with the Federal Trade
Commission and the US Department of Justice as well as the Tennessee
Regulatory Authority. Consummation of the merger is currently
contemplated in the second half of 1998.
The statements in this Form 8-K regarding the estimated merger
savings and estimated costs to achieve and the estimated date of
consummation of the merger are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, which
provides a safe harbor for forward-looking statements in certain
circumstances. Readers are cautioned that such forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements of KU
Energy or LG&E Energy to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Factors that could cause KU Energy's or LG&E
Energy's actual results to differ materially from those contemplated in
any forward-looking statement include, among others, the following:
general economic and business conditions; industry capacity; changes in
technology; changes in political, social and economic conditions;
regulatory matters; integration of the operations of KU Energy and LG&E
Energy; regulatory delays or conditions imposed by regulatory bodies in
approving the merger; adverse regulatory treatment, including
requirements for rate reductions or allocation to customers of merger
cost savings in excess of what management has anticipated; the ability
of LG&E Energy and KU Energy to implement and obtain anticipated merger
costs savings and realize anticipated costs savings; the loss of any
significant customers; changes in business strategy or development
plans; the speed and degree to which competition enters the electric
utility industry; state and federal legislative and regulatory
initiatives that increase competition, affect cost and investment
recovery and have an impact on rate structures; industrial, commercial
and residential growth in the service territories of LG&E and Kentucky
Utilities; the weather and other natural phenomena; the timing and
extent of changes in commodity prices and interest rates; the
development of opportunities for growth by the subsidiaries of LG&E
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Energy and KU Energy and the other factors listed in Exhibit 99.06 to KU
Energy's Annual Report on Form 10-K for the year ended December 31,
1996, incorporated herein by reference.
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KU ENERGY CORPORATION
AND
KENTUCKY UTILITIES COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrants have each duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KU ENERGY CORPORATION AND
KENTUCKY UTILITIES COMPANY
(Registrants)
Date September 19, 1997 /s/ Michael R. Whitley
Michael R. Whitley
Chairman and President
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