FORM 10-K
SECURlTlES AND EXCHANGE COMMlSSlON
WASHINGTON, D. C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended
December 31, 1999 Commission File Number 1-8644
IPALCO ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
Indiana 35-1575582
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Monument Circle
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317-261-8261
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
IPALCO Enterprises, Inc. New York Stock Exchange
Common Stock (without par value) Chicago Stock Exchange
Common Share Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
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 the filing requirements for at least 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. ( )
As of January 31, 2000, the aggregate market value of the voting stock
held by non-affiliates of the registrant was: $1,330,676,506 based on
the average of the high and low price of the common stock on such date.
As of January 31, 2000, there were 85,700,469 shares of the
registrant's common stock (without par value) outstanding.
-------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the IPALCO Enterprises, Inc. definitive Proxy Statement for
the Annual Meeting of Shareholders to be held on April 19, 2000, are
incorporated by reference into Part III of this Report.
PART I
------
Item 1. BUSINESS
--------
ORGANIZATION
IPALCO Enterprises, Inc. (IPALCO) is a holding company and was
incorporated under the laws of the state of Indiana on September 14, 1983.
IPALCO has 13 employees and has two (2) subsidiaries: Indianapolis Power & Light
Company (IPL), a regulated electric and steam service utility, and Mid-America
Capital Resources, Inc. (Mid-America), a holding company for unregulated
businesses. IPALCO and its subsidiaries are collectively referred to as
"Enterprises."
Enterprises has two business segments, electric and "all other." Steam
operations of IPL and all subsidiaries other than IPL are combined in the "all
other" segment (see Note 15 in the Notes to Consolidated Financial Statements
for additional information about segments).
DESCRIPTION OF BUSINESS OF SUBSIDIARIES
INDIANAPOLIS POWER & LIGHT COMPANY
GENERAL
IPL was incorporated under the laws of the state of Indiana in 1926 and
is a wholly-owned subsidiary of IPALCO. IPL is engaged primarily in generating,
transmitting, distributing and selling electric energy in the city of
Indianapolis and neighboring cities, towns, communities, and adjacent rural
areas, all within the state of Indiana, the most distant point being about 40
miles from Indianapolis. It also produces, distributes and sells steam within a
limited area in such city. There have been no significant changes in the
services rendered, or in the markets or methods of distribution, since the
beginning of the fiscal year. IPL intends to do business of the same general
character as that in which it is now engaged. Indiana law authorizes
electricity suppliers to have exclusive retail service areas.
IPL's business is not dependent on any single customer or group of a few
customers. IPL's electricity sales for 1995-1999 are depicted on page I-5.
The electric utility business is affected by seasonal weather patterns
throughout the year and, therefore, the operating revenues and associated
operating expenses are not generated evenly by month during the year.
IPL's generation, transmission and distribution facilities (electric
system) are described in Item 2, "PROPERTIES." IPL's electric system is directly
interconnected with the electric systems of Indiana Michigan Power Company, PSI
Energy, Inc., Southern Indiana Gas and Electric Company, Wabash Valley Power
Association, Hoosier Energy Rural Electric Cooperative, Inc. and the Indiana
Municipal Power Agency.
Also, IPL is a member of the East Central Area Reliability Group (ECAR),
and is cooperating under an agreement that provides for coordinated planning of
generation and transmission facilities and the operation of such facilities to
promote reliability of bulk power supply in the nine-state region served by
ECAR. Smaller electric utility systems, independent power producers and power
marketers participate as associate members.
REGULATION
IPL is subject to regulation by the Indiana Utility Regulatory Commission
(IURC) as to its services and facilities, valuation of property, the
construction, purchase or lease of electric generating facilities,
classification of accounts, rates of depreciation, rates and charges, issuance
of securities (other than evidences of indebtedness payable less than twelve
months after the date of issue), the acquisition and sale of public utility
properties or securities and certain other matters (see Note 10 in the Notes to
Consolidated Financial Statements).
In addition, IPL is subject to the jurisdiction of the Federal Energy
Regulatory Commission (FERC), with respect to short-term borrowings not
regulated by the IURC, the sale and transmission of electric energy in
interstate commerce, the classification of its accounts and the acquisition and
sale of utility property in certain circumstances as provided by the Federal
Power Act.
IPL is also subject to federal, state and local environmental laws and
regulations, particularly as to generating station discharges affecting air and
water quality. The impact of compliance with such regulations on the capital and
operating costs of IPL has been and will continue to be substantial (see Item 7,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" under "Competition and Industry Changes").
RETAIL RATEMAKING
IPL's tariffs for electric and steam service to retail customers (basic
rates and charges) are set and approved by the IURC after public hearings. Such
proceedings, which have occurred at irregular intervals, involve IPL, the staff
of the IURC, the Office of the Indiana Utility Consumer Counselor, as well as
other interested consumer groups and customers. In Indiana, basic rates and
charges are determined after giving consideration, on a pro-forma basis, to all
allowable costs for ratemaking purposes including a fair return on the fair
value of the utility property used and useful in providing service to customers.
Once set, the basic rates and charges authorized do not assure the realization
of a fair return on the fair value of property. Pursuant to statute, the IURC
conducts a periodic review of the basic rates and charges of all utilities at
least once every four years. Other numerous factors including, but not limited
to, weather, inflation, customer growth and usage, the level of actual
maintenance and capital expenditures, fuel costs, generating unit availability
and purchased power costs and availability can affect the return realized.
During 1998, in an order resulting from an IPL initiated proceeding, the IURC
declined to exercise its jurisdiction in part over IPL customers who voluntarily
select service under IPL's Elect Plan option. Under two of these options, the
customer's prices are not adjusted for changes in fuel costs or other factors.
During 1999, the total revenue from customers choosing the Elect Plan options
was $68 million. The Elect Plan will expire in September 2001 unless a
subsequent plan is approved by the IURC. Substantially all other IPL customers
are served pursuant to retail tariffs that provide for the monthly billing or
crediting to customers of increases or decreases, respectively, in the actual
costs of fuel consumed from estimated fuel costs embedded in base tariffs,
subject to certain restrictions on the level of operating income. Additionally,
most such retail tariffs provide for billing of "lost revenue margins" on
estimated kilowatt-hour (kWh) sales reductions along with current and deferred
costs resulting from IPL's IURC-approved demand side management programs (DSM).
IPL maintains its books and records consistent with generally accepted
accounting principles reflecting the impact of regulation (see Note 1 in the
Notes to Consolidated Financial Statements and Item 7, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" under "Nature of
Operations and Regulatory Matters").
Future events, including the advent of retail competition within IPL's
service territory, could result in the deregulation of part of IPL's existing
regulated businesses (see "Competition and Industry Changes" in Item 7,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS"). Upon deregulation, adjustments to IPL's accounting records may be
required to eliminate the historical impact of regulatory accounting. Such
adjustments, as required by Statement of Financial Accounting Standards No. 101
(SFAS 101), "Regulated Enterprises - Accounting for the Discontinuation of
Application of FASB Statement No. 71," would eliminate the "effects of any
actions of regulators that have been recognized as assets and liabilities...."
Required adjustments could include expensing of any unamortized net regulatory
assets, elimination of certain tax liabilities and a write down of any impaired
utility plant balances. IPL does not expect to be required to adopt SFAS 101 in
the near term.
FUEL
In 1999, approximately 99% of the total kWh produced by IPL were
generated from coal. Natural gas, No. 2 fuel oil and purchased steam combined to
provide the remaining kWh generation. Natural gas is used in IPL's newer
combustion turbines. In addition to use in oil-fired generating units, fuel oil
is used for start up and flame stabilization in coal-fired generating units.
IPL's long-term coal contracts provide for the major portion of its burn
requirements through the year 2005. The long-term coal agreements are with four
suppliers and the coal is mined entirely in the state of Indiana. It is
presently believed that all coal used by IPL will be mined by others. IPL
normally carries fuel oil and a 60-day supply of coal to offset unforeseen
occurrences such as labor disputes, equipment breakdowns and power sales to
other utilities. IPL increases its stockpile to an approximate 80-day supply
when strikes are anticipated in the coal industry. In preparation for possible
supply problems with Year 2000 issues, IPL temporarily increased its stockpile
to an approximate 100-day supply at the end of 1999.
EMPLOYEE RELATIONS
As of December 31, 1999, IPL had 1,936 employees of whom 971 were
represented by the International Brotherhood of Electrical Workers, AFL-CIO
(IBEW) and 307 were represented by the Electric Utility Workers Union (EUWU), an
independent labor organization. In September 1999, the membership of the IBEW
ratified a new labor agreement that remains in effect until December 16, 2002.
The agreement provided for general pay adjustments of 4% in December 1999, 2% in
December 2000 and 2% in December 2001, and changes in pension and health care
coverage. In February of 1998, the membership of the EUWU ratified a new labor
agreement that remains in effect until February of 2001. The agreement provided
for general pay adjustments of 3% in both 1998 and 1999, as well as an
adjustment of 2% in 2000. The agreement also provides for increases in pension
amounts.
MID-AMERICA CAPITAL RESOURCES, INC. (Mid-America)
GENERAL
Mid-America, the holding company for the unregulated activities of
Enterprises, has as subsidiaries Mid-America Energy Resources, Inc. (Energy
Resources), Indianapolis Campus Energy, Inc. (ICE), Cleveland Thermal Energy
Corporation (Cleveland Thermal) and Cleveland District Cooling Corporation
(Cleveland Cooling).
Mid-America has also made investments in entities which are not
subsidiaries. At December 31, 1999, it had an investment in Internet Capital
Group, Inc. (Nasdaq: ICGE). Mid-America also had an investment in EnerTech
Capital Partners II L.P., a venture capital fund. (See Item 7, "MANAGEMENT'S
DISCUSSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" under
"LIQUIDITY AND CAPITAL RESOURCES" within the subsection "IPALCO.")
Energy Resources operates a district cooling system in downtown
Indianapolis, Indiana.
ICE owns and operates an energy system under contract to Eli Lilly and
Company (Lilly) to provide cooling capacity to the Lilly Technology Center, in
Indianapolis, Indiana.
Cleveland Thermal owns and operates a district heating system in
Cleveland, Ohio. Cleveland Cooling owns and operates a district cooling system
also located in Cleveland. Cleveland Thermal and Cleveland Cooling conduct
business jointly under the name Cleveland Energy Resources.
EMPLOYEES
As of December 31, 1999, Mid-America and its subsidiaries had 82
employees. There are no labor organizations.
<PAGE>
<TABLE>
<CAPTION>
IPALCO ENTERPRISES, INC.
STATISTICAL INFORMATION - ELECTRIC
The following table of statistical information presents additional data on IPL's
operation.
Year Ended December 31,
------------------------------------------------------------------------------------
Operating Revenues (In 1999 (1) 1998 (1) 1997 (1) 1996 1995
Thousands):
------------ ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Residential $ 282,254 $ 269,351 $ 261,832 $ 261,819 $ 243,055
Small industrial and commercial 127,027 122,082 125,131 131,465 130,009
Large industrial and commercial 328,903 321,103 306,761 298,720 275,803
Public lighting 10,386 9,754 9,324 9,043 8,369
Miscellaneous 10,600 12,469 12,050 9,264 8,289
------------ ------------ -------------- ------------- --------------
Revenues - ultimate consumers 759,170 734,759 715,098 710,311 665,525
Sales for resale - REMC 1,035 936 1,082 1,141 1,105
Sales for resale - other 40,132 50,140 21,954 13,312 6,758
------------ ------------ -------------- ------------- --------------
Total electric revenues $ 800,337 $ 785,835 $ 738,134 $ 724,764 $ 673,388
============ ============ ============== ============= ==============
Kilowatt-hour Sales (In
Millions):
Residential 4,510 4,359 4,276 4,367 4,277
Small industrial and commercial 1,928 1,888 1,969 2,117 2,197
Large industrial and commercial 7,187 7,138 6,857 6,772 6,509
Public lighting 73 71 69 71 73
------------ ------------ -------------- ------------- --------------
Sales - ultimate consumers 13,698 13,456 13,171 13,327 13,056
Sales for resale - REMC 33 31 29 29 28
Sales for resale - other 1,968 2,252 1,111 725 394
------------ ------------ -------------- ------------- --------------
Total kilowatt-hours sold 15,699 15,739 14,311 14,081 13,478
============ ============ ============== ============= ==============
Customers at End of Year:
Residential 385,799 379,943 374,686 370,029 365,163
Small industrial and commercial 42,610 42,230 41,137 40,393 39,772
Large industrial and commercial 4,107 4,036 3,960 3,657 3,557
Public lighting 509 445 357 313 290
------------ ------------ -------------- ------------- --------------
Total ultimate consumers 433,025 426,654 420,140 414,392 408,782
Sales for resale - REMC 1 1 1 1 1
------------ ------------ -------------- ------------- --------------
Total electric customers 433,026 426,655 420,141 414,393 408,783
============ ============ ============== ============= ==============
(1) Includes estimated electric operating revenue and kilowatt-hour sales for
services delivered but not billed during the period (see Notes 1 and 3 in the
Notes to Consolidated Financial Statements).
</TABLE>
Item 2. PROPERTIES
----------
IPL
IPL's executive offices are in the IPALCO Corporate Center located at One
Monument Circle, Indianapolis, Indiana. This facility also houses certain
administrative operations of certain other IPALCO subsidiaries.
IPL also owns two distribution service centers in Indianapolis at 1230
West Morris Street and 3600 North Arlington Avenue. IPL's customer service
center is located at 2102 North Illinois Street in Indianapolis.
IPL owns and operates three primarily coal-fired generating plants that
are used for electric generation. IPL also operates one coal and gas-fired
plant. For electric generation, the total gross nameplate rating is 3,024 MW,
winter capability is 3,036 MW and summer capability is 2,956 MW. For steam
generation, gross capacity is 1,990 Mlbs. (thousands of pounds) per hour.
Total Electric Stations:
H. T. Pritchard plant (Pritchard), located 25 miles southwest of
Indianapolis (seven units in service - one each in 1949, 1950, 1951, 1956 and
1967 and two in 1953) with 367 MW nameplate rating and net winter and summer
capabilities of 344 MW and 341 MW, respectively.
E. W. Stout plant (Stout) located in the southwest part of Marion County
(eleven units in service - one each in 1941, 1947, 1958, 1961, 1967, 1994 and
1995 and four in 1973) with 921 MW nameplate rating and net winter and summer
capabilities of 1,000 MW and 924 MW, respectively.
Petersburg plant (Petersburg), located in Pike County, Indiana (seven units
in service - four in 1967 and one each in 1969, 1977 and 1986) with 1,716 MW
nameplate rating and net winter and summer capabilities of 1,672 MW.
Combination Electric and Steam Station:
C.C.Perry Section K plant (Perry K), located in Indianapolis with 20 MW
nameplate rating (net winter capability 20 MW, summer 19 MW) for electric and a
gross winter and summer capacity of 1,990 Mlbs. per hour for steam.
Net electrical generation during 1999, at the Petersburg, Stout and
Pritchard stations accounted for about 69.0%, 23.3% and 7.7%, respectively, of
IPL's total net generation. Perry K produced all of the steam generated by IPL
for the steam system. In addition, IPL purchases steam from an independent
resource recovery system in Indianapolis.
Included in the above totals are three gas turbine units at the Stout
station added in 1973, one gas turbine added in 1994 and one gas turbine added
in 1995 with a combined nameplate rating of 214 MW. Also included is one diesel
unit each at Pritchard and Stout stations and three diesel units at Petersburg
station, all added in 1967. Each diesel unit has a nameplate rating of 3 MW.
During 1998, IPL announced plans to construct up to 200 megawatts of new
combustion turbines (CTs). The new turbines would be used during times of
highest or "peak" electric demand. One turbine is expected to be placed in
service by June 2000, and is included in the construction forecast. IPL filed a
petition with the IURC recommending that the IURC decline its jurisdiction over
IPL's planned construction and operation of the new CTs and adopt an alternative
procedure for dealing with the sale of power produced by the CTs to IPL's retail
customers. During 1999, the IURC agreed to decline to exercise its jurisdiction
over the construction of the CTs. The Commission also agreed to defer any
determinations regarding all ratemaking issues until a later proceeding.
IPL's transmission system includes 457 circuit miles of 345,000 volt
lines, 359 circuit miles of 138,000 volt lines and 269 miles of 34,500 volt
lines. Underground distribution and service facilities include 686 miles of
conduit and 6,487 wire miles of conductor. Underground street lighting
facilities include 108 miles of conduit and 760 wire miles of conductor. Also
included in the system are 73 bulk power substations and 69 distribution
substations.
Steam distribution properties include 22 miles of mains with 238 customer
connections. Other properties include coal and other minerals, underlying 798
acres in Sullivan County, Indiana, and coal underlying about 6,215 acres in Pike
and Gibson Counties, Indiana. IPL owns approximately 4,067 acres in Morgan
County, Indiana and approximately 884 acres in Switzerland County, Indiana, for
future plant sites.
All critical facilities owned by IPL are well maintained, in good
condition and meet the present needs of IPL.
The Mortgage and Deed of Trust of IPL, together with the Supplemental
Indentures thereto (the "Mortgage"), secure first mortgage bonds issued by IPL.
Pursuant to the terms of the Mortgage, substantially all property owned by IPL
is subject to a direct first mortgage lien.
OTHER SUBSIDIARIES
Energy Resources owns and operates a district cooling facility located
near downtown Indianapolis, which distributes chilled water to subscribers
located downtown for their air conditioning needs. The plant is equipped with
six 5,000 ton chillers powered by steam purchased from IPL and one 2,250 ton
chiller powered by electricity purchased from IPL.
Cleveland Thermal owns and operates two steam plants in Cleveland, Ohio,
with a total of eight boilers having a gross capacity of 1,025 Mlbs. per hour.
The distribution system includes 15.5 miles of mains with 289 services.
Cleveland Cooling owns and operates a district cooling facility located near
downtown Cleveland, which distributes chilled water to subscribers located
downtown for their air conditioning needs. The plant is equipped with two 5,000
ton chillers powered by electricity.
In 1997, Enterprises initiated a plan to sell during 1998, Cleveland
District Cooling Corporation and Cleveland Thermal Corporation (collectively
referred to as CER) and ceased recording depreciation. During the third quarter
of 1998, Enterprises determined that it was not probable that CER would be sold
during 1998, and resumed depreciation on these assets. Enterprises anticipates
the sale of CER in 2000.
ICE owns and operates a chilled water facility in Indianapolis, which
serves the chilled water requirements of Eli Lilly and Company's Lilly
Technology Center. The plant is equipped with three 5,000 ton chillers powered
by electricity purchased from IPL.
Substantially all the property of Mid-America and its subsidiaries is
subject to the lien of existing debt and/or credit agreements of Mid-America,
Energy Resources and ICE.
Item 3. LEGAL PROCEEDINGS
-----------------
IPL is a party to State of Michigan et al v. U.S. EPA a proceeding
----------------------------------------
instituted in November, 1998, now pending in the U.S. Court of Appeals for
the District of Columbia Circuit. This is a petition for review of EPA's rule
promulgated October 27, 1998, requiring Indiana and 22 other jurisdictions to
impose more stringent limitations on emissions of nitrogen oxides (the "NOx SIP
Call"). Petitioners challenging the NOx SIP Call include seven states, about 60
investor-owned electric utility companies, numerous trade associations, serveral
municipal utilities, co-ops, and labor unions. Intervenor-respondents include
several environmental interest groups, Canada, eight states in the Northeast,
and several eastern electric utility companies.
EPA's NOx SIP Call would require operators of coal-fired electric utility
boilers in the affected states to limit NOx emissions to 0.15 pounds per million
BTUs of heat input as a system-wide average. That limit calls for a reduction of
about 85% from 1990 average emissions from coal-fired electric utility boilers,
and a reduction of about 57% from Enterprises' current emissions.
It is not possible to predict whether EPA's NOx SIP Call will ultimately
survive judicial review. Nor is it possible to predict accurately the costs of
compliance. Enterprises' preliminary estimates are that the NOx SIP Call would
necessitate capital expenditures of about $180 million.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
EXECUTIVE OFFICERS OF THE REGISTRANT AT FEBRUARY 29, 2000.
Name, age (at December 31, 1999), and positions and offices held for the
past five years:
From To
---- --
John R. Hodowal (54)
Chairman of the Board and
President of IPALCO May, 1989
Chairman of the Board of IPL February, 1990
Chief Executive Officer of IPL May, 1989
Ramon L. Humke (67)
Vice Chairman of IPALCO May, 1991
President and Chief Operating
Officer of IPL February, 1990
John R. Brehm (46)
Vice President and Treasurer
of IPALCO May, 1989
Senior Vice President - Finance of IPL May, 1998
Senior Vice President - Finance
and Information Services of IPL May, 1991 May, 1998
Stephen M. Powell (49)
Senior Vice President -
Energy Supply of IPL May, 1998
Manager of Engineering and
Production Services of IPL June, 1994 May, 1998
N. Stuart Grauel (55)
Vice President - Public Affairs
of IPALCO May, 1991
Bryan G. Tabler (56)
Vice President -
Secretary and General Counsel of IPALCO January, 1995
Senior Vice President -
Secretary and General Counsel of IPL January, 1995
Ralph E. Canter (43)
Senior Vice President -
Customer Services of IPL May, 1998
Vice President -
Steam Operations May, 1995 May, 1998
Manager of Steam Operations October, 1990 May, 1995
Paul S. Mannweiler (50)
Senior Vice President -
External Affairs of IPL January, 1997
Partner, Locke Reynolds Boyd and Weisell July, 1980 December, 1996
Max Califar (46)
Vice President - Human
Resources of IPL December, 1992
Michael P. Holstein (42)
Vice President - Strategic Business
Initiatives of IPALCO May, 1998
Vice President - Corporate
Strategy and Marketing April, 1996 May, 1998
Corporate Strategies of IPL July, 1995 April, 1996
Senior Manager, Deloitte & Touche LLP March, 1994 July, 1995
Michael G. Banta (49)
Vice President - Financial Strategy May, 1998
Vice President and Assistant General
Counsel of IPL July, 1995 May, 1998
Daniel L. Short (42)
Assistant Treasurer of IPALCO January, 2000
Treasurer of IPL January, 2000
Treasurer of Mid-America Capital Resources January, 1995
Stephen J. Plunkett (51)
Controller of IPALCO
and IPL May, 1991
<PAGE>
PART II
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Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------------
On March 15, 1999, IPALCO completed its most recent common stock
purchase plan initiated in late 1998. This plan resulted in IPALCO's purchase,
in the open market and in privately negotiated transactions, of 6 million shares
or 6.6% of its outstanding common stock. All shares purchased remained in
Treasury stock at December 31, 1999.
IPALCO's initial stock purchase plan resulted in the purchase of
25,078,856 shares of IPALCO's common stock during 1997, which remained in
Treasury stock at December 31, 1999.
At December 31, 1999, IPALCO had 18,758 holders of common stock of record
(including shareholders whose shares are held in IPALCO PowerInvest, the
Dividend Reinvestment and Direct Stock Purchase Plan of IPALCO Enterprises,
Inc.). IPALCO's common stock is principally traded on the New York Stock
Exchange and the Chicago Stock Exchange. The high and low sale prices for
IPALCO's common stock during 1999 and 1998 as reported on the Composite Tape in
The Wall Street Journal were as follows:
1999 1998
-------------------------- --------------------------
High Low High Low
Sale Price Sale Price Sale Price Sale Price
---------- ---------- ---------- ----------
First Quarter $28 9/16 $21 13/16 $22 5/8 $19 15/16
Second Quarter 24 3/4 21 23 1/16 20 1/8
Third Quarter 22 7/8 18 15/16 23 7/8 20 3/4
Fourth Quarter 21 15 5/8 27 13/16 22 3/4
The high and low sale prices for IPALCO's common stock reported on the
Composite Tape in The Wall Street Journal for the period January 1, 2000,
through February 25, 2000, were: High - $20 15/16, Low - $15 13/16.
Quarterly dividends paid on the common stock during 1999 and 1998 were as
follows:
1999 1998
---- ----
First Quarter $.1375 $.1250
Second Quarter .1500 .1375
Third Quarter .1500 .1375
Fourth Quarter .1500 .1375
At its meeting on February 29, 2000, the Board declared a regular
quarterly dividend on common stock of $.1625 per share, payable April 15, 2000,
to shareholders of record on March 31, 2000.
Dividend Restrictions
- ---------------------
The following restrictions pertain to IPL but, to the extent that the
dividends of IPALCO depend upon IPL earnings, may have an effect on IPALCO. So
long as any of the several series of bonds of IPL issued under the Mortgage and
Deed of Trust, dated as of May 1, 1940, as supplemented and modified, executed
by IPL to American National Bank and Trust Company of Chicago, as Trustee,
remain outstanding, IPL is restricted in the declaration and payment of
dividends, or other distribution on shares of its capital stock of any class, or
in the purchase or redemption of such shares, to the aggregate of its net
income, as defined in Section 47 of such Mortgage, after December 31, 1939. The
amount which these Mortgage provisions would have permitted IPL to declare and
pay as dividends at December 31, 1999, exceeded retained earnings at that date.
Such restrictions do not apply to the declaration or payment of dividends upon
any shares of capital stock of any class to an amount in the aggregate not in
excess of $1,107,155, or to the application to the purchase or redemption of any
shares of capital stock of any class of amounts not to exceed in the aggregate
the net proceeds received by IPL from the sale of any shares of its capital
stock of any class subsequent to December 31, 1939. In addition, pursuant to
IPL's Articles of Incorporation, no dividends may be paid or accrued and no
other distribution may be made on IPL's common stock unless dividends on all
outstanding shares of IPL preferred stock have been paid or declared and set
apart for payment. The management of IPL believes these restrictions will not
materially restrict anticipated dividends.
<PAGE>
<TABLE>
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
<CAPTION>
(In Thousands Except Per Share Amounts) 1999 1998 1997 1996 1995
- ---------------------------------------
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total utility operating revenues (1) $ 834,652 $ 821,256 $ 776,427 $ 762,503 $ 709,206
Utility operating income 183,501 179,511 167,315 163,219 147,588
Allowance for funds used during
construction 2,201 2,300 4,407 9,321 11,370
Income before cumulative effect of
accounting change 128,947 130,119 95,699 114,275 98,778
Cumulative effect of accounting change (1) - - 18,347 - -
Net income 128,947 130,119 114,046 114,275 98,778
Utility plant - net 1,750,412 1,748,460 1,766,383 1,787,969 1,792,007
Total assets 2,315,837 2,118,945 2,155,558 2,182,701 2,230,029
Common shareholders' equity 677,746 574,191 524,546 857,358 821,635
Cumulative preferred stock of subsidiary 59,135 59,135 9,135 51,898 51,898
Long-term debt (less current
maturities and sinking
fund requirements) 870,050 907,974 1,032,846 662,591 698,600
Utility construction expenditures 103,452 79,458 73,130 78,543 166,874
Nonutility construction expenditures 295 975 1,569 4,187 34,745
BASIC EARNINGS PER SHARE (2) (3)
Income before cumulative effect of
accounting change 1.50 1.45 1.00 1.00 .87
Cumulative effect of accounting change (1) - - .19 - -
Net Income 1.50 1.45 1.19 1.00 .87
DILUTED EARNINGS PER SHARE (2) (3)
Income before cumulative effect of
accounting change 1.49 1.43 .99 1.00 .87
Cumulative effect of accounting change (1) - - .19 - -
Net Income 1.49 1.43 1.18 1.00 .87
Dividends declared per share of
common stock (3) .60 .55 .50 .74 .72
See consolidated financial statements.
(1) In 1997, IPL adopted the unbilled revenue method of accounting for
electricity and steam delivered during the period. Revenues are accrued for
services provided but unbilled at the end of each month (see Notes 1 and 3
in the Notes to Consolidated Financial Statements).
(2) See Note 6 in the Notes to Consolidated Financial Statements.
(3) Per share amounts have been adjusted to reflect the two-for-one common
stock split issued in March 1999 and three-for-two split in 1996.
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS (INCLUDING ITEM 7A)
-----------------------------------------
IPALCO Enterprises, Inc. (IPALCO) is a holding company incorporated under
the laws of the state of Indiana. Indianapolis Power & Light Company (IPL) and
Mid-America Capital Resources, Inc. (Mid-America) are subsidiaries of IPALCO
Enterprises, Inc. (collectively referred to as Enterprises). Mid-America is the
holding company for the unregulated activities of IPALCO. IPL represents the
regulated subsidiary. Enterprises has two business segments (electric and "all
other"). IPL steam and all subsidiaries other than IPL were combined in the "all
other" category (see Note 15 in the Notes to Consolidated Financial Statements).
FORWARD-LOOKING STATEMENTS
Enterprises hereby files cautionary statements identifying important
factors that could cause Enterprises' actual results to differ materially from
those projected in forward-looking statements of Enterprises. This Form 10-K,
and particularly Management's Discussion and Analysis, contains forward-looking
statements. Forward-looking statements express an expectation or belief and
contain a projection, plan or assumption with regard to, among other things,
future revenues, income, earnings per share or capital structure. Such
statements of future events or performance are not guarantees of future
performance and involve estimates, assumptions and uncertainties. The words
"anticipate," "believe," "estimate," "expect," "forecast," "project,"
"objective," and similar expressions are intended to identify forward-looking
statements.
Some important factors that could cause Enterprises' actual results or
outcomes to differ materially from those discussed in the forward-looking
statements include, but are not limited to, fluctuations in customer growth and
demand, weather, fuel costs, generating unit availability, purchased power costs
and availability, regulatory action, environmental matters, federal and state
legislation, interest rates, labor strikes, maintenance and capital expenditures
and local economic conditions. In addition, IPL's ability to have available an
appropriate amount of production capacity in a timely manner can significantly
affect IPL's financial performance. The timing of deregulation and competition,
product development and technology changes are also important potential factors.
Most of these factors affect Enterprises through its wholly owned subsidiary,
IPL.
All such factors are difficult to predict, contain uncertainties that may
materially affect actual results and are beyond the control of Enterprises.
LIQUIDITY AND CAPITAL RESOURCES
IPALCO
- ------
On February 25, 1997, the Board of Directors (Board) of IPALCO approved a
new financial strategy designed to maximize shareholder value and position it
for an increasingly competitive business environment. The principal elements of
the strategy include:
A recapitalization of IPALCO to employ a higher degree of leverage in the
capital structure while the electric utility industry is in a transition
period between regulation and competition.
A dividend policy guided by, among other factors, paying out 45% to 50%
of the prior year's earnings (adjusted for one-time events).
A target debt-to-capital ratio of 45%, which IPALCO believes can be
achieved in 2002.
Consistent with the strategy, during 1997, IPALCO purchased
approximately 25.1 million shares, or about 21%, of its outstanding common
stock. Such purchase was accomplished in a single transaction through a
self-tender offer (1997 Tender Offer) at a price of $16 per share, resulting in
a total transaction value of approximately $403.1 million. On March 15, 1999,
IPALCO completed a second common stock purchase plan (1998 Purchase Plan) which
began in 1998. The 1998 Purchase Plan resulted in the purchase, through the open
market and in privately negotiated transactions, of 6 million shares or 6.6% of
IPALCO's outstanding common stock for a total cost of $154 million.
The 1997 Tender Offer was financed with a $401 million revolving credit
facility (revolver) which was issued in April 1997. By July 15, 1998, the
outstanding balance under the revolver had been reduced to $234 million. At that
time, IPALCO replaced the revolver with a commercial paper facility. The 1998
Purchase Plan was financed with the issuance of additional commercial paper
through the commercial paper facility, as well as with cash flows from
operations. The net outstanding balance of the commercial paper facility at
December 31, 1999, was $211.2 million.
As a result of the common stock and debt transactions enumerated above,
Enterprises' debt-to-capital ratio increased from 42.6% at December 31, 1996, to
65.9% at December 31, 1997. At December 31, 1998, Enterprises debt-to-capital
ratio was 59.0% and at December 31, 1999, the debt-to-capital ratio was 55.6%.
Enterprises believes its earnings and cash flow will be sufficient to allow it
to retain earnings and reduce debt so that the target debt-to-capital ratio of
45% can be achieved in 2002. There can be no assurance, however, that such a
target ratio can be achieved or that economic or industry factors will not make
achieving such a ratio impractical or undesirable. Enterprises continually
evaluates additional purchases of outstanding IPALCO common stock, and
investments in new growth, as possible alternatives to its basic plan of using
its cash flow to achieve its target debt-to-capital ratio in 2002. There can be
no assurance as to the timing or outcome of such evaluations.
During 1998 and 1999, Mid-America invested $1.2 million in Internet
Capital Group LLC. The limited liability company, which is an internet holding
company, merged into Internet Capital Group, Inc. (Nasdaq: ICGE) and went public
on August 5, 1999. At December 31, 1999, Mid-America held 1,030,600 shares of
ICGE. During February 2000, Mid-America sold 1 million shares of ICGE at an
average price per share of $113.17. The after-tax proceeds from this sale were
applied primarily to the reduction of IPALCO's outstanding unsecured debt. Also
during 1999, Mid-America made a commitment to invest $15 million in EnerTech
Capital Partners II L.P., a venture capital fund. The fund invests in service
and technology companies providing innovative products and services that take
advantage of opportunities created by deregulation of the energy and
telecommunications industries. At December 31, 1999, Mid-America had funded $1.5
million of such commitment and expects to fund the balance during 2000.
Also consistent with its financial strategy, simultaneously with the
announcement of the 1997 Tender Offer on February 25, 1997, IPALCO reduced its
quarterly dividend from $.185 per share ($.74 annually) to $.125 per share ($.50
annually). Since that time, IPALCO has increased its quarterly dividend each
year. On February 29, 2000, the Board increased the quarterly dividend to $.1625
per share ($.65 annually), up from $.15 per share ($.60 annually) during 1999.
IPALCO believes its financial strategy will enable it to raise sufficient
funds, when necessary, to replace existing assets and undertake investments in
new growth while maintaining a prudent balance between debt and equity in the
capital structure. IPALCO believes its actions preserve the financial
flexibility necessary to accommodate unexpected future cash needs.
Sustaining investment grade debt ratings is a key element for having
adequate liquidity and financial flexibility. As of December 31, 1999, IPALCO's
corporate credit rating was A+ as rated by Standard & Poor's. IPALCO's senior
unsecured debt was rated AA- by Duff & Phelps and its commercial paper was rated
P-1 by Moody's, A-1 by Standard & Poor's and D-1+ by Duff & Phelps.
IPL
- ---
Nature of Operations and Regulatory Matters
-------------------------------------------
Regulation
- ----------
IPL is a regulated public utility and is principally engaged in providing
electric and steam service to the Indianapolis metropolitan area. As a regulated
entity, IPL is required to use certain accounting methods prescribed by
regulatory bodies which may differ from those accounting methods required to be
used by nonregulated entities (see Note 1 in the Notes to Consolidated Financial
Statements).
IPALCO and IPL are subject to extensive regulation at both the federal
and state level. For example, IPALCO is subject to the normal, yet significant,
regulatory requirements of the Securities and Exchange Commission. IPL is
substantially affected by the regulatory jurisdiction of the Environmental
Protection Agency and the Federal Energy Regulatory Commission at the federal
level and the Indiana Department of Environmental Management and the Indiana
Utility Regulatory Commission (IURC) at the state level. Other significant
regulatory agencies affecting the Company include, but are not limited to, the
U.S. Department of Labor and the Indiana Occupational Safety and Health
Administration. The regulatory power of the IURC over IPL is both comprehensive
and typical of the economic regulation generally imposed by state public utility
commissions over investor-owned utilities.
An inherent business risk facing any regulated public utility is that of
unexpected or adverse regulatory action. Regulatory discretion is reasonably
broad in Indiana, as elsewhere. Therefore, IPL attempts to work cooperatively
with regulators and those who participate in the regulatory process, while
remaining vigilant and steadfast in protecting IPL's legal rights in the
regulatory process. IPL takes an active role in addressing regulatory policy
issues in the current regulatory environment, which is subject to rapid change
in large part because of the trend toward restructuring of the United States
electric utility industry and increased activity by environmental regulators.
Elect Plan
- ----------
In 1998, the IURC approved a plan that allows IPL to offer customers with
less than 2,000 kilowatts of demand an opportunity to choose from optional
payment or service plans. IPL's authority to offer these options will expire on
September 18, 2001, and any contracts entered into thereunder must terminate on
or before that date unless a subsequent plan is approved by the IURC.
Under the plan, eligible IPL customers may enter into written contracts
for:
Fixed Rate - Pay a guaranteed fixed rate per unit of consumption
for one or more years.
Green Power - Purchase environmentally friendly or "green" power.
Additionally, residential customers may choose a "Sure Bill" option,
paying the same bill each month for 12 months, regardless of how much
electricity is used. Customers not choosing one of these options continue to
receive electric service under existing tariffs. (See Item 1, BUSINESS, under
the subheading "Retail Ratemaking.")
Authorized Annual Operating Income
- ----------------------------------
During quarterly fuel adjustment clause proceedings, the annual
jurisdictional operating income of IPL's electric business is subject to review.
IPL's steam business is subject to annual fuel adjustment clause proceedings.
Customer refunds could result if actual annual jurisdictional operating income
exceeds levels authorized by the IURC (see Note 1 in the Notes to Consolidated
Financial Statements). IPL does not anticipate any customer refunds to result
from such reviews during 2000.
Competition and Industry Changes
--------------------------------
In recent years, various forms of proposed industry-restructuring
legislation and/or rulemakings have been introduced at the federal level and in
several states. Generally, the intent of these initiatives is to encourage an
increase in competition within the regulated electric utility industry. While
federal rulemaking to date has addressed only the electric wholesale market,
various state legislatures are considering or have enacted new laws impacting
the retail energy markets within their respective states. A discussion of the
legislative and regulatory initiatives most likely to affect IPL follows:
Wholesale Energy Market
- -----------------------
In April 1996, the Federal Energy Regulatory Commission (FERC) issued
Orders 888 and 889 concerning open access transmission service for wholesale
sales. These Orders require all utilities under FERC jurisdiction to: 1. file
open, nondiscriminatory transmission access tariffs with FERC; 2. offer
transmission to eligible customers comparable to service they provide
themselves; and 3. take service under the tariffs for their own wholesale sales
and purchases of electricity. IPL filed its open access transmission tariff on
January 6, 2000. Historically, FERC has issued an order making such tariffs
effective as of their date of filing. FERC Order 888 also provides for the
recovery of utility stranded costs that are defined as the difference between
revenues received by utilities under traditional ratemaking and market-based
prices.
In December 1999, FERC issued Order 2000, which provides for the
voluntary formation of regional transmission organizations (RTOs), entities
created to operate, plan and control utility transmission assets. Order 2000
also prescribes certain characteristics and functions of acceptable RTO
proposals. The rule requires all public utilities that own, operate or control
interstate transmission to individually file in October 2000, either a proposal
to join an RTO or the reasons for not participating in an RTO.
Retail Energy Market
- --------------------
The legislatures of several states have enacted, and many other states
are considering, new laws that would allow various forms of competition for
retail sales of electric energy. While each state proposal is different, most
provide for some recovery of a utility's stranded costs and require an extended
transition period before competition is fully effective. Additionally, a few
states have implemented pilot programs that experiment with allowing some form
of customer choice of electricity suppliers.
In Indiana, competition among electric energy providers for sales has
focused primarily on the sale of bulk power to other public and municipal
utilities. Indiana law provides for electricity suppliers to have exclusive
retail service areas.
In 1995, the Indiana General Assembly, anticipating increasing
competitive forces in the regulated public utility industry, enacted I.C.
8-1-2.5. This law enables the IURC to consider and approve, on an individual
utility basis, utility-initiated proposals wherein the IURC declines to exercise
jurisdiction over the whole or any part of the utility, or its retail energy
service or both. The IPL Elect Plan was approved by the IURC under this law.
During 1997, the Indiana General Assembly authorized a legislative study
committee to assess the issue of electric utility competition and restructuring.
A comprehensive restructuring bill was introduced in the Indiana Senate in 1998,
but failed to pass. Subsequently, comprehensive restructuring bills were
submitted in both 1999 and 2000, and also failed to pass. IPL continues to work
cooperatively with other electric utilities in Indiana regarding future
legislation. However, the outcome of such efforts is uncertain.
National Ambient Air Quality Standards
- --------------------------------------
On July 16, 1997, the United States Environmental Protection Agency (EPA)
promulgated final rules tightening the National Ambient Air Quality Standards
for ozone and creating new fine particulate matter standards. On October 29,
1999, after conducting a rehearing of its initial decision of May 14, 1999, the
United States Court of Appeals for the District of Columbia Circuit determined
that the new ozone standards were not issued lawfully, but left open the
question of future remedy. The Court also determined that the standards for fine
particulate matter were legally deficient in certain respects. EPA has
petitioned the Supreme Court to review the Court of Appeals' decision.
NOx SIP Call
- ------------
On October 27, 1998, EPA issued a final rule calling for Indiana, along
with 22 other jurisdictions in the eastern third of the United States, to impose
more stringent limits on nitrogen oxides (NOx) from fossil-fuel fired steam
electric generators, such as those operated by Enterprises. This rule (the NOx
SIP Call) was based in part on the new ozone standards that were later held
unlawful in the Court of Appeals' decision discussed above. In a separate
decision on May 25, 1999, the Court of Appeals stayed the compliance deadlines
in the NOx SIP Call.
Because power plants emit nitrogen oxides, as well as certain air
pollutants that may contribute to formation of fine particulate matter, existing
Enterprises sources may be required to be retrofitted with additional air
pollution controls in the future, either as a result of EPA's 1997 and 1998
regulations or due to future regulatory actions. Enterprises is a party to
litigation concerning EPA's 1997 and 1998 final regulations, and that litigation
is still in progress.
EPA's NOx SIP Call would require operators of coal-fired electric utility
boilers in the affected states to limit NOx emissions to 0.15 pounds per million
BTUs of heat input as a system-wide average. That limit calls for a reduction of
about 85% from 1990 average emissions from coal-fired electric utility boilers,
and a reduction of about 57% from Enterprises' current emissions.
It is not possible to predict whether EPA's NOx SIP Call will ultimately
survive judicial review. Nor is it possible at this time to predict accurately
the costs of compliance. Enterprises' preliminary estimates are that the NOx SIP
Call would necessitate capital expenditures of about $180 million.
The Indiana Department of Environmental Management has recently
circulated a draft rule calling for coal-fired electric utilities to meet an
emission limit of 0.25 pounds of NOx per million BTUs of heat input on a
company-wide basis. Preliminary estimates are that compliance with such a limit
would call for Enterprises to expend capital of approximately $81 million. It is
not possible to predict whether the draft rule will ever become effective.
As to timing, if either of the requirements discussed in the two
preceding paragraphs became effective, they would likely do so during the
2000-2001 period and would probably necessitate deployment of capital during the
period between 2002 and 2005. There can be no certainty about these estimates.
Enterprises expects to refine the above estimates as engineering studies
progress and when, as, and if such rules become effective.
Liquidity, Financing Requirements and Capital Market Access
-----------------------------------------------------------
Liquidity is the ability of an entity to meet its short-term and
long-term cash needs. IPL's liquidity is a function of its ability to generate
internal funds, its construction program, its mortgage covenants and loan
agreements and its access to external capital markets.
Sustaining investment grade debt ratings is also a key element for having
adequate liquidity and financial flexibility. As of December 31, 1999, IPL's
senior secured debt was rated AA- by Standard & Poor's, Aa2 by Moody's Investor
Services and AA+ by Duff & Phelps, and IPL's commercial paper was rated A-1+ by
Standard & Poor's, P-1 by Moody's Investor Services and D-1+ by Duff & Phelps.
IPL expects to be able to maintain investment grade debt ratings into the
foreseeable future.
During 1999, IPL refinanced its $23.5 million 7.45% Series first mortgage
bonds with the use of proceeds from a $23.5 million unsecured note. The 1999
Series note has an interest rate based on tax-exempt auction rates and has a
maturity date of August 1, 2030 (see Note 7 in the Notes to Consolidated
Financial Statements).
IPL has no long-term debt that matures during 2000. However, other
existing higher-rate debt may be refinanced depending upon market conditions.
During the next five years, IPL expects to meet its cash requirements
without any additional permanent financing. Cash flows from operations and
temporary short-term borrowings are projected to provide the funds required for
IPL's construction program. See the following section for discussion of the
construction program.
Future Performance
------------------
Traditionally, retail KWH sales, after adjustments for weather
variations, have grown in reasonable correlation with growth in service
territory economic activity. During the past 10 years, IPL's retail KWH sales
have grown at a compound annual rate of 2.0%, while the Indianapolis economy
grew at an annual rate of 2.5%. The Indianapolis economy is expected to grow at
an annual rate of 2.7% for 2000 through 2004, according to the Kelley School of
Business at Indiana University.
IPL's wholesale KWH sales decreased 12% in 1999 from the level achieved
in 1998, largely as a result of planned and unplanned generating unit outages.
As IPL's retail sales grow, the level of generating capacity available for
wholesale sales is more limited. The ability to sell power in the highly
competitive wholesale market is also highly dependent on market conditions and
the level and frequency of unplanned outages. IPL is unable to predict, with any
degree of certainty, the level of wholesale sales that may be achieved in 2000.
Operating and maintenance expenses were $425.0 million in 1999. These
expenses in 2000 will be influenced by the level of KWH generation, generating
unit availability and overhaul costs, purchased power costs, cost control
programs and inflation. IPL depends on purchased power, in part, to meet its
retail obligations. Purchased power costs are highly volatile and, therefore,
IPL is unable to predict with any degree of certainty the level of those costs
for 2000.
IPL's construction program for the three-year period 2000-2002 is
estimated to cost $294.0 million including AFUDC. The estimated cost of the
program by year (in millions) is $106.5 in 2000, $103.9 in 2001 and $83.6 in
2002. It includes $152.2 million for additions, improvements and extensions to
transmission and distribution lines, substations, power factor and voltage
regulating equipment, distribution transformers and street lighting facilities.
The construction program also includes $6.6 million of the remaining costs for
construction of a 100-megawatt combustion turbine expected to be in service by
June 2000. These projected amounts also include $20.7 million of costs
associated with new environmental standards proposed by the EPA which are
currently under appeal in the United States Court of Appeals (see "Competition
and Industry Changes").
Other
-----
Cumulative Effect of Accounting Change
- --------------------------------------
On December 31, 1997, effective January 1, 1997, IPL adopted the unbilled
revenue method of accounting for all electric and steam sales to more closely
match revenues with expenses. Under this method, IPL accrues revenues for all
electric and steam energy delivered to customers during the period, whether
billed or not. Previously, IPL recognized these revenues only as customers were
billed, with the service rendered after monthly meter reading dates through the
end of a calendar month recognized as operating revenues in the following month.
The cumulative effect of this change in accounting method as of January 1, 1997,
net of taxes, was a one-time income increase of $18.3 million, and was reported
as a separate component of net income for 1997. This accounting change does not
affect IPL's cash flow or liquidity (see Note 3 in the Notes to Consolidated
Financial Statements).
Preferred Stock, Debt Issuance and Dividend Restrictions
- --------------------------------------------------------
Restrictions on IPL's ability to issue certain securities or pay cash
dividends are contained in its Mortgage and Deed of Trust (Mortgage) and its
Amended Articles of Incorporation (Articles). The Articles require that, so long
as any shares of preferred stock are outstanding, the net income of IPL, as
specified therein, be at least one and one-half times the total interest on the
funded debt and the pro forma dividend requirements on the outstanding, and any
proposed, preferred stock before any additional preferred stock is issued. The
Mortgage requires that net earnings as calculated thereunder be two and one-half
times the annual interest requirements before additional bonds can be
authenticated on the basis of property additions. Based on IPL's net earnings
for the 12 months ended December 31, 1999, the ratios under the Articles and the
Mortgage are 5.05 and 12.35, respectively.
The following restrictions pertain to IPL but, to the extent that the
dividends of IPALCO depend upon IPL earnings, may have an effect on IPALCO. So
long as any of the several series of bonds of IPL issued under its Mortgage
remain outstanding, and subject to certain exceptions, IPL is restricted in the
declaration and payment of dividends, or other distribution on shares of its
capital stock of any class, or in the purchase or redemption of such shares, to
the aggregate of its net income, as defined in Section 47 of such Mortgage,
after December 31, 1939. The amount which these Mortgage provisions would have
permitted IPL to declare and pay as dividends at December 31, 1999, exceeded
retained earnings at that date. In addition, pursuant to IPL's Articles, no
dividends may be paid or accrued and no other distribution may be made on IPL's
common stock unless dividends on all outstanding shares of IPL preferred stock
have been paid or declared and set apart for payment.
IPL believes these requirements will not restrict any anticipated future
financings or cash dividend payments. At December 31, 1999, and considering all
existing restrictions, IPL had the capacity to issue approximately $1.2 billion
of additional long-term debt.
MID-AMERICA
- -----------
Nature of Operations
--------------------
Mid-America, the holding company for the unregulated activities of
Enterprises, has as subsidiaries Mid-America Energy Resources, Inc. (Energy
Resources), Indianapolis Campus Energy, Inc. (ICE), Cleveland Thermal Energy
Corporation (Cleveland Thermal) and Cleveland District Cooling Corporation
(Cleveland Cooling). Energy Resources owns and operates a district cooling
system in downtown Indianapolis, Indiana. ICE provides chilled water to the
Lilly Technology Center located near downtown Indianapolis. Cleveland Thermal
owns and operates a district heating system in Cleveland, Ohio. Cleveland
Cooling owns and operates a district cooling system in Cleveland.
Capital and Financing Requirements
----------------------------------
Total capital requirements of Mid-America and its subsidiaries, including
funds needed for construction and maturing debt obligations, are estimated to be
$2.1 million, $3.5 million and $3.7 million during the next three years. The
cash requirements of Mid-America subsidiaries are expected to be funded by
Mid-America from its existing liquid assets, future cash flows from its
operations and from temporary short-term borrowings.
During 1999, Energy Resources refinanced its $9.5 million 7.25% note due
2011, and its $9.3 million variable rate note due 2030, with the proceeds of an
$18.8 million variable rate note which varies with the tax-exempt weekly rate.
The new $18.8 million note has a $9.5 million maturity on December 1, 2011, and
the remainder is due on September 1, 2030 (see Note 7 in the Notes to
Consolidated Financial Statements).
In 1997, Enterprises initiated a plan to sell, during 1998, Cleveland
Thermal and Cleveland Cooling (collectively referred to as CER) and ceased
recording depreciation. During the third quarter of 1998, Enterprises determined
that it was not probable that CER would be sold during 1998, and resumed
depreciation on these assets. Enterprises anticipates the sale of CER in 2000.
IPALCO ENTERPRISES CONSOLIDATED
- -------------------------------
Market Risk Sensitive Instruments and Positions
-----------------------------------------------
The primary market risk to which Enterprises is exposed is related to
interest rate risk. Enterprises uses long-term debt as a primary source of
capital in its business. A portion of this debt has an interest component that
resets on a periodic basis to reflect current market conditions. The following
table presents the principal cash repayments and related weighted average
interest rates by maturity date for Enterprises' long-term fixed-rate debt and
its other types of long-term debt at December 31, 1999:
<TABLE>
<CAPTION>
Maturity Schedule
Period Ending December 31
Fair
(Dollars in Millions) 2000 2001 2002 2003 2004 Thereafter Total Value
- ---------------------------------------------------------------------------------------------------------------
Long-term debt
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $1.7 $3.3 $3.4 $3.8 $84.1 $423.6 $519.9 $505.2
Average rate 7.9% 7.9% 7.9% 7.9% 6.1% 7.0% 6.9%
Variable rate - - - - - $192.3 $192.3 $192.3
Average rate - - - - - 3.8% 3.8%
Recapitalization debt $50.8 $80.2 $80.2 - - - $211.2 $211.2
Average rate 6.7% 6.7% 6.7% - - - 6.7%
</TABLE>
To manage Enterprises' exposure to fluctuations in interest rates and to
lower funding costs, Enterprises constantly evaluates the use of, and has
entered into, interest rate swaps. Under these swaps, Enterprises or its
subsidiaries agree with counterparties to exchange, at specified intervals, the
difference between fixed-rate and floating-rate interest amounts calculated on
an agreed notional amount. This interest differential paid or received is
recognized in the consolidated statements of income as a component of interest
expense.
At December 31, 1999, IPALCO had an interest rate swap agreement
outstanding with a notional amount of $150 million, of which the notional amount
decreases $25 million each quarter. Enterprises has agreed to pay a fixed rate
of 6.3575% and receive a floating rate based on applicable LIBOR. The fair value
of IPALCO's swap agreement was $(0.1) million at December 31, 1999.
At December 31, 1999, IPL had an interest rate swap agreement with a
notional amount of $40 million, which expires in January 2023. IPL agrees to pay
interest at a fixed rate of 5.21% to a swap counter party and receive a variable
rate based on the tax-exempt weekly rate. The fair value of IPL's swap agreement
was $0.4 million at December 31, 1999.
Other
-----
Year 2000
- ---------
Enterprises has not discovered any significant problems associated with
its systems as a result of the year change from 1999 to 2000. It is unlikely
that any such problems will be encountered in the future. However, should such
problems occur, Enterprises has established a Year 2000 Committee which would
act to correct any problems as a result of the year changeover. It is not likely
that any such occurrences would have a material effect on the financial position
or results of operations of the Company.
Cash Flows
- ----------
Additional information regarding Enterprises' historical cash flows from
operations, investing and financing for the past three years, including the
capital expenditures of IPL and Mid-America, are disclosed in the Statements of
Consolidated Cash Flows and in the Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following discussion pertains to the consolidated financial
statements of IPALCO Enterprises, Inc.
Diluted earnings per share during 1999 were $1.49, or $.06 above the
$1.43 attained in 1998. Diluted earnings per share during 1998 were $1.43, or
$.25 above the $1.18 attained in 1997. The following discussion highlights the
factors contributing to these results.
The weighted average shares used to calculate diluted earnings per share
for each of the years reported were substantially affected by stock purchases.
The first purchase occurred in April 1997 and resulted in the purchase by IPALCO
of approximately 25.1 million shares (approximately 21%) of its outstanding
common stock. On March 15, 1999, IPALCO completed a second common stock purchase
plan. This plan, which began in 1998, resulted in the purchase, in the open
market and in privately negotiated transactions, of 6 million shares or 6.6% of
IPALCO's outstanding common stock. Of the 6 million shares purchased during the
second plan, 3.5 million shares were purchased during 1999.
Utility Operating Revenues
- --------------------------
Operating revenues in 1999 and 1998 increased from the prior year
by $13.4 million and $44.8 million, respectively. The increases in
revenues resulted from the following:
Increase (Decrease)
-------------------
1999 over 1998 1998 over 1997
-------------- --------------
(In Millions)
Electric:
Change in retail KWH sales - net of fuel $ 17.5 $ 14.5
Change in estimate for unbilled revenue 8.0 -
Fuel revenue (0.1) 3.5
Wholesale revenue (9.9) 28.0
DSM tracker revenue 0.8 1.3
Steam revenue (1.1) (2.9)
Other revenue (1.8) 0.4
------ ------
Total change in operating revenues $ 13.4 $ 44.8
====== ======
The increase in retail KWH sales in 1999 primarily was due to economic
growth in Indianapolis. The increase in 1998 also reflected economic growth in
Indianapolis, as well as an increase in cooling degree days during the summer
partially offset by a decrease in heating degree days. Actual and percentage
changes in electric customers and in heating and cooling degree days for these
periods are as follows:
Increase (Decrease)
-------------------
1999 over 1998 1998 over 1997
-------------- --------------
Electric Residential Customers 5,856 1.5% 5,257 1.4%
Commercial & Industrial Customers 451 1.0% 1,169 2.6%
Heating Degree Days 448 10.1% (1,261) (22.2)%
Cooling Degree Days (73) (5.8)% 381 43.8%
A change in the estimate for unbilled revenue was made during 1999. The
changes in fuel revenues in 1999 and 1998 from the prior year reflect
differences in fuel costs billed to customers. Wholesale sales were $41.2
million, $51.1 million and $23.1 million for 1999, 1998 and 1997, respectively.
The decrease in wholesale revenues in 1999 was a result of both planned and
unplanned generating unit outages during 1999. The increase in wholesale
revenues during 1998 reflected increased wholesale marketing efforts and energy
requirements of other utilities. The decrease in other revenues during 1999
reflects decreased service revenues.
Utility Operating Expenses
- --------------------------
Fuel expense decreased in 1999 by $7.2 million due primarily to a
decrease in deferred fuel cost and a 0.3% decrease in generation caused by
unscheduled unit outages. During 1998, fuel expense increased by $16.5 million
primarily as a result of increased total KWH sales.
Other operating expenses decreased $18.3 million in 1999 primarily due to
decreased administrative and general expenses of $10.5 million and increased
sales of emission allowances of $4.8 million (reduced operating expenses) as
well as other cost improvements. The decreased administrative and general
expenses were primarily due to decreased benefits expense as well as the
non-recurrence of a $2.2 million charge in 1998 for a voluntary early retirement
and separation program. During 1998, other operating expenses increased from the
prior year by $12.3 million. The increase in 1998 was partially due to increased
administrative and general expenses of $7.7 million. This increase was due to
the voluntary early retirement and separation program as well as increased
outside services and increased labor costs. Electric distribution expenses
increased $1.7 million and production expenses increased $1.5 million during
1998.
Power purchased increased by $22.6 million during 1999 as a result of the
combination of higher market prices for scheduled summer peaking power and a
$13.0 million increase in replacement power costs due to the unusually high
level of generating unit outages during peak electricity demand in the third
quarter of 1999. Power purchased decreased $0.7 million during 1998 due to
decreased demand charges partially offset by increased purchases of KWH.
Maintenance expenses increased by $4.1 million during 1999 and decreased
by $3.2 million during 1998. These variances primarily reflect the timing of
major generating unit overhauls.
Taxes other than income taxes decreased by $0.9 million during 1999
primarily due to decreased employment taxes. During 1998, taxes other than
income taxes increased $2.0 million from the prior period due to increased
property taxes, gross income taxes and employment taxes.
Income taxes - net increased in both 1999 and 1998 from the prior
years by $4.3 million and $6.9 million, respectively. These changes reflect
increases in pretax operating income.
Other Income And Deductions
- ---------------------------
Allowance for equity funds used during construction did not change during
1999 from the prior period. During 1998, allowance for equity funds used during
construction decreased $2.1 million. In mid-1997, the amortization of deferred
carrying charges on a plant asset ended, contributing to this decrease.
Other - net, which includes the pretax income before interest charges of
operations other than IPL, as well as pre-tax non-operating income from IPL,
increased by $6.6 million during 1999 and decreased by $5.1 million during 1998,
as compared to the prior years. The increase in 1999 was due to an insurance
recovery of $3.2 million and the non-recurrence of a $3.0 million charitable
contribution in 1998. The decrease in 1998 was due primarily to the
non-recurring gain from the sale of a retired IPL plant site in 1997, and the
charitable contribution of $3.0 million in 1998.
During 1998, a gain from the liquidation and termination of an agreement
to purchase power was recognized by IPL in the amount of $12.5 million before
taxes.
The provision for impairment of nonutility property during 1997 reflects
a charge of $32 million to write down the carrying values of Cleveland Thermal
and Cleveland Cooling (see Note 2 in the Notes to Consolidated Financial
Statements).
Interest and Other Charges
- --------------------------
Interest on long-term debt decreased by $1.9 million during 1999 from the
prior period. The decrease was primarily due to a lower average amount of
principal outstanding on the recapitalization debt facility at IPALCO and from
decreased interest expense on floating rate debt at IPL due to lower average
interest rates during the year.
Other interest charges increased by $0.6 million during 1999 as a result
of increased short-term debt borrowing at IPL. Interest expense decreased $0.7
million during 1998 primarily due to decreased short-term debt borrowings and
decreased interest on tax assessments.
Amortization of redemption premiums and expenses on debt - net increased
in 1999 and 1998 compared to the previous periods. The 1999 increase of $0.5
million was primarily due to costs associated with Energy Resources' replacement
of its $9.5 million 7.25% Series note and its $9.3 million 1995 Series variable
rate note with the $18.8 million 1999 Series variable rate note. The increased
expense during 1998 was due to a full year of amortization of the costs
associated with debt issued during 1997.
Preferred stock transaction costs increased $0.4 million during 1999 and
$1.7 million during 1998 as compared to the prior periods. The increases reflect
the dividends of the January 1998 issue of 500,000 shares of 5.65% preferred
stock and the 1997 retirement of preferred stock.
Cumulative Effect of Accounting Change
- --------------------------------------
A cumulative effect of accounting change in the amount of $18.3 million,
net of taxes, was recorded during 1997. Effective January 1, 1997, IPL adopted
the unbilled revenue method of accounting for electricity and steam delivered
during the period. Revenues are accrued for services provided but unbilled at
the end of each month (see Notes 1 and 3 in the Notes to Consolidated Financial
Statements).
New Accounting Pronouncement
- ----------------------------
The Financial Accounting Standards Board issued Statement of Financial
Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities," in June 1998. SFAS 137 delayed the effective date of this standard
to all fiscal quarters of all fiscal years beginning after June 15, 2000 (see
Note 1 in the Notes to Consolidated Financial Statements).
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
============================
To the Shareholders and Board of Directors of IPALCO Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of IPALCO
Enterprises, Inc. and its subsidiaries as of December 31, 1999 and 1998, and the
related statements of consolidated income, common shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, such consolidated financial statements present fairly, in all
material respects, the financial position of IPALCO Enterprises, Inc. and its
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, in 1997 the
Company changed its method of accounting for unbilled revenue.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
January 20, 2000
<PAGE>
<TABLE>
<CAPTION>
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
Statements of Consolidated Income
For the Years Ended December 31, 1999, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
(In Thousands Except Per Share Amounts)
UTILITY OPERATING REVENUES (Notes 3 and 10):
<S> <C> <C> <C>
Electric $ 800,337 $ 785,835 $ 738,134
Steam 34,315 35,421 38,293
----------- ------------ -----------
Total operating revenues 834,652 821,256 776,427
----------- ------------ -----------
UTILITY OPERATING EXPENSES:
Operation:
Fuel 173,872 181,036 164,578
Other 137,348 155,610 143,311
Power purchased 29,769 7,170 7,833
Purchased steam 6,391 5,968 7,075
Maintenance 77,637 73,501 76,679
Depreciation and amortization 107,469 103,223 103,230
Taxes other than income taxes 34,190 35,047 33,071
Income taxes - net (Note 9) 84,475 80,190 73,335
----------- ------------ -----------
Total operating expenses 651,151 641,745 609,112
----------- ------------ -----------
UTILITY OPERATING INCOME 183,501 179,511 167,315
----------- ------------ -----------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 1,372 1,389 3,462
Other - net 3,580 (2,995) 2,140
Gain on termination of agreement (Note 13) - 12,500 -
Provision for impairment of nonutility property (Note 2) - - (32,000)
Income taxes - net (Note 9) 5,688 5,231 19,004
----------- ------------ -----------
Total other income and (deductions) - net 10,640 16,125 (7,394)
----------- ------------ -----------
INCOME BEFORE INTEREST AND OTHER CHARGES 194,141 195,636 159,921
----------- ------------ -----------
INTEREST AND OTHER CHARGES:
Interest on long-term debt 58,584 60,489 60,385
Other interest 1,671 1,071 1,799
Allowance for borrowed funds used during construction (829) (911) (945)
Amortization of redemption premiums and expenses on
debt - net 2,555 2,062 1,903
Preferred stock transactions 3,213 2,806 1,080
----------- ------------ -----------
Total interest and other charges - net 65,194 65,517 64,222
----------- ------------ -----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 128,947 130,119 95,699
CUMULATIVE EFFECT OF ACCOUNTING CHANGE-
NET OF TAXES (Note 3) - - 18,347
----------- ------------ -----------
NET INCOME $ 128,947 $ 130,119 $ 114,046
=========== ============ ===========
BASIC EARNINGS PER SHARE (Note 6):
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 1.50 $ 1.45 $ 1.00
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 3) - - .19
----------- ------------ -----------
NET INCOME $ 1.50 $ 1.45 $ 1.19
=========== ============ ===========
DILUTED EARNINGS PER SHARE (Note 6):
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 1.49 $ 1.43 $ .99
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 3) - - .19
----------- ------------ -----------
NET INCOME $ 1.49 $ 1.43 $ 1.18
=========== ============ ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
- -------------------------------------------------------------------------------------------------------------------------
ASSETS 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
(In Thousands)
UTILITY PLANT:
<S> <C> <C>
Utility plant in service (Note 2) $ 2,922,338 $ 2,859,899
Less accumulated depreciation 1,299,122 1,202,356
---------------- ----------------
Utility plant in service - net 1,623,216 1,657,543
Construction work in progress 116,478 80,198
Property held for future use 10,718 10,719
---------------- ----------------
Utility plant - net 1,750,412 1,748,460
---------------- ----------------
OTHER ASSETS:
Nonutility property (Note 2) 84,937 91,319
Less accumulated depreciation 15,881 19,485
---------------- ----------------
Nonutility property - net 69,056 71,834
Available for sale securities (Note 14) 175,202 -
Other investments 13,970 12,234
---------------- ----------------
Other assets - net 258,228 84,068
---------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 23,935 9,075
Accounts receivable and unbilled revenue (less allowance for doubtful
accounts - 1999, $1,360,000 and 1998, $1,212,000) 51,357 39,702
Fuel - at average cost 52,016 39,147
Materials and supplies - at average cost 48,694 48,624
Tax refund receivable 770 9,647
Prepayments and other current assets 9,465 4,863
---------------- ----------------
Total current assets 186,237 151,058
---------------- ----------------
DEFERRED DEBITS:
Regulatory assets (Note 5) 107,948 116,801
Miscellaneous 13,012 18,558
---------------- ----------------
Total deferred debits 120,960 135,359
---------------- ----------------
TOTAL $ 2,315,837 $ 2,118,945
================ ================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1999 1998
- --------------------------------------------------------------------------------------------------------------------
(In Thousands)
CAPITALIZATION:
<S> <C> <C>
Common shareholders' equity (Note 6):
Common stock, no par, authorized - 290,000,000 shares,
116,806,470 issued and 85,727,614 outstanding in 1999,
116,412,526 issued and 88,863,026 outstanding in 1998 $ 439,066 $ 435,300
Unearned compensation - restricted stock (1,979) (6,003)
Premium on 4% cumulative preferred stock 649 649
Retained earnings 690,455 612,941
Accumulated other comprehensive income (Note 14) 106,733 -
Treasury stock, at cost (557,178) (468,696)
--------------- ---------------
Total common shareholders' equity 677,746 574,191
Cumulative preferred stock of subsidiary (Note 6) 59,135 59,135
Long-term debt (Notes 2 and 7) 870,050 907,974
--------------- ---------------
Total capitalization 1,606,931 1,541,300
--------------- ---------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper (Note 8) 57,578 25,200
Current maturities and sinking fund requirements (Note 7) 52,477 1,425
Accounts payable and accrued expenses 56,798 71,835
Dividends payable 13,859 13,392
Taxes accrued 22,237 20,723
Interest accrued 13,767 14,376
Other current liabilities 13,356 13,731
--------------- ---------------
Total current liabilities 230,072 160,682
--------------- ---------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Deferred income taxes - net (Note 9) 400,588 318,327
Unamortized investment tax credit 39,226 41,993
Accrued postretirement benefits (Note 11) 4,338 10,768
Accrued pension benefits (Note 11) 29,018 39,953
Miscellaneous 5,664 5,922
--------------- ---------------
Total deferred credits and other long-term liabilities 478,834 416,963
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Note 12)
TOTAL $ 2,315,837 $ 2,118,945
=============== ===============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
CASH FLOWS FROM OPERATIONS:
<S> <C> <C> <C>
Net income $ 128,947 $ 130,119 $ 114,046
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 110,297 102,977 103,841
Amortization of regulatory assets 14,470 14,246 16,210
Deferred income taxes and investment tax credit adjustments - net 9,622 (2,056) 3,533
Allowance for funds used during construction (2,201) (2,300) (4,407)
Cumulative effect of accounting change - before taxes (Note 3) - - (29,915)
Provision for impairment of nonutility property (Note 2) - - 32,000
Change in certain assets and liabilities:
Accounts receivable - excluding cumulative effect
of accounting change (11,655) 7,331 (6,019)
Fuel, materials and supplies (12,939) (4,098) (321)
Accounts payable and accrued expenses (15,037) 5,730 3,883
Taxes accrued 1,514 (1,403) (1,033)
Accrued pension benefits (10,935) 132 2,538
Other - net 1,705 (15,271) (4,729)
---------------- ---------------- ---------------
Net cash provided by operating activities 213,788 235,407 229,627
---------------- ---------------- ---------------
CASH FLOWS FROM INVESTING:
Construction expenditures - utility (103,452) (79,458) (73,130)
Construction expenditures - nonutility (295) (975) (1,569)
Other (8,594) 1,193 (7,371)
---------------- ---------------- ---------------
Net cash used in investing activities (112,341) (79,240) (82,070)
---------------- ---------------- ---------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 140,900 271,500 451,300
Issuance of preferred stock (Note 6) - 50,000 -
Retirement of long-term debt (127,830) (398,094) (89,250)
Reacquired common stock (Note 6) (88,482) (65,595) (403,101)
Preferred stock redemptions (Note 6) - - (41,814)
Short-term debt - net 32,378 (8,500) (12,300)
Common dividends paid (50,920) (48,235) (57,653)
Issuance of common stock related to incentive compensation plans 9,014 30,488 4,089
Other (1,647) 4,051 (852)
---------------- ---------------- ---------------
Net cash used in financing activities (86,587) (164,385) (149,581)
---------------- ---------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,860 (8,218) (2,024)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,075 17,293 19,317
---------------- ---------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 23,935 $ 9,075 $ 17,293
================ ================ ===============
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 60,454 $ 62,381 $ 59,761
================ ================ ===============
Income taxes $ 66,577 $ 82,067 $ 63,915
================ ================ ===============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Common Shareholders' Equity
For the Years Ended December 31, 1999, 1998 and 1997
- ------------------------------------------------------------------------------------------------------------------------
(In Thousands Except Per Share Amounts) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Common Stock
<S> <C> <C> <C>
Balance at beginning of the year $ 435,300 $ 395,851 $ 389,966
Exercise of stock options 9,014 29,869 4,089
Restricted stock issues / adjustments (3,205) 11,605 1,796
Restricted stock repurchased (2,043) (2,025) -
- ------------------------------------------------------------------------------------------------------------------------
Balance at end of the year 439,066 435,300 395,851
- ------------------------------------------------------------------------------------------------------------------------
Unearned Compensation
Balance at beginning of the year (6,003) (1,583) (368)
Amortization of restricted stock 819 7,185 581
Restricted stock issues / adjustments 3,205 (11,605) (1,796)
- ------------------------------------------------------------------------------------------------------------------------
Balance at end of the year (1,979) (6,003) (1,583)
- ------------------------------------------------------------------------------------------------------------------------
Premium on 4% Cumulative Preferred Stock
Balance at beginning of the year 649 649 1,363
Reacquired and retired preferred stock - - (714)
- ------------------------------------------------------------------------------------------------------------------------
Balance at end of the year 649 649 649
- ------------------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance at beginning of the year 612,941 532,730 466,397
Net income 128,947 130,119 114,046
Cash dividends declared (1999 - $.60 per share;
1998 - $.55 per share; 1997 - $.50 per share) (51,433) (49,418) (47,713)
Subsidiary capital stock expense - (490) -
- ------------------------------------------------------------------------------------------------------------------------
Balance at end of the year 690,455 612,941 532,730
- ------------------------------------------------------------------------------------------------------------------------
Other Comprehensive Income Other comprehensive income, net of tax:
Unrealized gains on securities (Note 14) 106,733
- ------------------------------------------------------------------------------------------------------------------------
Balance at end of the year 106,733
- ------------------------------------------------------------------------------------------------------------------------
Treasury Stock
Balance at beginning of the year (468,696) (403,101)
Reacquired common stock (1999-3,529,356 shares;
1998-2,470,644 shares; 1997-25,078,856 shares) (88,482) (65,595) (403,101)
- ------------------------------------------------------------------------------------------------------------------------
Balance at end of the year (557,178) (468,696) (403,101)
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity at end of the year $ 677,746 $ 574,191 $ 524,546
========================================================================================================================
See notes to consolidated financial statements.
</TABLE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
=========================================
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: IPALCO Enterprises, Inc. (IPALCO) owns all of
the outstanding common stock of its subsidiaries (collectively referred to as
Enterprises). The consolidated financial statements include the accounts of
IPALCO, its regulated utility subsidiary, Indianapolis Power & Light Company
(IPL), and its unregulated subsidiary, Mid-America Capital Resources, Inc.
(Mid-America). Mid-America conducts its businesses through various wholly owned
subsidiaries, including Mid-America Energy Resources, Inc. (Energy Resources),
Indianapolis Campus Energy, Inc. (ICE), Cleveland Thermal Energy Corporation
(Cleveland Thermal) and Cleveland District Cooling Corporation (Cleveland
Cooling). All significant intercompany items have been eliminated in
consolidation.
The operating components of all subsidiaries other than IPL are included
under the captions OTHER INCOME AND (DEDUCTIONS), "Other-net" and "Income
taxes-net" and INTEREST AND OTHER CHARGES, "Interest on long-term debt," "Other
Interest" and "Amortization of redemption premiums and expenses on debt-net" in
the Statements of Consolidated Income.
Nature of Operations: IPL is engaged principally in providing electric
and steam service to the Indianapolis metropolitan area. Mid-America operates
energy-related businesses in Indianapolis, Indiana and Cleveland, Ohio.
Concentrations of Risk: Substantially all of Enterprises' business
activity is with customers located within the Indianapolis area. In addition,
approximately 63% of Enterprises' employees are covered by collective bargaining
agreements.
Regulation: The retail utility operations of IPL are subject to the
jurisdiction of the Indiana Utility Regulatory Commission (IURC). IPL's
wholesale power transactions are subject to the jurisdiction of the Federal
Energy Regulatory Commission. These agencies regulate IPL's utility business
operations, tariffs, accounting, depreciation allowances, services, security
issues and the sale and acquisition of utility properties. The financial
statements of IPL are based on generally accepted accounting principles,
including the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation," which gives
recognition to the ratemaking and accounting practices of these agencies.
Revenues: Effective January 1, 1997, IPL adopted the unbilled revenue
method of accounting for electricity and steam delivered during the period (see
Note 3). Revenues are accrued for services provided but unbilled at the end of
each month.
A fuel adjustment charge provision, which is established after public
hearing, is applicable to most of the rate schedules of IPL and permits the
billing or crediting of estimated fuel costs above or below the levels included
in such rate schedules. Actual fuel costs in excess of or under estimated fuel
costs billed are deferred or accrued, respectively.
On August 18, 1999, the IURC issued an order that allows for the
recovery of purchased power costs based on a benchmark. This benchmark will be
determined by the calculation of a utility's highest on-system fuel cost. If the
cost per Mwh of power purchases is not greater than the benchmark, then the
purchased power costs should be considered net energy costs that are presumed
fuel costs included in purchased power. If the average cost per Mwh of power
purchases is greater than the benchmark, then the costs are recoverable only
through demonstration of the reasonableness of those purchases to the IURC. The
Indiana Office of Utility Consumer Counselor has appealed that order and the
eventual outcome of this matter is unknown at this time.
Authorized Annual Operating Income: Indiana law requires electric
utilities under the jurisdiction of the IURC to meet operating expense and
income requirements as a condition for approval of requested changes in fuel
adjustment charges. Additionally, customer refunds may result if the utilities'
rolling 12-month operating income, determined at quarterly measurement dates,
exceeds the utilities' authorized annual operating income and cannot be offset
by applicable cumulative net operating income deficiencies. In such a
circumstance, the required customer refund for the quarterly measurement period
is calculated to be one-fourth of the excess annual operating income grossed up
for federal and state taxes as required under I. C. 8-1-2-42.5.
Effective July 1, 1996, IPL's authorized annual jurisdictional electric
net operating income, for purposes of quarterly operating income tests, is $163
million, as established in an IURC order dated August 24, 1995. This level will
be maintained until changed by an IURC order. During 1999, the Commission found
that IPL's rolling annual jurisdictional retail electric operating income was
less than the authorized annual operating income at each of the quarterly
measurement dates (January, April, July and October). At October 31, 1999, IPL's
most recent quarterly measurement date, IPL had a cumulative net operating
deficiency of $128.8 million, of which $10.6 million expires at varying amounts
during the period ending September 1, 2000. The operating deficiency is
calculated by summing the 20 most recent quarterly measurement period annual
results or from the date of the last rate order, whichever is longer. As a
consequence, IPL could, for a period of time, earn above $163 million of
electric jurisdictional retail net operating income without being required to
make a customer refund.
Through the date of IPL's next general electric rate order, IPL is
required to file upward and downward adjustments in fuel cost credits and
charges on a quarterly basis, based on changes in the cost of fuel, irrespective
of its level of earnings.
Pursuant to an order of the IURC, IPL's authorized annual steam net
operating income is $6.2 million, plus any cumulative annual underearnings
occurring during the five-year period subsequent to the implementation of the
new rate tariffs. During 1999, IPL's annual jurisdictional steam operating
income was less than the authorized annual operating income at the January 31,
1999 measurement date.
Allowance For Funds Used During Construction: In accordance with the
prescribed uniform system of accounts, IPL capitalizes an allowance for the net
cost of funds (interest on borrowed funds and a reasonable rate on equity funds)
used for construction purposes during the period of construction with a
corresponding credit to income. IPL capitalized amounts using pretax composite
rates of 9.4%, 9.7% and 9.1% during 1999, 1998 and 1997, respectively.
Utility Plant and Depreciation: Utility plant is stated at original cost
as defined for regulatory purposes. The cost of additions to utility plant and
replacements of retirement units of property, as distinct from renewals of minor
items that are charged to maintenance, are charged to plant accounts. Units of
property replaced or abandoned in the ordinary course of business are retired
from the plant accounts at cost; such amounts plus removal costs, less salvage,
are charged to accumulated depreciation. Depreciation is computed by the
straight-line method based on functional rates approved by the IURC and averaged
3.5% during 1999, 1998 and 1997.
Nonutility property is recorded at cost, and depreciation is calculated
using the straight-line method over the estimated service lives of the related
property (see Note 2). Nonutility depreciation expense was $3.3 million, $2.7
million and $4.4 million for 1999, 1998 and 1997, respectively.
Sale of Accounts Receivable: IPL has sold, on a revolving basis, an
undivided percentage interest in $50 million of its accounts receivable.
Regulatory Assets: Regulatory assets represent deferred costs that have
been included as allowable costs for ratemaking purposes. IPL has recorded
regulatory assets relating to certain costs as authorized by the IURC. Specific
regulatory assets are disclosed in Note 5. As of December 31, 1999, all
nontax-related regulatory assets have been included as allowable costs in orders
of the IURC (see Note 10). IPL is amortizing such regulatory assets to expense
over periods authorized by these orders. Tax-related regulatory assets represent
the net income tax costs to be considered in future regulatory proceedings
generally as the tax-related amounts are paid.
In accordance with regulatory treatment, IPL deferred as a regulatory
asset certain post in-service date carrying charges and certain other costs
related to its investment in Petersburg Unit 4. As authorized in the 1995
Electric Rate Settlement, IPL, effective September 1, 1995, is amortizing this
deferral to expense over a life that generally approximates the useful life of
the related facility. Also in accordance with regulatory treatment, IPL defers
as regulatory assets non-sinking fund debt and preferred stock redemption
premiums and expenses, and amortizes such costs over the life of the original
debt or, in the case of preferred stock redemption premiums, over 20 years.
Derivatives: Enterprises has only limited involvement with derivative
financial instruments and does not use them for trading purposes. Enterprises
entered into interest rate swap agreements as a means of managing the interest
rate exposure on certain of its debt facilities. These interest rate swaps are
accounted for under the accrual method. Under this method, the differential to
be paid or received on the interest rate swap agreement is recognized over the
life of the agreement in interest expense. Changes in market value of interest
swaps accounted for under the accrual method are not reflected in the
accompanying financial statements.
Income Taxes: Deferred taxes are provided for all significant temporary
differences between book and taxable income. The effects of income taxes are
measured based on enacted laws and rates. Such differences include the use of
accelerated depreciation methods for tax purposes, the use of different book and
tax depreciable lives, rates and in-service dates and the accelerated tax
amortization of pollution control facilities. Deferred tax assets and
liabilities are recognized for the expected future tax consequences of existing
differences between the financial reporting and tax reporting basis of assets
and liabilities. IPL has recorded as regulatory assets and net deferred tax
liabilities, income taxes payable and includable in allowable costs for
ratemaking purposes in future years. Investment tax credits that reduced federal
income taxes in the years they arose have been deferred and are being amortized
to income over the useful lives of the properties in accordance with regulatory
treatment.
Cash and Cash Equivalents: Enterprises considers all highly liquid
investments purchased with original maturities of 90 days or less to be cash
equivalents.
Investments: Securities that Enterprises does not intend to hold until
maturity are classified as available-for-sale, and any unrealized gains or
losses are recorded as a separate component of stockholders' equity.
Employee Benefit Plans: Substantially all employees of IPALCO and IPL are
covered by a defined benefit pension plan, defined contribution plans and a
group benefits plan.
The defined benefit pension plan is noncontributory and is funded through
two trusts. Additionally, a select group of management employees of IPALCO and
IPL are covered under a funded supplemental retirement plan. Collectively, these
two plans are referred to as "the Plans." Benefits are based on each individual
employee's years of service and compensation. Enterprises' funding policy is to
contribute annually not less than the minimum required by applicable law, nor
more than the maximum amount that can be deducted for federal income tax
purposes.
A defined contribution plan is sponsored by IPL as the Employees' Thrift
Plan of Indianapolis Power & Light Company (Thrift Plan). Employees elect to
make contributions to the Thrift Plan based on a percentage of their annual base
compensation. Each employee's contribution is matched in amounts up to, but not
exceeding, 4% of the employee's annual base compensation. Employer contributions
to the Thrift Plan were $3.5 million, $3.5 million and $3.3 million in 1999,
1998 and 1997, respectively.
The group benefits plan is sponsored by IPL and provides certain health
care and life insurance benefits to active employees and employees who retire
from active service on or after attaining age 55 and have rendered at least 10
years of service. The postretirement benefit obligations of this plan are funded
through a Voluntary Employee Beneficiary Association (VEBA) Trust. IPL's policy
is to fund the annual actuarially determined postretirement benefit cost.
A defined contribution plan is sponsored by Enterprises as the
Mid-America Energy Resources Employee Retirement Plan. Employees elect to make
contributions to this plan based on a percentage of their annual base
compensation. Each employee's contribution is matched in amounts up to, but not
exceeding, 6% of the employee's annual base compensation.
New Accounting Pronouncement: Statement of Financial Accounting Standards
No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998. SFAS 137 delayed the effective date of
this standard to all fiscal quarters of all years beginning after June 15, 2000.
This statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
condition and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as a fair value hedge, a cash
flow hedge, or a hedge of a foreign currency exposure. The accounting for
changes in the fair value of a derivative (that is, gains and losses) depends on
the intended use of the derivative and the resulting designation. Management has
not yet quantified the effect of the new standard on the consolidated financial
statements.
Use of Management Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported amounts of
revenues and expenses during the reporting period may also be affected by the
estimates and assumptions management is required to make. Actual results may
differ from those estimates. During 1999, IPL changed its estimate for unbilled
revenue which resulted in a $8.0 million increase to unbilled revenue.
Earnings per Share: All references to earnings per share in the Notes
to the Consolidated Financial Statements represent diluted earnings per share.
Reclassifications: Certain amounts from prior years' consolidated
financial statements have been reclassified to conform to the current year
presentation.
2. PLANT IN SERVICE AND OTHER PROPERTY
Utility Plant in Service
------------------------
The original cost of utility plant in service at December 31, segregated by
functional classifications, follows:
1999 1998
- ----------------------------------------------------------------------------
(In Thousands)
Production............................... $1,735,026 $1,716,786
Transmission............................. 239,976 238,453
Distribution............................. 802,543 761,296
General ................................ 144,793 143,364
---------- ----------
Total utility plant in service........ $2,922,338 $2,859,899
========== ==========
Substantially all of IPL's property is subject to the lien of the
indentures securing IPL's First Mortgage Bonds.
In 1997, IPL retired and sold its C.C. Perry W plant site, including land
and improvements, to the state of Indiana White River State Park Commission at
an approximate pretax net gain of $5.7 million included under the caption OTHER
INCOME AND (DEDUCTIONS), "Other - net."
Nonutility Property
-------------------
The original cost of nonutility property at December 31 follows:
1999 1998
- ----------------------------------------------------------------------------
(In Thousands)
District Cooling....................... $ 76,821 $ 80,777
District Heating....................... 5,470 7,672
General .............................. 2,646 2,870
-------- --------
Total nonutility property..... $ 84,937 $ 91,319
======== ========
Substantially all the District Cooling and Heating property is subject to
the lien of existing debt and/or credit agreements.
In 1997, Enterprises initiated a plan to sell, during 1998, two
subsidiaries of Mid-America, Cleveland Thermal and Cleveland Cooling
(collectively referred to as CER) and ceased recording depreciation. Based on
fair market value estimates, Enterprises recorded a charge of $32 million during
1997 to write down the carrying amounts of these businesses to estimated fair
value less cost to sell. The charge was included in Enterprises' OTHER INCOME
AND (DEDUCTIONS), for the year ended December 31, 1997. During 1998, it was
determined that it was not probable that CER would be sold during 1998. Due to
the delay, depreciation was resumed on the CER assets during September 1998.
Enterprises continues to have the ability to remove the assets from operations
and anticipates the sale of CER in 2000. Excluding the charge described above,
these businesses contributed a net loss of $.6 million, $1.5 million and $2.5
million in 1999, 1998 and 1997, respectively.
3. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In December 1997, IPL changed its method of accounting (retroactive to
January 1, 1997) to record revenues of all electricity and steam delivered
during the period. Prior to 1997, IPL recognized revenues on a cycle basis as
meters were read. The new accounting method more accurately reports revenues in
the period in which electricity and steam is used by customers. The cumulative
effect of the change in accounting at January 1, 1997, was $18.3 million (net of
income taxes of $11.2 million and other taxes of $.4 million) or $.19 per share.
The change had the effect of decreasing 1997 income before the cumulative effect
of the accounting change by $1.9 million (net of taxes) or $.02 per share.
4. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
Enterprises using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that Enterprises
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have an effect on the estimated
fair value amounts.
Cash and Cash Equivalents and Notes Payable: The carrying amount
approximates fair value due to the short maturity of these instruments.
Long-Term Debt, Including Current Maturities and Sinking Fund
Requirements: Interest rates that are currently available to Enterprises for
issuance of debt with similar terms and remaining maturities are used to
estimate fair value. The variable rate debt has been included at the face amount
for both carrying amount and fair value. The fair values of the interest rate
swap agreements of Enterprises have been estimated to be $.3 million and $(9.7)
million at December 31, 1999 and 1998, respectively. These amounts represent
what Enterprises would either pay or receive to enter into equivalent agreements
with a swap counterparty. The fair value of the debt outstanding has been
determined on the basis of the specific securities issued and outstanding.
Accordingly, the purpose of this disclosure is not to approximate the value on
the basis of how the debt might be refinanced. At December 31, 1999, and 1998,
the consolidated carrying amount of Enterprises' long-term debt, including
current maturities and sinking fund requirements, and the approximate fair value
are as follows:
1999 1998
------------------------------------------------------------------------
(In Thousands)
Carrying amount $922,527 $909,399
Approximate fair value 908,744 952,121
5. REGULATORY ASSETS
The amounts of regulatory assets at December 31 are as follows:
1999 1998
- ------------------------------------------------------------------------------
(In Thousands)
Related to deferred taxes (Note 1) $ 49,398 $ 46,823
Postretirement benefit costs in excess
of cash payments and amounts capitalized (Note 11) 4,288 10,720
Unamortized reacquisition premium on debt (Note 1) 21,687 22,301
Unamortized Petersburg Unit 4 carrying charges
and certain other costs (Note 1) 28,119 29,174
Demand side management costs (Note 10) 4,456 7,783
--------- ---------
Total regulatory assets $ 107,948 $ 116,801
========= =========
6. CAPITAL STOCK
Stock Repurchases: In 1997, IPALCO conducted a "Dutch Auction"
self-tender offer and purchased 25,078,856 shares of common stock at a total
cost of $403.1 million. During 1998 and 1999, IPALCO repurchased 6 million
shares at a cost of $154 million.
Stock Split: On February 23, 1999, the IPALCO Board of Directors
authorized a two-for-one split of IPALCO's common stock, payable to stockholders
of record on March 5, 1999. All outstanding share, per share and stock option
data in all periods have been restated to reflect the split.
Common Stock: IPALCO has a Rights Agreement, amended and restated as of
April 28, 1998, that is designed to protect IPALCO's shareholders against
unsolicited attempts to acquire control of IPALCO that do not offer what the
Board believes is a fair and adequate price to all shareholders. The Board
declared a dividend of one Right for each share of common stock to shareholders
of record on July 11, 1990. The Rights will expire at the time of redemption or
exchange, or on April 28, 2008, whichever occurs earliest. At this time, the
Rights are attached to and trade with the common stock. The Rights are not
taxable to shareholders or to IPALCO, and they do not affect reported earnings
per share. Under the Rights Agreement, IPALCO has authorized and reserved 120
million shares for issuance.
The following is a reconciliation of the weighted average common shares
for the basic and diluted earnings per share computations:
For the Year Ended December 31,
-------------------------------
1999 1998 1997
---- ---- ----
(In Thousands)
Weighted average common shares 86,096 89,979 95,884
Dilutive effect of stock options 695 1,298 571
------ ------ ------
Weighted average common
and incremental shares 86,791 91,277 96,455
====== ====== ======
IPALCO PowerInvest, IPALCO's Dividend Reinvestment and Direct Stock
Purchase Plan, allows participants to purchase shares of common stock and to
reinvest dividends. The plan provides that such shares may be purchased on the
open market or directly from IPALCO at the option of IPALCO. IPALCO is
authorized to issue approximately 1.4 million additional shares as of December
31, 1999, pursuant to this plan. All purchases in 1999 were made on the open
market.
Under the Thrift Plan, shares may be purchased either on the open market
or, if available, as original issue shares directly from IPALCO. There were
approximately 3.2 million additional shares available for issue under the Thrift
Plan as of December 31, 1999. All purchases in 1999 were made on the open
market.
IPALCO is authorized to issue 55,964 additional shares of common stock
pursuant to the Energy Resources 401(k) plan. All purchases in 1999 were made on
the open market.
IPALCO has an existing stock option plan (1990 Plan) for key employees
under which options to acquire shares of common stock may be granted. Three
million shares of common stock were authorized for issuance under the 1990 Plan,
although no shares are available for future grants. The maximum period for
exercising an option may not exceed 10 years and one day after grant or 10 years
for incentive stock options.
The 1991 Directors' Stock Option Plan (1991 Plan) provides to the
non-employee Directors of IPALCO options to acquire shares of common stock.
These options are exercisable for the period beginning on the six-month
anniversary of, and ending on the 10-year anniversary of, the grant date. Under
the 1991 Plan, 750,000 shares of common stock were authorized for issuance and
108,000 are available for future grants.
The IPALCO Enterprises, Inc. 1997 Stock Option Plan (1997 Plan) for
officers and other key employees authorizes four million shares of common stock
for issuance. As of December 31, 1999, 1,570,500 shares were available for
future grants. The maximum period for exercising an option may not exceed 10
years and one day after the grant provided, however, that the incentive stock
options shall have terms not in excess of 10 years.
A summary of options issued under all plans is as follows:
<TABLE>
<CAPTION>
Weighted Average Range of Option Number of
Price per Share Price per Share Shares
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, January 1, 1997.................. $12.06 $8.416 - $12.686 2,047,140
Granted....................................... 15.69 15.688 2,265,000
Granted....................................... 15.25 15.25 84,000
Exercised..................................... 12.03 8.416 - 15.688 (305,464)
----------
Otstanding, December 31, 1997 14.14 8.416 - 15.688 4,090,676
Granted....................................... 21.03 21.03 150,000
Granted....................................... 20.35 20.345 30,000
Granted....................................... 21.67 21.67 72,000
Exercised..................................... 14.16 8.416 - 15.688 (1,724,378)
----------
Outstanding, December 31, 1998................ 14.80 8.416 - 21.67 2,618,298
Granted....................................... 19.23 16.63 - 23.38 187,000
Exercised..................................... 14.69 8.416 - 20.345 (455,318)
----------
Outstanding, December 31, 1999................ 15.17 8.416 - 23.38 2,349,980
==========
</TABLE>
The number of shares exercisable at December 31, 1999, 1998 and 1997
were: 2,309,980, 2,558,298, and 4,090,676, respectively, with a weighted average
exercise price of $15.06, $14.65 and $14.14, respectively. The weighted average
remaining contractual life of the options outstanding at December 31, 1999, 1998
and 1997 was 6.5 years, 7.0 years and 7.7 years, respectively.
The 1999 Stock Incentive Plan (1999 Plan) is for key employees and
consultants under which options and restricted stock awards may be granted.
Under the 1999 Plan 1.5 million shares were authorized for issuance, and all
shares are available for future grants as of December 31, 1999. The maximum
period for exercising an option may not exceed fifteen years.
IPALCO has a Long-Term Performance and Restricted Stock Incentive Plan
(1995 Plan). Pursuant to the 1995 Plan, 1.2 million shares of common stock of
IPALCO have been authorized and reserved for issuance, and initial awards of
174,608 shares of restricted common stock were made to participating employees
on January 1, 1995. On January 1, 1997 and 1996, an additional 3,256 and 14,638
shares, respectively, were issued to reflect the addition of new participants.
Under the 1995 Plan, shares of restricted common stock with value equal to a
stated percentage of participants' base salary are initially awarded at the
beginning of a three-year performance period, subject to adjustment to reflect
the participants' actual base salary. The shares remain restricted and
nontransferable throughout each three-year performance period, vesting in
one-third increments in each of the three years following the end of the
performance period. The first performance period was from January 1, 1995, to
December 31, 1997. At the end of a performance period, awards are subject to
adjustment to reflect Enterprises' performance compared to peer companies under
two performance criteria, cost-effective service and total return to
shareholders. Depending on Enterprises' performance under these criteria, final
awards may range from 200% of the initial awards to zero. On January 5, 1998, an
additional 18,864 shares were issued to reflect participants' actual base
salaries. On January 15, 1998, the final performance evaluation was performed,
resulting in final awards of 200% of the initial awards with one-third of the
total vesting (147,480 shares). Participants may choose from one of four payout
options for vested shares, including partial cash payout. Of the vested shares,
67,438 were paid out in the form of stock. During 1998, an additional 24,218
shares vested. An additional one-third of the awards vested (115,104 shares) on
January 1, 1999, of which 38,158 shares were paid out in the form of stock. The
final one-third of the amounts vested (115,096 shares) on January 1, 2000, of
which 64,584 shares have been paid out in the form of stock.
On January 27, 1998, the Board of Directors amended the Long-Term
Performance and Restricted Stock Incentive Plan (1998 Plan). Pursuant to the
1998 Plan, an additional 1.8 million shares of common stock of IPALCO have been
authorized and reserved for issuance, for a total of 3 million shares. Initial
awards of 225,382 shares of restricted common stock were made to participating
employees on January 27, 1998. During 1998, 19,826 shares of restricted stock
were canceled. On January 4, 1999, an additional 15,572 shares were issued to
reflect the addition of new participants. On January 3, 2000, an additional
2,933 shares were issued to reflect the addition of new participants. Awards are
made on established targets for the participants to reflect the participants'
actual base salary. The shares remain restricted and nontransferable throughout
each three-year performance period, vesting in one-third increments in each of
the three years following the end of the performance period. At the end of a
performance period, awards are subject to adjustment to reflect Enterprises'
performance compared to companies in the S&P 500 Index with regard to cumulative
total return to shareholders during the three-year performance period. Depending
on Enterprises' performance, final awards may range from 400% of the initial
awards to zero.
APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for the stock-based plans have been
applied by Enterprises. No compensation cost has been recognized for the 1990,
1991, 1997 and 1999 option plans because the stock option exercise price is
equal to the fair value of the underlying common stock at the date of grant. Had
compensation cost been determined based on the fair value at the grant dates for
awards under the plans consistent with the method of SFAS 123, "Accounting for
Stock-Based Compensation," Enterprises' net income for the year ended December
31, 1999, would have decreased from $128.9 million ($1.49 per share) to the pro
forma amount of $128.4 million ($1.48 per share). Enterprises' net income for
the year ended December 31, 1998, would have decreased from $130.1 million
($1.43 per share) to the pro forma amount of $129.6 million ($1.42 per share).
Enterprises' net income and earnings per share for the similar period in 1997
would have decreased from $114.0 million ($1.18 per share) to the pro forma
amount of $110.4 million ($1.15 per share). Enterprises estimated the SFAS 123
fair values by utilizing the binomial options pricing model with the following
assumptions: dividend yields of 2.5% to 6.9%, risk-free rates of 6.3% to 6.9%,
volatility of 12% to 19% and expected lives of five years.
Compensation expense of $1.2 million and $2.0 million for 1999 and 1998,
respectively, as measured by the market value of the common stock at the balance
sheet date, has been recognized in accordance with the vesting period for the
1998 Plan. Compensation expense of $3.1 million and $3.4 million for 1998 and
1997, respectively, was recognized in accordance with the vesting period for the
1995 Plan.
Restrictions on the payment of cash dividends or other distributions of
IPL common stock held by IPALCO and on the purchase or redemption of such shares
by IPL are contained in the indentures securing IPL's First Mortgage Bonds. In
addition, pursuant to IPL's Articles of Incorporation, no dividends may be paid
or accrued and no other distribution may be made on IPL's common stock unless
dividends on all outstanding shares of IPL's preferred stock have been paid or
declared and set apart for payment. All of IPL's retained earnings at December
31, 1999, were free of such restrictions. There are no other restrictions on the
retained earnings of IPALCO.
Cumulative Preferred Stock of Subsidiary: Preferred stock shareholders
are entitled to two votes per share for IPL matters, and if four full quarterly
dividends are in default on all shares of the preferred stock then outstanding,
they are entitled to elect the smallest number of IPL Directors to constitute a
majority. Preferred stock is redeemable solely at the option of IPL and can be
redeemed in whole or in part at any time at specific call prices.
On January 13, 1998, IPL issued the 5.65% Preferred Series, which is
redeemable at par value, subject to certain restrictions, in whole or in part,
at any time on or after January 1, 2008, at the option of IPL.
At December 31, preferred stock consisted of the following:
December 31, 1999
-----------------
Shares Call December 31
Outstanding Price 1999 1998
----------- ---------- -------- ------
(In Thousands)
Cumulative $100 Par Value,
authorized 2,000,000 shares
4% Series................. 47,611 $118.00 $4,761 $4,761
4.2% Series............... 19,331 103.00 1,933 1,933
4.6% Series............... 2,481 103.00 248 248
4.8% Series............... 21,930 101.00 2,193 2,193
5.65% Series.............. 500,000 - 50,000 50,000
------- ------- -------
Total cumulative preferred stock 591,353 $59,135 $59,135
======= ======= =======
During 1999, 1998 and 1997, preferred stock dividends were $3.2 million,
$3.1 million and $2.8 million, respectively.
<PAGE>
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31,
------------
1999 1998
---- ----
Series Due (In Thousands)
------ ---
IPL First Mortgage Bonds:
<S> <C> <C> <C>
6.05% February 2004............................................ $ 80,000 $ 80,000
8% October 2006............................................. 58,800 58,800
7 3/8% August 2007.............................................. 80,000 80,000
6.10% * January 2016............................................. 41,850 41,850
5.40% * August 2017.............................................. 24,650 24,650
7.45% August 2019.............................................. - 23,500
5.50% * October 2023............................................. 30,000 30,000
7.05% February 2024............................................ 100,000 100,000
6 5/8% * December 2024............................................ 40,000 40,000
Unamortized discount - net..................................................... (849) (907)
--------- ---------
Total first mortgage bonds................................................. 454,451 477,893
IPL Variable Series Notes
1991* August 2021.............................................. 40,000 40,000
1994A* December 2024............................................ 20,000 20,000
1995B* January 2023 ............................................ 40,000 40,000
1995C* December 2029 ........................................... 30,000 30,000
1996* November 2029 ........................................... 20,000 20,000
1999 August 2030 ............................................. 23,500 -
--------- ---------
Total long-term debt - IPL..................................................... 627,951 627,893
--------- ---------
Long-Term Debt - Other:
Energy Resources - 7.25% note, due December 2011........................... - 9,500
Energy Resources - 1995 Series variable note, due September 2030........... - 9,300
Energy Resources - 1999 Series variable note, due September 2030........... 18,800 -
ICE - 7.59% note, due February 2016 ....................................... 16,000 16,000
IPALCO Enterprises, Inc. commercial paper.................................. 211,195 197,000
Energy Resources - 8.03% notes payable, due June 2012 ..................... 48,281 49,406
SHAPE -7.50% notes payable, due October 2000 .............................. 300 300
Current maturities............................................................. (52,477) (1,425)
--------- ---------
Total long-term debt - other............................................... 242,099 280,081
--------- ---------
Total long-term debt....................................................... $ 870,050 $ 907,974
========= =========
</TABLE>
* Notes are issued to the city of Petersburg, Indiana, by IPL to secure the loan
of proceeds from various tax-exempt instruments issued by the city.
IPL redeemed the $23.5 million, 7.45% Series bond in October 1999 with
the proceeds from the $23.5 million variable rate note issued September 1999.
Energy Resources refinanced its $9.5 million 7.25% Series note and its $9.3
million 1995 Series variable rate note with the proceeds of an $18.8 million
variable rate note issued May 1999.
The IPL Series 1991 note provides for an interest rate that varies with
the tax-exempt commercial paper rate. The IPL 1994A, 1995B, 1995C and 1996 notes
provide for an interest rate that varies with the tax-exempt weekly rate.
Additionally, these notes can be converted into long-term fixed interest rate
instruments by the issuance of an IPL First Mortgage Bond. The notes are
classified as long-term liabilities because IPL maintains a $150 million
long-term credit facility supporting these agreements, which were unused at
December 31, 1999. The IPL Series 1999 note provides for an interest rate that
varies based on tax-exempt auction rates. IPL, at its option, can change the
interest rate mode for all of the variable series notes to be based on other
short-term rates.
Energy Resources' 1999 variable long-term note due 2030 was issued to the
Indiana Development Finance Authority and has an interest rate which varies with
the tax-exempt weekly rate. Energy Resources, at its option, can change the
interest rate mode for this note to be based on other short-term rates. The note
is classified as a long-term liability because Energy Resources maintains a
long-term credit facility supporting this agreement.
IPALCO's Revolving Credit Facility (Revolver) was issued in April 1997 in
the amount of $401 million. The proceeds were used to purchase, through a
self-tender offer, shares of IPALCO's outstanding common stock. During 1998,
IPALCO repaid the Revolver with a commercial paper facility. The Revolver
currently has no outstanding balance but is available for future borrowings.
According to the credit agreement, IPALCO could borrow up to $160.4 million
until March 31, 2001. The final step down provides for the available borrowings
to decrease to $80.2 million on March 31, 2001, and remain available until March
31, 2002.
The year-end interest rates for the variable rate notes are as follows:
Interest Rate at
December 31,
1999 1998
- -----------------------------------------------------------
Series 1991 3.14% 3.48%
Series 1994A 3.38% 3.56%
Series 1995B 5.21% 5.21%
Series 1995C 3.41% 3.54%
Series 1996 3.41% 3.54%
Series 1999 3.74% -
Energy Resources
Series 1995 note - 3.65%
Energy Resources
Series 1999 note 3.75% -
IPALCO commercial paper 6.65% 6.65%
In conjunction with the issuance of the 1995B note, IPL entered into an
interest rate swap agreement. Pursuant to the swap agreement, IPL will pay
interest at a fixed rate of 5.21% to a swap counterparty and will receive a
variable rate of interest in return, which is identical to the variable rate
payment made on the 1995B note. The result is to effectively establish a fixed
rate of interest on the 1995B note of 5.21%. The interest rate swap agreement is
accounted for on a settlement basis. IPL is exposed to credit loss in the event
of nonperformance by the counterparty for the net interest differential when
floating rates exceed the fixed maximum rate. However, IPL does not anticipate
nonperformance by the counterparty.
In conjunction with the issuance of the Revolver, IPALCO entered into an
interest rate swap agreement which fixed the interest rate on $300 million of
the Revolver. Pursuant to the swap agreement which matures April 1, 2001, IPALCO
will pay interest at a fixed rate of 6.3575% to a swap counterparty and will
receive a variable rate of interest in return based on one month LIBOR. Per the
swap agreement, in July 1998, the amount covered by the swap began decreasing
$25 million each quarter. The notional amount of the swap at December 31, 1999,
was $150 million. This interest rate swap agreement is accounted for on a
settlement basis. This interest rate swap is designated as a hedge of the IPALCO
commercial paper facility and other variable rate debt instruments. IPALCO is
exposed to credit loss in the event of nonperformance by the counterparty for
the net interest differential when floating rates exceed the fixed maximum rate.
However, IPALCO does not anticipate nonperformance by the counterparty.
Maturities on long-term debt for the five years subsequent to December
31, 1999, are as follows:
Maturities
----------
Year Amount
---- ------
(In Thousands)
2000........................... $52,477
2001........................... 83,477
2002........................... 83,650
2003........................... 3,761
2004........................... 84,092
8. LINES OF CREDIT
IPL has committed lines of credit with banks of $55 million used to
provide loans for interim financing. These lines require the payment of
commitment fees. At December 31, 1999, $9 million was outstanding, $40 million
was used to support commercial paper and $6 million was unused. These lines of
credit, based on separate agreements, have expiration dates ranging from
February 2000 to April 2000.
IPALCO has a $60 million line of credit that requires the payment of a
fee. At December 31, 1999, there was no outstanding balance.
Mid-America has a $30 million line of credit that requires the payment of
a commitment fee. At December 31, 1999, $8.5 million was outstanding, and $18.8
million was committed as liquidity for the Energy Resources variable note and
$2.7 million was unused.
The weighted average interest rate on notes payable and commercial
paper outstanding was 6.21% and 6.09% at December 31, 1999 and 1998,
respectively.
9. INCOME TAXES
<TABLE>
<CAPTION>
Federal and state income taxes charged to income are as follows:
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
(In Thousands)
Utility Operating Expenses:
Current income taxes:
<S> <C> <C> <C>
Federal..................................................... $68,093 $72,094 $64,553
State....................................................... 9,208 10,585 9,474
-------- -------- --------
Total current taxes....................................... 77,301 82,679 74,027
Deferred federal income taxes............................... 8,117 (414) 1,444
Deferred state income taxes................................. 1,824 715 803
-------- -------- --------
Total deferred income taxes.............................. 9,941 301 2,247
-------- -------- --------
Net amortization of investment credit....................... (2,767) (2,790) (2,939)
-------- -------- --------
Total charge to utility operating expenses................ 84,475 80,190 73,335
Net credit to other income and deductions................... (5,688) (5,231) (19,004)
-------- -------- --------
78,787 74,959 54,331
Cumulative effect of change in accounting principle......... - - 11,209
-------- -------- --------
Total federal and state income tax provisions............. $78,787 $74,959 $65,540
======== ======== ========
</TABLE>
The provision for federal income taxes (including net investment tax
credit adjustments) is less than the amount computed by applying the statutory
tax rate to pretax income. The reasons for the difference, stated as a
percentage of pretax income, are as follows:
1999 1998 1997
- ------------------------------------------------------------------------------
Federal statutory tax rate...................... 35.0% 35.0% 35.0%
Effect of state income taxes.................... (1.7) (1.8) (2.1)
Amortization of investment tax credits.......... (1.3) (1.3) (1.6)
Preferred dividends of subsidiary............... 0.5 0.5 0.2
Other - net..................................... (0.1) (1.5) (1.2)
----- ----- -----
Effective tax rate............................ 32.4% 30.9% 30.3%
==== ==== ====
The significant items comprising Enterprises' net deferred tax liability
recognized in the consolidated balance sheets as of December 31, 1999, and 1998,
are as follows:
1999 1998
- -------------------------------------------------------------------------------
(In Thousands)
Deferred tax liabilities:
Relating to utility property................... $422,907 $412,922
Unrealized gain on investment security......... 67,297 -
Other.......................................... 19,264 16,542
--------- ---------
Total deferred tax liabilities............. 509,468 429,464
--------- ---------
Deferred tax assets:
Relating to utility property................... 48,417 44,444
Investment tax credit.......................... 23,856 25,547
Employee benefit plans......................... 22,463 24,767
Other.......................................... 12,836 16,271
--------- ---------
Total deferred tax assets.................. 107,572 111,029
--------- ---------
Net deferred tax liability.......................... 401,896 318,435
Current deferred tax liability............... 1,308 108
--------- ---------
Deferred income taxes - net......................... $400,588 $318,327
========= =========
10. RATE MATTERS
Demand Side Management (DSM) Program: In compliance with certain orders,
IPL is deferring certain approved DSM costs and carrying charges. In the
Settlement Agreement approved by the IURC on August 24, 1995, IPL was authorized
to amortize $5.3 million of such costs deferred prior to February 1995, over a
four-year period beginning September 1, 1995. On July 30, 1997, IPL received an
IURC order approving a settlement agreement authorizing IPL to recognize in
rates the existing regulatory asset (consisting of DSM costs deferred after
January 31, 1995), along with carrying charges, and also to approve changes to
IPL's DSM programs. On August 18, 1999, IPL received an IURC order approving a
settlement agreement authorizing IPL to extend its low income single family
residential DSM program through July 30, 2000.
Elect Plan: During 1998, the IURC approved a plan that allows IPL
customers with less than 2,000 kilowatts of demand, an opportunity to choose
optional service or payment plans. This includes a green power option, a fixed
rate per unit of consumption option and a fixed bill option. Customers not
choosing one of these options continue to receive electric service under
existing tariffs.
<PAGE>
11. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------- -----------------------
(In Thousands) 1999 1998 1999 1998
-------- -------- --------- --------
Change in benefit obligation
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year $276,638 $254,540 $149,761 $136,705
Service cost 5,845 5,535 3,761 3,557
Interest cost 18,899 18,021 10,025 9,972
Actuarial (gain) loss (11,765) 12,740 (17,717) 5,204
Amendments 764 (1,408) - -
Benefits paid (13,774) (12,790) (5,831) (5,677)
--------- -------- -------- --------
Benefit obligation at end of year 276,607 276,638 139,999 149,761
--------- -------- -------- --------
Change in plan assets
Fair value of plan assets
at beginning of year 290,770 262,126 83,846 68,688
Actual return on plan assets 30,417 37,179 14,288 1,743
Employer contribution 3,324 4,254 18,274 19,092
Benefits paid (13,774) (12,789) (5,831) (5,677)
--------- -------- -------- --------
Fair value of plan assets at end of year 310,737 290,770 110,577 83,846
--------- -------- -------- --------
Funded status 34,130 14,132 (29,422) (65,915)
Unrecognized net gain (70,048) (55,065) (54,476) (30,532)
Unrecognized prior service cost 15,241 15,871 - -
Unrecognized net transition (asset) obligation (8,341) (9,755) 79,560 85,679
Adjustment to recognize minimum liability - (5,136) - -
--------- -------- -------- --------
Accrued benefit cost $(29,018) $(39,953) $ (4,338) $(10,768)
========= ======== ======== ========
Weighted-average assumptions as of
December 31
Discount rate 7.50% 7.00% 7.50% 7.00%
</TABLE>
The defined benefit pension plan had expected returns on plan assets of
9.0%, 8.0% and 8.0% for 1999, 1998 and 1997, respectively. The defined benefit
plan assumed compensation increases to be 5.10% during 1998 and 1997. During
1999, the defined benefit plan began using salary bands to determine future
benefit costs rather than rate of compensation increases. The supplemental
retirement pension plan used an expected return on plan assets of 8.0% for 1999,
1998 and 1997. The supplemental plan assumed compensation increases to be 6.0%
for 1999, 1998 and 1997.
Other benefits used expected rates of return on plan assets of 8.0% for
1999, 1998 and 1997. For measurement purposes, a 6.6% annual rate of increase in
the per capita cost of covered health care benefits was assumed for 2000. The
year in which the ultimate health care cost trend rate of 4.5% will be achieved
is assumed to be 2003.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------------------- --------------------------------
(In Thousands) 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Components of net periodic benefit cost
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 8,451 $ 10,617 $ 6,584 $ 3,761 $ 3,557 $ 4,021
Interest cost 18,899 18,021 16,873 10,025 9,972 11,135
Expected return on plan assets (25,417) (20,426) (18,344) (6,505) (5,278) (3,780)
Amortization of transition (asset) obligation (1,414) (1,414) (1,414) 6,120 6,120 6,120
Amortization of prior service cost 1,394 1,124 1,159 - - -
Recognized actuarial gain (2,051) (1,545) (910) (1,556) (1,656) (551)
-------- -------- -------- -------- -------- --------
Net periodic benefit cost (138) 6,377 3,948 11,845 12,715 16,945
Less: amounts capitalized (48) 339 621 1,895 1,924 2,930
-------- -------- -------- -------- -------- --------
Amount charged to expense $ (90) $ 6,038 $ 3,327 $ 9,950 $ 10,791 $ 14,015
======== ======== ======== ======== ======== ========
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one percentage-point change in
assumed health care cost trend rates would have the following effects:
One Percentage- One Percentage-
(In Thousands) Point Increase Point Decrease
-------------- --------------
Effect on total of service and
interest cost components $ 1,622 $ (1,622)
Effect on postretirement
benefit obligation 15,475 (15,475)
Also, during 1999, 1998 and 1997, IPL expensed postretirement regulatory
asset amortization of $6.4 million each year. The final period of amortization
is August 2000.
12. COMMITMENTS AND CONTINGENCIES
In 2000, Enterprises anticipates the cost of its construction programs
to be approximately $107 million.
Enterprises is involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based upon advice of counsel, believes that the final
outcome will not have a material adverse effect on the consolidated financial
statements.
With respect to environmental issues, Enterprises has ongoing discussions
with various regulatory authorities and continues to believe that Enterprises is
in compliance with its various permits.
13. GAIN ON TERMINATION OF AGREEMENT
During September 1998, a pretax gain of $12.5 million ($7.8 million
after-tax) resulted from the liquidation and termination of an agreement to
purchase up to 150 megawatts of power during the summer months through the year
2000.
14. COMPREHENSIVE INCOME
Enterprises has classified its investment in marketable equity securities
as available-for-sale, and any unrealized gains or losses are recorded as a
separate component of shareholders' equity. There were no unrealized gains on
securities prior to 1999. During 1999, Enterprises recorded directly to
shareholders' equity an unrealized after-tax gain of $106.7 million resulting
from its investment in Internet Capital Group, Inc. (Nasdaq:ICGE), an internet
holding company, which went public in August 1999. The gross unrealized gain on
these available-for-sale securities was $174.0 million and the related taxes
would be $67.3 million. The cost basis and the market value for the investment
were $1.2 million and $175.2 million, respectively, at December 31, 1999
(1,030,600 shares). There have been no proceeds from sales of these securities
and no realized gains during 1999. The balance of other comprehensive income,
net of taxes, at December 31, 1999 was $106.7 million.
15. SEGMENT INFORMATION
Operating segments are components of an enterprise for which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. Enterprises' reportable business segments are electric and "all
other." Steam operations of IPL and all subsidiaries other than IPL are combined
in the "all other" category. The accounting policies of the identified segments
are consistent with those policies and procedures described in the summary of
significant accounting policies (see Note 1). Intersegment sales are generally
based on prices that reflect the current market conditions. The following tables
provide information about Enterprises' business segments:
<TABLE>
<CAPTION>
1999 1998 1997
Electric All Other Total Electric All Other Total Electric All Other Total
-------- --------- ----- -------- --------- ----- -------- --------- -----
(In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $800 $ 69 $869 $786 $ 69 $855 $738 $ 71 $809
Depreciation and
Amortization 104 7 111 100 6 106 100 8 108
Pre-tax Operating Income 263 10 273 255 7 262 233 7 240
Income Taxes 83 3 86 79 4 83 71 (10) 61
Property - net
of Depreciation 1,674 145 1,819 1,671 149 1,820 1,693 146 1,839
Capital Expenditures 103 2 105 74 8 82 71 4 75
</TABLE>
Included within Depreciation and Amortization for the All Other segment
is IPL steam depreciation of $3 million for each of the years 1999, 1998 and
1997. Included within Pre-tax Operating Income for the All Other segment is IPL
steam pre-tax operating income of $5 million, $5 million and $8 million for
1999, 1998 and 1997, respectively. Included within Income Taxes for the All
Other segment is IPL steam income taxes of $1 million, $1 million and $2 million
for 1999, 1998 and 1997, respectively. Included within Property - net of
Depreciation for the All Other segment is IPL steam plant of $76 million, $77
million and $73 million for 1999, 1998 and 1997, respectively. Included within
Capital Expenditures for the All Other segment is IPL steam plant of $2 million,
$7 million and $2 million for 1999, 1998 and 1997, respectively.
<PAGE>
16. QUARTERLY RESULTS (UNAUDITED)
Operating results for the years ended December 31, 1999, and 1998, by
quarter, are as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
1999
------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Utility operating revenues................. $ 200,831 $ 203,010 $228,515 $ 202,296
Utility operating income................... $ 43,251 $ 49,434 $ 48,414 $ 42,402
Net income................................. $ 29,597 $ 34,652 $ 35,379 $ 29,319
Weighted average shares.................... 87,218 85,718 85,720 85,728
Basic earnings per share................... $ .34 $ .40 $ .41 $ .34
Weighted average diluted shares............ 88,115 86,502 86,368 86,179
Diluted earnings per share................. $ .34 $ .40 $ .41 $ .34
1998
------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Utility operating revenues................. $ 190,321 $ 206,706 $222,028 $ 202,201
Utility operating income................... $ 40,142 $ 49,198 $ 51,665 $ 38,506
Net income................................. $ 25,337 $ 35,809 $ 47,299 $ 21,674
Weighted average shares.................... 89,678 89,848 89,908 90,482
Basic earnings per share................... $ .28 $ .40 $ .53 $ .24
Weighted average diluted shares............ 91,022 91,198 91,210 91,678
Diluted earnings per share................. $ .28 $ .39 $ .52 $ .24
</TABLE>
The quarterly figures reflect seasonal and weather-related fluctuations
that are normal to IPL's operations.
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the total for the year.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Information relating to the directors of the registrant, set
forth in the Proxy Statement of IPALCO Enterprises, Inc. dated
March 20, 2000, (the registrant's Proxy Statement), under
"Proposal 1-Election of Five Directors" at pages 4-6 is
incorporated herein by reference. Information relating to the
registrant's executive officers is set forth at pages I-9 -
I-10 of this Form 10-K under "Executive Officers of the
Registrant at February 29, 2000."
Information relating to Section 16(a) Beneficial Ownership
Reporting Compliance, set forth in the registrant's Proxy
Statement at page 3 is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
----------------------
Information relating to executive compensation, set forth in
the registrant's Proxy Statement under "Compensation of
Executive Officers" at page 13, "Compensation of Directors" at
page 8, "Compensation Committee Interlocks and Insider
Participation" at page 8, "Pensions Plans" at page 18, and
"Employment Contracts and Termination of Employment and Change
in Control Arrangements" at page 19, is incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Information relating to ownership of the registrant's common
stock by persons known by the registrant to be the beneficial
owners of more than 5% of the outstanding shares of common
stock and by management, set forth in the registrant's Proxy
Statement under "Voting Securities and Beneficial Owners" at
pages 23 is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Information relating to certain relationships and related
transactions, set forth in the registrant's Proxy Statement
under "Certain Business Relationships" at page 8, is
incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) The Consolidated Financial Statements under this
Item 14 (a) 1 filed in this Form 10-K are those of
IPALCO Enterprises, Inc. and subsidiaries.
1. Consolidated Financial Statements
---------------------------------
Included in Part II of this report:
Independent Auditors' Report
Statements of Consolidated Income for the
Years Ended December 31, 1999, 1998 and 1997
Consolidated Balance Sheets, December 31, 1999
and 1998
Statements of Consolidated Cash Flows
for the Years Ended December 31, 1999,
1998 and 1997
Statements of Consolidated Common
Shareholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. Exhibits
--------
The Exhibit Index beginning on page IV-5 of
this Annual Report on Form 10-K lists the exhibits
that are filed as part of this report.
3. Financial Statement Schedules
None
(b) Reports on Form 8-K
None
<TABLE>
<CAPTION>
IPALCO ENTERPRISES, INC. EXHIBIT 11.1
Computation of Per Share Earnings
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
YEAR ENDED DECEMBER 31, 1999:
Basic Diluted
--------------- ---------------
Weighted average number of shares
<S> <C> <C>
Average common shares outstanding at December 31, 1999 86,095,975 86,095,975
Dilutive effect for stock options at December 31, 1999 - 694,878
--------------- ---------------
Adjusted weighted average shares at December 31, 1999 86,095,975 86,790,853
=============== ===============
Net income $128,947 $128,947
=============== ===============
Earnings per share $1.50 $1.49
=============== ===============
YEAR ENDED DECEMBER 31, 1998:
Basic Diluted
--------------- ---------------
Weighted average number of shares
Average common shares outstanding at December 31, 1998 89,979,192 89,979,192
Dilutive effect for stock options at December 31, 1998 - 1,297,978
--------------- ---------------
Adjusted weighted average shares at December 31, 1998 89,979,192 91,277,170
=============== ===============
Net income $130,119 $130,119
=============== ===============
Earnings per share $1.45 $1.43
=============== ===============
YEAR ENDED DECEMBER 31, 1997:
Basic Diluted
--------------- ---------------
Weighted average number of shares
Average common shares outstanding at December 31, 1997 95,883,514 95,883,514
Dilutive effect for stock options at December 31, 1997 - 571,166
--------------- ---------------
Adjusted weighted average shares at December 31, 1997 95,883,514 96,454,680
=============== ===============
Net income to be used to compute earnings per share
Income before cumulative effect of accounting change $95,699 $95,699
Cumulative effect of accounting change 18,347 18,347
--------------- ---------------
Net income $114,046 $114,046
=============== ===============
Income before cumulative effect of accounting change $1.00 $0.99
Cumulative effect of accounting change .19 .19
--------------- ---------------
Earnings per share $1.19 $1.18
=============== ===============
</TABLE>
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.
IPALCO ENTERPRISES, INC.
By /s/ John R. Hodowal
------------------------
(John R. Hodowal, Chairman
of the Board and President)
Date: February 29, 2000
-----------------
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 dates indicated.
Signature Title Date
--------- ----- ----
(i) Principal Executive Officer:
/s/ John R. Hodowal Chairman of the Board February 29, 2000
------------------------------ and President
(John R. Hodowal)
(ii) Principal Financial Officer:
/s/ John R. Brehm Vice President and February 29, 2000
------------------------------ Treasurer
(John R. Brehm)
(iii) Principal Accounting Officer:
/s/ Stephen J. Plunkett Controller February 29, 2000
------------------------------
(Stephen J. Plunkett)
(iv) A majority of the Board of Directors of IPALCO Enterprises, Inc.:
/s/ Joseph D. Barnett, Jr. Director February 29, 2000
- ----------------------------
(Joseph D. Barnett, Jr.)
/s/ Daniel R. Coats Director February 29, 2000
- -----------------------------
(Daniel R. Coats)
/s/ Mitchell E. Daniels, Jr. Director February 29, 2000
- --------------------------------------
(Mitchell E. Daniels, Jr.)
/s/ Rexford C. Early Director February 29, 2000
- --------------------------------
(Rexford C. Early)
/s/ Otto N. Frenzel III Director February 29, 2000
- -------------------------------
(Otto N. Frenzel III)
/s/ Max L. Gibson Director February 29, 2000
- --------------------------------
(Max L. Gibson)
/s/ John R. Hodowal Director February 29, 2000
- -------------------------------
(John R. Hodowal)
/s/ Ramon L. Humke Director February 29, 2000
- ----------------------------
(Ramon L. Humke)
/s/ Andre B. Lacy Director February 29, 2000
- -------------------------------
(Andre B. Lacy)
/s/ L. Ben Lytle Director February 29, 2000
- ----------------------------------
(L. Ben Lytle)
/s/ Michael S. Maurer Director February 29, 2000
- ---------------------------------------
(Michael S. Maurer)
/s/ Sallie W. Rowland Director February 29, 2000
- -----------------------------
(Sallie W. Rowland)
/s/ Thomas H. Sams Director February 29, 2000
- ----------------------------
(Thomas H. Sams)
EXHIBIT INDEX
-------------
Copies of documents listed below which are identified with an asterisk
(*) are incorporated herein by reference and made a part hereof. The management
contracts or compensatory plans are marked with a double asterisk (**) after the
description of the contract or plan.
Exhibit
No. Description
--- -----------
3.1* Articles of Incorporation of IPALCO Enterprises, Inc., as amended.
(Exhibit 3.1 to the Form 10-Q dated 6-30-97.)
3.2* Bylaws of IPALCO Enterprises, Inc. (Exhibit 3.2 to the Form 10Q dated
3-31-99.)
4.1* IPALCO PowerInvest Dividend Reinvestment and Direct Stock Purchase
Plan. (Exhibit 4.1 to the Form 10-Q dated 9-30-96.)
4.2* IPALCO Enterprises, Inc. and First Chicago Trust Company of New
York (Rights Agent) - Rights Agreement, as amended and restated.
(Exhibit B to the Form 8-K dated 4-29-98.)
10.1* IPALCO Enterprises, Inc. and Indianapolis Power & Light Company
Unfunded Deferred Compensation Plan for Officers and Directors as
amended and restated January 1, 1999. (Exhibit 10.1 to the Form 10-K
dated 12-31-98.) **
10.2* Directors' and Officers' Liability Insurance Policy No. DO392B1A97
effective June 1, 1998 to June 1, 1999. (Exhibit 10.1 to the Form
10-Q dated 6-30-99.) **
10.3* IPALCO Enterprises, Inc. Benefit Protection Fund and Trust
Agreement effective November 1, 1988. (Form 10-K for year ended
12-31-88.) **
10.4* Exhibit A to IPALCO Enterprises, Inc. Benefit Protection Fund and
Trust Agreement dated January 1, 1998. (Exhibit 10.5 to the Form 10-K
dated 12-31-97.) **
10.5* IPALCO Enterprises, Inc. Annual Incentive Plan and Administrative
Guidelines effective January 1, 1990. (Form 10-K for year ended
12-31-89.) **
10.6* IPALCO Enterprises, Inc. Long-Term Performance and Restricted
Stock Incentive Plan (as amended and restated effective
January 1, 1998). (Exhibit 10.1 to the Form 10-Q dated 3-31-98.) **
10.7* IPALCO Enterprises, Inc. 1990 Stock Option Plan. (Exhibit 10.8 to the
Form 10-K dated 12-31-94.) **
10.8* IPALCO Enterprises, Inc. 1991 Directors' Stock Option Plan.
(Exhibit 10.9 to the Form 10-K dated 12-31-94.) **
10.9* IPALCO Enterprises, Inc. 1997 Stock Option Plan. (Exhibit 10.1 to the
Form 10-Q dated 6-30-97.)**
10.10 IPALCO Enterprises, Inc. 1999 Stock Incentive Plan. **
10.11 Form of Termination Benefits Agreement together with schedule of
parties to, and dates of, the Termination Benefits Agreements. **
10.12 Termination Benefits Agreement between IPALCO Enterprises, Inc.,
Indianapolis Power & Light Company and Ramon L. Humke. **
10.13* Employment Agreement between IPALCO Enterprises, Inc. and John R.
Hodowal dated July 29, 1986. (Exhibit 10.11 to the Form 10-K dated
12-31-94.) **
10.14 Employment Agreement between IPALCO Enterprises, Inc. and Ramon L.
Humke dated 12-31-99. **
10.15* Voluntary Employee Beneficiary Association (VEBA) Trust Agreement.
(Exhibit 10.12 to the Form 10-K dated 12-31-94.) **
10.16 First Amendment to Voluntary Employee Beneficiary Association (VEBA)
Trust Agreement as amended and effective 11-30-99. **
11.1 Computation of Per Share Earnings.
20.1* Form 10-K of Indianapolis Power & Light Company for the year ended
December 31, 1999, and all exhibits thereto. (SEC File No. 1-3132-2.)
21.1 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent.
27.1 Financial Data Schedule.
EXHIBIT 10.10
IPALCO ENTERPRISES, INC.
1999 STOCK INCENTIVE PLAN
1. Purpose. The purpose of the IPALCO
Enterprises, Inc. 1999 Stock Incentive Plan (the "Plan")
is to provide to certain officers (including officers who
are members of the Board of Directors), other key
executive employees and non-employee consultants of
IPALCO Enterprises, Inc. (the "Corporation") and of any
of the eighty percent (80%) or greater owned, direct or
indirect, subsidiaries of the Corporation (individually a
"Subsidiary" and collectively the "Subsidiaries") who are
materially responsible for the management or operation of
the business of the Corporation or a Subsidiary, a
favorable opportunity to acquire Common Stock, without
par value, of the Corporation ("Common Stock"), thereby
providing them with an increased incentive to work for
the success of the Corporation and the Subsidiaries and
better enabling the Corporation and the Subsidiaries to
attract and retain capable executive personnel and
outside consultants.
2. Administration of the Plan. The Plan shall be
administered, construed and interpreted by the
Compensation Committee (the "Committee") of the Board of
Directors of the Corporation. The Committee must be
composed of two or more persons who qualify as "Non-
Employee Directors" within the meaning of Rule 16b-
3(b)(3) promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act") and as "outside
directors" as defined in Treasury Reg. 1.162-27(e)(3).
The decision of a majority of the members of the
Committee shall constitute the decision of the Committee,
and the Committee may act (a) at a meeting at which a
majority of the members of the Committee is present, (b)
by simultaneous telephonic communication as authorized by
IND. CODE 23-1-34-1, or (c) by a written consent signed
by all members of the Committee. The Committee shall
have the sole, final and conclusive authority to
determine, consistent with and subject to the provisions
of the Plan:
(a) the individuals to whom options (the
"Optionees") and to whom restricted share awards
shall be granted under the Plan (the Optionees and
restricted share grantees are collectively referred
to as the "Awardees") ;
(b) the time when options or restricted shares
shall be granted hereunder;
(c) the number of shares of Common Stock of
the Corporation to be covered under each option or
restricted share award;
(d) the option price to be paid upon the
exercise of each option;
(e) the price to be paid, if any, for
restricted shares;
(f) the period within which each option may be
exercised;
(g) the period of restriction for restricted
share awards; and
(h) the terms and conditions of the respective
agreements by which options or restricted share
awards granted shall be evidenced.
The Committee shall also have authority to prescribe,
amend and rescind rules and regulations relating to the
Plan, and to make all other determinations necessary or
advisable in the administration of the Plan.
3. Eligibility. The Committee may, consistent
with the purposes of the Plan, award options or
restricted shares to officers, other key employees and
non-employee consultants of the Corporation or of a
Subsidiary who in the opinion of the Committee are
materially responsible for the management or operation of
the business of the Corporation or of a Subsidiary.
Subject to the provisions of Section 4 hereof, an
individual who has been granted an option or restricted
share awards under the Plan, if he or she is otherwise
eligible, may be granted an additional option or award if
the Committee shall so determine.
4. Stock Subject to the Plan. There shall be
reserved for issuance upon the exercise of options
granted under the Plan or restricted share awards, one
million and five hundred thousand (1,500,000) shares of
the Corporation's Common Stock which are held by the
Corporation as treasury shares (the "Plan Common Stock").
Such Plan Common Stock shall be the sole source of shares
for which options or restricted share awards may be
granted under the Plan. Subject to Section 6 hereof, the
shares for which options or restricted share awards may
be granted under the Plan shall not exceed that number.
If any option shall expire or terminate for any reason
without having been exercised in full or if any
restricted share award is forfeited, the unpurchased
shares or forfeited shares subject thereto shall (unless
the Plan shall have terminated) become available for
other options or restricted share awards under the Plan.
5. Terms of Option. Each option granted under the
Plan shall be subject to the following terms and
conditions and to such other terms and conditions not
inconsistent herewith as the Committee may deem
appropriate in each case:
(a) Option Price. The price to be paid for
shares of Plan Common Stock upon the exercise of
each option shall be determined by the Committee at
the time such option is granted.
(b) Period for Exercise of Option. An option
shall not be exercisable after the expiration of
such period as shall be fixed by the Committee at
the time such option is granted, but such period in
no event shall exceed fifteen (l5) years from the
date on which such option is granted; provided,
however, that no option shall be exercisable in any
calendar year during which the Committee determines
that the Optionee is an individual whose
compensation is subject to the limits set forth in
Section 162(m) of the Internal Revenue Code of 1986
(the "Code").
(c) Exercise of Options. The option price of
each share of Plan Common Stock purchased upon
exercise of an option shall be paid in full (1) in
cash at the time of such exercise, (2) if the
Optionee may do so in conformity with Regulation T
(12 C.F.R. Section 220.3(e)(4)) and without
violating Section 16(b) or (c) of the 1934 Act (to
the extent applicable) and subject to approval by
the Committee, by delivering a properly executed
exercise note together with irrevocable
instructions to a broker to deliver promptly to the
Corporation the total option price in cash and, if
desired, the amount of any taxes to be withheld from
the Optionee's compensation as a result of any
withholding tax obligation of the Corporation or any
of its Subsidiaries, as specified in such notice, or
(3) by tendering to the Corporation whole shares of
Common Stock owned by him or her or any combination
of whole shares of Common Stock owned by him or her
and cash, having a fair market value equal to the
cash exercise price of the shares with respect to
which the option is being exercised. For this
purpose, the fair market value of the shares
tendered by the Optionee shall be computed as of the
exercise date in such manner as determined by the
Committee, consistent with the requirements of 422
of the Code. The Committee shall have the authority
to grant options exercisable in full at any time
during their term, or exercisable in such quotas as
the Committee shall determine. An option may be
exercised at any time or from time to time during
the term of the option as to any or all whole shares
which have become subject to purchase pursuant to
the terms of the option (including, without
limitation, any quotas with respect to option
exercise) or the Plan.
(d) Nontransferability of Option. An Option
may not be transferred by the Optionee otherwise
than by will or the laws of descent and
distribution, and during the lifetime of the
Optionee shall be exercisable only by him or her.
(e) Investment Representations. Unless the
shares of Plan Common Stock subject to an option are
registered under applicable federal and state
securities laws, each Optionee by accepting an
option shall be deemed to agree for himself or
herself and his or her legal representatives that
any option granted to him or her and any and all
shares of Plan Common Stock purchased upon the
exercise of the option shall be acquired for
investment and not with a view to, or for the sale
in connection with, any distribution thereof, and
each notice of the exercise of any portion of an
option shall be accompanied by a representation in
writing, signed by the Optionee or his or her legal
representatives, as the case may be, that the shares
of Plan Common Stock are being acquired in good
faith for investment and not with a view to, or for
sale in connection with, any distribution thereof
(except in case of the Optionee's legal
representatives for distribution, but not for sale,
to his or her legal heirs, legatees and other
testamentary beneficiaries). Any shares issued
pursuant to an exercise of an option may, but need
not, bear a legend evidencing such representations
and restrictions. In addition, if the options and
shares of Plan Common Stock issued pursuant to this
Plan are issued in reliance upon Rule 147,
promulgated under the Securities Act of 1933, as
amended, the written representations required by
such rule shall be obtained from the Optionees prior
to or at the time they are granted options, any and
all legends required by Rule 147 shall be set forth
on the certificates representing shares of Plan
Common Stock issued pursuant to the exercise of such
options, and stop transfer instructions shall be
issued to the Corporation's recordkeeping transfer
agent with respect to such shares.
(f) Agreement. Each option shall be evidenced
by an agreement between the optionee and the
Corporation.
(g) Certificates. The certificate or
certificates for the shares issuable upon an
exercise of an option shall be issued as promptly as
practicable after such exercise. An Optionee shall
not have any rights of a shareholder in respect to
the shares of Plan Common Stock subject to an option
until the date of issuance of a stock certificate to
him or her for such shares. In no case may a
fraction of a share be purchased or issued under the
Plan, but if, upon the exercise of an option, a
fractional share would otherwise be issuable, the
Corporation shall pay cash in lieu thereof.
(h) No Right to Continued Service. Nothing in
this Plan or in any agreement entered into pursuant
hereto shall confer on any person any right to
continue in the employ of, or as a consultant to,
the Corporation or its Subsidiaries or affect any
rights of the Corporation, a Subsidiary, or the
shareholders of the Corporation may have to
terminate his or her employment or consulting
service at any time.
(i) Non-Qualified Stock Options. Options
granted under the Plan shall be non-qualified stock
options and not incentive stock options.
6. Adjustment of Shares. In the event of any
change after the effective date of the Plan in the
outstanding stock of the Corporation by reason of any
reorganization, recapitalization, stock split, stock
dividend, combination of shares, exchange of shares,
merger or consolidation, liquidation, or any other change
after the effective date of the Plan in the nature of the
shares of stock of the Corporation, the Committee shall
determine what changes, if any, are appropriate in the
number and kind of shares reserved under the Plan, and in
the option price and restricted share price under and the
number and kind of shares covered by outstanding awards
granted under the Plan. Any determination of the
Committee hereunder shall be conclusive.
7. Restricted Share Awards. The Committee may
also grant restricted share awards of Plan Common Stock
which entitle Awardees to receive shares of Plan Common
Stock. Each restricted share award shall be evidenced by
a Restricted Share Agreement between the Corporation and
the Awardee which Agreement shall set forth the terms and
conditions of the award to the extent not inconsistent
with the provisions of the Plan. A restricted share
award may provide for the crediting or payment to the
Awardee, on each dividend payment date, of an amount
equal to the dividends on awarded shares. A restricted
share award may also provide for the distribution of
shares subject to the following conditions:
(a) the shares may not be distributed earlier
than six (6) months after award;
(b) the shares may not be transferred until
the lapsing of the forfeiture provisions;
(c) the shares shall be deposited with the
Secretary of the Corporation until the lapsing of
the forfeiture provisions;
(d) dividends on awarded shares shall be
distributed at such times as are determined by the
Committee; and
(e) the shares shall be subject to forfeiture
under the circumstances described in the Restricted
Share Agreement between the Corporation and the
Awardee.
Each restricted share award shall provide for the
distribution of the awarded shares free of all
restrictions at such time or times as the Committee shall
determine, and specified in the Restricted Share
Agreement.
8. Cash Awards. The Committee may, at any time
and in its discretion, grant to any Awardee the right to
receive, at such times and in such amounts as determined
by the Committee in its discretion, a cash amount ("cash
award") which is intended to reimburse the Awardee for
all or a portion of the federal, state and local income
taxes imposed upon such Awardee as a consequence of the
exercise of a non-qualified stock option and the receipt
of a cash award or upon the holder of a restricted share
award as a result of the vesting of the shares subject to
the restricted share award and the receipt of a cash
award.
9. Replacement and Extension of the Terms of
Options and Cash Awards. The Committee from time to time
may permit an Optionee under the Plan or any other stock
option plan heretofore or hereafter adopted by the
Corporation or any Subsidiary to surrender for
cancellation any unexercised outstanding stock option and
receive from the Corporation or subsidiary in exchange
therefor an option for such number of shares of Plan
Common Stock as may be designated by the Committee. Such
Optionees also may be granted related cash awards as
provided in Section 8 hereof.
10. Tax Withholding. Whenever the Corporation
proposes or is required to issue or transfer treasury
shares of Plan Common Stock under the Plan, the
Corporation shall have the right to require the Awardee
or his or her legal representative to remit to the
Corporation an amount sufficient to satisfy any federal,
state and/or local withholding tax requirements prior to
the delivery of any certificate or certificates for such
shares, and whenever under the Plan payments are to be
made in cash, such payments shall be net of an amount
sufficient to satisfy any federal, state and/or local
withholding tax requirements.
11. Amendment. The Board of Directors of the
Corporation may amend the Plan from time to time and,
with the consent of the Awardee, the terms and provisions
of his or her option or restricted share award.
No amendment of the Plan, however, may, without the
consent of the Awardees, make any changes in any
outstanding options or awards theretofore granted under
the Plan which would adversely affect the rights of such
Awardees.
12. Termination. The Board of Directors of the
Corporation may terminate the Plan at any time and no
option or restricted share award shall be granted
thereafter. Such termination, however, shall not affect
the validity of any option or restricted share award
theretofore granted under the Plan.
13. Successors. The Plan shall be binding upon the
successors and assigns of the Corporation.
14. Governing Law. The terms of any options or
restricted share awards granted hereunder and the rights
and obligations hereunder of the Corporation, the
Awardees and their successors in interest shall, except
to the extent governed by federal law, be governed by
Indiana law.
15. Government and Other Regulations. The
obligations of the Corporation to issue or transfer and
deliver shares under options or awards granted under the
Plan shall be subject to compliance with all applicable
laws, governmental rules and regulations, and
administrative action.
16. Effective Date. The Plan shall become
effective when it shall have been approved by the
Corporation's Board of Directors.
EXHIBIT 10.11
TERMINATION BENEFITS AGREEMENT
AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1993
This Agreement, dated as of January 1, 1993, by and
between IPALCO ENTERPRISES, INC., an Indiana corporation
having its principal executive offices at 25 Monument
Circle, Indianapolis, Indiana 46204 ("IPALCO" or the
"Company"), and , an Indiana resident whose mailing
address is (the "Executive").
R E C I T A L S
The following facts are true:
A. The Executive is serving the Company as a key
executive officer, and is expected to continue to make a
major contribution to the profitability, growth, and
financial strength of the Company.
B. The Company considers the continued services of
the Executive to be in the best interests of the Company
and its shareholders, and desires to assure itself of the
availability of such continued services in the future on
an objective and impartial basis and without distraction
or conflict of interest in the event of an attempt to
obtain control of the Company.
C. The Executive is willing to remain in the employ
of the Company upon the understanding that the Company
will provide him with income security upon the terms and
subject to the conditions contained herein if his
employment is terminated by the Company without cause or
if he voluntarily terminates his employment for good
reason.
D. If the Company and Executive entered into one or
more Termination Benefits Agreements prior to this
Agreement (the "Prior Termination Benefits Agreements"),
this Agreement is intended to supersede and replace the
Prior Termination Benefits Agreements.
A G R E E M E N T
In consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the
Company and the Executive agree as follows:
1. Undertaking. The Company agrees to pay to the
Executive the termination benefits specified in paragraph
2 hereof if (a) control of IPALCO is acquired (as defined
in paragraph 3(a) hereof) during the term of this
Agreement (as described in paragraph 5 hereof) and (b)
within three (3) years after the acquisition of control
occurs (i) the Company terminates the employment of the
Executive for any reason other than Cause (as defined in
paragraph 3(b) hereof), death, the Executive's attainment
of age sixty-five (65) or total and permanent disability,
or (ii) the Executive voluntarily terminates his
employment for Good Reason (as defined in paragraph 3(c)
hereof).
2. Termination Benefits. If the Executive is
entitled to termination benefits pursuant to paragraph 1
hereof, the Company agrees to pay to the Executive as
termination benefits in a lump-sum payment within five
(5) calendar days of the termination of the Executive's
employment an amount to be computed by multiplying (i)
the Executive's average annual compensation (as defined
in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code")) payable by the Company which was
includable in the gross income of the Executive for the
most recent five (5) calendar years ending coincident
with or immediately before the date on which control of
the Company is acquired (or such portion of such period
during which the Executive was an employee of the
Company), by (ii) two hundred ninety-nine and ninety-nine
one hundredths percent (299.99%). For purposes of this
Agreement, employment and compensation paid by any direct
or indirect subsidiary of the Company will be deemed to
be employment and compensation paid by the Company.
3. Definitions.
(a) As used in this Agreement, the
"acquisition of control" means:
(i) The acquisition by any individual,
entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange
Act) of twenty percent (20%) or more of
either (A) the then outstanding shares of
common stock of IPALCO (the "Outstanding
IPALCO Common Stock") or (B) the combined
voting power of the then outstanding voting
securities of IPALCO entitled to vote
generally in the election of directors (the
"Outstanding IPALCO Voting Securities");
provided, however, that the following
acquisitions shall not constitute an
acquisition of control: (A) any acquisition
directly from IPALCO (excluding an
acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by
IPALCO, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or
maintained by IPALCO, IPL or any corporation
controlled by IPALCO or (D) any acquisition
by any corporation pursuant to a
reorganization, merger or consolidation, if,
following such reorganization, merger or
consolidation, the conditions described in
clauses (A), (B) and (C) of subsection (iii)
of this paragraph 3(a) are satisfied;
(ii) Individuals who, as of the date
hereof, constitute the Board of Directors of
IPALCO (the "Incumbent Board") cease for any
reason to constitute at least a majority of
the Board of Directors of IPALCO (the
"Board"); provided, however, that any
individual becoming a director subsequent to
the date hereof whose election, or nomination
for election by IPALCO's shareholders, was
approved by a vote of at least a majority of
the directors then comprising the Incumbent
Board shall be considered as though such
individual were a member of the Incumbent
Board, but excluding, for this purpose, any
such individual whose initial assumption of
office occurs as a result of either an actual
or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies
or consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the shareholders of
IPALCO of a reorganization, merger or
consolidation, in each case, unless,
following such reorganization, merger or
consolidation, (A) more than sixty percent
(60%) of, respectively, the then outstanding
shares of common stock of the corporation
resulting from such reorganization, merger or
consolidation and the combined voting power
of the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors is then
beneficially owned, directly or indirectly,
by all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities
immediately prior to such reorganization,
merger or consolidation in substantially the
same proportions as their ownership,
immediately prior to such reorganization,
merger or consolidation, of the Outstanding
IPALCO Stock and Outstanding IPALCO Voting
Securities, as the case may be, (B) no Person
(excluding IPALCO, any employee benefit plan
or related trust of IPALCO, IPL or such
corporation resulting from such
reorganization, merger or consolidation and
any Person beneficially owning, immediately
prior to such reorganization, merger or
consolidation and any Person beneficially
owning, immediately prior to such
reorganization, merger or consolidation,
directly or indirectly, twenty percent (20%)
or more of the Outstanding IPALCO Common
Stock or Outstanding Voting Securities, as
the case may be) beneficially owns, directly
or indirectly, twenty percent (20%) or more
of, respectively, the then outstanding shares
of common stock of the corporation resulting
from such reorganization, merger or
consolidation or the combined voting power of
the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors and (C) at least
a majority of the members of the board of
directors of the corporation resulting from
such reorganization, merger or consolidation
were members of the Incumbent Board at the
time of the execution of the initial
agreement providing for such reorganization,
merger or consolidation;
(iv) Approval by the shareholders of
IPALCO of (A) a complete liquidation or
dissolution of IPALCO or (B) the sale or
other disposition of all or substantially all
of the assets of IPALCO, other than to a
corporation, with respect to which following
such sale or other disposition (1) more than
sixty percent (60%) of, respectively, the
then outstanding shares of common stock of
such corporation and the combined voting
power of the then outstanding voting
securities of such corporation entitled to
vote generally in the election of directors
is then beneficially owned, directly or
indirectly, by all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities
immediately prior to such sale or other
disposition in substantially the same
proportion as their ownership, immediately
prior to such sale or other disposition, of
the Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities, as the
case may be, (2) no Person (excluding IPALCO
and any employee benefit plan or related
trust of IPALCO, IPL or such corporation and
any Person beneficially owning, immediately
prior to such sale or other disposition,
directly or indirectly, twenty percent (20%)
or more of the Outstanding IPALCO Common
Stock or Outstanding IPALCO Voting
Securities, as the case may be) beneficially
owns, directly or indirectly, twenty percent
(20%) or more of, respectively, the then
outstanding shares of common stock of such
corporation and the combined voting power of
the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors and (3) at least
a majority of the members of the board of
directors of such corporation were members of
the Incumbent Board at the time of the
execution of the initial agreement or action
of the Board providing for such sale or other
disposition of assets of IPALCO; or
(v) The closing, as defined in the
documents relating to, or as evidenced by a
certificate of any state or federal
governmental authority in connection with, a
transaction approval of which by the
shareholders of IPALCO would constitute an
"acquisition of control" under subsection
(iii) or (iv) of this section 3(a) of this
Agreement.
Notwithstanding anything contained in this
Agreement to the contrary, if the Executive's
employment is terminated before an "acquisition of
control" as defined in this section 3(a) and the
Executive reasonably demonstrates that such
termination (i) was at the request of a third
party who has indicated an intention or taken
steps reasonably calculated to effect an
"acquisition of control" and who effectuates an
"acquisition of control" (a "Third Party") or (ii)
otherwise occurred in connection with, or in
anticipation of, an "acquisition of control" which
actually occurs, then for all purposes of this
Agreement, the date of an "acquisition of control"
with respect to the Executive shall mean the date
immediately prior to the date of such termination
of the Executive's employment.
(b) As used in this Agreement, the term
"Cause" means fraud, dishonesty, theft of
corporate assets, or other gross misconduct by the
Executive. Notwithstanding the foregoing, the
Executive shall not be deemed to have been
terminated for cause unless and until there shall
have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less
than a majority of the entire membership of the
Board at a meeting of the Board called and held
for the purpose (after reasonable notice to him
and an opportunity for him, together with his
counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in
the first sentence of the subsection and
specifying the particulars thereof in detail.
(c) As used in this Agreement, the term
"Good Reason" means, without the Executive's
written consent, (i) a demotion in the Executive's
status, position or responsibilities which, in his
reasonable judgment, does not represent a
promotion from his status, position or
responsibilities as in effect immediately prior to
the change in control; (ii) the assignment to the
Executive of any duties or responsibilities which,
in his reasonable judgment, are inconsistent with
such status, position or responsibilities; or any
removal of the Executive from or failure to
reappoint or reelect him to any of such positions,
except in connection with the termination of his
employment for total and permanent disability,
death or Cause or by him other than for Good
Reason; (iii) a reduction by the Company in the
Executive's base salary as in effect on the date
hereof or as the same may be increased from time
to time during the term of this Agreement or the
Company's failure to increase (within twelve (12)
months of the Executive's last increase in base
salary) the Executive's base salary after a change
in control in an amount which at least equals, on
a percentage basis, the average percentage
increase in base salary for all executive and
senior officers of the Company effected in the
preceding twelve (12) months; (iv) the relocation
of the principal executive offices of IPALCO or
IPL, whichever entity on behalf of which the
Executive performs a principal function of that
entity as part of his employment services, to a
location outside the Indianapolis, Indiana
metropolitan area or the Company's requiring him
to be based at any place other than the location
at which he performed his duties prior to a change
in control, except for required travel on the
Company's business to an extent substantially
consistent with his business travel obligations at
the time of a change in control; (v) the failure
by the Company to continue in effect any
incentive, bonus or other compensation plan in
which the Executive participates, including but
not limited to the Company's stock option and
restricted stock plans, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan), with which he has consented,
has been made with respect to such plan in
connection with the change in control, or the
failure by the Company to continue his
participation therein, or any action by the
Company which would directly or indirectly
materially reduce his participation therein; (vi)
the failure by the Company to continue to provide
the Executive with benefits substantially similar
to those enjoyed by him or to which he was
entitled under any of the Company's pension,
profit sharing, life insurance, medical, dental,
health and accident, or disability plans in which
he was participating at the time of a change in
control, the taking of any action by the Company
which would directly or indirectly materially
reduce any of such benefits or deprive him of any
material fringe benefit enjoyed by him or to which
he was entitled at the time of the change in
control, or the failure by the Company to provide
him with the number of paid vacation and sick
leave days to which he is entitled on the basis of
years of service with the Company in accordance
with the Company's normal vacation policy in
effect on the date hereof; (vii) the failure of
the Company to obtain a satisfactory agreement
from any successor or assign of the Company to
assume and agree to perform this Agreement; (viii)
any purported termination of the Executive's
employment which is not effected pursuant to a
Notice of Termination satisfying the requirements
of paragraph 4(c) hereof (and, if applicable,
paragraph 3(b) hereof); and for purposes of this
Agreement, no such purported termination shall be
effective; or (ix) any request by the Company that
the Executive participate in an unlawful act or
take any action constituting a breach of the
Executive's professional standard of conduct.
Notwithstanding anything in this paragraph
3(c) to the contrary, the Executive's right to
terminate his employment pursuant to this
paragraph 3(c) shall not be affected by his
incapacity due to physical or mental illness.
4. Additional Provisions.
(a) Enforcement of Agreement. The Company
is aware that upon the occurrence of a change in
control the Board of Directors or a shareholder of
the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations
under this Agreement, or may cause or attempt to
cause the Company to institute, or may institute,
litigation seeking to have this Agreement declared
unenforceable, or may take or attempt to take
other action to deny the Executive the benefits
intended under this Agreement. In these
circumstances, the purpose of this Agreement could
be frustrated. It is the intent of the Company
that the Executive not be required to incur the
expenses associated with the enforcement of his
rights under this Agreement by litigation or other
legal action, nor be bound to negotiate any
settlement of his rights hereunder, because the
cost and expense of such legal action or
settlement would substantially detract from the
benefits intended to be extended to the Executive
hereunder. Accordingly, if following a change in
control it should appear to the Executive that the
Company has failed to comply with any of its
obligations under this Agreement or in the event
that the Company or any other person takes any
action to declare this Agreement void or
unenforceable, or institutes any litigation or
other legal action designed to deny, diminish or
to recover from the Executive the benefits
entitled to be provided to the Executive hereunder
and that the Executive has complied with all of
his obligations under this Agreement, the Company
irrevocably authorizes the Executive from time to
time to retain counsel of his choice, at the
expense of the Company as provided in this
paragraph 4(a), to represent the Executive in
connection with the initiation or defense of any
litigation or other legal action, whether such
action is by or against the Company or any
director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior
attorney-client relationship between the Company
and such counsel, the Company irrevocably consents
to the Executive entering into an attorney-client
relationship with such counsel, and in that
connection the Company and the Executive agree
that a confidential relationship shall exist
between the Executive and such counsel. The
reasonable fees and expenses of counsel selected
from time to time by the Executive as hereinabove
provided shall be paid or reimbursed to the
Executive by the Company on a regular, periodic
basis upon presentation by the Executive of a
statement or statements prepared by such counsel
in accordance with its customary practices, up to
a maximum aggregate amount of $500,000. Any legal
expenses incurred by the Company by reason of any
dispute between the parties as to enforceability
of or the terms contained in this Agreement,
notwithstanding the outcome of any such dispute,
shall be the sole responsibility of the Company,
and the Company shall not take any action to seek
reimbursement from the Executive for such
expenses.
(b) Severance Pay; No Duty to Mitigate. The
amounts payable to the Executive under this
Agreement shall not be treated as damages but as
severance compensation to which the Executive is
entitled by reason of termination of his
employment in the circumstances contemplated by
this Agreement. The Company shall not be entitled
to set off against the amounts payable to the
Executive any amounts earned by the Executive in
other employment after termination of his
employment with the Company, or any amounts which
might have been earned by the Executive in other
employment had he sought such other employment.
(c) Notice of Termination. Any purported
termination by the Company or by the Executive
shall be communicated by written Notice of
Termination to the other party hereto in
accordance with paragraph 4(k) hereof. For
purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall
indicate the specific termination provision in
this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances
claimed to provide a basis for termination of his
employment under the provision so indicated. For
purposes of this Agreement, no such purported
termination shall be effective without such Notice
of Termination.
(d) Internal Revenue Code. Anything in this
Agreement to the contrary notwithstanding, in the
event that Deloitte & Touche determines that any
payment by the Company to or for the benefit of
the Executive pursuant to the terms of this
Agreement would be nondeductible by the Company
for federal income tax purposes because of Section
280G of the Code, then the amount payable to or
for the benefit of the Executive pursuant to this
Agreement shall be reduced (but not below zero) to
the maximum amount payable without causing the
payment to be nondeductible by the Company because
of Section 280G of the Code. Such determination
by Deloitte & Touche shall be conclusive and
binding upon the parties.
(e) Assignment. This Agreement shall inure
to the benefit of and be binding upon the parties
hereto and their respective executors,
administrators, heirs, personal representatives,
successors, and assigns, but neither this
Agreement nor any right hereunder may be assigned
or transferred by either party hereto, any
beneficiary, or any other person, nor be subject
to alienation, anticipation, sale, pledge,
encumbrance, execution, levy, or other legal
process of any kind against the Executive, his
beneficiary or any other person. Notwithstanding
the foregoing, the Company will assign this
Agreement to any corporation or other business
entity succeeding to substantially all of the
business and assets of the Company by merger,
consolidation, sale of assets, or otherwise and
shall obtain the assumption of this Agreement by
such successor.
(f) Entire Agreement. This Agreement
contains the entire agreement between the parties
with respect to the subject matter hereof. All
representations, promises, and prior or
contemporaneous understandings between the parties
with respect to the subject matter hereof,
including any Prior Termination Benefits
Agreements, are merged into and expressed in this
Agreement, and any and all prior agreements
between the parties with respect to the subject
matter hereof are hereby cancelled.
(g) Amendment. This Agreement shall not be
amended, modified, or supplemented without the
written agreement of the parties at the time of
such amendment, modification, or supplement.
(h) Governing Law. This Agreement shall be
governed by and subject to the laws of the State
of Indiana.
(i) Severability. The invalidity or
unenforceability of any particular provision of
this Agreement shall not affect the other
provisions, and this Agreement shall be construed
in all respects as if such invalid or
unenforceable provision had not been contained
herein.
(j) Captions. The captions in this
Agreement are for convenience and identification
purposes only, are not an integral part of this
Agreement, and are not to be considered in the
interpretation of any part hereof.
(k) Notices. Except as otherwise
specifically provided in this Agreement, all
notices and other communications hereunder shall
be in writing and shall be deemed to have been
duly given if delivered in person or sent by
registered or certified mail, postage prepaid,
addressed as set forth above, or to such other
address as shall be furnished in writing by any
party to the others.
(l) Waivers. Except as otherwise
specifically provided in this Agreement, no waiver
by either party hereto of any breach by the other
party hereto of any condition or provision of this
Agreement to be performed by such other party
shall be deemed to be a valid waiver unless such
waiver is in writing or, even if in writing, shall
be deemed to be a waiver of a subsequent breach of
such condition or provision or a waiver of a
similar or dissimilar provision or condition at
the same or at any prior or subsequent time.
(m) Gender. The use of the masculine gender
throughout this Agreement is solely for
convenience; thus, in cases where the Executive is
female, the feminine gender shall be deemed to be
used in place of the masculine gender.
5. Term of this Agreement. This Agreement shall
remain in effect until January 1, 1998 or until the
expiration of any extension thereof. The term of this
Agreement shall be automatically extended for one (1)
year periods without further action of the parties as of
January 1, 1994 and each succeeding January 1 thereafter,
unless IPALCO shall have served written notice to the
Executive prior to January 1, 1994 or prior to January 1
of each succeeding year, as the case may be, of its
intention that the Agreement shall terminate at the end
of the five (5) year period that begins with the
January 1 following the date of such written notice.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
IPALCO ENTERPRISES, INC.
By:
Attest:
SCHEDULE A
Employee Date of Agreement Company
N. Stuart Grauel January 1, 1993 IPALCO
Susan Hanafee May 1, 1995 IPALCO
Michael P. Holstein May 1, 1996 IPALCO
Thomas A. Steiner May 1, 1996 IPALCO
Michael G. Banta July 1, 1995 IPALCO/IPL
John R. Brehm January 1, 1993 IPALCO/IPL
Max Califar January 1, 1993 IPALCO/IPL
Ralph E. Canter May 1, 1995 IPALCO/IPL
Kevin P. Greisl May 1, 1998 IPALCO/IPL
Joseph A. Gustin May 1, 1998 IPALCO/IPL
John R. Hodowal January 1, 1993 IPALCO/IPL
Donald W. Knight January 1, 1993 IPALCO/IPL
Paul S. Mannweiler January 1, 1997 IPALCO/IPL
David J. McCarthy January 1, 1996 IPALCO/IPL
Steven L. Meyer January 1, 1993 IPALCO/IPL
Stephen J. Plunkett January 1, 1993 IPALCO/IPL
Stephen M. Powell May 1, 1998 IPALCO/IPL
Daniel L. Short January 1, 2000 IPALCO/IPL
Joseph A. Slash January 1, 1993 IPALCO/IPL
Clark L. Snyder January 1, 1995 IPALCO/Mid-America
Capital Resources,
Inc.
Bryan G. Tabler October 1, 1994 IPALCO/IPL
William A. Tracy May 1, 1998 IPALCO/IPL
Exhibit 10.12
TERMINATION BENEFITS AGREEMENT
This Agreement, dated as of January 1, 1997, by and
among IPALCO ENTERPRISES, INC., an Indiana corporation
having its principal executive offices at One Monument
Circle, Indianapolis, Indiana 46204 ("IPALCO"),
INDIANAPOLIS POWER & LIGHT COMPANY, an Indiana
corporation having its principal executive offices at One
Monument Circle, Indianapolis, Indiana 46204 ("IPL")
(both IPALCO and IPL being collectively referred to
herein as the "Company"), and RAMON L. HUMKE, an Indiana
resident whose mailing address is 7624 William Penn
Place, Indianapolis, Indiana 46256 (the "Executive").
R E C I T A L S
The following facts are true:
A. The Executive is serving the Company as a key
executive officer, and is expected to continue to make a
major contribution to the profitability, growth, and
financial strength of the Company.
B. The Company considers the continued services of
the Executive to be in the best interests of the Company
and its shareholders, and desires to assure itself of the
availability of such continued services in the future on
an objective and impartial basis and without distraction
or conflict of interest in the event of an attempt to
obtain control of the Company.
C. The Executive is willing to remain in the employ
of the Company upon the understanding that the Company
will provide him with income security upon the terms and
subject to the conditions contained herein if his
employment is terminated by the Company without cause or
if he voluntarily terminates his employment for good
reason.
D. If the Company and Executive entered into one or
more Termination Benefits Agreements prior to this
Agreement (the "Prior Termination Benefits Agreements"),
this Agreement is intended to supersede and replace the
Prior Termination Benefits Agreements.
A G R E E M E N T
In consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the
Company and the Executive agree as follows:
1. Undertaking. The Company agrees to pay to the
Executive the termination benefits specified in paragraph
2 hereof if (a) control of IPALCO is acquired (as defined
in paragraph 3(a) hereof) during the term of this
Agreement (as described in paragraph 5 hereof) and (b)
within three (3) years after the acquisition of control
occurs (i) the Company terminates the employment of the
Executive for any reason other than Cause (as defined in
paragraph 3(b) hereof), death, or total and permanent
disability, or (ii) the Executive voluntarily terminates
his employment for Good Reason (as defined in paragraph
3(c) hereof).
2. Termination Benefits. If the Executive is
entitled to termination benefits pursuant to paragraph 1
hereof, the Company agrees to pay to the Executive as
termination benefits in a lump-sum payment within five
(5) calendar days of the termination of the Executive's
employment an amount to be computed by multiplying (i)
the Executive's average annual compensation (as defined
in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code")) payable by the Company which was
includable in the gross income of the Executive for the
most recent five (5) calendar years ending coincident
with or immediately before the date on which control of
the Company is acquired (or such portion of such period
during which the Executive was an employee of the
Company), by (ii) two hundred ninety-nine and ninety-nine
one hundredths percent (299.99%). For purposes of this
Agreement, employment and compensation paid by any direct
or indirect subsidiary of the Company will be deemed to
be employment and compensation paid by the Company.
3. Definitions.
(a) As used in this Agreement, the
"acquisition of control" means:
(i) The acquisition by any individual,
entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange
Act) of twenty percent (20%) or more of
either (A) the then outstanding shares of
common stock of IPALCO (the "Outstanding
IPALCO Common Stock") or (B) the combined
voting power of the then outstanding voting
securities of IPALCO entitled to vote
generally in the election of directors (the
"Outstanding IPALCO Voting Securities");
provided, however, that the following
acquisitions shall not constitute an
acquisition of control: (A) any acquisition
directly from IPALCO (excluding an
acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by
IPALCO, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or
maintained by IPALCO, IPL or any corporation
controlled by IPALCO or (D) any acquisition
by any corporation pursuant to a
reorganization, merger or consolidation, if,
following such reorganization, merger or
consolidation, the conditions described in
clauses (A), (B) and (C) of subsection (iii)
of this paragraph 3(a) are satisfied;
(ii) Individuals who, as of the date
hereof, constitute the Board of Directors of
IPALCO (the "Incumbent Board") cease for any
reason to constitute at least a majority of
the Board of Directors of IPALCO (the
"Board"); provided, however, that any
individual becoming a director subsequent to
the date hereof whose election, or nomination
for election by IPALCO's shareholders, was
approved by a vote of at least a majority of
the directors then comprising the Incumbent
Board shall be considered as though such
individual were a member of the Incumbent
Board, but excluding, for this purpose, any
such individual whose initial assumption of
office occurs as a result of either an actual
or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies
or consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the shareholders of
IPALCO of a reorganization, merger or
consolidation, in each case, unless,
following such reorganization, merger or
consolidation, (A) more than sixty percent
(60%) of, respectively, the then outstanding
shares of common stock of the corporation
resulting from such reorganization, merger or
consolidation and the combined voting power
of the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors is then
beneficially owned, directly or indirectly,
by all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities
immediately prior to such reorganization,
merger or consolidation in substantially the
same proportions as their ownership,
immediately prior to such reorganization,
merger or consolidation, of the Outstanding
IPALCO Stock and Outstanding IPALCO Voting
Securities, as the case may be, (B) no Person
(excluding IPALCO, any employee benefit plan
or related trust of IPALCO, IPL or such
corporation resulting from such
reorganization, merger or consolidation and
any Person beneficially owning, immediately
prior to such reorganization, merger or
consolidation and any Person beneficially
owning, immediately prior to such
reorganization, merger or consolidation,
directly or indirectly, twenty percent (20%)
or more of the Outstanding IPALCO Common
Stock or Outstanding Voting Securities, as
the case may be) beneficially owns, directly
or indirectly, twenty percent (20%) or more
of, respectively, the then outstanding shares
of common stock of the corporation resulting
from such reorganization, merger or
consolidation or the combined voting power of
the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors and (C) at least
a majority of the members of the board of
directors of the corporation resulting from
such reorganization, merger or consolidation
were members of the Incumbent Board at the
time of the execution of the initial
agreement providing for such reorganization,
merger or consolidation;
(iv) Approval by the shareholders of
IPALCO of (A) a complete liquidation or
dissolution of IPALCO or (B) the sale or
other disposition of all or substantially all
of the assets of IPALCO, other than to a
corporation, with respect to which following
such sale or other disposition (1) more than
sixty percent (60%) of, respectively, the
then outstanding shares of common stock of
such corporation and the combined voting
power of the then outstanding voting
securities of such corporation entitled to
vote generally in the election of directors
is then beneficially owned, directly or
indirectly, by all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities
immediately prior to such sale or other
disposition in substantially the same
proportion as their ownership, immediately
prior to such sale or other disposition, of
the Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities, as the
case may be, (2) no Person (excluding IPALCO
and any employee benefit plan or related
trust of IPALCO, IPL or such corporation and
any Person beneficially owning, immediately
prior to such sale or other disposition,
directly or indirectly, twenty percent (20%)
or more of the Outstanding IPALCO Common
Stock or Outstanding IPALCO Voting
Securities, as the case may be) beneficially
owns, directly or indirectly, twenty percent
(20%) or more of, respectively, the then
outstanding shares of common stock of such
corporation and the combined voting power of
the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors and (3) at least
a majority of the members of the board of
directors of such corporation were members of
the Incumbent Board at the time of the
execution of the initial agreement or action
of the Board providing for such sale or other
disposition of assets of IPALCO; or
(v) The closing, as defined in the
documents relating to, or as evidenced by a
certificate of any state or federal
governmental authority in connection with, a
transaction approval of which by the
shareholders of IPALCO would constitute an
"acquisition of control" under subsection
(iii) or (iv) of this section 3(a) of this
Agreement.
Notwithstanding anything contained in this
Agreement to the contrary, if the Executive's
employment is terminated before an "acquisition of
control" as defined in this section 3(a) and the
Executive reasonably demonstrates that such
termination (i) was at the request of a third
party who has indicated an intention or taken
steps reasonably calculated to effect an
"acquisition of control" and who effectuates an
"acquisition of control" (a "Third Party") or (ii)
otherwise occurred in connection with, or in
anticipation of, an "acquisition of control" which
actually occurs, then for all purposes of this
Agreement, the date of an "acquisition of control"
with respect to the Executive shall mean the date
immediately prior to the date of such termination
of the Executive's employment.
(b) As used in this Agreement, the term
"Cause" means fraud, dishonesty, theft of
corporate assets, or other gross misconduct by the
Executive. Notwithstanding the foregoing, the
Executive shall not be deemed to have been
terminated for cause unless and until there shall
have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less
than a majority of the entire membership of the
Board at a meeting of the Board called and held
for the purpose (after reasonable notice to him
and an opportunity for him, together with his
counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in
the first sentence of the subsection and
specifying the particulars thereof in detail.
(c) As used in this Agreement, the term
"Good Reason" means, without the Executive's
written consent, (i) a demotion in the Executive's
status, position or responsibilities which, in his
reasonable judgment, does not represent a
promotion from his status, position or
responsibilities as in effect immediately prior to
the change in control; (ii) the assignment to the
Executive of any duties or responsibilities which,
in his reasonable judgment, are inconsistent with
such status, position or responsibilities; or any
removal of the Executive from or failure to
reappoint or reelect him to any of such positions,
except in connection with the termination of his
employment for total and permanent disability,
death or Cause or by him other than for Good
Reason; (iii) a reduction by the Company in the
Executive's base salary as in effect on the date
hereof or as the same may be increased from time
to time during the term of this Agreement or the
Company's failure to increase (within twelve (12)
months of the Executive's last increase in base
salary) the Executive's base salary after a change
in control in an amount which at least equals, on
a percentage basis, the average percentage
increase in base salary for all executive and
senior officers of the Company effected in the
preceding twelve (12) months; (iv) the relocation
of the principal executive offices of IPALCO or
IPL, whichever entity on behalf of which the
Executive performs a principal function of that
entity as part of his employment services, to a
location outside the Indianapolis, Indiana
metropolitan area or the Company's requiring him
to be based at any place other than the location
at which he performed his duties prior to a change
in control, except for required travel on the
Company's business to an extent substantially
consistent with his business travel obligations at
the time of a change in control; (v) the failure
by the Company to continue in effect any
incentive, bonus or other compensation plan in
which the Executive participates, including but
not limited to the Company's stock option and
restricted stock plans, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan), with which he has consented,
has been made with respect to such plan in
connection with the change in control, or the
failure by the Company to continue his
participation therein, or any action by the
Company which would directly or indirectly
materially reduce his participation therein; (vi)
the failure by the Company to continue to provide
the Executive with benefits substantially similar
to those enjoyed by him or to which he was
entitled under any of the Company's pension,
profit sharing, life insurance, medical, dental,
health and accident, or disability plans in which
he was participating at the time of a change in
control, the taking of any action by the Company
which would directly or indirectly materially
reduce any of such benefits or deprive him of any
material fringe benefit enjoyed by him or to which
he was entitled at the time of the change in
control, or the failure by the Company to provide
him with the number of paid vacation and sick
leave days to which he is entitled on the basis of
years of service with the Company in accordance
with the Company's normal vacation policy in
effect on the date hereof; (vii) the failure of
the Company to obtain a satisfactory agreement
from any successor or assign of the Company to
assume and agree to perform this Agreement; (viii)
any purported termination of the Executive's
employment which is not effected pursuant to a
Notice of Termination satisfying the requirements
of paragraph 4(c) hereof (and, if applicable,
paragraph 3(b) hereof); and for purposes of this
Agreement, no such purported termination shall be
effective; or (ix) any request by the Company that
the Executive participate in an unlawful act or
take any action constituting a breach of the
Executive's professional standard of conduct.
Notwithstanding anything in this paragraph
3(c) to the contrary, the Executive's right to
terminate his employment pursuant to this
paragraph 3(c) shall not be affected by his
incapacity due to physical or mental illness.
4. Additional Provisions.
(a) Enforcement of Agreement. The Company
is aware that upon the occurrence of a change in
control the Board of Directors or a shareholder of
the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations
under this Agreement, or may cause or attempt to
cause the Company to institute, or may institute,
litigation seeking to have this Agreement declared
unenforceable, or may take or attempt to take
other action to deny the Executive the benefits
intended under this Agreement. In these
circumstances, the purpose of this Agreement could
be frustrated. It is the intent of the Company
that the Executive not be required to incur the
expenses associated with the enforcement of his
rights under this Agreement by litigation or other
legal action, nor be bound to negotiate any
settlement of his rights hereunder, because the
cost and expense of such legal action or
settlement would substantially detract from the
benefits intended to be extended to the Executive
hereunder. Accordingly, if following a change in
control it should appear to the Executive that the
Company has failed to comply with any of its
obligations under this Agreement or in the event
that the Company or any other person takes any
action to declare this Agreement void or
unenforceable, or institutes any litigation or
other legal action designed to deny, diminish or
to recover from the Executive the benefits
entitled to be provided to the Executive hereunder
and that the Executive has complied with all of
his obligations under this Agreement, the Company
irrevocably authorizes the Executive from time to
time to retain counsel of his choice, at the
expense of the Company as provided in this
paragraph 4(a), to represent the Executive in
connection with the initiation or defense of any
litigation or other legal action, whether such
action is by or against the Company or any
director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior
attorney-client relationship between the Company
and such counsel, the Company irrevocably consents
to the Executive entering into an attorney-client
relationship with such counsel, and in that
connection the Company and the Executive agree
that a confidential relationship shall exist
between the Executive and such counsel. The
reasonable fees and expenses of counsel selected
from time to time by the Executive as hereinabove
provided shall be paid or reimbursed to the
Executive by the Company on a regular, periodic
basis upon presentation by the Executive of a
statement or statements prepared by such counsel
in accordance with its customary practices, up to
a maximum aggregate amount of $500,000. Any legal
expenses incurred by the Company by reason of any
dispute between the parties as to enforceability
of or the terms contained in this Agreement,
notwithstanding the outcome of any such dispute,
shall be the sole responsibility of the Company,
and the Company shall not take any action to seek
reimbursement from the Executive for such
expenses.
(b) Severance Pay; No Duty to Mitigate. The
amounts payable to the Executive under this
Agreement shall not be treated as damages but as
severance compensation to which the Executive is
entitled by reason of termination of his
employment in the circumstances contemplated by
this Agreement. The Company shall not be entitled
to set off against the amounts payable to the
Executive any amounts earned by the Executive in
other employment after termination of his
employment with the Company, or any amounts which
might have been earned by the Executive in other
employment had he sought such other employment.
(c) Notice of Termination. Any purported
termination by the Company or by the Executive
shall be communicated by written Notice of
Termination to the other party hereto in
accordance with paragraph 4(k) hereof. For
purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall
indicate the specific termination provision in
this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances
claimed to provide a basis for termination of his
employment under the provision so indicated. For
purposes of this Agreement, no such purported
termination shall be effective without such Notice
of Termination.
(d) Internal Revenue Code. Anything in this
Agreement to the contrary notwithstanding, in the
event that Deloitte & Touche determines that any
payment by the Company to or for the benefit of
the Executive pursuant to the terms of this
Agreement would be nondeductible by the Company
for federal income tax purposes because of Section
280G of the Code, then the amount payable to or
for the benefit of the Executive pursuant to this
Agreement shall be reduced (but not below zero) to
the maximum amount payable without causing the
payment to be nondeductible by the Company because
of Section 280G of the Code. Such determination
by Deloitte & Touche shall be conclusive and
binding upon the parties.
(e) Assignment. This Agreement shall inure
to the benefit of and be binding upon the parties
hereto and their respective executors,
administrators, heirs, personal representatives,
successors, and assigns, but neither this
Agreement nor any right hereunder may be assigned
or transferred by either party hereto, any
beneficiary, or any other person, nor be subject
to alienation, anticipation, sale, pledge,
encumbrance, execution, levy, or other legal
process of any kind against the Executive, his
beneficiary or any other person. Notwithstanding
the foregoing, the Company will assign this
Agreement to any corporation or other business
entity succeeding to substantially all of the
business and assets of the Company by merger,
consolidation, sale of assets, or otherwise and
shall obtain the assumption of this Agreement by
such successor.
(f) Entire Agreement. This Agreement
contains the entire agreement between the parties
with respect to the subject matter hereof. All
representations, promises, and prior or
contemporaneous understandings among the parties
with respect to the subject matter hereof,
including any Prior Termination Benefits
Agreements, are merged into and expressed in this
Agreement, and any and all prior agreements
between the parties with respect to the subject
matter hereof are hereby cancelled.
(g) Amendment. This Agreement shall not be
amended, modified, or supplemented without the
written agreement of the parties at the time of
such amendment, modification, or supplement.
(h) Governing Law. This Agreement shall be
governed by and subject to the laws of the State
of Indiana.
(i) Severability. The invalidity or
unenforceability of any particular provision of
this Agreement shall not affect the other
provisions, and this Agreement shall be construed
in all respects as if such invalid or
unenforceable provision had not been contained
herein.
(j) Captions. The captions in this
Agreement are for convenience and identification
purposes only, are not an integral part of this
Agreement, and are not to be considered in the
interpretation of any part hereof.
(k) Notices. Except as otherwise
specifically provided in this Agreement, all
notices and other communications hereunder shall
be in writing and shall be deemed to have been
duly given if delivered in person or sent by
registered or certified mail, postage prepaid,
addressed as set forth above, or to such other
address as shall be furnished in writing by any
party to the others.
(l) Waivers. Except as otherwise
specifically provided in this Agreement, no waiver
by either party hereto of any breach by the other
party hereto of any condition or provision of this
Agreement to be performed by such other party
shall be deemed to be a valid waiver unless such
waiver is in writing or, even if in writing, shall
be deemed to be a waiver of a subsequent breach of
such condition or provision or a waiver of a
similar or dissimilar provision or condition at
the same or at any prior or subsequent time.
(m) Gender. The use of the masculine gender
throughout this Agreement is solely for
convenience; thus, in cases where the Executive is
female, the feminine gender shall be deemed to be
used in place of the masculine gender.
5. Term of this Agreement. This Agreement shall
remain in effect until December 31, 1999 or until the
expiration of any extension thereof. The term of this
Agreement shall be automatically extended for one (1)
year periods without further action of the parties as of
January 1, 1998 and each succeeding January 1 thereafter,
unless IPALCO shall have served written notice to the
Executive prior to January 1, 1998 or prior to January 1
of each succeeding year, as the case may be, of its
intention that the Agreement shall terminate at the end
of the three (3) year period that begins with the
January 1 following the date of such written notice.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
IPALCO ENTERPRISES, INC.
By:/s/ John R. Hodowal
John R. Hodowal, Chairman of
the Board and President
Attest:
/s/ Bryan G. Tabler
Bryan G. Tabler, Secretary
INDIANAPOLIS POWER & LIGHT COMPANY
By:/s/ John R. Hodowal
John R. Hodowal, Chairman of the
Board and Chief Executive Officer
Attest:
/s/ Bryan G. Tabler
Bryan G. Tabler, Secretary
/s/ Ramon L. Humke
Ramon L. Humke
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
RAMON L. HUMKE
This Agreement, dated as of December 31, 1999, is
between IPALCO Enterprises, Inc., an Indiana corporation
having its principal executive offices at One Monument
Circle, Indianapolis, Indiana 46204 (the "Company"), and
RAMON L. HUMKE, an Indiana resident whose mailing address
is 7624 William Penn Place, Indianapolis, IN 46256 (the
"Executive").
R E C I T A L S
The following facts are true:
A. The Executive has for many years served the
Company as a key executive officer, and is expected to
continue to make a major contribution to the
profitability, growth and financial strength of the
Company.
B. The Company considers the continued services of
the Executive to be in the best interests of the Company
and its shareholders, and desires to assure itself of the
availability of such continued services in the future.
C. The Executive is willing to remain in the
employ of the Company upon the terms and subject to the
conditions hereinafter provided.
A G R E E M E N T
In consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the
Company and the Executive agree as follows:
1. Employment. The Company hereby employs the
Executive for the Term of Employment (as defined in
Paragraph 6 hereof) as Vice Chairman or in such other
executive capacity, for the Company or a major affiliate
thereof, as may be determined by the Board of Directors
of the Company (the "Board"), with such duties as may be
reasonably assigned to him by the By-Laws of the Company
and by the Board. During the Term of Employment, the
Executive shall devote his best efforts and ability,
skill and attention to the business of the Company and to
the promotion of its interests during normal working
hours (with the exception of absences because of
vacations or illness). The Executive's office shall
continue to be located in the Indianapolis, Indiana
metropolitan area, unless he shall consent to a
relocation.
2. Base Salary. During the Term of Employment,
the Executive shall receive a minimum base salary of
$500,000.00 per year, payable in bi-weekly intervals, or
such larger amount as the Board shall in its discretion
determine from time to time.
3. Fringe Benefits. During the Term of
Employment, the Company shall provide to the Executive
such fringe benefits as are generally provided to its key
executive officers, including without limitation,
incentive compensation and bonus arrangements,
retirement, profit-sharing and stock bonus plans (whether
qualified or nonqualified), and life, health and
accident, director and officer liability and long term
disability insurance.
4. Reimbursement of Expenses. The Company shall
reimburse the Executive for all of his reasonable
expenses incurred in the performance of his duties
hereunder, in accordance with the Company's generally
applicable expense reimbursement policy as in effect from
time to time and upon compliance with all reasonable
accounting and reporting requirements as set forth in
such policy.
5. Noncompetition. During the Term of Employment
and thereafter so long as the Executive is receiving
payments pursuant to Paragraph 7 hereof, the Executive
shall not, without the consent of the Company, engage in,
be employed by, be a director of or own an equity
interest in any business or activity competing with or of
a nature similar to the business of the Company within
the Company's service territory as constituted from time
to time.
6. Term of Employment. The "Term of Employment"
shall commence on the date of this Agreement and shall
continue indefinitely until one (1) year after either the
Company or the Executive gives notice to the other party
of a decision to fix the duration thereof, unless earlier
terminated as follows. The Term of Employment shall
terminate early upon the first to occur of (a) the death
of the Executive, (b) the Total Disability (as
hereinafter defined) of the Executive, (c) the voluntary
retirement of the Executive upon reaching retirement age
as provided in the Employees' Retirement Plan of
Indianapolis Power & Light Company as now in effect or
hereinafter amended (the "Retirement Plan"), (d)
termination of employment by the Company for Cause (as
hereinafter defined), (e) the resignation of the
Executive for Good Reason (as hereinafter defined), or
(f) by mutual agreement of the Company and the Executive.
For purposes of this Agreement, the term "Total
Disability" shall mean a physical or mental condition
which prevents the Executive from performing his duties
for the Company; provided, however, that the Executive
shall not be deemed to have incurred a Total Disability
unless he is eligible for disability retirement under the
Retirement Plan. The term "Cause" shall mean fraud,
dishonesty, theft of corporate assets or other gross
misconduct by the Executive. The term "Good Reason"
shall mean, without the Executive's written consent, a
demotion in the Executive's status, position or
responsibilities; the assignment to the Executive of any
duties which are inconsistent with such status, position
or responsibilities; or the relocation of the principal
executive offices of the Company to a location outside
the Indianapolis, Indiana metropolitan area.
7. Payments on Early Termination. In the event
the Term of Employment is terminated early by reason of
Paragraph 6(e) (resignation for Good Reason), the Company
shall continue to pay to the Executive the base salary
which would have been payable pursuant to Paragraph 2
above for a period of one (1) year from the date of
resignation for Good Reason. The Company shall also
continue for the same period to provide life, health and
accident and long term disability insurance for the
Executive and his dependents to the extent provided
before such termination and, if the Term of Employment
would have ended with the retirement of the Executive but
for such early termination, the Company shall provide
such insurance thereafter to the extent generally
provided by the Company to retired employees.
Notwithstanding the foregoing:
(a) In the event the Executive receives
severance benefits from the Company as a result of
such termination pursuant to any other plan or
agreement in or to which the Executive is a
participant or party, other than the Retirement Plan
or the Indianapolis Power & Light Company Unfunded
Supplemental Retirement Plan for a Select Group of
Management Employees or any similar or successor
plan, such benefits shall be applied on a first
dollar basis against the payments owing to the
Executive under this Paragraph 7; and
(b) In the event that Deloitte & Touche
determines that any payment by the Company to or for
the benefit of the Executive pursuant to this
Paragraph 7 would be nondeductible by the Company
for federal income tax purposes because of Section
280G of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), then the
amount payable to or for the benefit of the
Executive pursuant to this Paragraph 7 shall be
reduced (but not below zero) to the maximum amount
payable without causing the payment to be
nondeductible by the Company because of Section 280G
of the Code. Such determination by Deloitte &
Touche shall be conclusive and binding upon the
parties.
8. Miscellaneous.
(a) This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their
respective executors, administrators, heirs,
personal representatives, successors, and assigns,
but neither this Agreement nor any right hereunder
may be assigned or transferred by either party
hereto, any beneficiary, or any other person, nor be
subject to alienation, anticipation, sale, pledge,
encumbrance, execution, levy, or other legal process
of any kind against the Executive, his beneficiary
or any other person. Notwithstanding the foregoing,
the Company will assign this Agreement to any
corporation or other business entity succeeding to
substantially all of the business and assets of the
Company by merger, consolidation, sale of assets, or
otherwise and shall obtain the assumption of this
Agreement by such successor.
(b) This Agreement contains the entire
agreement between the parties with respect to the
subject matter hereof. All representations,
promises, and prior or contemporaneous
understandings among the parties with respect to the
subject matter hereof are merged into and expressed
in this Agreement, and any and all prior agreements
between the parties with respect to the subject
matter hereof are hereby cancelled. Notwithstanding
the foregoing portion of this Paragraph 8(b), this
Agreement is in addition to, and shall not operate
to cancel or reduce any benefits that may become due
to Executive under the Termination Benefits
Agreement as amended and restated effective January
1, 1997, by and among IPALCO Enterprises, Inc., the
Company, and Executive.
(c) This Agreement shall not be amended,
modified, or supplemented without the written
agreement of the parties at the time of such
amendment, modification, or supplement.
(d) This Agreement shall be governed by and
subject to the laws of the State of Indiana.
(e) The invalidity or unenforceability of any
particular provision of this particular Agreement
shall not affect the other provisions, and this
Agreement shall be construed in all respects as if
such invalid or unenforceable provision had not been
contained herein.
(f) The captions in this Agreement are for
convenience and identification purposes only, are
not an integral part of this Agreement, and are not
to be considered in the interpretation of any part
hereof.
(g) Except as specifically set forth in this
Agreement, all notices and other communications
hereunder shall be in writing and shall be deemed to
have been duly given if delivered in person or sent
by registered or certified mail, postage prepaid,
addressed as set forth above, or to such other
address as shall be furnished in writing by any
party to the others.
(h) Except as otherwise specifically provided
in this Agreement, no waiver by either party hereto
of any breach by the other party hereto of any
condition or provision of this Agreement to be
performed by such other party shall be deemed to be
a valid waiver unless such waiver is in writing or,
even if in writing, shall be deemed to be a waiver
of a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar
provision or condition at the same or at any prior
or subsequent time.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
IPALCO ENTERPRISES, INC.
Attest: /s/ Bryan G. Tabler By:/s/ John R. Hodowal
Secretary Chairman of the Board
and President
/s/ Ramon L. Humke
Ramon L. Humke
Exhibit 10.16
Revised Exhibit "A"
(As Amended and Effective November 30, 1999)
List of Member Categories and Plans Funded Through the Trust Fund
Name of Member Category and Plan Effective Date
Current & Future Retirees - Electric:
MetLife Life Insurance Benefits 01/01/36
Blue Cross Blue Shield of Indiana 05/01/88
Anthem Health Plan of Indiana 01/01/95
Severance Benefits pursuant to Company 12/01/99
approved Plan or Arrangement
Current & Future Retirees - Steam:
MetLife Life Insurance Benefits 01/01/36
Blue Cross Blue Shield of Indiana 05/01/88
Anthem Health Plan of Indiana 01/01/95
Severance Benefits pursuant to Company 12/01/99
approved Plan or Arrangement
Current & Future Retirees - Non-Utility:
MetLife Life Insurance Benefits 01/01/36
Anthem Health Plan of Indiana 01/01/95
Severance Benefits pursuant to Company 12/01/99
approved Plan or Arrangement
<TABLE>
<CAPTION>
IPALCO ENTERPRISES, INC. EXHIBIT 11.1
Computation of Per Share Earnings
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
YEAR ENDED DECEMBER 31, 1999:
Basic Diluted
--------------- ---------------
Weighted average number of shares
<S> <C> <C>
Average common shares outstanding at December 31, 1999 86,095,975 86,095,975
Dilutive effect for stock options at December 31, 1999 - 694,878
--------------- ---------------
Adjusted weighted average shares at December 31, 1999 86,095,975 86,790,853
=============== ===============
Net income $128,947 $128,947
=============== ===============
Earnings per share $1.50 $1.49
=============== ===============
YEAR ENDED DECEMBER 31, 1998:
Basic Diluted
--------------- ---------------
Weighted average number of shares
Average common shares outstanding at December 31, 1998 89,979,192 89,979,192
Dilutive effect for stock options at December 31, 1998 - 1,297,978
--------------- ---------------
Adjusted weighted average shares at December 31, 1998 89,979,192 91,277,170
=============== ===============
Net income $130,119 $130,119
=============== ===============
Earnings per share $1.45 $1.43
=============== ===============
YEAR ENDED DECEMBER 31, 1997:
Basic Diluted
--------------- ---------------
Weighted average number of shares
Average common shares outstanding at December 31, 1997 95,883,514 95,883,514
Dilutive effect for stock options at December 31, 1997 - 571,166
--------------- ---------------
Adjusted weighted average shares at December 31, 1997 95,883,514 96,454,680
=============== ===============
Net income to be used to compute earnings per share
Income before cumulative effect of accounting change $95,699 $95,699
Cumulative effect of accounting change 18,347 18,347
--------------- ---------------
Net income $114,046 $114,046
=============== ===============
Income before cumulative effect of accounting change $1.00 $0.99
Cumulative effect of accounting change .19 .19
--------------- ---------------
Earnings per share $1.19 $1.18
=============== ===============
</TABLE>
Exhibit 21.1 List of Subsidiaries
--------------------
State in
Which
Organized
---------
Subsidiary of IPALCO Enterprises, Inc.
Indianapolis Power & Light Company (IPL) Indiana
Subsidiary of IPL
IPL Funding Corporation Indiana
Mid-America Capital Resources, Inc. Indiana
(Mid-America)
Subsidiaries of Mid-America
Indianaplis Campus Energy, Inc. (ICE) Indiana
Store Heat and Produce Energy, Inc. (SHAPE) Indiana
Mid-America Energy Resources, Inc.
(Energy Resources) Indiana
Subsidiaries of Energy Resources
Cleveland Thermal Energy Corporation Ohio
Cleveland District Cooling Corporation Ohio
Both IPL and Mid-America are wholly owned by IPALCO
Enterprises, Inc. Each of the subsidiaries listed for
IPL, Mid-America and Energy Resources is wholly owned
except for SHAPE, which is 80% owned by Mid-America.
Both Cleveland Thermal Energy Corporation and Cleveland
District Cooling Corporation conduct business under the
name Cleveland Energy Resources.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-08527 of IPALCO Enterprises Inc. on Form S-3 and Statements No. 33-40316,
No.33-45615, No.33-53260, No.33-50815, No.33-52039, No.33-60915, No.33-60921,
No.333-28543, No. 333-93673 and No. 333-93675 on Form S-8 of our report dated
January 20, 2000, appearing in this Annual Report on Form 10-K of IPALCO
Enterprises, Inc. for the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
March 1, 2000
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000728391
<NAME> IPALCO ENTERPRISES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,750,412
<OTHER-PROPERTY-AND-INVEST> 258,228
<TOTAL-CURRENT-ASSETS> 186,237
<TOTAL-DEFERRED-CHARGES> 120,960
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,315,837
<COMMON> 439,066
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 690,455
<TOTAL-COMMON-STOCKHOLDERS-EQ> 677,746
0
59,135
<LONG-TERM-DEBT-NET> 870,050
<SHORT-TERM-NOTES> 57,578
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 52,477
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 598,851
<TOT-CAPITALIZATION-AND-LIAB> 2,315,837
<GROSS-OPERATING-REVENUE> 834,652
<INCOME-TAX-EXPENSE> 84,475
<OTHER-OPERATING-EXPENSES> 566,676
<TOTAL-OPERATING-EXPENSES> 651,151
<OPERATING-INCOME-LOSS> 183,501
<OTHER-INCOME-NET> 10,640
<INCOME-BEFORE-INTEREST-EXPEN> 194,141
<TOTAL-INTEREST-EXPENSE> 65,194
<NET-INCOME> 128,947
3,213
<EARNINGS-AVAILABLE-FOR-COMM> 128,947
<COMMON-STOCK-DIVIDENDS> 50,920
<TOTAL-INTEREST-ON-BONDS> 58,584
<CASH-FLOW-OPERATIONS> 213,788
<EPS-BASIC> 1.50
<EPS-DILUTED> 1.49
</TABLE>
