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 March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission Registrant, State of Incorporation, IRS Employer
File Number Address, and Telephone Number Identification No.
1-10568 LG&E Energy Corp. 61-1174555
(A Kentucky Corporation)
220 West Main Street
P.O. Box 32030
Louisville, Ky. 40232
(502) 627-2000
2-26720 Louisville Gas and Electric Company 61-0264150
(A Kentucky Corporation)
220 West Main Street
P.O. Box 32010
Louisville, Ky. 40232
(502) 627-2000
1-3464 Kentucky Utilities Company 61-0247570
(A Kentucky and Virginia Corporation)
One Quality Street
Lexington, Kentucky 40507-1428
(606) 255-2100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
LG&E Energy Corp.
129,677,030 shares, without par value, as of April 28, 2000.
Louisville Gas and Electric Company
21,294,223 shares, without par value, as of April 28, 2000,
all held by LG&E Energy Corp.
Kentucky Utilities Company
37,817,878 shares, without par value, as of April 28, 2000,
all held by LG&E Energy Corp.
This combined Form 10-Q is separately filed by LG&E Energy Corp.,
Louisville Gas and Electric Company and Kentucky Utilities Company.
Information contained herein related 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. In
particular, information contained herein related to LG&E Energy Corp. or
any of its direct or indirect subsidiaries other than Louisville Gas and
Electric Company or Kentucky Utilities Company is provided solely by LG&E
Energy Corp., not Louisville Gas and Electric Company or Kentucky Utilities
Company, and shall be deemed not included in the Form 10-Q of Louisville
Gas and Electric Company or the Form 10-Q of Kentucky Utilities Company.
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TABLE OF CONTENTS
PART I
Item 1 Financial Statements
LG&E Energy Corp. and Subsidiaries
Consolidated Statements of Income 1
Consolidated Balance Sheets 3
Consolidated Statements of Cash Flows 5
Consolidated Statements of Retained Earnings 7
Consolidated Statements of Comprehensive Income 8
Louisville Gas and Electric Company
Statements of Income 9
Balance Sheets 10
Statements of Cash Flows 12
Statements of Retained Earnings 14
Statements of Comprehensive Income 15
Kentucky Utilities Company
Statements of Income 16
Balance Sheets 17
Statements of Cash Flows 19
Statements of Retained Earnings 20
Notes to Financial Statements 21
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition 26
Item 3 Quantitative and Qualitative Disclosures About
Market Risk 32
PART II
Item 1 Legal Proceedings 33
Item 6 Exhibits and Reports on Form 8-K 34
Signatures 35
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Part I. Financial Information - Item 1. Financial Statements
LG&E Energy Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited - Thousands of $ Except Per Share Data)
Three Months
Ended
Mar. 31,
2000 1999
REVENUES:
Electric utility $365,890 $361,673
Gas utility 88,316 75,779
International and non-utility 171,184 161,813
Total revenues 625,390 599,265
OPERATING EXPENSES:
Operation and maintenance:
Fuel and power purchased 203,196 205,088
Gas supply expenses 119,228 95,064
Utility operation and
maintenance 103,858 103,705
International and non-utility
operation and maintenance 48,538 44,964
Depreciation and amortization 58,373 54,736
Non-recurring charges (Note 3) 20,713 -
Total operating expenses 553,906 503,557
Equity in earnings of uncon-
solidated ventures 5,930 21,656
OPERATING INCOME 77,414 117,364
Other income and (deductions) 5,009 6,388
Interest charges and preferred dividends 34,965 30,520
Minority interest 1,494 1,571
Income before income taxes 45,964 91,661
Income taxes 16,082 34,882
Income from continuing
operations 29,882 56,779
Income on disposal of dis-
continued operations, net of
income tax expense of $328 (Note 4) - 788
NET INCOME $ 29,882 $ 57,567
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LG&E Energy Corp. and Subsidiaries
Consolidated Statements of Income (cont.)
(Unaudited - Thousands of $ Except Per Share Data)
Three Months
Ended
Mar. 31,
2000 1999
Average common shares
outstanding 129,677 129,677
Earnings per share -
basic and diluted $.23 $.44
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Consolidated Balance Sheets
(Thousands of $)
ASSETS
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
CURRENT ASSETS:
Cash and temporary cash investments $ 109,195 $ 91,413
Marketable securities 9,991 10,126
Accounts receivable - less reserve 270,362 318,914
Materials and supplies - primarily at average cost:
Fuel (predominantly coal) 78,967 91,931
Gas stored underground 23,289 49,038
Other 96,296 90,259
Prepayments and other 54,515 54,038
Total current assets 642,615 705,719
UTILITY PLANT:
At original cost 5,958,178 5,916,905
Less: reserve for depreciation 2,550,527 2,503,851
Net utility plant 3,407,651 3,413,054
OTHER PROPERTY AND INVESTMENTS - LESS RESERVES:
Investment in unconsolidated
ventures (Note 5) 242,949 249,455
Non-utility property and plant, net 475,137 477,442
Other 25,265 25,596
Total other property and investments 743,351 752,493
DEFERRED DEBITS AND OTHER ASSETS 275,757 262,491
Total assets $5,069,374 $5,133,757
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Consolidated Balance Sheets (cont.)
(Thousands of $)
CAPITAL AND LIABILITIES
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
CURRENT LIABILITIES:
Current portion of long-term debt $ 411,808 $ 411,810
Notes payable 443,520 449,578
Accounts payable 202,197 220,460
Net liabilities of discontinued opera-
tions (Note 4) 152,384 158,222
Other 254,844 248,841
Total current liabilities 1,464,753 1,488,911
Long-term debt 1,279,426 1,299,415
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes 584,460 585,880
Investment tax credit, in
process of amortization 83,838 85,828
Regulatory liability 102,234 104,795
Other 178,598 182,357
Total deferred credits and other liabilities 949,130 958,860
Minority interests 111,133 109,952
Cumulative preferred stock 135,140 135,328
COMMON EQUITY:
Common stock, without par value -
129,677,030 shares outstanding 777,013 777,013
Other (2,165) (1,956)
Retained earnings 354,944 366,234
Total common equity 1,129,792 1,141,291
Total liabilities and capital $5,069,374 $5,133,757
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,882 $ 57,567
Items not requiring cash currently:
Depreciation and amortization 58,373 54,736
Deferred income taxes - net (8,091) 4,694
Income from discontinued operations -
net of tax (Note 4) - (788)
Other (638) (17,627)
Change in net current assets 59,434 19,647
Other (15,718) (8,417)
Net cash flows from operating activities 123,242 109,812
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities (242) (223)
Proceeds from sales of securities 132 3,075
Construction expenditures (53,716) (79,410)
Investments in unconsolidated
ventures - (74,250)
Proceeds from sale of investment
in affiliate (Note 5) 17,907 33,821
Net cash flows from investing activities (35,919) (116,987)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of bonds (20,022) -
Short-term borrowings 2,170,510 416,174
Repayment of short-term borrowings (2,178,857) (346,174)
Redemption of preferred stock - (1,202)
Payment of common dividends (41,172) (39,876)
Net cash flows from financing activities (69,541) 28,922
CHANGE IN CASH AND TEMPORARY
CASH INVESTMENTS 17,782 21,747
BEGINNING CASH AND TEMPORARY
CASH INVESTMENTS 91,413 105,604
ENDING CASH AND TEMPORARY
CASH INVESTMENTS $ 109,195 $ 127,351
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LG&E Energy Corp. and Subsidiaries
Consolidated Statements of Cash Flows (cont.)
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 4,410 $ 2,969
Interest on borrowed money 30,097 23,533
For the purposes of these statements, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Consolidated Statements of Retained Earnings
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
Balance at beginning
of period $366,234 $466,279
Net income 29,882 57,567
Cash dividends declared on
common stock ($.3175 and
$.3075 per share) 41,172 39,876
Balance at end of period $354,944 $483,970
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
Net income $29,882 $57,567
Unrealized holding gains (losses)
on available-for-sale securities
arising during the period (312) 192
Reclassification adjustment for realized
gains and losses on available-for-sale
securities included in net income 14 5
Other comprehensive (loss) income,
before tax (298) 197
Income tax benefit (expense) related to items
of other comprehensive (loss) income 113 (64)
Comprehensive income $29,697 $57,700
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Statements of Income
(Unaudited)
(Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
REVENUES:
Electric $161,326 $150,840
Gas 88,316 75,779
Total operating revenues 249,642 226,619
OPERATING EXPENSES:
Fuel for electric generation 39,926 32,457
Power purchased 21,753 23,026
Gas supply expenses 63,394 50,492
Non-recurring charges (Note 3) 8,141 -
Other operation expenses 36,975 40,192
Maintenance 13,881 14,702
Depreciation and amortization 24,149 24,144
Federal and state
income taxes 9,668 9,556
Property and other taxes 5,163 5,036
Total operating expenses 223,050 199,605
NET OPERATING INCOME 26,592 27,014
Other income and (deductions) 1,519 1,080
Interest charges 10,690 9,178
NET INCOME 17,421 18,916
Preferred stock dividends 1,165 1,089
NET INCOME AVAILABLE
FOR COMMON STOCK $ 16,256 $ 17,827
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Balance Sheets
(Thousands of $)
ASSETS
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
UTILITY PLANT:
At original cost $3,086,048 $3,065,839
Less: reserve for depreciation 1,238,536 1,215,032
Net utility plant 1,847,512 1,850,807
OTHER PROPERTY AND INVESTMENTS -
less reserve 1,353 1,224
CURRENT ASSETS:
Cash and temporary cash investments 49,059 54,761
Marketable securities 6,902 6,936
Accounts receivable - less reserve 172,077 113,859
Materials and supplies - at average cost:
Fuel (predominantly coal) 17,472 17,350
Gas stored underground 15,754 38,780
Other 35,192 35,010
Prepayments 2,100 2,775
Total current assets 298,556 269,471
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense 5,529 5,607
Regulatory assets 30,386 31,443
Other 10,010 12,900
Total deferred debits and other assets 45,925 49,950
Total assets $2,193,346 $2,171,452
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Louisville Gas and Electric Company
Balance Sheets (cont.)
(Thousands of $)
CAPITALIZATION AND LIABILITIES
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
CAPITALIZATION:
Common stock, without par value -
Outstanding 21,294,223 shares $ 425,170 $ 425,170
Retained earnings 258,987 259,231
Other (1,120) (1,025)
Total common equity 683,037 683,376
Cumulative preferred stock 95,140 95,328
Long-term debt 360,600 380,600
Total capitalization 1,138,777 1,159,304
CURRENT LIABILITIES:
Current portion of long-term debt 246,200 246,200
Notes payable 131,791 120,097
Accounts payable 143,357 113,008
Provision for rate refunds 5,409 8,962
Dividends declared 17,665 24,236
Accrued taxes 37,814 23,759
Accrued interest 7,566 9,265
Other 16,795 15,725
Total current liabilities 606,597 561,252
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes 257,422 255,910
Investment tax credit, in
process of amortization 66,182 67,253
Accumulated provision for pensions
and related benefits 40,741 38,431
Customer advances for construction 10,208 11,104
Regulatory liability 55,923 58,726
Other 17,496 19,472
Total deferred credits and other liabilities 447,972 450,896
Total capital and liabilities $2,193,346 $2,171,452
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Statements of Cash Flows
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,421 $ 18,916
Items not requiring cash currently:
Depreciation and amortization 24,149 24,143
Deferred income taxes - net (3,498) 3,650
Investment tax credit - net (1,071) (1,072)
Other 1,677 1,772
Changes in net current assets and liabilities 5,399 (7,335)
Other 4,156 4,704
Net cash flows from operating activities 48,233 44,778
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities (124) (223)
Proceeds from sales of securities - 3,065
Construction expenditures (21,269) (17,323)
Net cash flows from investing activities (21,393) (14,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings 11,694 -
Retirement of first mortgage bonds (20,000) -
Payment of dividends (24,236) (23,168)
Net cash flows from financing activities (32,542) (23,168)
CHANGE IN CASH AND TEMPORARY
CASH INVESTMENTS (5,702) 7,129
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD 54,761 31,730
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD $ 49,059 $ 38,859
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<PAGE>
Louisville Gas and Electric Company
Statements of Cash Flows (cont.)
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 3,184 $ 11,288
Interest on borrowed money 8,743 8,811
For the purposes of these statements, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Louisville Gas and Electric Company
Statements of Retained Earnings
(Unaudited)
(Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
Balance at beginning
of period $259,231 $247,462
Net income 17,421 18,916
Subtotal 276,652 266,378
Cash dividends declared on stock:
5% cumulative preferred 269 269
Auction rate cumulative
preferred 529 453
$5.875 cumulative preferred 367 367
Common 16,500 22,000
Subtotal 17,665 23,089
Balance at end of period $258,987 $243,289
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Statements of Comprehensive Income
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
Net income available for common stock $16,256 $17,827
Unrealized holding gains (losses) on
available-for-sale securities arising
during the period (159) 84
Other comprehensive (loss) income,
before tax (159) 84
Income tax benefit (expense) related to items
of other comprehensive (loss) income 64 (34)
Comprehensive income $16,161 $17,877
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Kentucky Utilities Company
Statements of Income
(Unaudited)
(Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
OPERATING REVENUES $217,778 $217,349
OPERATING EXPENSES:
Fuel for electric generation 55,615 58,155
Power purchased 38,845 39,317
Non-recurring charges (Note 3) 11,030 -
Other operation expenses 28,848 27,142
Maintenance 14,150 12,520
Depreciation and amortization 24,331 21,991
Federal and state
income taxes 11,366 17,144
Property and other taxes 4,840 4,113
Total operating expenses 189,025 180,382
NET OPERATING INCOME 28,753 36,967
Other income and (deductions) 1,325 2,168
Interest charges 9,904 9,507
NET INCOME 20,174 29,628
Preferred stock dividends 564 564
NET INCOME AVAILABLE
FOR COMMON STOCK $ 19,610 $ 29,064
The accompanying notes are an integral part of these financial statements.
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Kentucky Utilities Company
Balance Sheets
(Thousands of $)
ASSETS
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
UTILITY PLANT:
At original cost $2,872,130 $2,851,066
Less: reserve for depreciation 1,311,991 1,288,819
Net utility plant 1,560,139 1,562,247
OTHER PROPERTY AND INVESTMENTS -
less reserve 14,575 14,349
CURRENT ASSETS:
Cash and temporary cash investments 1,190 6,793
Accounts receivable - less reserve 93,211 88,549
Materials and supplies - at average cost:
Fuel (predominantly coal) 23,154 30,225
Other 27,496 26,213
Prepayments 2,322 3,743
Total current assets 147,373 155,523
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense 4,727 4,827
Regulatory assets 21,738 23,033
Other 28,401 25,111
Total deferred debits and other assets 54,866 52,971
Total assets $1,776,953 $1,785,090
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Kentucky Utilities Company
Balance Sheets (cont.)
(Thousands of $)
CAPITALIZATION AND LIABILITIES
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
CAPITALIZATION:
Common stock, without par value -
Outstanding 37,817,878 shares $ 308,140 $ 308,140
Retained earnings 324,080 329,470
Other (595) (595)
Total common equity 631,625 637,015
Cumulative preferred stock 40,000 40,000
Long-term debt 430,830 430,830
Total capitalization 1,102,455 1,107,845
CURRENT LIABILITIES:
Current portion of long-term debt 115,500 115,500
Accounts payable 86,176 116,546
Provision for rate refunds 13,907 20,567
Dividends declared 25,188 19,150
Accrued taxes 38,082 10,502
Accrued interest 9,825 7,329
Other 19,208 18,617
Total current liabilities 307,886 308,211
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes 240,678 243,620
Investment tax credit, in
process of amortization 17,656 18,575
Accumulated provision for pensions
and related benefits 48,269 48,285
Regulatory liability 44,539 46,069
Other 15,470 12,485
Total deferred credits and other liabilities 366,612 369,034
Total capital and liabilities $1,776,953 $1,785,090
The accompanying notes are an integral part of these financial statements.
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Kentucky Utilities Company
Statements of Cash Flows
(Unaudited - Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,174 $ 29,628
Items not requiring cash currently:
Depreciation and amortization 24,331 21,991
Deferred income taxes - net (4,602) (2,396)
Investment tax credit - net (919) (895)
Other (911) 1,556
Changes in net current assets and liabilities 2,222 (17,031)
Other (2,804) 1,718
Net cash flows from operating activities 37,491 34,571
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (23,530) (18,240)
Net cash flows from investing activities (23,530) (18,240)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (19,564) (18,564)
Net cash flows from financing activities (19,564) (18,564)
CHANGE IN CASH AND TEMPORARY
CASH INVESTMENTS (5,603) (2,233)
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD 6,793 59,071
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD $ 1,190 $ 56,838
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid (received) during the period for:
Income taxes $ (9,260) $ (904)
Interest on borrowed money 6,560 6,079
For the purposes of these statements, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Kentucky Utilities Company
Statements of Retained Earnings
(Unaudited)
(Thousands of $)
Three Months
Ended
Mar. 31,
2000 1999
Balance at beginning
of period $329,470 $299,167
Net income 20,174 29,628
Subtotal 349,644 328,795
Cash dividends declared on stock:
4.75% preferred 237 237
6.53% preferred 327 327
Common 25,000 18,000
Subtotal 25,564 18,564
Balance at end of period $324,080 $310,231
The accompanying notes are an integral part of these financial statements.
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<PAGE>
LG&E Energy Corp. and Subsidiaries
Louisville Gas and Electric Company
Kentucky Utilities Company
Notes to Financial Statements
(Unaudited)
1. The unaudited consolidated financial statements include the accounts of
LG&E Energy Corp. and its wholly-owned subsidiaries (LG&E Energy or the
Company). In the opinion of management, all adjustments, including
those of a normal recurring nature, have been made to present fairly
the consolidated financial position, results of operations and cash
flows for the periods indicated. 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 SEC rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading.
See the Company's, Louisville Gas and Electric Company's (LG&E's) and
Kentucky Utilities Company 's (KU's) Reports on Form 10-K for 1999 for
information relevant to the accompanying financial statements,
including information as to the significant accounting policies of the
Company.
2. On February 28, 2000, the Company announced that its Board of Directors
accepted an offer to be acquired by PowerGen for cash of approximately
$3.2 billion or $24.85 per share and the assumption of $2.2 billion of
the Company's debt. Pursuant to the acquisition agreement, among other
things, LG&E Energy will become a wholly owned subsidiary of PowerGen
and its U.S. headquarters. The Utility Operations of the Company will
continue their separate identities and serve customers in Kentucky and
Virginia under their present names. The preferred stock and debt
securities of the Utility Operations will not be affected by this
transaction. The acquisition is expected to close 9 to 12 months from
the announcement, shortly after all of the conditions to consummation
of the acquisition are met. Those conditions include, without
limitation, the approval of the holders of a majority of the
outstanding shares of common stock of each of LG&E Energy and PowerGen,
the receipt of all necessary governmental approvals and the making of
all necessary governmental filings, including approvals of various
regulators in Kentucky and Virginia under state utility laws, the
approval of the FERC under the FPA, the approval of the SEC under the
PUHCA of 1935, and the filing of requisite notifications with the
Federal Trade Commission and the Department of Justice under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
expiration of all applicable waiting periods thereunder. Shareholder
meetings to vote upon the approval of the acquisition are scheduled to
be held in early June 2000 for both LG&E Energy and PowerGen. During
the first quarter of 2000, the Company expensed approximately $1.0
million relating to the PowerGen transaction. The foregoing
description of the acquisition does not purport to be complete and is
qualified in its entirety by reference to LG&E Energy's current reports
on Form 8-K, filed February 29, 2000, with the SEC.
As of the end of April 2000 the Company has filed applications for
approval with the U.S. Securities and Exchange Commission (under the
Public Utility Holding Company Act of 1935), the Kentucky Public
Service Commission, the Virginia State Corporation Commission and the
Federal Energy Regulatory Commission (under the Federal Power Act).
Hearings before the Kentucky Commission were held April 19-21 and
submission of briefs and data requests have been completed. A decision
is expected on or about May 15 and the Company will have approximately
23 days from any order in which to file for rehearing, or approximately
33 days in which to file for appeal. While the Company and PowerGen
believe that they will receive the requisite regulatory approvals for
the merger in sufficient time to complete the transaction on the
schedule men
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<PAGE>
tioned above, there can be no assurance as to the timing of such approvals
or the ability to obtain such approvals on satisfactory terms or
otherwise.
3. During the first quarter 2000, the Company took a $12.1 million ($.09)
after-tax charge for the continued integration of the operations of
LG&E and KU including their customer service centers and their retail
electric and gas operations. The result of this consolidation was the
elimination of approximately 400 positions most of which were taken by
employees through the Company's voluntary enhanced severance program.
4. Effective June 30, 1998, the Company discontinued its merchant energy
trading and sales business. This business consisted primarily of a
portfolio of energy marketing contracts entered into in 1996 and early
1997, nationwide deal origination and some level of speculative trading
activities, which were not directly supported by the Company's physical
assets. The Company's decision to discontinue these operations was
primarily based on the impact that volatility and rising prices in the
power market had on its portfolio of energy marketing contracts.
Exiting the merchant energy trading and sales business enabled the
Company to focus on optimizing the value of physical assets it owns or
controls, and reduced the earnings impact on continuing operations of
extreme market volatility in its portfolio of energy marketing
contracts. The Company continues to settle commitments that obligate
it to buy and sell natural gas and electric power. If the Company is
unable to dispose of these commitments or assets it will continue to
meet its obligations under the terms of the contracts. The Company,
however, has maintained sufficient market knowledge, risk management
skills, technical systems and experienced personnel to maximize the
value of power sales from physical assets it owns or controls,
including LG&E, KU and WKE.
As a result of the Company's decision to discontinue its merchant
energy trading and sales activity, and the initial decision to sell the
associated gas gathering and processing business, the Company recorded
an after-tax loss on disposal of discontinued operations of $225
million in the second quarter of 1998. The loss on disposal of
discontinued operations resulted primarily from several fixed-price
energy marketing contracts entered into in 1996 and early 1997,
including the Company's long-term contract with OPC. Other components
of the write-off included costs relating to certain peaking options,
goodwill associated with the Company's 1995 purchase of merchant energy
trading and sales operations and exit costs.
In the fourth quarter of 1999, the Company received an adverse decision
from the arbitration panel considering its contract dispute with OPC,
which was commenced by the Company in April 1998. As a result of this
adverse decision, higher than anticipated commodity prices, increased
load demands, and other factors, the Company increased its after-tax
accrued loss on disposal of discontinued operations by $175 million.
The additional write-off included costs related to the remaining
commitments in its portfolio and exit costs expected to be incurred to
serve those commitments. Although the Company used what it believes to
be appropriate estimates for future energy prices, among other factors,
to calculate the net realizable value of discontinued operations, there
are inherent limitations in models to accurately predict future
commodity prices, load demands and other events that could impact the
amounts recorded by the Company.
- 22 -
<PAGE>
Operating results for the discontinued merchant energy trading and
sales business follow.
Three Months
Ended
Mar. 31,
2000 1999
Revenues $ 74,698 $ 146,498
Loss before taxes (1,389) (4,650)
Loss from discontinued opera-
tions, net of income taxes (1,389) (2,749)
Net liabilities of discontinued operations at March 31, 2000, follow.
Accounts receivable $ 24,809
Price risk management assets 30,816
Accounts payable and accruals (36,215)
Other assets and liabilities, net (3,388)
Net assets before accrued
loss on disposal of dis-
continued operations 16,022
Accrued loss on disposal
of discontinued operations,
net of income tax benefit
of $102,647 (168,406)
Net liabilities of discon-
tinued operations $(152,384)
Total pretax charges against the accrued loss on disposal of
discontinued operations through March 31, 2000, include $260.6 million
for commitments prior to disposal, $69.6 million for transaction
settlements, $11.1 million for goodwill, and $31.5 million for other
exit costs. While the Company has been successful in settling portions
of its discontinued operations, significant assets, operations and
obligations remain. The Company continues to manage the remaining
portfolio and believes it has hedged certain of its future obligations
through various power purchase commitments and planned construction of
physical assets. Management cannot predict the ultimate effectiveness
of these hedges.
The pretax net fair value of the remaining commitments as of March 31,
2000, are currently estimated to be approximately $41.3 million in
2000, $33.0 million to $57.8 million each year in 2001 through 2004 and
$9.7 million in the aggregate thereafter.
As of March 31, 2000, the Company's discontinued operations were under
various contracts to buy and sell power and gas with net notional
amounts of 16.3 million Mwh's of power and 21.9 million Mmbtu's of
natural gas with a volumetric weighted-average period of approximately
38 and 41 months, respectively. These notional amounts are based on
estimated loads since various commitments do not include specified firm
volumes. The Company is also under contract to buy or sell coal and
SO2 allowances in support of its power contracts. Notional amounts
reflect the nominal volume of transactions included in the Company's
price risk management commitments, but do not reflect actual amounts of
cash, financial instruments, or quantities of the underlying commodity
which may ultimately be exchanged between the parties.
- 23 -
<PAGE>
As of May 9, 2000, the Company estimates that a $1 change in
electricity prices and a 10-cent change in natural gas prices across
all geographic areas and time periods could change the value of the
Company's remaining energy portfolio by approximately $2.6 million. In
addition to price risk, the value of the Company's remaining energy
portfolio is subject to operational and event risks including, among
others, increases in load demand, regulatory changes, and forced
outages at units providing supply for the Company. As of May 9, 2000,
the Company estimates that a 1% change in the forecasted load demand
could change the value of the Company's remaining energy portfolio by
$11.7 million.
The Company's discontinued operations maintain policies intended to
minimize credit risk and revalue credit exposures daily to monitor
compliance with those policies. As of March 31, 2000, over 95% of the
Company's price risk management commitments were with counterparties
rated BBB equivalent or better. As of March 31, 2000, six
counterparties represented 88% of the Company's price risk management
commitments.
5. In March 2000, the Company sold its interest in CEC-APL L.P., a
partnership in which the Company owned a 49% interest, for
approximately $18 million. The sale resulted in a pretax gain of
approximately $2 million. In March 1999, LG&E-Westmoreland Rensselaer,
a California general partnership in which the Company owns a 50%
interest, sold substantially all the assets and major contracts of its
79 MW gas-fired cogeneration facility in Rensselaer, New York, with net
proceeds to the Company of approximately $34 million.
6. In February, 2000, the Commission acknowledged that the PBR Order
issued on January 7, 2000, contained an error and issued an Order
changing the KU annual base rate reduction from $36.5 million to $33.9
million. The Commission also ordered rehearing on several issues and
subsequently held hearings in April 2000. The Commission is expected
to issue a Final Order on Rehearing by June 2000. The outcome of these
hearings are not anticipated to have a material effect on the
consolidated financial results of the Company.
In March 2000, the 2000 Kentucky General Assembly passed House Bill 897
that established requirements for cost allocations, affiliate
transactions and a code of conduct governing the relationship between
utilities and their non-utility operations and affiliates. Management
does not expect this matter to have a material adverse effect on the
Company's financial position or results of operations.
In March 2000, LG&E filed a Notice and Statement with the Kentucky
Public Service Commission requesting an adjustment in LG&E's gas rates.
LG&E asked for a general adjustment in gas rates for a test year for
the twelve months ended December 31, 1999. The revenue increase
applied for is $27.9 million. The new rates are expected to go into
effect October 1, 2000. The increase is to recover higher costs for
providing service to natural gas customers.
- 24 -
<PAGE>
7. External and intersegment revenues and income from continuing
operations by business segment for the three months ended March 31,
2000, follow:
Income
Inter- from
External segment Cont.
Revenues Revenues Oper.
LG&E electric $155,119 $ 6,207 $ 16,305
LG&E gas 88,316 - (49)
KU electric 210,771 7,007 19,610
Power Operations 4,676 - 6,827
Western Kentucky
Energy 60,754 - (501)
Argentine Gas
Distribution 30,742 - (731)
Other Non-Utility
Operations 75,012 - (9,990)
All Other - (13,214) (1,589)
Consolidated $625,390 $ - $ 29,882
External and intersegment revenues and income from continuing
operations by business segment for the three months ended March 31,
1999, follow:
Income
Inter- from
External segment Cont.
Revenues Revenues Oper.
LG&E electric $148,326 $ 2,514 $ 17,613
LG&E gas 75,779 - 214
KU electric 213,347 4,002 29,064
Power Operations 6,904 - 14,180
Western Kentucky
Energy 59,978 - (1,024)
Argentine Gas
Distribution 29,797 - 357
Other Non-Utility
Operations 65,134 - 888
All Other - (6,516) (4,513)
Consolidated $599,265 $ - $ 56,779
8. Reference is made to Part II, Legal Proceedings, below and Part I, Item
3, Legal Proceedings, of the Company's, KU Energy's, LG&E's and KU's
(and Note 18 of the Company's Notes to Financial Statements) Annual
Reports on Form 10-K for the year ended December 31, 1999.
- 25 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
General
The Company's principal subsidiaries are LG&E, an electric and gas utility,
KU, an electric utility, and LG&E Capital Corp. (Capital Corp.), the
holding company for all non-utility investments other than trading
operations. LG&E's and KU's results of operations and liquidity and
capital resources are important factors affecting the Company's
consolidated results of operations and capital resources and liquidity.
On February 28, 2000, the Company announced that its Board of Directors
accepted an offer to be acquired by PowerGen for cash of approximately $3.2
billion or $24.85 per share and the assumption of $2.2 billion of the
Company's debt. For more information, see Note 2 of Notes to Financial
Statements under Item 1.
Some of the matters discussed in the Notes to Consolidated Financial
Statements and Management's Discussion and Analysis may contain forward-
looking statements that are subject to certain risks, uncertainties and
assumptions. Actual results may vary materially. Factors that could cause
actual results to differ materially include, but are not limited to:
general economic conditions; business and competitive conditions in the
energy industry; future prices of power and natural gas; unusual weather;
regulatory decisions; and other factors described from time to time in the
Company's reports to the Securities and Exchange Commission, including
Exhibit 99.01 to the Form 10-K for the year ended December 31, 1999.
Results of Operations
The results of operations for LG&E, KU and Capital Corp.'s Argentine gas
distribution and WKE operations are affected by seasonal fluctuations in
temperature and other weather-related factors. Because of these and other
factors, the results of one interim period are not necessarily indicative
of results or trends to be expected for the full year.
Three Months Ended March 31, 2000, Compared to
Three Months Ended March 31, 1999
The Company's earnings per share from continuing operations decreased to
$.23 in 2000 from $.44 in 1999. The decrease resulted from recording non-
recurring after-tax charges of $12.5 million ($.10 per share) in March
2000, and from recognizing one-time after-tax gains totaling $10.3 million
($.08 per share) in 1999. The non-recurring after-tax charges represent
$12.1 million of costs associated with the integration of the Company's two
utilities operations (the One-Utility Program) and $0.4 million of merger
costs incurred by the Company relating to its proposed merger with PowerGen
plc. The gains in 1999 resulted from selling the Company's interest in the
Rensselaer, New York, project ($8.9 million, or $.07 per share) and a
bankruptcy settlement received in connection with the Company's windpower
partnerships ($1.4 million, or $.01 per share).
LG&E Results:
LG&E's net income decreased $1.6 million (9%) for the quarter ended March
31, 2000, as compared to the quarter ended March 31, 1999, primarily
because of mild weather, as the region recorded its mildest winter since
1931, increases in gas supply expenses, fuel for electric generation, and
administrative and general operating expenses including a $4.9 million net
of tax one-time charge for the Company's One-Utility Program. These
expenses were partially offset by increased gas sales to ultimate
consumers, off-system electric sales, and the reversal of a rate refund of
$.5 million net of tax. Excluding these one-time charges, LG&E's net
income would have increased $2.8 million.
- 26 -
<PAGE>
A comparison of LG&E's revenues for the quarter ended March 31, 2000, with
the quarter ended March 31, 1999, excluding the reversal of an FAC refund
of $1.1 million which was offset by an additional accrual for performance-
based ratemaking of $.3 million, reflects increases and (decreases) which
have been segregated by the following principal causes (thousands of $):
Electric Gas
Cause Revenues Revenues
Retail sales:
Fuel and gas supply adjustments $ 1,112 $10,006
Performance based rate reduction (1,179) -
Electric rate refunds (1,156) -
Variation in sales volume, merger
surcredit, etc. (4,065) (2,443)
Total retail sales (5,288) 7,563
Wholesale sales 15,786 4,720
Gas transportation - net - 189
Other (12) 65
Total $10,486 $12,537
Fuel for electric generation and gas supply expenses comprise a large
component of LG&E's total operating expenses. LG&E's electric and gas
rates contain a fuel adjustment clause and a gas supply clause,
respectively, whereby increases or decreases in the cost of fuel and gas
supply may be reflected in retail rates, subject to the approval of the
Public Service Commission of Kentucky. Fuel for electric generation
increased $7.5 million (23%) for the quarter because of an increase in
generation ($11 million), partially offset by a lower cost of coal burned
($3.5 million). Gas supply expenses increased $12.9 million (26%) due to
increases in net gas supply cost.
Power Purchased decreased $1.3 million (6%) due to a decrease in purchases
for wholesale sales ($3.0 million), partially offset by higher purchases to
support off-system sales ($1.7 million).
Non-recurring charges of $5.0 million, after tax, include the costs
associated with the Company's One-Utility Program.
Other operation expenses decreased $3.2 million as compared to 1999. This
decrease resulted from decreases in pension expense, $1.2 million, and
various other administrative and general activities, $2 million.
Maintenance expenses decreased $.8 million (6%) in 2000 primarily due to
decreases in scheduled outages of $1.5 million, and electric distribution
maintenance, $.6 million, partially offset by an increase in software and
communication equipment maintenance, $1.3 million.
Variations in income tax expense are largely attributable to changes in
pretax income.
KU Results:
KU's net income decreased $9.5 million (32%) for the quarter ended March
31, 2000, as compared to the quarter ended March 31, 1999. The decrease
was mainly due to a non-recurring charge of $6.6 million, after tax, made
in the first quarter of 2000 for costs associated
- 27 -
<PAGE>
with further integration of KU and LG&E. Excluding this non-recurring
charge, net income decreased $2.9 million.
A comparison of KU's revenues for the quarter ended March 31, 2000, with
the quarter ended March 31, 1999, reflects increases and (decreases) which
have been segregated by the following principal causes (thousands of $):
Sales to ultimate consumers:
Fuel clause adjustments $ 867
Environmental cost recovery (1,272)
Performance based rate reduction (893)
Merger surcredit (452)
Electric rate refunds (3,389)
Variation in sales volume, etc. 4,601
Total retail sales (538)
Wholesale sales 1,309
Other (342)
Total $ 429
Fuel for electric generation comprises a large segment of KU's total
operating expenses. KU's electric rates contain a fuel adjustment clause
(FAC), whereby increases or decreases in the cost of fuel are reflected in
retail rates, subject to the approval of the Public Service Commission of
Kentucky, The Virginia State Corporation Commission, and the Federal Energy
Regulatory Commission.
Fuel for electric generation decreased $2.5 million (4%) for the quarter
because of a decrease in generation ($1.5 million) and the lower cost of
coal burned ($1 million).
Non-recurring charges of $6.6 million, after tax, include the costs
associated with the Company's One-Utility Program.
Other operating expenses increased by $1.7 million (6%). The increase was
primarily attributable to increased transmission ($.6 million) and
distribution ($.4 million) system operating expenditures as well as
increased sales and marketing expenses ($.5 million).
Maintenance expenses increased by $1.6 million (13%) due primarily to
increased maintenance at the steam generating plants ($1.3 million) and the
distribution system ($.5 million).
Depreciation and amortization increased by $2.3 million (11%) due to
additional utility plant in service.
Variations in income tax expense are largely attributable to changes in
pretax income.
LG&E Capital Corp. and Other Results:
Power Operations
Power Operations' revenues decreased from $6.9 million in 1999 to $4.7
million in 2000. The decrease resulted mainly from recognizing revenues in
1999 related to the Rensselaer project, which the Company sold in March
1999.
Power Operations' operation and maintenance expense decreased from $3.6
million in 1999 to $1.6 million in 2000. The decrease resulted primarily
from writing off assets related to the Rensselaer project in 1999.
- 28 -
<PAGE>
Power Operations' equity in earnings of unconsolidated ventures decreased
from $21.4 million in 1999 to $5.8 million in 2000, due mainly to
recognizing a pretax gain or $14.5 million on the sale of the Rensselaer
project in 1999.
Western Kentucky Energy
Western Kentucky Energy Corp.'s (WKE's) revenues were approximately the
same in 2000 and 1999, $60.1 million and 60.0 million, respectively.
Higher smelter sales were offset by lower off-system sales resulting from
lower volumes and prices.
WKE's cost of revenues were approximately the same in 2000 and 1999, $35.3
million and $35.7 million, respectively.
WKE's operating expenses increased slightly in 2000 to $25.8 million from
$24.7 million in 1999. The increase was due to more unit outages in 2000
and higher depreciation expense.
Argentine Gas Distribution
The Argentine Distribution companies' revenues of $30.7 million, cost of
revenues of $16.9 million and operation and maintenance expenses of $5.7
million in 2000 were slightly higher than 1999 due to higher consumption
per customer.
Other
Other revenues increased from $65.1 million in 1999 to $75.0 million in
2000. The increases resulted from acquiring CRC-Evans in July 1999 and
increased sales in the Company's natural gas gathering and processing and
energy marketing businesses, partially offset by a decrease in Retail
Access Services' revenues and a decrease resulting from recognizing fees in
1999 related to the development of an independent power project in Gregory,
Texas.
Other cost of revenues increased from $47.9 million in 1999 to $60.6
million in 2000. The increases resulted from acquiring CRC-Evans in July
1999 and increased sales in the Company's natural gas gathering and
processing and energy marketing businesses, partially offset by a decrease
at Retail Access Services.
Other income for Capital Corp. and Other increased from $3.3 million in
1999 to $4.2 million in 2000. The increase resulted from higher interest
income and the gain on the sale of the Company's interest in CEC-APL L.P.
Decreases resulting from payments received in 1999 related to the
Rensselaer sale and the initial settlement of a claim on an undeveloped
independent power project in California partially offset the increases.
Capital Corp. and Other interest expense increased from $10.2 million in
1999 to $13.2 million in 2000. The increase resulted from funding
discontinued operations, corporate operating expenses, and the Gas BAN and
CRC acquisitions. The Company's consolidated effective income tax rate
decreased from 38.1% in 1999 to 35.0% in 2000 due to an increase in
investment and wind tax credits as a percent of pretax income.
Liquidity and Capital Resources
The Company's need for capital funds is largely related to the construction
of plant and equipment necessary to meet the needs of electric and gas
utility customers and equity investments in connection with independent
power production projects and other energy-related growth or acquisition
opportunities among the non-utility businesses. Capital funds are also
needed for the Company's capital obligations under the Big Rivers lease
arrangements, losses incurred in connection with the discontinuance of the
merchant energy trading and sales business, information system
enhancements, and other business develop
- 29 -
<PAGE>
ment opportunities. Fluctuations in the Company's discontinued energy
marketing and trading activities also affected liquidity throughout the
quarter. Lines of credit and commercial paper programs are maintained to
fund these temporary capital requirements.
Construction expenditures for the three months ended March 31, 2000, of
$53.7 million were financed with internally generated funds and commercial
paper.
The Company's combined cash and marketable securities balance increased
$17.6 million during the three months ended March 31, 2000. The increase
reflects cash flows from operations and the proceeds received from the sale
of CEC-APL L.P., partially offset by construction expenditures, debt
repayments and dividends paid.
Variations in accounts receivable, accounts payable and materials and
supplies are generally not significant indicators of the Company's
liquidity. Such variations are primarily attributable to fluctuations in
weather, which have a direct effect on sales of electricity and natural
gas. The decreases in accounts receivable and accounts payable resulted
mainly from seasonal fluctuations at LG&E, KU and the Company's natural gas
gathering and processing business. The decrease in fuel resulted from
seasonal fluctuations at KU and WKE, and the decrease in gas stored
underground resulted from seasonal fluctuations at LG&E and the natural gas
gathering and processing business.
Long-term debt decreased by $20 million due to the redemption of LG&E's
first mortgage bonds 7.5% series due July 1, 2002, in January 2000.
At March 31, 2000, unused capacity under the Company's lines of credit
totaled $415.4 million after considering commercial paper support and
approximately $40.0 million in letters of credit securing on- and off-
balance sheet commitments. In March 2000, KU finalized an uncommitted line
of credit for $60 million.
Standard and Poor's downgraded LG&E's, KU's and Capital Corp.'s debt
ratings on February 28, 2000. The downgrades reflect S&P's opinion of the
credit quality of the Companies following the impact of the PBR and the OPC
decision. S&P, Moody's and Duff and Phelps continue to have the debt of
the Companies on credit watch pending review of the financial condition
following consummation of the merger of the Company with PowerGen.
The Company's capitalization ratios at March 31, 2000, and December 31,
1999, follow:
Mar. 31, Dec. 31,
2000 1999
Long-term debt (including current portion) 49.8% 49.8%
Notes payable 13.0 13.1
Preferred stock 4.0 3.9
Common equity 33.2 33.2
Total 100.0% 100.0%
LG&E's capitalization ratios at March 31, 2000, and December 31, 1999,
follow:
Mar. 31, Dec. 31,
2000 1999
Long-term debt (including current portion) 40.0% 41.1%
Notes payable 8.7 7.9
Preferred stock 6.3 6.2
Common equity 45.0 44.8
Total 100.0% 100.0%
- 30 -
<PAGE>
KU's capitalization ratios at March 31, 2000, and December 31, 1999,
follow:
Mar. 31, Dec. 31,
2000 1999
Long-term debt (including current portion) 44.9% 44.7%
Preferred stock 3.3 3.3
Common equity 51.8 52.0
Total 100.0% 100.0%
For a description of significant contingencies that may affect the Company,
LG&E and KU, reference is made to Part II herein - Item 1, Legal
Proceedings.
- 31 -
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
LG&E Energy is exposed to market risks in both its regulated and non-
utility operations. Both operations are exposed to market risks from
changes in interest rates and commodity prices, while the non-utility
operations are also exposed to changes in foreign exchange rates. To
mitigate changes in cash flows attributable to these exposures, the Company
has entered into various derivative instruments. Derivative positions are
monitored using techniques that include market value and sensitivity
analysis.
The potential change in interest expense resulting from changes in base
interest rates of the Company's unswapped debt did not change materially in
the first quarter of 2000. The potential changes in the fair values of the
Company's interest-rate swaps resulting from changes in interest rates and
the yield curve also did not change materially in the first quarter of
2000. The Company's exposure to market risks from changes in commodity
prices and foreign exchange rates remained immaterial in the first quarter
of 2000.
- 32 -
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings.
For a description of the significant legal proceedings involving the
Company, LG&E and KU, reference is made to the information under the
following items and captions of the Company's, LG&E's and KU's respective
combined Annual Report on Form 10-K for the year ended December 31, 1999:
Item 1, Business; Item 3, Legal Proceedings; Item 7, Management's
Discussion and Analysis of Results of Operations and Financial Condition;
Notes 2, 6, 18 and 22 of the Company's Notes to Financial Statements under
Item 8; Notes 3, 12 and 16 of LG&E's Notes to Financial Statements under
Item 8 and Notes 3, 11 and 14 of KU's Notes to Financial Statements under
Item 8. Except as described herein, to date, the proceedings reported in
the Company's, LG&E's and KU's respective combined Annual Report on Form 10-
K have not changed materially.
PowerGen Merger Regulatory Filings
On February 28, 2000, the Company announced the signing of a definitive
merger agreement with PowerGen plc of the United Kingdom, wherein, upon
closing, the Company will become a wholly-owned subsidiary of PowerGen and
shareholders of the Company will receive $24.85 per share of Company common
stock. The transaction is scheduled to be completed nine to twelve months
from announcement, subject to receipt of required regulatory approvals and
other conditions to consummation. Applications for approval were filed
with the Kentucky Commission, the Virginia State Corporation Commission and
the FERC (under the Federal Power Act) in March 2000, and with the SEC
(under the Public Utility Holding Company Act of 1935) in April 2000.
Approval applications or notice filings will also be made to the Tennessee
Regulatory Authority, to the Department of Justice and the Federal Trade
Commission (under the Hart-Scott-Rodino Antitrust Improvements Act of 1976)
and as required under the "Exon-Florio" US Omnibus Trade and
Competitiveness Act of 1988. PowerGen has made standard filings with the
United Kingdom Office of Fair Trading under the Fair Trading Act of 1973,
which implements a voluntary regulatory regime.
Hearings before the Kentucky Commission were held April 19-21 and
submissions of briefs and data requests have been completed. A decision is
expected on or about May 15 and the Company will have approximately 23 days
from any order in which to file for rehearing, or approximately 33 days in
which to file for appeal. While the Company and PowerGen believe that they
will receive the requisite regulatory approvals for the merger in
sufficient time to complete the transaction on the schedule mentioned
above, there can be no assurance as to the timing of such approvals or the
ability to obtain such approvals on satisfactory terms or otherwise. See
Item 1, PowerGen Merger and Note 22 to the Company's Notes to Financial
Statements under Item 8 of its Annual Report on Form 10-K for the year
ended December 31, 1999 for further discussion of this matter.
- 33 -
<PAGE>
Item 6(a). Exhibits.
Exhibit
Number Description
27 Financial Data Schedules for LG&E Energy Corp.,
Louisville Gas and Electric Company, and Kentucky
Utilities Company.
Item 6(b). Reports on Form 8-K.
On January 6, 2000, the Company filed a report on Form 8-K announcing that
on December 21, 1999, it received an adverse order from the arbitration
panel considering its contract dispute with OPC.
On January 25, 2000, the Company filed a report on Form 8-K announcing that
on January 7, 2000, it issued a statement regarding the Kentucky
Commission's decision in the PBR case involving its two utility
subsidiaries, LG&E and KU.
On February 29, 2000, the Company filed a report on Form 8-K announcing
that on February 27, 2000, it and PowerGen entered into an Agreement and
Plan of Merger.
- 34 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LG&E Energy Corp.
Registrant
Date: May 15, 2000 /s/ Michael D. Robinson
Michael D. Robinson
Vice President and Controller
(On behalf of the registrant in his
capacity as Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Louisville Gas and Electric Company
Registrant
Date: May 15, 2000 /s/ Michael D. Robinson
Michael D. Robinson
Vice President and Controller
(On behalf of the registrant in his
capacity as Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Kentucky Utilities Company
Registrant
Date: May 15, 2000 /s/ Michael D. Robinson
Michael D. Robinson
Vice President and Controller
(On behalf of the registrant in his
capacity as Principal Accounting Officer)
- 35 -
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40,000
<LONG-TERM-DEBT-NET> 430,830
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 115,500
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 558,998
<TOT-CAPITALIZATION-AND-LIAB> 1,776,953
<GROSS-OPERATING-REVENUE> 217,778
<INCOME-TAX-EXPENSE> 11,366
<OTHER-OPERATING-EXPENSES> 177,659
<TOTAL-OPERATING-EXPENSES> 189,025
<OPERATING-INCOME-LOSS> 28,753
<OTHER-INCOME-NET> 1,325
<INCOME-BEFORE-INTEREST-EXPEN> 30,078
<TOTAL-INTEREST-EXPENSE> 9,904
<NET-INCOME> 20,174
564
<EARNINGS-AVAILABLE-FOR-COMM> 19,610
<COMMON-STOCK-DIVIDENDS> 25,000
<TOTAL-INTEREST-ON-BONDS> 8,735
<CASH-FLOW-OPERATIONS> 37,369
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes common stock expense of $595.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000861388
<NAME> LG&E ENERGY CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,407,651
<OTHER-PROPERTY-AND-INVEST> 599,603
<TOTAL-CURRENT-ASSETS> 744,656
<TOTAL-DEFERRED-CHARGES> 253,625
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,005,535
<COMMON> 775,299 <F1>
<CAPITAL-SURPLUS-PAID-IN> (451)<F2>
<RETAINED-EARNINGS> 354,944
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,129,792
0
135,140
<LONG-TERM-DEBT-NET> 1,279,426
<SHORT-TERM-NOTES> 443,520
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 411,808
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,605,849
<TOT-CAPITALIZATION-AND-LIAB> 5,005,535
<GROSS-OPERATING-REVENUE> 625,390
<INCOME-TAX-EXPENSE> 16,082
<OTHER-OPERATING-EXPENSES> 549,470 <F3>
<TOTAL-OPERATING-EXPENSES> 565,552
<OPERATING-INCOME-LOSS> 59,838
<OTHER-INCOME-NET> 5,009
<INCOME-BEFORE-INTEREST-EXPEN> 64,847
<TOTAL-INTEREST-EXPENSE> 33,237
<NET-INCOME> 31,610
1,728
<EARNINGS-AVAILABLE-FOR-COMM> 29,882
<COMMON-STOCK-DIVIDENDS> 41,172
<TOTAL-INTEREST-ON-BONDS> 16,910
<CASH-FLOW-OPERATIONS> 125,157
<EPS-BASIC> 0.23
<EPS-DILUTED> 0.23
<FN>
<F1>Includes common stock expense of $1,714.
<F2>Represents unrealized loss on marketable securities,
net of taxes.
<F3>Includes equity in earnings of affiliates of
$5,930.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000060549
<NAME> LOUISVILLE GAS AND ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,847,512
<OTHER-PROPERTY-AND-INVEST> 1,353
<TOTAL-CURRENT-ASSETS> 298,556
<TOTAL-DEFERRED-CHARGES> 45,925
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,193,346
<COMMON> 424,334 <F1>
<CAPITAL-SURPLUS-PAID-IN> (284)<F2>
<RETAINED-EARNINGS> 258,987
<TOTAL-COMMON-STOCKHOLDERS-EQ> 683,037
0
95,140
<LONG-TERM-DEBT-NET> 360,600
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 131,791
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 922,778
<TOT-CAPITALIZATION-AND-LIAB> 2,193,346
<GROSS-OPERATING-REVENUE> 249,643
<INCOME-TAX-EXPENSE> 9,668
<OTHER-OPERATING-EXPENSES> 213,383
<TOTAL-OPERATING-EXPENSES> 223,051
<OPERATING-INCOME-LOSS> 26,592
<OTHER-INCOME-NET> 1,519
<INCOME-BEFORE-INTEREST-EXPEN> 28,111
<TOTAL-INTEREST-EXPENSE> 10,690
<NET-INCOME> 17,421
1,165
<EARNINGS-AVAILABLE-FOR-COMM> 16,256
<COMMON-STOCK-DIVIDENDS> 16,500
<TOTAL-INTEREST-ON-BONDS> 8,175
<CASH-FLOW-OPERATIONS> 48,233
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes common stock expense of $836.
<F2>Represents unrealized gain/loss on marketable securities,
net of taxes.
</FN>
</TABLE>