UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MarkOne)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas
& Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company. Information contained herein relating to any individual registrant is
filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its
company specific information with the reduced disclosure format.
As of April 30, 1999, shares of Common Stock outstanding for each registrant
were as listed:
Company Shares
- ---------------------------------------------------------------- ------------
Cinergy Corp., par value $.01 per share 158,870,194
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
<PAGE>
TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . . 3
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets . . . . . . . . . . . . . 6
Consolidated Statements of Income . . . . . . . . . . 8
Consolidated Statements of Changes in Common
Stock Equity. . . . . . . . . . . . . . . . . . . . 9
Consolidated Statements of Cash Flows . . . . . . . . 10
Results of Operations . . . . . . . . . . . . . . . . 11
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets . . . . . . . . . . . . . 15
Consolidated Statements of Income and Comprehensive
Income. . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Statements of Cash Flows . . . . . . . . 18
Results of Operations . . . . . . . . . . . . . . . . 19
PSI Energy, Inc.
Consolidated Balance Sheets. . . . . . . . . . . . 23
Consolidated Statements of Income and
Comprehensive Income . . . . . . . . . . . . . . . 25
Consolidated Statements of Cash Flows. . . . . . . . 26
Results of Operations . . . . . . . . . . . . . . . . 27
The Union Light, Heat and Power Company
Balance Sheets. . . . . . . . . . . . . . . . . . . . 31
Statements of Income. . . . . . . . . . . . . . . . . 33
Statements of Cash Flows. . . . . . . . . . . . . . . 34
Results of Operations . . . . . . . . . . . . . . . . 35
Notes to Financial Statements . . . . . . . . . . . . . 37
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 45
3 Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . 51
PART II. OTHER INFORMATION
1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 52
4 Submission of Matters to a Vote of Security Holders . . 52
5 Other Information . . . . . . . . . . . . . . . . . . . 53
6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 53
Signatures. . . . . . . . . . . . . . . . . . . . . . . 56
<PAGE>
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:
TERM DEFINITION
1998 Form Combined 1998 Annual Report on Form 10-K filed separately by
10-K Cinergy, CG&E, PSI, and ULH&P
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
CAAA Clean Air Act Amendments of 1990
CC&T Cinergy Capital and Trading, Inc. (a subsidiary of
Investments)
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
CIBU Cinergy Investments Business Unit
Cinergy or Cinergy Corp.
Company
Committed Lines A line of credit providing short-term loans on a
committed basis
Destec Destec Energy, Inc.
DOE United States Department of Energy
Dynegy Dynegy Inc.
ECBU Energy Commodities Business Unit
EDBU Energy Delivery Business Unit
EPA United States Environmental Protection Agency
EPS Earnings per share
FASB Financial Accounting Standards Board
Gibson PSI's Gibson Generating Station (steam electric generating
plant)
IBU International Business Unit
ICR Information Collection Request
IDEM Indiana Department of Environmental Management
IGC Indiana Gas Company, Inc., formerly Indiana Gas and Water
Company, Inc.
Investments Cinergy Investments, Inc. (a subsidiary of Cinergy)
IT Information Technology
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION
IURC Indiana Utility Regulatory Commission
kwh Kilowatt-hour
mcf Thousand cubic feet
MGP Manufactured gas plant
Midlands Midlands Electricity plc, a United Kingdom regional electric
company (a wholly-owned subsidiary of Avon Energy)
MW Megawatts
N/A Not applicable
NERC North American Electric Reliability Council
NIPSCO Northern Indiana Public Service Company
NOx Nitrogen oxide
ProEnergy Producers Energy Marketing, LLC (a subsidiary of CC&T),
which is engaged in the marketing of natural gas
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
RUS Rural Utilities Service
SEC United States Securities and Exchange Commission
September 1996 An IURC order issued in September 1996 on PSI's retail
Order rate proceeding
SIP State Implementation Plan
SO2 Sulfur dioxide
Statement 131 Statement of Financial Accounting Standards No. 131,
Disclosures About Segments of an Enterprise and Related
Information
Statement 133 Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
Uncommitted A line of credit providing short-term loans on an
Lines uncommitted basis
US United States
WVPA Wabash Valley Power Association, Inc.
<PAGE>
CINERGY CORP.
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 92,652 $ 100,154
Restricted deposits 3,641 3,587
Notes receivable 59 64
Accounts receivable less accumulated provision
for doubtful accounts of $31,355 at March
31, 1999, and $25,622 at December 31, 1998 397,686 580,305
Materials, supplies, and fuel - at average cost 180,969 202,747
Prepayments and other 73,692 74,849
Energy risk management assets 703,278 969,000
----------- ------------
1,451,977 1,930,706
Utility Plant - Original Cost
In service
Electric 9,248,374 9,222,261
Gas 794,785 786,188
Common 197,299 186,364
----------- -----------
10,240,458 10,194,813
Accumulated depreciation 4,100,406 4,040,247
----------- -----------
6,140,052 6,154,566
Construction work in progress 209,461 189,883
----------- -----------
Total utility plant 6,349,513 6,344,449
Other Assets
Regulatory assets 940,386 970,767
Investments in unconsolidated subsidiaries 645,250 574,401
Other 459,022 478,472
----------- -----------
2,044,658 2,023,640
$ 9,846,148 $10,298,795
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 433,732 $ 668,860
Accrued taxes 240,179 228,347
Accrued interest 40,878 51,679
Notes payable and other short-term obligations 1,052,811 903,700
Long-term debt due within one year 25,959 136,000
Energy risk management liabilities 828,424 1,117,146
Other 86,814 93,376
---------- -----------
2,708,797 3,199,108
Non-Current Liabilities
Long-term debt 2,605,657 2,604,467
Deferred income taxes 1,100,473 1,091,075
Unamortized investment tax credits 154,381 156,757
Accrued pension and other postretirement
benefit costs 323,949 315,147
Other 268,042 298,370
---------- -----------
4,452,502 4,465,816
Total liabilities 7,161,299 7,664,924
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 92,616 92,640
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares -
158,779,900 at March 31, 1999, and
158,664,532 at December 31, 1998 1,588 1,587
Paid-in capital 1,598,884 1,595,237
Retained earnings 1,001,034 945,214
Accumulated other comprehensive loss (9,273) (807)
---------- -----------
Total common stock equity 2,592,233 2,541,231
$9,846,148 $10,298,795
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands, except per share amounts)
Operating Revenues
Electric $ 968,532 $1,158,724
Gas 421,308 184,846
Other 12,439 4,891
---------- ----------
1,402,279 1,348,461
Operating Expenses
Fuel and purchased and exchanged power 433,169 652,404
Gas purchased 334,402 107,586
Other operation and maintenance 244,548 212,693
Depreciation and amortization 86,477 79,935
Taxes other than income taxes 69,534 70,135
---------- ----------
1,168,130 1,122,753
Operating Income 234,149 225,708
Equity in Earnings of Unconsolidated
Subsidiaries 44,682 11,854
Other Income and (Expenses) - Net (11,886) (11,815)
Interest 60,772 59,805
---------- ----------
Income Before Taxes 206,173 165,942
Income Taxes 77,564 57,449
Preferred Dividend Requirements
of Subsidiaries 1,364 2,422
---------- ----------
Net Income $ 127,245 $ 106,071
Average Common Shares Outstanding 158,746 157,764
Earnings Per Common Share
Net income $0.80 $0.67
Earnings Per Common Share - Assuming Dilution
Net income $0.80 $0.67
Dividends Declared Per Common Share $0.45 $ 0.45
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Loss Income (Loss) Equity
Quarter Ended March 31, 1999
Balance at January 1, 1999 $1,587 $1,595,237 $ 945,214 $ (807) $2,541,231
Comprehensive income
Net income 127,245 $127,245 127,245
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (8,451) (8,451)
Unrealized gains/losses -
grantor trusts (15) (15)
--------
Other comprehensive loss
total (8,466) (8,466)
--------
Comprehensive income total $118,779
Issuance of 115,368 shares of
common stock - net 1 1,978 1,979
Treasury shares purchased (233) (233)
Treasury shares reissued 1,902 1,902
Dividends on common stock (see
page 8 for per share amounts) (71,422) (71,422)
Other (3) (3)
------ ---------- ---------- ------- ----------
Balance at March 31, 1999 $1,588 $1,598,884 $1,001,034 $(9,273) $2,592,233
Quarter Ended March 31, 1998
Balance at January 1, 1998 $1,577 $1,573,064 $ 967,420 $(2,861) $2,539,200
Comprehensive income
Net income 106,071 $106,071 106,071
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (367) (367)
Minimum pension liability
adjustment (51) (51)
--------
Other comprehensive loss
total (418) (418)
--------
Comprehensive income total $105,653
========
Issuance of 19,362 shares of
common stock - net 1 289 290
Treasury shares purchased (1) (1,430) (1,431)
Treasury shares reissued 1 2,149 2,150
Dividends on common stock (see
page 8 for per share amounts) (70,994) (70,994)
Other 8 (2) 6
------ ---------- ---------- ------- ----------
Balance at March 31, 1998 $1,578 $1,574,080 $1,002,495 $(3,279) $2,574,874
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 127,245 $ 106,071
Items providing (using) cash currently:
Depreciation and amortization 86,477 79,935
Deferred income taxes and investment tax
credits - net 12,877 (12,955)
Equity in earnings of unconsolidated subsidiaries (44,682) (11,854)
Allowance for equity funds used during
construction (775) (21)
Regulatory assets - net 5,140 10,670
Changes in current assets and current liabilities
Restricted deposits (54) (29)
Accounts and notes receivable, net of reserves
on receivables sold 182,265 (106,525)
Materials, supplies, and fuel 21,778 4,660
Accounts payable (235,128) 69,305
Accrued taxes and interest 1,031 24,938
Energy risk management - net (23,000) -
Other items - net 9,478 25,788
--------- ---------
Net cash provided by operating
activities 142,652 189,983
Financing Activities
Issuance of common stock 1,979 290
Issuance of long-term debt 6,623 98,901
Retirement of preferred stock of subsidiaries (20) (85,229)
Redemption of long-term debt (116,000) (160,291)
Change in short-term debt 149,111 108,767
Dividends on common stock (71,422) (70,994)
--------- ---------
Net cash used in financing activities (29,729) (108,556)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (79,143) (66,348)
Investments in unconsolidated subsidiaries (41,282) (9,658)
--------- ---------
Net cash used in investing activities (120,425) (76,006)
Net increase (decrease) in cash and temporary
cash investments (7,502) 5,421
Cash and temporary cash investments at beginning
of period 100,154 53,310
--------- ---------
Cash and temporary cash investments at end of period $ 92,652 $ 58,731
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
CINERGY CORP.
Below is information concerning the consolidated results of operations for
Cinergy for the quarter ended March 31, 1999. For information concerning the
results of operations for each of the other registrants for the quarter ended
March 31, 1999, see the discussion under the heading "Results of Operations"
following the financial statements of each registrant.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Quarter Ended
March 31
Revenue Kwh Sales
1999 1998 1999 1998
($ and kwh in millions)
Retail $676 $ 633 12,276 11,678
Sales for resale 266 515 10,694 21,733
Other 27 11 172 -
---- ------ ------ -------
Total $969 $1,159 23,142 33,411
Electric operating revenues decreased $190 million (16%) for the quarter ended
March 31, 1999, when compared to the same period for 1998. This decrease was
primarily due to decreased volumes on non-firm power sales for resale
transactions related to energy marketing and trading operations. Partially
offsetting the decline was an increase in the average price per kwh for retail
customers, higher retail and firm power kwh sales resulting from growth in the
average number of residential and commercial customers and a return to more
normal weather in the first quarter of 1999, as compared to 1998, and increased
international operations.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
March 31
Revenue Mcf Sales
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- -----
($ and mcf in millions)
Sales for resale $243 $ - 143 N/A
Retail 158 174 26 26
Transportation 20 11 13 16
---- ---- --- ---
Total $421 $185 182 42
Gas operating revenues increased $236 million in the first quarter of 1999, when
compared to the same period last year, primarily due to the gas operating
revenues of ProEnergy, which was acquired in June 1998. A lower average cost per
mcf of gas purchased, which was passed on to end users, contributed to the
decrease in retail sales. Transportation revenues increased as more residential
and commercial customers began to purchase gas directly from suppliers, using
transportation services provided by CG&E. This increase in transportation
revenues was partially offset by a decrease in mcf transportation volumes
resulting from the loss of a large industrial transportation customer during
late 1998.
Other Revenues
Other revenues increased $8 million for the quarter ended March 31, 1999, over
the same period of 1998. This increase was primarily the result of increased
revenues of new non-regulated initiatives operated by the various business
units.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Fuel $198 $181
Purchased and exchanged power 235 471
---- ----
Total $433 $652
Electric fuel costs increased $17 million (9%) for the quarter ended March 31,
1999, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter Ended
March 31
(in millions)
Fuel expense - March 31, 1998 $181
Increase (Decrease) due to change in:
Price of fuel (2)
Deferred fuel cost 5
Kwh generation 9
Other 5
----
Fuel expense - March 31, 1999 $198
Purchased and exchanged power expense decreased $236 million (50%) for the
quarter ended March 31, 1999, as compared to the same period last year,
primarily reflecting decreased purchases of non-firm power for resale to others
as a result of a decline in sales for resale volumes in the energy marketing and
trading operations.
Gas Purchased
Gas purchased for the quarter ended March 31, 1999, increased $227 million, when
compared to the same period last year, primarily due to the gas purchased
expenses of ProEnergy, which was acquired in June 1998. Partially offsetting
this increase was a lower average cost per mcf of gas purchased.
<PAGE>
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Other operation $195 $174
Maintenance 50 39
---- ----
Total $245 $213
Other operation expenses increased $21 million (12%) for the quarter ended March
31, 1999, as compared to the same period last year, primarily due to an increase
in operating expenses related to various non-regulated subsidiaries and the
estimated loss on a specific customer account.
Maintenance expenses increased $11 million (28%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to an increase in
maintenance activities associated with planned outages at certain production
facilities.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Depreciation $79 $73
Amortization of phase-in deferrals 6 6
Amortization of post-in-service
deferred operating expenses 1 1
--- ---
Total $86 $80
Depreciation expense increased $6 million (8%) for the quarter ended March 31,
1999, as compared to the same period last year, primarily due to additions to
depreciable plant.
Equity in Earnings of Unconsolidated Subsidiaries
The $33 million increase in equity in earnings of unconsolidated subsidiaries
for the quarter ended March 31, 1999, as compared to the same period of 1998, is
primarily attributable to an increase in the earnings of Avon Energy resulting
from increased profits related to Midlands' supply business and lower costs of
purchased electricity.
Preferred Dividend Requirements of Subsidiaries
The decrease in preferred dividend requirements of subsidiaries of $1 million
(44%) for the quarter ended March 31, 1999, as compared to the same period of
1998, is primarily attributable to PSI's redemption of all outstanding shares of
its 7.44% Series Cumulative Preferred Stock on March 1, 1998.
<PAGE>
THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 17,856 $ 26,989
Restricted deposits 1,173 1,173
Notes receivable from affiliated companies 109,725 84,358
Accounts receivable less accumulated provision
for doubtful accounts of $19,295 at March
31, 1999, and $17,607 at December 31, 1998 119,288 205,060
Accounts receivable from affiliated companies 431 22,635
Materials, supplies, and fuel - at average cost 94,163 115,294
Prepayments and other 41,369 40,158
Energy risk management assets 351,639 484,500
---------- ---------
735,644 980,167
Utility Plant - Original Cost
In service
Electric 4,817,108 4,806,958
Gas 794,786 786,188
Common 197,299 186,364
---------- ----------
5,809,193 5,779,510
Accumulated depreciation 2,184,770 2,147,298
---------- ----------
3,624,423 3,632,212
Construction work in progress 121,476 119,993
---------- ----------
Total utility plant 3,745,899 3,752,205
Other Assets
Regulatory assets 616,784 627,035
Other 101,817 100,061
---------- ----------
718,601 727,096
$5,200,144 $5,459,468
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 171,792 $ 282,743
Accounts payable to affiliated companies 34,376 13,166
Accrued taxes 138,096 151,455
Accrued interest 13,920 20,571
Long-term debt due within one year 20,000 130,000
Notes payable and other short-term obligations 288,991 189,283
Notes payable to affiliated companies 4,289 17,020
Energy risk management liabilities 414,212 558,573
Other 25,961 26,422
---------- ----------
1,111,637 1,389,233
Non-Current Liabilities
Long-term debt 1,219,901 1,219,778
Deferred income taxes 779,201 771,145
Unamortized investment tax credits 109,260 110,801
Accrued pension and other postretirement
benefit costs 149,830 146,361
Other 134,550 134,990
---------- ----------
2,392,742 2,383,075
Total liabilities 3,504,379 3,772,308
Cumulative Preferred Stock
Not subject to mandatory redemption 20,697 20,717
Common Stock Equity
Common stock - $8.50 par value; authorized
shares - 120,000,000; outstanding shares -
89,663,086 at March 31, 1999, and
December 31, 1998 762,136 762,136
Paid-in capital 553,929 553,926
Retained earnings 360,127 351,505
Accumulated other comprehensive loss (1,124) (1,124)
---------- ----------
Total common stock equity 1,675,068 1,666,443
$5,200,144 $5,459,468
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands)
Operating Revenues
Electric $481,586 $593,305
Gas 163,797 173,462
-------- --------
645,383 766,767
Operating Expenses
Fuel and purchased and exchanged power 198,871 325,171
Gas purchased 78,878 96,588
Other operation and maintenance 108,156 101,405
Depreciation and amortization 50,570 47,660
Taxes other than income taxes 54,114 54,683
-------- --------
490,589 625,507
Operating Income 154,794 141,260
Other Income and (Expenses) - Net (1,261) (2,494)
Interest 24,407 26,789
-------- --------
Income Before Taxes 129,126 111,977
Income Taxes 48,889 40,785
-------- --------
Net Income $ 80,237 $ 71,192
Preferred Dividend Requirement 214 215
-------- --------
Net Income Applicable to Common Stock $ 80,023 $ 70,977
Other Comprehensive Income (Loss), Net of Tax - (155)
-------- --------
Comprehensive Income $ 80,023 $ 70,822
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 80,237 $ 71,192
Items providing (using) cash currently:
Depreciation and amortization 50,570 47,660
Deferred income taxes and investment tax
credits - net 8,795 (27)
Allowance for equity funds used during
construction (775) (10)
Regulatory assets - net 4,496 2,912
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 80,619 391
Materials, supplies, and fuel 21,131 14,073
Accounts payable (89,741) 51,971
Accrued taxes and interest (20,010) (4,439)
Energy risk management - net (11,500) -
Other items - net (1,938) 9,753
--------- --------
Net cash provided by operating
activities 121,884 193,476
Financing Activities
Retirement of preferred stock (17) (9)
Redemption of long-term debt (110,000) (160,291)
Change in short-term debt 86,977 49,157
Dividends on preferred stock (214) (215)
Dividends on common stock (71,400) (42,600)
--------- ---------
Net cash used in financing
activities (94,654) (153,958)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (36,363) (36,483)
Net cash used in investing
activities (36,363) (36,483)
Net increase (decrease) in cash and temporary
cash investments (9,133) 3,035
Cash and temporary cash investments at
beginning of period 26,989 2,349
--------- ---------
Cash and temporary cash investments at
end of period $ 17,856 $ 5,384
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Quarter Ended
March 31
Revenue Kwh Sales
1999 1998 1999 1998
($ and kwh in millions)
Retail $358 $336 5,882 5,438
Sales for resale 121 254 4,918 10,793
Other 3 3 N/A N/A
---- ---- ------ ------
Total $482 $593 10,800 16,231
Electric operating revenues decreased $111 million (19%) for the quarter ended
March 31, 1999, when compared to the same period for 1998. This decrease was
primarily due to decreased volumes on non-firm power sales for resale
transactions related to Cinergy's energy marketing and trading operations.
Partially offsetting the decline was higher retail kwh sales resulting from
growth in the average number of residential and commercial customers and a
return to more normal weather in the first quarter of 1999, as compared to 1998.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
March 31
Revenue Mcf Sales
1999 1998 1999 1998
($ and mcf in millions)
Retail $144 $162 26 26
Transportation 20 11 13 16
---- ---- -- --
Total $164 $173 39 42
Gas operating revenues decreased $9 million (5%) in the first quarter of 1999,
when compared to the same period last year. A lower average cost per mcf of gas
purchased, which was passed on to end users, contributed to the decrease in
retail sales. Transportation revenues increased as more residential and
commercial customers began to purchase gas directly from suppliers, using
transportation services provided by CG&E. This increase in transportation
revenues was partially offset by a decrease in mcf transportation volumes
resulting from the loss of a large industrial transportation customer during
late 1998.
<PAGE>
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Fuel $ 86 $ 88
Purchased and exchanged power 113 237
---- ----
Total $199 $325
Electric fuel costs decreased $2 million (2%) for the quarter ended March 31,
1999, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter Ended
March 31
(in millions)
Fuel expense - March 31, 1998 $88
Increase (Decrease) due to change in:
Price of fuel 1
Deferred fuel cost (7)
Kwh generation 4
---
Fuel expense - March 31, 1999 $86
Purchased and exchanged power expense decreased $124 million (52%) for the
quarter ended March 31, 1999, as compared to the same period last year. This
decline primarily reflects decreased purchases of non-firm power for resale to
others as a result of a decline in sales for resale volumes in Cinergy's energy
marketing and trading operations.
Gas Purchased
Gas purchased for the quarter ended March 31, 1999, decreased $18 million (18%),
when compared to the same period last year, primarily due to an decrease in the
average cost per mcf of gas purchased.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Other operation $ 84 $ 82
Maintenance 24 19
--- ---
Total $108 $101
<PAGE>
Maintenance expenses increased $5 million (26%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to an increase in
maintenance activities associated with planned outages at certain production
facilities.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Depreciation $43 $41
Amortization of phase-in deferrals 7 6
Amortization of post-in-service
deferred operating expenses 1 1
--- ---
Total $51 $48
Depreciation expense increased $2 million (5%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to additions to
depreciable plant.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $1 million for the quarter
ended March 31, 1999, as compared to the same period of 1998, is primarily due
to an increase in interest income and an increase in allowance for equity funds
used during construction resulting from an increase in the equity rate applied
and an increase in construction expenditures subject to allowance.
Interest
The decrease in interest expense of $2 million (9%) for the quarter ended March
31, 1999, as compared to the same period last year, was due to decreases in both
interest on long-term debt and other interest expense. The decrease in interest
expense on long-term debt is primarily due to a net redemption of approximately
$90 million of long-term debt during the period of March 1998 through February
1999. The decrease in other interest expense was due to a reduction in average
short-term borrowings and lower short-term interest rates.
<PAGE>
PSI ENERGY, INC.
AND SUBSIDIARY COMPANY
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 31,187 $ 18,788
Restricted deposits 2,468 2,414
Notes receivable 8,298 17,024
Notes receivable from affiliated companies 70 73
Accounts receivable less accumulated provision
for doubtful accounts of $11,968 at March
31, 1999, and $7,893 at December 31, 1998 139,685 225,449
Accounts receivable from affiliated companies 10,674 384
Materials, supplies, and fuel - at average cost 83,789 80,445
Prepayments and other 27,485 31,461
Energy risk management assets 351,639 484,500
---------- ----------
Total current assets 655,295 860,538
Electric Utility Plant - Original Cost
In service 4,431,266 4,415,303
Accumulated depreciation 1,915,636 1,892,949
---------- ----------
2,515,630 2,522,354
Construction work in progress 87,984 69,891
---------- ----------
Total electric utility plant 2,603,614 2,592,245
Other Assets
Regulatory assets 323,603 343,731
Other 92,496 93,012
---------- ----------
Total other assets 416,099 436,743
$3,675,008 $3,889,526
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 141,076 $ 217,959
Accounts payable to affiliated companies 12,954 30,145
Accrued taxes 90,558 58,901
Accrued interest 17,628 28,335
Notes payable and other short-term obligations 157,597 173,162
Notes payable to affiliated companies 103,092 102,946
Long-term debt due within one year 5,959 6,000
Energy risk management liabilities 414,212 558,573
Other 2,161 2,227
---------- ----------
945,237 1,178,248
Non-Current Liabilities
Long-term debt 1,020,093 1,025,659
Deferred income taxes 360,007 364,049
Unamortized investment tax credits 45,121 45,956
Accrued pension and other postretirement
benefit costs 116,664 112,387
Other 101,641 115,656
---------- ----------
1,643,526 1,663,707
Total liabilities 2,588,763 2,841,955
Cumulative Preferred Stock
Not subject to mandatory redemption 71,919 71,923
Common Stock Equity
Common stock - without par value; $0.01
stated value; authorized shares - 60,000,000;
outstanding shares - 53,913,701 at March
31, 1999, and December 31, 1998 539 539
Paid-in capital 410,740 410,739
Retained earnings 603,557 564,865
Accumulated other comprehensive loss (510) (495)
---------- ----------
Total common stock equity 1,014,326 975,648
$3,675,008 $3,889,526
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands)
Operating Revenues
Electric $482,465 $592,125
Operating Expenses
Fuel and purchased and exchanged power 234,927 352,746
Other operation and maintenance 113,240 101,685
Depreciation and amortization 33,743 32,275
Taxes other than income taxes 14,488 14,967
-------- --------
396,398 501,673
Operating Income 86,067 90,452
Other Income and (Expenses) - Net 323 1,718
Interest 21,364 22,898
-------- --------
Income Before Taxes 65,026 69,272
Income Taxes 25,185 25,944
-------- --------
Net Income $ 39,841 $ 43,328
Preferred Dividend Requirement 1,150 2,208
-------- --------
Net Income Applicable to Common Stock $ 38,691 $ 41,120
Other Comprehensive Income (Loss), Net of Tax (15) 944
-------- ---------
Comprehensive Income $ 38,676 $ 42,064
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 39,841 $ 43,328
Items providing (using) cash currently:
Depreciation and amortization 33,743 32,275
Deferred income taxes and investment tax
credits - net (3,476) (473)
Allowance for equity funds used during
construction - (11)
Regulatory assets - net 644 7,758
Changes in current assets and current
liabilities
Restricted deposits (54) (29)
Accounts and notes receivable, net of
reserves on receivables sold 85,834 (75,348)
Materials, supplies, and fuel (3,344) (9,413)
Accounts payable (94,074) 33,541
Accrued taxes and interest 20,950 26,088
Energy risk management - net (11,500) -
Other items - net 7,593 (14,292)
--------- ---------
Net cash provided by operating
activities 76,157 43,424
Financing Activities
Issuance of long-term debt - 98,901
Retirement of preferred stock (3) (85,220)
Redemption of long-term debt (6,000) -
Change in short-term debt (15,419) 8,481
Dividends on preferred stock (1,150) (2,736)
Dividends on common stock - (28,400)
--------- ---------
Net cash used in financing activities (22,572) (8,974)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (41,186) (26,803)
Net cash used in investing activities (41,186) (26,803)
Net increase in cash and temporary cash
investments 12,399 7,647
Cash and temporary cash investments at
beginning of period 18,788 18,169
--------- ---------
Cash and temporary cash investments at
end of period $ 31,187 $ 25,816
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
The components of operating revenues and the related kwh sales are shown below:
Quarter Ended
March 31
Revenue Kwh Sales
1999 1998 1999 1998
($ and kwh in millions)
Retail $318 $297 6,393 6,239
Sales for resale 157 287 6,282 12,185
Other 7 8 N/A N/A
---- ---- ------ ------
Total $482 $592 12,675 18,424
Operating revenues decreased $110 million (19%) for the quarter ended March 31,
1999, when compared to the same period for 1998. This decrease was primarily due
to decreased volumes on non-firm power sales for resale transactions related to
Cinergy's energy marketing and trading operations. Partially offsetting the
decline was an increase in the average price per kwh for retail customers and
higher retail and firm power kwh sales resulting from growth in the average
number of residential and commercial customers and a return to more normal
weather in the first quarter of 1999, as compared to 1998.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Fuel $107 $ 92
Purchased and exchanged power 128 261
---- ----
Total $235 $353
Fuel costs increased $15 million (16%) for the first quarter of 1999, as
compared to the same period last year.
<PAGE>
An analysis of fuel costs is shown below:
Quarter Ended
March 31
(in millions)
Fuel expense - March 31, 1998 $ 92
Increase (Decrease) due to change in:
Price of fuel (3)
Deferred fuel cost 12
Kwh generation 6
----
Fuel expense - March 31, 1999 $107
Purchased and exchanged power expense decreased $133 million (51%) for the
quarter ended March 31, 1999, as compared to the same period last year. This
decline primarily reflects decreased purchases of non-firm power for resale to
others as a result of a decline in sales for resale volumes in Cinergy's energy
marketing and trading operations.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in millions)
Other operation $ 88 $ 82
Maintenance 25 20
---- ----
Total $113 $102
Other operation expense increased $6 million (7%) for the quarter ended March
31, 1999, as compared to the same period of 1998, primarily due to the estimated
loss on a specific customer account.
Maintenance expense increased $5 million (25%) for the quarter ended March 31,
1999, as compared to the same period of 1998, primarily due to an increase in
maintenance activities associated with planned outages at certain production
facilities.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $1 million for the quarter
ended March 31, 1999, as compared to the same period of 1998, is primarily
attributable to a decrease in interest income.
Interest
The $2 million (7%) decrease in interest expense for the quarter ended March 31,
1999, as compared to the same period of 1998, is primarily due to a decrease in
other interest expense resulting from a reduction in average short-term
borrowings and lower short-term interest rates. Partially offsetting the
decrease was an increase in interest expense on long-term debt resulting from
the net issuance of approximately $144 million of long-term debt during the
period from March 1998 through December 1998.
<PAGE>
Preferred Dividend Requirement
The decrease in preferred dividend requirement of $1 million (48%) for the
quarter ended March 31, 1999, as compared to the same period of 1998, is
primarily attributable to PSI's redemption of all outstanding shares of its
7.44% Series Cumulative Preferred Stock on March 1, 1998.
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
ASSETS
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 4,993 $ 3,244
Accounts receivable less accumulated provision
for doubtful accounts of $1,826 at
March 31, 1999, and $1,248 at December
31, 1998 9,076 14,125
Accounts receivable from affiliated companies - 666
Materials, supplies, and fuel - at average cost 3,668 8,269
Prepayments and other 154 308
-------- --------
Total current assets 17,891 26,612
Utility Plant - Original Cost
In service
Electric 234,791 232,222
Gas 165,629 164,040
Common 20,358 18,908
-------- --------
420,778 415,170
Accumulated depreciation 146,128 143,386
-------- --------
274,650 271,784
Construction work in progress 9,971 11,444
-------- --------
Total utility plant 284,621 283,228
Other Assets
Regulatory assets 10,893 10,978
Other 5,470 3,767
-------- --------
16,363 14,745
$318,875 $324,585
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
March 31 December 31
1999 1998
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 6,729 $ 5,903
Accounts payable to affiliated companies 15,582 14,986
Accrued taxes 6,616 3,216
Accrued interest 1,432 1,959
Long-term debt due within one year 20,000 20,000
Notes payable to affiliated companies 11,386 31,817
Other 4,179 4,247
-------- --------
65,924 82,128
Non-Current Liabilities
Long-term debt 54,571 54,553
Deferred income taxes 25,711 26,134
Unamortized investment tax credits 4,168 4,238
Accrued pension and other postretirement
benefit costs 11,920 11,678
Amounts due to customers - income taxes 9,253 8,959
Other 11,968 8,077
-------- --------
117,591 113,639
Total liabilities 183,515 195,767
Common Stock Equity
Common stock - $15.00 par value; authorize
shares - 1,000,000; outstanding shares -
585,333 at March 31, 1999, and
December 31, 1998 8,780 8,780
Paid-in capital 19,525 19,525
Retained earnings 107,055 100,513
-------- --------
Total common stock equity 135,360 128,818
$318,875 $324,585
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
<S> <C> <C>
Quarter Ended
March 31
1999 1998
(in thousands)
Operating Revenues
Electric $49,159 $46,999
Gas 33,000 28,480
------- -------
82,159 75,479
Operating Expenses
Electricity purchased from parent company
for resale 36,748 34,090
Gas purchased 17,322 16,353
Operation and maintenance 10,190 9,430
Depreciation 3,571 3,232
Taxes other than income taxes 1,083 1,005
------- -------
68,914 64,110
Operating Income 13,245 11,369
Other Income and (Expenses) - Net (390) (496)
Interest 1,563 1,115
------- -------
Income Before Taxes 11,292 9,758
Income Taxes 4,749 3,989
------- -------
Net Income $ 6,543 $ 5,769
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
<S> <C> <C>
Year to Date
March 31
1999 1998
(in thousands)
Operating Activities
Net income $ 6,543 $ 5,769
Items providing (using) cash currently:
Depreciation 3,571 3,232
Deferred income taxes and investment tax
credits - net (200) 462
Allowance for equity funds used during
construction 16 14
Regulatory assets 35 (41)
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 4,006 240
Materials, supplies, and fuel 4,601 3,111
Accounts payable 1,422 (5,751)
Accrued taxes and interest 2,873 (1,000)
Other current assets and liabilities 86 -
Other items - net 4,200 1,627
-------- --------
Net cash provided by operating
activities 27,153 7,663
Financing Activities
Change in short-term debt (20,431) (2,030)
-------- --------
Net cash used in financing
activities (20,431) (2,030)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (4,973) (6,175)
Net cash used in investing
activities (4,973) (6,175)
Net increase (decrease) in cash and temporary
cash investments 1,749 (542)
Cash and temporary cash investments at
beginning of period 3,244 546
-------- --------
Cash and temporary cash investments at
end of period $ 4,993 $ 4
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999
Operating Revenues
Electric Operating Revenues
Electric operating revenues increased $2 million (5%) for the quarter ended
March 31, 1999, as compared to the same period last year. This increase
primarily reflects a return to more normal weather conditions, as compared to
the same period in 1998, and higher retail kwh sales resulting from growth in
the average number of residential and commercial customers.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
March 31
Revenue Mcf Sales
1999 1998 1999 1998
($ and mcf in thousands)
Retail $31,555 $27,266 5,219 4,491
Transportation 1,445 1,214 1,078 1,106
------- ------- ----- -----
Total $33,000 $28,480 6,297 5,597
Gas operating revenues increased $5 million (16%) in the first quarter of 1999,
when compared to the same period last year, primarily due to a increase in mcf
volumes sold, a return to more normal weather conditions, and an increase in the
number of customers.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased increased $3 million (8%) for the quarter ended March 31,
1999, as compared to the same period last year. This increase reflects higher
volumes purchased from CG&E.
Gas Purchased
Gas purchased for the quarter ended March 31, 1999, increased $1 million (6%),
when compared to the same period last year, primarily due to an increase in the
volumes of gas purchased, due to higher demand and an increase in the number of
customers.
<PAGE>
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
March 31
1999 1998
(in thousands)
Other operation $ 8,948 $8,135
Maintenance 1,242 1,295
------- -------
Total $10,190 $9,430
Other operation expenses increased $.8 million (10%) for the quarter ended March
31, 1999, as compared to the same period last year, primarily due to an increase
in administrative and general activities.
Depreciation
Depreciation increased $.3 million (10%) for the quarter ended March 31, 1999,
as compared to the same period last year, due to additions to depreciable plant.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $.1 million for the quarter
ended March 31, 1999, as compared to the same period of 1998, is primarily
attributable to an increase in miscellaneous non-utility revenues.
Interest
The increase in interest expense of $.4 million (40%) for the quarter ended
March 31, 1999, as compared to the same period last year, was primarily due to
the net issuance of approximately $30 million of long-term debt during the
period of April 1998 through December 1998.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include normal,
recurring adjustments) necessary in the opinion of the registrants for a
fair presentation of the interim results. These statements should be read
in conjunction with the Financial Statements and the notes thereto included
in the combined 1998 Form 10-K of the registrants.
Certain amounts in the 1998 Financial Statements have been reclassified to
conform to the 1999 presentation.
Cinergy
2. On April 16, 1999, Cinergy issued and sold $200 million principal amount of
its 6.125% Debentures due 2004. Proceeds from the sale were used to repay a
portion of short-term indebtedness and for general corporate purposes.
Cinergy and PSI
3. On April 30, 1999, PSI issued: $124.7 million principal amount of its First
Mortgage Bonds, Series BBB, 8%, due July 15, 2009, in exchange for $125.7
million principal amount of certain outstanding Secured Medium-term Notes,
Series A; $60.1 million principal amount of its First Mortgage Bonds,
Series CCC, 8.85%, due January 15, 2022, in exchange for $60.5 million
principal amount of certain outstanding Secured Medium-term Notes, Series
A; and $38 million principal amount of its First Mortgage Bonds, Series
DDD, 8.31%, due September 1, 2032, in exchange for $38 million principal
amount of certain outstanding Secured Medium-term Notes, Series B.
Also on April 30, 1999, PSI issued $97 million principal amount of its
6.52% Senior Notes due 2009 in exchange for a like principal amount of
outstanding 7.25% Junior Maturing Principal Securities due 2028
("JUMPS(sm)").
The Secured Medium-term Notes and JUMPS(sm) received by PSI in the exchange
transactions described above have been cancelled.
Cinergy, CG&E, and PSI
4. Cinergy'senergy marketing and trading operations, conducted primarily
through its ECBU, markets and trades electricity, natural gas, and other
energy-related products. The power marketing and trading operation has both
physical and trading activities. Generation not required to meet native
load requirements is available to be sold to third parties, either under
long-term contracts, such as full requirements transactions or firm forward
sales contracts, or in short-term and spot market transactions. When
transactions are entered into, each transaction is designated as either a
physical or trading transaction. In order for a transaction to be
designated as physical, there must be intent and ability to physically
deliver the power from company-owned generation. Physical transactions are
accounted for on a settlement basis. All other transactions are considered
trading transactions and are accounted for using the mark-to-market method
of accounting. Under the mark-to-market method of accounting, these trading
transactions are reflected at fair value as "Energy risk management assets"
and "Energy risk management liabilities." Changes in fair value, resulting
in unrealized gains and losses, are reflected in "Fuel and purchased and
exchanged power." Revenues and costs for all transactions are recorded
gross in
<PAGE>
the Consolidated Statements of Income as contracts are settled. Revenues
are recognized in "Operating Revenues - Electric" and costs are recorded in
"Fuel and purchased and exchanged power."
Although physical transactions are entered with the intent and ability to
settle the contract with company-owned generation, it is likely, that from
time to time, due to numerous factors such as generating station outages,
native load requirements, and weather, power used to settle the physical
transactions will be required to be purchased on the open market. Depending
on the factors giving rise to these open market purchases, the cost of such
purchases could be in excess of the associated revenues. Losses such as
this will be recognized as the power is delivered. In addition, physical
contracts are subject to permanent impairment tests. At March 31, 1999,
management has concluded that no physical contracts are impaired.
Prior to December 31, 1998, the transactions now included in the trading
portfolio were accounted for and valued at the aggregate lower of cost or
market. Under this method, only the net value of the entire portfolio was
recorded as a liability in the Consolidated Balance Sheets.
Contracts in the trading portfolio are valued at end-of-period market
prices, utilizing factors such as closing exchange prices, broker and
over-the-counter quotations, and model pricing. Model pricing considers
time value and volatility factors underlying any options and contractual
commitments. Management expects that some of these obligations, even though
considered as trading contracts, will ultimately be settled from time to
time by using company-owned generation. The cost of this generation is
typically below the market prices at which the trading portfolio has been
valued.
Because of the volatility currently experienced in the power markets, and
the factors discussed above pertaining to both the physical and trading
activities, volatility in future earnings (losses) from period to period in
the ECBU is likely.
Cinergy's ECBU also physically markets natural gas and trades natural gas
and other energy-related products. All of these operations are accounted
for on the mark-to-market method of accounting. Revenues and costs from
physical marketing are recorded gross in the Consolidated Statements of
Income as contracts are settled due to the exchanging of title to the
natural gas throughout the earnings process. All non-physical transactions
are recorded net in the Consolidated Statements of Income. Energy risk
management assets and liabilities and gross margins from these trading
activities currently are not significant.
Cinergy, CG&E, and PSI
5. Cinergy and its subsidiaries use derivative financial instruments to hedge
exposures to foreign currency exchange rates, lower funding costs, and
manage exposures to fluctuations in interest rates. Instruments used as
hedges must be designated as a hedge at the inception of the contract and
must be effective at reducing the risk associated with the exposure being
hedged. Accordingly, changes in market values of designated hedge
instruments must be highly correlated with changes in market values of the
underlying hedged items at inception of the hedge and over the life of the
hedge contract.
Cinergy and its subsidiaries utilize foreign exchange forward contracts and
currency swaps to hedge certain of its net investments in foreign
operations. Accordingly, any translation gains or losses related to the
foreign exchange forward contracts or the principal exchange on the
currency swap are recorded in "Accumulated other comprehensive loss," which
is a separate component of common stock equity. Aggregate translation
losses related to these instruments are reflected in "Current Liabilities"
in the Consolidated Balance Sheets.
Interest rate swaps are accounted for under the accrual method.
Accordingly, gains and losses based on any interest differential between
fixed-rate and floating-rate interest amounts, calculated on agreed upon
notional principal amounts, are recognized in the Consolidated Statements
of Income as a component of interest expense as realized over the life of
the agreement.
Cinergy, CG&E, PSI, and ULH&P
6. As discussed in the 1998 Form 10-K, prior to the 1950s, gas was produced at
MGP sites through a process that involved the heating of coal and/or oil.
The gas produced from this process was sold for residential, commercial,
and industrial uses.
Cinergy and PSI
Coal tar residues, related hydrocarbons, and various metals associated with
MGP sites have been found at former MGP sites in Indiana, including at
least 21 MGP sites which PSI or its predecessors previously owned. PSI
acquired four of the sites from NIPSCO in 1931 and at the same time it sold
NIPSCO the sites located in Goshen and Warsaw, Indiana. In 1945, PSI sold
19 of these sites (including the four it acquired from NIPSCO) to Indiana
Gas and Water Company, Inc. (now IGC). One of the 19 sites, located in
Rochester, Indiana, was later sold by IGC to NIPSCO.
IGC and NIPSCO both made claims against PSI, contending that PSI is a
Potentially Responsible Party under the CERCLA with respect to the 21 MGP
sites, and therefore legally responsible for the costs of investigating and
remediating these sites. Moreover, in August 1997, NIPSCO filed suit
against PSI in federal court, claiming, pursuant to CERCLA, recovery from
PSI of NIPSCO's past and future costs of investigating and remediating MGP
related contamination at the Goshen MGP site.
In November 1998, NIPSCO, IGC, and PSI entered into a Site Participation
and Cost Sharing Agreement by which they settled allocation of CERCLA
liability for past and future costs, among the three companies, at seven
MGP sites in Indiana. Pursuant to this agreement, NIPSCO's lawsuit against
PSI was dismissed. The parties have assigned one of the parties lead
responsibility for managing further investigation and remediation
activities at each of the sites. Similar agreements were reached between
IGC and PSI which allocate CERCLA liability at 14 MGP sites with which
NIPSCO had no involvement. These agreements conclude all CERCLA and similar
claims between the three companies relative to MGP sites. Pursuant to the
agreements and applicable laws, the parties are continuing to investigate
and remediate the sites as appropriate. Investigation and cleanup of some
of the sites is subject to oversight by the IDEM.
PSI has placed its insurance carriers on notice of IGC's, NIPSCO's, and the
IDEM's claims related to MGP sites. In April 1998, PSI filed suit in
Hendricks County Circuit Court against its general liability insurance
carriers seeking, among other matters, a declaratory judgment that its
insurance carriers are obligated to defend MGP claims against PSI or pay
PSI's costs of defense and to indemnify PSI for its costs of investigating,
preventing, mitigating, and remediating damage to
<PAGE>
property and paying claims associated with MGP sites. PSI cannot predict
the outcome of this litigation.
Based upon the work performed to date, PSI has accrued costs for the sites
related to investigation, remediation, and groundwater monitoring.
Estimated costs of certain remedial activities are accrued when such costs
are reasonably estimable. PSI does not believe it can provide an estimate
of the reasonably possible total remediation costs for any site prior to
completion of a remedial investigation/feasibility study and the
development of some sense of the timing for the implementation of the
potential remedial alternatives, to the extent such remediation may be
required. Accordingly, the total costs that may be incurred in connection
with the remediation of all sites, to the extent remediation is necessary,
cannot be determined at this time. These future costs at the 21 Indiana MGP
sites, based on information currently available, are not material to
Cinergy's financial condition or results of operations. However, as further
investigation and remediation activities are undertaken at these sites, the
potential liability for the 21 MGP sites could be material to Cinergy's and
PSI's financial condition or results of operations.
Cinergy, CG&E, and ULH&P
CG&E and its utility subsidiaries are aware of potential sites where MGP
activities have occurred at some time in the past. None of these sites is
known to present a risk to the environment. CG&E and its utility
subsidiaries have undertaken preliminary site assessments to obtain more
information about some of these MGP sites.
Cinergy, CG&E, PSI, and ULH&P
7. During the second quarter of 1998, the FASB issued Statement 133. The new
standard requires companies to record derivative instruments, as defined in
Statement 133, as assets or liabilities, measured at fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting
treatment. The standard is effective for fiscal years beginning after June
15, 1999, and Cinergy expects to adopt the provisions of Statement 133 in
the first quarter of 2000.
The Company has not yet quantified the impacts of adopting Statement 133 on its
consolidated financial statements. However, Statement 133 could increase
volatility in earnings and other comprehensive income.
<PAGE>
<TABLE>
<CAPTION>
Cinergy
Presented below is a reconciliation of earnings per common share (basic EPS) and
earnings per common share assuming dilution (diluted EPS).
<S> <C> <C> <C>
Income Shares Earnings
(Numerator) (Denominator) Per Share
(In thousands, except per share amounts)
Quarter ended March 31, 1999
Earnings per common share:
Net income $127,245 158,746 $ .80
Effect of dilutive securities:
Common stock options 412
Contingently issuable common stock 13
EPS--assuming dilution:
Net income plus assumed conversions $127,245 159,171 $ .80
Quarter ended March 31, 1998
Earnings per common share:
Net income $106,071 157,764 $ .67
Effect of dilutive securities:
Common stock options 787
Contingently issuable common stock 123
EPS--assuming dilution:
Net income plus assumed conversions $106,071 158,674 $ .67
</TABLE>
Options to purchase shares of common stock that were excluded from the
calculation of EPS--assuming dilution because the exercise prices of these
options were greater than the average market price of the common shares during
the period are summarized below:
Quarter Average
Ended Exercise
March 31 Shares Price
1999 1,744,800 $35.70
1998 914,800 37.61
Cinergy
9. Midlands (of which the Company owns 50%) has a 40% ownership interest in a
586 MW power project in Pakistan ("Uch project" or "Uch") which as
originally scheduled to begin commercial operation in late 1998. In July
1998, the Pakistani government-owned utility issued a notice of intent to
terminate certain key project agreements relative to the Uch project. The
notice asserted that various forms of corruption were involved in the
original granting of the agreements to the Uch investors by a predecessor
government. The Company believes that this notice is similar to notices
received by a number of other independent power projects in Pakistan.
The Uch investors, including a subsidiary of Midlands, strongly deny the
allegations and have pursued all available legal options to enforce their
contractual rights under the project agreements. Physical construction of
the project is complete; however, commercial operations have been delayed
pending resolution of the dispute. In December 1998, the Pakistani
government offered to withdraw its notice.
Through its 50% ownership of Midlands, the Company's current investment in the
Uch project is approximately $36 million. In addition, project lenders could
require investors to make additional capital contributions to the project under
certain conditions. The Company's share of these additional contributions is
approximately $8 million. At the present time, the Company cannot predict the
ultimate outcome of this matter.
Cinergy and PSI
10. As discussed in the 1998 Form 10-K, PSI and Dynegy (formerly Destec)
entered into a 25-year contractual agreement for the provision of coal
gasification services in November 1995. The agreement requires PSI to pay
Dynegy a base monthly fee including certain monthly operating expenses. PSI
received authorization in the September 1996 Order for the inclusion of
these costs in retail rates. In addition, PSI received authorization to
defer, for subsequent recovery in retail rates, the base monthly fees and
expenses incurred prior to the effective date of the September 1996 Order.
Over the next five years, the base monthly fees and expenses for the coal
gasification service agreement are expected to total $201 million.
During the third quarter of 1998, PSI reached an agreement with Dynegy to
purchase the remainder of its 25-year contract for coal gasification
services for $265.7 million. The proposed purchase, which is contingent
upon regulatory approval satisfactory to PSI, could be completed in 1999.
PSI is investigating financing alternatives. The transaction, if approved
as proposed, is not expected to have a material impact on PSI's earnings.
Currently, natural gas prices have fallen to a level which causes the
synthetic gas supply taken under the current gasification services
agreement to be substantially above market. If the buyout of the
gasification services agreement is approved, the combustion turbine will be
fired with natural gas, or with synthetic gas if it can be produced at a
cost competitive with natural gas.
11. As discussed in the 1998 Form 10-K, the collective-bargaining agreement
with the International Brotherhood of Electrical Workers Local No. 1393,
covering approximately 1,470 employees, expired on May 1, 1999. A new labor
agreement was ratified April 22, 1999, and is effective from May 1, 1999,
through April 30, 2002.
Cinergy, CG&E, PSI, and ULH&P
12. As discussed in the 1998 Form 10-K, during 1998, Cinergy and its
subsidiaries adopted the provisions of Statement 131. During the first
quarter of 1999, Cinergy reorganized its reportable segments. The business
unit structure effective with that reorganization is described below.
The ECBU operates and maintains, exclusive of certain jointly-owned plant,
all of the Company's domestic electric generation facilities. In addition
to the production of electric power, all energy risk management, marketing,
and proprietary arbitrage trading, with the exception of electric and gas
retail sales, is conducted through the ECBU. Revenues from external
customers are derived from the ECBU's marketing, trading, and risk
management activities. Intersegment revenues are derived from the sale of
electric power to the EDBU.
The EDBU plans, constructs, operates, and maintains the Company's
transmission and distribution systems and provides gas and electric energy
to end users. Revenues from customers other than end users are primarily
derived from the transmission of electric power through the Company's
transmission system.
The CIBU manages the development, sales, and marketing of domestic,
non-regulated wholesale energy and energy-related products and services.
Most of the CIBU's revenues are derived from the sales of such products and
services to external, end-use customers. In addition, some of the CIBU's
activities are conducted through joint-venture affiliates, including the
construction and sale or lease of cogeneration and trigeneration facilities
to large commercial/industrial customers and energy management services to
third parties.
The IBU directs and manages all of the Company's international business
holdings, which include wholly-owned subsidiaries and equity investments.
Revenues and equity earnings from unconsolidated companies are primarily
derived from energy-related businesses.
Transfer pricing for sales of electric energy and sales of electric and gas
transmission and distribution services between the ECBU and EDBU are
derived from the operating utilities' retail and wholesale rate structures.
<PAGE>
<TABLE>
<CAPTION>
Financial results by business unit for the quarters ended March 31, 1999, and
1998, and Total Segments Assets at March 31, 1999, and December 31, 1998, are as
follows:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
All Reconciling
Cinergy Business Units Other Eliminations
ECBU EDBU CIBU IBU Total (1) (2) Consolidated
-------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues -
External Customers $ 503,638 $ 868,367 $17,400 $ 12,874 $1,402,279 $ - $ - $1,402,279
Intersegment Revenues 456,536 - - - 456,536 - (456,536) -
Segment Profit (Loss)
Before Taxes 83,317 102,754 (2,729) 24,136 207,478 (1,305) - 206,173
Total Segment Assets
at March 31, 1999 $5,081,083 $3,897,368 $46,876 $789,840 $9,815,167 $30,981 $ - $9,846,148
1998
All Reconciling
Cinergy Business Units Other Eliminations
ECBU EDBU CIBU IBU Total (1) (2) Consolidated
-------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues -
External Customers $ 502,098 $ 832,452 $13,765 $ 146 $ 1,348,461 $ - $ - $ 1,348,461
Intersegment Revenues 434,931 - - - 434,931 - (434,931) -
Segment Profit (Loss)
Before Taxes 91,153 90,572 (3,268) (961) 177,496 (11,554) - 165,942
Total Segment Assets
at December 31,
1998 $5,474,428 $3,987,055 $42,107 $751,861 $10,255,451 $ 43,344 $ - $10,298,795
<FN>
1. The all other category represents miscellaneous corporate items, which are
not allocated to business units for the purposes of segment profit
measurement.
2. The reconciling eliminations category eliminates the intersegment revenues
of the ECBU and the EDBU.
</FN>
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION Matters discussed in
this "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" in "Part I. Financial Information" reflect and elucidate
Cinergy's corporate vision of the future and, as a part of that, outline goals
and aspirations, as well as specific projections. These goals and projections
are considered forward-looking statements and are based on management's beliefs,
as well as certain assumptions made by management. Forward-looking statements
involve risks and uncertainties which may cause actual results to differ
materially from the forward-looking statements. In addition to any assumptions
and other factors that are referred to specifically in connection with these
statements, other factors that could cause actual results to differ materially
from those indicated in any forward-looking statements include, among others:
factors generally affecting operations, such as unusual weather conditions,
unscheduled generation outages; unusual maintenance or repairs, unanticipated
changes in fuel costs, environmental incidents, or system constraints;
legislative and regulatory initiatives regarding deregulation and restructuring
of the industry; increased competition in the electric and gas utility
environment; challenges related to Year 2000 readiness; regulatory factors;
changes in accounting principles or policies; adverse political, legal, or
economic conditions; changing market conditions; success of efforts to invest in
and develop new opportunities in non-traditional business; availability or cost
of capital; employee workforce factors; legal and regulatory delays and other
obstacles associated with mergers, acquisitions, and investments in joint
ventures; costs and effects of legal and administrative proceedings; changes in
legislative requirements; and other risks. The SEC's rules do not require
forward-looking statements to be revised or updated, and Cinergy does not intend
to do so.
FINANCIAL CONDITION
Recent Developments
Cinergy
Acquisitions During the first quarter of 1999, Cinergy, through its
international subsidiaries, invested an additional $41 million in international
unconsolidated subsidiaries.
Competitive Pressures
Cinergy, CG&E, PSI, and ULH&P
Ohio As discussed in the 1998 Form 10-K, electric restructuring legislation was
reintroduced in 1999 in both houses of the Ohio General Assembly. These
companion bills propose to give choice to all retail electric customers by
January 1, 2001. As written, the legislation has not gained consensus among the
stakeholders.
The Ohio Senate Ways and Means Committee has scheduled a vote on a deregulation
bill during the second quarter of 1999 with a full senate vote scheduled if a
bill is reported from committee. It is uncertain whether these efforts will
produce legislation in Ohio in 1999.
<PAGE>
Indiana As discussed in the 1998 Form 10-K, legislation by a large group of
industrial customers was introduced into the Indiana legislature in January
1999. This legislation did not pass in the 1999 session of the Indiana General
Assembly, which came to a close on April 29, 1999.
Regulatory Matters
Cinergy and PSI
Coal Contract Buyout Costs See Note 10 of the "Notes to Financial Statements" in
"Part I. Financial Information."
Environmental Issues
Cinergy, CG&E, and PSI
Ozone Transport Rulemaking As discussed in the 1998 Form 10-K, in October 1998,
the EPA finalized its Ozone Transport Rule (or NOx SIP Call). It applies to 22
states in the eastern half of the US, including the three states in which the
Cinergy electric utilities operate, and also proposes a model NOx trading
program. This rule recommends that states reduce NOx emissions from primarily
industrial and utility sources to a certain limit by May 2003. The EPA gave the
affected states until September 30, 1999, to incorporate utility NOx reductions
with a trading program into their SIPs. Ohio, Indiana, a number of other states,
and various industry groups, including some of which Cinergy is a member, filed
legal challenges to the NOx SIP Call in late 1998. Ohio and Indiana have also
provided preliminary indications that they will seek fewer NOx reductions from
the utility sector in their implementing regulations than the EPA has budgeted
in its rulemaking.
On April 30, 1999, the EPA made an affirmative technical determination on the
February 1998 northeast state CAAA Section 126 petitions seeking to reduce ozone
in the eastern US. By affirming these Section 126 petitions the EPA makes a
finding that the named Midwest stationary sources (including all of Cinergy's
facilities) are significantly contributing to ozone problems in the northeast
for both the one- and eight-hour ozone standard. The EPA has stated that the
Section 126 petitions and the NOx SIP call requirements should be coordinated.
Therefore, the EPA will defer fully granting the relief sought by petitioners
until the affected states file their proposed SIPs in September 1999.
Ambient Air Standards and Regional Haze As discussed in the 1998 Form 10-K, in
1997, the EPA revised the National Ambient Air Quality Standards for ozone and
fine particulate matter and was scheduled to finalize new regional haze rules by
the summer of 1999. It is currently anticipated that the new ozone standard will
not require additional utility NOx reductions beyond those resulting from the
NOx SIP Call discussed above.
The EPA finalized the new regional haze rules on April 22, 1999. These rules
established planning and emission reduction timelines for states to use to
improve visibility in national parks throughout the US. The ultimate effect of
the new regional haze rules could be requirements for newer and cleaner
technologies and additional controls on conventional particulates and/or
reductions in SO2 and NOx emissions from utility sources. If more utility
emissions reductions are required, the compliance cost could be significant. The
outcome or effects of the states' determination cannot currently be predicted.
Air Toxics As discussed in the 1998 Form 10-K, in November 1998, the EPA
finalized its Mercury ICR. Pursuant to the ICR, all generating units must
provide detailed information about coal use and mercury content. The EPA has
since selected about 100 generating units for one-time stack sampling, including
Cinergy's Gibson Unit No. 3 and the Wabash River Repowering Project. The EPA is
planning to make its regulatory determination on the need for additional
regulation by the fourth quarter of 2000. If more air toxics regulations are
issued, the compliance cost could be significant. The outcome or effects of the
EPA's determination cannot currently be predicted.
MGP Sites See Note 6 of the "Notes to Financial Statements" in "Part I.
Financial Information."
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standards See Note 7 of the "Notes to Financial Statements" in
"Part I. Financial Information."
Market Risk Sensitive Instruments and Positions
Cinergy, CG&E, and PSI
Energy Commodities Sensitivity The Company markets and trades electricity,
natural gas, and other energy-related products. The Company utilizes
over-the-counter forward and option contracts for the purchase and sale of
electricity and also trades exchange-traded futures contracts. See Notes 4 and 5
of the "Notes to Financial Statements" in "Part I. Financial Information" for
the Company's accounting policies for certain derivative instruments. The
Company's market risks have not changed materially from the market risks
reported in the 1998 Form 10-K.
Cinergy
Exchange Rate Sensitivity The Company utilizes foreign exchange forward
contracts and currency swaps to hedge certain of its net investments in foreign
operations. See Notes 4 and 5 of the "Notes to Financial Statements" in "Part I.
Financial Information" for the Company's accounting policies for certain
derivative instruments. The Company's market risks have not changed materially
from the market risks reported in the 1998 Form 10-K.
Cinergy, CG&E, PSI, and ULH&P
Interest Rate Sensitivity The Company's net exposure to changes in interest
rates primarily consists of debt instruments with floating interest rates that
are benchmarked to various market indices. To manage the Company's exposure to
fluctuations in interest rates and to lower funding costs, the Company
constantly evaluates the use of, and has entered into, interest rate swaps. See
Notes 4 and 5 of the "Notes to Financial Statements" in "Part I. Financial
Information" for the Company's accounting policies for certain derivative
instruments. The Company's market risks have not changed materially from the
market risks reported in the 1998 Form 10-K.
CAPITAL RESOURCES AND REQUIREMENTS
Cinergy, CG&E, PSI, and ULH&P
Long-term Debt For information regarding recent issuances and redemptions of
long-term debt securities, see Notes 2 and 3 of the "Notes to Financial
Statements" in "Part I. Financial Information."
As of April 30, 1999, CG&E and PSI have remaining state regulatory authority for
long-term debt issuance of $200 million and $30 million, respectively.
<PAGE>
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt Obligations representing notes payable and other short-term
obligations (excluding notes payable to affiliated companies) at March 31, 1999,
were as follows:
Cinergy
Established
Lines Outstanding
(in millions)
Cinergy
Committed lines
Acquisition line $ 160 $ 160
Revolving line 600 -
Commercial paper - 336
Uncommitted line 45 83*
Utility subsidiaries
Committed lines 215 -
Uncommitted lines 410 180
Pollution control notes 267 267
Non-utility subsidiary 130 27
------ ------
Total $1,827 $1,053
* Excess over Established Line represents amount sold by dealers to other
investors.
CG&E
Established
Lines Outstanding
(in millions)
Committed lines $ 85 $ -
Uncommitted lines 215 105
Pollution control notes 184 184
---- ----
Total $484 $289
PSI
Established
Lines Outstanding
(in millions)
Committed lines $130 $ -
Uncommitted lines 195 75
Pollution control notes 83 83
---- ----
Total $408 $158
Cinergy, CG&E, and PSI
Cinergy's committed lines are comprised of an acquisition line and a revolving
line. The established revolving line also provides credit support for Cinergy's
commercial paper program, which is limited to a maximum principal amount of $400
million. The proceeds from the commercial paper sales were used for general
corporate purposes.
The established committed lines for CG&E and PSI each include $75 million
designated as backup for certain of the uncommitted lines at March 31, 1999.
CG&E and PSI also have the capacity to issue commercial paper that must be
supported by committed lines of the respective company. Neither CG&E nor PSI
issued commercial paper during the first quarter of 1999.
Both CG&E and PSI have issued variable rate pollution control notes. Holders of
these pollution control notes have the right to put their notes on any business
day. Accordingly, these issuances are reflected in the Consolidated Balance
Sheets as "Notes payable and other short-term obligations."
Cinergy
Global Resources established a $100 million revolving credit agreement in 1998,
which was due to expire in March 1999 and has been extended to June 29, 1999.
Cinergy, CG&E, PSI, and ULH&P
Year 2000 The Year 2000 issue generally exists because many computer systems and
applications, including those embedded in equipment and facilities, use
two-digit rather than four-digit date fields to designate an applicable year. As
a result, the systems and applications may not properly recognize dates
including and beyond the year 2000 or accurately process data in which such
dates are included, potentially causing data miscalculations and inaccuracies or
operational malfunctions and failures, which could materially affect a
business's financial condition, results of operations, and cash flows.
Cinergy has established a centrally-managed, company-wide initiative, known as
the Cinergy Year 2000 Readiness Program, to identify, evaluate, and address Year
2000 issues. The Cinergy Year 2000 Readiness Program, which began in the fourth
quarter of 1996, is generally focused on three elements that are integral to
this initiative: (1) business continuity, (2) risk management, and (3)
regulatory compliance. Business continuity includes providing reliable electric
and gas supply and service in a safe and cost-effective manner. This element
encompasses mission-critical generation, transmission, and distribution systems
and related infrastructure, as well as operational and financial IT systems and
applications, end-user computing resources, and building systems (such as
security, elevator, and heating and cooling systems). Risk management includes a
review of the Year 2000 readiness efforts of Cinergy's critical suppliers, key
customers and other principal business partners, and, as appropriate, the
development of joint business support, contingency plans, and the inclusion of
Year 2000 concerns as a regular part of the due diligence process in any new
business venture. Regulatory compliance includes communications with regulatory
agencies, other utilities, and various industry groups. While this initiative is
broad in scope, it has been structured to identify and prioritize efforts for
mission-critical electric and gas systems and services and key business
partners.
Under the Cinergy Year 2000 Readiness Program, Cinergy has established a target
date of June 30, 1999, for the remediation and testing of its mission-critical
generation, transmission, and distribution systems (gas and electric). An
innovative remediation and testing effort which Cinergy has initiated involves
operating several electric-generating units with post Year 2000 dates. Cinergy's
experience has been that those units have continued to operate without any
material adverse result relating to a Year 2000 issue. Cinergy's progress to
date ranges from approximately 95% regarding IT systems to approximately 87%
regarding assessment of critical suppliers.
Cinergy has also reviewed its existing contingency and business continuity plans
and modified them in light of the Year 2000 issue. Contingency planning to
maintain and restore service in the event of natural and other disasters
(including software- and hardware-related problems) has been part of Cinergy's
standard operation for many years, and Cinergy is working to leverage this
experience in the review of existing plans to address Year 2000-related
challenges. These reviews have assessed the potential for business disruption in
various scenarios, including the most reasonably likely worst-case scenario, and
to provide for key operational back up, recovery, and restoration alternatives.
Cinergy cannot guarantee that third parties on whom it depends for essential
goods and services (those where the interruption of the supply of such goods and
services could lead to issues involving the safety of employees, customers, or
the public; the continued reliable delivery of gas and/or electricity; and the
ability to comply with applicable laws or regulations) will convert their
mission-critical systems and processes in a timely manner. Failure or delay by
any of these third parties could significantly disrupt business. However, to
address this issue, Cinergy has established a supplier compliance program, and
is working with its critical suppliers in an effort to minimize such risks.
In addition, Cinergy is coordinating its findings and other issues with other
utilities and various industry groups via the Electric Power Research Institute
Year 2000 Embedded Systems Project and the Year 2000 Readiness Assessment
Program of the NERC, acting at the request of the DOE. The DOE has asked NERC to
report on the integrity of the transmission system for North America and to
coordinate and assess the preparation of the electric systems in North America
for the Year 2000. NERC submitted its initial quarterly status report and
coordination plan to the DOE in September 1998, and a second quarterly status
report for the fourth quarter of 1998 was submitted on January 11, 1999. A third
quarterly status report for the first quarter of 1999 was submitted on April 30,
1999.
Cinergy currently estimates that the total cost for the inventory, assessment,
remediation, testing, and upgrading of its systems as a result of the Year 2000
effort is approximately $13 million. Approximately $12 million in expenses have
been incurred through March 31, 1999, for such things as external labor, for
hardware and software upgrades, and for Cinergy employees who are dedicated
full-time to the Cinergy Year 2000 Readiness Program. The timing of these
expenses may vary and is not necessarily indicative of readiness efforts or
progress to date. Cinergy anticipates that a portion of its Year 2000 expenses
will not be incremental costs, but rather, will represent the redeployment of
existing IT resources. Since its formation, Cinergy has incurred, and will
continue to incur, significant capital improvement costs related to planned
system upgrades or replacements required in the normal course of business. These
costs have not been accelerated as a result of the Year 2000 issue.
The above information is based on Cinergy's current best estimates, which were
derived using numerous assumptions of future events, including the availability
and future costs of certain technological and other resources, third-party
modification actions, and other factors. Given the complexity of these issues
and possible unidentified risks, actual results may vary materially from those
anticipated and discussed above. Specific factors that might cause such
differences include, among others, the ability to locate and correct all
affected computer code, the timing and success of remedial efforts of
third-party suppliers, and similar uncertainties.
The above information is a Year 2000 Readiness Disclosure pursuant to the
Federal Year 2000 Information and Readiness Disclosure Act.
Cinergy
Other Commitments At March 31, 1999, Cinergy had issued $297 million in
guarantees primarily related to the energy marketing and trading activities of
its subsidiaries and affiliates. In addition, Cinergy had guaranteed $258
million of the debt securities of its subsidiaries and affiliates.
<PAGE>
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
Reference is made to "Item 1. Financial Statements" in "Part I. Financial
Information."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Cinergy, CG&E, PSI, and ULH&P
Reference is made to the "Market Risk Sensitive Instruments and Positions"
section in "Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations" in "Part I. Financial Information" and Notes 4 and 5
of the "Notes to Financial Statements" in "Part I. Financial Information."
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy, CG&E, and PSI
Manufactured Gas Plant Sites
See Note 6 of the "Notes to Financial Statements" in Part I. Financial
Information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Cinergy
The annual meeting of shareholders of Cinergy was held April 21, 1999, in
Cincinnati, Ohio.
At the meeting, six Class II directors were elected to the board of Cinergy to
serve three-year terms, expiring in 2002, as set forth below:
Votes Votes
Class II For Withheld
Melvin Perelman, Ph.D. 128,436,454 2,555,756
Thomas E. Petry 128,566,730 2,425,480
Jackson H. Randolph 128,212,529 2,779,681
Mary L. Schapiro 128,329,336 2,662,874
Philip R. Sharp, Ph.D. 128,557,852 2,434,358
Dudley S. Taft 128,586,398 2,405,812
Also at the meeting, the following matters were submitted to a vote of security
holders:
Votes Votes Votes
Item For Against Abstain
Approval of Amended and Restated Cinergy
Corp. Retirement Plan for Directors 107,613,574 21,666,413 1,712,217
Approval of Cinergy Corp. Directors'
Equity Compensation Plan 112,705,936 16,438,145 1,848,122
Adoption of Amendment to Article III,
Section 3.1, of the Company's By-laws 127,811,378 4,740,599 1,979,187
CG&E
(a) In lieu of the annual meeting of shareholders of CG&E, a resolution was
duly adopted via unanimous written consent of CG&E's sole shareholder,
effective April 20, 1999.
(b) The following members of the Board of Directors were elected via unanimous
written consent of the sole shareholder of CG&E, in lieu of its annual
meeting, for one-year terms expiring in 2000:
Jackson H. Randolph
James E. Rogers
James L. Turner
PSI
(a) The annual meeting of shareholders of PSI was held April 21, 1999, in
Cincinnati, Ohio.
(b) Proxies were not solicited for the annual meeting, at which the Board of
Directors was re-elected in its entirety (see (c) below).
(c) The following members of the Board of Directors were unanimously re-elected
at the annual meeting for one-year terms expiring in 2000:
James K. Baker
Michael G. Browning
John A. Hillenbrand II
John M. Mutz
Jackson H. Randolph
James E. Rogers
ULH&P
Omitted pursuant to Instruction H(2)(b).
ITEM 5. OTHER INFORMATION
Cinergy and PSI
On April 20, 1999, the Company announced that John M. Mutz will retire May 31,
1999, as president of PSI. Mr. Mutz has served as president of PSI since October
1993.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits identified with a pound sign (#) are being filed herewith by the
registrant identified in the exhibit discussion below and are incorporated
herein by reference with respect to any other designated registrant.
Exhibits not so identified are filed herewith:
Exhibit
Designation Nature of Exhibit
Cinergy
3-a By-laws of Cinergy, as amended on April 21, 1999.
4-a Indenture between Cinergy and Fifth Third Bank, as Trustee, dated as
of April 15, 1999.
Cinergy and PSI
4-b #Fifty-second Supplemental Indenture between PSI and LaSalle National
Bank, as Trustee, dated as of April 30, 1999. (Exhibit to PSI's March
31, 1999, Form 10-Q in File No. 1-3543.)
4-c #Sixth Supplemental Indenture between PSI and Fifth Third Bank, as
Trustee, dated as of April 30, 1999. (Exhibit to PSI's March 31, 1999,
Form 10-Q in File No. 1-3543.)
Cinergy, CG&E, and PSI
10-a #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Cheryl M.
Foley. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
<PAGE>
Exhibit
Designation Nature of Exhibit
10-b #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and William J.
Grealis. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-c #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy
Services, Inc., CG&E, PSI, and M. Stephen Harkness. (Exhibit to
Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.)
10-d #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Donald B.
Ingle, Jr. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-e #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Madeleine W.
Ludlow. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-f #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy
Services, Inc., CG&E, PSI, and William L. Sheafer. (Exhibit to
Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.)
10-g #Employment Agreement dated July 1, 1998, between Cinergy, Cinergy
Services, Inc., CG&E, PSI, and John P. Steffen. (Exhibit to Cinergy's
March 31, 1999, Form 10-Q in File No. 1-11377.)
10-h #Employment Agreement dated February 16, 1999, between Cinergy,
Cinergy Services, Inc., CG&E, PSI, and James L. Turner. (Exhibit to
Cinergy's March 31, 1999, Form 10-Q in File No. 1-11377.)
10-i #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Charles J.
Winger. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
10-j #First Amended and Restated Employment Agreement dated March 1, 1999,
between Cinergy, Cinergy Services, Inc., CG&E, PSI, and Larry E.
Thomas. (Exhibit to Cinergy's March 31, 1999, Form 10-Q in File No.
1-11377.)
Cinergy, CG&E, PSI, and ULH&P
27 Financial Data Schedules (included in electronic submission only)
<PAGE>
The following reports on Form 8-K were filed during the quarter ended March 31,
1999.
Date of Report Item Filed
Cinergy
December 31, 1998 Item 5. Other Events
Item 7. Financial Statements and Exhibits
<PAGE>
SIGNATURES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make
the information presented not misleading. In the opinion of Cinergy, CG&E, PSI,
and ULH&P, these statements reflect all adjustments (which include normal,
recurring adjustments) necessary to reflect the results of operations for the
respective periods. The unaudited statements are subject to such adjustments as
the annual audit by independent public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed by an
officer and the chief accounting officer on their behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Date: May 13, 1999 /s/Bernard F. Roberts
---------------------------------------
Bernard F. Roberts
Duly Authorized Officer
and
Chief Accounting Officer
FIFTY-SECOND SUPPLEMENTAL
INDENTURE
TO
INDENTURE DATED SEPTEMBER 1, 1939
---------------
PSI ENERGY, INC.
(FORMERLY NAMED "PUBLIC SERVICE COMPANY OF INDIANA, INC." AND
SUCCESSOR BY CONSOLIDATION TO PUBLIC SERVICE COMPANY OF INDIANA)
TO
LASALLE NATIONAL BANK
AS TRUSTEE
(SUCCESSOR TO THE FIRST NATIONAL BANK OF CHICAGO)
----------------
DATED AS OF APRIL 30, 1999
----------------
CREATING FIRST MORTGAGE BONDS, SERIES BBB, 8%, DUE JULY 15, 2009,
FIRST MORTGAGE BONDS, SERIES CCC, 8.85%, DUE JANUARY 15, 2022, AND
FIRST MORTGAGE BONDS, SERIES DDD, 8.31%, DUE SEPTEMBER 1, 2032
AND
OTHERWISE SUPPLEMENTING AND AMENDING THE INDENTURE
<PAGE>
TABLE OF CONTENTS
----------------
Page
PARTIES:
Company (PSI Energy, Inc. formerly named Public Service Company
of Indiana, Inc., successor by consolidation to Initial Mortgagor
(Public Service Company of Indiana)), and Trustee 1
RECITALS:
Indenture of the Initial Mortgagor, dated September 1, 1939, and First
Supplemental Indenture thereto of the Initial Mortgagor, dated
as of March 1, 1941 1
Consolidation of Initial Mortgagor (and four other companies) into the
Company 1
Execution by Company of Second Supplemental Indenture to the original
Indenture 1
Company substituted for Initial Mortgagor under Indenture 1
Execution by Company of Third through the Fifty-First Supplemental
Indentures to the original Indenture 2
LaSalle National Bank, successor to original Trustee 2
Change of name of Company from Public Service Company of Indiana,
Inc. to PSI Energy, Inc. 3
Amount of bonds presently outstanding under the Indenture 3
Fifty-Second Supplemental Indenture and Bonds of Series BBB, CCC,
and DDD authorized 3
Conditions precedent performed 3
EXECUTING CLAUSE 4
- i -
<PAGE>
Page
ARTICLE I.
FIRST MORTGAGE BONDS, SERIES BBB, 8%, DUE JULY 15, 2009,
FIRST MORTGAGE BONDS, SERIES CCC, 8.85%, DUE JANUARY 15, 2022, AND
FIRST MORTGAGE BONDS, SERIES DDD, 8.31%, DUE SEPTEMBER 1, 2032.
Section 1..Creation and designation of Bonds of Series BBB, CCC and DDD 4
Section 2..Bonds of Series BBB, CCC, and DDD to be in registered form only 4
Form of face of Bonds of Series BBB 9
Form of reverse of Bonds of Series BBB and Trustee's
certificate 11
Form of face of Bonds of Series CCC 15
Form of reverse of Bonds of Series CCC and Trustee's
certificate 17
Form of face of Bonds of Series DDD 21
Form of reverse of Bonds of Series DDD and Trustee's
certificate 23
Section 3..Date of Bonds of Series BBB, CCC, and DDD 27
Section 4..Maturity dates and interest rates of Bonds of Series BBB, CCC,
and DDD 27
Section 5..Place and manner of payment of Bonds of Series BBB, CCC,
and DDD 27
Section 6..Denominations and numbering of definitive Bonds of Series BBB,
CCC and DDD 27
Temporary Bonds of Series BBB, CCC, and DDD and exchange
thereof for definitive bonds 27
ARTICLE II.
ISSUANCE OF BONDS OF SERIES BBB, CCC, AND DDD.
Section 1..Aggregate principal amount of Bonds of Series BBB, Bonds
of Series CCC, and Bonds of Series DDD issuable at once 28
Section 2..Issuance of additional Bonds of Series BBB, CCC, and DDD 28
ARTICLE III.
INDENTURE AMENDMENTS.
Section 1..Amendments to Article I of the original Indenture 28
Section 2..Amendments to Article VII of the original Indenture 29
Section 3..Amendments to Article IX of the original Indenture 31
Section 4..Amendments to Section 22 of Article V of the original Indenture 31
Section 5..Company's right to further amend the original Indenture 31
- ii -
<PAGE>
Page
ARTICLE IV.
CONCERNING THE TRUSTEE.
Acceptance of trust by Trustee 32
Trustee not responsible for validity or sufficiency of Fifty-Second
Supplemental Indenture, etc. 32
Terms and conditions of Article XVII of the original Indenture to be applied
to the Fifty-Second Supplemental Indenture 32
ARTICLE V.
MISCELLANEOUS PROVISIONS.
Section 1..References in any article or section of the original Indenture refer
to such article or section as amended by all Fifty-Two
Supplemental Indentures thereto 33
Section 2..Operation and construction of amendments to the original
Indenture 33
Section 3..All covenants, etc., for sole benefit of parties to the Fifty-Second
Supplemental Indenture and holders of bonds 33
Section 4..Table of contents and headings of articles not part of Fifty-Second
Supplemental Indenture 33
Section 5..Execution of Fifty-Second Supplemental Indenture in
counterparts 33
Section 6..Payments Due on Legal Holidays 33
ATTESTATION CLAUSE 34
SIGNATURES 34
ACKNOWLEDGMENT BY COMPANY 35
ACKNOWLEDGMENT BY TRUSTEE 36
- iii -
<PAGE>
FIFTY-SECOND SUPPLEMENTAL INDENTURE dated as of the thirtieth day of
April, 1999, made and entered into by and between PSI ENERGY, INC. (hereinafter
commonly referred to as the "Company"), a corporation organized and existing
under the laws of the State of Indiana, formerly named Public Service Company of
Indiana, Inc., and the successor by consolidation to Public Service Company of
Indiana, an Indiana corporation, party of the first part, and LASALLE NATIONAL
BANK, a national banking association organized and existing under the laws of
the United States and having its office or place of business in the City of
Chicago, State of Illinois and the successor trustee to The First National Bank
of Chicago (hereinafter commonly referred to as the "Trustee"), party of the
second part,
WITNESSETH:
WHEREAS, Public Service Company of Indiana (hereinafter commonly
referred to as the "Initial Mortgagor"), prior to its consolidation with certain
other corporations to form the Company, executed and delivered to the Trustee a
certain indenture of mortgage or deed of trust (hereinafter called the "original
Indenture" when referred to as existing prior to any amendment thereto, and the
"Indenture" when referred to as heretofore, now or hereafter amended), dated
September 1, 1939, and a First Supplemental Indenture thereto, dated as of March
1, 1941, to secure the bonds of the Initial Mortgagor, its successors and
assigns, issued from time to time under the Indenture in series for the purposes
of and subject to the limitations specified in the Indenture; and
WHEREAS, the Company on September 6, 1941, became, through a
consolidation, the successor of the Initial Mortgagor (and four other companies)
and succeeded to all the rights and became liable for all the obligations of the
Initial Mortgagor (and such other companies); and
WHEREAS, after said consolidation, the Company executed and delivered a
Second Supplemental Indenture, dated as of November 1, 1941, to the original
Indenture for the purposes, among others, of (i) the making by the Company of an
agreement of assumption and adoption by it of the Indenture, (ii) the assumption
by the Company of the bonds (and interest and premium, if any, thereon) issued
or to be issued under the Indenture, and of all terms, covenants and conditions
binding upon it under the Indenture, and the agreeing by the Company to pay,
perform and fulfill the same, and (iii) the conveying to the Trustee upon the
trusts declared in the Indenture, but subject to any outstanding liens and
encumbrances, all the property which the Company then owned or which it might
thereafter acquire, except property of a character similar to the property of
the Initial Mortgagor which is excluded from the lien of the Indenture; and
WHEREAS, all conditions have been met and all acts and things necessary
have been done and performed to make the Indenture the valid and binding
agreement of the Company and to substitute the Company for the Initial Mortgagor
under the Indenture, and to vest the Company with each and every right and power
of the Initial Mortgagor, including the right and power to issue bonds
thereunder; and
WHEREAS, the Company has subsequently executed and delivered, for
purposes authorized under the Indenture, a Third Supplemental Indenture dated as
of March 1, 1942, a Fourth Supplemental Indenture dated as of May 1, 1943, a
Fifth Supplemental Indenture dated as of August 1, 1944, a Sixth Supplemental
Indenture dated as of September 1, 1945, a Seventh Supplemental Indenture dated
as of November 1, 1947, an Eighth Supplemental Indenture dated as of January 1,
1949, a Ninth Supplemental Indenture dated as of May 1, 1950, a Tenth
Supplemental Indenture dated as of July 1, 1952, an Eleventh Supplemental
Indenture dated as of January 1, 1954, a Twelfth Supplemental Indenture dated as
of October 1, 1957, a Thirteenth Supplemental Indenture dated as of February 1,
1959, a Fourteenth Supplemental Indenture dated as of July 15, 1960, a Fifteenth
Supplemental Indenture dated as of June 15, 1964, a Sixteenth Supplemental
Indenture dated as of January 1, 1969, a Seventeenth Supplemental Indenture
dated as of March 1, 1970, an Eighteenth Supplemental Indenture dated as of
January 1, 1971, a Nineteenth Supplemental Indenture dated as of January 1,
1972, a Twentieth Supplemental Indenture dated as of February 1, 1974, a
Twenty-First Supplemental Indenture dated as of August 1, 1974, a Twenty-Second
Supplemental Indenture dated as of August 1, 1975, a Twenty-Third Supplemental
Indenture dated as of January 1, 1977, a Twenty-Fourth Supplemental Indenture
dated as of October 1, 1977, a Twenty-Fifth Supplemental Indenture dated as of
September 1, 1978, a Twenty-Sixth Supplemental Indenture dated as of September
1, 1978, a Twenty-Seventh Supplemental Indenture dated as of March 1, 1979, a
Twenty-Eighth Supplemental Indenture dated as of May 1, 1979, a Twenty-Ninth
Supplemental Indenture dated as of March 1, 1980, a Thirtieth Supplemental
Indenture dated as of August 1, 1980, a Thirty-First Supplemental Indenture
dated as of February 1, 1981, a Thirty-Second Supplemental Indenture dated as of
August 1, 1981, a Thirty-Third Supplemental Indenture dated as of December 1,
1981, a Thirty-Fourth Supplemental Indenture dated as of December 1, 1982, a
Thirty-Fifth Supplemental Indenture dated as of March 30, 1984, a Thirty-Sixth
Supplemental Indenture dated as of November 15, 1984, a Thirty-Seventh
Supplemental Indenture dated as of August 15, 1985, a Thirty-Eighth Supplemental
Indenture dated as of October 1, 1986, a Thirty-Ninth Supplemental Indenture
dated as of March 15, 1987, a Fortieth Supplemental Indenture dated as of June
1, 1987, a Forty-First Supplemental Indenture dated as of June 15, 1988, a
Forty-Second Supplemental Indenture dated as of August 1, 1988, a Forty-Third
Supplemental Indenture dated as of September 15, 1989, a Forty-Fourth
Supplemental Indenture dated as of March 15, 1990, a Forty-Fifth Supplemental
Indenture dated as of March 15, 1990, a Forty-Sixth Supplemental Indenture dated
as of June 1, 1990, a Forty-Seventh Supplemental Indenture dated as of July 15,
1991, a Forty-Eighth Supplemental Indenture dated as of July 15, 1992, a
Forty-Ninth Supplemental Indenture dated as of February 15, 1993, a Fiftieth
Supplemental Indenture dated as of February 15, 1993, and a Fifty-First
Supplemental Indenture dated as of February 1, 1994, each supplementing and
amending the Indenture; and
WHEREAS, the Thirty-Fifth Supplemental Indenture authorized and
appointed LaSalle National Bank, a national banking association duly organized
and existing under the law of the United States of America with its principal
office in Chicago, Illinois, as Successor Trustee to The First National Bank of
Chicago, which appointment was accepted, and all trust powers under the
Indenture were thereby transferred from The First National Bank of Chicago to
LaSalle National Bank; and
WHEREAS, the Forty-Sixth Supplemental Indenture amended the Indenture to
reflect a change in the name of the Company from Public Service Company of
Indiana, Inc. to PSI Energy, Inc. effective as of April 20, 1990; and
WHEREAS, as of April 30, 1999, the only bonds that have been heretofore
issued under the Indenture which are now outstanding are $10,000,000 aggregate
principal amount of "Public Service Company of Indiana, Inc. First Mortgage
Bonds, Series TT, 7 3/8%, Due March 15, 2012" and $14,250,000 aggregate
principal amount of "Public Service Company of Indiana, Inc. First Mortgage
Bonds, Series UU, 7 1/2%, Due March 15, 2015" and $300,000,000 aggregate
principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series VV, Due July
15, 2026" and $545,000,000 aggregate principal amount of "PSI Energy, Inc. First
Mortgage Bonds, Series WW, Due August 15, 2027" and $29,945,000 aggregate
principal amount of "PSI Energy, Inc. First Mortgage Bonds, Series YY, 5.60%,
Due February 15, 2023" and $50,000,000 aggregate principal amount of "PSI
Energy, Inc. First Mortgage Bonds, Series ZZ, 5 3/4%, Due February 15, 2028" and
$50,000,000 aggregate principal amount of "PSI Energy, Inc. First Mortgage
Bonds, Series AAA, 7 1/8%, Due February 1, 2024"; and
WHEREAS, in accordance with the provisions of Section 1 of Article
XVIII of the Indenture, the Board of Directors has authorized the execution and
delivery by the Company of a Fifty-Second Supplemental Indenture, substantially
in the form of this Fifty-Second Supplemental Indenture, for the purpose of
creating a forty-seventh, a forty-eighth and a forty-ninth series of bonds to be
issued under the Indenture, to be known as, respectively, "PSI Energy, Inc.
First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009" (such bonds being
hereinafter referred to as "Bonds of Series BBB"), "PSI Energy, Inc. First
Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022" (such bonds being
hereinafter referred to as "Bonds of Series CCC") and "PSI Energy, Inc. First
Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032" (such bonds being
hereinafter referred to as "Bonds of Series DDD") (the Bonds of Series BBB, the
Bonds of Series CCC, and the Bonds of Series DDD, when referred to collectively
in this Fift Second Supplemental Indenture, shall be hereinafter referred to as
"Bonds of Series BBB, CCC, and DDD"), and prescribing the form and substance of
the Bonds of Series BBB, CCC, and DDD and the terms, provisions and
characteristics thereof, and for the purpose of adding to the covenants and
agreements of the Company for the protection of the bondholders and of the trust
estate and of making such changes in the Indenture as are deemed necessary or
desirable and as are permitted by the Indenture; and
WHEREAS, all conditions and requirements necessary to make this
Fifty-Second Supplemental Indenture a valid, binding and legal instrument have
been done, performed and fulfilled and the execution and delivery hereof have
been in all respects duly authorized:
NOW, THEREFORE, in consideration of the premises, and of the acceptance
and purchase of the Bonds of Series BBB, CCC, and DDD by the holders and
registered owners thereof, and of the sum of One Dollar ($1.00) duly paid by the
Trustee to the Company, the receipt whereof is hereby acknowledged, and in
accordance with and subject to the terms and provisions of the Indenture, the
Company and the Trustee, respectively, have entered into, executed and delivered
this Fifty-Second Supplemental Indenture for the uses and purposes hereinafter
expressed, that is to say:
ARTICLE I.
FIRST MORTGAGE BONDS, SERIES BBB, 8%, DUE JULY 15, 2009,
FIRST MORTGAGE BONDS, SERIES CCC, 8.85%, DUE JANUARY 1, 2022, AND
FIRST MORTGAGE BONDS, SERIES DDD, 8.31%, DUE SEPTEMBER 1, 2032
Section 1. There are hereby created a forty-seventh, a forty-eighth and
a forty-ninth series of bonds to be issued under and secured by the Indenture,
to be designated as "PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due
July 15, 2009", "PSI Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due
January 15, 2022" and "PSI Energy, Inc. First Mortgage Bonds, Series DDD, 8.31%,
Due September 1, 2032", respectively, being the Bonds of Series BBB, the Bonds
of Series CCC, and the Bonds of Series DDD, or collectively, the Bonds of Series
BBB, CCC, and DDD, hereinbefore referred to.
Section 2. The following provisions shall apply to the Bonds of Series
BBB, CCC, and DDD.
(a) The Bonds of Series BBB, CCC, and DDD shall be issued in
fully registered form only. However, except as provided elsewhere in
this Section, the registered owner of all of the Bonds of Series BBB,
CCC, and DDD initially shall be The Depository Trust Company ("DTC") or
its nominee, and such Bonds of Series BBB, CCC, and DDD initially shall
be registered in the name of DTC or its nominee. Payment of the
principal of or interest on Bonds of Series BBB, CCC, and DDD
registered in the name of DTC or its nominee shall be made in the
manner and at the address(es) specified in the Letter of
Representations, dated April 30, 1999, from the Company and the Trustee
to DTC. DTC (and any successor securities depository) and its (or
their) participating institutions (collectively "Participants") shall
maintain a book-entry registration and transfer system with respect to
ownership of beneficial interests in the Bonds of Series BBB, CCC, and
DDD (the "Book-Entry System").
(b) The Bonds of Series BBB, CCC, and DDD, initially shall be
issued in the form of a separate, single, authenticated, fully
registered bond for each such series (each a "Global Debt Security")
which (i) need not be in the form of a lithographed or engraved
certificate, but may be typewritten or printed on ordinary paper or
such paper as the Trustee may reasonably request, (ii) shall represent
and be denominated in an amount equal to 100% of the aggregate
principal amount of the Bonds of Series BBB, CCC, or DDD (as
applicable) issued under this Supplemental Indenture, (iii) shall be
executed by the Company and authenticated by the Trustee in accordance
with the provisions of the Indenture, (iv) shall be registered in the
name of DTC or its nominee, and delivered to DTC or its nominee or a
custodian therefor, and (v) shall contain the following legend on the
face thereof:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to issuer or its agent for
registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co
or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede &
Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered holder
hereof, Cede & Co., has an interest herein.
Unless and until it is exchanged in whole or in part for Bonds of
Series BBB, CCC, or DDD (as applicable) in definitive certificated form, a
Global Debt Security representing the Bonds of a particular Series may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or by DTC or any such nominee to a successor
securities depository or a nominee of any such successor securities depository.
(c) The Trustee and the Company may treat Cede & Co. or its
nominee, or any successor securities depository or nominee thereof
(collectively, the "Depository") as the sole and exclusive owner of the
Bonds of Series BBB, CCC, and DDD, registered in its name for the
purposes of payment of the principal or redemption price of or interest
on the Bonds of Series BBB, CCC, or DDD (as applicable), giving any
notice permitted or required to be given to holders of the Bonds of
Series BBB, CCC, or DDD (as applicable), under the Indenture or this
Supplemental Indenture, registering the transfer of the Bonds of Series
BBB, CCC, and DDD, obtaining any consent or other action to be taken by
holders of the Bonds of Series BBB, CCC, or DDD (as applicable), and
for all other purposes whatsoever and neither the Trustee nor the
Company shall be affected by any notice to the contrary. Neither the
Company nor the Trustee nor any registrar nor any paying agent shall
have any responsibility or obligation to any Participant, any person
claiming a beneficial ownership interest in the Bonds of Series BBB,
CCC, or DDD (as applicable) under or through the Depository or any
Participant, or any other person which is not shown on the registration
books as being a holder of the Bonds of Series BBB, CCC, or DDD (as
applicable) with respect to (i) the accuracy of any records maintained
by the Depository or any Participant; (ii) the payment by the
Depository to any Participant of any amount in respect of the principal
or redemption price of or interest on the Bonds of Series BBB, CCC, or
DDD (as applicable); (iii) the payment by any Participant to any owner
of a beneficial ownership interest in the Bonds of Series BBB, CCC, or
DDD (as applicable), in respect of the principal of or interest on the
Bonds of Series BBB, CCC, or DDD (as applicable) or (iv) any consent or
other action taken by the Depository as owner of the Bonds of Series
BBB, CCC, or DDD (as applicable). The Trustee shall pay all principal
of and interest on the Bonds of Series BBB, CCC, or DDD (as
applicable), only to or upon the order of the registered holder or
holders of the Bonds of Series BBB, CCC, or DDD (as applicable), as
shown on the registration books, and all such payments shall be valid
and effective to fully satisfy and discharge the Company's obligations
with respect to the principal or redemption price of and interest on
the Bonds of Series BBB, CCC, or DDD (as applicable), to the extent of
the sum or sums so paid. No person other than a holder of the Bonds of
Series BBB, CCC, or DDD (as applicable), as shown on the registration
books of DTC, shall receive an authenticated Bond evidencing the
obligation of the Company to make payment of the principal of and
interest on the Bonds of Series BBB, CCC, and DDD, pursuant to the
Indenture and this Supplemental Indenture. Upon delivery by DTC to the
Trustee of written notice to the effect that DTC has determined to
substitute a new nominee for Cede & Co, and subject to the provisions
of the Indenture and this Supplemental Indenture, the word "Cede &
Co.", as used in this Supplemental Indenture, shall refer to each new
nominee of DTC.
(d) In the event that after the occurrence of an event of default
that has not been cured or waived, holders of a majority in aggregate
principal amount of the beneficial interests in the Bonds of Series
BBB, the Bonds of Series CCC, or the Bonds of Series DDD (as
applicable), as reflected in the books and records of the Depository,
notify the Trustee, through the Depository or any Participant, that the
continuation of the Book-Entry System is no longer in the best
interests of such holders of beneficial interests in the Bonds of such
Series, then the Trustee shall notify the Depository and the Company,
and the Depository will notify the Participants of the availability
through the Depository of definitive certificated Bonds of such Series.
In such event, the Company shall execute, and the Trustee, upon receipt
of a written order of the Company, signed by its President or a Vice
President and by its Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary (an "Issue Order"), for the authentication and
delivery of definitive certificated Bonds of Series BBB, Bonds of
Series CCC, and Bonds Series DDD (as applicable), will authenticate and
deliver Bonds of such Series in definitive certificated form, in any
authorized denominations, all pursuant to the provisions of the
Indenture, to the person or persons specified to the Trustee in writing
by the Depository in the aggregate principal amount of the applicable
Global Debt Security or Securities and in exchange for such Global Debt
Security or Securities.
(e) If at any time the Depository notifies the Company that it is
unwilling or unable to continue as Depository for the Bonds of Series
BBB, the Bonds of Series CCC, or the Bonds of Series DDD, or if at any
time the Depository shall no longer be registered as a clearing agency
in good standing under the Securities Exchange Act of 1934, as amended,
or other applicable statute or regulation, the Company may appoint a
successor Depository with respect to the Bonds of such Series. If a
successor Depository for the Bonds of such Series is not appointed by
the Company within 90 days after the Company receives such notice or
becomes aware of such condition, the Company will execute, and the
Trustee, upon receipt of an Issuer Order for the authentication and
delivery of definitive certificated Bonds of Series BBB, Bonds of
Series CCC, and Bonds of Series DDD (as applicable), will authenticate
and deliver Bonds of such Series in definitive certificated form, in
any authorized denominations, all pursuant to the provisions of the
Indenture, to the person or persons specified to the Trustee in writing
by the Depository in the aggregate principal amount of the applicable
Global Debt Security or Securities and in exchange for such Global Debt
Security or Securities.
(f) The Company may at any time and in its sole discretion
determine that the Bonds of Series BBB, the Bonds of Series CCC, or the
Bonds of Series DDD shall no longer be represented by a Global Debt
Security. In such event the Company will execute, and the Trustee, upon
receipt of an Issuer Order for the authentication and delivery of
definitive certificated Bonds of such Series, will authenticate and
deliver Bonds of Series BBB, Bonds of Series CCC, and Bonds of Series
DDD (as applicable) in definitive certificated form, in any authorized
denominations, all pursuant to the provisions of the Indenture, to the
person or persons specified to the Trustee in writing by the Depository
in the aggregate principal amount of the applicable Global Debt
Security and in exchange for such Global Debt Security or Securities.
(g) Upon the exchange of a Global Debt Security for the Bonds of
Series BBB, the Bonds of Series CCC, or the Bonds of Series DDD in
definitive certificated form, in authorized denominations, the
applicable Global Debt Security or Securities shall be cancelled by
the Trustee.
(h) Whenever the Depository requests the Company and the Trustee
to do so, the Trustee and the Company will cooperate with the
Depository in taking appropriate action after reasonable notice to (i)
make available one or more separate Global Debt Securities evidencing
the Bonds of Series BBB, the Bonds of Series CCC, or the Bonds of
Series DDD to any Participant having Bonds of such Series credited to
its account at the Depository, or (ii) arrange for another Depository
to maintain custody of the Global Debt Security or Securities
evidencing the Bonds of Series BBB, the Bonds of Series CCC, or the
Bonds of Series DDD.
(i) In connection with any notice or other communication to be
provided to holders of the Bonds of Series BBB, the Bonds of Series
CCC, or the Bonds of Series DDD pursuant to the Indenture and this
Supplemental Indenture by the Company or the Trustee with respect to
any consent or other action to be taken by holders of the Bonds of such
Series, the Company or the Trustee, as the case may be, shall establish
a record date for such consent or other action and give the Depository
notice of such record date not less than 15 calendar days in advance of
such record date to the extent possible. Such notice to the Depository
shall be given only so long as a Depository or its nominee is the sole
holder of the Bonds of Series BBB, the Bonds of Series CCC, or the
Bonds of Series DDD (as applicable).
The Bonds of Series BBB, CCC, and DDD and the Trustee's certificate of
each such series to be endorsed thereon shall be substantially in the following
forms, respectively:
- 1 -
<PAGE>
(FORM OF FACE OF SERIES BBB BOND)
No. BBB- $............
PSI ENERGY, INC.
FIRST MORTGAGE BOND, SERIES BBB, 8%,
DUE JULY 15, 2009
[Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent
for registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an
interest herein.]1
PSI Energy, Inc., an Indiana corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of _____________________________ Dollars
($ ) on the fifteenth day of July, 2009 and to pay interest on said sum from the
date hereof, until said principal sum is paid, at the rate of 8% per annum,
payable semi-annually on the fifteenth day of January and July in each year.
Both the principal of and the interest on this bond shall be payable in any coin
or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts at the office or agency
of the Company in Plainfield, Indiana, or, at the option of the registered owner
hereof, at the office or agency of the Company in the Borough of Manhattan, the
City of New York, State of New York, except that interest on this bond may be
paid, at the option of the Company, by check or draft mailed to the address of
the person entitled thereto as it appears on the books of the Company maintained
for that purpose.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE
REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This bond shall not be valid or become obligatory for any purpose
unless and until it shall have been authenticated by the execution by the
Trustee, or its successor in trust under the Indenture, of the certificate
endorsed hereon.
- --------
1 This should be included only if the Series BBB Bonds are being issued in
global form.
- 2 -
<PAGE>
IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be
executed in its name by the manual or facsimile signature of its President or an
Executive Vice President or one of its Vice Presidents, and its corporate seal
or a facsimile thereof to be hereto affixed and attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries.
Dated as of:
PSI ENERGY, INC.
By.............................................
......................................President
ATTEST:
.............................................
..............................Secretary
- 3 -
<PAGE>
(FORM OF REVERSE OF SERIES BBB BOND)
This bond is one of the bonds of the Company issued and to be issued
from time to time under and in accordance with and all secured by an indenture
of mortgage or deed of trust, dated September 1, 1939, from Public Service
Company of Indiana (predecessor of the Company) to The First National Bank of
Chicago, as Trustee, to which LaSalle National Bank is successor trustee, (which
indenture as amended by all supplemental indentures is hereinafter referred to
as the "Indenture"). Said Trustee or its successor in trust under the Indenture
is hereinafter sometimes referred to as the "Trustee." Reference is hereby made
to the Indenture for a description of the property mortgaged and pledged and the
nature and extent of the security for said bonds. By the terms of the Indenture,
the bonds secured thereby are issuable in series which may vary as to date,
amount, date of maturity, rate of interest and in other respects as in the
Indenture provided.
This bond is one of a series designated as "PSI Energy, Inc. First
Mortgage Bonds, Series BBB, 8%, Due July 15, 2009" (hereinafter referred to as
"Bonds of Series BBB") of the Company issued under and secured by the Indenture
and created by a Fifty-Second Supplemental Indenture, dated as of April 30,
1999, which also amends the Indenture.
The rights and obligations of the Company and of the bearers and
registered owners of bonds may be modified or amended with the consent of the
Company by an affirmative vote of the bearers or registered owners entitled to
vote of at least seventy-five per centum (75%) in principal amount of the bonds
then outstanding at a meeting of bondholders called for the purpose (and by an
affirmative vote of the bearers or registered owners entitled to vote of at
least seventy-five per centum (75%) in principal amount of bonds of any series
affected by such modification or amendment in case one or more, but less than
all, series of bonds are so affected), all in the manner and subject to the
limitations set forth in the Indenture, any consent by the bearer or registered
owner of any bond being conclusive and binding upon such bearer or registered
owner and upon all future bearers or registered owners of such bond,
irrespective of whether or not any notation of such consent is made on such
bond; provided that no such modification or amendment shall, among other things,
extend the maturity or reduce the amount of, or reduce the rate of interest on,
or otherwise modify the terms of the payment of the principal of, or interest or
premium (if any) on this bond, which obligations are absolute and unconditional,
or permit the creation of any lien ranking prior to or equal with the lien of
the Indenture on any of the mortgaged property.
The Bonds of Series BBB will be subject to redemption (the "Make-Whole
Redemption") at the option of the Company at any time in whole, or from time to
time in part, until maturity, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to the sum of (i) the principal amount of
the Bonds of Series BBB being redeemed plus accrued and unpaid interest thereon
to the redemption date, and (ii) the Make-Whole Amount (as defined below), if
any, with respect to such Bonds of Series BBB.
"Make-Whole Amount" means, in connection with any Make-Whole Redemption
of any Bonds of Series BBB, the excess, if any, of (i) the sum, as determined by
a Quotation Agent (as defined herein), of the present values of the principal
amount of such Bonds of Series BBB, together with scheduled payments of interest
from the redemption date to the stated maturity of the Bonds of Series BBB, in
each case discounted to the redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
(as defined herein) over (ii) 100% of the principal amount of the Bonds of
Series BBB to be redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date for
a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue (as defined herein),
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price (as
defined herein) for such redemption date, calculated on the third business day
preceding the redemption date, plus 0.15% (15 basis points).
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the redemption date to the stated maturity of the Bonds of Series BBB
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Bonds of Series BBB.
"Quotation Agent" means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company. "Reference Treasury Dealer" means a
primary U.S. Government securities dealer.
"Comparable Treasury Price" means, with respect to any redemption date
for a Make-Whole Redemption, (i) the average of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such redemption date, as
set forth in the daily statistical release designated "H.15" (or any successor
release) published by the Board of Governors of the Federal Reserve System or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date for a Make-Whole Redemption,
the average, as determined by the Trustee (after consultation with the Company),
of the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
Notice of any redemption by the Company will be mailed at least 30 days
but not more than 60 days before any redemption date to each holder of Bonds of
Series BBB to be redeemed. If less than all the Bonds of Series BBB are to be
redeemed at the option of the Company, the Trustee shall select, in such manner
as it shall deem fair and appropriate, the Bonds of Series BBB of such series to
be redeemed in whole or in part.
Unless the Company defaults in payment of the redemption price, on and
after any redemption date, interest will cease to accrue on the Bonds of Series
BBB or portions thereof called for redemption.
In the case of any of certain events of default specified in the
Indenture, the principal of this bond may be declared or may become due and
payable prior to the stated date of maturity hereof in the manner and with the
effect provided in the Indenture.
No recourse shall be had for the payment of the principal of or
interest on this bond, or for any claim based hereon, or otherwise in respect
hereof or of the Indenture, to or against any incorporator, shareholder, officer
or director, past, present or future, of the Company or of any predecessor or
successor company, either directly or through the Company or such predecessor or
successor company, under any constitution or statute or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all such liability of
incorporators, shareholders, directors and officers being waived and released by
the registered owner hereof by the acceptance of this bond and being likewise
waived and released by the terms of the Indenture.
The Bonds of Series BBB are issuable only in registered form without
coupons. This bond is transferable by the registered owner hereof, in person or
by attorney duly authorized, at the principal office or place of business of
LaSalle National Bank, the Trustee, or its successor in trust under the
Indenture, or, at the option of the registered owner, at the office or agency of
the Company in the Borough of Manhattan, the City of New York, State of New
York, upon the surrender and cancellation of this bond, and upon any such
transfer a new registered bond or bonds of the same series and maturity date and
for the same aggregate principal amount will be issued to the transferee in
exchange herefor.
The Bonds of Series BBB are issuable in the denomination of $1,000 and
in such multiples thereof as shall from time to time be determined and
authorized by the Board of Directors of the Company. In the manner and subject
to the limitations provided in the Indenture, Bonds of Series BBB are
exchangeable as between authorized denominations, upon presentation thereof for
such purpose by the registered owner, at the principal office or place of
business of LaSalle National Bank, the Trustee, or its successor in trust under
the Indenture, or, at the option of the registered owner, at the office or
agency of the Company in the Borough of Manhattan, the City of New York, State
of New York.
- 4 -
<PAGE>
No service charge will be made for any transfer or exchange of this
bond, but the Company may require a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
(FORM OF TRUSTEE'S CERTIFICATE)
TRUSTEE'S CERTIFICATE
This bond is one of the Bonds of the Series BBB designated therein
referred to and described in the within mentioned Indenture and Fifty-Second
Supplemental Indenture.
LASALLE NATIONAL BANK,
AS TRUSTEE,
By.............................................
Authorized Officer
- 5 -
<PAGE>
(FORM OF FACE OF SERIES CCC BOND)
No. CCC- $............
PSI ENERGY, INC.
FIRST MORTGAGE BOND, SERIES CCC, 8.85%,
DUE JANUARY 15, 2022
[Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent
for registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an
interest herein.]1
PSI Energy, Inc., an Indiana corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of _____________________________ Dollars
($ ) on the fifteenth day of January, 2022 and to pay interest on said sum from
the date hereof, until said principal sum is paid, at the rate of 8.85% per
annum, payable semi-annually on the fifteenth day of January and July in each
year. Both the principal of and the interest on this bond shall be payable in
any coin or currency of the United States of America which at the time of
payment is legal tender for the payment of public and private debts at the
office or agency of the Company in Plainfield, Indiana, or, at the option of the
registered owner hereof, at the office or agency of the Company in the Borough
of Manhattan, the City of New York, State of New York, except that interest on
this bond may be paid, at the option of the Company, by check or draft mailed to
the address of the person entitled thereto as it appears on the books of the
Company maintained for that purpose.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE
REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This bond shall not be valid or become obligatory for any purpose
unless and until it shall have been authenticated by the execution by the
Trustee, or its successor in trust under the Indenture, of the certificate
endorsed hereon.
- --------
1 This should be included only if the Series CCC Bonds are being issued in
global form.
- 6 -
<PAGE>
IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be
executed in its name by the manual or facsimile signature of its President or an
Executive Vice President or one of its Vice Presidents, and its corporate seal
or a facsimile thereof to be hereto affixed and attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries.
Dated as of:
PSI ENERGY, INC.
By.............................................
......................................President
ATTEST:
.............................................
..............................Secretary
- 7 -
<PAGE>
(FORM OF REVERSE OF SERIES CCC BOND)
This bond is one of the bonds of the Company issued and to be issued
from time to time under and in accordance with and all secured by an indenture
of mortgage or deed of trust, dated September 1, 1939, from Public Service
Company of Indiana (predecessor of the Company) to The First National Bank of
Chicago, as Trustee, to which LaSalle National Bank is successor trustee, (which
indenture as amended by all supplemental indentures is hereinafter referred to
as the "Indenture"). Said Trustee or its successor in trust under the Indenture
is hereinafter sometimes referred to as the "Trustee." Reference is hereby made
to the Indenture for a description of the property mortgaged and pledged and the
nature and extent of the security for said bonds. By the terms of the Indenture,
the bonds secured thereby are issuable in series which may vary as to date,
amount, date of maturity, rate of interest and in other respects as in the
Indenture provided.
This bond is one of a series designated as "PSI Energy, Inc. First
Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022" (hereinafter referred
to as "Bonds of Series CCC") of the Company issued under and secured by the
Indenture and created by a Fifty-Second Supplemental Indenture, dated as of
April 30, 1999, which also amends the Indenture.
The rights and obligations of the Company and of the bearers and
registered owners of bonds may be modified or amended with the consent of the
Company by an affirmative vote of the bearers or registered owners entitled to
vote of at least seventy-five per centum (75%) in principal amount of the bonds
then outstanding at a meeting of bondholders called for the purpose (and by an
affirmative vote of the bearers or registered owners entitled to vote of at
least seventy-five per centum (75%) in principal amount of bonds of any series
affected by such modification or amendment in case one or more, but less than
all, series of bonds are so affected), all in the manner and subject to the
limitations set forth in the Indenture, any consent by the bearer or registered
owner of any bond being conclusive and binding upon such bearer or registered
owner and upon all future bearers or registered owners of such bond,
irrespective of whether or not any notation of such consent is made on such
bond; provided that no such modification or amendment shall, among other things,
extend the maturity or reduce the amount of, or reduce the rate of interest on,
or otherwise modify the terms of the payment of the principal of, or interest or
premium (if any) on this bond, which obligations are absolute and unconditional,
or permit the creation of any lien ranking prior to or equal with the lien of
the Indenture on any of the mortgaged property.
The Bonds of Series CCC will be subject to redemption (the "Make-Whole
Redemption") at the option of the Company at any time in whole, or from time to
time in part, until maturity, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to the sum of (i) the principal amount of
the Bonds of Series CCC being redeemed plus accrued and unpaid interest thereon
to the redemption date, and (ii) the Make-Whole Amount (as defined below), if
any, with respect to such Bonds of Series CCC.
"Make-Whole Amount" means, in connection with any Make-Whole Redemption
of any Bonds of Series CCC, the excess, if any, of (i) the sum, as determined by
a Quotation Agent (as defined herein), of the present values of the principal
amount of such Bonds of Series CCC, together with scheduled payments of interest
from the redemption date to the stated maturity of the Bonds of Series CCC, in
each case discounted to the redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
(as defined herein) over (ii) 100% of the principal amount of the Bonds of
Series CCC to be redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date for
a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue (as defined herein),
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price (as
defined herein) for such redemption date, calculated on the third business day
preceding the redemption date, plus 0.25% (25 basis points).
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the redemption date to the stated maturity of the Bonds of Series CCC
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Bonds of Series CCC.
"Quotation Agent" means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company. "Reference Treasury Dealer" means a
primary U.S. Government securities dealer.
"Comparable Treasury Price" means, with respect to any redemption date
for a Make-Whole Redemption, (i) the average of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such redemption date, as
set forth in the daily statistical release designated "H.15" (or any successor
release) published by the Board of Governors of the Federal Reserve System or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date for a Make-Whole Redemption,
the average, as determined by the Trustee (after consultation with the Company),
of the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
Notice of any redemption by the Company will be mailed at least 30 days
but not more than 60 days before any redemption date to each holder of Bonds of
Series CCC to be redeemed. If less than all the Bonds of Series CCC are to be
redeemed at the option of the Company, the Trustee shall select, in such manner
as it shall deem fair and appropriate, the Bonds of Series CCC of such series to
be redeemed in whole or in part.
Unless the Company defaults in payment of the redemption price, on and
after any redemption date, interest will cease to accrue on the Bonds of Series
CCC or portions thereof called for redemption.
In the case of any of certain events of default specified in the
Indenture, the principal of this bond may be declared or may become due and
payable prior to the stated date of maturity hereof in the manner and with the
effect provided in the Indenture.
No recourse shall be had for the payment of the principal of or
interest on this bond, or for any claim based hereon, or otherwise in respect
hereof or of the Indenture, to or against any incorporator, shareholder, officer
or director, past, present or future, of the Company or of any predecessor or
successor company, either directly or through the Company or such predecessor or
successor company, under any constitution or statute or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all such liability of
incorporators, shareholders, directors and officers being waived and released by
the registered owner hereof by the acceptance of this bond and being likewise
waived and released by the terms of the Indenture.
The Bonds of Series CCC are issuable only in registered form without
coupons. This bond is transferable by the registered owner hereof, in person or
by attorney duly authorized, at the principal office or place of business of
LaSalle National Bank, the Trustee, or its successor in trust under the
Indenture, or, at the option of the registered owner, at the office or agency of
the Company in the Borough of Manhattan, the City of New York, State of New
York, upon the surrender and cancellation of this bond, and upon any such
transfer a new registered bond or bonds of the same series and maturity date and
for the same aggregate principal amount will be issued to the transferee in
exchange herefor.
The Bonds of Series CCC are issuable in the denomination of $1,000 and
in such multiples thereof as shall from time to time be determined and
authorized by the Board of Directors of the Company. In the manner and subject
to the limitations provided in the Indenture, Bonds of Series CCC are
exchangeable as between authorized denominations, upon presentation thereof for
such purpose by the registered owner, at the principal office or place of
business of LaSalle National Bank, the Trustee, or its successor in trust under
the Indenture, or, at the option of the registered owner, at the office or
agency of the Company in the Borough of Manhattan, the City of New York, State
of New York.
- 8 -
<PAGE>
No service charge will be made for any transfer or exchange of this
bond, but the Company may require a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
(FORM OF TRUSTEE'S CERTIFICATE)
TRUSTEE'S CERTIFICATE
This bond is one of the Bonds of the Series CCC designated therein
referred to and described in the within mentioned Indenture and Fifty-Second
Supplemental Indenture.
LASALLE NATIONAL BANK,
AS TRUSTEE,
By.............................................
Authorized Officer
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<PAGE>
(FORM OF FACE OF SERIES DDD BOND)
No. DDD- $............
PSI ENERGY, INC.
FIRST MORTGAGE BOND, SERIES DDD, 8.31%,
DUE SEPTEMBER 1, 2032
[Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to issuer or its agent
for registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered holder hereof, Cede & Co., has an
interest herein.]1
PSI Energy, Inc., an Indiana corporation (hereinafter called the
"Company"), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of _____________________________ Dollars
($ ) on the first day of September, 2032 and to pay interest on said sum from
the date hereof, until said principal sum is paid, at the rate of 8.31% per
annum, payable semi-annually on the first day of March and September in each
year. Both the principal of and the interest on this bond shall be payable in
any coin or currency of the United States of America which at the time of
payment is legal tender for the payment of public and private debts at the
office or agency of the Company in Plainfield, Indiana, or, at the option of the
registered owner hereof, at the office or agency of the Company in the Borough
of Manhattan, the City of New York, State of New York, except that interest on
this bond may be paid, at the option of the Company, by check or draft mailed to
the address of the person entitled thereto as it appears on the books of the
Company maintained for that purpose.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE
REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This bond shall not be valid or become obligatory for any purpose
unless and until it shall have been authenticated by the execution by the
Trustee, or its successor in trust under the Indenture, of the certificate
endorsed hereon.
- --------
1 This should be included only if the Series DDD Bonds are being issued in
global form.
- 10 -
<PAGE>
IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be
executed in its name by the manual or facsimile signature of its President or an
Executive Vice President or one of its Vice Presidents, and its corporate seal
or a facsimile thereof to be hereto affixed and attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries.
Dated as of:
PSI ENERGY, INC.
By.............................................
......................................President
ATTEST:
.............................................
..............................Secretary
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<PAGE>
(FORM OF REVERSE OF SERIES DDD BOND)
This bond is one of the bonds of the Company issued and to be issued
from time to time under and in accordance with and all secured by an indenture
of mortgage or deed of trust, dated September 1, 1939, from Public Service
Company of Indiana (predecessor of the Company) to The First National Bank of
Chicago, as Trustee, to which LaSalle National Bank is successor trustee, (which
indenture as amended by all supplemental indentures is hereinafter referred to
as the "Indenture"). Said Trustee or its successor in trust under the Indenture
is hereinafter sometimes referred to as the "Trustee." Reference is hereby made
to the Indenture for a description of the property mortgaged and pledged and the
nature and extent of the security for said bonds. By the terms of the Indenture,
the bonds secured thereby are issuable in series which may vary as to date,
amount, date of maturity, rate of interest and in other respects as in the
Indenture provided.
This bond is one of a series designated as "PSI Energy, Inc. First
Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032" (hereinafter referred
to as "Bonds of Series DDD") of the Company issued under and secured by the
Indenture and created by a Fifty-Second Supplemental Indenture, dated as of
April 30, 1999, which also amends the Indenture.
The rights and obligations of the Company and of the bearers and
registered owners of bonds may be modified or amended with the consent of the
Company by an affirmative vote of the bearers or registered owners entitled to
vote of at least seventy-five per centum (75%) in principal amount of the bonds
then outstanding at a meeting of bondholders called for the purpose (and by an
affirmative vote of the bearers or registered owners entitled to vote of at
least seventy-five per centum (75%) in principal amount of bonds of any series
affected by such modification or amendment in case one or more, but less than
all, series of bonds are so affected), all in the manner and subject to the
limitations set forth in the Indenture, any consent by the bearer or registered
owner of any bond being conclusive and binding upon such bearer or registered
owner and upon all future bearers or registered owners of such bond,
irrespective of whether or not any notation of such consent is made on such
bond; provided that no such modification or amendment shall, among other things,
extend the maturity or reduce the amount of, or reduce the rate of interest on,
or otherwise modify the terms of the payment of the principal of, or interest or
premium (if any) on this bond, which obligations are absolute and unconditional,
or permit the creation of any lien ranking prior to or equal with the lien of
the Indenture on any of the mortgaged property.
The Bonds of Series DDD will be subject to redemption (the "Make-Whole
Redemption") at the option of the Company at any time in whole, or from time to
time in part, until maturity, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to the sum of (i) the principal amount of
the Bonds of Series DDD being redeemed plus accrued and unpaid interest thereon
to the redemption date, and (ii) the Make-Whole Amount (as defined below), if
any, with respect to such Bonds of Series DDD.
"Make-Whole Amount" means, in connection with any Make-Whole Redemption
of any Bonds of Series DDD, the excess, if any, of (i) the sum, as determined by
a Quotation Agent (as defined herein), of the present values of the principal
amount of such Bonds of Series DDD, together with scheduled payments of interest
from the redemption date to the stated maturity of the Bonds of Series DDD, in
each case discounted to the redemption date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate
(as defined herein) over (ii) 100% of the principal amount of the Bonds of
Series DDD to be redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date for
a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue (as defined herein),
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price (as
defined herein) for such redemption date, calculated on the third business day
preceding the redemption date, plus 0.25% (25 basis points).
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the redemption date to the stated maturity of the Bonds of Series DDD
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Bonds of Series DDD.
"Quotation Agent" means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company. "Reference Treasury Dealer" means a
primary U.S. Government securities dealer.
"Comparable Treasury Price" means, with respect to any redemption date
for a Make-Whole Redemption, (i) the average of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such redemption date, as
set forth in the daily statistical release designated "H.15" (or any successor
release) published by the Board of Governors of the Federal Reserve System or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date for a Make-Whole Redemption,
the average, as determined by the Trustee (after consultation with the Company),
of the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.
Notice of any redemption by the Company will be mailed at least 30 days
but not more than 60 days before any redemption date to each holder of Bonds of
Series DDD to be redeemed. If less than all the Bonds of Series DDD are to be
redeemed at the option of the Company, the Trustee shall select, in such manner
as it shall deem fair and appropriate, the Bonds of Series DDD of such series to
be redeemed in whole or in part.
Unless the Company defaults in payment of the redemption price, on and
after any redemption date, interest will cease to accrue on the Bonds of Series
DDD or portions thereof called for redemption.
In the case of any of certain events of default specified in the
Indenture, the principal of this bond may be declared or may become due and
payable prior to the stated date of maturity hereof in the manner and with the
effect provided in the Indenture.
No recourse shall be had for the payment of the principal of or
interest on this bond, or for any claim based hereon, or otherwise in respect
hereof or of the Indenture, to or against any incorporator, shareholder, officer
or director, past, present or future, of the Company or of any predecessor or
successor company, either directly or through the Company or such predecessor or
successor company, under any constitution or statute or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all such liability of
incorporators, shareholders, directors and officers being waived and released by
the registered owner hereof by the acceptance of this bond and being likewise
waived and released by the terms of the Indenture.
The Bonds of Series DDD are issuable only in registered form without
coupons. This bond is transferable by the registered owner hereof, in person or
by attorney duly authorized, at the principal office or place of business of
LaSalle National Bank, the Trustee, or its successor in trust under the
Indenture, or, at the option of the registered owner, at the office or agency of
the Company in the Borough of Manhattan, the City of New York, State of New
York, upon the surrender and cancellation of this bond, and upon any such
transfer a new registered bond or bonds of the same series and maturity date and
for the same aggregate principal amount will be issued to the transferee in
exchange herefor.
The Bonds of Series DDD are issuable in the denomination of $1,000 and
in such multiples thereof as shall from time to time be determined and
authorized by the Board of Directors of the Company. In the manner and subject
to the limitations provided in the Indenture, Bonds of Series DDD are
exchangeable as between authorized denominations, upon presentation thereof for
such purpose by the registered owner, at the principal office or place of
business of LaSalle National Bank, the Trustee, or its successor in trust under
the Indenture, or, at the option of the registered owner, at the office or
agency of the Company in the Borough of Manhattan, the City of New York, State
of New York.
- 12 -
<PAGE>
No service charge will be made for any transfer or exchange of this
bond, but the Company may require a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
(FORM OF TRUSTEE'S CERTIFICATE)
TRUSTEE'S CERTIFICATE
This bond is one of the Bonds of the Series DDD designated therein
referred to and described in the within mentioned Indenture and Fifty-Second
Supplemental Indenture.
LASALLE NATIONAL BANK,
AS TRUSTEE,
By.............................................
Authorized Officer
- 13 -
<PAGE>
Section 3. Each Bond of Series BBB, CCC, and DDD issued prior to the first
interest payment date shall be dated as of April 30, 1999, and otherwise shall
be dated as provided in Section 1 of Article II of the Indenture.
Section 4. All Bonds of Series BBB shall be due and payable on July 15,
2009, and shall bear interest from the date thereof at the rate of 8% per annum,
payable semi-annually on the fifteenth day of January and July in each year,
commencing July 15, 1999. All Bonds of Series CCC shall be due and payable on
January 15, 2022, and shall bear interest from the date thereof at the rate of
8.85% per annum, payable semi-annually on the fifteenth day of January and July
in each year, commencing July 15, 1999. All Bonds of Series DDD shall be due and
payable on September 1, 2032, and shall bear interest from the date thereof at
the rate of 8.31% per annum, payable semi-annually on the first day of March and
September in each year, commencing September 1, 1999.
Section 5. Subject to agreements with or the rules of the Depository or
any successor book-entry security system or similar system with respect to
Global Securities, both the principal of and the interest on the Bonds of Series
BBB, CCC, and DDD shall be payable in any coin or currency of the United States
of America which at the time of payment is legal tender for the payment of
public and private debts, at the office or agency of the Company in Plainfield,
Indiana, or, at the option of the holder thereof, at the office or agency of the
Company in the Borough of Manhattan, the City of New York, State of New York,
except that interest on the Bonds of Series BBB, CCC, and DDD may be paid, at
the option of the Company, by check or draft mailed to the address of the person
entitled thereto as it appears on the books of the Company maintained for that
purpose.
Section 6. Definitive Bonds of Series BBB, CCC, and DDD shall be issuable
in any denomination which is a multiple of $1,000 numbered consecutively from
"BBB-1", "CCC-1", and "DDD-1", respectively, upward.
All Bonds of Series BBB, CCC, and DDD shall be executed on behalf of
the Company by the manual or facsimile signature of its President or an
Executive Vice President or one of its Vice Presidents and shall have affixed
thereto the seal of the Company or a facsimile thereof attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries and
shall be authenticated by the execution by the Trustee of the certificate
endorsed on said bonds.
No service charge will be made by the Company for the transfer or for
the exchange of Bonds of Series BBB, CCC, and DDD except, in the case of
transfer, a charge sufficient to reimburse the Company for any tax or other
governmental charge payable in connection therewith.
Pursuant to the provisions of Section 11 of Article II of the
Indenture, Bonds of Series BBB, CCC, and DDD may be issued in temporary form,
and if temporary bonds be issued, the Company shall, with all reasonable
dispatch, at its own expense and without charge to the holders of the temporary
bonds, prepare and execute definitive Bonds of Series BBB, CCC, and DDD and
exchange the temporary bonds for such definitive bonds in the manner provided
for in said section, provided, however, no presentation or surrender of
temporary Bonds of Series BBB, CCC, and DDD shall be necessary in order for the
holders entitled to interest thereon to receive such interest.
ARTICLE II.
ISSUANCE OF BONDS OF SERIES BBB, CCC, AND DDD.
Section 1. An initial issue of Bonds of Series BBB in the aggregate
principal amount not exceeding one hundred twenty-four million six hundred
sixty-five thousand dollars ($124,665,000), an initial issue of Bonds of Series
CCC in the aggregate principal amount not exceeding sixty million fifty-five
thousand dollars ($60,055,000), and an initial issue of Bonds of Series DDD in
the aggregate principal amount not exceeding thirty-eight million dollars
($38,000,000), may be executed by the Company and delivered to the Trustee for
authentication, and shall be authenticated and delivered by the Trustee to or
upon the order of the Company (which authentication and delivery may be made
without awaiting the filing or recording of this Fifty-Second Supplemental
Indenture), upon receipt by the Trustee of the resolutions, certificates,
orders, opinions and other instruments required by the provisions of Section 2
of Article IV of the Indenture to be received by the Trustee as a condition to
the authentication and delivery by the Trustee of bonds pursuant to said Section
2.
Section 2. Subject to the limitations provided in Section 24 of Article V
of the Indenture, additional Bonds of Series BBB, CCC, and DDD may be issued by
the Company under the provisions of Sections 2, 3 or 4 of Article IV of the
Indenture.
ARTICLE III.
INDENTURE AMENDMENTS.
Section 1. Article I of the Indenture, as heretofore amended, is hereby
further amended (i) by adding immediately after subdivision "(91)" thereof an
additional subdivision numbered "(92)" and reading as follows:
"(92) The term 'Fifty-Second Supplemental Indenture' shall mean the
Fifty-Second Supplemental Indenture executed by the Company and the
Trustee, dated as of April 30, 1999, supplementing and amending the
Indenture, and the terms 'Bonds of Series BBB' shall mean the 'PSI
Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009,',
'Bonds of Series CCC' shall mean the 'PSI Energy, Inc. First Mortgage
Bonds, Series CCC, 8.85%, Due January 15, 2022,', and 'Bonds of Series
BBB' shall mean the 'PSI Energy, Inc. First Mortgage Bonds, Series DDD,
8.31%, Due September 1, 2032,', created by the Fifty-Second
Supplemental Indenture."
and (ii) by changing the numbering of the present subdivision "(92)"
thereof to "(93)".
Section 2. Article VII of the Indenture, as heretofore amended, is hereby
further amended by inserting therein immediately after Section 36 thereof, a new
section designated "Section 37" and reading as follows:
"Section 37. Each of the Bonds of Series BBB, the Bonds of
Series CCC, and the Bonds of Series DDD will be subject to redemption
(the 'Make-Whole Redemption') at the option of the Company at any time
in whole, or from time to time in part, until maturity, upon not less
than 30 nor more than 60 days' notice to the holders of such Series, at
a redemption price equal to the sum of (i) the principal amount of the
Bonds of such Series being redeemed, plus accrued and unpaid interest
thereon to the redemption date, and (ii) the Make-Whole Amount (as
defined below), if any, with respect to such Bonds.
'Make-Whole Amount' means, in connection with any Make-Whole
Redemption of any Bonds of Series BBB, Bonds of Series CCC, or Bonds of
Series DDD, the excess, if any, of (i) the sum, as determined by a
Quotation Agent (as defined herein), of the present values of the
principal amount of such Bonds being redeemed, together with scheduled
payments of interest from the redemption date to the stated maturity of
such Bonds, in each case discounted to the redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate (as defined herein) over (ii)
100% of the principal amount of the Bonds of Series BBB, the Bonds of
Series CCC, or the Bonds of Series DDD (as applicable) to be redeemed.
'Adjusted Treasury Rate' means, with respect to any redemption
date for a Make-Whole Redemption, the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury
Issue (as defined herein), calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price (as defined herein) for such
redemption date, calculated on the third business day preceding the
redemption date, plus 0.15% (15 basis points) for the Bonds of Series
BBB and plus 0.25% (25 basis points) for the Bonds of Series CCC and
Bonds of Series DDD.
'Comparable Treasury Issue' means the United States Treasury
security selected by the Quotation Agent as having a maturity
comparable to the remaining term from the redemption date to the
stated maturity of the Bonds of Series BBB, CCC, and DDD that would be
utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Bonds of Series
BBB, CCC, and DDD.
'Quotation Agent' means the Reference Treasury Dealer selected by
the Trustee after consultation with the Company. 'Reference Treasury
Dealer' means a primary U.S. Government securities dealer.
'Comparable Treasury Price' means, with respect to any
redemption date for a Make-Whole Redemption, (i) the average of the bid
and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily statistical
release designated 'H.15' (or any successor release) published by the
Board of Governors of the Federal Reserve System or (ii) if such
release (or any successor release) is not published or does not contain
such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than three such Reference Treasury
Dealer Quotations, the average of such Quotations.
'Reference Treasury Dealer Quotations' means, with respect to
each Reference Treasury Dealer and any redemption date for a Make-Whole
Redemption, the average, as determined by the Trustee (after
consultation with the Company), of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time, on the
third business day preceding such redemption date.
Notice of any redemption by the Company will be mailed at least
30 days but not more than 60 days before any redemption date to each
holder of Bonds of Series BBB, CCC, and DDD to be redeemed. If less
than all the Bonds of Series BBB, the Bonds of Series CCC, or the
Bonds of Series DDD (as applicable) are to be redeemed at the option
of the Company, the Trustee shall select, in such manner as it shall
deem fair and appropriate, the Bonds of Series BBB, the Bonds of
Series CCC, or the Bonds of Series DDD (as applicable) to be redeemed
in whole or in part.
Unless the Company defaults in payment of the redemption price,
on and after any redemption date, interest will cease to accrue on the
Bonds of Series BBB, CCC, and DDD or portions thereof called for
redemption.
The Company shall indemnify and hold harmless the Trustee from
any and all losses, costs, damages, expenses, fees (including
attorneys' fees), court costs, judgments, penalties, obligations,
suits, disbursements and liabilities of any kind or character
whatsoever which may at any time be imposed upon, incurred by or
asserted against the Trustee by reason of or arising out of or caused,
directly or indirectly by any act or omission of the Trustee with
respect to the foregoing Section 37, including without limitation
selection of any Reference Treasury Dealer or determination of any
Reference Treasury Dealer Quotations, except for such that would arise
out of the willful misconduct or gross negligence of the Trustee and
except for costs and expenses arising in the ordinary course of the
Trustee's business.."
Section 3. Article IX of the Indenture, "Maintenance and Renewal Fund and
Sinking Fund Provisions" as heretofore and hereby amended or supplemented shall
not apply to the Bonds of Series BBB, CCC, and DDD or to any subsequently
created series of bonds from and after the date on which no series of bonds
created under the Indenture prior to the Bonds of Series BBB, CCC, and DDD are
outstanding.
Section 4. Section 22 of Article V of the Indenture as heretofore and
hereby amended or supplemented which, among other things, requires an inspection
of the mortgaged property every two years by an independent engineer, shall not
apply to the Bonds of Series BBB, CCC, and DDD or to any subsequently created
series of bonds, from and after the date in which no series of bonds created
under the Indenture prior to the Bonds of Series BBB, CCC, and DDD are
outstanding.
Section 5. The Company reserves the right, without consent or other action
by the holders of the Bonds of Series BBB, CCC, and DDD or of any subsequently
created series of bonds, to amend the Indenture, as heretofore and hereby
amended or supplemented, at any time after all bonds of any series created prior
to the Bonds of Series BBB, CCC, and DDD are no longer outstanding under the
Indenture, as follows:
(a) by substituting for the words "in principal amount not greater
than sixty per centum (60%) of " in Section 3 of Article IV thereof the
following:
"in principal amount not greater than sixty-six and two-thirds
per centum (66-2/3%) of ".
(b) by substituting for the words "shall exceed sixty per centum (60%)
of the value of bondable property so acquired" in Section 9 of Article V
thereof the following:
"shall exceed sixty-six and two-thirds per centum (66-2/3%) of
the value of bondable property so acquired".
(c) by substituting for the words "shall be deemed to be paid within
the meaning of this article; provided, that the date for the payment or
redemption of such bonds shall be not more than one (1) year after such
moneys shall have been so set apart or paid." in the first paragraph of
Article XIV thereof the following:
"shall be deemed to be paid within the meaning of this article.".
(d) by substituting for the words "with the consent of holders of at
least seventy-five per centum (75%) in aggregate principal amount of the
bonds at the time outstanding;" in sub-section (a) of Section 3 of Article
XVIII thereof the following:
"with the consent of holders of at least sixty-six and two-thirds
per centum (66-2/3%) in aggregate principal amount of the bonds at the
time outstanding;".
(e) by substituting for the words "holders (or persons entitled to
vote the bonds) of not less than seventy-five per centum (75%) in aggregate
principal amount of the bonds entitled to be voted" in sub-section (l) of
Section 3 of Article XVIII thereof the following:
"holders (or persons entitled to vote the bonds) of not less than
sixty-six and two-thirds per centum (66-2/3%) in aggregate principal
amount of the bonds entitled to be voted".
(f) by substituting for the words "holders (or persons entitled to
vote the bonds) of at least seventy-five per centum (75%) in principal
amount of the bonds outstanding" in sub-section (m) of Section 3 of Article
XVIII thereof the following:
"holders (or persons entitled to vote the bonds) of at least
sixty-six and two-thirds per centum (66-2/3%) in principal amount of
the bonds outstanding".
ARTICLE IV.
CONCERNING THE TRUSTEE.
The Trustee hereby accepts the trusts hereby declared and agrees to perform
the same upon the terms and conditions in the Indenture and in this Fifty-Second
Supplemental Indenture set forth. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Fifty-Second Supplemental Indenture or the due execution hereof by the Company
or for or in respect of the recitals contained herein, all of which recitals are
made by the Company solely. In general, each and every term and condition
contained in Article XVII of the Indenture shall apply to this Fifty-Second
Supplemental Indenture.
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<PAGE>
ARTICLE V.
MISCELLANEOUS PROVISIONS.
Section 1. Wherever in the original Indenture or in any of the fifty-two
supplemental indentures thereto reference is made to any article or section of
the original Indenture, such reference shall be deemed to refer to such article
or section as amended by such supplemental indentures.
Section 2. Upon the execution and delivery hereof, the Indenture shall
thereupon be deemed to be amended as hereinabove set forth as fully and with the
same effect as if the amendments made hereby were set forth in the original
Indenture and each of the fifty-two supplemental indentures to the Indenture
shall henceforth be read, taken and construed as one and the same instrument;
but such amendments shall not operate so as to render invalid or improper any
action heretofore taken under the original Indenture or said supplemental
indentures.
Section 3. All the covenants, stipulations and agreements in this
Fifty-Second Supplemental Indenture contained are and shall be for the sole and
exclusive benefit of the parties hereto, their successors and assigns, and of
the holders from time to time of the bonds.
Section 4. The table of contents to, and the headings of the different
articles of, this Fifty-Second Supplemental Indenture are inserted for
convenience of reference, and are not to be taken to be any part of the
provisions hereof, nor to control or affect the meaning, construction or effect
of the same.
Section 5. This Fifty-Second Supplemental Indenture may be simultaneously
executed in any number of counterparts, and all such counterparts shall
constitute but one and the same instrument.
Section 6. Whenever a payment of principal or interest in respect of
the Bonds of Series BBB, CCC, and DDD are due on any day other than a business
day (as hereinafter defined), such payment shall be payable on the first
business day next following such date, and, in the case of a principal payment,
interest on such principal payment shall accrue to the date of such principal
payment. For the purposes of this Section 6 the term business day shall mean any
day other than a day on which the Trustee is authorized by law to close.
- 15 -
<PAGE>
IN WITNESS WHEREOF, said PSI Energy, Inc. has caused this instrument to
be executed in its corporate name by its President or one of its Vice Presidents
and to be attested by its Secretary or one of its Assistant Secretaries and said
LaSalle National Bank has caused this instrument to be executed in its corporate
name by one of its First Vice Presidents and to be attested by one of its
Assistant Secretaries, in several counterparts, all as of the day and year first
above written.
PSI ENERGY, INC.
(CORPORATE SEAL) By ________________________
William L. Sheafer
Vice President and Treasurer
ATTEST:
- ----------------------
John E. Polley, Assistant Secretary
Signed and delivered by PSI Energy, Inc.
in the presence of:
- ---------------------------
Witness
---------------------------
Witness
LASALLE NATIONAL BANK
(CORPORATE SEAL) By ________________________
Sarah H. Webb
First Vice President
ATTEST:
- ----------------------
Russell C. Bergman, Assistant Secretary
Signed and delivered by LaSalle National Bank in the presence of:
- ---------------------------
Witness
- ---------------------------
Witness
- 16 -
<PAGE>
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this ___ day of April, 1999, before me, the
undersigned, a notary public in and for the County and State aforesaid, duly
commissioned and qualified, personally appeared William L. Sheafer and John E.
Polley, personally known to me to be the same persons whose names are subscribed
to the foregoing instrument, and personally known to me to be the Vice President
and Treasurer, and an Assistant Secretary, respectively, of PSI Energy, Inc., an
Indiana corporation, and acknowledged that they signed and delivered said
instrument as their free and voluntary act as such Vice President and Treasurer,
and Assistant Secretary, respectively, and as the free and voluntary act of said
PSI Energy Inc., for the uses and purposes therein set forth; in pursuance of
the power and authority granted to them by resolution of the Board of Directors
of said Company.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year aforesaid.
(NOTARIAL SEAL)
-------------------------
Notary Public
My commission expires _________________.
County of residence: Hamilton
- 17 -
<PAGE>
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
BE IT REMEMBERED, that on this ____ day of April, 1999, before me, the
undersigned, a notary public in and for the County and State aforesaid, duly
commissioned and qualified, personally appeared Sarah H. Webb and Russell C.
Bergman, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument, and personally known to me to be a First
Vice President and an Assistant Secretary, respectively, of LaSalle National
Bank, a national banking association, and acknowledged that they signed and
delivered said instrument as their free and voluntary act as such First Vice
President and Assistant Secretary, respectively, and as the free and voluntary
act of said LaSalle National Bank, for the uses and purposes therein set forth;
in pursuance of the power and authority granted to them by the bylaws of said
association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year aforesaid.
(NOTARIAL SEAL)
-------------------------
Notary Public
My commission expires _________________.
County of residence: Cook
- 18 -
PSI ENERGY, INC.
AND
FIFTH THIRD BANK,
Trustee
----------------
Sixth Supplemental Indenture
Dated as of April 30, 1999
To
Indenture
Dated as of November 15, 1996
----------------
6.52% Senior Notes Due 2009
<PAGE>
SIXTH SUPPLEMENTAL INDENTURE, dated as of April 30, 1999, between PSI
Energy, Inc., a corporation duly organized and existing under the laws of the
State of Indiana (herein called the "Company"), having its principal office at
1000 East Main Street, Plainfield, Indiana 46168, and Fifth Third Bank, an Ohio
banking corporation, as Trustee (herein called the "Trustee") under the
Indenture dated as of November 15, 1996 between the Company and the Trustee, as
supplemented (the "Indenture").
Recitals of the Company
The Company has executed and delivered the Indenture to the Trustee to
provide for the issuance from time to time of its unsecured debentures, notes or
other evidences of indebtedness (the "Securities"), to be issued in one or more
series as provided in the Indenture.
Pursuant to the terms of the Indenture, the Company desires to provide
for the establishment of a new series of its Securities to be known as its 6.52%
Senior Notes Due 2009 (herein called the "Debentures"), in this Sixth
Supplemental Indenture.
All things necessary to make this Sixth Supplemental Indenture a valid
agreement of the Company have been done.
Now, Therefore, This Sixth Supplemental Indenture Witnesseth:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Debentures, as follows:
ARTICLE ONE
Terms of the Debentures
Section 101. There is hereby authorized a series of Securities designated
the "6.52% Senior Notes Due 2009", limited in aggregate principal amount to
$97,342,000 (except as provided in Section 301(2) of the Indenture). The
Debentures shall mature and the principal shall be due and payable together with
all accrued and unpaid interest thereon on March 15, 2009 and shall be issued in
the form of a registered Global Security without coupons, registered in the name
of Cede & Co., as nominee of the Depository Trust Company (the "Depositary").
Section 102. The provisions of Section 305 of the Indenture applicable to
Global Securities shall apply to the Debentures.
Section 103. Interest on each of the Debentures shall be payable
semiannually on March 15 and September 15 in each year (each an "Interest
Payment Date"), commencing on September 15, 1999, at the rate per annum
specified in the form of Debentures, from and including, April 30, 1999, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will be paid to the Person in whose name such
Debenture (or one or more Predecessor Securities) is registered at the close of
business on March 1 or September 1 next preceding the Interest Payment Date. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months.
Section 104. Subject to agreements with or the rules of the Depositary or
any successor book-entry security system or similar system with respect to
Global Securities, payments of interest will be made by check mailed to the
Holder of each Debenture at the address shown in the Security Register, and
payments of the principal amount of each Debenture will be made at maturity by
check against presentation of the Debenture at the office or agency of the
Trustee.
Section 105. The Debentures shall be issued in denominations of $1,000 or
any integral multiple of $1,000.
Section 106. Principal and interest on the Debentures shall be payable in
the coin or currency of the United States of America, which, at the time of
payment, is legal tender for public and private debts.
Section 107. The Debentures shall be subject to defeasance and covenant
defeasance, at the Company's option, as provided for in Sections 1302 and 1303
of the Indenture.
Section 108. Subject to the terms of Article Eleven of the Indenture,
the Company shall have the right to redeem the Debentures, at any time in whole
or from time to time in part, until maturity, (such redemption, a "Make-Whole
Redemption", and the date thereof, the "Redemption Date"), upon not less than 30
nor more than 60 days' notice to the holders, at a redemption price equal to the
sum of the principal amount of the Debentures being redeemed plus accrued and
unpaid interest thereon to the Redemption Date, and (ii) the Make-Whole Amount
(as defined below), if any, with respect to the Debentures being redeemed.
"Make-Whole Amount" means, in connection with any Make-Whole Redemption
of any Debentures, the excess, if any, of (i) the sum, as determined by a
Quotation Agent (as defined herein) of the present value of the principal amount
of such Debentures, together with scheduled payments of interest from the
Redemption Date to the Stated Maturity of the Debentures, in each case
discounted to the Redemption Date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined herein) over (ii) 100% of the principal amount of the Debentures to be
redeemed.
"Adjusted Treasury Rate" means, with respect to any Redemption Date for
a Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date,
calculated on the third business day preceding the Redemption Date, plus in each
case 0.20% (20 basis points).
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the Redemption Date to the Stated Maturity of the Debentures that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the Debentures.
"Quotation Agent" means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company. "Reference Treasury Dealer" means a
primary U.S. Government securities dealer.
"Comparable Treasury Price" means, with respect to the any Redemption
Date for a Make-Whole Redemption, (i) the average of the bid and asked prices
for the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such Redemption Date, as
set forth in the daily statistical release designated "H.15" (or any successor
release) published by the Board of Governors of the Federal Reserve System or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such Redemption Date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date for a Make-Whole Redemption,
the average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third business day preceding
such Redemption Date.
<PAGE>
ARTICLE TWO
Form of the Debentures
Section 201. The Debentures are to be substantially in the following form
and shall include substantially the legend shown so long as the Debentures are
Global Securities:
(FORM OF FACE OF DEBENTURE)
No. R-1 $97,342,000
CUSIP No. 693627AL 5
PSI ENERGY, INC.
6.52% SENIOR NOTES DUE 2009
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND SUCH CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
PSI ENERGY, INC., a corporation duly organized and existing under the
laws of the State of Indiana (herein called the "Company", which term includes
any successor Person under the Indenture hereafter referred to), for value
received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of Ninety Seven Million Three Hundred Forty Two Thousand and
No/100 Dollars ($97,342,000.00) on March 15, 2009, and to pay interest thereon
from, and including, April 30, 1999 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semiannually, on
March 15 and September 15, in each year, commencing September 15, 1999, at the
rate of 6.52% per annum, until the principal hereof is paid or made available
for payment. The amount of interest payable on any Interest Payment Date shall
be computed on the basis of a 360-day year of twelve 30-day months. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on the March 1 or September 1 next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in the Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the corporate trust office of the Trustee maintained
for that purpose in the City of Cincinnati, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.
Any payment on this Security due on any day which is not a Business Day
in the City of New York need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
due date and no interest shall accrue for the period from and after such date,
unless such payment is a payment at maturity or upon redemption, in which case
interest shall accrue thereon at the stated rate for such additional days.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, or a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to be closed.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE>
In Witness Whereof, the Company has caused this instrument to be duly
executed.
PSI ENERGY, INC.
By.............
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
FIFTH THIRD BANK,
as Trustee
By...............
Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Security is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of November 15, 1996 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and Fifth Third Bank, as Trustee (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
and reference is hereby made to the Indenture for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to $97,342,000.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security upon compliance with certain conditions
set forth in the Indenture.
The Securities of this series are subject to optional redemption at any time in
whole or from time to time in part, until maturity, (such redemption, a
"Make-Whole Redemption", and the date thereof, the "Redemption Date"), upon not
less than 30 nor more than 60 days' notice to the holders, at a redemption price
equal to the sum of the principal amount of the Debentures being redeemed plus
accrued and unpaid interest thereon to the Redemption Date, and (ii) the
Make-Whole Amount (as defined below), if any, with respect to the Debentures
being redeemed.
"Make-Whole Amount" means, in connection with any Make-Whole Redemption of any
Debentures, the excess, if any, of (i) the sum, as determined by a Quotation
Agent (as defined herein) of the present value of the principal amount of such
Debentures, together with scheduled payments of interest from the Redemption
Date to the Stated Maturity of the Debentures, in each case discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) over
(ii) 100% of the principal amount of the Debentures to be redeemed.
"Adjusted Treasury Rate" means, with respect to any Redemption Date for a
Make-Whole Redemption, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date,
calculated on the third business day preceding the Redemption Date, plus in each
case 0.20% (20 basis points).
"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the remaining term
from the Redemption Date to the Stated Maturity of the Debentures that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Debentures.
"Quotation Agent" means the Reference Treasury Dealer selected by the Trustee
after consultation with the Company. "Reference Treasury Dealer" means a primary
U.S. Government securities dealer.
"Comparable Treasury Price" means, with respect to the any Redemption Date for a
Make-Whole Redemption, (i) the average of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such Redemption Date, as
set forth in the daily statistical release designated "H.15" (or any successor
release) published by the Board of Governors of the Federal Reserve System or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such Redemption Date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any Redemption Date for a Make-Whole Redemption, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third business day preceding
such Redemption Date.
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of a majority in principal amount of the
Securities of each series at the time outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
<PAGE>
As provided in and subject to the provisions of the Indenture, the Holder of
this Security shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 35% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonably satisfactory indemnity,
and the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity.
The foregoing shall not apply to any suit instituted by the Holder of this
Security for the enforcement of any payment of principal hereof or any premium
or interest hereon on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and any premium and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
ARTICLE THREE
Original Issue of Debentures
Section 301. Debentures in the aggregate principal amount of $97,342,000,
may, upon execution of this Sixth Supplemental Indenture, or from time to time
thereafter, be executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver said
Debentures upon a Company Order without any further action by the Company.
ARTICLE FOUR
Paying Agent and Security Registrar
Section 401. Fifth Third Bank will be the Paying Agent and Security
Registrar for the Debentures.
ARTICLE FIVE
Sundry Provisions
Section 501. Except as otherwise expressly provided in this Sixth
Supplemental Indenture or in the form of Debenture or otherwise clearly required
by the context hereof or thereof, all terms used herein or in said form of
Debenture that are defined in the Indenture shall have the several meanings
respectively assigned to them thereby.
Section 502. The Indenture, as supplemented by this Sixth Supplemental
Indenture, is in all respects ratified and confirmed, and this Sixth
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.
------------------
<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
In Witness Whereof, the parties hereto have caused this Sixth
Supplemental Indenture to be duly executed as of the day and year first above
written.
PSI ENERGY, INC.
By
William L. Sheafer
Vice President and Treasurer
FIFTH THIRD BANK, as Trustee
By
Kerry Byrne
Vice President
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,603,614
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 655,295
<TOTAL-DEFERRED-CHARGES> 323,603
<OTHER-ASSETS> 92,496
<TOTAL-ASSETS> 3,675,008
<COMMON> 539
<CAPITAL-SURPLUS-PAID-IN> 410,740
<RETAINED-EARNINGS> 603,047
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,014,326
0
71,919
<LONG-TERM-DEBT-NET> 1,020,093
<SHORT-TERM-NOTES> 260,689
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 5,959
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,302,022
<TOT-CAPITALIZATION-AND-LIAB> 3,675,008
<GROSS-OPERATING-REVENUE> 482,465
<INCOME-TAX-EXPENSE> 25,185
<OTHER-OPERATING-EXPENSES> 396,398
<TOTAL-OPERATING-EXPENSES> 421,583
<OPERATING-INCOME-LOSS> 60,882
<OTHER-INCOME-NET> 308
<INCOME-BEFORE-INTEREST-EXPEN> 61,190
<TOTAL-INTEREST-EXPENSE> 21,364
<NET-INCOME> 39,826
1,150
<EARNINGS-AVAILABLE-FOR-COMM> 38,676
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 19,577
<CASH-FLOW-OPERATIONS> 76,157
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
