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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 2-26720
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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 W. Main Street
P. O. Box 32010 (502) 627-2000
Louisville, Kentucky 40232 (Registrant's telephone
(Address of principal executive offices number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
First Mortgage Bonds, Series due July 1, 2002, 7 1/2% New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
5% Cumulative Preferred Stock, $25 Par Value
$5.875 Cumulative Preferred Stock, Without Par Value
Auction Rate Series A Preferred Stock, Without Par Value
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
As of February 28, 1997, the aggregate market value of the registrant's voting
stock held by non-affiliates was $15,162,170 and the number of outstanding
shares of the registrant's common stock, without par value, was 21,294,223 all
of which were held by LG&E Energy Corp.
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement of Louisville Gas and Electric Company filed with the
Commission on March 26, 1997, is incorporated by reference into Part III of this
Form 10-K.
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TABLE OF CONTENTS
PART I PAGE
----
Item 1. Business................................................... 1
General.................................................. 1
Electric Operations...................................... 3
Gas Operations........................................... 5
Regulation and Rates..................................... 6
Construction Program and Financing....................... 7
Coal Supply.............................................. 7
Gas Supply............................................... 8
Environmental Matters.................................... 9
Labor Relations.......................................... 10
Employees................................................ 10
Item 2. Properties................................................. 11
Item 3. Legal Proceedings.......................................... 12
Item 4. Submission of Matters to a Vote of Security Holders........ 13
Executive Officers of the Company................................... 13
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters...................................... 15
Item 6. Selected Financial Data.................................... 15
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition....................... 16
Item 8. Financial Statements and Supplementary Data................ 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................. 45
PART III
Item 10. Directors and Executive Officers of the Registrant (a)..... 46
Item 11. Executive Compensation (a)................................. 46
Item 12. Security Ownership of Certain Beneficial Owners
and Management (a)....................................... 46
Item 13. Certain Relationships and Related Transactions (a)......... 46
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.................................. 46
Signatures ......................................................... 63
(a) Incorporated by reference.
<PAGE>
PART I
ITEM 1. BUSINESS.
General
Incorporated July 2, 1913, Louisville Gas and Electric Company (the Company) is
an operating public utility that supplies natural gas to approximately 277,000
customers and electricity to approximately 351,000 customers in Louisville and
adjacent areas in Kentucky. The Company's service area covers approximately 700
square miles in 17 counties and has an estimated population of 800,000. Included
in this area is the Fort Knox Military Reservation, to which the Company
transports gas and provides electric service, but which maintains its own
distribution systems. The Company also provides gas service in limited
additional areas. The Company's coal-fired electric generating plants, which are
all equipped with systems to remove sulfur dioxide, produce most of the
Company's electricity; the remainder is generated by a hydroelectric power plant
and combustion turbines. Underground natural gas storage fields help the Company
provide economical and reliable gas service to customers.
In August 1990, the Company and LG&E Energy Corp. (Energy Corp.) implemented a
corporate reorganization pursuant to a mandatory share exchange whereby each
share of outstanding common stock of the Company was exchanged on a
share-for-share basis for the common stock of Energy Corp. The reorganization
created a corporate structure that gives the holding company the flexibility to
take advantage of opportunities to expand into other businesses while insulating
the Company's utility customers and senior security holders from risks
associated with such businesses. The Company's preferred stock and first
mortgage bonds were not exchanged and remained securities of the Company.
The Company's Trimble County Unit 1 (Trimble County), a 495-megawatt, coal-fired
electric generating unit, which the Company began constructing in 1979, was
placed in commercial operation on December 23, 1990. Trimble County had been
subject to numerous reviews by the Public Service Commission of Kentucky
(Kentucky Commission or Commission). On December 8, 1995, the Commission
approved a settlement agreement filed by the Company and all intervenors in the
Trimble County proceedings, including various consumer interest groups and
government agencies, that in effect, resolved all of the regulatory and legal
issues related to the appropriate ratemaking treatment to exclude 25% of the
Trimble County costs from customer rates. The Company owns a 75% undivided
interest in Trimble County. For a more detailed discussion of the proceedings
relating to Trimble County, see Electric Operations and Notes 14 and 15 of Notes
to Financial Statements under Item 8.
With the passage of the Clean Air Act Amendments of 1990 (the Act), the Company
already complied with the stringent sulfur dioxide emission limits required by
the year 2000 as it had previously installed scrubbers on all of its coal-fired
generating units. Since then, as part of its ongoing construction program, the
Company has spent $29 million through 1996 for remedial measures necessary to
meet the Act's requirements for nitrogen oxides. The overall financial impact of
the Act on the Company has been minimal. However, the Company is closely
monitoring a number of significant regulatory developments. In November 1996,
the United States Environmental Protection Agency (USEPA) announced its proposal
to revise the National Ambient Air Quality Standards for ozone and particulate
matter. In November 1996, USEPA also announced its intent to direct certain
states to address long range ozone transport from Midwest emission sources which
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allegedly contribute to ozone problems in the Northeast. While management is
unable to predict the outcome or exact impact of these ongoing regulatory
proceedings, the Company continues to be 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. For a more detailed discussion of the
Clean Air Act and other environmental issues, see Environmental Matters under
this Item, Item 3, Item 7, and Note 13 of the Notes to Financial Statements
under Item 8.
The Company has taken many steps to prepare for the expected increase in
competition in its industry, including a reduction in the number of employees;
aggressive cost cutting; a write-off of previously deferred expenses; an
increase in focus on not only commercial and industrial customers, but
residential customers as well; an increase in employee involvement and training;
a major realignment and formation of new business units, and continuous
modifications of its organizational structure.
In 1996, the Power Generation Division of the Company introduced initiatives
designed to maintain the Company's low-cost advantage in this increasingly
competitive segment of the energy-services industry. To optimize the daily
operation of the plants, the Company established new work processes that
encourage decision making at the optimal level.
The Company is continually developing ways to enhance the service it provides to
customers, including the formation of strategic partnerships with other service
providers. These partnerships increase the product offerings available to
customers, allow the Company to leverage existing systems and position it in new
markets for the future. Partnerships also allow the Company to be more
innovative by creating cutting-edge offerings that might not be possible
otherwise. The Company is now using its customer service centers as a central
portal for other utility services. Through a joint effort with the Louisville
Water Company, customers can now arrange for new services or make payment to
both utilities through the Company. Customers can also apply for low-interest
loans to purchase a variety of energy-efficient household appliances and
equipment, such as natural gas furnaces, through the Company's Home Energy Loan
Program. These are conveniences that enhance customers' lives and help secure
our relationships for the future.
By using gas storage fields strategically, the Company can buy gas when prices
are low, store it, and retrieve the gas when demand is high. Accessing least
cost gas was made easier in November 1993 when the Federal Energy Regulatory
Commission Order No. 636 went into effect. Previously, the Company and other
utilities purchased most of their gas services from pipeline companies. The
order "unbundled" gas services, allowing utilities to purchase gas,
transportation, and storage services separately from many different sources.
Currently, the Company buys competitively priced gas from several large
producers under contracts of varying duration. By purchasing from multiple
suppliers and storing any excess gas, the Company is able to secure favorably
priced gas for its customers. Without storage capacity, the Company would be
forced to buy additional gas when customer demand increases, which is usually
when the price is highest.
During 1995, the Company negotiated a five year transportation agreement with
Tennessee Gas Pipeline Company (Tennessee) to become the Company's second
natural gas pipeline transporter. The agreement with Tennessee became effective
November 1, 1996. For many years, Texas Gas Transmission Corporation (Texas Gas)
has been the sole provider of gas transport services to the Company. For further
discussion, see Gas Supply.
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For the year ended December 31, 1996, 74% of total operating revenues was
derived from electric operations and 26% from gas operations. Electric and gas
operating revenues and the percentages by classes of service on a combined basis
for this period were as follows:
(Thousands of $)
---------------------------------------------
Electric Gas Combined % Combined
-------- -------- -------- ----------
Residential ................... $202,318 $125,327 $327,645 44%
Commercial .................... 163,027 47,415 210,442 29
Industrial .................... 110,914 21,229 132,143 18
Public authorities ............ 54,318 11,731 66,049 9
-------- -------- -------- ---
Total-ultimate consumers .... 530,577 205,702 736,279 100%
===
Sales for resale .............. 67,854 -- 67,854
Gas transportation-net ........ -- 6,850 6,850
Miscellaneous ................. 8,265 1,867 10,132
-------- -------- --------
Total ....................... $606,696 $214,419 $821,115
======== ======== ========
See Note 16 of Notes to Financial Statements under Item 8 for financial
information concerning segments of business for the three years ended
December 31, 1996.
Electric Operations
The sources of electric operating revenues and the volumes of sales for the
three years ended December 31, 1996, were as follows:
1996 1995 1994
----------- ------------ -----------
ELECTRIC OPERATING REVENUES
(Thousands of $):
Residential ......................... $ 202,318 $ 201,357 $ 194,145
Small commercial and industrial ..... 74,034 73,074 70,916
Large commercial .................... 88,993 87,497 84,931
Large industrial .................... 110,914 110,800 108,004
Public authorities .................. 54,318 53,861 53,191
Refund - Trimble County settlement .. -- (28,300) --
----------- ------------ -----------
Total-ultimate consumers ........... 530,577 498,289 511,187
Sales for resale .................... 67,854 37,471 42,720
Miscellaneous ....................... 8,265 6,577 5,039
----------- ------------ -----------
Total .............................. $ 606,696 $ 542,337 $ 558,946
=========== ============ ===========
ELECTRIC SALES (Thousands of kwh):
Residential ......................... 3,382,124 3,415,225 3,204,330
Small commercial and industrial ..... 1,130,558 1,112,130 1,073,152
Large commercial .................... 1,850,294 1,802,035 1,729,668
Large industrial .................... 3,058,723 3,023,543 2,874,411
Public authorities .................. 1,122,147 1,113,063 1,085,741
----------- ------------ -----------
Total-ultimate consumers ........... 10,543,846 10,465,996 9,967,302
Sales for resale .................... 3,589,090 2,000,607 2,315,311
----------- ------------ -----------
Total .............................. 14,132,936 12,466,603 12,282,613
=========== ============ ===========
At December 31, 1996, the Company had 351,295 electric customers.
The Company uses efficient coal-fired boilers that are fully equipped with
sulfur dioxide removal systems to generate electricity. The Company's system
wide emission rate for sulfur dioxide in 1996 was approximately .96 lbs./MMBtu
of heat input, which is significantly below the Phase II limit of 1.2 lbs./MMBtu
established by the Clean Air Act Amendments for the year 2000.
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The 1996 maximum local peak load of 2,282 Mw occurred on Wednesday, August 7
when the temperature at the time of peak was 93 degrees Fahrenheit (average for
the day was 84 degrees Fahrenheit). On Thursday, August 17, 1995, the Company
set its all-time record local peak load of 2,357 Mw, when the temperature at the
time of peak reached 94 degrees Fahrenheit (average for the day was 86 degrees
Fahrenheit). The record system peak of 3,223 Mw (which included purchases from
and short-term sales to other electric utilities) occurred on Thursday, May 30,
1991.
The Company's current reserve margin is 16%. At February 28, 1997, the Company
owned steam and combustion turbine generating facilities with a capacity of
2,512 Mw and an 80 Mw hydroelectric facility on the Ohio River. See Item 2,
Properties.
The Company is a participating owner with 14 other electric utilities of Ohio
Valley Electric Corporation whose primary customer is the Portsmouth Area
uranium-enrichment complex of the U.S. Department of Energy at Piketon, Ohio.
The Company has direct interconnections with 11 utility companies in the area
and has agreements with each interconnected utility for the purchase and sale of
capacity and energy. The Company also has agreements with an increasing number
of entities throughout the United States for the purchase and/or sale of
capacity and energy and for the utilization of their bulk transmission system.
The Illinois Municipal Electric Agency (IMEA), based in Springfield, Illinois,
which is an agency of 30 municipalities that own and operate their own electric
systems, has a 12.12% ownership interest in the Company's Trimble County Unit 1.
The Indiana Municipal Power Agency (IMPA), based in Carmel, Indiana, has a
12.88% ownership interest in the Trimble County Unit. IMPA is composed of 31
municipalities that have joined together to meet their long-term electric power
needs. Both IMEA and IMPA pay their proportionate share for operation and
maintenance expenses of Trimble County and for fuel and reactant used. They are
also responsible for their proportionate share of incremental capital assets
acquired. See Note 15 of Notes to Financial Statements under Item 8 for further
discussion.
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Gas Operations
The sources of gas operating revenues and the volumes of sales for the three
years ended December 31, 1996, were as follows:
1996 1995 1994
-------- -------- --------
GAS OPERATING REVENUES
(Thousands of $):
Residential ........................... $125,327 $107,762 $110,553
Commercial ............................ 47,415 38,161 40,474
Industrial ............................ 21,229 17,430 27,956
Public authorities .................... 11,731 8,679 12,930
-------- -------- --------
Total-ultimate consumers ............. 205,702 172,032 191,913
Gas transportation-net ................ 6,850 7,821 6,759
Miscellaneous ......................... 1,867 1,273 1,457
-------- -------- --------
Total ................................ $214,419 $181,126 $200,129
======== ======== ========
GAS SALES (Millions of cu. ft.):
Residential ........................... 25,531 24,242 22,935
Commercial ............................ 10,656 9,885 9,450
Industrial ............................ 5,190 5,188 7,505
Public authorities .................... 2,790 2,423 3,268
-------- -------- --------
Total-ultimate consumers ............. 44,167 41,738 43,158
Gas transported ....................... 12,540 12,241 6,854
-------- -------- --------
Total ................................ 56,707 53,979 50,012
======== ======== ========
At December 31, 1996, the Company had 277,493 gas customers.
The Company has underground natural gas storage fields that help provide
economical and reliable gas service to ultimate consumers.
Reflecting the changing nature of the gas business, a number of industrial
customers purchase their natural gas requirements directly from alternate
suppliers for delivery through the Company's distribution system. Generally,
transportation of natural gas for the Company's customers does not have an
adverse effect on earnings because of the offsetting decrease in gas supply
expenses. Transportation rates are designed to make the Company economically
indifferent as to whether gas is sold or merely transported.
The all-time maximum day gas sendout of 545,000 Mcf occurred on Sunday, January
20, 1985, when the average temperature for the day was -11 degrees Fahrenheit.
During 1996, the maximum day gas sendout was 521,000 Mcf, occurring on February
2, when the average temperature for the day was 6 degrees Fahrenheit. Supply on
that day consisted of 202,000 Mcf from purchases, 275,000 Mcf delivered from
underground storage, and 44,000 Mcf transported for industrial customers. For
further discussion, see Gas Supply.
Under FERC Order No. 636, pipelines may recover costs associated with the
transition to and implementation of this order from pipeline customers,
including the Company. The Company is recovering these costs from its customers
through its gas supply clause.
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Regulation and Rates
The Kentucky Commission has regulatory jurisdiction over the rates and service
of the Company and over the issuance of certain of its securities. The Company
is a "public utility" as defined in the Federal Power Act, and is subject to the
jurisdiction of the Department of Energy and the FERC with respect to the
matters covered in such Act, including the sale of electric energy at wholesale
in interstate commerce. In addition, the FERC has sole jurisdiction over the
issuance by the Company of short-term securities.
For a discussion of current regulatory matters, see Rates and Regulation under
Item 7 and Note 2 of Notes to Financial Statements under Item 8.
Increases and decreases in the cost of fuel for electric generation are
reflected in the rates charged to all of the Company's electric customers by
means of the Company's fuel adjustment clause. The Kentucky Commission requires
public hearings at six-month intervals to examine past fuel adjustments, and at
two-year intervals for the purpose of additional examination and transfer of the
then current fuel adjustment charge or credit to the base charges. The
Commission also requires that electric utilities, including the Company, file
certain documents relating to fuel procurement and the purchase of power and
energy from other utilities.
The Company's gas rates contain a gas supply clause (GSC), whereby increases or
decreases in the cost of gas supply are reflected in the Company's rates,
subject to approval of the Kentucky Commission. The GSC procedure prescribed by
order of the Commission provides for quarterly rate adjustments to reflect the
expected cost of gas supply in that quarter. In addition, the GSC contains a
mechanism whereby any over- or under-recoveries of gas supply cost from prior
quarters will be refunded to or recovered from customers through the adjustment
factor determined for subsequent quarters.
On December 8, 1995, the Commission approved a settlement agreement that, in
effect, resolved all the regulatory and legal issues related to the appropriate
ratemaking treatment to exclude 25% of the Trimble County plant costs from
customer rates. See Note 14 of Notes to Financial Statements under Item 8 for
further discussion of this matter.
On April 6, 1995, in response to an application filed by the Company, the
Commission approved, with modifications, an environmental cost recovery
surcharge that increased electric revenues by $3.2 million in 1995 and $2.4
million in 1996. The surcharge became effective May 1, 1995. An appeal of the
Commission's April 6 order by various intervenors in the proceeding (including
the Kentucky Attorney General) is currently pending in the Franklin Circuit
Court of Kentucky. The Company is 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. See Rates and
Regulation under Item 7 for a further discussion.
In January 1994, the Company implemented a Commission approved demand side
management (DSM) program. The program contains a rate mechanism that provides
for the recovery of DSM program costs, allows the Company to recover revenues
due to lost sales associated with the DSM programs and provides the Company an
incentive for implementing DSM programs. See Rates and Regulation under Item 7
for a further discussion of DSM.
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On April 24, 1996, the Federal Energy Regulatory Commission (FERC) issued Orders
888 and 889. Order 888 requires all public utilities to file Open Access
Transmission Tariffs. These tariffs will allow third parties to utilize a
utility's transmission assets under comparable terms and conditions as the
utility. The Company filed its Open Access Transmission Tariff on July 9, 1996,
to comply with FERC's Order 888. See Rates and Regulation under Item 7 for a
further discussion of this matter.
As part of the corporate reorganization whereby the Company became the
subsidiary of LG&E Energy Corp., the Company obtained the approval of the
Kentucky Commission. The order of the Kentucky Commission authorizing the
Company to reorganize into a holding company structure contains certain
provisions, which, among other things, ensure the Kentucky Commission access to
books and records of Energy Corp. and its affiliates which relate to
transactions with the Company; requires Energy Corp. and its subsidiaries to
employ accounting and other procedures and controls to protect against
subsidization of non-utility activities by the Company's customers; and
precludes the Company from guaranteeing any obligations of Energy Corp. without
prior written consent from the Kentucky Commission. In addition, the order
provides that the Company's Board of Directors has the responsibility to use its
dividend policy consistent with preserving the financial strength of the Company
and that the Kentucky Commission, through its authority over the Company's
capital structure, can protect the Company's ratepayers from the financial
effects resulting from non-utility activities.
Construction Program and Financing
The Company's construction program is designed to ensure that there will be
adequate capacity and reliability to meet the electric and gas needs of its
service area. These needs are continually being reassessed and appropriate
revisions are made, when necessary, in construction schedules. The Company's
estimates of its construction expenditures can vary substantially due to
numerous items beyond the Company's control, such as changes in rates, economic
conditions, construction costs, and new environmental or other governmental laws
and regulations.
During the five years ended December 31, 1996, gross property additions amounted
to $496 million. Internally generated funds for the five year period were
sufficient to provide for all of these gross additions. The gross additions
during this period amounted to approximately 18% of total utility plant at
December 31, 1996, and consisted of $368 million for electric properties and
$128 million for gas properties. Gross retirements during the same period were
$94 million, consisting of $76 million for electric properties and $18 million
for gas properties.
At December 31, 1996, the Company's embedded cost of long-term debt was 6.05%
and its ratio of earnings to fixed charges was 5.07. See Exhibit 12. For a
further discussion of construction expenditures and financing, see Liquidity and
Capital Resources under Item 7.
Coal Supply
Over 90% of the Company's present electric generating capacity is coal-fired,
the remainder being made up of a hydroelectric plant and combustion turbine
peaking units fueled by natural gas and oil. Coal will be the predominant fuel
used by the Company in the foreseeable future, with natural gas and oil being
used for peaking capacity and flame stabilization in coal-fired boilers or in
emergencies. The Company has no nuclear generating units and has no plans to
build any in the foreseeable future.
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In January 1996, the Company bought out the last year of its three year contract
with Andalex Resources, Inc. at a cost of $3.5 million. The Kentucky Commission
allowed the recovery of the buyout expense through the Company's fuel adjustment
clause. As a result of the buyout of the coal contract, the Company's customers
realized a net savings in excess of $1 million.
The Company has entered into coal supply agreements with various suppliers for
coal deliveries for 1997 and beyond. The Company normally augments its coal
supply agreements with spot market purchases which, during 1996, were about 10%
of total purchases. The Company has a coal inventory policy, which is in
compliance with the Kentucky Commission's directives and which the Company
believes provides adequate protection under most contingencies. The Company had
on hand at December 31, 1996, a coal inventory of approximately 650,000 tons, or
a 36 day supply.
The Company expects, for the foreseeable future, to continue purchasing most of
its coal from western Kentucky and southwest Indiana, which has a sulfur content
in the 2%-4.5% range. The abundant supply of this relatively low priced coal,
combined with present and future desulfurization technologies, is expected to
enable the Company to continue to provide adequate electric service in a manner
acceptable under existing environmental laws and regulations.
Coal for the Company's Mill Creek plant is delivered by rail and barge.
Deliveries to the Cane Run and Trimble County plants are by rail and barge,
respectively.
The average delivered cost of coal purchased by the Company, per ton and per
million Btu, for the periods shown were as follows:
1996 1995 1994
---- ---- ----
Per ton........................... $21.73 $23.68 $25.27
Per million Btu................... .97 1.04 1.10
This downward trend in the delivered cost of coal is expected to continue
through 1997.
Gas Supply
Prior to the implementation of FERC Order No. 636, the Company had purchased
natural gas and pipeline transportation services from Texas Gas Transmission
Corporation (Texas Gas). The Company now purchases only transportation services
from Texas Gas and, beginning in 1996, Tennessee Gas Pipeline Company
(Tennessee). In addition, the Company purchases natural gas from many other
sources under contracts for varying periods of time.
Under Order No. 636, pipelines may recover costs associated with the transition
to and implementation of this order from pipeline customers, including the
Company. The Commission issued an order, based on proceedings that were held to
investigate the impact of Order No. 636 on utilities and ratepayers in Kentucky,
providing that transition costs assessed on utilities by the pipelines, which
are clearly identifiable as being related to the cost of the commodity itself,
are appropriate to be recovered from customers through the gas supply clause.
Transition costs are billed pursuant to orders issued by FERC in transition cost
regulatory proceedings.
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The Company transports on the Texas Gas system under No-Notice Service (NNS) and
Firm Transportation (FT) rates. During the winter months, the Company has
184,900 MMBtu (180,390 Mcf) per day in NNS. The Company does not transport on
the Texas Gas system under FT rates during the winter months. During the summer
months, the Company's NNS level is 111,000 MMBtu (108,293 Mcf) per day, and its
FT service level is 24,000 MMBtu (23,415 Mcf) per day. Each of these NNS and FT
agreements with Texas Gas expire in equal portions in 1998, 2000, and 2001. Each
agreement includes a unilateral five year roll-over provision exercisable at the
Company's option. Effective November 1, 1996, the Company also terminated a
transportation agreement with Texas Gas which provided for 30,000 MMBtu (29,268
Mcf) per day in FT service throughout the year. On November 1, 1996, the Company
initiated service under a five year transportation agreement with Tennessee for
30,000 MMBtu (28,986 Mcf) per day in firm transportation service under
Tennessee's Rate FT-A. For the previous thirty years, Texas Gas had been the
sole provider of gas transportation services to the Company.
During 1996, the Company participated in several regulatory proceedings at FERC.
During 1997, Texas Gas is expected to file for a change in its rates as required
under the settlement in its last rate case in Docket RP94-423. The Company plans
to participate in that and other proceedings, as appropriate.
The Company also has a portfolio of supply arrangements with various suppliers
in order to meet its firm sales obligations. These gas supply arrangements
include pricing provisions which are market-responsive. These firm supplies, in
tandem with pipeline transportation services, provide the reliability and
flexibility necessary to serve the Company's customers.
The Company operates five underground gas storage fields with a current working
gas capacity of 14.6 million Mcf. Gas is purchased and injected into storage
during the summer season and is then withdrawn to supplement pipeline supplies
to meet the gas-system load requirements during the winter heating season.
The estimated maximum deliverability from storage during the early part of the
1995-1996 heating season was approximately 373,000 Mcf per day. Deliverability
decreases during the latter portion of the heating season as the storage
inventory is reduced by seasonal withdrawals.
The average cost per Mcf of natural gas purchased by the Company was $3.46 in
1996, $2.62 in 1995, and $2.78 in 1994.
Environmental Matters
Protection of the environment is a major priority for the Company. The Company
engages in a variety of activities within the jurisdiction of federal, state,
and local regulatory agencies. Those agencies have issued the Company permits
for various activities subject to air quality, water quality, and waste
management laws and regulations. For the five year period ending with 1996,
expenditures for pollution control facilities represented $101 million or 20% of
total construction expenditures. The cost of operating and maintaining
scrubber-related facilities amounted to $22 million in 1996 and $21 million in
1995. See Note 13 of Notes to Financial Statements under Item 8 for a discussion
of specific environmental proceedings affecting the Company.
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Labor Relations
The Company's approximately 1,500 operating, maintenance, and construction
employees are members of the International Brotherhood of Electrical Workers
(IBEW) Local 2100. The current three year contract will expire in November 1998.
Employees
The Company had 2,500 full-time employees at December 31, 1996.
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ITEM 2. PROPERTIES.
The Company's power generating system consists of the coal-fired units operated
at its three steam generating stations. Combustion turbines supplement the
system during peak or emergency periods. At February 28, 1997, the Company owned
the following electric generating stations:
Year in
Steam Stations: Service Capability Rating (Kw)
------- ----------------------
Mill Creek-Kosmosdale, Ky.
Unit 1.......................... 1972 303,000
Unit 2.......................... 1974 301,000
Unit 3.......................... 1978 386,000
Unit 4.......................... 1982 480,000 1,470,000
-------
Cane Run-near Louisville, Ky.
Unit 4.......................... 1962 155,000
Unit 5.......................... 1966 168,000
Unit 6.......................... 1969 240,000 563,000
-------
Trimble County-Bedford, Ky.
Unit 1.......................... 1990 371,000(a)
Combustion Turbine Generators
(Peaking capability):
Zorn............................. 1969 16,000
Paddy's Run...................... 1968 43,000
Cane Run......................... 1968 16,000
Waterside........................ 1964 33,000 108,000
------- ----------
2,512,000
==========
(a) Amount shown represents the Company's 75% interest in Trimble County.
The Company is responsible for operation of Unit 1 and is reimbursed
by IMEA and IMPA for expenditures related to Trimble County based on
their proportionate share of ownership interest. See Note 15 of Notes
to Financial Statements, Jointly Owned Electric Utility Plant, under
Item 8 for further discussion on ownership.
The Company also owns an 80 Mw hydroelectric generating station located in
Louisville, operated under license issued by the FERC.
At December 31, 1996, the Company's electric transmission system included 21
substations with a total capacity of approximately 11,026,897 Kva and
approximately 652 structure miles of lines. The electric distribution system
included 83 substations with a total capacity of approximately 3,383,530 Kva,
3,537 structure miles of overhead lines, 274 miles of underground conduit, and
5,420 miles of underground conductors.
The Company's gas transmission system includes 178 miles of transmission mains,
and the gas distribution system includes 3,528 miles of distribution mains.
The Company operates underground gas storage facilities with a current working
gas capacity of approximately 14.6 million Mcf. See Gas Supply under Item 1.
In 1990, the Company entered into an operating lease for its corporate office
building located in downtown Louisville, Kentucky. The lease is for a period of
15 years and is scheduled to expire in June 2005.
-11-
<PAGE>
Other properties owned by the Company include office buildings, service centers,
warehouses, garages, and other structures and equipment, the use of which is
common to both the electric and gas departments.
The trust indenture securing the Company's First Mortgage Bonds constitutes a
direct first mortgage lien upon much of the property owned by the Company.
ITEM 3. LEGAL PROCEEDINGS.
Rates, Regulatory Matters, and Trimble County Generating Plant
For a discussion of current regulatory matters and a detailed discussion of the
Trimble County Unit 1 settlement agreement, see Rates and Regulation under
Item 7 and Notes 2 and 14 of Notes to Financial Statements under Item 8.
Statewide Power Planning
In March 1995, the Commission staff issued its report on its review of the
Company's 1993 biennial Integrated Resource Plan. The Staff Report specifically
found that the Company's plan contained some of the better analyses among those
filed by the electric utilities under the Commission's jurisdiction, and
presented several suggestions for the Company's consideration when it develops
its next plan. In an order issued March 17, 1995, the Commission formally closed
its proceeding for the review of the Company's plan. On May 5, 1995, the
Commission granted the Company's request to waive the requirement that the
Company file an Integrated Resource Plan during 1995. On July 21, 1995, the
Kentucky Commission amended its Integrated Resource Planning regulations to
replace the biennial filing requirement with a triennial requirement. The
amended regulations also specified that the Company's next Integrated Resource
Plan is to be filed 39 months from the effective date of the amended regulation,
or October 21, 1998.
Environmental
For a complete discussion of the Company's environmental issues concerning its
Mill Creek and Cane Run generating plants, manufactured gas plant sites, and
certain other environmental issues, see Note 13 of Notes to Financial Statements
under Item 8.
Other
In the normal course of business, other lawsuits, claims, environmental actions,
and other governmental proceedings arise against the Company. To the extent that
damages are assessed in any of these lawsuits, the Company believes that its
insurance coverage is adequate. Management, after consultation with legal
counsel, does not anticipate that liabilities arising out of other currently
pending or threatened lawsuits and claims will have a material adverse effect on
the Company's consolidated financial position or results of operations.
-12-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
---------------------
Executive Officers of the Company.
Effective Date of
Election to Present
Name Age Position Position
- ---- --- -------- -------------------
Roger W. Hale 53 Chairman of the Board and
Chief Executive Officer January 1, 1992
Victor A. Staffieri 41 President January 1, 1994
John R. McCall 53 Executive Vice President,
General Counsel and
Corporate Secretary July 1, 1994
Rebecca L. Farrar 37 Vice President, Gas Service
Business February 15, 1995
M. Lee Fowler 60 Vice President and
Controller September 1, 1988
Wendy C. Heck 43 Vice President, Information
Services January 1, 1994
Chris Hermann 49 Vice President and General
Manager, Wholesale
Electric Business January 1, 1993
Paul W. Thompson 40 Vice President, Retail
Electric Business September 15, 1996
Charles A. Markel III 49 Treasurer January 1, 1993
The present term of office of each of the above executive officers extends to
the meeting of the Board of Directors following the Annual Meeting of
Stockholders, scheduled to be held May 8, 1997.
There are no family relationships between executive officers of the Company.
Mr. Hale, Mr. Fowler, Ms. Heck, Mr. Hermann, and Mr. Markel have been employed
for more than five years in executive or management positions with the Company.
Prior to election to the position shown in the table, the following executive
officers held other positions with the Company since January 1, 1992: Ms. Heck
was Vice President-Fuels and Operating Services prior to January 1993, and Vice
President-Fuels and Information Services thereafter; Mr. Hermann was General
Manager-Wholesale Electric prior to January 1993; Mr. Markel was Senior Vice
President and Chief
-13-
<PAGE>
Financial Officer prior to January 1993. Effective January 1993, Mr. Markel was
named Corporate Vice President-Finance, and Treasurer of the parent company,
LG&E Energy Corp.
Prior to election to his current position, Mr. Staffieri was Senior Vice
President-Public Policy, and General Counsel of the Company, and prior to
November 1992, Senior Vice President, General Counsel and Corporate Secretary.
Prior to March 1992, Mr. Staffieri was employed by Long Island Lighting Company
and held the position of General Counsel and Secretary.
Prior to election to his current position, Mr. McCall was Partner and Litigation
Chairman of Brown, Todd & Heyburn, a law firm.
Prior to election to her current position, Ms. Farrar was employed by South
Carolina Electric and Gas Company and held the position of General Manager, Gas
Operations from July 1994 to February 1995; Division Manager, Central
Division-Gas Operations prior to July 1994; and General Manager, Northern
Division-Gas Operations prior to February 1992.
Prior to election to his current position, Mr. Thompson was Vice
President-Business Development for the parent company, LG&E Energy Corp. from
July 1994 to September 1996; General Manager-Gas Operations for the Company
prior to July 1994; and Director-Business Development for Energy Corp. prior to
December 1993.
-14-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
All Louisville Gas and Electric Company common stock, 21,294,223 shares, is held
by LG&E Energy Corp. Therefore, there is no public trading market for the
Company's common stock.
The following table sets forth the cash distributions on common stock paid to
LG&E Energy Corp. for the periods indicated:
1996 1995
---- ----
(Thousands of $)
First Quarter............. $18,500 $18,000
Second Quarter............ 18,500 34,000
Third Quarter............. 18,500 18,000
Fourth Quarter............ 19,200 18,500
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating Revenues .................... $ 821,115 $ 723,463 $ 759,075 $ 775,125 $ 700,195
---------- ----------- ----------- ---------- ----------
Net Operating Income:
Before Unusual Items ............... 147,263 138,203 134,393 136,118 125,829
Trimble County Settlement .......... -- (16,877) -- -- --
Non-Recurring Charges .............. -- -- (23,353) -- --
---------- ----------- ----------- ---------- ----------
Total Net Operating Income ...... 147,263 121,326 111,040 136,118 125,829
---------- ----------- ----------- ---------- ----------
Net Income:
Before Unusual Items ............... 107,941 100,061 94,423 90,535 73,793
Trimble County Settlement .......... -- (16,877) -- -- --
Non-Recurring Charges,
Charitable Foundation, etc....... -- -- (32,734) -- --
Cumulative Effect of
Accounting Change ............... -- -- (3,369) -- --
---------- ----------- ----------- ---------- ----------
Total Net Income ................ 107,941 83,184 58,320 90,535 73,793
---------- ----------- ----------- ---------- ----------
Net Income Available for
Common Stock ........................ 103,373 76,873 52,492 84,554 66,620
---------- ----------- ----------- ---------- ----------
Total Assets .......................... 2,006,712 1,979,490 1,966,590 1,974,584 1,960,860
Long-Term Obligations (including
amounts due within one year) ........ 646,800 662,800 662,800 662,800 686,262
</TABLE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition and of the Notes to Financial Statements should be read in conjunction
with the above information.
-15-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The following discussion and analysis by management focuses on those factors
that had a material effect on the Company's financial results of operations and
financial condition during 1996, 1995, and 1994 and should be read in connection
with the financial statements and notes thereto.
Some of the following discussion may contain forward looking statements that are
subject to certain risks, uncertainties and assumptions. Such forward looking
statements are intended to be identified in this document by the words
"anticipate," "estimate," "objective," "possible," "potential" and similar
expressions. Actual results may vary materially. Factors that could cause actual
results to differ materially include: general economic conditions; business and
competitive conditions in the energy industry; change in federal or state
legislation; unusual weather; actions by state or federal regulatory agencies
affecting rates; and other factors described from time to time in Louisville Gas
and Electric Company's reports to the Securities and Exchange Commission.
RESULTS OF OPERATIONS
Net Income
Net income for 1996 increased $7.9 million over 1995 excluding a $16.9 million
charge against net income in 1995 to recognize the effects of a settlement of
the long-standing issues surrounding the Company's Trimble County electric
generating plant. Without excluding the Trimble County charge-off, net income
increased $24.8 million over 1995. The $7.9 million increase in net income is
primarily the result of a significantly higher level of wholesale electric sales
and increased retail sales of electricity and natural gas, partially offset by
increased operation and maintenance expenses.
The Company's net income increased $24.9 million for 1995 over 1994 in spite of
recording the Trimble County settlement charge mentioned in the preceding
paragraph. In 1994 net income of $58.3 million included the write-off of certain
non-recurring items ($23.9 million), the expense of establishing a charitable
foundation ($8.9 million), and the adoption of Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Post-Employment Benefits ($3.4
million). Without consideration of the unusual charges against income in 1995
and 1994 as discussed above, the Company's 1995 net income increased $5.6
million over 1994. This improvement was primarily due to higher retail electric
sales during 1995 partially offset by increased purchased power expenses
resulting from unplanned power plant outages.
-16-
<PAGE>
Revenues
A comparison of operating revenues for the years 1996 and 1995, excluding the
Trimble County settlement (which reduced electric revenues by $28.3 million in
1995), with the immediately preceding year reflects both increases and
decreases, which have been segregated by the following principal causes (in
thousands of $):
<TABLE>
<CAPTION>
Increase (Decrease) From Prior Period
-----------------------------------------
Electric Revenues Gas Revenues
------------------- -------------------
Cause 1996 1995 1996 1995
----- ---- ---- ---- ----
Sales to Ultimate Consumers:
<S> <C> <C> <C> <C>
Fuel and gas supply adjustments, etc $ (4,652) $(10,566) $ 21,176 $(16,940)
Demand side management/decoupling ... 5,429 (4,619) (1,989) 479
Environmental cost recovery surcharge 2,410 3,205 -- --
Variation in sales volumes .......... 801 27,382 14,483 (3,420)
-------- -------- -------- --------
Total ............................. 3,988 15,402 33,670 (19,881)
Sales for resale ........................ 30,383 (5,249) -- --
Gas transportation-net .................. -- -- (971) 1,062
Other ................................... 1,688 1,538 594 (184)
-------- -------- -------- --------
Total ............................. $ 36,059 $ 11,691 $ 33,293 $(19,003)
======== ======== ======== ========
</TABLE>
Electric revenues increased in 1996 compared with 1995 primarily because of an
increase in sales of electricity for resale which resulted from aggressive
marketing efforts. Gas revenues increased as a result of the higher cost of
natural gas in 1996 and because of increased sales to ultimate consumers (6%)
caused mainly by colder weather experienced in the first quarter of the year.
Electric revenues increased in 1995 mainly because of an increase in sales to
ultimate consumers as a result of the warmer summer weather and improved
economic conditions in the Company's service territory. Gas revenues decreased
as a result of lower gas supply adjustment revenues, which reflected the lower
cost of natural gas in 1995.
Expenses
Fuel for electric generation and gas supply expenses comprise a large segment of
the Company's total operating costs. 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 are reflected in the
Company's rates, subject to approval by the Public Service Commission of
Kentucky (Kentucky Commission or Commission).
Fuel expenses increased $11.7 million (8%) in 1996 primarily because of a 12%
increase in generation ($16 million), partially offset by a decrease in the cost
of coal burned ($4.3 million). Fuel expenses decreased $5.6 million (4%) in 1995
as compared to 1994 due to a decrease in the cost of coal burned ($7.5 million)
partially offset by increased generation of 2%. The average delivered cost per
ton of coal purchased was $21.73 in 1996, $23.68 in 1995, and $25.27 in 1994.
This downward trend in the delivered cost of coal is expected to continue
through 1997.
Power purchased expense in 1996 of $16.6 million was approximately the same as
in 1995. Power was purchased in 1996 primarily to supplement generation
requirements related to wholesale electric power sales. Power purchased in 1995
increased $7.1 million over 1994 primarily because of
-17-
<PAGE>
increased purchases resulting from unplanned outages at the electric generating
plants during the extremely hot summer weather.
Gas supply expenses increased $29.7 million (27%) mainly because of the higher
unit cost of net gas supply ($21.8 million) and an increase in the volume of gas
delivered to the distribution system ($7.9 million). Gas supply expenses
decreased $20.8 million (16%) in 1995 because of the lower cost of net gas
supply ($18.7 million) and a decrease in the volume of gas delivered to the
distribution system ($2.1 million). The average unit cost per Mcf of purchased
gas was $3.46 in 1996, $2.62 in 1995, and $2.78 in 1994.
Other operation expenses increased $8.7 million (6%) over 1995 primarily because
of increased costs to operate the Company's electric power plants ($2.9
million), the electric and gas transmission and distribution systems ($1.9
million), and because of the recognition of credits to expense in 1995 for
settlement proceeds received related to a commercial dispute ($6.0 million).
In 1995 the Company received cash proceeds of $8 million in connection with the
settlement of a commercial dispute. Pursuant to a study to determine the proper
amount of income to be recognized, the Company recognized $6 million as a
reduction of 1995 operation expense. After further study and the resolution of
the remaining legal issues, the $2 million balance was applied as a reduction of
operation expense in 1996.
Maintenance expenses increased $2.7 million (5%) over 1995 primarily due to
increased storm damage repairs ($1.8 million) and an increase in electric power
plant expenses ($.9 million). Maintenance increased $3.4 million in 1995 over
1994 primarily as a result of an increase in repairs at the electric power
plants ($4.2 million), partially offset by a decrease in storm damage expenses
($1 million).
Non-recurring charges in 1994 of $38.6 million include the Company's write-off
of costs in connection with early retirements and workforce reductions that
occurred in 1992 and 1993, costs in connection with property damage claims
pertaining to particulate emissions from the Mill Creek electric generating
plant, and certain costs previously deferred resulting from adoption of
Statement of Financial Accounting Standards No. 106, EMPLOYERS' ACCOUNTING FOR
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS. See Note 3 of Notes to Financial
Statements under Item 8.
Depreciation and amortization increased in both 1996 and 1995 primarily because
of additional depreciable plant in service.
Variations in income tax expenses are largely attributable to changes in pre-tax
income.
Other income decreased about $3 million in 1996 because of a decrease in income
earned from investments and lower gains realized from the sale of property as
compared to 1995. See Note 9 of Notes to Financial Statements under Item 8.
Contribution to the Company's charitable foundation reflects the expense
associated with establishing a tax-exempt foundation during 1994. Contributions
made from this Foundation are not charged against income, and therefore, do not
affect the Company's net income. See Note 3 of Notes to Financial Statements
under Item 8.
-18-
<PAGE>
Interest charges for 1996 decreased $1.7 million (4%) primarily because of the
retirement of outstanding debt. The Company's First Mortgage Bonds, 5.625%
Series of $16 million were retired at maturity on June 1, 1996 and $50 million
in other debt was refinanced at more favorable rates. Interest charges for 1995
decreased $.9 million primarily due to a reversal of an interest expense reserve
resulting from a favorable ruling on certain income tax matters. The embedded
cost of long-term debt at December 31, 1996, was 6.05%; at December 31, 1995,
6.32%. See Note 11 under Item 8, First Mortgage Bonds and Pollution Control
Bonds, for further discussion.
Preferred dividends decreased $1.7 million (28%) due primarily to the redemption
of the 7.45% Series Cumulative Preferred Stock in December 1995. Preferred
dividends increased $.5 million in 1995 because of a higher rate associated with
the Auction Rate Series.
The rate of inflation may have a significant impact on the Company's operations,
its ability to control costs, and the need to seek timely and adequate rate
adjustments. However, relatively low rates of inflation in the past few years
have moderated the impact on current operating results.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for capital funds is primarily related to the construction of
plant and equipment necessary to meet the needs of electric and gas utility
customers and protection of the environment.
Capital Requirements
New construction expenditures for 1996 were $108 million compared with $93
million for 1995 and $95 million for 1994.
Past Financing Activities
During 1996, 1995, and 1994, the Company's primary source of capital was
internally generated funds from operating cash flows. Internally generated funds
provided financing for 100% of the Company's construction expenditures for 1996,
1995, and 1994.
Variations in accounts receivable and accounts payable are not generally
significant indicators of the Company's liquidity, as such variations are
primarily attributable to fluctuations in weather in the Company's service
territory, which has a direct affect on sales of electricity and natural gas.
On June 1, 1996, the Company's First Mortgage Bonds, 5.625% Series of $16
million matured and were retired by the Company. The bonds were redeemed with
available funds.
In October 1996, the Company issued $22.5 million of Jefferson County, Kentucky
and $27.5 million of Trimble County, Kentucky, Pollution Control Bonds, Flexible
Rate Series, due September 1, 2026. Interest rates for these bonds were 3.60%
and 3.57%, respectively, at December 31, 1996. The proceeds from these bonds
were applied in December 1996 to redeem the outstanding 7.25% Series of
Jefferson County, Kentucky and Trimble County, Kentucky, Pollution Control Bonds
due December 1, 2016.
-19-
<PAGE>
In April 1995, the Company issued $40 million of Jefferson County, Kentucky,
Pollution Control Bonds, 5.90% Series, due April 15, 2023. The proceeds from
these bonds were used to redeem the outstanding 9.25% Series of Pollution
Control Bonds due July 1, 2015.
In December 1995, the Company redeemed the outstanding shares of its 7.45%
Cumulative Preferred Stock with a par value of $25 per share at a redemption
price of $25.75 per share. The Company funded the $22 million redemption with
cash generated internally.
Future Capital Requirements
Future financing requirements may be affected in varying degrees by factors such
as load growth, changes in construction expenditure levels, rate actions allowed
by regulatory agencies, new legislation, market entry of competing electric
power generators, changes in environmental regulations and other regulatory
requirements. The Company estimates construction expenditures will total $250
million for 1997 and 1998. In addition, capital requirements for 1998 include
$20 million to retire long-term debt that is scheduled to mature.
Future Sources of Financing
Internally generated funds from operations are expected to fund substantially
all anticipated construction expenditures in 1997 and 1998.
At December 31, 1996, the Company had unused lines of credit of $200 million for
which it pays commitment fees. These credit facilities are scheduled to expire
during the year 2001. Management expects to renegotiate them when they expire.
To the extent permanent financings are needed in 1997 and 1998, the Company
expects that it will have ready access to the securities markets to raise needed
funds.
Year 2000 Computer Software Modification Costs
Based on a preliminary study, the Company expects to spend approximately $12
million to $15 million from 1997 through 1999 to modify its computer information
systems enabling proper processing of transactions relating to the year 2000 and
beyond. The Company continues to evaluate appropriate courses of corrective
action, including replacement of certain systems whose associated costs would be
recorded as assets and amortized. Accordingly, the Company does not expect the
amounts required to be expensed over the next three years to have a material
effect on its financial position or results of operations. The amount expensed
in 1996 was immaterial.
-20-
<PAGE>
Rates and Regulation
The Company is subject to the jurisdiction of the Kentucky Commission in
virtually all matters related to electric and gas utility regulation, and as
such, its accounting is subject to Statement of Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation (SFAS No. 71).
Given the Company's competitive position in the market and the status of
regulation in the state of Kentucky, the Company has no plans or intentions to
discontinue its application of SFAS No. 71. See Note 2 of Notes to Financial
Statements under Item 8.
On December 8, 1995, the Commission approved a settlement agreement filed by the
Company and all intervenors in the Trimble County proceedings, including various
consumer interest groups and government agencies, that, in effect, resolved all
of the regulatory and legal issues related to the appropriate ratemaking
treatment to exclude 25% of the Trimble County plant costs from customer rates.
Under the settlement, ratepayers are to receive $22 million in refunds, most of
which is being refunded over the five-year period, 1996 through 2000, based on a
per kilowatt-hour credit. In addition, the Company also agreed to provide
$900,000 annually for five years, beginning in 1996, to fund low-income energy
assistance programs and agreed to revise the decoupling methodology in a manner
that was to reduce revenues collected from residential customers during 1996 and
1997 by a total of approximately $1.8 million.
The overall effect of the settlement, which the Company recognized in its
entirety in the fourth quarter of 1995, was to reduce electric revenues by $28.3
million and net income by $16.9 million. See Note 14 of Notes to Financial
Statements under Item 8 for further discussion.
In May 1995, the Company implemented a Commission approved environmental cost
recovery (ECR) 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 production of energy from coal. As a result of this
surcharge, the Company's electric revenues increased $3.2 million in 1995, an
additional $2.4 million in 1996 and a further increase in revenues of
approximately $1 million is projected for 1997. The Kentucky Attorney General
(KAG), and the Kentucky Industrial Utility Customers (KIUC) have filed an appeal
in Franklin Circuit Court on various issues related to the Commission's order in
this proceeding, 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 contesting the legal challenges but cannot
predict the outcome of this litigation. However, the amount of refunds, if any,
that may ultimately be ordered, are not expected to have a material adverse
effect on the Company's financial position or results of operation.
In January 1994, the Company implemented a Commission approved demand side
management (DSM) program that the Company, KAG, the Jefferson County Attorney,
and representatives of several customer-interest groups had filed with the
Commission. The Company committed up to $3.3 million over three years (from 1994
through 1996) for initial programs that include a residential energy
conservation and education program and a commercial conservation audit program.
The approved program includes a formal collaborative process to develop future
DSM programs and also contains a rate mechanism that (1) provides the Company
concurrent recovery of DSM costs, (2) provides an incentive for implementing DSM
programs, and (3) allows the Company to recover revenues from lost sales
associated with the DSM programs through a decoupling mechanism.
-21-
<PAGE>
In 1996, the Commission approved the addition of six new programs that increased
the Company's commitment to DSM by approximately $4 million over the next two
years.
On April 24, 1996 the Federal Energy Regulatory Commission (FERC) issued Orders
888 and 889. Order 888 requires all public utilities to file Open Access
Transmission Tariffs. These tariffs will allow third parties to utilize a
utility's transmission assets under comparable terms and conditions as the
utility. The Company filed its Open Access Transmission Tariff on July 9, 1996,
to comply with FERC's Order 888.
Order 889 requires public utilities to implement standards of conduct and an
Open Access Same-time Information System (OASIS). The standards of conduct
require that public utilities functionally separate their transmission and
wholesale power merchant functions. OASIS will allow other parties to obtain
information about a utility's transmission system in the same manner that the
utility's wholesale power merchant function does. OASIS ensures that relevant
information is passed from the utility's transmission function to the purchaser
of transmission service in a non-discriminatory manner. The Company has made a
functional separation of its transmission and wholesale power merchant function.
A filing of the Company's standards of conduct was made with the FERC on
December 31, 1996. In January 1997, the Company began operation of its OASIS
system in accordance with the FERC Order.
The Company last filed for a rate increase with the Commission in June 1990
based on the test-year ended April 30, 1990. The Commission issued a final order
in September 1991 that effectively granted the Company an annual increase in
rates of $6.8 million ($6.1 million electric and $.7 million gas).
Environmental Matters
With the passage of the Clean Air Act Amendments of 1990 (the Act), the Company
already complied with the stringent sulfur dioxide emission limits required by
the year 2000 as it had previously installed scrubbers on all of its coal-fired
generating units. Since then, as part of its ongoing construction program, the
Company has spent $29 million through 1996 for remedial measures necessary to
meet the Act's requirements for nitrogen oxides. These expenditures are being
recovered under the environmental cost recovery mechanism as more fully
discussed in Note 2 of the Notes to Financial Statements under Item 8. The
overall financial impact of the Act on the Company has been minimal. However,
the Company is closely monitoring a number of significant regulatory
developments. In November 1996, the United States Environmental Protection
Agency (USEPA) announced its proposal to revise the National Ambient Air Quality
Standards for ozone and particulate matter. In November 1996, the USEPA also
announced its intent to direct certain states to address long range ozone
transport from Midwest emission sources which allegedly contribute to ozone
problems in the Northeast. While management is unable to predict the outcome or
exact impact of these ongoing regulatory proceedings, the Company continues to
be 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.
Reference is made to Environmental under Note 13 of Notes to Financial
Statements under Item 8 for a complete discussion of the Company's environmental
issues concerning its Mill Creek and Cane Run electric generating plants,
manufactured gas plant sites, and certain other environmental issues.
-22-
<PAGE>
FUTURE OUTLOOK
Electric Industry Restructuring
The Kentucky Public Service Commission (Kentucky Commission) has held a series
of meetings with electric utilities operating in Kentucky to discuss the
potential impact of the major restructuring of the industry that is being driven
by competition and market forces. Specifically, the Kentucky Commission has
indicated it wants to ensure that ratepayers in Kentucky will continue to
receive the current low electric rates and high reliability and quality of
service during and after the restructuring of the industry.
Topics discussed have included the regulatory treatment of potential stranded
costs or benefits, the utility's historical obligation to serve, the functional
separation of utilities, regulatory and legal changes that may be needed in a
restructured electric industry and many other issues. These wide-ranging
discussions, which are expected to continue in the future, centered around the
theme of how the Kentucky Commission and utilities can best work together to
benefit energy consumers in Kentucky.
The Company is exploring steps that it can take to maintain or even improve its
position as a low-cost producer of electricity and evaluating other actions,
including an analysis associated with the future recovery of certain regulatory
assets, that will enable the Company to continue to offer favorable electric
rates to its customers.
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<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LOUISVILLE GAS AND ELECTRIC COMPANY
STATEMENTS OF INCOME
(Thousands of $)
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Operating Revenues
Electric .......................................... $606,696 $ 570,637 $ 558,946
Gas ............................................... 214,419 181,126 200,129
Refund - Trimble County Settlement (Note 14) ...... -- (28,300) --
-------- --------- ---------
Total operating revenues (Note 1) ................ 821,115 723,463 759,075
-------- --------- ---------
Operating Expenses
Fuel for electric generation ...................... 149,697 138,002 143,602
Power purchased ................................... 16,626 16,830 9,754
Gas supply expenses ............................... 140,482 110,738 131,561
Other operation expenses .......................... 143,338 134,655 136,214
Maintenance ....................................... 54,790 52,101 48,731
Non-recurring charges (Note 3) .................... -- -- 38,613
Depreciation and amortization ..................... 89,002 85,759 82,519
Federal and State income taxes (Note 8) ........... 63,259 47,524 39,922
Property and other taxes .......................... 16,658 16,528 17,119
-------- --------- ---------
Total operating expenses ......................... 673,852 602,137 648,035
-------- --------- ---------
Net Operating Income ................................ 147,263 121,326 111,040
Other Income and (Deductions) (Note 9) .............. 920 3,776 2,451
Contribution to Charitable Foundation - net (Note 3) -- -- 8,946
Interest Charges .................................... 40,242 41,918 42,856
-------- --------- ---------
Income before Cumulative Effect of a Change in
Accounting Principle .............................. 107,941 83,184 61,689
Cumulative Effect of a Change in Accounting for
Post-Employment Benefits, net of income taxes
of $2,280 ......................................... -- -- (3,369)
-------- --------- ---------
Net Income .......................................... 107,941 83,184 58,320
Preferred Stock Dividends ........................... 4,568 6,311 5,828
-------- --------- ---------
Net Income Available for Common Stock ............... $103,373 $ 76,873 $ 52,492
======== ========= =========
</TABLE>
STATEMENTS OF RETAINED EARNINGS
(Thousands of $)
Years Ended December 31
------------------------------
1996 1995 1994
-------- -------- --------
Balance January 1 ............................. $181,049 $193,895 $194,903
Add net income ................................ 107,941 83,184 58,320
-------- -------- --------
288,990 277,079 253,223
-------- -------- --------
Deduct: Cash dividends declared on stock:
5% cumulative preferred ............... 1,075 1,075 1,075
7.45% cumulative preferred ............ -- 1,527 1,598
Auction rate cumulative preferred ..... 2,024 2,240 1,686
$5.875 cumulative preferred ........... 1,469 1,469 1,469
Common ................................ 75,200 89,000 53,500
Preferred stock redemption expense ...... -- 719 --
-------- -------- --------
79,768 96,030 59,328
-------- -------- --------
Balance December 31 ........................... $209,222 $181,049 $193,895
======== ======== ========
The accompanying notes are an integral part of these financial statements.
-24-
<PAGE>
LOUISVILLE GAS AND ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Thousands of $)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income ................................................... $ 107,941 $ 83,184 $ 58,320
Items not requiring cash currently:
Depreciation and amortization ............................... 89,002 85,759 82,519
Deferred income taxes-net ................................... 26,055 7,049 (2,274)
Investment tax credit-net ................................... (3,997) (4,742) (4,619)
Cumulative effect of change in accounting principle ......... -- -- 3,369
Non-recurring charges ....................................... -- -- 38,613
Other ....................................................... 3,911 3,958 6,603
(Increases) decreases in certain net current assets:
Accounts receivable ......................................... (9,555) (19,531) 18,339
Materials and supplies ...................................... (1,418) 1,428 3,280
Trimble County Settlement ................................... (10,789) 28,300 --
Accounts payable ............................................ 3,772 22,936 (22,781)
Accrued taxes ............................................... 4,168 (433) (1,247)
Accrued interest ............................................ (1,070) (2,330) 530
Prepayments and other ....................................... 685 (61) (743)
Other ........................................................ (23,153) (6,917) 972
--------- --------- ---------
Net cash provided by operating activities ................... 185,552 198,600 180,881
--------- --------- ---------
Cash Flows from Investing Activities
Purchases of securities ...................................... (11,039) (119,151) (87,896)
Proceeds from sales of securities ............................ 28,605 151,422 56,085
Construction expenditures .................................... (107,879) (93,423) (95,398)
--------- --------- ---------
Net cash used for investing activities ...................... (90,313) (61,152) (127,209)
--------- --------- ---------
Cash Flows from Financing Activities
Issuance of first mortgage bonds and pollution control bonds . 49,745 39,914 --
Redemption of preferred stock ................................ -- (22,108) --
Retirement of first mortgage bonds and pollution control bonds (67,013) (41,055) --
Payment of dividends ......................................... (79,310) (95,206) (58,639)
--------- --------- ---------
Net cash used for financing activities ...................... (96,578) (118,455) (58,639)
--------- --------- ---------
Net Increase (Decrease) in Cash and Temporary Cash Investments . (1,339) 18,993 (4,967)
Cash and Temporary Cash Investments at Beginning of Year ....... 58,131 39,138 44,105
--------- --------- ---------
Cash and Temporary Cash Investments at End of Year ............. $ 56,792 $ 58,131 $ 39,138
========= ========= =========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Income taxes ................................................ $ 41,508 $ 40,049 $ 42,803
Interest on borrowed money .................................. 40,334 42,589 40,827
</TABLE>
The accompanying notes are an integral part of these financial statements.
-25-
<PAGE>
LOUISVILLE GAS AND ELECTRIC COMPANY
BALANCE SHEETS
(Thousands of $)
<TABLE>
<CAPTION>
Assets December 31
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Utility Plant, at original cost
Electric ............................................... $2,192,557 $2,123,699
Gas .................................................... 320,791 299,070
Common ................................................. 130,678 128,902
---------- ----------
2,644,026 2,551,671
Less: Reserve for depreciation ........................ 999,987 934,942
---------- ----------
1,644,039 1,616,729
Construction work in progress .......................... 41,183 47,189
---------- ----------
1,685,222 1,663,918
---------- ----------
Other Property and Investments - less reserve ............ 1,028 760
---------- ----------
Current Assets
Cash and temporary cash investments .................... 56,792 58,131
Marketable securities (Note 6) ......................... 3,595 20,449
Accounts receivable-less reserve of $1,470
in 1996 and $1,360 in 1995 ............................ 115,144 105,589
Materials and supplies-at average cost
Fuel (predominantly coal) ............................. 14,576 14,996
Gas stored underground ................................ 35,510 31,714
Other ................................................. 32,426 34,384
Prepayments ............................................ 2,480 2,108
---------- ----------
260,523 267,371
---------- ----------
Deferred Debits and Other Assets
Unamortized debt expense ............................... 6,933 7,710
Regulatory assets (Note 2) ............................. 27,729 29,926
Other .................................................. 25,277 9,805
---------- ----------
59,939 47,441
---------- ----------
$2,006,712 $1,979,490
========== ==========
Capital and Liabilities
Capitalization (see Statements of Capitalization)
Common equity .......................................... $ 633,757 $ 605,157
Cumulative preferred stock ............................. 95,328 95,328
Long-term debt ......................................... 646,835 646,845
---------- ----------
1,375,920 1,347,330
---------- ----------
Current Liabilities
Long-term debt due within one year ..................... -- 16,000
Accounts payable ....................................... 97,478 93,706
Trimble County Settlement (Note 14) .................... 17,511 28,300
Dividends declared ..................................... 20,131 19,672
Accrued taxes .......................................... 11,982 7,814
Accrued interest ....................................... 9,994 11,064
Other .................................................. 13,128 12,071
---------- ----------
170,224 188,627
---------- ----------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes (Notes 1 and 8) ...... 241,681 204,816
Investment tax credit, in process of amortization ...... 80,040 84,037
Accumulated provision for pensions and related benefits 42,554 47,099
Customers' advances for construction ................... 10,033 9,251
Regulatory liability (Note 2) .......................... 77,287 88,242
Other .................................................. 8,973 10,088
---------- ----------
460,568 443,533
---------- ----------
Commitments and Contingencies (Note 13)
$2,006,712 $1,979,490
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-26-
<PAGE>
LOUISVILLE GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
(Thousands of $)
<TABLE>
<CAPTION>
December 31
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Common Equity
Common stock, without par value -
Authorized 75,000,000 shares, outstanding 21,294,223 shares .... $ 425,170 $ 425,170
Common stock expense ............................................ (836) (836)
Unrealized gain (loss) on marketable securities, net of income
taxes of $136 in 1996 and $153 in 1995 (Note 6) .............. 201 (226)
Retained earnings ............................................... 209,222 181,049
----------- -----------
633,757 605,157
----------- -----------
Cumulative Preferred Stock
Redeemable on 30 days notice by the Company except, $5.875 series
Shares Current
Outstanding Redemption Price
----------- ----------------
$25 par value, 1,720,000 shares authorized -
5% series .......................................... 860,287 $ 28.00 21,507 21,507
Without par value, 6,750,000 shares authorized -
Auction Rate ....................................... 500,000 100.00 50,000 50,000
$5.875 series ...................................... 250,000 Not redeemable 25,000 25,000
Preferred stock expense ......................................... (1,179) (1,179)
----------- -----------
95,328 95,328
----------- -----------
Long-Term Debt (Note 11)
First mortgage bonds -
Series due June 1, 1998, 6 3/4% ................................ 20,000 20,000
Series due July 1, 2002, 7 1/2% ................................ 20,000 20,000
Series due August 15, 2003, 6% ................................. 42,600 42,600
Pollution control series:
K due December 1, 2016, 7 1/4% ............................... -- 27,500
L due December 1, 2016, 7 1/4% ............................... -- 22,500
N due February 1, 2019, 7 3/4% ............................... 35,000 35,000
O due February 1, 2019, 7 3/4% ............................... 35,000 35,000
P due June 15, 2015, 7.45% ................................... 25,000 25,000
Q due November 1, 2020, 7 5/8% ............................... 83,335 83,335
R due November 1, 2020, 6.55% ................................ 41,665 41,665
S due September 1, 2017, variable ............................ 31,000 31,000
T due September 1, 2017, variable ............................ 60,000 60,000
U due August 15, 2013, variable .............................. 35,200 35,200
V due August 15, 2019, 5 5/8% ................................ 102,000 102,000
W due October 15, 2020, 5.45% ................................ 26,000 26,000
X due April 15, 2023, 5.90% .................................. 40,000 40,000
----------- -----------
Total first mortgage bonds ..................................... 596,800 646,800
Pollution control bonds (unsecured) -
Jefferson County Series due September 1, 2026, variable ...... 22,500 --
Trimble County Series due September 1, 2026, variable ........ 27,500 --
----------- -----------
Total unsecured long-term debt ................................. 50,000 --
----------- -----------
Total long-term bonds .......................................... 646,800 646,800
Unamortized premium on bonds .................................... 35 45
----------- -----------
646,835 646,845
----------- -----------
Total Capitalization .............................................. $ 1,375,920 $ 1,347,330
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-27-
<PAGE>
LOUISVILLE GAS AND ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Louisville Gas and Electric Company (the Company) is the primary subsidiary of
LG&E Energy Corp. The Company is a regulated public utility that is engaged in
the generation, transmission, distribution, and sale of electric energy and the
storage, distribution, and sale of natural gas in Louisville and adjacent areas
in Kentucky. LG&E Energy Corp. is an exempt energy services holding company with
wholly-owned subsidiaries consisting of the Company, LG&E Energy Systems Inc.,
and LG&E Gas Systems Inc. All of the Company's Common Stock is held by LG&E
Energy Corp.
Certain reclassifications have been made to the 1995 financial statements to
conform to the 1996 presentation with no impact on previously reported income.
UTILITY PLANT. The Company's plant is stated at original cost, which includes
payroll-related costs such as taxes, fringe benefits, and administrative and
general costs. Construction work in progress has been included in the rate base,
and, accordingly, the Company has not recorded any allowance for funds used
during construction.
The cost of plant retired or disposed of in the normal course of business is
deducted from plant accounts and such cost plus removal expense less salvage
value is charged to the reserve for depreciation. When complete operating units
are disposed of, appropriate adjustments are made to the reserve for
depreciation and gains and losses, if any, are recognized.
DEPRECIATION. Depreciation is provided on the straight-line method over the
estimated service lives of depreciable plant. The amounts provided for 1996 and
1995 were 3.3% (3.2% electric, 3.3% gas, and 6% common); and for 1994, 3.3%
(3.2% electric, 3.3% gas, and 5% common) of average depreciable plant.
CASH AND TEMPORARY CASH INVESTMENTS. The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents. Temporary cash investments are carried at cost, which approximates
fair value.
FINANCIAL INSTRUMENTS. The Company uses over-the-counter interest-rate swap
agreements to hedge its exposure to fluctuations in the interest rates it pays
on variable-rate debt, and it uses exchange-traded U.S. Treasury note and bond
futures to hedge its exposure to fluctuations in the value of its investments in
the preferred stocks of other companies. Gains and losses on interest-rate swaps
used to hedge interest rate risk are reflected in interest charges monthly.
Gains and losses on U.S. Treasury note and bond futures used to hedge
investments in preferred stocks are initially deferred and classified as
unrealized gains or losses on marketable securities in common equity and then
charged or credited to other income and deductions when the securities are sold.
See Note 4, Financial Instruments.
-28-
<PAGE>
DEBT PREMIUM AND EXPENSE. Debt premium and expense are amortized over the lives
of the related debt issues, consistent with regulatory practices.
DEFERRED INCOME TAXES. Deferred income taxes have been provided for all material
book-tax temporary differences.
INVESTMENT TAX CREDITS. Investment tax credits resulted from provisions of the
tax law that permitted a reduction of the Company's tax liability based on
credits for certain construction expenditures. Deferred investment tax credits
are being amortized to income over the estimated lives of the related property
that gave rise to the credits.
REVENUE RECOGNITION. Revenues are recorded based on service rendered to
customers through month end. The Company accrues an estimate for unbilled
revenues from each meter reading date to the end of the accounting period. Under
an agreement approved by the Public Service Commission of Kentucky (Kentucky
Commission or Commission), the Company has implemented a demand side management
program and a "decoupling mechanism," which allows the Company to recover a
predetermined level of revenue on electric and gas residential sales. See
Management's Discussion and Analysis, Rates and Regulation, for further
discussion.
FUEL AND GAS COSTS. The cost of fuel for electric generation is charged to
expense as used, and the cost of gas supply is charged to expense as delivered
to the distribution system.
MANAGEMENT'S USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported assets and liabilities
and disclosure of contingent items at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. See Note 13, Commitments and
Contingencies, for a further discussion.
NEW ACCOUNTING PRONOUNCEMENTS. LONG-LIVED ASSETS. 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) in
the first quarter of 1996. This new standard requires that long-lived assets and
certain intangibles be reviewed for impairment and possible write-down to fair
value whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company has performed these
impairment reviews on certain long-lived assets and has determined their
carrying amounts to be recoverable. Management continues to monitor current and
anticipated future operating conditions, legal requirements and regulatory
environment for circumstances that may trigger potential asset impairments.
TRANSFERS AND EXTINGUISHMENTS. In June 1996, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 125, ACCOUNTING FOR
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES
(SFAS No. 125), effective for all transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996. The
Company plans to adopt the provisions of SFAS No. 125 in the first quarter of
1997. The Company does not expect the adoption of SFAS No. 125 to have a
material adverse impact on its financial position or results of operation.
-29-
<PAGE>
ENVIRONMENTAL REMEDIATION. Effective January 1, 1997, the Company will adopt the
provisions of Statement of Position (SOP) 96-1, ENVIRONMENTAL REMEDIATION
LIABILITIES. This statement provides authoritative guidance for recognition,
measurement, and disclosure of environmental remediation liabilities in
financial statements. Due to the Company's previous recognition of this type of
liability, adoption is not expected to have a material impact on its financial
position or results of operation. See Note 13, Commitments and Contingencies,
for a further discussion on the Company's environmental commitments and
contingencies.
NOTE 2 - RATES AND REGULATORY MATTERS
The Company conforms with generally accepted accounting principles as applied to
regulated public utilities and as prescribed by the Federal Energy Regulatory
Commission (FERC) and the Kentucky Commission. The Company is subject to
Statement of Financial Accounting Standards No. 71, ACCOUNTING FOR THE EFFECTS
OF CERTAIN TYPES OF REGULATION (SFAS No. 71). Under SFAS No. 71, certain costs
that would otherwise be charged to expense are deferred as regulatory assets
based on expected recovery from customers in future rates. Likewise, certain
credits that would otherwise be reflected as income are deferred as regulatory
liabilities based on expected flowback to customers in future rates.
Management's expected recovery of deferred costs and expected flowback of
deferred credits is generally based on specific ratemaking decisions or
precedent for each item. The following regulatory assets and liabilities were
included in the balance sheets as of December 31 (in thousands of $):
1996 1995
-------- --------
Unamortized loss on bonds .......................... $ 17,162 $ 16,443
Unamortized extraordinary retirements .............. 4,087 6,935
Manufactured gas sites ............................. 3,244 3,220
Other .............................................. 3,236 3,328
-------- --------
Total regulatory assets ............................ 27,729 29,926
Deferred income taxes - net ........................ (77,287) (88,242)
-------- --------
Regulatory assets and (liabilities) - net .......... $(49,558) $(58,316)
======== ========
Substantially all of the Company's regulatory assets are being recovered through
rates charged to customers. The Company expects to seek regulatory approval to
recover any remaining regulatory assets in its next general rate case.
ENVIRONMENTAL COST RECOVERY. On April 6, 1995, in response to an application
filed by the Company, the Commission approved, with modifications, an
environmental cost recovery surcharge that increased electric revenues by $3.2
million in 1995 and $2.4 million in 1996. The surcharge became effective May 1,
1995.
An appeal of the Commission's April 6 order by various intervenors in the
proceeding (including the Kentucky Attorney General) is currently pending in the
Franklin Circuit Court of Kentucky. The Company is 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. See Rates and Regulation under Management's Discussion and Analysis
under Item 7 for a further discussion.
-30-
<PAGE>
NOTE 3 - NON-RECURRING CHARGES
As part of a study of LG&E Energy Corp.'s business strategy and realignment
during 1994, the Company re-evaluated its regulatory strategy which previously
had been to seek full recovery of certain costs deferred in accordance with
prior precedents established by the Commission. As a result of this
re-evaluation, the Company wrote off certain expenses that had previously been
deferred amounting to approximately $38.6 million before taxes. While the
Company continues to believe that it could have reasonably expected to recover
these costs in future rate proceedings before the Commission, the Company
decided to deduct these expenses currently and not seek recovery for such
expenses in future rates due to increasing competitive pressures and the
existing and anticipated future economic conditions.
In the first quarter of 1994, the Board of Directors of the Company approved the
formation of a tax-exempt charitable foundation (Foundation) that makes
charitable contributions to qualified persons and entities. In 1994, the Company
recorded a pre-tax charge against income and made an irrevocable payment of $15
million to fund the Foundation. The Foundation is exempt from federal income tax
under the Internal Revenue Code.
NOTE 4 - FINANCIAL INSTRUMENTS
The Company uses over-the-counter interest-rate swap agreements to hedge its
exposure to fluctuations in the interest rates it pays on variable-rate debt,
and it uses exchange-traded U.S. Treasury note and bond futures to hedge its
exposure to fluctuations in the value of its investments in the preferred stocks
of other companies.
At December 31, 1996, the Company had a short position in U.S. Treasury note and
bond futures contracts with notional amounts totaling $1.3 million. These
contracts are used to hedge price risk associated with certain marketable
securities and mature in March 1997.
At December 31, 1996, the Company was a party to two interest-rate swap
agreements. The swaps have notional amounts of $15 million each, and the Company
uses them to hedge its exposure to changes in the interest rates paid on $30
million of the Company's Pollution Control Bonds, Variable Rate Series, due
September 1, 2017. One of these swaps will mature in September 1997, and the
other will mature in September 1999. The Company paid interest at average fixed
rates on the swaps of 4.55% in 1996, 1995, and 1994, and received interest at
average variable rates based on the JJ Kenny Index of 3.46% in 1996, 3.87% in
1995, and 2.84% in 1994.
-31-
<PAGE>
The cost and estimated fair values of the Company's financial instruments
as of December 31, 1996 and 1995 follow (in thousands of $):
<TABLE>
<CAPTION>
1996 1995
------------------- -------------------
Fair Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Marketable securities ......................... $ 3,258 $ 3,595 $ 20,828 $ 20,449
Long-term investments -
Not practicable to estimate fair value ...... 744 744 740 740
Preferred stock subject to mandatory redemption 25,000 24,938 25,000 25,000
Long-term debt ................................ 646,800 662,721 662,800 688,977
U.S. Treasury note and bond futures ........... -- 6 -- (105)
Interest-rate swaps ........................... -- (319) -- (522)
</TABLE>
All of the above valuations reflect prices quoted by exchanges except for the
swaps and the long-term investments. The fair values of the swaps reflect price
quotes from dealers or amounts calculated using accepted pricing models. The
fair values of the long-term investments reflect cost, since the Company cannot
reasonably estimate fair value.
NOTE 5 - CONCENTRATIONS OF CREDIT AND OTHER RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties (See Note 4, Financial Instruments, for further
discussion) failed completely to perform as contracted. Concentrations of credit
risk (whether on- or off-balance sheet) relate to groups of customers or
counterparties that have similar economic or industry characteristics that would
cause their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions.
The Company's customer receivables and gas and electric revenues arise from
deliveries of natural gas to approximately 277,000 customers and electricity to
approximately 351,000 customers in Louisville and adjacent areas in Kentucky.
For the year ended December 31, 1996, 74% of total revenue was derived from
electric operations and 26% from gas operations.
The Company's operation and maintenance employees are members of the
International Brotherhood of Electrical Workers (IBEW) Local 2100 which
represents approximately one-half of the Company's workforce. The Company's
collective bargaining agreement with IBEW employees expires in November 1998.
NOTE 6 - MARKETABLE SECURITIES
The Company's marketable securities have been determined to be
"available-for-sale" under the provisions of Statement of Financial Accounting
Standards SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. The available-for-sale category of investments results in the
classification of unrealized gains and losses on investments in common equity,
net of income taxes, until such gains and losses are realized, at which time
they are recognized in earnings. Proceeds from sales of available-for-sale
securities in 1996 were $28.6 million, which resulted in realized gains of $.3
million and losses of $.8 million, calculated using the specific identification
method. Proceeds from sales of available-for-sale securities in 1995 were $151.4
million, which resulted in realized gains of $1.6 million and losses of
approximately $3.4 million.
-32-
<PAGE>
Approximate cost, fair value, and other required information about the Company's
available-for-sale securities by major security type as of December 31, 1996 and
1995, follow (in thousands of $):
<TABLE>
<CAPTION>
1996 1995
----------------------------- ------------------------------
Fixed Fixed
Equity Income Total Equity Income Total
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cost ................................ $ 3,258 $ -- $ 3,258 $ 5,342 $ 15,486 $ 20,828
Unrealized gains .................... 572 -- 572 55 4 59
Unrealized losses ................... (235) -- (235) (193) (245) (438)
-------- -------- -------- -------- -------- --------
Fair values ......................... $ 3,595 $ -- $ 3,595 $ 5,204 $ 15,245 $ 20,449
======== ======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------
Fair Values:
No maturity ....................... $ 2,126 $ -- $ 2,126 $ 4,565 $ -- $ 4,565
Contractual Maturities:
Less than one year .............. 1,469 -- 1,469 639 2,710 3,349
One to five years ............... -- -- -- -- 8,808 8,808
Five to ten years ............... -- -- -- -- 831 831
Over ten years .................. -- -- -- -- 2,219 2,219
Not due at a single maturity date -- -- -- -- 677 677
-------- -------- -------- -------- -------- --------
Total Fair Values ................... $ 3,595 $ -- $ 3,595 $ 5,204 $ 15,245 $ 20,449
======== ======== ======== ======== ======== ========
</TABLE>
NOTE 7 - PENSION PLANS AND RETIREMENT BENEFITS
PENSION PLANS. The Company has two non-contributory, defined-benefit pension
plans, that cover all eligible employees. Retirement benefits are based on the
employee's years of service, age at retirement and compensation. The Company's
policy is to fund annual actuarial costs, up to the maximum amount deductible
for income tax purposes, as determined under the frozen entry age actuarial cost
method. The assets of the plans consist primarily of common stocks, corporate
bonds and United States government securities.
The Company also has a supplemental executive retirement plan that covers
officers of the Company. The plan provides retirement benefits based on average
earnings during the final three years prior to retirement, reduced by social
security benefits, any pension benefits received from plans of prior employers,
and by amounts received under the pension plans referred to in the preceding
paragraph.
-33-
<PAGE>
Pension costs were $4.3 million for 1996, $5 million for 1995, and $4.4 million
for 1994, of which approximately $751,000, $761,000, and $693,000, respectively,
were charged to construction. The components of periodic pension expense are
shown below (in thousands of $):
1996 1995 1994
-------- -------- --------
Service cost-benefits earned during the period $ 4,989 $ 4,361 $ 4,813
Interest cost on projected benefit obligation . 16,697 14,328 13,057
Actual return on plan assets .................. (31,931) (45,608) (489)
Amortization of transition asset .............. (1,112) (1,112) (1,112)
Net amortization and deferral ................. 15,669 33,008 (11,846)
-------- -------- --------
Net pension cost .............................. $ 4,312 $ 4,977 $ 4,423
======== ======== ========
The funded status of the pension plans at December 31 is shown below (in
thousands of $):
1996 1995
--------- ---------
Actuarial present value of accumulated plan benefits:
Vested ............................................... $ 178,534 $ 166,525
Non-Vested ........................................... 19,913 8,577
--------- ---------
Accumulated benefit obligation ....................... 198,447 175,102
Effect of projected future compensation .............. 30,902 31,764
--------- ---------
Projected benefit obligation ......................... 229,349 206,866
Plan assets at fair value ............................ 238,026 207,470
--------- ---------
Plan assets in excess of projected
benefit obligation ................................. 8,677 604
Unrecognized net transition asset .................... (10,300) (11,412)
Unrecognized prior service cost ...................... 44,142 28,938
Unrecognized net gain ................................ (65,891) (43,652)
--------- ---------
Accrued pension liability .............................. $ (23,372) $ (25,522)
========= =========
The assumptions used in determining the actuarial valuations are as follows:
1996 1995
------- -------
Assumed discount rate to determine
projected benefit obligation .................. 7.75% 7.5%
Assumed long-term rate of return
on plan assets ................................ 8.5% 8.5%
Assumed annual rate of increase in
future compensation levels .................... 2% - 4.25% 3.5% - 4%
POST-RETIREMENT BENEFITS. The Company provides certain health care and life
insurance benefits for eligible retired employees. Post-retirement health care
benefits are subject to a maximum amount payable by the Company. The Company
accrues for the expected cost of post-retirement benefits other than pensions
during the employee's years of service with the Company. The discounted present
value of the post-retirement benefit obligation at the date of adoption is being
amortized over 20 years.
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Post-retirement benefit costs are shown below (in thousands of $):
1996 1995 1994
------ ------ ------
Service cost .................................. $ 773 $ 595 $ 621
Interest cost ................................. 2,976 2,706 2,386
Amortization of transition obligation ......... 1,337 1,337 1,337
Amortization of prior service cost ............ 328 -- --
------ ------ ------
Post-retirement benefit cost .................. $5,414 $4,638 $4,344
====== ====== ======
The accumulated post-retirement benefit obligation at December 31, is shown
below (in thousands of $):
1996 1995
-------- --------
Retirees ............................................. $(18,568) $(19,965)
Fully eligible active employees ...................... (4,808) (2,768)
Other active employees ............................... (16,575) (15,082)
-------- --------
Accumulated post-retirement benefit obligation ....... (39,951) (37,815)
Plan assets at fair value ............................ 2,284 --
Unrecognized prior service cost ...................... 3,738 --
Unrecognized transition obligation ................... 21,390 22,727
Unrecognized net loss ................................ 493 3,480
-------- --------
Accrued post-retirement benefit liability ............ $(12,046) $(11,608)
======== ========
The accumulated post-retirement benefit obligation was determined using an
assumed discount rate of 7.75% for 1996 and 7.5% for 1995. Assumed compensation
increases for projected life insurance benefits for affected groups was 4% for
1996 and 1995. An assumed health care cost trend rate of 10% was assumed for
1996, gradually decreasing to 5% in eight years and thereafter.
A 1% increase in the assumed health care cost trend rate would increase the
accumulated post-retirement benefit obligation by approximately $2 million and
the annual service and interest cost by approximately $200,000. In 1996, the
Company began funding certain liabilities for post-retirement benefits through a
tax-deductible funding vehicle. The plan assets are being held in two voluntary
employee benefit association (VEBA) trusts and are invested primarily in
short-term United States government securities.
THRIFT SAVINGS PLAN. The Company has a Thrift Savings Plan under Section 401(k)
of the Internal Revenue Code. The plan covers all regular full-time employees
with one year or more of service at the Company. Under the plan, eligible
employees may defer and contribute to the plan a portion of current compensation
in order to provide future retirement benefits. The Company makes contributions
to the plan by matching a portion of employee contributions. These costs were
approximately $1.8 million for 1996 and 1995, and $1.7 million for 1994.
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NOTE 8 - INCOME TAXES
Components of income tax expense are shown in the table below
(in thousands of $):
1996 1995 1994
-------- -------- --------
Included in Operating Expenses:
Current - Federal ........................... $ 33,823 $ 36,379 $ 35,552
- State .............................. 7,685 9,138 9,003
Deferred - Federal-net ...................... 19,161 4,021 (969)
- State-net .......................... 6,587 2,728 955
Deferred investment tax credit .............. 409 -- --
Amortization of investment tax credit ....... (4,406) (4,742) (4,619)
-------- -------- --------
Total ................................. $ 63,259 $ 47,524 $ 39,922
-------- -------- --------
Included in Other Income and (Deductions):
Current - Federal .......................... $ 196 $ (555) $ (4,626)
- State ............................ (96) (343) (1,277)
Deferred - Federal-net ...................... 246 240 19
- State-net ........................ 61 60 1
-------- -------- --------
Total ................................. $ 407 $ (598) $ (5,883)
-------- -------- --------
Total Income Tax Expense ...................... $ 63,666 $ 46,926 $ 34,039
======== ======== ========
Net deferred tax liabilities resulting from book-tax temporary differences are
shown below (in thousands of $):
1996 1995
-------- --------
Deferred Tax Liabilities:
Depreciation and other plant-related items ............. $314,692 $297,929
Other liabilities ...................................... 14,864 7,714
-------- --------
329,556 305,643
-------- --------
Deferred Tax Assets:
Investment tax credit .................................. 32,305 33,919
Income taxes due to customers .......................... 31,195 32,363
Pension overfunding .................................... 7,860 9,075
Accrued expenses not currently deductible and other .... 16,515 25,470
-------- --------
87,875 100,827
-------- --------
Net Deferred Income Tax Liability .................... $241,681 $204,816
======== ========
A reconciliation of differences between the statutory U.S. federal income tax
rate and the Company's effective income tax rate follows:
1996 1995 1994
------ ------ ------
Statutory federal income tax rate ............. 35.0% 35.0% 35.0%
State income taxes net of federal benefit ..... 5.4 5.8 5.9
Amortization of investment tax credit ......... (2.6) (3.6) (5.1)
Other differences-net ......................... (.7) (1.1) (.5)
------ ------ ------
Effective Income Tax Rate ..................... 37.1% 36.1% 35.3%
====== ====== ======
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NOTE 9 - OTHER INCOME AND DEDUCTIONS
Other income and deductions consisted of the following at December 31 (in
thousands of $):
1996 1995 1994
------- ------- -------
Interest and dividend income ............... $ 4,096 $ 5,732 $ 4,568
(Losses) gains on fixed asset disposal ..... (36) 1,090 1,427
Donations .................................. (150) (144) (1,015)
Income taxes and other ..................... (2,990) (2,902) (2,529)
------- ------- -------
Total other income and deductions .......... $ 920 $ 3,776 $ 2,451
======= ======= =======
NOTE 10 - PREFERRED STOCK
In December 1995, the Company redeemed the 858,128 outstanding shares of its
7.45% Cumulative Preferred Stock with a par value of $25 per share at a
redemption price of $25.75 per share.
NOTE 11 - FIRST MORTGAGE BONDS AND POLLUTION CONTROL BONDS
Annual requirements for the sinking funds of the Company's First Mortgage Bonds
(other than the First Mortgage Bonds issued in connection with the Pollution
Control Bonds) are the amounts necessary to redeem 1% of the highest principal
amount of each series of bonds at any time outstanding. Property additions (166
2/3% of principal amounts of bonds otherwise required to be so redeemed) have
been applied in lieu of cash. It is the intent of the Company to apply property
additions to meet 1997 sinking fund requirements of the First Mortgage Bonds.
The trust indenture securing the First Mortgage Bonds constitutes a direct first
mortgage lien upon substantially all property owned by the Company. The
indenture, as supplemented, provides in substance that, under certain specified
conditions, portions of retained earnings will not be available for the payment
of dividends on common stock. No portion of retained earnings is presently
restricted by this provision.
Pollution Control Bonds (Louisville Gas and Electric Company Projects) issued by
Jefferson and Trimble Counties, Kentucky, are secured by the assignment of loan
payments by the Company to the Counties pursuant to loan agreements, and further
secured by the delivery from time to time of an equal amount of the Company's
First Mortgage Bonds, Pollution Control Series. First Mortgage Bonds so
delivered are summarized in the Statements of Capitalization. No principal or
interest on these First Mortgage Bonds is payable unless default on the loan
agreements occurs. The interest rate reflected in the Statements of
Capitalization applies to the Pollution Control Bonds.
In October 1996, the Company issued $22.5 million of Jefferson County, Kentucky,
and $27.5 million of Trimble County, Kentucky, Pollution Control Bonds, Flexible
Rate Series, due September 1, 2026. Interest rates for these bonds were 3.60%
and 3.57%, respectively, as of December 31, 1996. In December 1996, the proceeds
from the bonds were used to redeem the outstanding 7.25% Series of Jefferson
County and Trimble County Pollution Control Bonds due December 1, 2016.
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<PAGE>
On June 1, 1996, the Company's First Mortgage Bonds, 5.625% Series of $16
million matured and were retired by the Company.
In April 1995, the Company issued $40 million of Jefferson County, Kentucky,
Pollution Control Bonds, 5.90% Series, due April 15, 2023. The proceeds of the
bonds were used to redeem the outstanding 9.25% Series of Pollution Control
Bonds due July 1, 2015.
The Company's First Mortgage Bonds, 6.75% Series of $20 million is scheduled to
mature in 1998. There are no scheduled maturities of Pollution Control Bonds for
the five years subsequent to December 31, 1996. The Company has no cash sinking
fund requirements.
NOTE 12 - NOTES PAYABLE
The Company had no notes payable at December 31, 1996, and 1995.
At December 31, 1996, the Company had unused lines of credit of $200 million,
for which it pays commitment fees. The credit lines are scheduled to expire
during the year 2001. Management expects to renegotiate these lines when they
expire.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
CONSTRUCTION PROGRAM. The Company had commitments in connection with its
construction program aggregating approximately $7 million at December 31, 1996.
Construction expenditures for the years 1997 and 1998 are estimated to total
approximately $250 million.
OPERATING LEASE. The Company has an operating lease for its corporate office
building that is scheduled to expire in June 2005. The Company's total expense
in connection with this lease for 1996, 1995, and 1994, less amounts contributed
by the parent company, was $1.9 million, $2 million, and $2.2 million,
respectively. The future minimum annual lease payments under the lease agreement
for years subsequent to December 31, 1996, are as follows (in thousands of $):
1997 ................................................... $ 2,850
1998 ................................................... 2,850
1999 ................................................... 2,850
2000 ................................................... 3,178
2001 ................................................... 3,507
Thereafter ............................................. 12,275
-------
Total ................................................ $27,510
=======
ENVIRONMENTAL. With the passage of the Clean Air Act Amendments of 1990 (the
Act), the Company already complied with the stringent sulfur dioxide emission
limits required by the year 2000 as it had previously installed scrubbers on all
of its coal-fired generating units. Since then, as part of its ongoing
construction program, the Company has spent $29 million through 1996 for
remedial measures necessary to meet the Act's requirements for nitrogen oxides.
The overall financial impact of the Act on the Company has been minimal.
However, the Company is closely monitoring a number of significant regulatory
developments. In November 1996, the United States Environmental Protection
Agency (USEPA) announced its proposal to revise the
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<PAGE>
National Ambient Air Quality Standards for ozone and particulate matter. In
November 1996, USEPA also announced its intent to direct certain states to
address long range ozone transport from Midwest emission sources which allegedly
contribute to ozone problems in the Northeast. While management is unable to
predict the outcome or exact impact of these ongoing regulatory proceedings, the
Company continues to be 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.
In recent years, the Company has undertaken extensive modifications at its Mill
Creek plant aimed at controlling certain particulate emissions which allegedly
damaged metal surfaces on adjacent properties. The Air Pollution Control
District of Jefferson County (APCD) and the Company are reviewing the results of
a field sampling program to demonstrate the effectiveness of the plant
modifications. In an effort to resolve the associated property damage claims,
the Company also established a claims resolution process which resulted in
property damage settlements with adjacent residents at an aggregate cost of
approximately $15 million.
In August 1993, 34 persons filed a complaint in Jefferson Circuit Court against
the Company seeking certification of a class consisting of certain persons in
the vicinity of the Mill Creek plant who have allegedly suffered personal injury
or property damage as a result of emissions from the plant. The court denied the
Plaintiffs' initial motion for class certification, but allowed the Plaintiffs
to bring a total of 537 individual claimants into the litigation. As part of its
ongoing claims resolution process, as described above, the Company subsequently
settled the claims of approximately half of the individual claimants. In
December 1996, the court granted Plaintiff counsel's motion to withdraw from
representation of all remaining claimants who have not settled with the Company.
If those parties fail to obtain alternate counsel or otherwise pursue the
litigation, their claims will be subject to dismissal. The Company intends to
vigorously defend itself against any claims which remain. In management's
opinion, resolution of any remaining claims should not have a material adverse
impact on the financial position or results of operations of the Company.
In response to a notification from the APCD that the Company's Cane Run plant
may be the source of a potential exceedance of the National Ambient Air Quality
Standards for sulfur dioxide, the Company submitted a draft action plan and
modeling schedule to the APCD and USEPA. The APCD and USEPA have approved the
submittals, and a Company contractor is currently conducting additional modeling
activities. Although it is expected that corrective action will be accomplished
through capital improvements, until the modeling activities are complete, the
Company cannot determine the precise impact of this matter.
The APCD is reviewing potential reductions in emissions of ozone precursors
necessary to bring Jefferson County, Kentucky into compliance with the National
Ambient Air Quality Standards for ozone. As described above, the Company has
installed controls which result in substantial reductions in nitrogen oxide
(NOX) emissions from its plants. In March 1994, the APCD adopted a regulation
requiring a 15% reduction in volatile organic compound (VOC) emissions from
industrial sources, including the Company's Cane Run and Mill Creek plants.
Because there are currently no demonstrated technologies for control of VOC
emissions from coal-fired boilers, the regulation raised the prospect of
potential limits on generation at those two plants. After extensive negotiation
with affected parties, in December 1996, the APCD amended its regulation to
delete the requirement for VOC reductions from the Company's plants. The APCD
also determined that no additional reductions in either industrial VOC or NOX
-39-
<PAGE>
emissions are warranted at this time, but reserved the right to impose
additional reductions if necessary in the future.
The Company owns or formerly owned three primary sites where manufactured gas
plant operations were conducted. Remedial investigations performed at these
sites have identified coal tar and other contaminants typical of manufactured
gas plant operations. In December 1996, the Company conveyed one of the sites to
a new owner for a nominal sum in return for the new owner assuming certain
environmental liabilities and cleanup obligations. The Company does not expect
to incur any further remedial investigation or cleanup costs at this site. The
Company is awaiting regulatory determinations from the Kentucky Natural
Resources and Environmental Protection Cabinet on the level of remediation
required at both other sites. Until such regulatory determinations are made, the
Company is unable to precisely determine the liability for cleanup costs.
However, based on the results of studies at the sites, management currently
estimates total cleanup costs will fall within a range of $3 million to $8
million and has recorded an accrual of approximately $3 million in the
accompanying financial statements.
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,
USEPA has identified the Company as a de minimis PRP and is currently pursuing
other parties for the vast majority of the $44 million in cleanup costs as
estimated by USEPA. 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 involved in
litigation with USEPA and approximately 50 companies in an effort to resolve
liability for approximately $2.5 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.
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<PAGE>
NOTE 14 - TRIMBLE COUNTY GENERATING PLANT
Trimble County Unit 1 (Trimble County), a 495-megawatt coal-fired electric
generating unit placed into service in December 1990, has been the subject of
numerous legal and regulatory proceedings to determine the appropriate
ratemaking treatment to implement the Kentucky Public Service Commission's 1988
decision that the Company should not be allowed to recover 25% of the cost of
Trimble County from ratepayers.
On December 1, 1995, the Company and other parties filed with the Commission a
unanimous settlement agreement that was approved by the Commission on December
8, 1995. Under the agreement, which resolves all outstanding issues, the Company
agreed to refund approximately $22 million to current electric customers, most
of which is being refunded by credits to customers' bills over the five years
1996 through 2000. In addition, the Company has agreed to pay $900,000 per year
for five years beginning in 1996 to the Metro Human Needs Alliance, Inc., a
not-for-profit Louisville-based corporation, for the sole purpose of funding
low-income energy assistance programs in the service territory. The Company also
agreed to revise the residential decoupling methodology approved by the
Commission in 1994 in a manner that will reduce revenues collected from
residential customers during 1996 and 1997 by a total of approximately $1.8
million. Finally, the parties agreed to dismiss all appeals currently pending in
state courts regarding the Commission's orders in the Company's last general
rate case.
NOTE 15 - JOINTLY OWNED ELECTRIC UTILITY PLANT
The Company owns a 75% undivided interest in Trimble County Unit 1. Accounting
for the 75% portion of the Unit, which the Commission has allowed to be
reflected in customer rates, is similar to the Company's accounting for other
wholly-owned utility plants.
Of the remaining 25% of the Unit, Illinois Municipal Electric Agency (IMEA) owns
a 12.12% undivided interest in the Unit, and Indiana Municipal Power Agency
(IMPA) owns a 12.88% undivided interest. Each is responsible for their
proportionate ownership share of operation and maintenance expenses and
incremental assets, and for fuel used.
The following data represent shares of the jointly owned property:
Trimble County
--------------------------------------
LG&E IMPA IMEA Total
---- ---- ---- -----
Ownership interest....... 75% 12.88% 12.12% 100%
Mw capacity.............. 371.25 63.75 60 495
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NOTE 16 - SEGMENTS OF BUSINESS
The Company is a regulated public utility engaged in the generation,
transmission, distribution, and sale of electricity and the storage,
distribution, and sale of natural gas.
1996 1995 1994
---------- ---------- ----------
(Thousands of $)
Operating Information
Operating Revenues
Electric ............................. $ 606,696 $ 542,337(a) $ 558,946
Gas .................................. 214,419 181,126 200,129
---------- ---------- ----------
Total .............................. $ 821,115 $ 723,463 $ 759,075
========== ========== ==========
Pre-tax Operating Income
Electric ............................. $ 192,129 $ 152,199 $ 139,594
Gas .................................. 18,393 16,651 11,368
---------- ---------- ----------
Total .............................. $ 210,522 $ 168,850 $ 150,962
========== ========== ==========
Other Information
Depreciation and Amortization
Electric ............................. $ 76,929 $ 74,437 $ 71,882
Gas .................................. 12,073 11,322 10,637
---------- ---------- ----------
Total .............................. $ 89,002 $ 85,759 $ 82,519
========== ========== ==========
Construction Expenditures (b)
Electric ............................. $ 79,541 $ 66,661 $ 71,592
Gas .................................. 28,338 26,762 23,806
---------- ---------- ----------
Total .............................. $ 107,879 $ 93,423 $ 95,398
========== ========== ==========
Investment Information-December 31
Identifiable Assets
Electric ............................. $1,505,508 $1,501,568 $1,514,287
Gas .................................. 300,550 268,840 252,946
---------- ---------- ----------
Total .............................. 1,806,058 1,770,408 1,767,233
Other Assets (c) ...................... 200,654 209,082 199,357
---------- ---------- ----------
Total Assets ....................... $2,006,712 $1,979,490 $1,966,590
========== ========== ==========
(a) Net of Refund - Trimble County Settlement of $28.3 million.
(b) Excluding cost of removal and salvage.
(c) Includes cash and temporary cash investments, marketable securities,
accounts receivable, unamortized debt expense, and other property and
investments.
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<PAGE>
REPORT OF MANAGEMENT
The management of Louisville Gas and Electric Company is responsible for the
preparation and integrity of the financial statements and related information
included in this Annual Report. These statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis and, necessarily, include amounts that reflect the best estimates and
judgment of management.
The Company's financial statements have been audited by Arthur Andersen LLP,
independent public accountants. Management has made available to Arthur Andersen
LLP all the Company's financial records and related data as well as the minutes
of shareholders' and directors' meetings.
Management has established and maintains a system of internal controls that
provide reasonable assurance that transactions are completed in accordance with
management's authorization, that assets are safeguarded and that financial
statements are prepared in conformity with generally accepted accounting
principles. Management believes that an adequate system of internal controls is
maintained through the selection and training of personnel, appropriate division
of responsibility, establishment and communication of policies and procedures
and by regular reviews of internal accounting controls by the Company's internal
auditors. Management reviews and modifies its system of internal controls in
light of changes in conditions and operations, as well as in response to
recommendations from the internal auditors. These recommendations for the year
ended December 31, 1996, did not identify any material weaknesses in the design
and operation of the Company's internal control structure.
The Audit Committee of the Board of Directors is composed entirely of outside
directors. In carrying out its oversight role for the financial reporting and
internal controls of the Company, the Audit Committee meets regularly with the
Company's independent public accountants, internal auditors and management. The
Audit Committee reviews the results of the independent accountants' audit of the
financial statements and their audit procedures, and discusses the adequacy of
internal accounting controls. The Audit Committee also approves the annual
internal auditing program, and reviews the activities and results of the
internal auditing function. Both the independent public accountants and the
internal auditors have access to the Audit Committee at any time.
Louisville Gas and Electric Company maintains and internally communicates a
written code of business conduct that addresses, among other items, potential
conflicts of interest, compliance with laws, including those relating to
financial disclosure, and the confidentiality of proprietary information.
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Louisville Gas and Electric Company:
We have audited the accompanying balance sheets and statements of capitalization
of Louisville Gas and Electric Company (a Kentucky corporation and a wholly
owned subsidiary of LG&E Energy Corp.) as of December 31, 1996 and 1995, and the
related statements of income, retained earnings and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
and the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Louisville Gas and Electric
Company as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 14(a)2 is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Louisville, Kentucky Arthur Andersen LLP
January 29, 1997 -----------------------------
Arthur Andersen LLP
---------------------------
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SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(Thousands of $)
Selected financial data for the four quarters of 1996 and 1995 are shown below.
Because of seasonal fluctuations in temperature and other factors, results for
quarters may fluctuate throughout the year.
Quarters Ended
-------------------------------------------
March June September December
----- ---- --------- --------
1996
Operating Revenues .............. $226,744 $181,107 $203,818 $209,446
Net Operating Income ............ 33,950 32,736 51,681 28,896
Net Income ...................... 23,552 22,908 42,466 19,015
Net Income Available for
Common Stock .................. 22,396 21,772 41,320 17,885
1995
Operating Revenues .............. $199,517 $167,821 $196,351 $159,774(a)
Net Operating Income ............ 32,409 30,015 47,774 11,128
Net Income ...................... 21,839 21,085 38,346 1,914
Net Income Available for
Common Stock .................. 20,222 19,458 36,780 413
(a) Net of Refund - Trimble County Settlement of $28.3 million.
-------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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<PAGE>
PART III
ITEMS 10, 11, 12, and 13 are omitted pursuant to General Instruction G, inasmuch
as the Company filed copies of a definitive proxy statement with the Commission
on March 26, 1997, pursuant to Regulation 14A under the Securities Exchange Act
of 1934. Such proxy statement is incorporated herein by this reference. In
accordance with General Instruction G of Form 10-K, the information required by
Item 10 relating to executive officers has been included in Part I of this Form
10-K. The Louisville Gas and Electric Company (LG&E) is a subsidiary of LG&E
Energy Corp. At December 31, 1996, LG&E Energy Corp. controlled 100% of the
common stock of LG&E. There are situations where LG&E Energy Corp. interacts
with its affiliated companies through the use of shared facilities, common
employees, and other business relationships. In these situations, LG&E receives
payment in accordance with regulatory requirements for the services provided to
affiliated companies.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements (included in Item 8):
Statements of Income for the three years ended December 31, 1996
(page 24).
Statements of Retained Earnings for the three years
ended December 31, 1996 (page 24).
Statements of Cash Flows for the three years ended December 31,
1996 (page 25).
Balance Sheets - December 31, 1996, and 1995 (page 26).
Statements of Capitalization - December 31, 1996, and
1995 (page 27).
Notes to Financial Statements (pages 28-42).
Report of Management (page 43).
Report of Independent Public Accountants (page 44).
Selected Quarterly Financial Data for 1996 and 1995 (page 45).
2. Financial Statement Schedule (included in Part IV):
Schedule II - Valuation and Qualifying Accounts for the three
years ended December 31, 1996 (page 62).
All other schedules have been omitted as not applicable or not required or
because the information required to be shown is included in the Financial
Statements or the accompanying Notes to Financial Statements.
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<PAGE>
3. Exhibits:
Exhibit
No. Description
------- -----------
3.01 Copy of Restated Articles of Incorporation, dated November 6, 1996.
[Filed as Exhibit 3.06 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, and incorporated by
reference herein]
3.02 Copy of Bylaws, as amended through December 15, 1995. [Filed as
Exhibit 3.06 to the Company's Form 10-K for the year ended December
31, 1995, and incorporated by reference herein]
4.01 Copy of Trust Indenture dated November 1, 1949, from the Company to
Harris Trust and Savings Bank, Trustee. [Filed as Exhibit 7.01 to
Registration Statement 2-8283 and incorporated by reference herein]
4.02 Copy of Supplemental Indenture dated February 1, 1952, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.05 to Registration Statement 2-9371 and incorporated by reference
herein]
4.03 Copy of Supplemental Indenture dated February 1, 1954, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.03 to Registration Statement 2-11923 and incorporated by reference
herein]
4.04 Copy of Supplemental Indenture dated September 1, 1957, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.04 to Registration Statement 2-17047 and incorporated by reference
herein]
4.05 Copy of Supplemental Indenture dated October 1, 1960, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.05 to Registration Statement 2-24920 and incorporated by reference
herein]
4.06 Copy of Supplemental Indenture dated June 1, 1966, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.06 to Registration Statement 2-28865 and incorporated by reference
herein]
4.07 Copy of Supplemental Indenture dated June 1, 1968, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.07 to Registration Statement 2-37368 and incorporated by reference
herein]
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<PAGE>
4.08 Copy of Supplemental Indenture dated June 1, 1970, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.08 to Registration Statement 2-37368 and incorporated by reference
herein]
4.09 Copy of Supplemental Indenture dated August 1, 1971, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.09 to Registration Statement 2-44295 and incorporated by reference
herein]
4.10 Copy of Supplemental Indenture dated June 1, 1972, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.10 to Registration Statement 2-52643 and incorporated by reference
herein]
4.11 Copy of Supplemental Indenture dated February 1, 1975, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.11 to Registration Statement 2-57252 and incorporated by reference
herein]
4.12 Copy of Supplemental Indenture dated September 1, 1975, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.12 to Registration Statement 2-57252 and incorporated by reference
herein]
4.13 Copy of Supplemental Indenture dated September 1, 1976, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.13 to Registration Statement 2-57252 and incorporated by reference
herein]
4.14 Copy of Supplemental Indenture dated October 1, 1976, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.14 to Registration Statement 2-65271 and incorporated by reference
herein]
4.15 Copy of Supplemental Indenture dated June 1, 1978, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.15 to Registration Statement 2-65271 and incorporated by reference
herein]
4.16 Copy of Supplemental Indenture dated February 15, 1979, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
2.16 to Registration Statement 2-65271 and incorporated by reference
herein]
-48-
<PAGE>
4.17 Copy of Supplemental Indenture dated September 1, 1979, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.17 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1980, and incorporated by reference herein]
4.18 Copy of Supplemental Indenture dated September 15, 1979, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.18 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1980, and incorporated by reference herein]
4.19 Copy of Supplemental Indenture dated September 15, 1981, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.19 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1981, and incorporated by reference herein]
4.20 Copy of Supplemental Indenture dated March 1, 1982, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.20 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1982, and incorporated by reference herein]
4.21 Copy of Supplemental Indenture dated March 15, 1982, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.21 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1982, and incorporated by reference herein]
4.22 Copy of Supplemental Indenture dated September 15, 1982, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.22 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1982, and incorporated by reference herein]
4.23 Copy of Supplemental Indenture dated February 15, 1984, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.23 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1984, and incorporated by reference herein]
4.24 Copy of Supplemental Indenture dated July 1, 1985, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.24 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1985, and incorporated by reference herein]
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<PAGE>
4.25 Copy of Supplemental Indenture dated November 15, 1986, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.25 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1986, and incorporated by reference herein]
4.26 Copy of Supplemental Indenture dated November 16, 1986, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.26 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1986, and incorporated by reference herein]
4.27 Copy of Supplemental Indenture dated August 1, 1987, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.27 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1987, and incorporated by reference herein]
4.28 Copy of Supplemental Indenture dated February 1, 1989, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.28 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, and incorporated by reference herein]
4.29 Copy of Supplemental Indenture dated February 2, 1989, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.29 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, and incorporated by reference herein]
4.30 Copy of Supplemental Indenture dated June 15, 1990, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.30 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1990, and incorporated by reference herein]
4.31 Copy of Supplemental Indenture dated November 1, 1990, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.31 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1990, and incorporated by reference herein]
4.32 Copy of Supplemental Indenture dated September 1, 1992, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.32 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated by reference herein]
4.33 Copy of Supplemental Indenture dated September 2, 1992, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.33 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated by reference herein]
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<PAGE>
4.34 Copy of Supplemental Indenture dated August 15, 1993, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.34 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]
4.35 Copy of Supplemental Indenture dated August 16, 1993, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.35 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]
4.36 Copy of Supplemental Indenture dated October 15, 1993, which is a
supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit
4.36 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]
10.01 Copies of Agreement between Sponsoring Companies re: Project D of
Atomic Energy Commission, dated May 12, 1952, Memorandums of
Understanding between Sponsoring Companies re: Project D of Atomic
Energy Commission, dated September 19, 1952 and October 28, 1952,
and Power Agreement between Ohio Valley Electric Corporation and
Atomic Energy Commission, dated October 15, 1952. [Filed as
Exhibit 13(y) to Registration Statement 2-9975 and incorporated by
reference herein]
10.02 Copy of Modification No. 1 dated July 23, 1953, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 4.03(b) to Registration
Statement 2-24920 and incorporated by reference herein]
10.03 Copy of Modification No. 2 dated March 15, 1964, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02(c) to Registration
Statement 2-61607 and incorporated by reference herein]
10.04 Copy of Modification No. 3 and No. 4 dated May 12, 1966 and
January 7, 1967, respectively, to the Power Agreement between Ohio
Valley Electric Corporation and Atomic Energy Commission. [Filed
as Exhibits 4(a)(13) and 4(a)(14) to Registration Statement
2-26063 and incorporated by reference herein]
10.05 Copy of Modification No. 5 dated August 15, 1967, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 13(c) to Registration
Statement 2-27316 and incorporated by reference herein]
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<PAGE>
10.06 Copies of (i) Inter-Company Power Agreement, dated July 10, 1953,
between Ohio Valley Electric Corporation and Sponsoring Companies
(which Agreement includes as Exhibit A the Power Agreement, dated
July 10, 1953, between Ohio Valley Electric Corporation and
Indiana-Kentucky Electric Corporation); (ii) First Supplementary
Transmission Agreement, dated July 10, 1953, between Ohio Valley
Electric Corporation and Sponsoring Companies; (iii) Inter-Company
Bond Agreement, dated July 10, 1953, between Ohio Valley Electric
Corporation and Sponsoring Companies; (iv) Inter-Company Bank
Credit Agreement, dated July 10, 1953, between Ohio Valley
Electric Corporation and Sponsoring Companies. [Filed as Exhibit
5.02(f) to Registration Statement 2-61607 and incorporated by
reference herein]
10.07 Copy of Modification No. 1 and No. 2 dated June 3, 1966 and
January 7, 1967, respectively, to Inter-Company Power Agreement
dated July 10, 1953. [Filed as Exhibits 4(a)(8) and 4(a)(10) to
Registration Statement 2-26063 and incorporated by reference
herein]
10.08 Copies of Amendments to Agreements (iii) and (iv) referred to
under 10.06 above as follows: (i) Amendment to Inter-Company Bond
Agreement and (ii) Amendment to Inter-Company Bank Credit
Agreement. [Filed as Exhibit 5.02(h) to Registration Statement
2-61607 and incorporated by reference herein]
10.09 Copy of Modification No. 1, dated August 20, 1958, to the First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 5.02(i) to Registration Statement 2-61607 and
incorporated by reference herein]
10.10 Copy of Modification No. 2, dated April 1, 1965, to the First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 5.02(j) to Registration Statement 2-6l607 and
incorporated by reference herein]
10.11 Copy of Modification No. 3, dated January 20, 1967, to the First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 4(a)(7) to Registration Statement 2-26063 and
incorporated by reference herein]
10.12 Copy of Modification No. 6, dated November 15, 1967, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 4(g) to Registration
Statement 2-28524 and incorporated by reference herein]
-52-
<PAGE>
10.13 Copy of Modification No. 3, dated November 15, 1967, to the
Inter-Company Power Agreement dated July 10, 1953. [Filed as
Exhibit 4.02(m) to Registration Statement 2-37368 and incorporated
by reference herein]
10.14 Copy of Modification No. 7, dated November 5, 1975, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02(n) to Registration
Statement 2-56357 and incorporated by reference herein]
10.15 Copy of Modification No. 4, dated November 5, 1975, to the
Inter-Company Power Agreement dated July 10, 1953. [Filed as
Exhibit 5.02(o) to Registration Statement 2-56357 and incorporated
by reference herein]
10.16 Copy of Modification No. 4, dated April 30, 1976, to the First
Supplementary Transmission Agreement, dated July 10, 1953, among
Ohio Valley Electric Corporation and the Sponsoring Companies.
[Filed as Exhibit 5.02(p) to Registration Statement 2-6l607 and
incorporated by reference herein]
10.17 Copy of Modification No. 8, dated June 23, 1977, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02(q) to Registration
Statement 2-61607 and incorporated by reference herein]
10.18 Copy of Modification No. 9, dated July 1, 1978, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 5.02(r) to Registration
Statement 2-63149 and incorporated by reference herein]
10.19 Copy of Modification No. 10, dated August 1, 1979, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1979, and
incorporated by reference herein]
10.20 Copy of Modification No. 11, dated September 1, 1979, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 3 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1979, and
incorporated by reference herein]
-53-
<PAGE>
10.21 Copy of Modification No. 5, dated September 1, 1979, to the
Inter-Company Power Agreement dated July 5, 1953, among Ohio
Valley Electric Corporation and Sponsoring Companies. [Filed as
Exhibit 4 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1979, and incorporated by reference herein]
10.22 Copy of Modification No. 12, dated August 1, 1981, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.25 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1981, and
incorporated by reference herein]
10.23 Copy of Modification No. 6, dated August 1, 1981, to the
Inter-Company Power Agreement dated July 5, 1953, among Ohio
Valley Electric Corporation and Sponsoring Companies. [Filed as
Exhibit 10.26 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1981, and incorporated by reference
herein]
10.24 Copy of Diversity Power Agreement dated September 9, 1987, between
East Kentucky Power Cooperative and the Company covering the
purchase and sale of power between the two companies from 1988
through 1995. [Filed as Exhibit 10.28 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987, and
incorporated by reference herein]
10.25 Copy of Supplemental Executive Retirement Plan as amended through
January 3, 1990, covering all officers of the Company. [Filed as
Exhibit 10.29 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989, and incorporated by reference
herein]
10.26 Copy of LG&E Energy Corp. Deferred Stock Compensation Plan
effective January 1, 1992, covering non-employee directors of LG&E
Energy Corp. and its subsidiaries. [Filed as Exhibit 10.34 to LG&E
Energy Corp.'s Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated by reference herein]
10.27 Copy of Form of Change in Control Agreement for officers of
Louisville Gas and Electric Company. [Filed as Exhibit 10.38 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated by reference herein]
10.28 Copy of Supplemental Executive Retirement Plan for Roger W. Hale,
effective June 1, 1989. [Filed as Exhibit 10.40 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992,
and incorporated by reference herein]
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<PAGE>
10.29 Copy of Nonqualified Savings Plan covering officers of the
Company, effective January 1, 1992. [Filed as Exhibit 10.41 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992, and incorporated by reference herein]
10.30 Copy of Modification No. 13, dated September 1, 1989, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.42 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]
10.31 Copy of Modification No. 14, dated January 15, 1992, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.43 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]
10.32 Copy of Modification No. 7, dated January 15, 1992, to the Inter-
Company Power Agreement dated July 10, 1953, among Ohio Valley
Electric Corporation and Sponsoring Companies. [Filed as Exhibit
10.44 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]
10.33 Copy of Modification No. 15, dated February 15, 1993, to the Power
Agreement between Ohio Valley Electric Corporation and Atomic
Energy Commission. [Filed as Exhibit 10.45 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]
10.34 Copy of Firm No-Notice Transportation Agreement effective November
1, 1993, between Texas Gas Transmission Corporation and the
Company (expires October 31, 2001) covering the transmission of
natural gas. [Filed as Exhibit 10.47 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]
Copy of Firm No-Notice Transportation Agreement effective November
1, 1993, between Texas Gas Transmission Corporation and the
Company (expires October 31, 2000) covering the transmission of
natural gas. [Filed as Exhibit 10.47 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]
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<PAGE>
Copy of Firm No-Notice Transportation Agreement effective November
1, 1993, between Texas Gas Transmission Corporation and the
Company (expires October 31, 1998) covering the transmission of
natural gas. [Filed as Exhibit 10.47 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]
10.35 Copy of Employment Contract between LG&E Energy Corp. and Roger W.
Hale effective January 1, 1997. [Filed as Exhibit 10.70 to LG&E
Energy Corp.'s Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated by reference herein]
10.36 Copy of LG&E Energy Corp. Stock Option Plan for Non-Employee
Directors. [Filed as Exhibit 10.51 to LG&E Energy Corp.'s Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated by reference herein]
10.37 Copy of Modification No. 8 dated January 19, 1994, to Intercompany
Power Agreement, dated July 10, 1953, among Ohio Valley Electric
Corporation and the Sponsoring Companies. [Filed as Exhibit 10.43
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated by reference herein]
10.38 Copy of Amendment dated March 1, 1995, to Firm No-Notice
Transportation Agreements dated November 1, 1993 (2-Year, 5-Year
and 8-Year), between Texas Gas Transmission Corporation and LG&E
covering the transmission of natural gas. [Filed as Exhibit 10.44
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated by reference herein]
10.39 Copy of Modification No. 9, dated August 17, 1995, to the
Inter-Company Power Agreement dated July 10, 1953, among Ohio
Valley Electric Corporation and the Sponsoring Companies.
10.40 Copy of Firm Transportation Agreement, dated March 1, 1995,
between Texas Gas Transmission Corporation and the Company
(expires October 31, 1998) covering the transportation of natural
gas. [Filed as Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and incorporated
by reference herein]
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<PAGE>
Copy of Firm Transportation Agreement, dated March 1, 1995,
between Texas Gas Transmission Corporation and the Company
(expires October 31, 2001) covering the transportation of natural
gas. [Filed as Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and incorporated
by reference herein]
10.41 Copy of Firm Transportation Agreement, dated March 1, 1995,
between Texas Gas Transmission Corporation and the Company
(expires October 31, 2000) covering the transportation of natural
gas.
10.42 Copy of Firm Transportation Agreement, dated November 1, 1996,
between Tennessee Gas Pipeline Company and the Company (expires
October 31, 2001) covering the transportation of natural gas.
10.43 Copy of Coal Supply Agreement, dated January 1, 1996, between
Lafayette Coal Company, Black Beauty Coal Company and the Company
covering the purchase of coal. [Filed as Exhibit 10.46 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995, and incorporated by reference herein]
10.44 Copy of Coal Supply Agreement, dated December 15, 1995, between W.
B. Coal Company, Inc., Windsor Coal Company and the Company
covering the purchase of coal. [Filed as Exhibit 10.48 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995, and incorporated by reference herein]
10.45 Copy of Coal Supply Agreement dated January 1, 1996, between
Peabody Coalsales Company and the Company covering the purchase of
coal. [Filed as Exhibit 10.49 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and incorporated
by reference herein]
10.46 Copy of Coal Supply Agreement dated June 1, 1996, between Kindill
Mining, Inc. and the Company covering the purchase of coal.
10.47 Copy of Amendment dated October 31, 1996, to the Coal Supply
Agreement dated June 1, 1996, between Kindill Mining, Inc. and the
Company covering the purchase of coal.
10.48 Copy of Amended and Restated Omnibus Long-Term Incentive Plan
effective January 1, 1996, covering officers and key employees of
the Company. [Filed as Exhibit 10.52 to LG&E Energy Corp.'s Annual
Report on Form 10-K for the year ended December 31, 1995, and
incorporated by reference herein]
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<PAGE>
10.49 Copy of Short-Term Incentive Plan effective January 1, 1996,
covering officers and key employees of the Company. [Filed as
Exhibit 10.53 to LG&E Energy Corp.'s Annual Report on Form 10-K
for the year ended December 31, 1995, and incorporated by
reference herein]
10.50 Copy of form of first amendment to change in control agreement for
officers of the Company and key employees. [Filed as Exhibit 10.54
to LG&E Energy Corp.'s Annual Report on Form 10-K for the year
ended December 31, 1995, and incorporated by reference herein]
10.51 Copy of Amendment to the Non-Qualified Savings Plan, effective
January 1, 1992. [Filed as Exhibit 10.55 to LG&E Energy Corp.'s
Annual Report on Form 10-K for the year ended December 31, 1995,
and incorporated by reference herein]
10.52 Copy of Amendment to the Non-Qualified Savings Plan, effective
January 1, 1995. [Filed as Exhibit 10.56 to LG&E Energy Corp.'s
Annual Report on Form 10-K for the year ended December 31, 1995,
and incorporated by reference herein]
10.53 Copy of Amendment to the Non-Qualified Savings Plan, effective
January 1, 1995. [Filed as Exhibit 10.57 to LG&E Energy Corp.'s
Annual Report on Form 10-K for the year ended December 31, 1995,
and incorporated by reference herein]
10.54 Copy of Amendment to the Supplemental Executive Retirement Plan,
effective January 1, 1992. [Filed as Exhibit 10.58 to LG&E Energy
Corp.'s Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated by reference herein]
10.55 Copy of Amendment to the Supplemental Executive Retirement Plan,
effective January 1, 1993. [Filed as Exhibit 10.59 to LG&E Energy
Corp.'s Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated by reference herein]
10.56 Copy of Amendment to the Supplemental Executive Retirement Plan,
effective January 1, 1995. [Filed as Exhibit 10.60 to LG&E Energy
Corp.'s Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated by reference herein]
10.57 Copy of Amendment to the Supplemental Executive Retirement Plan,
effective May 1, 1995. [Filed as Exhibit 10.61 to LG&E Energy
Corp.'s Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated by reference herein]
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<PAGE>
10.58 Copy of Credit Agreement, dated December 18, 1995, by and among
the Company the Banks party thereto, PNC Bank, Kentucky, Inc. as
Agent and Bank of Montreal as Co-Agent. [Filed as Exhibit 10.01 to
the Company's Quarterly Report on Form 10-Q/A for the quarter
ended March 31, 1996, and incorporated by reference herein]
10.59 Copy of Amendment No. 1, dated as of November 5, 1996, to the
Credit Agreement dated December 18, 1995, by and among the
Company, the Banks party thereto, and PNC Bank, Kentucky, Inc. as
agent for the banks.
12 Computation of Ratio of Earnings to Fixed Charges
23 Consent of Independent Public Accountants
24 Power of Attorney
27 Financial Data Schedule
99.01 Cautionary Statement for purposes of the "Safe Harbor" provisions
of the Private Securities Litigation Reform Act of 1995.
(b) Executive Compensation Plans and Arrangements:
Supplemental Executive Retirement Plan as amended through January
3, 1990, covering all officers of the Company. [Filed as Exhibit
10.29 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989, and incorporated by reference herein]
LG&E Energy Corp. Deferred Stock Compensation Plan effective
January 1, 1992, covering non-employee directors of LG&E
Energy Corp. and its subsidiaries. [Filed as Exhibit 10.34 to
LG&E Energy Corp.'s Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated by reference herein]
Form of change in control agreement for officers of Louisville Gas
and Electric Company. [Filed as Exhibit 10.38 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992,
and incorporated by reference herein]
Supplemental Executive Retirement Plan for R. W. Hale, effective
June 1, 1989. [Filed as Exhibit 10.40 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992, and
incorporated by reference herein]
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<PAGE>
Nonqualified Savings Plan covering officers of the Company
effective January 1, 1992. [Filed as Exhibit 10.41 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992,
and incorporated by reference herein]
Employment Contract between LG&E Energy Corp. and Roger W.
Hale effective November 3, 1993. [Filed as Exhibit 10.50 to
LG&E Energy Corp.'s Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated by reference herein]
Employment Contract between LG&E Energy Corp. and Roger W.
Hale effective January 1, 1997. [Filed as Exhibit 10.70 to LG&E
Energy Corp.'s Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated by reference herein]
LG&E Energy Corp. Stock Option Plan for Non-Employee
Directors. [Filed as Exhibit 10.51 to LG&E Energy Corp.'s
Annual Report on Form 10-K for the year ended December 31,
1993, and incorporated by reference herein]
Amended and Restated Omnibus Long-Term Incentive Plan effective
January 1, 1996, covering officers and key employees of the
Company. [Filed as Exhibit 10.52 to LG&E Energy Corp.'s Annual
Report on Form 10-K for the year ended December 31, 1995, and
incorporated by reference herein]
Short-Term Incentive Plan effective January 1, 1996, covering
officers and key employees of the Company. [Filed as Exhibit 10.53
to LG&E Energy Corp.'s Annual Report on Form 10-K for the year
ended December 31, 1995, and incorporated by reference herein]
Form of first amendment to change in control agreement for officers
of the Company and key employees. [Filed as Exhibit 10.54 to LG&E
Energy Corp.'s Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated by reference herein]
Amendment to the Non-Qualified Savings Plan, effective January 1,
1992. [Filed as Exhibit 10.55 to LG&E Energy Corp.'s Annual Report
on Form 10-K for the year ended December 31, 1995, and incorporated
by reference herein]
Amendment to the Non-Qualified Savings Plan, effective January 1,
1995. [Filed as Exhibit 10.56 to LG&E Energy Corp.'s Annual Report
on Form 10-K for the year ended December 31, 1995, and incorporated
by reference herein]
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<PAGE>
Amendment to the Non-Qualified Savings Plan, effective January 1,
1995. [Filed as Exhibit 10.57 to LG&E Energy Corp.'s Annual Report
on Form 10-K for the year ended December 31, 1995, and incorporated
by reference herein]
Amendment to the Supplemental Executive Retirement Plan, effective
January 1, 1992. [Filed as Exhibit 10.58 to LG&E Energy Corp.'s
Annual Report on Form 10-K for the year ended December 31, 1995,
and incorporated by reference herein]
Amendment to the Supplemental Executive Retirement Plan, effective
January 1, 1993. [Filed as Exhibit 10.59 to LG&E Energy Corp.'s
Annual Report on Form 10-K for the year ended December 31, 1995,
and incorporated by reference herein]
Amendment to the Supplemental Executive Retirement Plan, effective
January 1, 1995. [Filed as Exhibit 10.60 to LG&E Energy Corp.'s
Annual Report on Form 10-K for the year ended December 31, 1995,
and incorporated by reference herein]
Amendment to the Supplemental Executive Retirement Plan, effective
May 1, 1995. [Filed as Exhibit 10.61 to LG&E Energy Corp.'s Annual
Report on Form 10-K for the year ended December 31, 1995, and
incorporated by reference herein]
Non-Officer Senior Management Pension Restoration Plan, effective
May 1, 1996 [Filed as Exhibit 10.69 to LG&E Energy Corp.'s Annual
Report on Form 10-K for the year ended December 31, 1996, and
incorporated by reference herein]
(c) Reports on Form 8-K:
None.
-61-
<PAGE>
SCHEDULE II
LOUISVILLE GAS AND ELECTRIC COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(Thousands of $)
<TABLE>
<CAPTION>
Reserves Deducted from
Assets in Balance Sheet
-----------------------------
Other Accounts
Property Receivable
and (Uncollectible
Investments Accounts)
----------- ---------
<S> <C> <C>
Balance January 1, 1994 ...................................... $ 63 $1,474
Additions:
Charged to costs and expenses ............................. 3,100
Deductions:
Net charges of nature for which reserves were created ..... 3,371
------ ------
Balance December 31, 1994 .................................... 63 1,203
Additions:
Charged to costs and expenses ............................. 3,200
Deductions:
Net charges of nature for which reserves were created ..... 3,043
------ ------
Balance December 31, 1995 .................................... $ 63 $1,360
Additions:
Charged to costs and expenses ............................. 2,600
Deductions:
Net charges of nature for which reserves were created ..... 2,490
------ ------
Balance December 31, 1996 .................................... $ 63 $1,470
====== ======
</TABLE>
-62-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 25, 1997 By /s/ M. L. FOWLER
- -------------- ----------------------------------------
(Date) M. L. Fowler
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
ROGER W. HALE Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer);
CHARLES A. MARKEL III Treasurer
(Principal Financial Officer);
M. L. FOWLER Vice President and Controller
(Principal Accounting Officer);
WILLIAM C. BALLARD, JR. Director;
RONALD L. BITTNER Director;
OWSLEY BROWN II Director;
S. GORDON DABNEY Director;
GENE P. GARDNER Director;
J. DAVID GRISSOM Director;
DAVID B. LEWIS Director;
ANNE H. MCNAMARA Director;
T. BALLARD MORTON, JR. Director; and
DR. DONALD C. SWAIN Director.
By /s/ M. L. FOWLER
------------------------------- March 25, 1997
M. L. FOWLER (Attorney-In-Fact)
-63-
<PAGE>
EXHIBIT 10.39
MODIFICATION NO. 9
TO
INTER-COMPANY POWER AGREEMENT
DATED JULY 10, 1953
AMONG
OHIO VALLEY ELECTRIC CORPORATION,
APPALACHIAN POWER COMPANY (formerly
APPALACHIAN ELECTRIC POWER COMPANY),
THE CINCINNATI GAS & ELECTRIC COMPANY
COLUMBUS SOUTHERN POWER COMPANY (formerly
COLUMBUS AND SOUTHERN OHIO ELECTRIC COMPANY),
THE DAYTON POWER AND LIGHT COMPANY,
INDIANA MICHIGAN POWER COMPANY (formerly
INDIANA & MICHIGAN ELECTRIC COMPANY),
KENTUCKY UTILITIES COMPANY,
LOUISVILLE GAS AND ELECTRIC COMPANY,
MONONGAHELA POWER COMPANY,
OHIO EDISON COMPANY,
OHIO POWER COMPANY (formerly THE OHIO
POWER COMPANY),
PENNSYLVANIA POWER COMPANY,
THE POTOMAC EDISON COMPANY,
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY,
THE TOLEDO EDISON COMPANY, and
WEST PENN POWER COMPANY.
----------------------------
Dated as of August 17, 1995
----------------------------
<PAGE>
MODIFICATION NO. 9
TO
INTER-COMPANY POWER AGREEMENT
THIS AGREEMENT dated as of the 17th day of August, 1995, by and among
OHIO VALLEY ELECTRIC CORPORATION (herein called "OVEC" or "Corporation"),
APPALACHIAN POWER COMPANY (herein called "Appalachian"), THE CINCINNATI GAS &
ELECTRIC COMPANY (herein called "Cincinnati"), COLUMBUS SOUTHERN POWER COMPANY
(formerly COLUMBUS AND SOUTHERN OHIO ELECTRIC COMPANY) (herein called
"Columbus"), THE DAYTON POWER AND LIGHT COMPANY (herein called "Dayton"),
INDIANA MICHIGAN POWER COMPANY (formerly INDIANA & MICHIGAN ELECTRIC COMPANY)
(herein called "Indiana"), KENTUCKY UTILITIES COMPANY (herein called
"Kentucky"), LOUISVILLE GAS AND ELECTRIC COMPANY (herein called "Louisville"),
MONONGAHELA POWER COMPANY (herein called "Monongahela"), OHIO EDISON COMPANY
(herein called "Ohio Edison"), OHIO POWER COMPANY (herein called "Ohio Power"),
PENNSYLVANIA POWER COMPANY (herein called "Pennsylvania"), THE POTOMAC EDISON
COMPANY (herein called "Potomac"), SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(herein called "Southern Indiana"), THE TOLEDO EDISON COMPANY (herein called
"Toledo"), and WEST PENN POWER COMPANY (herein called "West Penn"), all of the
foregoing, other than OVEC, being herein sometimes collectively referred to as
the Sponsoring Companies and individually as a Sponsoring Company.
1
<PAGE>
W I T N E S S E T H T H A T
WHEREAS, Corporation and the United States of America have heretofore
entered into Contract No. AT-(40-1)-1530 (redesignated Contract No.
E-(40-1)-1530, later redesignated Contract No. EY-76-C-05-1530 and later
redesignated Contract No. DE-AC05-76OR01530), dated October 15, 1952, providing
for the supply by Corporation of electric utility services to the United States
Atomic Energy Commission (hereinafter called "AEC") at AEC's project near
Portsmouth, Ohio (hereinafter called the "Project"), which Contract has
heretofore been modified by Modification No. 1, dated July 23, 1953,
Modification No. 2, dated as of March 15, 1964, Modification No. 3, dated as of
May 12, 1966, Modification No. 4, dated as of January 7, 1967, Modification No.
5, dated as of August 15, 1967, Modification No. 6, dated as of November 15,
1967, Modification No. 7, dated as of November 5, 1975, Modification No. 8,
dated as of June 23, 1977, Modification No. 9, dated as of July 1, 1978,
Modification No. 10, dated as of August 1, 1979, Modification No. 11, dated as
of September 1, 1979, Modification No. 12, dated as of August 1, 1981,
Modification No. 13, dated as of September 1, 1989, Modification No. 14, dated
as of January 15, 1992, and Modification No. 15, dated as of February 1, 1993
(said Contract, as so modified, is hereinafter called the "DOE Power
Agreement"); and
WHEREAS, pursuant to the Energy Reorganization Act of 1974, the AEC was
abolished on January 19, 1975 and certain of its
2
<PAGE>
functions, including the procurement of electric utility services for the
Project, were transferred to and vested in the Administrator of Energy Research
and Development; and
WHEREAS, pursuant to the Department of Energy Organization Act, on
October 1, 1977, all of the functions vested by law in the Administrator of
Energy Research and Development or the Energy Research and Development or the
Energy Research and Development Administration were transferred to, and vested
in, the Secretary of Energy, the statutory head of the Department of Energy
(hereinafter called "DOE"); and
WHEREAS, the parties hereto have entered into a contract, herein called
the "Inter-Company Power Agreement," dated July 10, 1953, governing, among other
things, (a) the supply by the Sponsoring Companies of Supplemental Power in
order to enable Corporation to fulfill its obligations under the DOE Power
Agreement, and (b) the rights of the Sponsoring Companies to receive Surplus
Power (as defined in the Agreement identified in the next clause in this
preamble) as may be available at the Project Generating Stations and the
obligations of the Sponsoring Companies to pay therefor; and
WHEREAS, the Inter-Company Power Agreement has heretofore been amended
by Modification No. 1, dated as of June 3, 1966, Modification No. 2 dated as of
January 7, 1967, Modification No. 3, dated as of November 15, 1967, Modification
No. 4, dated as of November 5, 1975, Modification No. 5, dated as of September
1,
3
<PAGE>
1979, Modification No. 6, dated as of August 1, 1981, Modification No. 7, dated
as of January 15, 1992, and Modification No. 8, dated as of January 19, 1994
(said contract so amended and as modified and amended by this Modification No. 9
being herein and therein sometimes called the "Agreement"); and
WHEREAS, OVEC and the Sponsoring Companies desire to enter into this
Modification No. 9 as more particularly hereinafter provided;
NOW, THEREFORE, the parties hereto agree with each other as follows:
1. Delete SUBSECTION 6.023 and substitute therefor the following:
6.023 Determine the total energy charge to be billed as DOE Emergency
Energy (as defined in SUBSECTION 6.037) for such month, such charge to
be an amount equal to the product of the total net charges for such
month at the project generating stations to Account 703 (Fuel) of the
Uniform System of Accounts, and the ratio of (a) the billing kWh of DOE
Emergency Energy for such month plus the transmission losses thereon
from the 345 kV busses of the project generating stations to the point
of delivery to (b) the total net kWh generated at the project
generating stations during such month corrected for losses to the 345
kV busses thereof. Such losses shall be determined by such methods and
procedures as may be mutually agreed upon.
2. Insert after SUBSECTION 6.023 a new SUBSECTION 6.024 as follows:
6.024 Determine for such month the difference between the total cost of
fuel as described in subsection 6.021 above and the sum of (a) the
total energy charge to be billed DOE as described in subsection 6.022
above and (b) the energy
4
<PAGE>
charge to be billed as DOE Emergency Energy as described in subsection
6.023 above. For the purposes hereof the difference so determined shall
be the fuel cost allocable for such month to the total kilowatt-hours
of energy generated at the Project Generating Stations for the supply
of Surplus Energy. Each Sponsoring Company shall pay Corporation, for
such month, an amount equal to (a) an amount obtained by multiplying
the billing kilowatt-hours of Surplus Energy availed of by such
Sponsoring Company during such month by the average station heat rate
of the Project Generating Stations times the average cost per Btu
(determined in a uniform manner for all Sponsoring Companies in
conformity with any applicable requirements of Account 703 (Fuel) of
the Uniform System of Accounts) of all fuel consumed by said Sponsoring
Company in its own generating stations, both averages to be computed in
respect of the month next preceding that for which payment is being
made, plus (b) its Power Participation Ratio of the excess, if any, for
such month of the fuel costs of the Corporation allocable to the total
kilowatt-hours of energy generated at the Project Generating Stations
for the supply of Surplus Energy over the aggregate of the amounts
computed with respect to all Sponsoring Companies under (a) above,
minus (c) its Power Participation Ratio of the excess, if any, for such
month of the aggregate of the amounts computed with respect to all
Sponsoring Companies under (a) above over the fuel costs of the
Corporation allocable to the total kilowatt-hours of energy generated
at the Project Generating Stations for the supply of Surplus Energy.
3. Insert after SUBSECTION 6.036 a new SUBSECTION 6.037 as follows:
6.037 DOE EMERGENCY POWER
In the event that the power and energy available to DOE's
uranium enrichment facility near Paducah, Kentucky is insufficient to
prevent or alleviate an emergency at such facility, at the request of
DOE, and provided the Sponsoring Companies agree to release their
rights to receive from Corporation power and energy to which they would
otherwise have been entitled, Corporation may in its sole discretion
agree to make available such power and energy for DOE's Paducah
Facility (such power being herein called "DOE Emergency Power" and the
energy associated therewith being called "DOE Emergency Energy").
5
<PAGE>
The aggregate of the kWh of DOE Emergency Energy scheduled for
all the hours of a month shall be the "Scheduled kWh of DOE Emergency
Energy" for such month. To the Scheduled kWh of DOE Emergency Energy so
computed for such month shall be added the number of kWh of
transmission losses applicable thereto computed by such methods and
procedures as may be mutually agreed upon, and the sum so computed is
herein called the "Billing kWh of DOE Emergency Energy."
Corporation will pay to each Sponsoring Company for DOE
Emergency Power during any month an amount equal to an emergency power
surcharge ("DOE Emergency Power Surcharge") which shall be determined
based on each Sponsoring Company's hourly net costs per kilowatt of
reducing load or purchasing power from alternative sources, which costs
are attributable to the provision of DOE Emergency Power and/or DOE
Emergency Energy. Corporation and Sponsoring Companies acknowledge that
they may not know until after the fact the amount of any DOE Emergency
Power Surcharge and that any estimates thereof provided by Sponsoring
Companies are not binding.
In order that DOE Emergency Power and DOE Emergency Energy may
be delivered to DOE's uranium enrichment facility in Paducah, Kentucky,
such power and energy may be sold to intervening entities which may
resell such power and energy for ultimate delivery to DOE.
4. This Modification No. 9 shall become effective at 12:00 o'clock
Midnight on the day on which Corporation shall advise the other parties to this
Modification No. 9 (to be later confirmed in writing) that all conditions
precedent to the effectiveness of this Modification No. 9 shall have been
satisfied.
5. The Inter-Company Power Agreement, as modified by Modifications
Nos. 1, 2, 3, 4, 5, 6, 7 and 8 and as hereinbefore provided, is hereby in all
respects confirmed.
6. The Modification No. 9 may be executed in any number of copies and
by the different parties hereto on separate
6
<PAGE>
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Modification
No. 9 as of the day and year first written above.
OHIO VALLEY ELECTRIC CORPORATION
BY: _____________________________________
APPALACHIAN POWER COMPANY
BY: _____________________________________
THE CINCINNATI GAS & ELECTRIC COMPANY
BY: _____________________________________
COLUMBUS SOUTHERN POWER COMPANY
BY: _____________________________________
THE DAYTON POWER AND LIGHT COMPANY
BY: _____________________________________
INDIANA MICHIGAN POWER COMPANY
BY: _____________________________________
7
<PAGE>
KENTUCKY UTILITIES COMPANY
BY: _____________________________________
LOUISVILLE GAS AND ELECTRIC COMPANY
BY: _____________________________________
MONONGAHELA POWER COMPANY
BY: _____________________________________
OHIO EDISON COMPANY
BY: _____________________________________
OHIO POWER COMPANY
BY: _____________________________________
PENNSYLVANIA POWER COMPANY
BY: _____________________________________
THE POTOMAC EDISON COMPANY
BY: _____________________________________
SOUTHERN INDIANA GAS AND ELECTRIC
COMPANY
BY: _____________________________________
8
<PAGE>
THE TOLEDO EDISON COMPANY
BY: _____________________________________
WEST PENN POWER COMPANY
BY: _____________________________________
9
<PAGE>
EXHIBIT 10.41
GAS TRANSPORTATION AGREEMENT
BETWEEN
TEXAS GAS TRANSMISSION CORPORATION
AND
LOUISVILLE GAS AND ELECTRIC COMPANY
(TERM THROUGH: OCTOBER 31, 2000)
DATED MARCH 1, 1995
<PAGE>
INDEX
PAGE NO.
--------
ARTICLE I Definitions 1
ARTICLE II Transportation Service 1
ARTICLE III Scheduling 2
ARTICLE IV Points of Receipt and Delivery 3
ARTICLE V Term of Agreement 3
ARTICLE VI Point(s) of Measurement 3
ARTICLE VII Facilities 4
ARTICLE VIII Rates and Charges 4
ARTICLE IX Miscellaneous 5
EXHIBIT "A"
FIRM POINT(S) OF RECEIPT
EXHIBIT "A-1"
SECONDARY POINT(S) OF RECEIPT
EXHIBIT "B"
FIRM POINT(S) OF DELIVERY
EXHIBIT "C"
SUPPLY LATERAL CAPACITY
STANDARD FACILITIES KEY
1
<PAGE>
FIRM TRANSPORTATION AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of March, 1995, by
and between Texas Gas Transmission Corporation, a Delaware corporation,
hereinafter referred to as "Texas Gas," and Louisville Gas and Electric Company,
a Kentucky corporation, hereinafter referred to as "Customer."
WITNESSETH:
WHEREAS, Customer has natural gas which cannot be moved into its
system/which it desires Texas Gas to move through its existing facilities; and
WHEREAS, Texas Gas has the ability in its pipeline system to move
natural gas for the account of Customer; and
WHEREAS, Customer desires that Texas Gas transport such natural gas for
the account of Customer; and
WHEREAS, Customer and Texas Gas are of the opinion that the transaction
referred to above falls within the provisions of Section 284.223 of Subpart G of
Part 284 of the Federal Energy Regulatory Commission's (Commission) regulations
and the blanket certificate issued to Texas Gas in Docket No. CP88-686-000, and
can be accomplished without the prior approval of the Commission;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definition of Terms of the General Terms and Conditions of Texas Gas's FERC
Gas Tariff on file with the Commission is hereby incorporated by reference and
made a part of this Agreement.
ARTICLE II
TRANSPORTATION SERVICE
2.1 Subject to the terms and provisions of this Agreement, Customer agrees to
deliver or cause to be delivered to Texas Gas, at the Point(s) of Receipt in
Exhibit "A" hereunder, Gas for Transportation, and Texas Gas agrees to receive,
transport, and redeliver, at the Point(s) of Delivery in Exhibit "B" hereunder,
Equivalent Quantities of Gas to Customer or for the account of Customer, in
accordance with Section 3 of Texas Gas's effective FT Rate Schedule and the
2
<PAGE>
terms and conditions contained herein, up to 0 MMBtu per day during the winter
season, and up to 8,000 MMBtu per day during the summer season, which shall be
Customer's Firm Transportation Contract Demand, and up to 0 MMBtu during the
winter season, and up to 1,712,000 MMBtu during the summer season, which shall
be Customer's Seasonal Quantity Levels.
2.2 Customer shall reimburse Texas Gas for the Quantity of Gas required for
fuel, company use, and unaccounted for associated with the transportation
service hereunder in accordance with Section 16 of the General Terms and
Conditions of Texas Gas's FERC Gas Tariff. The applicable fuel retention
percentage(s) is shown on Exhibit "A". Texas Gas may adjust the fuel retention
percentage as operating circumstances warrant; however, such change shall not be
retroactive. Texas Gas agrees to give Customer thirty (30) days written notice
before changing such percentage.
2.3 Texas Gas, at its sole option, may, if tendered by Customer, transport daily
quantities in excess of the Transportation Contract Demand.
2.4 In order to protect its system, the delivery of gas to its customers and/or
the safety of its operations, Texas Gas shall have the right to vent excess
natural gas delivered to Texas Gas by Customer or Customer's supplier(s) in that
part of its system utilized to transport gas received hereunder. Prior to
venting excess gas, Texas Gas will use its best efforts to contact Customer or
Customer's supplier(s) in an attempt to correct such excess deliveries to Texas
Gas. Texas Gas may vent such excess gas solely within its reasonable judgment
and discretion without liability to Customer, and a pro rata share of any gas so
vented shall be allocated to Customer. Customer's pro rata share shall be
determined by a fraction, the numerator of which shall be the quantity of gas
delivered to Texas Gas at the Point of Receipt by Customer or Customer's
supplier(s) in excess of Customer's confirmed nomination and the denominator of
which shall be the total quantity of gas in excess of total confirmed
nominations flowing in that part of Texas Gas's system utilized to transport
gas, multiplied by the total quantity of gas vented or lost hereunder.
2.5 Any gas imbalance between receipts and deliveries of gas, less fuel and PVR
adjustments, if applicable, shall be cleared each month in accordance with
Section 17 of the General Terms and Conditions in Texas Gas's FERC Gas Tariff.
Any imbalance remaining at the termination of this Agreement shall also be
cashed-out as provided herein.
ARTICLE III
SCHEDULING
3.1 Customer shall be obligated five (5) working days prior to the end of each
month to furnish Texas Gas with a schedule of the estimated daily quantity(ies)
of gas it desires to be received, transported, and redelivered for the following
month. Such schedules will show the quantity(ies) of gas Texas Gas will receive
from Customer at the Point(s) of Receipt, along with the identity of the
supplier(s) that is delivering or causing to be delivered to Texas Gas
quantities for Customer's account at each point of Receipt for which a
nomination has been made.
3
<PAGE>
3.2 Customer shall give Texas Gas, after the first of the month, at least
twenty-four (24) hours notice prior to the commencement of any day in which
Customer desires to change the quantity(ies) of gas it has scheduled to be
delivered to Texas Gas at the Point(s) of Receipt. Texas Gas agrees to waive
this 24-hour prior notice and implement nomination changes requested by Customer
to commence in such lesser time frame subject to Texas Gas's being able to
confirm and verify such nomination change at both Receipt and Delivery Points,
and receive PDAs reflecting this nomination change at both Receipt and Delivery
Points. Texas Gas will use its best efforts to make the nomination change
effective at the time requested by Customer; however, if Texas Gas is unable to
do so, the nomination change will be implemented as soon as confirmation is
received.
ARTICLE IV
POINTS OF RECEIPT, DELIVERY, AND SUPPLY LATERAL ALLOCATION
4.1 Customer shall deliver or cause to be delivered natural gas to Texas Gas at
the Point(s) of Receipt specified in Exhibit "A" attached hereto and Texas Gas
shall redeliver gas to Customer or for the account of Customer at the Point(s)
of Delivery specified in Exhibit "B" attached hereto in accordance with Sections
7 and 15 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff.
4.2 Customer's preferential capacity rights on each of Texas Gas's supply
laterals shall be as set forth in Exhibit "C" attached hereto, in accordance
with Section 34 of the General Terms and Conditions of Texas Gas's FERC Gas
Tariff.
ARTICLE V
TERM OF AGREEMENT
5.1 This Agreement shall become effective upon its execution and remain in full
force and effect with a primary term beginning April 1, 1995, (with the rates
and charges described in Article VIII becoming effective on that date) and
extending through October 31, 1995. At the end of such primary term, or any
subsequent roll-over term of five (5) years, this Agreement shall automatically
be extended for an additional roll-over term of five (5) years, unless Customer
terminates this Agreement at the end of such primary or roll-over term by giving
Texas Gas at least 365 days advance written notice prior to the expiration of
the primary term or any subsequent roll-over term.
ARTICLE VI
POINT(S) OF MEASUREMENT
6.1 The gas shall be delivered by Customer to Texas Gas and redelivered by Texas
Gas to Customer at the Point(s) of Receipt and Delivery hereunder.
4
<PAGE>
6.2 The gas shall be measured or caused to be measured by Customer and/or Texas
Gas at the Point(s) of Measurement which shall be as specified in Exhibits "A",
"A-I", and "B" herein. In the event of a line loss or leak between the Point of
Measurement and the Point of Receipt, the loss shall be determined in accordance
with the methods described contained in Section 3, "Measuring and Measuring
Equipment," contained in the General Terms and Conditions of First Revised
Volume No. 1 of Texas Gas's FERC Gas Tariff.
ARTICLE VII
FACILITIES
7.1 Texas Gas and Customer agree that any facilities required at the Point(s) of
Receipt, Point(s) of Delivery, and Point(s) of Measurement shall be installed,
owned, and operated as specified in Exhibits "A", "A-I", and "B" herein.
Customer may be required to pay or cause Texas Gas to be paid for the installed
cost of any new facilities required as contained in Sections 1.3, 1.4, and 1.5
of Texas Gas's FT Rate Schedule. Customer shall only be responsible for the
installed cost of any new facilities described in this Section if agreed to in
writing between Texas Gas and Customer.
ARTICLE VIII
RATES AND CHARGES
8.1 Each month, Customer shall pay Texas Gas for the service hereunder an amount
determined in accordance with Section 5 of Texas Gas's FT Rate Schedule
contained in Texas Gas's FERC Gas Tariff, which Rate Schedule is by reference
made a part of this Agreement. The maximum rates for such service consist of a
monthly reservation charge multiplied by Customer's firm transportation demand
as specified in Section 2.1 herein. The reservation charge shall be billed as of
the effective date of this Agreement. In addition to the monthly reservation
charge, Customer agrees to pay Texas Gas each month the maximum commodity charge
up to Customer's Transportation Contract Demand. For any quantities delivered by
Texas Gas in excess of Customer's Transportation Contract Demand, Customer
agrees to pay the maximum FT overrun commodity charge. In addition, Customer
agrees to pay:
(a) Texas Gas's Fuel Retention percentage(s).
(b) The currently effective GRI funding unit, if applicable, the
currently effective FERC Annual Charge Adjustment unit charge
(ACA), the currently effective Take-or-Pay surcharge, or any
other then currently effective surcharges, including but not
limited to Order 636 Transition Costs.
If Texas Gas declares force majeure which renders it unable to perform service
herein, then Customer shall be relieved of its obligation to pay demand charges
for that part of its FT Contract Demand affected by such force majeure event
until the force majeure event is remedied.
5
<PAGE>
Unless otherwise agreed to in writing by Texas Gas and Customer, Texas Gas may,
from time to time, and at any time selectively after negotiation, adjust the
rate(s) applicable to any individual Customer; provided, however, that such
adjusted rate(s) shall not exceed the applicable Maximum Rate(s) nor shall they
be less than the Minimum Rate(s) set forth in the currently effective Sheet No.
10 of this Tariff. If Texas Gas so adjusts any rates to any Customer, Texas Gas
shall file with the Commission any and all required reports respecting such
adjusted rate.
8.2 In the event Customer utilizes a Secondary Point(s) of Receipt or Delivery
for transportation service herein, Customer will continue to pay the monthly
reservation charges as described in Section 8.1 above. In addition, Customer
will pay the maximum commodity charge applicable to the zone in which gas is
received and redelivered up to Customer's Transportation Contract Demand and the
maximum overrun commodity charge for any quantities delivered by Texas Gas in
excess of Customer's winter season or summer season Transportation Contract
Demand. Customer also agrees to pay the ACA, Take-or-Pay Surcharge, GRI charges,
fuel retention charge, and any other effective surcharges, if applicable, as
described in Section 8.1 above.
8.3 It is further agreed that Texas Gas may seek authorization from the
Commission and/or other appropriate body for such changes to any rate(s) and
terms set forth herein or in Rate Schedule FT, as may be found necessary to
assure Texas Gas just and reasonable rates. Nothing herein contained shall be
construed to deny Customer any rights it may have under the Natural Gas Act, as
amended, including the right to participate fully in rate proceedings by
intervention or otherwise to contest increased rates in whole or in part.
8.4 Customer agrees to fully reimburse Texas Gas for all filing fees, if any,
associated with the service contemplated herein which Texas Gas is required to
pay to the Commission or any agency having or assuming jurisdiction of the
transactions contemplated herein.
8.5 Customer agrees to execute or cause its supplier or processor to execute a
separate agreement with Texas Gas providing for the transportation of any
liquids and/or liquefiables, and agrees to pay or reimburse Texas Gas, or cause
Texas Gas to be paid or reimbursed, for any applicable rates or charges
associated with the transportation of such liquids and/or liquefiables, as
specified in Section 24 of the General Terms and Conditions of Texas Gas's FERC
Gas Tariff.
ARTICLE IX
MISCELLANEOUS
9.1 Texas Gas's Transportation Service hereunder shall be subject to receipt of
all requisite regulatory authorizations from the Commission, or any successor
regulatory authority, and any other necessary governmental authorizations, in a
manner and form acceptable to Texas Gas. The parties agree to furnish each other
with any and all information necessary to comply with any laws, orders, rules,
or regulations.
6
<PAGE>
9.2 Except as may be otherwise provided, any notice, request, demand, statement,
or bill provided for in this Agreement or any notice which a party may desire to
give the other shall be in writing and mailed by regular mail, or by postpaid
registered mail, effective as of the postmark date, to the post office address
of the party intended to receive the same, as the case may be, or by facsimile
transmission, as follows:
Texas Gas
Texas Gas Transmission Corporation
3800 Frederica Street
Post Office Box 1160
Owensboro, Kentucky 42302
Attention: Gas Revenue Accounting (Billings and Statements)
Customer Services (Other Matters)
Gas Transportation and Capacity Allocation (Nominations)
Fax (502) 926-8686
Customer
Louisville Gas and Electric Company
820 West Broadway
Louisville, Kentucky 40202
Attention: Mr. J. Clay Murphy
The address of either party may, from time to time, be changed by a party
mailing, by certified or registered mail, appropriate notice thereof to the
other party. Furthermore, if applicable, certain notices shall be considered
duly delivered when posted to Texas Gas's Electronic Bulletin Board, as
specified in Texas Gas's tariff.
9.3 This Agreement shall be governed by the laws of the State of the Kentucky.
9.4 Each party agrees to file timely all statements, notices, and petitions
required under the Commission's Regulations or any other applicable rules or
regulations of any governmental authority having jurisdiction hereunder and to
exercise due diligence to obtain all necessary governmental approvals required
for the implementation of this Transportation Agreement.
9.5 All terms and conditions of Rate Schedule FT and the attached Exhibits "A",
"A-I", "B", and "C" are hereby incorporated to and made a part of this
Agreement.
9.6 This contract shall be binding upon and inure to the benefit of the
successors, assigns, and legal representatives of the parties hereto.
7
<PAGE>
9.7 Neither party hereto shall assign this Agreement or any of its rights or
obligations hereunder without the consent in writing of the other party.
Notwithstanding the foregoing, either party may assign its right, title and
interest in, to and by virtue of this Agreement including any and all
extensions, renewals, amendments, and supplements thereto, to a trustee or
trustees, individual or corporate, as security for bonds or other obligations or
securities, without such trustee or trustees assuming or becoming in any respect
obligated to perform any of the obligations of the assignor and, if any such
trustee be a corporation, without its being required by the parties hereto to
qualify to do business in the state in which the performance of this Agreement
may occur, nothing contained herein shall require consent to transfer this
Agreement by virtue of merger or consolidation of a party hereto or a sale of
all or substantially all of the assets of a party hereto, or any other corporate
reorganization of a party hereto.
9.8 This Agreement insofar as it is affected thereby, is subject to all valid
rules, regulations, and orders of all governmental authorities having
jurisdiction.
9.9 No waiver by either party of any one or more defaults by the other in the
performance of any provisions hereunder shall operate or be construed as a
waiver of any future default or defaults whether of a like or a different
character.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective representatives thereunto duly authorized, on the day
and year first above written.
ATTEST: TEXAS GAS TRANSMISSION CORPORATION
_____________________________ By: ____________________________
Secretary Vice President
WITNESSES: LOUISVILLE GAS AND ELECTRIC COMPANY
_____________________________ By: ____________________________
Vice President
_____________________________ Attest: ________________________
Secretary
Date of Execution by Customer:
_____________________________
8
<PAGE>
Contract No. T6487
Summer Season - Exhibit "A"
Firm Point(s) of Receipt
Louisville Gas and Electric Company
Firm Transportation Agreement
Daily Firm
Meter Capacity
Lateral Segment Zone No. Name MBtu
- --------------------------------------------------------------------------------
South Leg
Offshore in at Egan
SL 2770 Vermilion 267F 2,116
SL 2782 Vermilion 267C 1,254
SL 2774 Vermilion 256D 951
SL 9342 Vermilion 255/256E 225
SL 2776 S.S. 248D 4,811
SL 2781 S.S. 247F 3,592
HIOS (at ANR-Eunice)
H.I. 573
SL 2859 H I A-573B COMPLEX 12,303
This exhibit reflects the combined total receipt point capacity held by
Louisville Gas and Electric Company under the 2-year, 5-year and 8-year
agreements for Contract No. T6487. Amendments in contract quantities in either
the 2-year, 5-year or 8-year agreements will result in an amendment of this
exhibit.
9
<PAGE>
EXHIBIT "A-I"
SECONDARY POINT(S) OF RECEIPT
SUPPLY
Meter
Lateral Segment Zone No. Supply Point
- --------------------------------------------------------------------------------
NORTH LOUISIANA
Carthage-Haughton 1 2102 Champlin
1 9805 Delhi
1 9051 Grigsby
1 9860 Nelson-Greenwood/Waskom
1 8116 Texas Eastern-Sligo
1 9884 Valero-Carthage
Haughton-Sharon 1 8003 Barksdale
1 2455 Beacon
1 9866 Cornerstone-Ada
1 2173 Crystal Oil-West Arcadia
1 2340 F.E. Hargraves-Minden
1 2186 LGI #1
1 2456 McCormick
1 2457 Minden-Hunt
1 2459 Minden Pan-Am #1
1 9819 Nelson-Sibley
1 9461 Olin-McGoldrick
1 2760 Sligo Plant
1 9834 Texaco-Athens
Sharon 1 2010 Fina Oil-HICO
1 9818 PGC-Bodcaw
1 2757 Texas Eastern-Sharon
Sharon-East 1 2631 Calhoun Plant
1 2632 Dubach
1 2202 Ergon-Monroe
1 8760 Lonewa
1 8020 MRT-Bastrop
1 9302 Munce
1 9812 Par Minerals/Downsville
1 9823 Reliance-Bernice
1 2612 Reliance-West Monroe
1 2634 Southwest-Guthrie
10
<PAGE>
EAST
Bosco-Eunice SL 2015 Amerada Hess
SL 2016 Amerada Hess-South Lewisburg
SL 2385 D.B. McClinton #1
SL 9844 Germany Oil-Church Point
SL 2288 Great Southern-Mowata #2
SL 9804 Great Southern-Mowata #3
SL 2289 Great Southern-South Lewisburg
SL 8142 Ritchie
SL 9119 Sevarg
SL 2740 Superior-Pure
SOUTHEAST
Blk. 8-Morgan City SL 2198 Bois D'Arc
SL 9142 Bois D'Arc-Pelican Lake
SL 2109 Chevron-Block 8
SL 2638 Coon Point
SL 2845 Lake Pagie
SL 9817 Mustang-Bayou Piquant
SL 2460 Peltex Deep Saline #1
SL 2480 S.S. 41
SL 9471 Sohio
SL 9888 Star Oil & Gas-Bay Junop
SL 9187 Stone-South Timbalier
SL 2755 Texaco-Bay Junop
SL 9836 Texaco-Dog Lake
SL 2463 Toce Oil
SL 2850 Union Oil-N. Lake Pagie
SL 9883 Zeit-Lake Pagie
Henry-Lafayette SL 8190 Faustina-Henry
SL 2790 Henry Hub
Lafayette-Eunice SL 2153 Branch-Cox
SL 2125 California Co.-North Duson
SL 2137 California Co.-South Bosco #1
SL 2138 California Co.-South Bosco #2
SL 2600 Cayman-Anslem Coulee
SL 9852 CNG-South Rayne
SL 2389 Duson
SL 9837 Excel-Judice
SL 8068 Exch. O&G-No. Maurice
SL 2601 Fina Oil-Anslem Coulee
SL 8040 Florida
11
<PAGE>
SL 2290 Gulf Transport-Church Pt.
SL 2148 Maurice Cox
SL 9906 Quintana-South Bosco
SL 9005 Rayne-Columbia Gulf
SL 2045 Riceland-North Tepetate
SL 8067 South Scott
SL 2810 Tidewater-North Duson
SL 8051 Youngsville
Maurice-Freshwater SL 9822 Cities Service-Nunez
SL 2147 CNG-Hell Hole Bayou
SL 2203 Deck Oil-Perry/Hope
SL 9808 Duhon/Parcperdue
SL 9044 EDC-N. Parcperdue
SL 9160 LLOG-Abbeville
SL 2394 LRC-Theall
SL 9800 May Petroleum
SL 2424 McCain-Maurice
SL 2748 Parc Perdue
SL 2749 Par Perdue 2
SL 9830 R&R Res-Abbeville
SL 2706 Sun Ray
SL 9422 UNOCAL-Freshwater Bayou
SL 2840 UNOCAL-N. Freshwater Bayou
Morgan City-Lafayette SL 2064 Amoco-Charenton
SL 9173 ANR-Calumet (Rec.)
SL 9803 Atlantic
SL 9809 B.H. Petroleum-S.E. Avery
SL 2080 Bayou Sale-British Am
SL 9881 Bridgeline-Berwick
SL 2085 British American-Ramos
SL 9425 Charenton
SL 9047 Florida Gas-E.B. Pigeon
SL 2454 FMP/Bayou Postillion
SL 8059 Franklin
SL 2208 Frantzen
SL 9898 Hadson-East Bayou Pigeon
SL 2188 Lamson
SL 9854 Linder Oil-Bayou Penchant
SL 9853 Linder Oil-Garden City
SL 2189 Rutledge Deas
SL 2636 Shell-Bayou Pigeon
SL 9902 Smith Production-Charenton
SL 2035 Southwest-Jeanerette
12
<PAGE>
SL 9895 Texaco-Bayou Sale
SL 8205 Transco-Myette Point
SL 9829 Trunkline-Centerville
SL 9350 Vulcan
SL 9835 W.T. Burton-Lake Palourde
Offshore Points
enter at Calumet SL 2583 E.I. 273A
SL 2158 E.I. 273A/273A/284B
SL 2584 E.I. 273B
SL 2834 E.I. 276C
SL 2771 E.I. 287D
SL 2151 E.I. 292B
SL 9339 E.I. 292B/286I
SL 9419 E.I. 292B/286I/293
SL 2550 E.I. 293/308/315
SL 2773 E.I. 307E
SL 2154 E.I. 309C
SL 2155 E.I. 309G
SL 2157 E.I. 309H
SL 9886 E.I. 309H/309H/309J
SL 2156 E.I. 314F/309C/314F
SL 2780 SMI 11C
SL 2425 SMI 161
SL 2783 S.S. 204/219
Thibodaux-Morgan City SL 2250 A.Glassell-Chacahoula
SL 2047 Alliance Exploration
SL 9029 Coastal-Chacahoula
SL 2835 Lake Palourde
SL 9873 Linder Oil-Chacahoula
SL 9175 LLOG-Chacahoula
SL 9847 LRC-Choctaw
SL 2440 Magna-Chacahoula #1
SL 2445 Magna-St. John #2
SL 2470 Patterson-Chacahoula
SL 2135 Simon Pass
SOUTH
Egan-Eunice SL 9851 Booher-Iota
SL 9003 Egan
Offshore Points
entering at Egan SL 9310 E.I. 278/S.S. 247F
SL 9131 E.I. 278/S.S. 248D
SL 9128 E.I. 299/S.S. 271A
13
<PAGE>
SL 9129 E.I. 299/S.S. 271A/S.S. 271B
SL 9423 E.I. 320/324
SL 9122 E.I. 320/325A
SL 9123 E.I. 342/366A
SL 2793 E.I. 342/372A
SL 9399 E.I. 342/384A
SL 2767 E.I. 342C
SL 2786 E.I. 343B
SL 9363 E.I. 349/349A
SL 9364 E.I. 349/349A/349B
SL 2788 E.I. 365
SL 9369 E.I. 365A/365A/348
SL 9120 E.I. 372A
SL 2781 S.S. 247F
SL 2776 S.S. 248D
SL 9429 S.S. 248D/248G
SL 2778 S.S. 271A
SL 2785 S.S. 271B/271A/271B
SL 9427 Vermilion 248/255A/255H
SL 9342 Vermilion 255/256E
SL 9424 Vermilion 255/256E/268G
SL 2774 Vermilion 256D
SL 9105 Vermilion 267/275A
SL 9340 Vermilion 267/287A
SL 9341 Vermilion 267/287A/276
SL 9159 Vermilion 267/287A/277
SL 9374 Vermilion 267/289A
SL 2782 Vermilion 267C
SL 2770 Vermilion 267F
SOUTHWEST
East Cameron-Lowry SL 9872 E.C. 9A
SL 2581 E.C. 14
SL 2860 Lake Arthur
SL 2033 Little Cheniere-Arco
SL 2034 Little Cheniere-Linder
SL 2392 LRC-Grand Cheniere
Lowry-Eunice SL 9843 Mobil-Lowry
SL 9446 NGPL-Lowry
SL 2437 ENOGEX/NGPL Tap Washita
SL 9169 TEX SW/NGPL Washita
SL 9171 Transok/NGPL Inter #2 Beckham
SL 9170 Transok/NGPL Inter #2 Custer
SL 9172 Transok/NGPL Waggs Wheeler
14
<PAGE>
WEST
Iowa-Eunice SL 2091 Caribbean-China #1
SL 2092 Caribbean-China #2
SL 2093 Caribbean-China #3
SL 9038 Coastal/ANR-Iowa
SL 9839 Great Southern-Woodlawn
SL 8170 Iowa
SL 9445 Kilroy Riseden-Woodlawn
SL 9186 Linder Oil-Woodlawn
SL 9890 Source Petroleum-S. Elton #1
SL 9896 Source Petroleum-S. Elton #2
SL 2883 Tee Oil-Woodlawn
Mallard Bay-Woodlawn SL 2140 California Co.-South Thornwell
SL 2615 Caroline Hunt Sands-S. Thornwell
SL 2170 Cockrell-North Chalkley
SL 9828 Denovo-Lake Arthur
SL 2207 Franks Petroleum-Chalkley
SL 9028 Gas Energy Development-Hayes
SL 2355 Humble-Chalkley
SL 2383 IMC Wintershall-Chalkley
SL 9848 Lamson Onshore-Mallard Bay
SL 8071 LRC-Mallard Bay
SL 2701 Samedan-N. Chalkley
SL 2635 Shell-Chalkley
SL 2266 South Mallard Bay-Americal
SL 2822 Superior-S. Thornwell
SL 9879 Total Minatome-Bell City
SL 2885 Union Texas-Welsh
SL 2853 Welsh Field
W.C. 294
Entering at ANR-Eunice SL 9026 W.C. 167/132
SL 9135 W.C. 167/HIOS Mainline
SL 9136 W.C. 167/Near Shore
SL 9396 W.C. 293/H.I. 120/H.I. 120-128
SL 9383 W.C. 293/H.I. 167/H.I. 167-166
SL 2838 W.C. 294
HIOS
Offshore Points
entering at ANR-Eunice H.I. 247
SL 2868 H.I. A-247/A-244A/A-231
SL 9176 H.I. A-247/A-245
15
<PAGE>
H.I. 283
SL 9894 H.I. A-283/A-283A
SL 2855 H.I. A-285/A-282
H.I. 303
SL 2858 H.I. A-302A/A-303
H.I. A-345
SL 2863 H.I. A-334A/A-335
SL 9327 H.I. A-345/A-325A
H.I. A-498
SL 2867 H.I. A-462
SL 9375 H.I. A-477/A-462/A-486
SL 2534 H.I. A-498/A-489
SL 2533 H.I. A-498/A-489/A-474
SL 2535 H.I. A-498/A-489/A-499
SL 9371 H.I. A-498/A-490
SL 2856 H.I. A-498/A-517
H.I. A-539
SL 2537 H.I. A-539/A-480
SL 9365 H.I. A-539/A-511
SL 9376 H.I. A-539/A-532
SL 9328 H.I. A-539/A-550
SL 9901 H.I. A-539/A-552/A-551
SL 9889 H.I. A-539/A-552/A-553
SL 2539 H.I. A-539/A-567
SL 9380 H.I. A-539/A-568
H.I. A-555
SL 2857 H.I. A-531A
SL 2861 H.I. A-536C
SL 2862 H.I. A-537B
SL 9127 H.I. A-537B/A-537D/A-556
SL 9308 H.I. A-555
SL 9125 H.I. A-555/A-537D/A-556
SL 9887 H.I. A-555/A-557A/A-556
H.I. A-573
SL 9909 H.I. A-573/A-384/G B 224
SL 2859 H.I. A-573B Complex
16
<PAGE>
SL 2542 H.I. A-595CF Complex
H.I. A-582
SL 9165 H.I. A-582/A-561A
SL 9133 H.I. A-582/E.B. 110
SL 9377 H.I. A-582/E.B. 160/Various
SL 9134 H.I. A-582/E.B. 165
MAINLINE
Bastrop-North 3 8082 ANR-Slaughters
3 2061 Bee-Hunter
3 2072 Blair
2 8124 Dyersburg
3 2373 Har-Ken/Addison-G #1
3 2352 Har-Ken/Cox
3 2367 Har-Ken/I.C.C. #9
3 2376 Har-Ken/I.C.C. #12
3 2379 Har-Ken/I.C.C. #15
3 2022 Har-Ken/I.C.C. #16
3 2381 Har-Ken/I.C.C. #17
3 9530 Har-Ken/Murray
3 2362 Har-Ken/P. Gannon Est. #1
3 2351 Har-Ken/Qualls
3 2966 Har-Ken/Stearman #1
3 2960 Har-Ken/W. Ky. #1
3 2962 Har-Ken/W. Ky. #2
3 2375 Har-Ken/W. Ky. #6
3 2087 Heathville-Trenton
1 9303 Helena #2
3 9876 Hux Oil-Russellville
4 1715 Lebanon-Columbia
4 1247 Lebanon-Congas
4 1859 Lebanon-Texas Eastern
3 9527 Liberty-South Hill
3 8073 Midwestern-Whitesville
1 3801 Pooling Receipt-Zone 1
3 9525 Pride Energy No. 1
3 9141 Reynolds-Narge Creek
3 5800 Slaughters-Storage Complex
(Withdraw)
1 2648 Spears
3 9404 United Cities-Barnsley
Eunice-Zone SL/1 Line SL 9035 ANR-Eunice
SL 9084 Bayou Pompey
17
<PAGE>
SL 8107 Evangeline
SL 8046 Mamou
SL 3800 Pooling Receipt-Zone SL
SL 3900 SL Lateral Terminus
Zone SL/1 Line-Bastrop 1 2020 Arkla-Perryville
1 9870 Channel Explo.-Chicksaw Creek
1 9826 Delhi-Ewing
1 2361 Guffey-Millhaven
1 9877 Hadson-Olla/Summerville
1 9814 Hogan-Davis Lake
1 8063 Pineville (LIG)
1 9832 Wintershall-Clarks
18
<PAGE>
CONTRACT NO. T6487
Contract Demand 8,000 MMBtu/D
EXHIBIT "B"
POINT(S) OF DELIVERY
Meter MAOP MDP*
No. Name/Description Facilities (psig) (psig)
- --------------------------------------------------------------------------------
1529 Louisville Gas and Electric Company
BARDSTOWN ROAD - Latitude 38-12-0, (1) 674 400
Longitude 85-36-0, Jefferson County, KY
BEDFORD-LG&E - Latitude 38-34-30,
Longitude 85-18-15, Trimble County, KY (1) 810 400
CRESTWOOD - LG&E-Latitude 38-20-0,
Longitude 85-25-15, Oldham County, KY (1) 810 400
DOE RUN - Latitude 37-55-30,
Longitude 86-2-30, Meade County, KY (1) 810 400
ELDER PARK - Latitude 38-22-0,
Longitude 85-25-0, Oldham County, KY (1) 810 400
ELLINGSWORTH LANE - Latitude 38-13-15,
Longitude 85-33-0, Jefferson County, KY (1) 810 350
LA GRANGE - Latitude 38-24-0,
Longitude 85-24-15, Oldham County, KY (1) 810 400
PENILE ROAD - Latitude 38-6-0,
Longitude 85-47-0, Jefferson County, KY (1) 674 400
PRESTON STREET ROAD - Latitude 38-9-45,
Longitude 85-41-30, Jefferson County, KY (1) 674 400
19
<PAGE>
CONTRACT NO. T6487
FIRM TRANSPORTATION AGREEMENT
SUMMER SEASON - EXHIBIT "C"
SUPPLY LATERAL CAPACITY
LOUISVILLE GAS AND ELECTRIC COMPANY
Preferential Rights
Supply Lateral MMBtu/d
Zone 1 Supply Lateral(s)
------------------------
North Louisiana Leg: 0
Total Zone 1: 0
Zone SL Supply Lateral(s)
-------------------------
East Leg: 0
Southeast Leg: 0
South Leg: 12,949
Southwest Leg: 7,297
West Leg: 0
WC-294: 0
HIOS 12,303
------
Total Zone SL: 32,549
------
Grand Total: 32,549
------
This exhibit reflects the combined total supply lateral capacity held by
Louisville Gas and Electric Company under the 2-year, 5-year and 8-year
agreements for Contract No. T6487. Amendments in contract quantities in either
the 2-year, 5-year or 8-year agreements will result in amendment of this
exhibit.
20
<PAGE>
STANDARD FACILITIES KEY
(1) Measurement facilities are owned, operated, and maintained by Texas Gas
Transmission Corporation.
(2) Measurement facilities are owned, operated, and maintained by ANR
Pipeline Company.
(3) Measurement facilities are owned, operated, and maintained by Arkansas
Louisiana Gas Company.
(4) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Kerr-McGee Corporation.
(5) Measurement facilities are owned, operated, and maintained by Koch
Gateway Pipeline Company.
(6) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Delhi Gas Pipeline Corporation.
(7) Measurement facilities are owned, operated and maintained by Kerr-McGee
Corporation.
(8) Measurement facilities are owned, operated, and maintained by Louisiana
Intrastate Gas Corporation.
(9) Measurement facilities are owned, operated, and maintained by Trunkline
Gas Company.
(10) Measurement facilities are owned, operated, and maintained by Columbia
Gulf Transmission Company.
(11) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Columbia Gulf Transmission Company.
(12) Measurement facilities are owned, operated, and maintained by Florida
Gas Transmission Company.
(13) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by ANR Pipeline Company.
(14) Measurement facilities are owned by Champlin Petroleum Company and
operated and maintained by ANR Pipeline Company.
(15) Measurement facilities are owned by Transcontinental Gas Pipe Line
Corporation and operated and maintained by ANR Pipeline Company.
(16) Measurement facilities are jointly owned by others and operated and
maintained by ANR Pipeline Company.
(17) Measurement facilities are owned by Koch Gateway Pipeline Company and
operated and maintained by ANR Pipeline Company.
(18) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Texas Eastern Transmission Corporation.
(19) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Natural Gas Pipeline Company of America.
(20) Measurement facilities are owned by Louisiana Intrastate Gas
Corporation and operated and maintained by Texas Gas Transmission Corporation.
(21) Measurement facilities are owned, operated, and maintained by Texas
Eastern Transmission Corporation.
(22) Measurement facilities are owned by Kerr-McGee Corporation and operated
and maintained by ANR Pipeline Company.
(23) Measurement facilities are operated and maintained by ANR Pipeline
Company.
21
<PAGE>
(24) Measurement facilities are owned, operated, and maintained by
Transcontinental Gas Pipe Line Corporation.
(25) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Tennessee Gas Pipeline Company.
(26) Measurement facilities are owned, operated, and maintained by Northern
Natural Gas Company.
(27) Measurement facilities are owned and maintained by Faustina Pipeline
Company and operated by Texas Gas Transmission Corporation.
(28) Measurement facilities are owned by Samedan and operated and maintained
by ANR Pipeline Company.
(29) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by CNG Producing.
(30) Measurement facilities are owned, operated, and maintained by Devon
Energy Corporation.
(31) Measurement facilities are owned by Total Minatome Corporation and
operated and maintained by Texas Gas Transmission Corporation.
(32) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Trunkline Gas Company.
(33) Measurement facilities are owned by Linder Oil Company and operated and
maintained by Texas Gas Transmission Corporation.
(34) Measurement facilities are owned, operated, and maintained by
Mississippi River Transmission Corporation.
(35) Measurement facilities are owned, operated, and maintained by Texaco
Inc.
(36) Measurement facilities are owned by Texas Gas Transmission Corporation
and operated and maintained by Louisiana Resources Company.
(37) Measurement facilities are owned, operated, and maintained by Louisiana
Resources Company.
(38) Measurement facilities are owned by Oklahoma Gas Pipeline Company and
operated and maintained by ANR Pipeline Company.
(39) Measurement and interconnecting pipeline facilities are owned and
maintained by Louisiana Resources Company. The measurement facilities are
operated and flow controlled by Texas Gas Transmission Corporation.
(40) Measurement facilities are owned by Hall-Houston and operated and
maintained by ANR Pipeline Company.
(41) Measurement facilities are owned, operated, and maintained as specified
in Exhibit "B".
(42) Measurement facilities are owned by Enron Corporation and operated and
maintained by Texas Gas Transmission Corporation.
(43) Measurement facilities are owned by United Cities Gas Company and
operated and maintained by TXG Engineering, Inc.
(44) Measurement facilities are owned, operated, and maintained by NorAm Gas
Transmission Company.
(45) Measurement facilities are owned by Falcon Seaboard Gas Company and
operated and maintained by Texas Gas Transmission Corporation.
(46) Measurement facilities are owned by ANR Pipeline Company and operated
and maintained by High Island Offshore System.
22
<PAGE>
(47) Measurement facilities are owned by Forest Oil Corporation, et al., and
operated and maintained by Tenneco Gas Transportation Company.
(48) Measurement facilities are owned by PSI, Inc., and operated and
maintained by ANR Pipeline Company.
(49) Measurement facilities are owned, operated, and maintained by Tennessee
Gas Pipeline Company.
(50) Measurement facilities are owned, operated, and maintained by Colorado
Interstate Gas Company.
(51) Measurement facilities are owned by Producer's Gas Company and operated
and maintained by Natural Gas Pipeline Company of America.
(52) Measurement facilities are owned by Zapata Exploration and operated and
maintained by ANR Pipeline Company.
(53) Measurement facilities are jointly owned by Amoco, Mobil, and Union;
operated and maintained by ANR Pipeline Company.
(54) Measurement facilities are owned, operated, and maintained by VHC Gas
Systems, L.P.
(55) Measurement facilities are owned by Walter Oil and Gas and operated and
maintained by Columbia Gulf Transmission Company.
(56) Measurement facilities are operated and maintained by Natural Gas
Pipeline Company of America.
(57) Measurement facilities are operated and maintained by Texas Gas
Transmission Corporation.
(58) Measurement facilities are operated and maintained by Tennessee Gas
Pipeline Company.
(59) Measurement facilities are operated and maintained by Columbia Gulf
Transmission Company.
(60) Measurement facilities are owned, operated, and maintained by
Midwestern Gas Transmission Company.
(61) Measurement facilities are owned, operated, and maintained by Western
Kentucky Gas Company.
23
<PAGE>
EXHIBIT 10.42
THIS AGREEMENT shall be effective as of the 1st day of November, 1996, by and
between TENNESSEE GAS PIPELINE COMPANY, a Delaware Corporation, hereinafter
referred to as "Transporter" and LOUISVILLE GAS & ELECTRIC O., a KENTUCKY
Corporation, hereinafter referred to as "Shipper." Transporter and Shipper shall
collectively be referred to herein as the "Parties."
ARTICLE I
DEFINITIONS
1.1 TRANSPORTATION QUANTITY (TQ) - shall mean the maximum daily quantity of
gas which Transporter agrees to receive and transport on a firm basis,
subject to Article II herein, for the account of Shipper hereunder on
each day during each year during the term hereof, which shall be 30,000
dekatherms. Any limitations of the quantities to be received from each
Point of Receipt and/or delivered to each Point of Delivery shall be as
specified on Exhibit "A" attached hereto.
1.2 EQUIVALENT QUANTITY - shall be as defined in Article I of the General
Terms and Conditions of Transporter's FERC Gas Tariff.
ARTICLE II
TRANSPORTATION
Transportation Service - Transporter agrees to accept and receive daily on a
firm basis, at the Point(s) of Receipt from Shipper or for Shipper's account
such quantity of gas as Shipper makes available up to the Transportation
Quantity, and to deliver to or for the account of Shipper to the Point(s) of
Delivery an Equivalent Quantity of gas.
ARTICLE III
POINT(S) OF RECEIPT AND DELIVERY
The Primary Point(s) of Receipt and Delivery shall be those points specified on
Exhibit "A" attached hereto.
ARTICLE IV
<PAGE>
All Facilities are or shall be in place as of the service commencement date to
render the service provided for in this Agreement.
ARTICLE V
QUALITY SPECIFICATIONS AND STANDARDS FOR MEASUREMENT
For all gas received, transported and delivered hereunder the Parties agree to
the Quality Specifications and Standards for Measurement as specified in the
General Terms and Conditions of Transporter's FERC Gas Tariff Volume No. 1.
ARTICLE VI
RATES AND CHARGES FOR GAS TRANSPORTATION
6.1 TRANSPORTATION RATES - Commencing upon the effective date hereof, the
rates, charges, and surcharges to be paid by Shipper to Transporter for
the transportation service provided herein shall be in accordance with
Transporter's Rate Schedule FT-A and the General Terms and Conditions
of Transporter's FERC Gas Tariff.
6.2 INCIDENTAL CHARGES - Shipper agrees to reimburse Transporter for any
filing or similar fees, which have not been previously paid for by
Shipper, which Transporter incurs in rendering service hereunder.
6.3 CHANGES IN RATES AND CHARGES - Shipper agrees that Transporter shall
have the unilateral right to file with the appropriate regulatory
authority and make effective changes in (a) the rates and charges
applicable to service pursuant to Transporter's Rate Schedule FT-A, (b)
the rate schedule(s) pursuant to which service hereunder is rendered,
or (c) any provision of the General Terms and Conditions applicable to
those rate schedules. Transporter agrees that Shipper may protest or
contest the aforementioned filings, or may seek authorization from duly
constituted regulatory authorities for such adjustment of Transporter's
existing FERC Gas Tariff as may be found necessary to assure
Transporter just and reasonable rates.
ARTICLE VII
BILLINGS AND PAYMENT
Transporter shall bid and Shipper shall pay all rates and charges in accordance
with Articles V and VI, respectively, of the General Terms and Conditions of
Transporter's FERC Gas Tariff.
2
<PAGE>
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
This Agreement shall be subject to the effective provisions of Transporter's
Rate Schedule FT-A and to the General Terms and Conditions incorporated therein,
as the same may be changed or superseded from time to time in accordance with
the rules and regulations of the FERC.
ARTICLE IX
REGULATION
9.1 This Agreement shall be subject to all applicable and lawful
governmental statutes, orders, rules and regulations and is contingent
upon the receipt and continuation of all necessary regulatory approvals
or authorizations upon terms acceptable to Transporter. This Agreement
shall be void and of no force and effect if any necessary regulatory
approval is not so obtained or continued. All Parties hereto shall
cooperate to obtain or continue all necessary approvals or
authorizations, but no Party shall be liable to any other Party for
failure to obtain or continue such approvals or authorizations.
9.2 The transportation service described herein shall be provided subject
to Subpart G, Part 284, of the FERC Regulations provided however, that
Transporter shall initiate and provide service to Shipper under Subpart
B, Part 284, of the FERC Regulations until such time as the Commission
authorizes service under Subpart G.
ARTICLE X
RESPONSIBILITY DURING TRANSPORTATION
Except as herein specified, the responsibility for gas during transportation
shall be as stated in the General Terms and Conditions of Transporter's FERC Gas
Tariff Volume No. 1.
ARTICLE XI
WARRANTIES
11.1 In addition to the warranties set forth in Article IX of the General
Terms and Conditions of Transporter's FERC Gas Tariff, Shipper warrants
the following:
3
<PAGE>
(a) Shipper warrants that all upstream and downstream
transportation arrangements are in place, or will be in place
as of the requested effective date of service, and that it has
advised the upstream and downstream transporters of the
receipt and delivery points under this Agreement and any
quantity limitations for each point as specified on Exhibit
"A" attached hereto. Shipper agrees to indemnify and hold
Transporter harmless for refusal to transport gas hereunder in
the event any upstream or downstream transporter fails to
receive or deliver gas as contemplated by this Agreement.
(b) Shipper agrees to indemnify and hold Transporter harmless from
all suits, actions, debts, accounts, damages, costs, losses
and expenses (including reasonable attorneys fees) arising
from or out of breach of any warranty by Shipper herein.
11.2 Transporter shall not be obligated to provide or continue service
hereunder in the event of any breach of warranty.
ARTICLE XII
TERM
12.1 This Agreement shall be effective as of the 1st day of November, 1996,
the service commencement date, and shall remain in force and effect
until the 31st day of October, 2001, ("Primary Term") and on a year to
year basis thereafter unless terminated by Shipper upon at least one
year prior written notice to Transporter. If the FERC or other
governmental body having jurisdiction over the service rendered
pursuant to this Agreement authorizes abandonment of such service, this
Agreement shall terminate on the abandonment date permitted by the FERC
or such other governmental body. Tennessee warrants that it will not
file for abandonment of this service during the Primary Term or any
renewal term for a period of at least five years after the expiration
of the Primary Term.
12.2 Any portions of this Agreement necessary to resolve or cash-out
imbalances under this Agreement as required by the General Terms and
Conditions of Transporter's FERC Gas Tariff Volume No. 1, shall survive
the other parts of this Agreement until such time as such balancing has
been accomplished; provided, however, that Transporter notifies Shipper
of such imbalance no later than twelve months after the termination of
this Agreement.
4
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12.3 This Agreement will terminate automatically upon written notice from
Transporter in the event Shipper fails to pay all of the amount of any
bill for service rendered by Transporter hereunder in accord with the
terms and conditions of Article VI of the General Terms and Conditions
of Transporter's FERC Tariff.
ARTICLE XIII
NOTICE
Except as otherwise provided in the General Terms and Conditions applicable to
this Agreement, any notice under this Agreement shall be in writing and mailed
to the post office address of the Party intended to receive the same, as
follows:
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P.O. Box 2511
Houston, Texas 77252-2511
Attention: Transportation Marketing
SHIPPER:
NOTICES: LOUISVILLE GAS & ELECTRIC CO.
P.O. BOX 32020
LOUISVILLE, KY 40232
Attention: CLAY MURPHY, MGR - GAS SUPPLY
BILLING: LOUISVILLE GAS & ELECTRIC CO.
P.O. BOX 32020
LOUISVILLE, KY 40232
Attention: CLAY MURPHY, MGR - GAS SUPPLY
or to such other address as either Party shall designate by formal written
notice to the other.
ARTICLE XIV
ASSIGNMENTS
14.1 Either Party may assign or pledge this Agreement and all rights and
obligations hereunder under the provisions of any mortgage, deed of
trust, indenture, or other instrument which it has executed or may
execute hereafter as security for indebtedness. Either Party may,
without relieving itself of its obligation under this Agreement, assign
any of its rights hereunder to a company with which it is affiliated.
Otherwise, Shipper shall not assign this
5
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Agreement or any of its rights hereunder, except in accord with Article
III, Section 11 of the General Terms and Conditions of Transporter's
FERC Gas Tariff.
14.2 Any person which shall succeed by purchase, merger, or consolidation to
the properties, substantially as an entirety, of either Party hereto
shall be entitled to the rights and shall be subject to the obligations
of its predecessor in interest under this Agreement.
ARTICLE XV
MISCELLANEOUS
15.1 The interpretation and performance of this Agreement shall be in
accordance with and controlled by the laws of the State of Texas,
without regard to the doctrines governing choice of law.
15.2 If any provisions of this Agreement is declared null and void, or
voidable, by a court of competent jurisdiction, then that provision
will be considered severable at either Party's option; and if the
severability option is exercised, the remaining provisions of the
Agreement shall remain in full force and effect.
15.3 Unless otherwise expressly provided in this Agreement or Transporter's
Gas Tariff, no modification of or supplement to the terms and
provisions stated in this agreement shall be or become effective until
Shipper has submitted a request for change through the TENN-SPEED 2 of
Transporter's agreement to such change.
15.4 Exhibit "A" attached hereto is incorporated herein by reference and
made a part hereof for all purposes.
15.5 Notwithstanding Section XXX of the General Terms & Conditions of TGP's
FERC Gas Tariff, in the event of a conflict between this Agreement or
any modification thereto, and the General Terms & Conditions of TGP's
FERC Gas Tariff, this Agreement or any modification thereto shall
prevail.
15.6 This agreement shall be subject to modification by written agreement
between Shipper and Transporter.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed.
TENNESSEE GAS PIPELINE COMPANY
6
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By: _______________________________
Its: _______________________________
LOUISVILLE GAS & ELECTRIC CO.
By: __________________________
Title: __________________________
Date: __________________________
7
<PAGE>
GAS TRANSPORTATION AGREEMENT
(or Use Under oT-A Rate Schedule)
Exhibit "A"
AMENDMENT #0 TO GAS TRANSPORTATION AGREEMENT
DATED November 1, 1996
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
LOUISVILLE GAS & ELECTRIC CO.
LOUISVILLE GAS & ELECTRIC CO.
EFFECTIVE DATE OF AMENDMENT: November 1, 1996
RATE SCHEDULE: FT-A
SERVICE PACKAGE: 10609
SERVICE PACKAGE TQ: 30,000 Dth
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
METER METER NAME INTERCONNECT PARTY NAME COUNTY ST ZONE R/D LEG METER-TQ BILLABLE-TQ
011306 CHANNEL-AGUA DULCE EXCH CHANNEL INDUSTRIES GAS CO NUECES TX 00 R 100 18,000 18,000
020743 STA 834 POOLING POINT FRANKLIN LA 01 R 800 12,000 12,000
Total Receipt TQ: 30,000 30,000
020001 COLUMBIA UF-BR RUN COBB W VA COLUMBIA GAS TRANSMISSION CORP KANAWHA WV 03 D 087 30,000 30,000
</TABLE>
NUMBER OF RECEIPT POINTS AFFECTED: 2
NUMBER OF DELIVERY POINTS AFFECTED: 1
Note: Exhibit "A" is a reflection of the contract and all amendments as of the
amendment effective date
8
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CONTRACT 96-205-026
EXHIBIT 10.46
SPOT COAL SUPPLY AGREEMENT
This is a spot coal supply agreement (the "Agreement") dated June 1,
1996 between LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky corporation, 220
West Main Street, Louisville, Kentucky 40202 ("Buyer") and KINDILL MINING, INC.,
an Indiana corporation, 101 Court Street, Suite 106, Evansville, Indiana 47708
("Seller").
The parties hereto agree as follows:
SECTION 1. GENERAL
Seller will sell to Buyer and Buyer will buy from Seller steam coal
under all the terms and conditions of this Agreement.
SECTION 2. TERM
The term of this Agreement shall commence on June 1, 1996 and shall
continue through December 31, 1996.
SECTION 3. QUANTITY; OPTION
SECTION 3.1 Quantity. Seller shall sell and deliver and Buyer shall
purchase and accept delivery of 100,000 tons of coal per month. Such
coal shall be delivered in accordance with reasonable delivery
schedules to be submitted by Buyer as necessary.
SECTION 3.2 Option.
(a) Buyer shall have an option (the "Option") to extend the
term of this Agreement through December 31, 1997 (the period January 1, 1997 to
December 31, 1997
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CONTRACT #96-205-026
being hereinafter referred to as the "Option Period") under the terms and
conditions set forth in subsection (b) below. Buyer shall exercise the Option by
giving notice to Seller ("the Option Notice") by November 1, 1996 of its
exercise of the Option.
(b) If Buyer exercises the Option:
(i) The quantity to be delivered hereunder during the
Option Period shall be as designated by Buyer in its Option Notice but shall be
no greater than one million tons and no less than 750,000 tons. Such coal shall
be delivered ratably over the Option Period in accordance with reasonable
delivery schedules to be submitted by Buyer as necessary.
(ii) The base price of the coal to be sold and
purchased during the Option Period will be $.70500/MMBTU.
(iii) Except as specifically set forth in (i) and
(ii) above, all provisions of this Agreement shall remain in effect during the
Option Period.
SECTION 4. SOURCE
SECTION 4.1 Source. The coal sold hereunder shall be supplied from
geological seams Indiana 5 and 6, Kindill 1 and 2 Mines, Pike County, Indiana
(the "Coal Property").
SECTION 4.2 Assurance of Operation and Reserves. Seller represents and
warrants that the Coal Property contains economically recoverable coal of a
quality and in quantities which will be sufficient to satisfy all the
requirements of this Agreement.
SECTION 4.3 Substitute Coal. Notwithstanding the above
representations and warranties, in the event that Seller is unable to produce
or obtain coal from the Coal Property in the quantity and
2
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CONTRACT #96-205-026
of the quality required by this Agreement, and such inability is not caused by a
force majeure event as defined in SECTION 10, then Buyer will have the option of
requiring that Seller supply substitute coal from other facilities and mines
under all the terms and conditions of this Agreement including, but not limited
to, the price provisions of SECTION 8, the quality specifications of
SECTION 6.1, and the provisions of SECTION 5 concerning reimbursement to
Buyer for increased transportation costs. Seller's delivery of coal not produced
from the Coal Property without having received the express written consent of
Buyer shall constitute a material breach of this Agreement.
SECTION 5. DELIVERY
SECTION 5.1 RAIL DELIVERY. The coal shall be delivered to Buyer F.O.B.
railcar at the rail loading facility near Enosville, Indiana on the Norfolk
Southern Railway (the "Delivery Point"). Seller may deliver the coal at a
location different from the Delivery Point, provided, however, that Seller shall
reimburse Buyer for any resulting increases in the cost of transporting the coal
to Buyer's generating stations. Any resulting savings in such transportation
costs shall be retained by Buyer.
Title to and risk of loss respecting coal will pass to Buyer and the
coal will be considered to be delivered when it is loaded into the railcars at
the rail loading facility. Buyer or its contractor shall furnish suitable
railcars in accordance with a delivery schedule provided by Buyer to Seller.
Seller shall be responsible for and pay the cost of repairs for any damages
caused by Seller to railcars owned or leased by Buyer while such railcars are in
Seller's control
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CONTRACT #96-205-026
or custody. Seller shall comply with the applicable provisions of Buyer's rail
contractor's tariff.
SECTION 5.2 Freeze Conditioning. At Buyer's request, Seller shall
treat (or have treated) any shipment of coal hereunder with a freeze
conditioning agent approved by Buyer in order to maintain coal handling
characteristics during shipment. If requested by Buyer, Seller shall also
treat (or have treated) any railcars specified by Buyer with a side release
agent approved by Buyer. The price for each such requested chemical treatment
shall be one dollar ($1) per gallon for each application of freeze
conditioning agent or side release agent, as the case may be. Seller shall
invoice Buyer for all such treatments which occur in a calendar month by the
fifteenth of the following month; and payment shall be mailed by the 25th of
such following month or within ten days after receipt of Seller's invoice,
whichever is later.
SECTION 6. QUALITY
SECTION 6.1 Specifications. The coal delivered hereunder shall
conform to the following specifications on an "as received" basis:
Guaranteed Monthly Rejection Limits
Specifications Weighted Average (per shipment)
- --------------------------------------------------------------------------------
BTU/LB. min. 11,000 < 10,700
LBS/MMBTU:
----------
MOISTURE max. 13.0 > 14.0
ASH max. 9.0 > 10.5
SULFUR max. 3.1 > 3.3
SULFUR min. 2.2 < 2.0
CHLORINE max. 0.05 > 0.10
FLUORINE max. 0.006 > .01
NITROGEN max. 1.20 > 1.50
ASH/SULFUR RATIO min. 2.5:1 < 2.5:1
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CONTRACT #96-205-026
Size (3" x 0"):
Top size (inches)* max. 3x0 > 3x0
Fines (% by wgt)
Passing 1/4" screen max. 45 > 55
% BY WEIGHT:
------------
VOLATILE max. 38 > 40
VOLATILE min. 30 < 29
FIXED CARBON max. 46 > 48
FIXED CARBON min. 35 < 30
GRINDABILITY (HGI) min. 52 < 50
BASE ACID RATIO (B/A) max. .50 > .60
SLAGGING FACTOR** max. 1.90 > 2.10
FOULING FACTOR*** max. 0.50 > 1.00
ASH FUSION TEMPERATURE ((DEG.)F) (ASTM D1857)
-----------------------------------------------
REDUCING ATMOSPHERE
-------------------
Initial Deformation min. 1950F min. 1900F
Softening (H=W) min. 2005F min. 1975F
Softening (H=1/2W) min. 2050F min. 2000F
Fluid min. 2135F min. 2100F
OXIDIZING ATMOSPHERE
--------------------
Initial Deformation min. 2300F min. 2200F
Softening (H=W) min. 2330F min. 2280F
Softening (H=1/2W) min. 2425F min. 2300F
Fluid min. 2490F min. 2375F
* All the coal will be of such size that it will pass through a screen
having circular perforations three (3) inches in diameter, but shall not contain
more than forty-five percent (45%) by weight of coal that will pass through a
screen having circular perforations one-quarter (1/4) of an inch in diameter.
** Slagging Factor (R(s))=(B/A) x (Percent Sulfur by Weight(Dry))
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CONTRACT #96-205-026
*** Fouling Factor (R(f))=(B/A) x (Percent Na(2)0 by Weight(Dry))
The Base Acid Ratio (B/A) is herein defined as:
BASE ACID RATIO (B/A) = (Fe(2)0(3) + Ca0 + Mg0 + Na(2)0 + K(2)0)
----------------------------------------
(Si0(2) + A1(2)0(3) + T10(2))
Note: As used herein > means greater than:
< means less than.
SECTION 6.2 DEFINITION OF "SHIPMENT". As used herein, a "shipment"
shall mean one barge load, a barge lot load, or one unit trainload, in
accordance with Buyer's actual sampling and analyzing practices.
SECTION 6.3 REJECTION.
Buyer has the right, but not the obligation, to reject any shipment
which fail(s) to conform to the Rejection Limits set forth in SECTION 6.1 or
contains extraneous materials. Buyer must reject such coal within seventy-two
(72) hours of receipt of the coal analysis provided for in SECTION 7.2 or
such right to reject is waived. In the event Buyer rejects such non-conforming
coal, Buyer shall return the coal to Seller or, at Seller's request, divert
such coal to Seller's designee, all at Seller's cost. Seller shall replace
the rejected coal within five (5) working days from notice of rejection with
coal conforming to the Rejection Limits set forth in SECTION 6.1. If Seller
fails to replace the rejected coal within such five (5) working day period
or the replacement coal is rightfully rejected, Buyer may purchase coal
from another source in order to replace the rejected coal. Seller shall
reimburse Buyer for (i) any amount by which the actual price plus
transportation costs to Buyer of such coal purchased
from another source exceed the price of such coal under this Agreement (as
adjusted under SECTION 8.3 for coal of the
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CONTRACT #96-205-026
quality actually supplied by the other source) plus transportation costs to
Buyer from the Delivery Point; and (ii) any and all transportation, storage,
handling, or other expenses that have been incurred by Buyer for rightfully
rejected coal. This remedy is in addition to all of Buyer's other remedies under
this Agreement and under applicable law and in equity for Seller's breach.
If Buyer fails to reject a shipment of non-conforming coal which it had
the right to reject for failure to meet any or all of the Rejection Limits set
forth in SECTION 6.1 or because such shipment contained extraneous materials,
then such non-conforming coal shall be deemed accepted by Buyer; however,
the price shall be adjusted in accordance with SECTION 8.3 and the quantity
Buyer is obligated to purchase from Seller, at Buyer's sole option, shall
be reduced by the amount of each such non-conforming shipment. Further, for
shipments containing extraneous materials, which include, but are not limited
to, slate, rock, wood, corn husks, mining materials, metal, steel, etc., the
estimated weight of such materials shall be deducted from the weight of that
shipment.
SECTION 6.4 SUSPENSION AND TERMINATION.
If the coal sold hereunder fails to meet one or more of the Guaranteed
Monthly Weighted Averages set forth in SECTION 6.1 for any one month during the
term of this Agreement, or if 3 barge shipments in a 7 day period are rejectable
by Buyer, of if Buyer receives at generating station(s) 2 rail shipments which
are rejectable in any 10 day period, Buyer may, upon notice confirmed in writing
and sent to Seller by certified mail, terminate this Agreement
7
<PAGE>
CONTRACT #96-205-026
and exercise all its other rights and remedies under applicable law and in
equity for Seller's breach.
SECTION 7. WEIGHTS, SAMPLING AND ANALYSIS
SECTION 7.1 Weights. The weight of the coal delivered hereunder
shall be determined on a per shipment basis by Buyer on the basis of scale
weights at the generating station(s) unless another method is mutually agreed
upon by the parties. Such scales shall be duly certified by an appropriate
testing agency and maintained in an accurate condition. Seller shall have the
right, at Seller's expense and upon reasonable notice, to have the scales
checked for accuracy at any reasonable time or frequency. If the scales are
found to be inaccurate, over or under the tolerance range allowable for the
scale, either party shall pay to the other any amounts owed due to such
inaccuracy for a period not to exceed thirty (30) days before the time any
inaccuracy of scales is determined.
SECTION 7.2 Sampling and Analysis. The sampling and analysis of the
coal delivered hereunder shall be performed by Buyer and the results thereof
shall be accepted and used for the quality and characteristics of the coal
delivered under this Agreement. All analyses shall be made in Buyer's
laboratory at Buyer's expense in accordance with reliable and industry
accepted standards. Samples for analyses shall be taken by any reliable and
industry accepted standard acceptable to both parties, may be composited, and
shall be taken with a frequency and regularity sufficient to provide
reasonably accurate representative samples of the deliveries made hereunder.
Seller represents that it is familiar with Buyer's sampling and analysis
practices, and finds them to be acceptable. Buyer shall notify Seller in
writing of any
8
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CONTRACT #96-205-026
significant changes in Buyer's sampling and analysis practices. Any such changes
in Buyer's sampling and analysis practices shall, except for industry accepted
changes in practices, provide for no less accuracy than the sampling and
analysis practices existing at the time of the execution of this Agreement,
unless the Parties otherwise mutually agree.
Each sample taken by Buyer shall be divided into 4 parts and put into
airtight containers, properly labeled and sealed. One part shall be used for
analysis by Buyer; one part shall be used by Buyer as a check sample, if Buyer
in its sole judgment determines it is necessary; one part shall be retained by
Buyer until the 25th of the month following the month of unloading (the
"Disposal Date") and shall be delivered to Seller for analysis if Seller so
requests before the Disposal Date; and one part ("Referee Sample") shall be
retained by Buyer until the Disposal Date. Seller shall be given copies of all
analyses made by Buyer by the 12th day of the month following the month of
unloading. Seller, on reasonable notice to Buyer shall have the right to have a
representative present to observe the sampling and analyses performed by Buyer.
Unless Seller requests a Referee Sample analysis before the Disposal Date,
Buyer's analysis shall be used to determine the quality of the coal delivered
hereunder. The Monthly Weighted Averages shall be determined by utilizing the
individual shipment analyses.
If any dispute arises before the Disposal Date, the Referee Sample
retained by Buyer shall be submitted for analysis to an independent commercial
testing laboratory ("Independent Lab") mutually chosen by Buyer and Seller. For
each coal quality specification in question, a dispute shall be deemed not to
exist and Buyer's analysis shall prevail and the analysis of the
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CONTRACT #96-205-026
Independent Lab shall be disregarded if the analysis of the Independent Lab
differs from the analysis of Buyer by an amount equal to or less than:
(i) 0.50% moisture
(ii) 0.50% ash on a dry basis
(iii) 100 Btu/lb. on a dry basis
(iv) 0.10% sulfur on a dry basis.
For each coal quality specification in question, if the analysis of the
Independent Lab differs from the analysis of Buyer by an amount more than the
amounts listed above, then the analysis of the Independent Lab shall prevail and
Buyer's analysis shall be disregarded. The cost of the analysis made by the
Independent Lab shall be borne by Seller to the extent that Buyer's analysis
prevails and by Buyer to the extent that the analysis of the Independent Lab
prevails.
SECTION 8. PRICE
SECTION 8.1 Price. The base price (the "Base Price") of the coal
to be sold hereunder will be $.70000/MMBTU.
SECTION 8.2 Quality Price Adjustments.
(a) The Base Price is based on coal meeting or exceeding the Guaranteed
Monthly Weighted Average specifications as set forth in SECTION 6.1. Quality
price discounts shall be applied for each specification each month to reflect
failures to meet the Guaranteed Monthly Weighted Averages set forth in
SECTION 6.1, as determined pursuant to SECTION 7.2, subject to the provisions
set forth below. The discount values used are as follows:
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CONTRACT #96-205-026
DISCOUNT VALUES
---------------
$/MMBTU
-------
BTU/LB 0.2604
$/LB./MMBTU
-----------
SULFUR 0.1232
ASH 0.0083
MOISTURE 0.0016
(b) Notwithstanding the foregoing, for each specification each month,
there shall be no discount if the actual Monthly Weighted Average meets the
applicable Discount Point set forth below. However, if the actual Monthly
Weighted Average fails to meet such applicable Discount Point, then the discount
shall be calculated on the basis of the difference between the actual Monthly
Weighted Average and the Guaranteed Monthly Weighted Average pursuant to the
methodology shown in Exhibit A attached hereto.
Guaranteed Monthly
Weighted Average Discount Point
---------------- --------------
BTU/LB min.11,000 10,700
LB/MMBTU
- ---------
SULFUR max. 3.1 3.2
ASH max. 9.0 9.5
MOISTURE max. 13.0 14.0
For example, if the actual Monthly Weighted Average of ash equals
10.0 lb/MMBTU, then the applicable discount would be (10.0 lb. - 9.0 lb.) x
$0.0083/lb./MMBTU = $.0083/MMBTU.
11
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CONTRACT #96-205-026
SECTION 8.3 PAYMENT CALCULATION. Exhibit A attached hereto shows the
methodology for calculating the coal payment and quality price discounts for the
month Seller's coal was unloaded by Buyer. If there are any such discounts,
Buyer shall apply credit to amounts owed Seller for the month the coal was
unloaded.
SECTION 9. INVOICES, BILLING AND PAYMENT.
SECTION 9.1 INVOICING ADDRESS. Invoices will be sent to Buyer at the
following address:
Louisville Gas and Electric Company
220 West Main Street
P.O. Box 32010
Louisville, KY 40232
Attention: Director, Fuels Procurement and Delivery
With a copy to:
Louisville Gas and Electric Company
220 West Main Street
P.O. Box 32010
Louisville, KY 40232
Attention: Manager, Accounts Payable
SECTION 9.2 Invoice Procedures for Coal Shipments. Seller shall
invoice Buyer at the Base Price, minus any quality price discounts, for all
coal unloaded in a calendar month by the fifteenth of the following month.
SECTION 9.3 Payment Procedures for Coal Shipments. Payment for coal
unloaded in a calendar month shall be mailed by the 25th of the month following
the month of unloading or within ten days after receipt of Seller's invoice,
whichever is later. Buyer shall mail all
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CONTRACT #96-205-026
payments to Seller's account at P.O. Box 845, 313 Frederica Street, Suite 301,
Owensboro, Kentucky 42302, Attn: Rhonda Cavender.
SECTION 9.4 Withholding. Buyer shall have the right to withhold from
payment of any billing or billings (i) any sums which it is not able in good
faith to verify or which it otherwise in good faith disputes, (ii) any damages
resulting from or likely to result from any breach of this Agreement by Seller,
and (iii) any amounts owed to Buyer from Seller. Buyer shall notify Seller
promptly in writing of any such issue, stating the basis of its claim and the
amount it intends to withhold.
Payment by Buyer, whether knowing or inadvertent, of any amount in
dispute shall not be deemed a waiver of any claims or rights by Buyer with
respect to any disputed amounts or payments made.
SECTION 10. FORCE MAJEURE
If either party hereto is delayed in or prevented from performing any
of its obligations or from utilizing the coal sold under this Agreement due to
acts of God, war, riots, civil insurrection, acts of the public enemy, strikes,
lockouts, fires, floods, earthquakes, or the failure of Norfolk Southern Railway
Company ("NS") to transport the coal from the Delivery Point for any reason
other than Buyer's breach of its agreement with NS, which are beyond the
reasonable control and without the fault or negligence of the party affected
thereby, then the obligations of both parties hereto shall be suspended to the
extent made necessary by such event; provided that the affected party gives
written notice to the other party as early as practicable of the nature and
probable duration of the force majeure event. The party declaring
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CONTRACT #96-205-026
force majeure shall exercise due diligence to avoid and shorten the force
majeure event and will keep the other party advised as to the continuance of the
force majeure event.
During any period in which Seller's ability to perform hereunder is
affected by a force majeure event, Seller shall not deliver any coal to any
other buyers to whom Seller's ability to supply is similarly affected by such
force majeure event unless contractually committed to do so at the beginning of
the force majeure event; and further shall deliver to Buyer under this Agreement
at least a pro-rata portion (on a per ton basis) of its total contractual
commitments to all its buyers to whom Seller's ability to supply is similarly
affected by such force majeure event in place at the beginning of the force
majeure event. An event which affects the Seller's ability to produce or obtain
coal from a mine other than the Coal Property will not be considered a force
majeure event hereunder.
Tonnage deficiencies resulting from a force majeure event shall be made
up at Buyer's sole option on a reasonable schedule.
SECTION 11. NOTICES
SECTION 11.1 Form and Place of Notice. Any official notice, request for
approval or other document required to be given under this Agreement shall be in
writing, unless otherwise provided herein, and shall be deemed to have been
sufficiently given when delivered in person, transmitted by facsimile or other
electronic media, delivered to an established mail service for same day or
overnight delivery, or dispatched in the United States mail, postage prepaid,
for mailing by first class, certified, or registered mail, return receipt
requested, and addressed as follows:
14
<PAGE>
CONTRACT #96-205-026
If to Buyer: Louisville Gas and Electric Company
220 West Main Street
P.O. Box 32010
Louisville, Kentucky 40232
Attn: Director, Fuels Procurement and Delivery
with a copy to: Louisville Gas and Electric Company
820 West Broadway
P.O. Box 32020
Louisville, Kentucky 40232
Attn: Manager, Procurement Services
If to Seller: Kindill Mining, Inc.
101 Court Street, Suite 106
Evansville, Indiana 47708
Attn: Sales Manager
SECTION 11.2 CHANGE OF PERSON OR ADDRESS. Either party may change the
person or address specified above upon giving written notice to the other party
of such change.
SECTION 12. RIGHT TO SELL Buyer shall have the unqualified right to
sell all or any of the coal purchased under this Agreement.
SECTION 13. INDEMNITY AND INSURANCE
SECTION 13.1 INDEMNITY. Seller agrees to indemnify and save harmless
Buyer, its officers, directors, employees and representatives from any
responsibility and liability for any and all claims, demands, losses, legal
actions for personal injuries, property damage and pollution (including
reasonable attorney's fees) (i) relating to the barges or railcars provided
by Buyer or Buyer's contractor while such barges or railcars are in the care
and custody of the loading dock or loading facility, (ii) due to any failure
of Seller to comply with laws, regulations or ordinances, or (iii) due to the
acts or omissions of Seller in the performance of this Agreement.
15
<PAGE>
CONTRACT #96-205-026
SECTION 13.2 Insurance. Seller agrees to carry insurance coverage with
minimum limits as follows:
(1) Commercial General Liability, including Completed
Operations and Contractual Liability, $1,000,000 single limit liability.
(2) Automobile General Liability, $1,000,000 single limit
liability.
(3) In addition, Seller shall carry excess liability insurance
covering the foregoing perils in the amount of $4,000,000 for any one
occurrence.
(4) Workers' Compensation and Employer's Liability with
statutory limits.
If any of the above policies are written on a claims made basis, then
the retroactive date of the policy or policies will be no later than the
effective date of this Agreement. Certificates of Insurance satisfactory in form
to the Buyer and signed by the Seller's insurer shall be supplied by the Seller
to the Buyer evidencing that the above insurance is in force and that not less
than 30 calendar days written notice will be given to the Buyer prior to any
cancellation or material reduction in coverage under the policies. The Seller
shall cause its insurer to waive all subrogation rights against the Buyer
respecting all losses or claims arising from performance hereunder. Evidence of
such waiver satisfactory in form and substance to the Buyer shall be exhibited
in the Certificate of Insurance mentioned above. Seller's liability shall not be
limited to its insurance coverage.
SECTION 14. TERMINATION FOR DEFAULT.
Subject to SECTION 6.4, if either party hereto commits a material
breach of any of its obligations under this Agreement at any time, then the
other party has the right to give written
16
<PAGE>
CONTRACT #96-205-026
notice describing such breach and stating its intention to terminate this
Agreement no sooner than 15 days after the date of the notice (the "notice
period"). If such material breach is curable and the breaching party cures such
material breach within the notice period, then the Agreement shall not be
terminated due to such material breach. If such material breach is not curable
or the breaching party fails to cure such material breach within the notice
period, then this Agreement shall terminate at the end of the notice period in
addition to all the other rights and remedies available to the aggrieved party
under this Agreement and at law and in equity.
SECTION 15. TAXES, DUTIES AND FEES
Seller shall pay when due, and the price set forth in SECTION 8 of this
Agreement shall be inclusive of, all taxes, duties, fees and other assessments
of whatever nature imposed by governmental authorities with respect to the
transactions contemplated under this Agreement.
SECTION 16. DOCUMENTATION AND RIGHT OF AUDIT
Seller shall maintain all records and accounts pertaining to payments,
quantities, quality analyses and source of all coal supplied under this
Agreement for a period lasting through the term of this Agreement and for two
years thereafter. Buyer shall have the right at no additional expense to Buyer
to audit, copy and inspect such records and accounts at any reasonable time upon
reasonable notice during the term of this Agreement and for 2 years thereafter.
SECTION 17. EQUAL EMPLOYMENT OPPORTUNITY.
To the extent applicable, Seller shall comply with all of the following
provisions which are incorporated herein by reference: Equal Opportunity
regulations set forth in 41 CRF SECTION 60-
17
<PAGE>
CONTRACT #96-205-026
1.4(a) and (c) prohibiting discrimination against any employee or applicant for
employment because of race, color, religion, sex, or national origin; Vietnam
Era Veterans Readjustment Assistance Act regulations set forth in 41 CRF
SECTION 50-250.4 relating to the employment and advancement of disabled
veterans and veterans of the Vietnam Era; Rehabilitation Act regulations set
forth in 41 CRF SECTION 60-741.4 relating to the employment and advancement
of qualified disabled employees and applicants for employment; the clause known
as "Utilization of Small Business Concerns and Small Business Concerns Owned
and Controlled by Socially and Economically Disadvantaged Individuals" set
forth in 15 USC SECTION 637(d)(3); and subcontracting plan requirements set
forth in 15 USC SECTION 637(d).
SECTION 18. COAL PROPERTY INSPECTIONS Buyer and its representatives,
and others as may be required by applicable laws, ordinances and regulations
shall have the right at all reasonable times and at their own expense to inspect
the Coal Property, including the loading facilities, scales, sampling system(s),
wash plant facilities, and mining equipment for conformance with this Agreement.
Seller shall undertake reasonable care and precautions to prevent personal
injuries to any representatives, agents or employees of Buyer (collectively,
"Visitors") who inspect the Coal Property. Any such Visitors shall make every
reasonable effort to comply with Seller's regulations and rules regarding
conduct on the work site, made known to Visitors prior to entry, as well as
safety measures mandated by state or federal rules, regulations and laws. Buyer
understands that underground mines and related facilities are inherently
high-risk environments. Buyer's failure to inspect the Coal Property or
18
<PAGE>
CONTRACT #96-205-026
to object to defects therein at the time Buyer inspects the same shall not
relieve Seller of any of its responsibilities nor be deemed to be a waiver of
any of Buyer's rights hereunder.
SECTION 19. MISCELLANEOUS
SECTION 19.1 APPLICABLE LAW. This Agreement shall be construed in
accordance with the laws of the State of Kentucky, and all questions of
performance of obligations hereunder shall be determined in accordance
with such laws.
SECTION 19.2 HEADINGS. The paragraph headings appearing in this
Agreement are for convenience only and shall not affect the meaning of
interpretation of this Agreement.
SECTION 19.3 WAIVER. The failure of either party to insist on strict
performance of any provision of this Agreement, or to take advantage of any
rights hereunder, shall not be construed as a waiver of such provision or right.
SECTION 19.4 REMEDIES CUMULATIVE. Remedies provided under this
Agreement shall be cumulative and in addition to other remedies provided
under this Agreement or by law or in equity.
SECTION 19.5 SEVERABILITY. If any provision of this Agreement is found
contrary to law or unenforceable by any court of law, the remaining provisions
shall be severable and enforceable in accordance with their terms, unless such
unlawful or unenforceable provision is material to the transactions contemplated
hereby, in which case the parties shall negotiate in good faith a substitute
provision.
SECTION 19.6 BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the parties and their successors and assigns.
19
<PAGE>
CONTRACT #96-205-026
SECTION 19.7 ASSIGNMENT. Neither party may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
party, which consent shall not be unreasonably withheld or denied; provided,
however, that Buyer shall have the right, without consent of Seller, to assign
all or any part of this Agreement to any company, controlling, controlled by, or
under common control with Buyer.
SECTION 19.8 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties as to the subject matter hereof, and there are no
representations, understandings or agreements, oral or written, which are not
included herein.
SECTION 19.9 AMENDMENTS. Except as otherwise provided herein, this
Agreement may not be amended, supplemented or otherwise modified except by
written instrument signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LOUISVILLE GAS AND ELECTRIC
KINDILL MINING, INC. COMPANY
By: __________________________ By: ________________________________
E. Wayne Parke, Chris Hermann, Vice President &
President General Manager
Wholesale Electric Business
Date: __________________________ Date: ________________________________
20
<PAGE>
CONTRACT #96-205-026
96-205-026
Page 1 of 2
EXHIBIT A
SAMPLE COAL PAYMENT CALCULATIONS
Total Evaluated Coal Costs for Contract No. 96-205-026
-------------------------------------------------------------------------
For contracts supplied from multiple "origins", each "origin" will be calculated
individually
<TABLE>
<CAPTION>
SECTION I BASE DATA
- ----------------------------------------------------------------------
<S> <C> <C>
1) Base F.O.B. price per ton: $15.40 /ton
1a) Tons of coal delivered: ________ tons
2) Guaranteed average heat content: 11,000 B.T.U./LB.
2r) As received monthly avg. heat content: ________ B.T.U./LB.
2a) Energy delivered in M.M.B.T.U.: ________ MMBTU
[(Line 1a)*2,000 lb./ton*(Line 2r)]*MMBTU/1,000,000 BTU
2b) Base F.O.B. price per M.M.B.T.U.: $________ /MMBTU
{[(Line 1)/(Line 2)]*(1 ton/2,000 lb.)}*1,000,000 BTU/MMBTU
{[( )/ton)/( BTU/LB)]*(1 ton/2,000 lb.)}*1,000,000 BTU/MMBTU
3) Guaranteed monthly avg. max sulfur 3,100 LBS./MMBTU
3r) As received monthly avg. sulfur ________ LBS./MMBTU
4) Guaranteed monthly avg. max. ash 9,000 LBS./MMBTU
4r) As received monthly avg. ash ________ LBS./MMBTU
5) Guaranteed monthly avg. max. moisture 13,000 LBS./MMBTU
5r) As received monthly avg. moisture ________ LBS./MMBTU
SECTION II DISCOUNTS
- ----------------------------------------------------------------------
Assign a (-) to all discounts (round to five (5) decimal places)
6d) B.T.U./LB.: If line 2r is less than 11,000 BTU/lb.
{1-[(line 2r)/(line 2)]}*$0.2604/MMBTU
{1-[( )/( )]}*$0.2604 = $________ /MMBTU
7d) SULFUR: If line 3r is greater than 3,200 lbs./MMBTU
[(line 3r)-(line 3)]*$0.1232/lb sulfur
[( )-( )]*$0.1232 = $________ /MMBTU
8d) ASH: If line 4r is greater than 9,500 lbs./MMBTU
[(line 4r)-(line 4)]*$0.0083/lb ash
[( )-( )]*$0.0083 = $________ /MMBTU
9d) MOISTURE: If line 5r is greater than 14,000 lbs./MMBTU
[(line 5r)-(line 5)]*$0.0016/lb moisture
[( )-( )]*$0.0016 = $________ /MMBTU
</TABLE>
21
<PAGE>
Contract #96-205-026
96-205-026
Page 2 of 2
SECTION III TOTAL PRICE ADJUSTMENTS
- ----------------------------------------------------------
Determine total Discounts as follows:
Assign a (-) to all Discounts and enter number for:
<TABLE>
<S> <C> <C>
Line 6d: $________/MMBTU
Line 7d: $________/MMBTU
Line 8d: $________/MMBTU
Line 9d: $________/MMBTU
10) Total Discounts (-):
Algebraic sum of above: $________/MMBTU
11) Total evaluated coal price = (line 2b) + (line 10)
$________/MMBTU + $________/MMBTU = $________
12) Total discount price adjustment for Energy delivered:
(line 2a) * (line 10) (-)
________ MMBTU * $________/MMBTU = $________
13) Total base cost of coal
(line 2a) * (line 2b)
________ MMBTU * $________/MMBTU = $________
14) Total coal payment for month
(line 12) + (line 13)
$________ + $________ = $________
</TABLE>
22
<PAGE>
EXHIBIT 10.47
October 31, 1996
VIA FACSIMILE: (812/421-0173)
AND OVERNIGHT MAIL
Royce K. Traylor
Sales Manager
Kindill Mining, Inc.
101 Court Street, Suite 106
Evansville, Indiana 47708
RE: LG&E EXERCISE OF OPTION
Dear Royce:
This letter is formal notice that Louisville Gas and Electric Company ("LG&E")
is exercising its option under Section 3.2 of the Spot Coal Supply Agreement
dated June 1, 1996 between LG&E and Kindill Mining, Inc. to extend the term of
the Agreement through December 31, 1997. LG&E hereby designates 750,000 tons as
the quantity to be delivered during 1997. LG&E will submit a delivery schedule.
Please let me know if you have any questions or comments.
Sincerely,
Greg P. Cantrell, Director
Fuels Procurement and Delivery
/LFB
<PAGE>
EXHIBIT 10.59
AMENDMENT NO. 1 TO CREDIT AGREEMENT
This Amendment No. 1 to Credit Agreement ("AMENDMENT NO. 1") is
dated as of November 5, 1996, and is by and among LOUISVILLE GAS AND ELECTRIC
COMPANY, (the "BORROWER"), the banks set forth herein (collectively, the
"BANKS"), and PNC BANK, KENTUCKY, INC. as agent for the Banks (the "AGENT").
WHEREAS, the Borrower, the Banks set forth therein and the Agent are
parties to that certain Credit Agreement dated as of December 18, 1995 (the
"CREDIT AGREEMENT");
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the same meanings given to them in the Credit Agreement; and
WHEREAS, simultaneously with the execution and delivery of this
Amendment No. 1, Bank of Louisville and Trust Co., as assignor ("ASSIGNOR"), and
PNC Bank, Kentucky, Inc., as assignee ("ASSIGNEE"), are entering into an
Assignment and Assumption Agreement pursuant to which Assignor is assigning all
of its right, title and interest in the Commitments, the Notes and the Loan
Documents to Assignee.
WHEREAS, Union Bank of Switzerland ("UBS") and The First National
Bank of Chicago ("FIRST CHICAGO"), by executing this Amendment No. 1, are
joining the Credit Agreement as Banks with the respective Commitments set forth
on Schedule 1.01(B) hereto.
WHEREAS, the Borrower, the Banks and the Agent wish to amend the
Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto, intending to be legally bound,
agree as follows:
1. The first recital clause of the Credit Agreement is hereby amended by
deleting the number "$160,000,000" in the third line thereof and inserting in
lieu thereof "$200,000,000."
2. Section 1.1 of the Credit Agreement is hereby amended by deleting
therefrom the definitions of "EXPIRATION DATE," "FOURTH-LEVEL DEBT RATING,"
"SECOND-LEVEL DEBT RATING" and "THIRD-LEVEL DEBT RATING" and inserting in lieu
thereof the following:
"EXPIRATION DATE" shall mean, with respect to the Commitments,
November 5, 2001.
"FOURTH-LEVEL DEBT RATING" shall mean a Borrower Debt Rating
of BBB+ if the rating is provided by Standard & Poor's or
equal to Baa1 if the rating is provided by Moody's.
<PAGE>
"SECOND-LEVEL DEBT RATING" shall mean a Borrower Debt Rating
equal to or better than A but less than AA- if the rating is
provided by Standard & Poor's or equal to or better than A2
but less than Aa3 if the rating is provided by Moody's.
"THIRD-LEVEL DEBT RATING" shall mean a Borrower Debt Rating
equal to A- if the rating is provided by Standard & Poor's or
equal to A3 if the rating is provided by Moody's.
3. Section 1.1 of the Credit Agreement is hereby amended by inserting a
new definition of "Fifth-Level Debt Rating" as follows:
"FIFTH-LEVEL DEBT RATING" shall mean a Borrower Debt Rating of
BBB or lower if the rating is provided by Standard & Poor's or
Baa2 or lower if the rating is provided by Moody's.
4. Section 2.03 of the Credit Agreement is hereby amended by deleting the
chart setting forth the Borrower Debt Rating and Facility Fee Rate at the end of
the first sentence thereof in its entirety and inserting in lieu thereof the
following:
Borrower Debt Rating Facility Fee Rate
-------------------- -----------------
First-Level Debt Rating .06%
Second-Level Debt Rating .075%
Third-Level Debt Rating .09%
Fourth-Level Debt Rating .10%
Fifth-Level Debt Rating .15%
5. Section 4.01(a)(ii) of the Credit Agreement is hereby amended by
deleting the chart setting forth the Borrower Debt Rating and the Euro-Rate
Spread at the end of the first sentence thereof in its entirety and inserting in
lieu thereof the following:
Borrower Debt Rating Euro-Rate Spread
-------------------- ----------------
First-Level Debt Rating .115%
Second-Level Debt Rating .15%
Third-Level Debt Rating .16%
Fourth-Level Debt Rating .20%
Fifth-Level Debt Rating .225%
6. Section 8.02(c) of the Credit Agreement is hereby amended by inserting
immediately preceding the parenthetical in the third line thereof the following
words "any of its properties or assets, tangible or intangible."
2
<PAGE>
7. Schedule 1.01(B) of the Credit Agreement is hereby deleted in its
entirety and Schedule 1.01(B) attached hereto is inserted in lieu thereof.
8. Exhibit 1.01(B) to the Credit Agreement is hereby deleted in its
entirety and Exhibit 1.01(B) attached hereto is hereby inserted in lieu thereof.
9. Exhibit 1.01(G)(2) of the Credit Agreement is hereby deleted in its
entirety and Exhibit 1.01(G)(2) attached hereto is inserted in lieu thereof.
10. This Amendment No. 1 shall become effective on the first date on which
the following conditions have been satisfied:
(a) The Agent on behalf of each Bank shall have received
replacement Bid Loan Notes and Revolving Credit Notes
reflecting the changes in Schedule 1.01(B).
(b) The Agent on behalf of the Banks shall have received a
certificate signed by the Secretary or Assistant Secretary of
the Borrower certifying as to all action taken by the Borrower
to authorize the execution, delivery and performance of this
Amendment No. 1 by the Borrower and attaching thereto such
resolutions.
(c) The Agent shall have received a written opinion from in-house
counsel for the Borrower, addressed to the Agent for the
benefit of the Banks, opining as to such matters with respect
to the transactions contemplated herein as the Agent may
reasonably request, in form and substance satisfactory to the
Agent and Buchanan Ingersoll Professional Corporation, as
special counsel for the Agent and the Banks.
11. The Borrower hereby represents to the Agent and the Banks that: except
as disclosed on Schedule 7.02 (as previously delivered to the Agent and the
Banks and accepted by the Required Banks), the representations and warranties of
the Borrower contained in Article VI of the Credit Agreement remain true and
accurate on and as of the date hereof (except for representations and warranties
which relate solely to an earlier date or time, which representations and
warranties were true and correct on and as of the specific dates or times
referred to therein); the Borrower has performed and is in compliance with all
covenants contained in Article VIII or elsewhere in the Credit Agreement; no
Event of Default or Potential Default has occurred and is continuing.
12. The Borrower hereby agrees to reimburse the Agent on demand for all
costs, expenses and disbursements relating to this Amendment No. 1 which are
payable by the Borrower as provided in Sections 10.05 and 11.03 of the Credit
Agreement.
13. The Borrower and the Banks intend and agree that, except as provided
herein, the Credit Agreement shall remain in full force and effect without
modification.
3
<PAGE>
14. This Amendment No. 1 shall be governed by and construed and enforced
in accordance with the internal laws of the Commonwealth of Kentucky without
reference to its principles of conflicts of law.
15. Each of UBS and First Chicago (i) confirms that it has received a copy
of the Credit Agreement, together with copies of the financial statements (if
any) referred to in Sections 6.01(i), 8.03(a) and 8.03(b) of the Credit
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into the Credit Agreement;
(ii) agrees that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) appoints and authorizes the
Agent to take such actions on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Agent by the terms thereof; (iv) agrees
that it will become a party to and be bound by the Credit Agreement, as amended
by Amendment No. 1, on the date hereof (including without limitation the
provisions of Section 11.11) as if it were an original Bank thereunder and will
have the rights and obligations of a Bank thereunder and will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank; and (v) has
previously provided the Agent its address for notices.
[SIGNATURE PAGES FOLLOW]
4
<PAGE>
[SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 1 TO CREDIT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto by their officers thereunto
duly authorized, have executed this Amendment No. 1 to Credit Agreement as of
the date first above written.
LOUISVILLE GAS AND ELECTRIC COMPANY
By: _______________________________________
Title: ____________________________________
PNC BANK, KENTUCKY, INC., individually and
as Agent
By: _______________________________________
Title: ____________________________________
BANK OF MONTREAL, individually and as Co-
Agent
By: _______________________________________
Title: ____________________________________
CHASE MANHATTAN BANK, N.A.
By: _______________________________________
Title: ____________________________________
5
<PAGE>
[SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 1 TO CREDIT AGREEMENT]
THE BANK OF NEW YORK
By: _______________________________________
Title: ____________________________________
CITIBANK, N.A.
By: _______________________________________
Title: ____________________________________
NATIONAL CITY BANK, KENTUCKY
By: _______________________________________
Title: ____________________________________
BANK OF LOUISVILLE AND TRUST CO.
By: _______________________________________
Title: ____________________________________
BANK ONE, KENTUCKY, N.A.
By: _______________________________________
Title: ____________________________________
6
<PAGE>
[SIGNATURE PAGE 3 OF 3 TO AMENDMENT NO. 1 TO CREDIT AGREEMENT]
FIFTH THIRD BANK OF KENTUCKY, INC.
By: _______________________________________
Title: ____________________________________
UNION BANK OF SWITZERLAND
By: _______________________________________
Title: ____________________________________
THE FIRST NATIONAL BANK OF CHICAGO
By: _______________________________________
Title: ____________________________________
7
<PAGE>
SCHEDULE 1.01(B)
Ratable
Bank Commitment Share
---- ---------- -----
PNC Bank, Kentucky, Inc. $ 42,500,000 21.25%
Bank of Montreal $ 26,250,000 13.125%
Chase Manhattan Bank, N.A. $ 26,250,000 13.125%
The Bank of New York $ 21,000,000 10.5%
Citibank, N.A. $ 15,750,000 7.875%
National City Bank, Kentucky $ 15,750,000 7.875%
Bank One, Kentucky, N.A. $ 10,500,000 5.25%
Fifth Third Bank of Kentucky, Inc. $ 10,500,000 5.25%
Union Bank of Switzerland $ 15,750,000 7.875%
The First National Bank of Chicago $ 15,750,000 7.875%
------------ -----
Total $200,000,000 100.0%
<PAGE>
EXHIBIT 1.01(B)
FORM OF
BID LOAN NOTE
$200,000,000 Louisville, Kentucky
________________, 1996
FOR VALUE RECEIVED, the undersigned, LOUISVILLE GAS AND ELECTRIC
COMPANY, a Kentucky corporation (herein called the "BORROWER"), hereby promises
to pay to the order of ____________________ (the "BANK") the lesser of (i) the
principal sum of Two Hundred Million U.S. Dollars (U.S. $200,000,000), or (ii)
the aggregate unpaid principal balance of all Bid Loans made by the Bank to the
Borrower pursuant to Sections 3.01 and 3.02 of the Credit Agreement dated as of
December 18, 1995 among the Borrower, PNC BANK, KENTUCKY, INC., as agent
("AGENT"), BANK OF MONTREAL, as Co-Agent, the Bank, and the other banks party
thereto (as amended, restated, supplemented or modified from time to time, the
"CREDIT AGREEMENT"), whichever is less, payable on the Expiration Date or at
such other times specified in the Credit Agreement.
The Borrower shall pay interest on the unpaid principal balance hereof
from time to time outstanding from the date hereof at the rate or rates per
annum specified by the Borrower pursuant to Sections 3.01 and 3.02 of, or as
otherwise provided in, the Credit Agreement.
To the extent permitted by Law, upon the declaration of an Event of
Default by the Agent, and until such time as such Event of Default shall have
been cured or waived, the Borrower shall pay interest on the entire principal
amount of the then outstanding Bid Loans evidenced by this Bid Loan Note at a
rate per annum equal to two hundred basis points (2% per annum) above the rate
of interest otherwise applicable with respect to such Bid Loans. Such interest
rate will accrue before and after any judgment has been entered.
Subject to the provisions of the Credit Agreement, interest on this
Note will be payable at the times specified in Section 5.03 of the Credit
Agreement or as otherwise provided therein.
If any payment or action to be made or taken hereunder shall be stated
to be or become due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
Subject to the provisions of the Credit Agreement, payments of both
principal and interest shall be made without setoff, counterclaim or other
deduction of any nature at the office of the Agent located at 500 W. Jefferson
Street, Louisville, Kentucky 40202, in lawful money of the United States of
America in immediately available funds.
<PAGE>
This Note is a Bid Loan Note referred to in, and is entitled to the
benefits of, the Credit Agreement and other Loan Documents, including the
representations, warranties, covenants, conditions or Liens contained or granted
therein. The Credit Agreement among other things contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayment, in certain circumstances, on account of principal
hereof prior to maturity upon the terms and conditions therein specified.
All capitalized terms used herein shall, unless otherwise defined
herein, have the same meanings given to such terms in the Credit Agreement.
Except as otherwise provided in the Credit Agreement, the Borrower
waives presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.
This Note shall bind the Borrower and its successors and assigns, and
the benefits hereof shall inure to the benefit of the Bank and its successors
and assigns. All references herein to the "Borrower" and the "Bank" shall be
deemed to apply to the Borrower and the Bank, respectively, and their respective
successors and assigns.
This Note and any other documents delivered in connection herewith and
the rights and obligations of the parties hereto and thereto shall for all
purposes be governed by and construed and enforced in accordance with the
internal laws of the Commonwealth of Kentucky without giving effect to its
conflicts of law principles.
IN WITNESS WHEREOF, the undersigned has executed this Note by its duly
authorized officers with the intention that it constitute a sealed instrument.
ATTEST: LOUISVILLE GAS AND ELECTRIC COMPANY
__________________________________ By: ________________________________
Title: ___________________________ Name: ______________________________
Title: _____________________________
[Seal]
2
<PAGE>
EXHIBIT 1.01(G)(2)
FORM OF
GUARANTY AND SURETYSHIP AGREEMENT
This Agreement (the "Agreement") dated as of _______________, 199__, is
made and given by the undersigned signatories, each a Subsidiary of Louisville
Gas and Electric Company, a Kentucky corporation ("Borrower"), identified in
Schedule 1 attached hereto and made a part hereof (each a "Guarantor" and
collectively, the "Guarantors"), in favor of the Banks (as defined in that
certain Credit Agreement dated December 18, 1995 among PNC Bank, Kentucky, Inc.,
a Kentucky banking corporation, as agent (the "Agent"), the Banks party thereto
and the Borrower, as it may from time to time be amended, restated, modified or
supplemented, the "Credit Agreement").
W I T N E S S E T H:
WHEREAS, Borrower has entered into the Credit Agreement with the Agent
and the Banks; and
WHEREAS, this Agreement is made by the Guarantors among other things to
comply with the requirements of the Credit Agreement; and
WHEREAS, the respective businesses and investments of the Guarantors
are interdependent and loans made to the Borrower under the Credit Agreement are
with the expectation that the profits and other opportunities from such loans
will directly or indirectly inure to the benefit of each Guarantor and to all of
them taken as an affiliated group.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound, the Guarantors hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. Capitalized terms used herein and not otherwise
defined herein shall have such meanings as given to them in the Credit
Agreement. In addition to the other terms defined elsewhere in this Agreement,
the following terms shall have the following meanings:
"Guaranteed Obligations" shall mean all obligations from time
to time of the Borrower to the Agent and the Banks under or in
connection with the Credit Agreement, the Notes issued in connection
therewith in the maximum aggregate principal amount of $200,000,000 or
any other Loan Document or which arise in any other manner, whether for
principal, interest, fees, indemnities, expenses or otherwise, and all
refinancings or refundings thereof, whether such obligations are direct
or indirect, otherwise secured or unsecured, joint or several, absolute
or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising (specifically including
but not
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limited to Obligations arising or accruing after the commencement of
any bankruptcy, insolvency, reorganization or similar proceeding with
respect to the Borrower or any other individual or entity (a "Person")
including any Guarantor or which would have arisen or accrued but for
the commencement of such proceeding, even if the claim for such
Obligation is not enforceable or allowable in such proceeding). Without
limitation of the foregoing, such obligations include all obligations
arising from any extensions of credit under or in connection with the
Loan Documents from time to time, regardless of whether any such
extensions of credit are in excess of the amount committed under or
contemplated by the Loan Documents or are made in circumstances in
which any condition to extension of credit is not satisfied. Without
limitation of the foregoing, the Agent and the Banks (or any successive
assignee or transferee) from time to time may, subject to the
provisions of the Credit Agreement, assign or otherwise transfer all of
their respective rights and obligations under the Loan Documents
(including, without limitation, all of any commitment to extend
credit), or any other Guaranteed Obligations, to any other Person, and
such Guaranteed Obligations (including, without limitation, any
Guaranteed Obligations resulting from extension of credit by such other
Person under or in connection with the Loan Documents) assigned or
otherwise transferred in accordance with the terms of the Credit
Agreement shall be and remain Guaranteed Obligations entitled to the
benefit of this Agreement.
ARTICLE II
GUARANTY AND SURETYSHIP
2.01 Guaranty and Suretyship. The Guarantors jointly and severally
hereby absolutely, unconditionally and irrevocably guarantee and become surety
for the full and punctual payment and performance of the Guaranteed Obligations
as and when such payment or performance shall become due (at scheduled maturity,
by acceleration or otherwise) in accordance with the terms of the Loan
Documents. This Agreement is an agreement of suretyship as well as of guaranty,
is a guarantee of payment and performance and not merely of collectibility, and
is in no way conditioned upon any attempt to collect from or proceed against the
Borrower or any other Person or any other event or circumstance. The obligations
of the Guarantors under this Agreement are direct and primary obligations of
each Guarantor and are independent of the Guaranteed Obligations, and a separate
action or actions may be brought against any one or more of the Guarantors
regardless of whether action is brought against the Borrower, any other
Guarantor or any other Person or whether the Borrower, any other Guarantor or
any other Person is joined in any such action or actions.
2.02 Obligations Absolute. The Guarantors agree that the Guaranteed
Obligations will be paid and performed strictly in accordance with the terms of
the Loan Documents, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting the Guaranteed Obligations, any of the
terms of the Loan Documents or the rights of the Agent and the Banks or any
other Person with respect thereto. The obligations of the Guarantors under this
Agreement shall be absolute, unconditional and irrevocable, irrespective of any
of the following:
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(a) Any lack of genuineness, legality, validity, enforceability or
allowability (in a bankruptcy, insolvency, reorganization or
similar proceeding, or otherwise), or any avoidance or
subordination, in whole or in part, of any Loan Document or
any of the Guaranteed Obligations.
(b) Any increase, decrease or change in the amount, nature, type
or purpose of any of the Guaranteed Obligations (whether or
not contemplated by the Loan Documents as presently
constituted); any change in the time, manner, method or place
of payment or performance of, or in any other term of, any of
the Guaranteed Obligations; any execution or delivery of any
additional Loan Documents; or any amendment, modification or
supplement to, or refinancing or refunding of, any Loan
Document or any of the Guaranteed Obligations.
(c) Any failure to assert any breach of or default under any Loan
Document or any of the Guaranteed Obligations; any extensions
of credit in excess of the amount committed under or
contemplated by the Loan Documents, or in circumstances in
which any condition to such extensions of credit has not been
satisfied; any other exercise or non-exercise, or any other
failure, omission, breach, default, delay or wrongful action
in connection with any exercise or non-exercise, of any right
or remedy against the Borrower or any other Person under or in
connection with any Loan Document or any of the Guaranteed
Obligations; any refusal of payment or performance of any of
the Guaranteed Obligations, whether or not with any
reservation of rights against any Guarantor; or any
application of collections (including but not limited to
collections resulting from realization upon any direct or
indirect security for the Guaranteed Obligations) to other
obligations, if any, not entitled to the benefits of this
Agreement, in preference to Guaranteed Obligations entitled to
the benefits of this Agreement, or if any collections are
applied to Guaranteed Obligations, any application to
particular Guaranteed Obligations.
(d) Any taking, exchange, amendment, modification, supplement,
termination, subordination, release, loss or impairment of, OR
any failure to protect, perfect, or preserve the value of,
OR any enforcement of, realization upon, or exercise of
rights, or remedies under or in connection with, OR any
failure, omission, breach, default, delay or wrongful action
by the Agent and the Banks, or any of them, or any other
Person in connection with the enforcement of, realization
upon, or exercise of rights or remedies under or in connection
with, OR any other action or inaction by the Agent and the
Banks, or any of them, or any other Person in respect of, any
direct or indirect security for any of the Guaranteed
Obligations. As used in this Agreement, "direct or indirect
security" for the Guaranteed Obligations, and similar phrases,
includes but is not limited to any collateral security,
guaranty, suretyship, letter of credit, capital maintenance
agreement, put option, subordination agreement or other right
or arrangement of any nature providing direct or indirect
assurance of payment or performance of any of the Guaranteed
Obligations, made by or on behalf of any Person.
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(e) Any merger, consolidation, liquidation, dissolution,
winding-up, charter revocation or forfeiture, or other change
in, restructuring or termination of the corporate structure or
existence of, the Borrower or any other Person; any
bankruptcy, insolvency, reorganization or similar proceeding
with respect to the Borrower or any other Person; or any
action taken or election made by the Agent and the Banks, or
any of them (including but not limited to any election under
Section 1111(b)(2) of the United States Bankruptcy Code), the
Borrower or any other Person in connection with any such
proceeding.
(f) Any defense, setoff or counterclaim (excluding only the
defense of full, strict and indefeasible payment and
performance), which may at any time be available to or be
asserted by the Borrower, any Guarantor or any other Person
with respect to any Loan Document or any of the Guaranteed
Obligations; or any discharge by operation of law or release
of the Borrower, any Guarantor or any other Person from the
performance or observance of any Loan Document or any of the
Guaranteed Obligations.
(g) Any other event or circumstance, whether similar or dissimilar
to the foregoing, and whether known or unknown, which might
otherwise constitute a defense available to, or limit the
liability of or discharge, any Guarantor, a guarantor or a
surety, excepting only full, strict and indefeasible payment
and performance of the Guaranteed Obligations in full.
2.03. Waivers, etc. The Guarantors hereby waive any defense to or
limitation on their obligations under this Agreement arising out of or based on
any event or circumstance referred to in Section 2.02 hereof. Without limitation
and to the full extent permitted by applicable law, the Guarantors waive each of
the following:
(a) All notices, disclosures and demand of any nature which
otherwise might be required from time to time to preserve
intact any rights against any Guarantor, including without
limitation the following: any notice of any event or
circumstance described in Section 2.02 hereof; any notice
required by any law, regulation or order now or hereafter in
effect in any jurisdiction; any presentment, notice of
nonpayment, nonperformance, dishonor, or protest under any
Loan Document or any of the Guaranteed Obligations; any notice
of the incurrence of any Guaranteed Obligation; any notice of
any default or any failure on the part of the Borrower or any
other Person to comply with any Loan Document or any of the
Guaranteed Obligations or any direct or indirect security for
any of the Guaranteed Obligations; and any notice of any
information pertaining to the business, operations, condition
(financial or otherwise) or prospects of the Borrower or any
other Person.
(b) Any right to any marshalling of assets, to the filing of any
claim against the Borrower or any other Person in the event of
any bankruptcy, insolvency, reorganization or similar
proceeding, or to the exercise against the Borrower or
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any other Person of any other right or remedy under or in
connection with any Loan Document or any of the Guaranteed
Obligations or any direct or indirect security for any of the
Guaranteed Obligations; any requirement of promptness or
diligence on the part of the Agent and the Banks, or any of
them, or any other Person; any requirement to exhaust any
remedies under or in connection with, or to mitigate the
damages resulting from default under, any Loan Document or any
of the Guaranteed Obligations or any direct or indirect
security for any of the Guaranteed Obligations; any benefit of
any statute of limitations; and any requirement of acceptance
of this Agreement, and any requirement that any Guarantor
receive notice of such acceptance.
(c) Any defense or other right arising by reason of any law now or
hereafter in effect in any jurisdiction pertaining to election
of remedies (including but not limited to anti-deficiency
laws, "one action" laws or the like), or by reason of any
election of remedies or other action or inaction by the Agent
and the Banks, or any of them (including but not limited to
commencement or completion of any judicial proceeding or
nonjudicial sale or other action in respect of collateral
security for any of the Guaranteed Obligations), which results
in denial or impairment of the right of the Agent and the
Banks, or any of them, to seek a deficiency against the
Borrower or any other Person or which otherwise discharges or
impairs any of the Guaranteed Obligations.
(d) Notwithstanding any payment or payments made by each Guarantor
hereunder, or any set-off or application of funds of such
Guarantor by the Agent or any Bank, such Guarantor shall not
be entitled to be subrogated to any of the rights of the Agent
or any Bank against the Borrower or against any collateral
security or guarantee or right of offset held by the Agent or
any Bank for the payment of the Guaranteed Obligations, nor
shall such Guarantor seek any reimbursement from the Borrower
in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Agent and the Banks by the Borrower
on account of the Guaranteed Obligations are paid in full and
the Commitments are terminated. If any amount shall be paid to
any Guarantor on account of such subrogation rights at any
time when all of the Obligations shall not have been paid in
full, such amount shall be held by such Guarantor in trust for
the Agent and the Banks, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Agent in the exact form
received by such Guarantor (duly endorsed by such Guarantor to
the Agent, if required), to be applied against the Guaranteed
Obligations, whether matured or unmatured, in such order as
the Agent may determine.
2.04. Reinstatement. This Agreement shall continue to be effective, or
be automatically reinstated, as the case may be, if at any time payment of any
of the Guaranteed Obligations is avoided, rescinded or must otherwise be
returned by the Agent and the Banks, or any of them, for any reason (including,
without limitation, by reason of such payment being a
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preference, fraudulent transfer or fraudulent conveyance), all as though such
payment had not been made.
2.05. No Stay. Without limitation of any other provision of this
Agreement, if any declaration of default or acceleration or other exercise or
condition to exercise of rights or remedies under or with respect to any
Guaranteed Obligation shall at any time be stayed, enjoined or prevented for any
reason (including but not limited to stay or injunction resulting from the
pendency against the Borrower or any other Person of a bankruptcy, insolvency,
reorganization or similar proceeding), the Guarantors agree that, for the
purposes of this Agreement and their obligations hereunder, the Guaranteed
Obligations shall be deemed to have been declared in default or accelerated, and
such other exercise or conditions to exercise shall be deemed to have been taken
or met.
2.06. Payments. All payments to be made by any Guarantor pursuant to
this Agreement shall be made without setoff, counterclaim, or other deduction of
any nature (other than deductions for the withholding of United States federal
income tax which is due and payable by a Bank in connection with the income it
receives under the Loan Documents, provided that the Agent has elected not to
make such withholdings).
2.07. Continuing Guaranty. This Agreement is a continuing agreement and
shall continue in full force and effect (notwithstanding that no Guaranteed
Obligations may be outstanding from time to time, or any other event or
circumstance) until all Guaranteed Obligations and all other amounts payable
under this Agreement have been paid and performed in full, and all commitments
to extend credit under the Loan Documents have terminated, subject in any event
to reinstatement in accordance with Section 2.04 hereof. Any purported
termination, revocation or discharge of this Agreement (other than in accordance
with the preceding sentence) shall be void and of no effect. For purposes of
this Agreement the Guaranteed Obligations shall not be deemed to have been paid
in full until the Agent and the Banks shall have indefeasibly received payment
of the Guaranteed Obligations in full and in cash and all commitments to extend
credit under the Loan Documents have terminated. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall terminate on
November 5, 2001 except that such termination shall not effect the liability of
Guarantors with respect to (i) obligations created or incurred prior to such
date, or (ii) extensions or renewals of, interest accruing on, or fees, costs or
expenses, including reasonable attorney's fees, incurred with respect to, such
obligations on or after such date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Guarantor hereby represents and warrants to the Agent and the
Banks with respect to itself as follows:
3.01. No Conditions Precedent. There are no conditions precedent to the
effectiveness of this Guaranty that have not been satisfied or waived.
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3.02. No Reliance. Each Guarantor has, independently and without
reliance upon the Agent and the Banks, or any of them, and based upon such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
3.03. Representations and Warranties Remade at Each Extension of
Credit. Each request (including any deemed request) by the Borrower for any
extension of credit under the Credit Agreement shall be deemed to constitute a
representation and warranty by each Guarantor to the Agent and the Banks that
the representations and warranties made by each Guarantor in this Agreement are
true and correct on and as of the date of such request with the same effect as
though made on and as of such date. Failure by the Agent and the Banks to
receive notice from any Guarantor to the contrary before the Agent and the Banks
make any extension of credit under any Loan Document shall constitute a further
representation and warranty by such Guarantor to the Agent and the Banks that
the representations and warranties made by the Borrower are true and correct on
and as of the date of such extension of credit with the same effect as though
made on and as of such date.
ARTICLE IV
MISCELLANEOUS
4.01. Amendments, etc. No amendment to or waiver of any provision of
this Agreement, and no consent to any departure by any Guarantor herefrom, shall
in any event be effective unless in a writing manually signed by or on behalf of
the Agent and, in the case of an amendment, each of the Guarantors. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
4.02. No Implied Waiver; Remedies Cumulative. No delay or failure of
the Agent and the Banks, or any of them, in exercising any right or remedy under
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right or remedy preclude any other or further
exercise thereof or the exercise of any other right or remedy. The rights and
remedies of the Agent and the Banks under this Agreement are cumulative and not
exclusive of any other rights or remedies available hereunder, under any other
agreement or instrument, by law, or otherwise.
4.03. Notices. Each Guarantor agrees that all notices, statements,
requests, demands and other communications under this Agreement shall be given
to such Guarantor at the address set forth on the signature page hereof in the
manner provided in Section 11.06 of the Credit Agreement. The Agent and the
Banks may rely on any notice (whether or not made in a manner contemplated by
this Agreement) purportedly made by or on behalf of a Guarantor, and the Agent
and the Banks shall have no duty to verify the identity or authority of the
Person giving such notice.
4.04. Expenses. Each Guarantor unconditionally agrees to pay all costs
and expenses, including reasonable attorney's fees, incurred by the Agent and
any of the Banks in enforcing this Agreement against any Guarantor.
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4.05. Prior Understandings. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous understandings and agreements.
4.06. Survival. All representations and warranties of the Guarantors
contained in or made in connection with this Agreement shall survive, and shall
not be waived by, the execution and delivery of this Agreement, any
investigation by or knowledge of the Agent and the Banks, or any of them, any
extension of credit, or any other event or circumstance whatsoever.
4.07. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
4.08. Setoff. In the event that at any time any obligation of the
Guarantors now or hereafter existing under this Agreement shall have become due
and payable, the Agent and the Banks, or any of them, shall have the right from
time to time, without notice to any Guarantor, to set off against and apply to
such due and payable amount any obligation of any nature of the Agent and the
Banks to any Guarantor, including but not limited to all deposits (whether time
or demand, general or special, provisionally credited or finally credited,
however evidenced) now or hereafter maintained by any Guarantor with the Agent
or the Banks. Such right shall be absolute and unconditional in all
circumstances and, without limitation, shall exist whether or not the Agent
and/or the Banks, or any of them, shall have given any notice or made any demand
under this Agreement or under such obligation to such Guarantor, whether such
obligation of such Guarantor is absolute or contingent, matured or unmatured (it
being agreed that the Agent and the Banks, or any of them, may deem such
obligation to be then due and payable at the time of such setoff), and
regardless of the existence or adequacy of any guaranty or other direct or
indirect security, right or remedy available to the Agent and the Banks. The
rights of the Agent and the Banks under this Section are in addition to such
other rights and remedies (including, without limitation, other rights of setoff
and banker's lien) which the Agent and the Banks, or any of them, may have, and
nothing in this Agreement or in any other Loan Document shall be deemed a waiver
of or restriction on the right of setoff or banker's lien of the Agent and the
Banks, or any of them. The Guarantors hereby agree that, to the fullest extent
permitted by law, any affiliate of the Agent and the Banks, or any of them, and
any holder of a participation in any obligation of any Guarantor under this
Agreement, shall have the same rights of setoff as the Agent and the Banks as
provided in this Section 4.08 (regardless of whether such affiliate or
participant otherwise would be deemed a creditor of any Guarantor).
4.09. Construction. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect interpretation of
this Agreement in any respect. This Agreement has been fully negotiated between
the applicable parties, each party having the benefit of legal counsel, and
accordingly neither any doctrine of construction of guaranties or suretyships in
favor of the guarantor or surety, nor any doctrine of construction of
ambiguities in agreements or instruments against the party controlling the
drafting thereof, shall apply to this Agreement.
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4.10. Successors and Assigns. This Agreement shall be binding upon each
Guarantor, its successors and assigns, and shall inure to the benefit of and be
enforceable by the Agent and the Banks, or any of them, and their successors and
permitted assigns (as provided in the Credit Agreement). Without limitation of
the foregoing, the Agent and the Banks, or any of them (and any successive
assignee or transferee), from time to time may, subject to the applicable
provisions of the Credit Agreement, assign or otherwise transfer all or any
portion of its rights or obligations under the Loan Documents (including,
without limitation, all or any portion of any commitment to extend credit), or
any other Guaranteed Obligations, to any other Person and such Guaranteed
Obligations (including, without limitation, any Guaranteed Obligations resulting
from extension of credit by such other Person under or in connection with the
Loan Documents) assigned or otherwise transferred in accordance with the terms
of the Credit Agreement shall be and remain Guaranteed Obligations entitled to
the benefit of this Agreement, and to the extent of its interest in such
Guaranteed Obligations such other Person shall be vested with all the benefits
in respect thereof granted to the Agent and the Banks in this Agreement or
otherwise.
4.11. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH
OF KENTUCKY, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
(b) Certain Waivers. EACH GUARANTOR HEREBY IRREVOCABLY:
(i) CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE
CIRCUIT COURT OF JEFFERSON COUNTY, KENTUCKY AND THE
UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT
OF KENTUCKY, AND WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED
MAIL DIRECTED TO SUCH GUARANTOR AT THE ADDRESS
PROVIDED FOR IN SECTION 4.03 HEREOF AND SERVICE SO
MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL
RECEIPT THEREOF;
(ii) WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY
ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND
AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE OR BASED ON INCONVENIENT FORUM;
AND
(iii) WAIVES TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED
TO THIS AGREEMENT, THE CREDIT AGREEMENT OR
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ANY OTHER LOAN DOCUMENT TO THE FULL EXTENT PERMITTED
BY LAW.
(c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED BY
LAW, NO CLAIM MAY BE MADE BY ANY GUARANTOR OR ANY OTHER PERSON
AGAINST THE AGENT AND THE BANKS, OR ANY OF THEM, OR ANY
AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF
THE AGENT AND THE BANKS FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM
ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY STATEMENT,
COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN
CONNECTION HEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR
ANY OTHER THEORY OF LIABILITY); AND EACH GUARANTOR HEREBY
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY
SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN
OR SUSPECTED TO EXIST IN ITS FAVOR.
4.12. Severability; Modification to Conform to Law.
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(a) It is the intention of the parties that this Agreement be
enforceable to the fullest extent permissible under applicable
law, but that the unenforceability (or modification to conform
to such Law) of any provision or provisions hereof shall not
render unenforceable, or impair, the remainder hereof. If any
provision in this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, this
Agreement shall, as to such jurisdiction, be deemed amended to
modify or delete, as necessary, the offending provision or
provisions and to alter the bounds thereof in order to render
it or them valid and enforceable to the maximum extent
permitted by applicable Law, without in any manner affecting
the validity or enforceability of such provision or provisions
in any other jurisdiction or the remaining provisions hereof
in any jurisdiction.
(b) Without limitation of the preceding subsection (a), to the
extent that mandatory applicable law (including but not
limited to applicable laws pertaining to fraudulent conveyance
or fraudulent transfer) otherwise would render the full amount
of any Guarantor's obligations hereunder invalid or
unenforceable, such Guarantor's obligations hereunder shall be
limited to the maximum amount which does not result in such
invalidity or unenforceability.
(c) Notwithstanding anything to the contrary in this Section 4.12
or elsewhere in this Agreement, this Agreement shall be
presumptively valid and enforceable to its full extent in
accordance with its terms, as if this Section 4.12 (and
references elsewhere in this Agreement to enforceability to
the fullest extent permitted by Law) were not a part of this
Agreement, and in any related litigation the burden of proof
shall be on the party asserting the invalidity or
unenforceability of any provision hereof or asserting any
limitation on any Guarantor's obligations hereunder as to each
element of such assertion.
4.13. Additional Guarantors. At any time after the initial execution
and delivery of this Agreement to the Agent and the Banks, additional Persons
may become parties to this Agreement and thereby acquire the duties and rights
of being Guarantors hereunder by executing and delivering to the Agent and the
Banks a counterpart signature page for attachment hereto. No notice of the
addition of any Guarantor shall be required to be given to any pre-existing
Guarantor.
4.14. Joint and Several Obligations. The obligations of each Guarantor
under this Agreement are joint and several.
4.15 Receipt of Credit Agreement and Other Loan Documents. Each
Guarantor hereby acknowledges that it has received a copy of the Credit
Agreement and the other Loan Documents and each Guarantor certifies that the
representations and warranties made therein with respect to such Guarantor are
true and correct. Further, each Guarantor acknowledges and agrees to perform,
comply with and be bound by all of the provisions of the Credit Agreement and
the other Loan Documents including, without limitation, those covenants
contained in Sections 8.01 and 8.02 of the Credit Agreement.
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[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE 1 OF 1 TO THE GUARANTY AND SURETYSHIP AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first above written.
GUARANTORS:
ATTEST: EACH GUARANTOR LISTED ON SCHEDULE 1
By: _______________________________ By: _____________________________________
Address for notices to each Guarantor:
_________________________________________
_________________________________________
_________________________________________
Telecopier No. __________________________
Attention: ______________________________
Telephone No. ___________________________
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SCHEDULE 1
TO THE GUARANTY AND SURETYSHIP AGREEMENT
PNC BANK, KENTUCKY, INC., AS AGENT
LOUISVILLE GAS AND ELECTRIC COMPANY, AS BORROWER
Subsidiary and State of Formation
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EXHIBIT 12
LOUISVILLE GAS AND ELECTRIC COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of $)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Income before cumulative effect of a change
in accounting principle per statements
of income ................................ $ 107,941 $ 83,184 $ 61,689 $ 90,535 $ 73,793
Add:
Federal income taxes - current ............ 34,019 35,824 30,926 42,091 13,785
State income taxes - current .............. 7,589 8,795 7,726 12,954 3,140
Deferred Federal income taxes - net ....... 19,816 4,261 (950) 4,712 20,441
Deferred State income taxes - net ......... 6,648 2,788 956 226 8,470
Investment tax credit - net ............... (4,406) (4,742) (4,619) (7,821) (5,033)
Fixed charges ............................. 42,198 43,550 44,665 49,640 52,196
--------- --------- --------- --------- ---------
Earnings ................................. 213,805 173,660 140,393 192,337 166,792
--------- --------- --------- --------- ---------
Fixed Charges:
Interest Charges per statements of income.. 40,242 41,918 42,856 47,496 49,833
Add:
Interest income (1) ...................... 409 -- -- -- 4
One-third of rentals charged to
operating expense (2) ................... 1,547 1,632 1,809 2,144 2,359
--------- --------- --------- --------- ---------
Fixed charges ......................... $ 42,198 $ 43,550 $ 44,665 $ 49,640 $ 52,196
--------- --------- --------- --------- ---------
Ratio of Earnings to Fixed Charges .......... 5.07 3.99 3.14 3.87 3.20
========= ========= ========= ========= =========
</TABLE>
NOTE:
(1) Interest income earned on pollution control revenue bond proceeds held and
invested by trustees - netted against interest charges above.
(2) In the Company's opinion, one-third of rentals represents a reasonable
approximation of the interest factor.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated January 29, 1997, included in this Form 10-K, into
the Company's previously filed Registration Statement No. 33-13427.
Louisville, Kentucky Arthur Andersen LLP
March 25, 1997 ----------------------
Arthur Andersen LLP
<PAGE>
Exhibit 24
POWER OF ATTORNEY
WHEREAS, LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky corporation, is
to file with the Securities and Exchange Commission, under the provisions of the
Securities Act of 1934, as amended, its Annual Report on Form 10-K for the year
ended December 31, 1996 (the 1996 Form 10-K); and
WHEREAS, each of the undersigned holds the office or offices in LOUISVILLE
GAS AND ELECTRIC COMPANY set opposite his name;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints
ROGER W. HALE and M. L. FOWLER, and each of them, individually, his attorney,
with full power to act for him and in his name, place, and stead, to sign his
name in the capacity or capacities set forth below to the 1996 Form 10-K and to
any and all amendments to such 1996 Form 10-K and hereby ratifies and confirms
all that said attorney may or shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals this 5th day of March 1997.
Roger W. Hale J. David Grissom
- --------------------------------- ------------------------------------
Roger W. Hale, Principal J. David Grissom, Director
Executive Officer and Director
William C. Ballard, Jr. David B. Lewis
- --------------------------------- ------------------------------------
William C. Ballard, Jr., Director David B. Lewis, Director
Ronald L. Bittner Anne H. McNamara
- --------------------------------- ------------------------------------
Ronald L. Bittner, Director Anne H. McNamara, Director
Owsley Brown II T. Ballard Morton, Jr.
- --------------------------------- ------------------------------------
Owsley Brown II, Director T. Ballard Morton, Jr., Director
S. Gordon Dabney Dr. Donald C. Swain
- --------------------------------- ------------------------------------
S. Gordon Dabney, Director Dr. Donald C. Swain, Director
Gene P. Gardner Charles A. Markel III
- --------------------------------- ------------------------------------
Gene P. Gardner, Director Charles A. Markel III, Principal
Financial Officer
M. L. Fowler
- ---------------------------------
M. L. Fowler, Principal
Accounting Officer
STATE OF KENTUCKY )
)ss.
COUNTY OF JEFFERSON )
On this 5th day of March 1997, before me, Kathryn M. Carpenter, a Notary
Public, State of Kentucky at Large, personally appeared the above named
directors and officers of LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky
corporation, and known to me to be the persons whose names are subscribed to the
foregoing instrument, and they severally acknowledged to me that they executed
the same as their own free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date above set forth.
My Commission expires: Kathryn M. Carpenter
November 2, 2000 Kathryn M. Carpenter, Notary Public
State of Kentucky at Large
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,685,222
<OTHER-PROPERTY-AND-INVEST> 1,028
<TOTAL-CURRENT-ASSETS> 260,523
<TOTAL-DEFERRED-CHARGES> 59,939
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,006,712
<COMMON> 424,334
<CAPITAL-SURPLUS-PAID-IN> 201
<RETAINED-EARNINGS> 209,222
<TOTAL-COMMON-STOCKHOLDERS-EQ> 633,757
46,223
49,105
<LONG-TERM-DEBT-NET> 646,835
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 630,792
<TOT-CAPITALIZATION-AND-LIAB> 2,006,712
<GROSS-OPERATING-REVENUE> 821,115
<INCOME-TAX-EXPENSE> 63,259
<OTHER-OPERATING-EXPENSES> 610,593
<TOTAL-OPERATING-EXPENSES> 673,852
<OPERATING-INCOME-LOSS> 147,263
<OTHER-INCOME-NET> 920
<INCOME-BEFORE-INTEREST-EXPEN> 148,183
<TOTAL-INTEREST-EXPENSE> 40,242
<NET-INCOME> 107,941
4,568
<EARNINGS-AVAILABLE-FOR-COMM> 103,373
<COMMON-STOCK-DIVIDENDS> 75,200
<TOTAL-INTEREST-ON-BONDS> 39,771
<CASH-FLOW-OPERATIONS> 185,552
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.01
Louisville Gas and Electric Company Cautionary Factors
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage such disclosures without the
threat of litigation providing those statements are identified as
forward-looking and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual results to differ
materially from those projected in the statement. Forward-looking statements
have been and will be made in written documents and oral presentations of
Louisville Gas and Electric Company (the "Company"). Such statements are based
on management's beliefs as well as assumptions made by and information currently
available to management. When used in the Company's documents or oral
presentations, the words "anticipate", "estimate", "expect", "objective" and
similar expressions are intended to identify forward-looking statements. In
addition to any assumptions and other factors referred to specifically in
connection with such forward-looking statements, factors that could cause the
Company's actual results to differ materially from those contemplated in any
forward-looking statements include, among others, the following:
* Increased competition in the utility industry, including effects of:
decreasing margins as a result of competitive pressures; industry
restructuring initiatives; transmission system operation and/or
administration initiatives; recovery of investments made under traditional
regulation; nature of competitors entering the industry; retail wheeling;
a new pricing structure; and former customers entering the generation
market;
* Changing market conditions and a variety of other factors associated with
physical energy and financial trading activities including, but not
limited to, price, basis, credit, liquidity, volatility, capacity,
transmission, currency, interest rate and warranty risks;
* Risks associated with price risk management strategies intended to
mitigate exposure to adverse movement in the prices of electricity and
natural gas on both a global and regional basis;
* Economic conditions including inflation rates and monetary fluctuations;
* Customer business conditions including demand for their products or
services and supply of labor and materials used in creating their products
and services;
<PAGE>
* Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission, state public utility
commissions, state entities which regulate natural gas transmission,
gathering and processing and similar entities with regulatory oversight;
* Availability or cost of capital such as changes in: interest rates, market
perceptions of the utility and energy-related industries, the Company or
security ratings;
* Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; unscheduled generation outages,
unusual maintenance or repairs; unanticipated changes to fossil fuel, or
gas supply costs or availability due to higher demand, shortages,
transportation problems or other developments; environmental incidents; or
electric transmission or gas pipeline system constraints;
* Employee workforce factors including changes in key executives, collective
bargaining agreements with union employees, or work stoppages;
* Rate-setting policies or procedures of regulatory entities, including
environmental externalities;
* Social attitudes regarding the utility, natural gas and power industries;
* Costs and other effects of legal and administrative proceedings,
settlements, investigations, claims and matters, including but not limited
to those described in Note 13 of the Notes to Financial Statements of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
under the caption Commitments and Contingencies;
* Technological developments, changing markets and other factors that result
in competitive disadvantages and create the potential for impairment of
existing assets;
* Other business or investment considerations that may be disclosed from
time to time in the Company's Securities and Exchange Commission filings
or in other publicly disseminated written documents.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
