<PAGE>1
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 June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 2 - 26720
LOUISVILLE GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Kentucky 61 - 0264150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 West Main Street 40232
P.O. Box 32010 (Zip Code)
Louisville, KY
(Address of principal executive offices)
(502) 627-2000
(Registrant's telephone number)
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. 21,294,223 shares, without
par value, as of July 31, 1996, all of which were held by LG&E Energy Corp.
<PAGE>2
Part I. Financial Information - Item 1. Financial Statements
Louisville Gas and Electric Company
Statements of Income
(Thousands of $)
The following statements of income include all normal recurring adjustments and
accruals which are, in the opinion of the Company, necessary to present a fair
statement of the results for the periods shown.
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
OPERATING REVENUES:
Electric (Note 2). . . . . . . . . $151,745 $142,340 $287,433 $265,882
Gas. . . . . . . . . . . . . . . . 29,362 25,481 120,418 101,455
Total operating revenues. . . . . 181,107 167,821 407,851 367,337
OPERATING EXPENSES:
Fuel for electric generation . . . 36,692 35,801 72,606 67,652
Power purchased. . . . . . . . . . 5,171 1,037 8,273 1,843
Gas supply expenses. . . . . . . . 18,652 13,594 76,884 61,961
Other operation expenses . . . . . 31,530 35,658 71,257 71,056
Maintenance. . . . . . . . . . . . 15,988 13,205 30,156 24,687
Depreciation and amortization. . . 22,251 21,440 44,501 42,880
Federal and state income
taxes . . . . . . . . . . . . . . 13,832 13,013 28,409 26,241
Property and other taxes . . . . . 4,255 4,058 9,079 8,593
Total operating expenses. . . . . 148,371 137,806 341,165 304,913
NET OPERATING INCOME. . . . . . . . 32,736 30,015 66,686 62,424
Other income and
(deductions) (Note 3). . . . . . . 590 1,809 712 2,211
Interest charges. . . . . . . . . . 10,418 10,739 20,938 21,711
NET INCOME. . . . . . . . . . . . . 22,908 21,085 46,460 42,924
Preferred Stock Dividends . . . . . 1,136 1,627 2,292 3,244
NET INCOME AVAILABLE FOR
COMMON STOCK . . . . . . . . . . . $ 21,772 $ 19,458 $ 44,168 $ 39,680
<PAGE>3
Louisville Gas and Electric Company
Balance Sheets
(Thousands of $)
ASSETS
June 30, Dec. 31,
1996 1995
UTILITY PLANT:
At original cost . . . . . . . . . . . . . . . . . .$2,637,011 $2,598,860
Less: reserve for depreciation. . . . . . . . . . . 967,982 934,942
Net utility plant . . . . . . . . . . . . . . . . . 1,669,029 1,663,918
OTHER PROPERTY AND INVESTMENTS -
less reserve . . . . . . . . . . . . . . . . . . . . 765 760
CURRENT ASSETS:
Cash and temporary cash investments. . . . . . . . . 62,490 58,131
Marketable securities. . . . . . . . . . . . . . . . 6,237 20,449
Accounts receivable - less reserve. . . . . . . . . 106,211 105,589
Materials and supplies - at average cost:
Fuel (predominantly coal) . . . . . . . . . . . . . 6,477 14,996
Gas stored underground. . . . . . . . . . . . . . . 12,701 31,714
Other . . . . . . . . . . . . . . . . . . . . . . . 33,356 34,384
Prepayments. . . . . . . . . . . . . . . . . . . . . 1,688 2,108
Total current assets. . . . . . . . . . . . . . . . 229,160 267,371
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense . . . . . . . . . . . . . . 7,529 7,710
Regulatory assets. . . . . . . . . . . . . . . . . . 31,494 29,926
Other. . . . . . . . . . . . . . . . . . . . . . . . 24,315 9,805
Total deferred debits and other assets. . . . . . . 63,338 47,441
Total assets. . . . . . . . . . . . . . . . . . .$1,962,292 $1,979,490
<PAGE>4
Louisville Gas and Electric Company
Balance Sheets (cont.)
(Thousands of $)
CAPITAL AND LIABILITIES
June 30, Dec. 31,
1996 1995
CAPITALIZATION:
Common stock, without par value -
Outstanding 21,294,223 shares . . . . . . . . . . .$ 425,170 $ 425,170
Retained earnings. . . . . . . . . . . . . . . . . . 188,217 181,049
Other. . . . . . . . . . . . . . . . . . . . . . . . (895) (1,062)
Total common equity . . . . . . . . . . . . . . . . 612,492 605,157
Cumulative preferred stock . . . . . . . . . . . . . 95,328 95,328
Long-term debt . . . . . . . . . . . . . . . . . . . 646,838 646,845
Total capitalization. . . . . . . . . . . . . . . . 1,354,658 1,347,330
CURRENT LIABILITIES:
Long-term debt due within
one year (Note 4) . . . . . . . . . . . . . . . . . - 16,000
Accounts payable . . . . . . . . . . . . . . . . . . 77,408 93,706
Trimble County Settlement . . . . . . . . . . . . . 20,078 28,300
Dividends declared . . . . . . . . . . . . . . . . . 19,636 19,672
Accrued taxes. . . . . . . . . . . . . . . . . . . . 14,263 7,814
Accrued interest . . . . . . . . . . . . . . . . . . 11,185 11,064
Other. . . . . . . . . . . . . . . . . . . . . . . . 13,651 12,071
Total current liabilities . . . . . . . . . . . . . 156,221 188,627
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes . . . . . . . . . . . . . . . . . . . . . . . 213,450 204,816
Investment tax credit, in
process of amortization . . . . . . . . . . . . . . 81,834 84,037
Accumulated provision for pensions
and related benefits. . . . . . . . . . . . . . . . 43,486 47,099
Regulatory liability . . . . . . . . . . . . . . . . 86,753 88,242
Other. . . . . . . . . . . . . . . . . . . . . . . . 25,890 19,339
Total deferred credits and other liabilities. . . . 451,413 443,533
Total capital and liabilities . . . . . . .. . .$1,962,292 $1,979,490
<PAGE>5
Louisville Gas and Electric Company
Statements of Cash Flows
(Thousands of $)
Six Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . $ 46,460 $ 42,924
Items not requiring cash currently:
Depreciation and amortization . . . . . . . . . . . 44,501 42,880
Deferred income taxes - net . . . . . . . . . . . . 7,033 5,713
Investment tax credit - net . . . . . . . . . . . . (2,203) (2,440)
Other . . . . . . . . . . . . . . . . . . . . . . . 2,056 1,908
Decreases (increases) in net current assets:
Accounts receivable . . . . . . . . . . . . . . . . (622) (1,069)
Materials and supplies. . . . . . . . . . . . . . . 28,560 23,981
Trimble County Settlement . . . . . . . . . . . . . (8,222) -
Accounts payable. . . . . . . . . . . . . . . . . . (16,298) (12,217)
Accrued taxes . . . . . . . . . . . . . . . . . . . 6,449 (2,145)
Accrued interest. . . . . . . . . . . . . . . . . . 121 (1,396)
Prepayments and other . . . . . . . . . . . . . . . 2,000 498
Other. . . . . . . . . . . . . . . . . . . . . . . . (16,686) (9,118)
Net cash provided by operating activities . . . . . 93,149 89,519
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities. . . . . . . . . . . . . . . (6,550) (75,468)
Proceeds from sales of securities. . . . . . . . . . 21,036 91,970
Construction expenditures. . . . . . . . . . . . . . (47,949) (38,127)
Net cash used for
investing activities. . . . . . . . . . . . . . . (33,463) (21,625)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of pollution control bonds. . . . . . . . . - 39,959
Retirement of first mortgage bonds
and pollution control bonds . . . . . . . . . . . . (16,000) (41,076)
Payment of dividends . . . . . . . . . . . . . . . . (39,327) (55,184)
Net cash used for financing activities. . . . . . . $(55,327) $ (56,301)
<PAGE>6
Louisville Gas and Electric Company
Statements of Cash Flows (cont.)
(Thousands of $)
Six Months Ended
June 30,
1996 1995
NET INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS . . . . . . . . . . . . . $ 4,359 $ 11,593
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . 58,131 39,138
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD. . . . . . . . . . . . . . . . . . . . $62,490 $ 50,731
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes. . . . . . . . . . . . . . . . . . . $21,334 $ 23,494
Interest on borrowed money. . . . . . . . . . . . 20,048 22,285
For the purposes of this statement, all temporary cash investments purchased
with a maturity of three months or less are considered cash equivalents.
<PAGE>7
Louisville Gas and Electric Company
Statements of Retained Earnings
(Thousands of $)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Balance at beginning of period. . . $184,945 $180,117 $181,049 $193,895
Net income. . . . . . . . . . . . . 22,908 21,085 46,460 42,924
Subtotal. . . . . . . . . . . . . 207,853 201,202 227,509 236,819
Cash dividends declared
on stock -
5% cumulative preferred . . . . . 269 269 538 539
7.45% cumulative preferred. . . . - 400 - 799
Auction rate cumulative pref. . . 500 591 1,020 1,172
$5.875 cumulative preferred . . . 367 367 734 734
Common. . . . . . . . . . . . . . 18,500 18,000 37,000 52,000
Total dividends declared. . . . . 19,636 19,627 39,292 55,244
Balance at end of period. . . . . . $188,217 $181,575 $188,217 $181,575
<PAGE>8
Louisville Gas and Electric Company
Notes to Financial Statements
(Unaudited)
1. The financial statements included herein have been prepared by Louisville
Gas and Electric Company (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. 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 the Company believes that the disclosures are
adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year 1995, and the Report on Form 10-Q
for the quarter ended March 31, 1996.
2. The Company filed an application with the Public Service Commission of
Kentucky (Commission) on October 7, 1994, in which it requested approval
of an environmental cost recovery surcharge to recover certain costs
required to comply with the Federal Clean Air Act, as amended, and those
federal, state, and local environmental requirements which apply to coal
combustion wastes and by-products from facilities utilized for the
production of energy from coal. On April 6, 1995, the Commission
approved, with modifications, an environmental cost recovery surcharge
that increased electric revenues by $3.2 million in 1995, and is expected
to increase 1996 revenues by approximately $5.7 million. The surcharge
became effective on May 1, 1995.
An appeal of the Commission's April 6, 1995, order by various intervenors
in the proceeding (including the Kentucky Attorney General) is currently
pending in the Franklin Circuit Court of Kentucky. The intervenors are
contesting the validity of the order on several grounds, including the
constitutionality of the Kentucky statute that authorizes the surcharge.
In an order dated April 10, 1996, associated with the first six-month
review of the operation of the surcharge, the Commission stated that all
environmental surcharge revenues collected from the date of the April 10
order will be subject to refund, pending the final determination of the
April 6, 1995, order. The Company is vigorously contesting the legal
challenges to the surcharge, but cannot predict the outcome of the
appeal. The amount of refunds that may be ordered, if any, are not
expected to have a material adverse effect on the Company's financial
position or results of operations.
3. Other income and (deductions) consisted of the following (in thousands of
$):
3 Months Ended June 30 6 Months Ended June 30
1996 1995 1996 1995
Interest and dividend
income . . . . . . . $1,100 $1,403 $1,958 $2,984
Gains on fixed
asset disposal . . . 54 758 56 974
Income taxes and other (564) (352) (1,302) (1,747)
$ 590 $1,809 $ 712 $2,211
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4. On June 1, 1996, the Company's First Mortgage Bonds, 5.625% Series of
$16 million matured and were retired by the Company.
5. Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS
No. 121). The new standard requires that long-lived assets and
certain identified intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. In performing such impairment
reviews, companies are required to estimate the sum of future cash
flows from an asset and compare such amount to the asset's carrying
amount. Any excess of carrying amount over expected cash flows will
result in a possible write-down of an asset to its fair value.
Adopting SFAS No. 121 had no impact on the Company's financial
position or results of operations.
6. Reference is made to Part II herein - Item 1, Legal Proceedings, and
Note 13 of the Notes to Financial Statements of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
<PAGE>10
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Some of the matters discussed in Part I or Part II of this Form 10-Q 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 utility industry; unusual weather; regulatory decisions;
and the other factors described in the Company's Form 10-K for the year
ended December 31, 1995.
Results of Operations
Because of seasonal fluctuations in temperature and other factors the
results of one interim period are not necessarily indicative of results to
be expected for the year.
Quarter Ended June 30, 1996, Compared with
Quarter Ended June 30, 1995
Net income increased $1.8 million (9%) for the quarter ended June 30, 1996,
over the quarter ended June 30, 1995, primarily due to higher weather
related electric and natural gas sales and a decrease in other operation
expenses caused principally by a one-time reduction of certain employee
fringe benefits. This improvement in net income was achieved despite the
costs associated with numerous severe storms that occurred this quarter.
A comparison of operating revenues for the quarter ended June 30, 1996,
with the quarter ended June 30, 1995, reflects increases and decreases
which have been segregated by the following principal causes:
Increase or (Decrease)
(Thousands of $)
Electric Gas
Cause Revenues Revenues
Sales to ultimate consumers:
Fuel and gas supply adjustments. . . . . . . $(1,054) $ 3,374
Demand side management/revenue
decoupling. . . . . . . . . . . . . . . . (1,607) (1,907)
Environmental cost recovery surcharge. . . . 793 -
Variation in sales volume, etc.. . . . . . . 6,343 1,911
Total . . . . . . . . . . . . . . . . . . 4,475 3,378
Sales for resale. . . . . . . . . . . . . . . 4,789 -
Gas transportation - net. . . . . . . . . . . - 326
Other . . . . . . . . . . . . . . . . . . . . 141 177
Total . . . . . . . . . . . . . . . . . . $ 9,405 $ 3,881
<PAGE>11
As shown above, electric and gas revenues increased in the second quarter
primarily because of weather conditions. Electric sales for resale
increased over the second quarter of 1995 due to aggressive efforts in
marketing off-system sales.
Fuel for electric generation and gas supply expenses comprise a large
segment of the Company's total operating expenses. The Company'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 the Company's rates, subject to the approval of
the Public Service Commission of Kentucky. Fuel for electric generation
increased $.9 million (2%) for the quarter because of an increase in
generation ($2.3 million), partially offset by a decrease in the cost of
coal burned ($1.4 million). Gas supply expenses increased $5.1 million
(37%) due to an increase in net gas supply cost ($2.7 million) and a higher
volume of gas delivered to the distribution system ($2.4 million).
The Company's rates also include an environmental cost recovery surcharge
that recovers certain costs required to comply with the Federal Clean Air
Act and other governmental pollution control requirements. See Note 2 of
Notes to Financial Statements.
Power purchased increased $4.1 million due to increased purchases required
to meet native load and other power commitments.
Other operation expenses decreased $4.1 million (12%) primarily due to a
one-time reduction of certain employee fringe benefits in connection with a
change in the collective bargaining agreement ($3.6 million).
Maintenance expenses increased $2.8 million (21%) primarily related to an
increase in scheduled turbine overhauls ($2 million) and expenses related
to storm damage ($1.5 million).
Depreciation and amortization increased because of additional depreciable
plant in service.
Variations in income tax expense are largely attributable to changes in
pre-tax income.
Other income and deductions decreased $1.2 million primarily because of
lower gains related to the sale of property ($.7 million) as compared to
the same period in 1995 and a decrease in dividend and interest income from
investments ($.3 million). See Note 3 of Notes to Financial Statements.
Interest charges decreased because of a lower composite interest rate on
outstanding debt. The Company's First Mortgage Bonds, 5.625% Series of $16
million were retired at maturity on June 1, 1996. See Note 4 of Notes to
Financial Statements.
The decrease in preferred stock dividends is primarily related to
redemption of the 7.45% Series Cumulative Preferred Stock in December 1995.
<PAGE>12
Six Months Ended June 30, 1996, Compared with
Six Months Ended June 30, 1995
Net income for the six months ended June 30, 1996 increased $3.5 million
(8%) over the same period of 1995. This increase is due primarily to an
increase in sales of natural gas and electricity, partially offset by
increased maintenance expenses at the power plants and increased
storm-related expenses.
A comparison of operating revenues for the six months ended June 30, 1996,
with the six months ended June 30, 1995 reflects increases and decreases
which have been segregated by the following principal causes:
Increase or (Decrease)
(Thousands of $)
Electric Gas
Cause Revenues Revenues
Sales to ultimate consumers:
Fuel and gas supply adjustments. . . . . . . $ (593) $ 3,418
Demand side management/revenue
decoupling. . . . . . . . . . . . . . . . (2,358) (1,708)
Environmental cost recovery. . . . . . . . . 2,105 -
Variation in sales volume, etc.. . . . . . . 10,754 18,446
Total . . . . . . . . . . . . . . . . . . 9,908 20,156
Sales for resale. . . . . . . . . . . . . . . 11,121 -
Gas transportation - net. . . . . . . . . . . - (1,539)
Other . . . . . . . . . . . . . . . . . . . . 522 346
Total . . . . . . . . . . . . . . . . . . $21,551 $18,963
Fuel for electric generation increased $5 million (7%) for the six months
ended June 30, 1996, primarily because of increased generation ($7.4
million), partially offset by a lower cost of coal burned ($2.4 million).
Gas supply expenses increased $14.9 million (24%) primarily because of an
increase in gas delivered to the distribution system ($13.1 million) and
the higher cost of net gas supply ($1.8 million).
See Note 2 of Notes to Financial Statements concerning the environmental
cost recovery surcharge.
Power purchased increased $6.4 million due to increased purchases to meet
native load and other power commitments.
Other operation expenses increased only slightly overall, but the increase
was primarily offset by a one-time reduction of certain employee fringe
benefits in connection with a change in the collective bargaining agreement
($3.6 million).
Maintenance expenses increased $5.5 million (22%), primarily due to an
increase in scheduled turbine overhauls ($4.1 million) and expenses related
to storm damage ($1.7 million).
Other income and deductions decreased $1.5 million primarily because of
lower gains related to the sale of property as compared to the same period
in 1995 ($.9 million) and lower dividend and interest income from
investments ($1 million). See Note 3 of Notes to Financial Statements.
<PAGE>13
Liquidity and Capital Resources
The Company's capital structure and cash flow remained strong throughout
the reported periods. This is evidenced primarily by the Company's ability
to meet its capital needs through internal generation.
The Company's need for capital funds is primarily related to the
construction of plant and equipment necessary to meet electric and gas
customers' needs and the protection of the environment. Construction
expenditures for the six months ended June 30, 1996, of $48 million were
financed with internally generated funds.
The Company's cash and temporary cash investments balance increased $4
million during the six months ended June 30, 1996. The increase reflects
the Company's cash flow from operations plus proceeds from the sale of
marketable securities less construction expenditures, dividends paid, and
the retirement of bonds.
Other cash flows from operating activities for the first six months of 1996
included $20 million in increased gas supply costs. The Company will
recover these costs through its gas supply clause mechanism subject to the
approval of the Public Service Commission of Kentucky. The higher gas
prices were due to unusually cold weather that resulted in increased
demand.
Variations in accounts receivable, accounts payable and materials and
supplies are not generally significant indicators of the Company's
liquidity, as such variations are primarily attributable to seasonal
fluctuations in weather, which has a direct effect on sales of electricity
and natural gas.
The Company's First Mortgage Bonds, 5.625% Series of $16 million matured on
June 1, 1996. The Company used internally generated cash to retire the
bonds.
At June 30, 1996, the Company had unused lines of credit of $160 million
with banks for which it pays commitment fees. The lines are scheduled to
expire in the year 2000. The Company expects to renegotiate such lines
when they expire.
The Company's capitalization ratios at June 30, 1996, and December 31, 1995
were:
June 30, Dec. 31,
1996 1995
Long-term debt
(including current portion) . . . . . . . . 47.8% 48.6%
Preferred stock . . . . . . . . . . . . . . . 7.0 7.0
Common equity . . . . . . . . . . . . . . . . 45.2 44.4
Total. . . . . . . . . . . . . . . . . . . . 100.0% 100.0%
For a description of significant contingencies that may affect the Company,
reference is made to Part II herein - Item 1, Legal Proceedings.
<PAGE>14
Part II. Other Information
Item 1. Legal Proceedings.
For a description of the significant legal proceedings involving the
Company, reference is made to: (i) the information under the following
items and captions of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995: Item 1, Business; Item 3, Legal Proceedings; Item
7, Management's Discussion and Analysis of Results of Operations and
Financial Condition; and Notes 2 and 13 of the Notes to Financial
Statements under Item 8. Except as noted below, there have been no
material changes in these proceedings as reported in the Company's 1995
Form 10-K and Form 10-Q for the quarter ended March 31, 1996.
Environmental. The Clean Air Act Amendments of 1990 (the Act) impose
stringent limits on emissions of sulfur dioxide and nitrogen oxides by
electric utility generating plants. The Company is well-positioned in the
market to be a "clean" power provider without the large capital
expenditures that are expected to be incurred by many other utilities. All
of the Company's coal-fired boilers are equipped with sulfur dioxide
"scrubbers" and already achieve the final sulfur dioxide emission rates
required by the year 2000 under the legislation. However, as part of its
ongoing capital construction program, the Company has spent $27 million to
date and, based on engineering estimates from contractors, anticipates
incurring additional capital expenditures of approximately $3 million for
remedial measures necessary to meet the Act's requirements for nitrogen
oxides. The overall financial impact of the legislation on the Company is
expected to be minimal.
The Company, along with a number of other companies, has been identified as
a potentially responsible party (PRP) allegedly liable for cleanup under
the Comprehensive Environmental Response Compensation and Liability Act as
amended at four off-site waste treatment or disposal sites. Under the law,
each PRP potentially could be held jointly and severally liable for the
cost of cleanup, but would have the right to seek contribution from other
PRPs. The sites targeted for cleanup in which the Company has been
identified as a PRP include: the Smith's Farm site located in Bullitt
County, Kentucky, the Sonora and Carlie Middleton Burn sites located in
Hardin County, Kentucky, and the M.T. Richards site located in Crossville,
Illinois. With respect to the Smith's Farm site, the United States
Environmental Protection Agency (USEPA) has identified the Company as a de
minimis PRP and is currently pursuing other parties for the vast majority
of the $42 million in cleanup costs as estimated by USEPA. USEPA recently
revised its estimate for cleanup costs downward from $60 million to $42
million. The Company is participating in settlement discussions in an
effort to resolve any alleged liability which it may have. With respect to
the Sonora Site and Carlie Middleton Burn Site, the Company is now involved
in litigation with USEPA and approximately 50 companies in an effort to
resolve liability for approximately $1.8 million in cleanup costs incurred
by USEPA. With respect to the M.T. Richards site, the Company has been
identified as a de minimis party and has reached a tentative settlement for
$7,500, subject to approval by the government and entry by the court.
While it is not possible at this time to predict the exact outcome or
precise impact of these matters, management believes that these matters
should not have a material adverse impact on the financial position or
results of operations of the Company.
<PAGE>15
Open Access. As reported in Item 7, Management's Discussion and Analysis
of Results of Operations and Financial Condition, of the Company's 1995
Form 10-K, the Federal Energy Regulatory Commission (FERC) issued a Notice
of Proposed Rulemaking on Open Access Nondiscriminatory Transmission
Services and a Supplemental Notice of Proposed Rulemaking on Stranded
Investment (collectively, the Mega-NOPR). On April 24, 1996, the FERC
adopted final rules, which are similar in many respects to the Mega-NOPR
(Orders 888 and 889). The final rules are intended, among other things, to
create a vigorous wholesale electric market by requiring transmission
providers to functionally unbundle transmission from generation and
distribution businesses, and to offer open access to their transmission
systems. While the Company is still reviewing the provisions of the final
rules and is unable at this time to determine its precise effect on
operations, the Company generally is supportive of proposals to increase
competition at all levels of the electric power market and intends to
pursue opportunities created by a more competitive market.
Item 4. Submission of Matters to a Vote of Security Holders
a) The Company's Annual Meeting of Shareholders was held on April 23,
1996.
b) Not applicable.
c) The matters voted upon and the results of the voting at the Annual
Meeting follow:
1. The shareholders voted to elect the Company's nominees for election to
the Board of Directors as follows:
Roger W. Hale - 21,929,986 shares cast in favor of election and 2,461
shares withheld;
David B. Lewis - 21,925,731 shares cast in favor of election and 6,716
shares withheld;
Anne H. McNamara - 21,928,622 shares cast in favor of election and
3,825 shares withheld;
Donald C. Swain - 21,923,947 shares cast in favor of election and
8,500 shares withheld.
2. The shareholders voted 21,917,648 shares in favor of and 2,197 shares
against the approval of Arthur Andersen LLP as independent auditors
for 1996. Holders of 12,602 shares abstained from voting on this
matter.
d) Not applicable.
Item 6(a). Exhibits.
Exhibit No.
27. Financial Data Schedule
Item 6(b). Reports on Form 8-K.
None.
<PAGE>16
SIGNATURES
Pursuant to the requirements of the Securities and 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: August 13, 1996 Walter Z. Berger
---------------------------------------
Walter Z. Berger
Executive Vice President and
Chief Financial Officer
(On behalf of the registrant in his
capacity as Principal Accounting
Officer)
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