As filed with the Securities and Exchange Commission on October 24, 1995
File No. 70-____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
FORM U-1 APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
PSI Energy, Inc.
1000 East Main Street
Plainfield, Indiana 46168
(Name of company filing this statement
and address of principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Treasurer
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name and address of agent of service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application to:
John M. Mutz Cheryl M. Foley
President Vice President, General Counsel
PSI Energy, Inc. and Corporate Secretary
(address above) Cinergy Corp.
(address above)
Item 1. Description of Proposed Transactions.
A. Pilot Appliance Sales Program with Nonaffiliate.
PSI Energy, Inc. ("PSI") is an Indiana corporation and wholly-owned
subsidiary of Cinergy Corp. ("Cinergy"), a Delaware corporation and
registered holding company under the Public Utility Holding Company Act of
1935 (the "Act"). PSI is engaged in the production, transmission,
distribution and sale of electric energy in north central, central and
southern Indiana. PSI serves an estimated population of 1.9 million people
located in 69 of the state's 92 counties, including the cities of
Bloomington, Columbus, Kokomo, Lafayette, New Albany and Terre Haute. As
of and for the year ended December 31, 1994, PSI had total assets of
approximately $2.9 billion and operating revenues of approximately $1.1
billion. For more detailed information with respect to PSI, reference is
made to PSI's 1994 Form 10-K in Commission File No. 1-3543.
Gregg Appliances Inc., d.b.a. h. h. Gregg ("Gregg") is a privately
owned Indiana corporation with headquarters located in Indianapolis,
Indiana. Formed in 1960, Gregg is a retail vendor of household electronic
appliances and related consumer goods, such as clothes washing machines and
dryers, refrigerators, dishwashers, televisions, VCRs and camcorders, with
stores located throughout Indiana and Tennessee. Gregg has 800 full-time
employees. As of and for the year ended 1994, Gregg had total assets of
approximately $51 million and operating revenues of $221 million.
On September 26, 1995, PSI and Gregg executed a Memorandum of
Understanding (the "MOU", a copy of which is filed as Exhibit B)
contemplating a business venture between the two companies involving a
proposed appliance sales program. The proposed sales program would
initially be undertaken on a pilot basis over an approximate 13 month
period, beginning November 24, 1995 (the day after Thanksgiving, marking
the commencement of the Christmas holiday shopping season) and running
through year-end 1996. Thereafter, the parties would assess the results of
the pilot program and determine whether they wished to continue their
business alliance, including a possible expansion in the range of
activities covered./1/
PSI requests Commission authorization to undertake the pilot program
with Gregg. Under the proposed pilot program:
1. PSI would market Gregg's electronic goods and appliances to PSI
customers at certain local commercial offices of PSI (anticipated not to
exceed five in number). PSI would not take title to the goods, but would
sell the goods at retail on a best-efforts, consignment basis. Gregg would
periodically furnish inventory for display at the local PSI offices,
replenishing stock and substituting new models as they become available.
When a customer purchases an item of Gregg inventory displayed at one of
the local offices, PSI would notify Gregg's commercial ordering center of
the sale which would deliver the product to the customer, billing PSI the
wholesale price paid by Gregg for the product.
2. In addition, customers would have the option of purchasing extended
service warranties covering any items purchased. To the extent that PSI
sells any such warranties, it will be done in the following manner: (a)
PSI will sell such warranties on behalf of Gregg, whereby PSI would
purchase the extended warranty in question from Gregg at a wholesale rate,
and then resell the warranty to the customer; or (b) PSI will establish its
own warranty contract, modeled after the Gregg contract, sell that contract
to the customer and contract with Gregg to provide any warranty work
covered by PSI's warranty.
3. Finally, PSI, with the assistance of Gregg, intends to arrange with a
bank or other financial institution the option for customers to finance
their purchases of Gregg appliances, and would expect to receive a fee (up
to 2% of the amount of the purchase price financed) for its role in
procuring any such third-party financing of customer purchases. PSI does
not anticipate that during the pilot program it would itself provide
financing for purchases by its customers./2/
For its part, in addition to providing the display inventory, Gregg
intends to furnish PSI with its technical expertise in retailing consumer
electronic appliances as well as delivery and support services.
PSI does not anticipate hiring any new employees specifically to
implement the pilot program with Gregg. Although the pilot program may
require the involvement of up to 60 PSI employees, PSI estimates that, on a
"steady state" basis, the full-time employee equivalent of these 60
employees would equal only three or four employees. For the pilot program,
PSI projects that it may realize total sales revenues of approximately $2.6
million, an estimated $2.3 million of which would accrue to Gregg. Related
expenses would include out-of-pocket expenses estimated not to exceed
approximately $100,000 (primarily consisting of advertising and sales
expenses); approximately $55,000 in expenses associated with the use of
PSI's local offices and related facilities; and an estimated $165,000 in
expenses associated with PSI employees' time in implementing the pilot
program.
PSI believes that the utility industry is entering a very competitive
environment. PSI believes that marketing the Gregg appliances to PSI's
customers will benefit PSI in this new environment by among other things:
- establishing a brand name identity to facilitate the eventual
marketing to customers of other energy-related and demand side management
products such as energy efficiency and energy monitoring devices;
- more fully utilizing existing employees and local commercial offices
to hold down costs; and
- strengthening ties to customers generally.
B. Rule 54 Statement.
Under Rule 54, in determining whether to approve the issue and sale of
a security by a registered holding company for purposes other than the
acquisition of an exempt wholesale generator ("EWG") or a foreign utility
company ("FUCO"), or other transactions by such registered holding company
or its subsidiaries other than with respect to EWGs or FUCOs, the
Commission shall not consider the effect of the capitalization or earnings
of any subsidiary which is an EWG or a FUCO upon the registered holding
company if the conditions in Rule 53(a), (b) and (c) are satisfied. As set
forth below, all applicable conditions of Rule 53(a) are and, upon
consummation of the proposed transactions, will be satisfied, and none of
the conditions specified in Rule 53(b) exists or, as a result thereof, will
exist. The following discussion assumes the Cinergy system's existence for
the dates and periods in question.
Three Cinergy companies are EWGs or FUCOs: PSI Argentina, Inc. ("PSI
Argentina") and Costanera Power Corporation ("Costanera") are EWGs, and PSI
Energy Argentina, Inc. ("Energy Argentina") is a FUCO. For further
information with respect to such entities, reference is made to the
Commission's order dated September 21, 1995 in File No. 70-8589 (Rel. No.
35-26376).
Rule 53(a)(1): The average of Cinergy's consolidated retained
earnings for the four consecutive quarters ended June 30, 1995 was $909
million, and Cinergy's aggregate investment in EWGs and FUCOs at June 30,
1995 was approximately $20 million, or approximately 2% of consolidated
retained earnings.
Rule 53(a)(2): Cinergy maintains books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it
directly or indirectly holds an interest. At present, Cinergy does not
hold any interest in a domestic EWG; Rule 53(a)(2)(i) is therefore
inapplicable.
In accordance with Rule 53(a)(2)(ii), the books and records and
financial statements of each foreign EWG and FUCO which is a "majority-
owned subsidiary company" of Cinergy are kept in conformity with and
prepared according to U.S. generally accepted accounting principles
("GAAP"). Cinergy will provide the Commission access to such books and
records and financial statements, or copies thereof, in English, as the
Commission may request.
In accordance with Rule 53(a)(2)(iii), for each foreign EWG and FUCO
in which Cinergy directly or indirectly owns 50% or less of the voting
securities, Cinergy will proceed in good faith, to the extent reasonable
under the circumstances, to cause each such entity's books and records to
be kept in conformity with, and the financial statements of each such
entity to be prepared according to, GAAP. If such books and records are
maintained, or such financial statements are prepared, according to a
comprehensive body of accounting principles other than GAAP, Cinergy will,
upon request of the Commission, describe and quantify each material
variation from GAAP in the accounting principles, practices and methods
used to maintain such books and records and each material variation from
GAAP in the balance sheet line items and net income reported in such
financial statements, as the case may be. In addition, Cinergy will
proceed in good faith, to the extent reasonable under the circumstances, to
cause access by the Commission to such books and records and financial
statements, or copies thereof, in English, as the Commission may request,
and in any event will make available to the Commission any such books and
records that are available to Cinergy.
Rule 53(a)(3): Less than two percent of the total number of employees
of Cinergy's utility subsidiaries render services, at any one time, to
Costanera, PSI Argentina and Energy Argentina. Such services have been
rendered, in part, by employees of PSI in accordance with the Commission's
order in PSI Resources, Inc., et al., Rel. No. 35-25674, 52 SEC Docket
2533, 2534-35 (Nov. 13, 1992), and by employees of The Cincinnati Gas &
Electric Company in accordance with business practices established prior to
the Cinergy merger and the registration of Cinergy as a holding company
under the Act. Pursuant to the Commission's order issued October 21, 1994
in File No. 70-8427 (Rel. No. 35-26146), Cinergy's service company
subsidiary, Cinergy Services, Inc., is authorized to provide
administrative, management and other support services to utility and
nonutility associate companies, including those that are EWGs or FUCOs.
Rule 53(a)(4): Cinergy is concurrently submitting a copy of this
Application, and will submit copies of any Rule 24 certificates hereunder,
as well as a copy of Item 9 of Cinergy's Form U5S and Exhibits H and I
thereto, to each of the public service commissions having jurisdiction over
the retail rates of Cinergy's operating utility subsidiaries at the time
such documents are filed with the Commission.
Rule 53(b): The provisions of Rule 53(a) are not made inapplicable to
the authorizations herein requested by reason of the provisions of Rule
53(b).
Rule 53(b)(1): Neither Cinergy nor any subsidiary thereof is the
subject of any pending bankruptcy or similar proceeding.
Rule 53(b)(2): Average consolidated retained earnings for the four
quarters ended June 30, 1995 equaled $909 million, versus $979 million for
the four quarters ended June 30, 1994, a difference of approximately $70
million or 7%. Accordingly, the investment restriction set forth in this
provision of the Rule is inapplicable.
Rule 53(b)(3): For the twelve months ended June 30, 1995, Cinergy had
net income of approximately $910,000 attributable to its direct and
indirect investments in EWGs and FUCOs.
Rule 53(c): Inasmuch as Rule 53(c) applies only if an applicant is
unable to satisfy the requirements of Rule 53(a) and (b), it is
inapplicable here.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses to be incurred, directly or
indirectly, by PSI or any associate company thereof in connection with the
pilot program described herein are estimated as follows:
U-1 filing fee $ 2,000
Fees of Cinergy Services, Inc. $ 50,000
Out-of-pocket expenses (primarily
advertising and sales) $100,000
Use of PSI facilities $ 55,000
Employee labor expense $165,000
TOTAL $372,000
Item 3. Applicable Statutory Provisions.
Sections 9(a) and 10 and Rule 54 are applicable to the proposed
transactions.
Rule 48(a) may apply to, and exempt in whole or in part, bank
financing arranged by PSI in respect of the proposed customer appliance
purchases. Likewise, to the extent that PSI may determine to offer its own
financing to customers in respect of the proposed appliance sales, such
financing may be exempt in whole or in part under Rule 48(a).
Under the Commission's pending proposed Rule 58 (Rel. No. 35-26313,
June 20, 1995), the Commission has proposed to exempt from Sections 9(a)
and 10 appliance sales activities similar to those proposed herein if
carried out by an "energy-related company" and if certain other conditions
are met.
Item 4. Regulatory Approval.
No state or federal regulatory agency other than the Commission under
the Act has jurisdiction over the proposed transaction. However, the
Indiana Utility Regulatory Commission has continuing jurisdiction over
PSI's rates and charges for retail electric utility service, and thus will
have authority to review both the expenses and revenues associated with the
proposed transaction in the context of its jurisdiction over PSI's retail
rates and charges for retail electric service.
Item 5. Procedure.
As noted above, PSI and Gregg desire to commence their pilot program
on November 24, 1995 and are actively planning to that end. PSI would
greatly appreciate efforts by the Commission's staff to accommodate this
schedule.
Accordingly, PSI requests that the Commission issue and publish in the
Federal Register not later than October 27, 1995 the requisite notice under
Rule 23 with respect to the filing of this Application and the transactions
proposed herein. PSI further requests that such notice specify a date not
later than November 21 as the date after which the Commission may issue an
order granting this Application, and that the Commission issue such order
on November 22, 1995 or as soon thereafter as practicable (but in any event
not later than November 23, 1995).
PSI waives a recommended decision by a hearing officer or other
responsible officer of the Commission; consents that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and requests that there be no waiting period between
the issuance of the Commission's order and its effectiveness.
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
A Not applicable.
B Memorandum of Understanding, dated September 26, 1995,
between PSI and Gregg (filed herewith).
C Not applicable.
D Not applicable.
E Not applicable.
F-1 Preliminary opinion of counsel relating to the pilot
program (filed herewith).
G Suggested form of Federal Register public notice (filed
herewith).
(b) Financial Statements:
FS-1 PSI Consolidated Financial Statements, dated June 30,
1995 (filed herewith).
FS-2 Cinergy Consolidated Financial Statements, dated June
30, 1995 (filed herewith).
FS-3 PSI Financial Data Schedule (included herewith as part
of electronic submission only).
FS-4 Cinergy Financial Data Schedule (included herewith as
part of electronic submission only).
Item 7. Information as to Environmental Effects.
(a) The Commission's action in this matter will not constitute major
federal action significantly affecting the quality of the human
environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
SIGNATURE
Pursuant to the requirements of the Act, the undersigned company has
duly caused this document to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: October 24, 1995
PSI Energy, Inc.
By: /s/ William L. Sheafer
Treasurer
ENDNOTES
/1/ This Application requests Commission approval solely of PSI's
participation in the pilot program as herein described. In the event that
(1) the pilot program is proposed to be restructured such that a different
Cinergy system company - such as an existing nonutility company or a newly
formed entity - would conduct the appliance marketing activities with
Gregg, or (2) following expiration of the pilot program, PSI (or such other
Cinergy company) determines to continue its business relationship with
Gregg (including any potential expansion in the scope of marketing
activities), PSI (or such other Cinergy company, as appropriate) will
request further specific authorization from the Commission (in a post-
effective amendment hereto or in a separate Form U-1 filing) to the extent
required under the Act and the rules thereunder.
/2/ The proposed pilot program does not contemplate that PSI would acquire
any securities or other interest in Gregg nor any assets of Gregg.
EXHIBIT B
Memorandum of Understanding
This Memorandum of Understanding is dated this 26th day of September, 1995, is
by and between H.H. Gregg ("Gregg") and PSI Energy, Inc. ("PSI"); and sets out
the intentions of both parties relating to a potential strategic alliance,
retail pilot program, and expanded retail program and alliance.
WHEREAS:
A. The parties intend for this Memorandum of Understanding to represent
an outline of events which would lead to a strategic alliance, a retail pilot
program and an expanded retail program and alliance. Neither party intends to
be legally bound by any of the provisions of this Memorandum; and
B. Gregg, a privately-owned company, is engaged in the retail sale of
electronics and appliances through stores located in the State of Indiana; and
C. PSI, a wholly-owned subsidiary of Cinergy Corp., is engaged in the
business of generating, transmitting and distributing electricity to its
customers in the State of Indiana, with customer service offices located
throughout the state; and
D. Gregg and PSI intend to work together through a strategic alliance to
develop and implement a pilot program utilizing a maximum of five (5) PSI field
office locations and Gregg s electronic and appliance distribution
infrastructure, to sell electronics and appliances at the retail level; and
E. Based on the success of the pilot program, Gregg and PSI may enter
into subsequent discussions to expand the program and to explore the potential
for other strategic alliances.
THE PARTIES STATE THAT THEIR MUTUAL INTENT IS AS FOLLOWS:
1. Strategic Alliance
1.1 The alliance is expected to begin in October 1995 and last
approximately 12 to 15 months.
1.2 During this period, Gregg intends to provide electronic and appliance
retailing expertise along with inventory, delivery and service support.
1.3 During this period, PSI intends to provide and staff a maximum of five
(5) PSI field office locations for the display and sale of electronic and
appliance equipment.
1.4 PSI and Gregg would expect to mutually agree on the five (5) PSI
offices as pilot locations to test the retailing of electronics and appliances.
1.5 PSI and Gregg intend to establish a level of dollar sales for each
location in order to determine the location s success. This level is expected
to be approximately $240,000 per year in sales.
1.6 PSI would intend to market these electronics and appliances using its
best efforts.
2. Retail Pilot Program
2.1 Gregg intends to stock the PSI office locations with display inventory
on consignment. Display products will be expected to change as needed for new
models. At the termination of the pilot program, the display models would be
returned to Gregg or purchased by PSI.
2.2 PSI, through the assistance of Gregg, intends to arrange with a third
party, the option for customers to finance their purchases.
2.3 When a customer makes a purchase from a PSI location, PSI would expect
to notify Greg s commercial ordering center creating the orders, to deliver the
product to the customer and bill PSI.
2.4 PSI would be charged $25.00 per customer stop or the UPS charge,
whichever is less, for the delivery of appliances and major electronics.
Customers would have the option to pick up smaller purchases at the PSI office
without an additional delivery fee.
2.5 Product service warranties are expected to be billed to PSI at the
manufacturer s rate rather than retail, allowing PSI the option to sell extended
warranties.
2.6 Gregg intends to establish sales volume levels with PSI that would
allow PSI to purchase products at even lower prices, possibly 3% - 5%.
2.7 Gregg intends to invoice PSI monthly for all products and services
sold.
3. Expanded Retail Program and Alliance
3.1 If the pilot program is considered by both parties to be a retail and
operational success, Gregg and PSI intend to review and select additional sites
for electronic and appliance sales. Sites would be chosen by the parties from
other field offices of PSI and/or The Cincinnati Gas & Electric Company, a
wholly-owned subsidiary of Cinergy Corp.
3.2 Gregg and PSI may also explore at that time, the possibility of
entering into other strategic alliances.
3.3 Gregg and PSI would further intend to make a reasonable effort to
achieve a mutually acceptable agreement for any such expansion phase.
4. Non-Binding Effect of Memorandum
4.1 PSI and Gregg intend for this Memorandum of Understanding to represent
an outline of events which could lead to the development of the alliance, the
retail program and the expanded retail program and alliance.
4.2 Neither party intends to be legally bound by any of the provisions of
this Memorandum.
IN WITNESS WHEREOF the parties have caused this Memorandum of Understanding to
be executed by their duly authorized representatives as of the day, month and
year first written above.
H.H. Gregg PSI Energy, Inc.
By: /s/ Jerry Throgmartin By: /s/ John M. Mutz
Printed Name: Jerry Throgmartin Printed Name: John M. Mutz
Printed Title: President Printed Title: President
EXHIBIT F-1
October 24, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
I am counsel to the service company subsidiary of
Cinergy Corp. ("Cinergy"), and am furnishing this opinion as
an exhibit to the Application on Form U-1 (the
"Application") being filed with you concurrently herewith by
PSI Energy, Inc. ("PSI").
In the Application, PSI requests authorization to
undertake a pilot program, spanning approximately 13 months,
with a nonaffiliate Indiana consumer electronics and
household appliances vendor, Gregg Appliances Inc., d.b.a.
h.h. Gregg ("Gregg"), pursuant to which PSI proposes to sell
at retail to its Indiana customers, as agent for Gregg,
various items of Gregg inventory to be displayed on a
revolving basis at certain local commercial offices of PSI.
In connection with the proposed pilot program, PSI may also
offer extended service warranties to purchasers and related
third-party acquisition financing, all as more particularly
described in the Application.
In connection with this opinion, I have reviewed or
caused to be reviewed the Application, that certain
Memorandum of Understanding, dated September 26, 1995,
between PSI and Gregg, and such other documents and records
as I deemed necessary or appropriate in order to give this
opinion. The transactions proposed in the Application are
subject to receipt of an appropriate order or orders of the
Commission under the Public Utility Holding Company Act of
1935.
Subject to the foregoing, I am of the opinion that in
the event the proposed transactions are consummated in
accordance with the Application including any amendment that
may be filed thereto:
(a) All state laws applicable to PSI's participation
in the transactions proposed in the Application will have
been complied with.
(b) The consummation by PSI of the transactions
proposed in the Application will not violate the legal
rights of the holders of any securities issued by PSI or any
associate company thereof.
I am a member of the Indiana Bar and express no opinion
as to the laws of any jurisdiction other than those of the
State of Indiana. I hereby consent to the filing of this
opinion as an exhibit to the Application.
Very truly yours,
/s/ Frank T. Lewis
EXHIBIT G
PROPOSED FORM OF NOTICE
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-________)
Filings Under the Public Utility Holding Company Act of 1935
("Act")
October 27, 1995
Notice is hereby given that the following filing(s)
has/have been made with the Commission pursuant to
provisions of the Act and rules promulgated thereunder. All
interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed
transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendment(s) thereto is/are available
for public inspection through the Commission's Office of
Public Reference.
Interested persons wishing to comment or request a
hearing on the application(s) and/or declaration(s) should
submit their views in writing by November 21, 1995, to the
Secretary, Securities and Exchange Commission, Washington,
D.C. 20549, and serve a copy on the relevant applicant
and/or declarant at the address specified below. Proof of
service (by affidavit or, in case of an attorney at law, by
certificate) should be filed with the request. Any request
for hearing shall identify specifically the issues of fact
or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy
of any notice or order issued in the matter. After said
date, the application(s) and/or declaration(s), as filed or
amended, may be granted and/or permitted to become
effective.
PSI Energy, Inc. 70-
Notice of Proposal to Undertake Appliance Sales Pilot
Program with Nonaffiliate
PSI Energy, Inc. ("PSI"), an Indiana electric utility
subsidiary of Cinergy Corp., a registered holding company
("Cinergy"), has filed an Application under Sections 9(a)
and 10 of the Act and Rules 48(a) and 54 thereunder.
PSI proposes to undertake a pilot program with Gregg
Appliances Inc., d.b.a. h.h. Gregg ("Gregg"),, a privately
owned Indiana corporation engaged in the business of selling
household electronic appliances and related goods at retail
to consumers in Indiana and Tennessee, in which PSI would
market Gregg's electronic goods and appliances to PSI
customers at certain local commercial offices of PSI. PSI
would not take title to the goods, but would sell the goods
at retail on a best-efforts, consignment basis. Under the
pilot program, which is proposed to begin November 24, 1995
and terminate at year-end 1996, when a customer purchases an
item of Gregg inventory displayed at one of the local PSI
offices, PSI would notify Gregg's commercial ordering center
of the sale which would deliver the product to the customer,
billing PSI the wholesale price paid by Gregg for the
product. In addition to providing the display inventory,
Gregg would furnish PSI technical expertise in retailing
consumer electronic appliances as well as delivery and
support services.
Under the pilot program, customers would have the
option of purchasing extended service warranties covering
any items purchased. To the extent that PSI sells any such
warranties, either (1) PSI will sell such warranties on
behalf of Gregg, whereby PSI would purchase the extended
warranty in question from Gregg at a wholesale rate, and
then resell the warranty to the customer; or (2) PSI will
establish its own warranty contract, modeled after the Gregg
contract, sell that contract to the customer and contract
with Gregg to provide any warranty work covered by PSI's
warranty.
Finally, PSI, with the assistance of Gregg, proposes to
arrange with a bank or other financial institution the
option for customers to finance their purchases of Gregg
appliances, and would expect to receive a fee (up to 2% of
the amount of the purchase price financed) for its role in
procuring any such third-party financing of customer
purchases. PSI does not anticipate that during the pilot
program it would itself provide financing for purchases by
its customers.
PSI does not anticipate hiring any new employees
specifically to implement the pilot program with Gregg.
Although the pilot program may require the involvement of up
to 60 PSI employees, PSI estimates that the full-time
employee equivalent of these 60 employees would equal not
more than three or four employees. For the pilot program,
PSI projects that it may realize total sales revenues of
approximately $2.6 million, an estimated $2.3 million of
which would accrue to Gregg. Related expenses would include
out-of-pocket expenses estimated not to exceed approximately
$100,000 (primarily consisting of advertising and sales
expenses); approximately $55,000 in expenses associated with
the use of PSI's local offices and related facilities; and
an estimated $165,000 in expenses associated with PSI
employees' time in administering the pilot program. PSI
states that under the pilot program it would not acquire any
securities or other interest in Gregg nor any assets of
Gregg.
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
PSI ENERGY, INC.
CONSOLIDATED
AS OF JUNE 30, 1995
(Unaudited)
Pages 1 through 6
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED JUNE 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES $1,142,016 $55 $1,142,071
OPERATING EXPENSES
Fuel used in electric production 391,171 391,171
Purchased and exchanged power 42,844 42,844
Other operation 218,266 (165) 218,101
Maintenance 94,777 94,777
Depreciation 132,963 132,963
Post-in-service deferred operating
expenses -- net (8,380) (8,380)
Taxes
Federal and state income 53,320 83 53,403
State, local and other 47,563 47,563
972,524 (82) 972,442
OPERATING INCOME 169,492 137 169,629
OTHER INCOME AND EXPENSES - NET
Allowance for equity funds used during
construction 1,799 1,799
Post-in-service carrying costs 8,055 8,055
Phase-in deferred return 0 0
Income taxes (1,589) (1,589)
Other - net (4,674) 9 (4,665)
3,591 9 3,600
INCOME BEFORE INTEREST AND OTHER CHARGES 173,083 146 173,229
INTEREST AND OTHER CHARGES
Interest on long-term debt 71,139 71,139
Other interest 17,783 17,783
Allowance for borrowed funds used
during construction (6,995) (6,995)
81,927 81,927
NET INCOME 91,156 146 91,302
PREFERRED DIVIDEND REQUIREMENT 13,181 13,181
NET INCOME ON COMMON SHARES $77,975 $146 $78,121
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1995
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
ELECTRIC UTILITY PLANT - ORIGINAL COST
In service $3,862,703 $3,862,703
Accumulated depreciation 1,597,502 1,597,502
2,265,201 - 2,265,201
Construction work in progress 167,587 167,587
Total utility plant 2,432,788 - 2,432,788
CURRENT ASSETS
Cash and temporary cash investments 5,106 146 5,252
Restricted deposits 4,546 4,546
Accounts receivable less accumulated
provision of $957,000 48,112 48,112
Materials, supplies and fuel
- at average cost
Fuel 119,808 119,808
Other materials and supplies 30,195 30,195
Prepayments and other 4,543 4,543
212,310 146 212,456
OTHER ASSETS
Regulatory Assets
Post-in-service carrying costs and
deferred operating expenses 36,334 36,334
Deferred demand-side management costs 100,522 100,522
Amounts due from customers - income taxes 26,935 26,935
Deferred merger costs 37,630 37,630
Unamortized costs of reacquiring debt 35,737 35,737
Other 31,772 31,772
Other 84,452 84,452
353,382 - 353,382
$2,998,480 $146 $2,998,626
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1995
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 60,000,000
Outstanding shares -53,913,701 Actual $539 $- $539
Paid-in capital 389,316 - 389,316
Accumulated earnings subsequent to
November 30, 1986, quasi-reorganization 549,202 146 549,348
Total common stock equity 939,057 146 939,203
CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES
Not subject to mandatory redemption 187,915 187,915
LONG-TERM DEBT 877,978 877,978
Total capitalization 2,004,950 146 2,005,096
CURRENT LIABILITIES
Long-term debt due within one year 60,400 60,400
Notes payable 209,500 209,500
Accounts payable 106,800 106,800
Refund due to customers 15,796 15,796
Litigation settlement 80,000 80,000
Accrued taxes 27,876 27,876
Accrued interest 26,012 26,012
Other 3,085 3,085
529,469 - 529,469
OTHER LIABILITIES
Deferred income taxes 332,962 332,962
Unamortized investment tax credits 58,364 58,364
Accrued pension and other postretirement
benefit costs 42,806 42,806
Other 29,929 29,929
464,061 - 464,061
$2,998,480 $146 $2,998,626
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED JUNE 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
BALANCE JULY 1, 1994 $497,784 $497,784
Net income 91,156 146 91,302
Dividends on preferred stock (13,181) (13,181)
Dividends on common stock (26,550) (26,550)
Other (7) (7)
BALANCE JUNE 30, 1995 $549,202 $146 $562,529
</TABLE>
<PAGE>
PSI ENERGY, INC.
Pro Forma Consolidated Journal Entries to Give Effect to the
Sale of $2,644,000 worth of appliances and electronics
Entry No. 1
Cash and temporary cash investments $2,644,000
Revenue - merchandising $2,644,000
To record the sale of appliances and electronics.
Entry No. 2
Gross receipts tax - other $31,728
Cash and temporary cash investments $31,728
To record Indiana gross receipts tax of 1.2% on the sale of appliances and
electronics.
Entry No. 3
Cost - merchandising $2,278,000
Cash and temporary cash investments $2,278,000
To record the cost of appliances and electronics sold.
Entry No. 4
Cost - merchandising $100,000
Cash and temporary cash investments $100,000
To record out-of-pocket expenses (primarily sales and advertising) asssociated
with the sale of appliances and electronics.
Entry No. 5
Revenue - merchandising $54,900
Other revenue - electric $54,900
To record gross margin allocable to electric utility jurisdiction.
Entry No. 6
Cost - merchandising $165,000
Other operation - electric $165,000
To record labor expenses allocable to the sale of appliances and electronics.
Entry No. 7
Federal income tax - electric $76,965
State income tax - electric 6,432
Federal income tax - other 5,030
State income tax - other 420
Cash and temporary cash investments $88,848
To record income taxes on the sale of appliances and electronics at effective
rates of 35% for Federal income taxes and 2.925% for Indiana income taxes.
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP.
CONSOLIDATED
AS OF JUNE 30, 1995
(Unaudited)
Pages 1 through 6
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED JUNE 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES
Electric $2,478,494 $55 $2,478,549
Gas 383,868 383,868
2,862,362 55 2,862,417
OPERATING EXPENSES
Fuel used in electric production 723,749 723,749
Gas purchased 192,327 192,327
Purchased and exchanged power 31,155 31,155
Other operation 567,004 (165) 566,839
Maintenance 193,764 193,764
Depreciation 291,043 291,043
Amortization of phase-in deferrals 2,273 2,273
Post-in-service deferred operating
expenses -- net (5,090) (5,090)
Taxes
Federal and state income 158,951 83 159,034
State, local and other 247,216 247,216
2,402,392 (82) 2,402,310
OPERATING INCOME 459,970 137 460,107
OTHER INCOME AND EXPENSES - NET
Allowance for equity funds used during
construction 3,755 3,755
Post-in-service carrying costs 8,055 8,055
Phase-in deferred return 8,161 8,161
Income taxes 9,654 9,654
Other - net (21,609) 9 (21,600)
8,016 9 8,025
INCOME BEFORE INTEREST AND OTHER CHARGES 467,986 146 468,132
INTEREST AND OTHER CHARGES
Interest on long-term debt 215,748 215,748
Other interest 23,639 23,639
Allowance for borrowed funds used
during construction (10,542) (10,542)
Preferred dividend requirements of
subsidiaries 34,630 34,630
263,475 - 263,475
NET INCOME $204,511 $146 $204,657
AVERAGE COMMON SHARES OUTSTANDING 152,331 152,331
EARNINGS PER COMMON SHARE $1.33 $1.34
DIVIDENDS DECLARED PER COMMON SHARE $1.60
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1995
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
UTILITY PLANT - ORIGINAL COST
In service
Electric $8,393,518 $8,393,518
Gas 664,536 664,536
Common 184,750 184,750
9,242,804 - 9,242,804
Accumulated depreciation 3,262,715 3,262,715
5,980,089 - 5,980,089
Construction work in progress 241,987 241,987
Total utility plant 6,222,076 - 6,222,076
CURRENT ASSETS
Cash and temporary cash investments 25,206 146 25,352
Restricted deposits 4,646 4,646
Accounts receivable less accumulated
provision of $10,212,000 251,888 251,888
Materials, supplies and fuel
- at average cost
Fuel for use in electric production 160,363 160,363
Gas stored for current use 21,187 21,187
Other materials and supplies 93,722 93,722
Property taxes applicable to subsequent year 134,729 134,729
Prepayments and other 46,947 46,947
738,688 146 738,834
OTHER ASSETS
Regulatory Assets
Post-in-service carrying costs and
deferred operating expenses 188,061 188,061
Phase-in deferred return and depreciation 105,211 105,211
Deferred demand-side management costs 114,768 114,768
Amounts due from customers - income taxes 393,859 393,859
Deferred merger costs 50,067 50,067
Unamortized costs of reacquiring debt 71,778 71,778
Other 81,665 81,665
Other 141,581 141,581
1,146,990 - 1,146,990
$8,107,754 $146 $8,107,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1995
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 600,000,000
Outstanding shares - 156,567,331 Actual $1,566 $1,566
Paid-in capital 1,570,873 1,570,873
Retained earnings 900,094 146 900,240
Total common stock equity 2,472,533 146 2,472,679
CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES
Not subject to mandatory redemption 227,915 227,915
Subject to mandatory redemption 160,000 160,000
LONG-TERM DEBT 2,652,382 2,652,382
Total capitalization 5,512,830 146 5,512,976
CURRENT LIABILITIES
Long-term debt and preferred stock
of subsidiaries due within one year 150,400 150,400
Notes payable 244,000 244,000
Accounts payable 184,400 184,400
Refund due to customers 15,796 15,796
Litigation settlement 80,000 80,000
Accrued taxes 261,787 261,787
Accrued interest 56,740 56,740
Other 39,544 39,544
1,032,667 - 1,032,667
OTHER LIABILITIES
Deferred income taxes 1,074,724 1,074,724
Unamortized investment tax credits 190,804 190,804
Accrued pension and other postretirement
benefit costs 153,753 153,753
Other 142,976 142,976
1,562,257 - 1,562,257
$8,107,754 $146 $8,107,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED JUNE 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
BALANCE JULY 31, 1994 $943,659 $943,659
Net income 204,511 146 204,657
Dividends on common stock (243,797) (243,797)
Other (4,279) (4,279)
BALANCE JUNE 30, 1995 $900,094 $146 $900,240
</TABLE>
<PAGE>
CINERGY CORP.
Pro Forma Consolidated Journal Entries to Give Effect to the
Sale of $2,644,000 worth of appliances and electronics
Entry No. 1
Cash and temporary cash investments $2,644,000
Revenue - merchandising $2,644,000
To record the sale of appliances and electronics.
Entry No. 2
Gross receipts tax - other $31,728
Cash and temporary cash investments $31,728
To record Indiana gross receipts tax of 1.2% on the sale of appliances and
electronics.
Entry No. 3
Cost - merchandising $2,278,000
Cash and temporary cash investments $2,278,000
To record the cost of appliances and electronics sold.
Entry No. 4
Cost - merchandising $100,000
Cash and temporary cash investments $100,000
To record out-of-pocket expenses (primarily sales and advertising) asssociated
with the sale of appliances and electronics.
Entry No. 5
Revenue - merchandising $54,900
Other revenue - electric $54,900
To record gross margin allocable to electric utility jurisdiction.
Entry No. 6
Cost - merchandising $165,000
Other operation - electric $165,000
To record labor expenses allocable to the sale of appliances and electronics.
Entry No. 7
Federal income tax - electric $76,965
State income tax - electric 6,432
Federal income tax - other 5,030
State income tax - other 420
Cash and temporary cash investments $88,848
To record income taxes on the sale of appliances and electronics at effective
rates of 35% for Federal income taxes and 2.925% for Indiana income taxes.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000081020
<NAME> PSI ENERGY, INC.
<SUBSIDIARY>
<NUMBER> 3
<NAME> PSI ENERGY, INC. (CONSOLIDATED)
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JUN-30-1994 JUN-30-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 2,432,788 2,432,788
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 212,310 212,456
<TOTAL-DEFERRED-CHARGES> 268,930 268,930
<OTHER-ASSETS> 84,452 84,452
<TOTAL-ASSETS> 2,998,480 2,998,626
<COMMON> 539 539
<CAPITAL-SURPLUS-PAID-IN> 389,316 389,316
<RETAINED-EARNINGS> 549,202 549,348
<TOTAL-COMMON-STOCKHOLDERS-EQ> 939,057 939,203
0 0
187,915 187,915
<LONG-TERM-DEBT-NET> 877,978 877,978
<SHORT-TERM-NOTES> 209,500 209,500
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 60,400 60,400
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 723,630 723,630
<TOT-CAPITALIZATION-AND-LIAB> 2,998,480 2,998,626
<GROSS-OPERATING-REVENUE> 1,142,016 1,142,071
<INCOME-TAX-EXPENSE> 53,320 53,403
<OTHER-OPERATING-EXPENSES> 919,204 919,039
<TOTAL-OPERATING-EXPENSES> 972,524 972,442
<OPERATING-INCOME-LOSS> 169,492 169,629
<OTHER-INCOME-NET> 3,591 3,600
<INCOME-BEFORE-INTEREST-EXPEN> 173,083 173,229
<TOTAL-INTEREST-EXPENSE> 81,927 81,927
<NET-INCOME> 91,156 91,302
13,181 13,181
<EARNINGS-AVAILABLE-FOR-COMM> 77,975 78,121
<COMMON-STOCK-DIVIDENDS> 26,550 26,550
<TOTAL-INTEREST-ON-BONDS> 71,139 71,139
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000081020
<NAME> PSI ENERGY, INC.
<SUBSIDIARY>
<NUMBER> 0
<NAME> CINERGY CORP. (CONSOLIDATED)
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JUN-30-1994 JUN-30-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,222,076 6,222,076
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 738,688 738,834
<TOTAL-DEFERRED-CHARGES> 1,005,409 1,005,409
<OTHER-ASSETS> 141,581 141,581
<TOTAL-ASSETS> 8,107,754 8,107,900
<COMMON> 1,566 1,566
<CAPITAL-SURPLUS-PAID-IN> 1,570,873 1,570,873
<RETAINED-EARNINGS> 900,094 900,240
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,472,533 2,472,679
160,000 160,000
227,915 227,915
<LONG-TERM-DEBT-NET> 2,652,382 2,652,382
<SHORT-TERM-NOTES> 244,000 244,000
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 60,400 60,400
90,000 90,000
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,200,524 2,200,524
<TOT-CAPITALIZATION-AND-LIAB> 8,107,754 8,107,900
<GROSS-OPERATING-REVENUE> 2,862,362 2,862,417
<INCOME-TAX-EXPENSE> 158,951 159,034
<OTHER-OPERATING-EXPENSES> 2,243,441 2,243,276
<TOTAL-OPERATING-EXPENSES> 2,402,392 2,402,310
<OPERATING-INCOME-LOSS> 459,970 460,107
<OTHER-INCOME-NET> 8,016 8,025
<INCOME-BEFORE-INTEREST-EXPEN> 467,986 468,132
<TOTAL-INTEREST-EXPENSE> 228,845 228,845
<NET-INCOME> 239,141 239,287
34,630 34,630
<EARNINGS-AVAILABLE-FOR-COMM> 204,511 204,657
<COMMON-STOCK-DIVIDENDS> 243,797 243,797
<TOTAL-INTEREST-ON-BONDS> 215,748 215,748
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 1.33 1.34
<EPS-DILUTED> 1.33 1.34
