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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
Dated: September 19, 1997
LOUISVILLE GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Kentucky 2-26720 61 - 0264150
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
220 West Main Street (P.O. Box 32010) Louisville, Kentucky 40232
(Address of principal executive offices)
(502) 627-2000
(Registrant's telephone number)
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Item 5. Other Events.
On September 12, 1997 the Kentucky Public Service Commission
("Kentucky PSC") entered an Order (the "Kentucky Order") approving
the proposed merger of KU Energy Corporation ("KU Energy"), with LG&E
Energy Corp. ("LG&E Energy"), the parent of Louisville Gas and
Electric Company (the "Company"). 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 the Company, 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 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 during the first five
years as a result of the merger, 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 the savings
estimated at $77.2 million.
The Kentucky Order requires KU and the Company 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 the Company's and
KU's earnings at any time.
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The Kentucky Order also requires KU and the Company 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. 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 the Company.
The Kentucky Order also imposes certain routine record keeping and
reporting requirements on KU and the Company, including quarterly
financial analyses to be submitted to the Kentucky PSC beginning with
the last quarter of 1997. The Kentucky Order is subject to a
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 shareholders 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 (SEC) under the
Public Utility Holding Company Act of 1935. Notices will be filed
with the Federal Trade Commission and the U.S. Department of Justice
as well as the Tennessee Regulatory Authority. Consummation of the
merger is currently contemplated in the second half of 1998.
In an unrelated matter, LG&E Energy announced on September 17, 1997,
that its 1997 earnings would be lower than 1996 earnings of $1.57 per
share and could be in a range of $1.40 to $1.48 per share. LG&E
Energy's press release on this issue is filed as Exhibit 99.03
hereto.
Statements contained in this Form 8-K that state the Company's or
LG&E Energy's or their management's intentions, expectations or
predictions of the future are forward looking statements. The
Company's or LG&E Energy's actual results could differ materially
from those projected in the forward looking statements, and there can
be no assurance that estimates of future results will be achieved.
The Company's and LG&E Energy's SEC filings contain additional
information concerning factors that could cause actual results to
differ materially from those in the forward looking statements.
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Item 7(c). Exhibits Filed.
Exhibit
Number Description
99.01 News Release from LG&E Energy Corp. dated
September 12, 1997.
99.02 News Release from the Kentucky Public Service
Commission dated September 12, 1997.
99.03 News Release from LG&E Energy Corp. dated
September 17, 1997.
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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: September 19, 1997 John R. McCall
___________________________________
John R. McCall
Executive Vice President, General
Counsel and Corporate Secretary
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Exhibit 99.01
For Immediate Release: September 12, 1997
For More Information: Grant Ringel
LG&E Energy Corp.
502/627-2877
Kentucky PSC Unanimously Approves LG&E Energy/KU Energy Merger;
Joins with Governor and State Legislature in Positioning State to
be a National Energy Leader
LOUISVILLE, Ky. -- The Kentucky Public Service Commission
today positioned the state to continue to be a low-cost energy
provider with a unanimous approval of the merger as proposed
between Louisville-based LG&E Energy Corp.(NYSE:LGE) and
Lexington-based KU Energy Corp.(NYSE:KU). No changes were made
in the regulatory plan proposed by the companies.
The merger will consolidate in Kentucky a leading, Fortune
500 energy company uniquely positioned for the coming competitive
energy market.
"We are very pleased that Kentucky's government leaders have
continued their reputation of making wise energy decisions that
have for many years provided Kentuckians with some of the lowest
energy costs in the nation," said Roger W. Hale, LG&E Energy
Corp. chairman and chief executive officer. "The Kentucky Public
Service Commission, the governor and legislature have
demonstrated the foresight necessary for Kentucky to take a
leadership role in the future of the energy industry in America.
We're eager to complete the federal regulatory process and
deliver the benefits of this merger to the citizens of our
commonwealth," Hale added.
"Lower energy bills are only the beginning of great things
for our customers, the communities we serve and for the
commonwealth of Kentucky," said Michael R. Whitley, KU Energy
Corp. chairman and chief executive officer. "As a stronger
energy services company headquartered in Kentucky, the combined
company will enhance economic development in the commonwealth,
enhancing business' ability to run successfully, and
strengthening Kentucky's prospects of attracting new business and
creating new jobs."
As part of their merger proposal, LG&E Energy and KU Energy
have guaranteed benefits to customers of the two utilities -
Louisville Gas and Electric Company and Kentucky Utilities
Company. Customers can expect to see an average reduction in
their energy bills of about two percent for five years,
beginning with final federal regulatory approval next year.
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The commission's decision came after an in-depth review of
the merger proposal which included approximately 10,000 pages of
prepared testimony and days of witness cross-examination. "This
order demonstrates that after all the tough questions were
answered, there is a consensus among everyone involved that this
merger will be good for Kentucky, our customers, employees and
shareholders," Hale said.
The merger approval calls for the company to explore
additional opportunities in the area of performance-based rates.
"We welcome this directive and believe it will further our
company's efforts to prepare for a more competitive marketplace,"
Whitley said.
Shareholders of both companies will meet separately, in
Louisville and Lexington, on October 14 to vote on the proposed
merger. The boards of directors of both companies already have
voted unanimously in favor of the merger.
LG&E Energy and KU Energy announced their agreement to merge
on May 21, 1997. The combination will create one of the largest,
low-cost energy services holding companies in the nation. The
transaction is valued in excess of $3 billion and the combined
companies will have assets in excess of $4.7 billion.
Following merger approval, the resulting holding company
will be known as LG&E Energy and will be headquartered in
Louisville. The two utility companies, Louisville Gas and
Electric Company (LG&E) and Lexington-based Kentucky Utilities
Company (KU), will be wholly owned subsidiaries of the holding
company. The merged company will serve more than 1.1 million
customers throughout Kentucky, Virginia and internationally.
LG&E Energy Corp., a Fortune 500 company headquartered in
Louisville, Ky., is a diversified energy services and marketing
company with businesses in energy marketing and trading; power
generation and project development; and retail gas and electric
utility services. LG&E Energy has increased its dividends paid
to shareholders for 43 consecutive years. The company owns and
operates Louisville Gas and Electric Company, a regulated
electric and gas utility serving Louisville, Ky. and 17
surrounding counties, and owns interests in two natural gas
distribution companies in Argentina. The company owns equity in
and operates power plants in seven states, Argentina and Spain.
The company is one of the largest utility-affiliated energy
marketers in the U.S.
KU Energy, headquartered in Lexington, Ky., is a holding
company committed to building shareholder value, having increased
its dividends to shareholders for 16 consecutive years. KU
Energy is the parent company of Kentucky Utilities Company (KU).
KU was among the first electric utility companies in the country
to advocate nationwide customer choice and competition in the
energy arena. KU is recognized as an international model for
efficient, low-cost energy production, solid financial management
and superior customer service. The company provides service to
more than 464,000 customers in 77 Kentucky counties and five
counties in Virginia.
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Exhibit 99.02
COMMONWEALTH OF KENTUCKY
PUBLIC SERVICE COMMISSION
730 SCHENKEL LANE
POST OFFICE BOX 615
FRANKFORT, KY 40602
(502) 564-3940
FOR IMMEDIATE RELEASE CONTACT: Matthew Rhody
Statewide (502) 564-3940
FRANKFORT, KY (September 12, 1997) -- The Kentucky Public Service
Commission today approved the merger between LG&E Energy Corp.
and KU Energy Corporation affecting some 806,033 customers.
Once the merger is complete, KU Energy will be dissolved, leaving
LG&E Energy as the holding company for both Kentucky Utilities
Company (KU) and Louisville Gas and Electric Company (LG&E).
LG&E will continue its corporate existence under the laws of
Kentucky, while KU will continue its dual corporate existence
under the laws of Kentucky and Virginia.
The order states that the first five years of the merger should
produce a savings of $313,087,000 with estimated costs of
$77,220,000 over the five-year-period.
Both the cost and the savings will be shared on a 50/50 basis
between shareholders and ratepayers. Over the first five years,
shareholders and ratepayers will split a net savings of
$235,867,000 which is an average reduction of two percent for
ratepayers over five years.
LG&E and KU originally proposed to share the ratepayers' savings
on a 50/50 basis. However, the commission determined that a
53/47 basis was more appropriate, based upon current revenues,
with KU ratepayers receiving 53 percent and LG&E ratepayers
receiving 47 percent.
KU's ratepayers will receive approximately $62.5 million in net
non-fuel savings over the first five years, and LG&E's ratepayers
will receive approximately $55.5 million.
Once merged, the LG&E Energy board of directors will be expanded
and reconstituted from 11 members to 15 members, of which eight
will be selected by LG&E Energy and seven by KU Energy.
The current board chairman and chief executive officer of LG&E
Energy and LG&E, Roger Hale, will, after the merger, remain in
that position and head the holding company.
The current board chairman and chief executive officer of KU
Energy and KU, Michael Whitley, will, after the merger, become
vice chairman and chief operating officer of LG&E Energy, LG&E,
and KU.
Current shareholders of KU Energy will receive 1.67 shares of
LG&E Energy stock for each share of KU Energy stock.
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Shareholders of both holding companies must approve the merger.
That vote is scheduled for October 14.
In the matter of rates, "The record in this case contains no
analysis of the reasonable cost of equity for either LG&E or KU
and, with limited evidence on current earnings, no definitive
finding of overearning can be made," the order said.
"The commission will continue to monitor LG&E's and KU's
financial reports and retains its statutory authority to initiate
action, which may include an investigation of rates, should
circumstances warrant," the order said.
LG&E and KU must file detailed plans to address any future
financial situations and any proposed incentives to achieve the
highest possible level of performance by September 14, 1998 or
the consummation of the merger, whichever is later.
The order said, "If either utility elects to remain under
traditional rate of return regulation, it should state the
reasons and include an analysis and proposals relative to its
earnings at that time."
"Alternatively, if either utility elects non-traditional
regulation, the reasons for this choice should be disclosed,
along with the details of a proposal and how it will achieve the
commission's goals of providing incentives to utilities and a
sharing of resulting benefits with ratepayers," the order stated.
These filings will be docketed as new cases and subjected to
investigations to the full extent necessary. The commission will
then determine, based on all relevant financial information, as
well as current economic and regulatory conditions, whether
changes should be made to the existing regulation of LG&E and KU.
In addition to the commission's approval, LG&E and KU must
receive the approval of the Federal Energy and Regulatory
Commission, the Securities and Exchange Commission and the
Virginia State Corporation Commission.
LG&E and KU will file notifications with the Federal Trade
Commission and the U.S. Department of Justice. LG&E and KU will
also file notification with the Tennessee Regulatory Authority.
LG&E serves 349,866 customers in nine counties and KU serves
456,167 customers in 77 counties.
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Exhibit 99.03
For Immediate Release: September 17, 1997
For More Information: Grant Ringel Steve Cave
LG&E Energy Corp. LG&E Energy Corp.
502/627-2877 502/627-2502
LG&E Energy Issues Cautionary Comments On Year-End Earnings
LOUISVILLE, Ky. -- LG&E Energy Corp. (NYSE:LGE) today
announced it may report 1997 earnings lower than those in 1996.
These anticipated results primarily reflect lower earnings from
the company's unregulated energy marketing and trading businesses
due to abnormal weather, the volatility of prices in the energy
market and narrowing margins in the natural gas business.
As a result, the company's 1997 earnings could be lower than
1996 earnings of $1.57 per share. Earnings for 1997 could be in
a range of $1.40 to $1.48 per share. The company is exploring
initiatives to offset some of this decline.
"We have seen extraordinarily abrupt changes in electric
demand and prices in certain parts of the country this year,
substantially greater than has been experienced historically.
This has had a significant impact on the profitability of our
energy marketing and trading operations. In addition, the high
level of competition in the natural gas industry continues to
erode profit margins," said LG&E Energy Corp. chairman and chief
executive officer Roger W. Hale. "This could be the first time
in five years that earnings, as adjusted, may not increase over
the previous year," he said. "However, LG&E Energy's non-utility
energy businesses continue to grow and will be profitable in
1997, although earnings will be lower than the company expected."
"While we are disappointed in these results, the very nature
of the emerging energy marketing business is much more volatile -
and less predictable - than the traditional regulated utility
business. We expect our non-utility businesses to produce a
substantial increase to earnings, but those gains may not be
realized each and every period," Hale said.
"Our fundamental strategic direction remains sound. We are
committed to continue as a leader in the important energy
marketing business. LG&E Energy remains one of the top five
marketers of power in the nation, and one of the largest utility-
affiliated marketers of all forms of energy in the country," Hale
said. "We continue to strengthen our competitive position in the
energy marketplace with our transaction to lease the power plants
of the Big Rivers Electric Corporation and the pending merger
with KU Energy Corp., both of which will significantly strengthen
our core earnings and enhance our outstanding platform for growth
in 1998 and beyond," Hale said.
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LG&E Energy Corp. is a Fortune 500 energy services holding
company headquartered in Louisville, Ky. The company owns and
operates a portfolio of energy businesses with assets of more
than $3.0 billion. In addition to its energy marketing
businesses, the company owns Louisville Gas and Electric Company,
a regulated Kentucky utility, and interests in two Argentine
natural gas distribution facilities. LG&E Energy has offices and
operations throughout the U.S. as well as in Argentina and Spain.
Statements made in this news release that state the
Company's or management's intentions, expectations or predictions
of the future are forward looking statements. The Company's
actual results could differ materially from those projected in
the forward looking statements, and there can be no assurance
that estimates of future results will be achieved. The Company's
SEC filings contain additional information concerning factors
that could cause actual results to differ materially from those
in the forward looking statements.
