File No. 1-9941
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U-3A-2/A
Amendment No. 1 to Statement by Holding Company Claiming Exemption
Under Rule U-3A-2 from the Provisions of the Public
Utility Holding Company Act of 1935
for the Fiscal Year Ended December 31, 1993
To Be Filed Annually Prior to March 1
PSI Resources, Inc.
1000 East Main Street
Plainfield, IN 46168
April 22, 1994
File No. 1-9941
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U-3A-2/A
Amendment No. 1 to Statement by Holding Company Claiming Exemption
Under Rule U-3A-2 from the Provisions of the Public
Utility Holding Company Act of 1935
To Be Filed Annually Prior to March 1
PSI Resources, Inc.
(Name of Company)
hereby files with the Securities and Exchange Commission,
pursuant to Rule 2, its amended statement claiming exemption
as a holding company from the provisions of the Public
Utility Holding Company Act of 1935. In support of such
claim for exemption, the following information, as amended,
is submitted:
4. The following information for the reporting period with
respect to Claimant and each interest it holds
directly or indirectly in an EWG or a foreign utility
company, stating monetary amounts in United States
dollars:
(a) Name, location, business address and description
of the facilities used by the EWG or foreign
utility company for the generation, transmission
and distribution of electric energy for sale.
Costanera Power Corporation (Costanera); 251 North
Illinois Street, Suite 1410; Indianapolis, IN
46204. Costanera, as an EWG, holds 6% of the
common stock in Central Costanera, S. A. Central
Costanera, S. A. owns and operates a dual-fired
(oil and gas) thermoelectric generating plant in
Argentina. The plant is located in the southern
port area of the City of Buenos Aires. The
installed rated capacity of the plant is 1,260 MW.
(b) Name of each system company that holds an interest
in such EWG or foreign utility company; and
description of the interest held.
Costanera is a wholly-owned subsidiary of PSI
Argentina, Inc., which is a wholly-owned
subsidiary of PSI Resources, Inc. (Resources).
(c) Type and amount of capital invested, directly or
indirectly, by the holding company claiming
exemption; any direct or indirect guarantee of the
security of the EWG or foreign utility company by
the holding company claiming exemption; and any
debt or other financial obligation for which there
is recourse, directly or indirectly, to the
holding company claiming exemption or another
system company, other than the EWG or foreign
utility company.
The investment in Costanera is an equity
investment of $9.8 million. Resources (the
holding company) has not either directly or
indirectly guaranteed any securities of Costanera.
Costanera has no debt or other financial
obligations which have either direct or indirect
recourse to Resources.
(d) Capitalization and earnings of the EWG or foreign
utility company during the reporting period.
Capitalization Earnings
(in thousands)
Costanera $9,818 $439
(e) Identify any service, sales or construction
contract(s) between the EWG or foreign utility
company and a system company, and describe the
services to be rendered or goods sold and fees or
revenues under such agreement(s).
PSI Resources, Inc.'s Financial Policies
and Guidelines for Transactions Between Affiliates
Although these policies and guidelines do not
qualify as a service, sales or construction
contract, as defined by the Act, they do represent
Claimants cost allocation methodologies.
These policies and guidelines have been filed
with the Indiana Utility Regulatory Commission and
are being submitted for informational purposes only.
Agreement Apportioning the Consolidated
Tax Liability of PSI Resources, Inc. and Subsidiaries
Although this agreement is not a service,
sales or construction contract, as defined by
the Act, it has been filed with the Indiana
Utility Regulatory Commission and is being
submitted for informational purposes only.
See agreements filed herewith as Exhibits D and E, respectively.
An organizational chart showing the relationship of each EWG
or foreign utility company to associate companies in the
holding-company system is filed herewith as Exhibit C.
The above-named Claimant has caused this amendment to be
duly executed on its behalf by its authorized officer on
this 22nd day of April, 1994.
PSI RESOURCES, INC.
By /s/ Charles J. Winger
Charles J. Winger, Comptroller
ATTEST:
/s/ E. Renae Conley
E. Renae Conley, Assistant Secretary
Name, title and address of officer to whom notices and
correspondence concerning this statement should be
addressed:
Charles J. Winger, Comptroller
PSI Resources, Inc.
1000 East Main Street
Plainfield, Indiana 46168
Exhibit C
PSI RESOURCES, INC.
ORGANIZATIONAL CHART
AS OF DECEMBER 31, 1993
PSI Resources, Inc.
. PSI Recycling, Inc.
. PSI Energy, Inc.
. South Construction Company, Inc.
. PSI Energy Argentina, Inc.
. PSI Investments, Inc.
. PSI Power Resource Operations, Inc.
. PSI Power Resource Development, Inc.
. Power Equipment Supply Co.
. PSI Sunnyside, Inc.
. PSI International, Inc.
. PSI Environmental Corp.
. Wholesale Power Services, Inc.
. PSI Argentina, Inc.
. Energy Services Inc. of Buenos Aires
. Costanera Power Corp.
PSI RESOURCES, INC.
FINANCIAL POLICIES AND GUIDELINES
FOR TRANSACTIONS BETWEEN AFFILIATES
AUGUST 1993
INDEX
PAGE
I. Introduction 1
II. Transfer Pricing
A.General 1
B.Transfers of Assets or Rights to Use Assets 2
C.Transfers of Goods or Services Produced,
Purchased or Developed For Sale 3
D.Transfers of Goods or Services Not Produced,
Purchased or Developed For Sale 4
III. Risk Management and Claims 7
IV. Working Capital and Intercompany Billings 7
V. Budgeting 8
Capitalization and Financing 8
VI. Income Tax Allocation
A.General 8
B.Income Tax Allocation Methodology 8
C.Billing and Payment 9
VII. Financial Reporting
A.General 9
B.Financial Reporting Policies 9
VIII. Internal Controls
A.General 10
B.Internal Control Requirements 10
IX. Appendices
PSI Resources, Inc.
Financial Policies and Guidelines
for Transactions Between Affiliates
I. Introduction
The purpose of these Financial Policies and
Guidelines for Transactions Between Affiliates
(Policies and Guidelines) is to set forth the
financial policies and guidelines to be followed
for transactions involving one or more utility
members of the affiliated group comprised of PSI
Resources, Inc. (Resources) and its subsidiaries
(see Exhibit 1 of Appendix A attached hereto for a
list of the members of the affiliated group). For
purposes of these Policies and Guidelines, PSI
Energy, Inc. (Energy) is the sole utility member
of the consolidated group. Each subsidiary is
responsible for implementation of these Policies
and Guidelines within its organization. These
Policies and Guidelines may be modified from time
to time as necessary or desirable. In the event
that a transaction arises that has not been
addressed herein, the transaction should be
brought to the attention of Resources' Chief
Financial Officer or his designee for a
determination of the appropriate treatment
thereof.
Procedures for charging labor and other costs to
members of the affiliated group are included in
Appendix B attached hereto.
These guidelines are not intended to include
transactions between Energy and PSI Foundation,
Inc.
II. Transfer Pricing
A. General
The purpose of the transfer pricing provisions
of these Policies and Guidelines is to provide
a basis for assigning a monetary value to all
assets, goods or services transferred between
affiliated companies. The transfer pricing
methodology will maintain separate
accountability of the various entities to
ensure fair and equitable pricing of
transactions between utility affiliates and
between utility and nonutility affiliates.
The objectives to be achieved in accounting for
transfers between affiliates involve the
appropriate (1) identification, (2) valuation
and (3) recording of transactions. Generally,
there are three types of transfers that may
occur:
. Transfers of assets or rights to use assets.
. Transfers of goods or services produced,
purchased or developed for sale.
. Transfers of goods or services not
produced, purchased or developed for sale.
Transfers of assets or rights to use assets and
transfers of goods or services produced,
purchased or developed for sale will be priced
at fair market value. Transfers of goods or
services not produced, purchased or developed
for sale will be priced at fully allocated
cost. Any deviation from the transfer pricing
provision of these Policies and Guidelines must
be supported by written documentation and
approved by the Executive Policy Board.
B. Transfers of assets or rights to use assets
1.Identification: Transfers of assets
include transfers of tangible real or
personal property and intangible property
used in a trade or business. Transfers of
assets also include transfers of the rights
to use assets through lease or other
arrangements.
Real property includes but is not limited to:
. Land
. Buildings
. Improvements
. Rights associated with real property,
e.g., mineral rights and easements
Personal property includes but is not limited to:
. Generating station equipment
. Fuel or materials and supplies inventory
. Computer hardware and software
. Furniture
. Scrap materials
Intangible assets include but are not limited to:
. Copyrights
. Patent rights
. Trade secrets
. Licenses
. Franchises
. Other information not protected by
copyrights, etc. but which has value
(e.g., rights to lists of customers).
Examples of intangible assets that may be
transferred include patent rights that arise
out of research and development programs,
pole attachment rights and data regarding
customers.
2. Valuation: Assets or rights to use
assets will be transferred at fair market
value. Such value will be established
through methods appropriate for the asset.
Examples of methods that may be used include:
. Appraisals from qualified, independent appraisers.
. Averaging bid and ask prices as
published in newspapers or trade
journals.
. Vendor quotes.
. Market surveys.
The determination of fair market value must be documented.
Where product rights, patents, copyrights or
similar legal rights are transferred between
members of the affiliated group, depending
upon the terms of the transactions, payments
may be required to ensure that the
transferring party is appropriately
compensated. Transactions of this nature are
expected to be limited in number. To the
extent such transactions involve Energy,
approval of the transfer price and other
terms will be the responsibility of the
applicable Executive Policy Board member and
Energy's Chief Financial Officer. In order
to ease administrative burden for immaterial
transfers, if the book value and estimated
fair market value of a transferred asset are
equal to or less than $50,000, the transfer
may be priced at book value at the
transferor's option.
3. Recording: Transfers of assets or
rights to use assets will be recorded through
a direct charge to the recipient based on the
fair value of the transferred asset.
C. Transfers of goods or services produced, purchased or developed
for sale
1. Identification: Transfers of goods or services
produced, purchased or developed for sale
include those goods or services intended for
sale in the normal course of the subsidiary's
business.
Goods or services produced, purchased or
developed for sale would usually be the product
of resources which are planned and dedicated to
providing the goods or services. Examples
would include:
. Power Equipment Supply Co. (PESCO) services
for liquidating Energy's obsolete materials and supplies
inventory.
. PESCO services for liquidating Marble Hill
equipment and materials.
. PESCO materials and equipment acquired for resale.
. PSI Power Resources Operations, Inc.
(PSI PRO) services for operating generating facilities
of Energy or other affiliates.
. Energy electric service.
2. Valuation: Transfers of goods or services
produced, purchased or developed for sale will
be valued at fair market value. For purposes
of applying this transfer pricing provision,
fair market value may be based upon:
. Reference to current realizable values in
comparable cash transactions of similar
goods or services between non-affiliated
parties.
. Published prices.
. Rates established by a regulatory agency.
. Bids (e.g., purchase of equipment from
PESCO's inventory).
The determination of fair market value must be documented.
3. Recording: Transfers of goods or services
produced, purchased or developed for sale will
be recorded through a direct charge to the
recipient based upon the fair market value of
the goods or services.
D. Transfers of goods or services not produced,
purchased or developed for sale
1. Identification: Transfers of goods or services
not produced, purchased or developed for sale
represent goods or services provided that are
incidental to the primary business of the
provider of the goods and services. Examples
would include:
. Accounting services provided by Energy.
. Legal services provided by Energy.
. Data processing services provided by Energy.
. Use of Energy's vehicles and power operated equipment.
. Consulting services provided by Energy's
operations organization.
. Engineering and construction services
provided by Energy's Engineering and Construction
organization.
2. Valuation: Generally, transfers of goods or
services not produced, purchased or developed
for sale will be valued at fully allocated
cost. Costs incurred by Energy personnel for
Resources' activities (e.g., annual report,
quarterly financials) should only be charged to
Resources to the extent such costs exceed the
costs that Energy would have otherwise incurred
if Resources did not exist (incremental costs).
Exceptions must be approved by the Executive
Policy Board.
3. Recording: Transfers at fully allocated cost
will be recorded through the following process:
a. Costs will be directly assigned to the user
of the goods or services, to the extent
practical. Direct charges include:
. Direct Labor Costs, including applicable
payroll taxes and fringe benefit
loadings, of employees in Energy
departments which provide identifiable
services to Resources or its
subsidiaries. This would include, but
is not limited to, personnel in
departments/sections such as:
- Executive
- Business Management Information
- Corporate Accounting
- Budgets and Forecasts
- Legal
- Investor Relations
- Strategic Planning and Corporate Development
- Tax
- Treasury
- Customer Operations
- Engineering and Construction
Employees in these departments will
report actual time devoted to
affiliates. For those employees who
have unpaid overtime, only the hours
worked during normal working hours will
be charged to affiliates. Overtime will
be charged to affiliates only when paid.
Salaries may be allocated on the basis
of a fixed distribution. Documentation
must be maintained and updated
periodically to substantiate the fixed
distribution. However, in those
instances when an extended period of
time (e.g., one week) is spent working
on affiliate matters, this time should
be charged directly to the affiliate and
the fixed distribution would not be
utilized for that period of time.
Direct labor charges will be based on
the effective individual wage rates and
labor loading rates for overheads,
fringe benefits, and payroll taxes. A
complete listing of these sec
tions/departments is attached as Exhibit
2 of Appendix A attached hereto.
Additionally, certain departments are
100% dedicated to the affiliates. All
of the direct labor costs, fringe
benefits, payroll taxes, employee
expenses and all other costs for
employees of such departments are
charged to the affiliates. This would
involve personnel in
departments/sections shown in Exhibit 3
of Appendix A attached hereto.
. Purchases of goods and services including:
- Materials and supplies, including
stores, freight and handling
- Outside audit and tax services
- Outside legal services
- Insurance premiums
. Required Payments made by Energy on
behalf of affiliates such as:
- Income taxes (See Section VII herein)
- Property taxes on other than corporate office
facilities
- Sales, use and other taxes
. Vehicle and Equipment Costs, which will
be based on usage of:
- Vehicles
- Power operated equipment
. Chargebacks
Energy currently maintains a chargeback
system for purposes of allocating costs of
computer equipment and software. This
equipment and software will be available
to affiliates at the effective chargeback
rates.
b. Indirect costs for corporate functions
performed by Energy will be allocated on the
basis of casual or beneficiary relationships.
Indirect costs relate to shared corporate
functions for which it would be impractical
or unreliable to record actual time incurred.
This includes the functions of:
. Accounts Payable
. Corporate Communications
. Benefits and Payroll
. Human Resources
. Internal Auditing
The costs of these functions will be
allocated by applying an overhead loading
rate to direct labor charges to affiliates.
The rate applied will be based on the
relationship of total payroll costs of these
support functions to total consolidated
payroll, excluding the support functions
being allocated.
As necessary, other functions will be
allocated on a reasonable basis with
consideration given to materiality and ease
of administration.
c. Allocated direct and indirect labor charges
will be loaded for general and administrative
(G&A) costs such as office supplies, employee
expenses and chargebacks of those functions which have
salaries and wages allocated to affiliates.
In those circumstances where travel is
required for an affiliate, the employees will
charge the affiliate directly with the
employee expenses (airfare, lodging, meals,
etc.) associated with the travel.
The G&A overhead rate will be developed on an
annual basis. A schedule reflecting the
current overhead loading rate is attached
hereto as Exhibit 4 of Appendix A.
III. Risk Management and Claims
Energy's Risk Management and Claims sections will
provide services to Resources and its
subsidiaries. When applicable, insurance premium
allocations will be based on quotations from
underwriters. In those instances where premiums
for specific coverage for the individual affiliate
are not segregated, allocations will be based on
risk exposures and factors such as salaries and
wages, property values, revenues, etc. as
appropriate for the coverage involved.
IV. Working Capital and Intercompany Billings
Intercompany billings which summarize all
transactions between affiliates will be prepared
periodically (no less than quarterly). For all
affiliates except Resources, the cash flow
statement included in the financial statements may
be utilized as the intercompany billing. A
monthly invoice is prepared for use as Resources'
intercompany billing. Energy will provide cash
management services to Resources and its
subsidiaries, including investment of funds and
working capital needs. Each entity's net working
capital position will be evidenced by the ending
balance in its accounts receivable (net positive
working capital position) or accounts payable (net
negative working capital position) to affiliates.
Each entity will earn or be charged interest on
its net working capital position at a rate based
on the 30-day commercial paper rate as reported in
The Wall Street Journal for the first working day
of each calendar month. Borrowings from Resources
or arranged by Resources to finance specific
projects will be accounted for and reported
separately in the financial statements of the
applicable entity. Policies and guidelines for
these transactions are described in Section VI
hereof.
V. Budgeting
Each affiliated company will coordinate the
preparation of its own budget. The budget will
include budgets developed by each individual
responsibility center directly supporting the
affiliate. Each affiliate will compile this
budgeted information and provide such information
to Budgets and Forecasts for inclusion in
Resources' annual consolidated budget.
VI. Capitalization and Financing
Resources has a credit facility to provide it with
capital for general corporate purposes, including
investments in non-regulated energy-related
projects.
VII. Income Tax Allocation
A. General
Resources files consolidated federal and state
income tax returns which include the taxable
income of all subsidiary companies which are
considered members of the consolidated group.
Income taxes will be accrued monthly and each
subsidiary will settle its current tax lia
bility using the methodology described below.
Energy serves as the paying agent for all
income tax obligations.
B. Income Tax Allocation Methodology
The "stand alone" method will be used to
compute the total income tax expense (current
and deferred) of all subsidiaries. The "stand
alone" basis of income tax allocation requires
that each subsidiary account for the tax
effects of the revenues, deductions, and
credits for which it is responsible. No member
of the consolidated group will be allocated an
amount for income taxes which is greater than
the income tax computed as if such member had
filed a separate return. However, consolidated
taxable income is to be used for purposes of
determining such items as applicable income tax
rates, the amount of tax credits which can be
utilized, the tax status of the taxpayer (i.e.,
regular vs. alternative minimum tax), etc.
A subsidiary with a net positive current tax
provision will record a resulting liability to
Energy, while a subsidiary with a net negative
current tax provision will record a receivable
from Energy (as described in IV above). The
payment made to a subsidiary should be the
amount by which the consolidated tax is reduced
by including the entity's net corporate tax
loss in the consolidated tax return.
The above is a general description of income
tax allocation policy. The tax sharing
agreement among all members of the consolidated
group shall be followed in allocating current
income tax liability between all members of the
consolidated group.
C. Billing and Payment
Billings for federal and state income taxes
will include supporting calculations to
facilitate timely payment. Estimated federal
income tax installments are paid to the
Internal Revenue Service on the fifteenth day
of April, June, September and December. A
final payment is due by March 15 of the
following year. In addition, estimated income
tax installments are required to be made to
state taxing authorities. The timing of these
installments is dictated by the laws in effect
in each applicable state. The amounts required
to be paid by each subsidiary for its portion
of the consolidated group's tax liability,
including interest, will be incorporated into
the intercompany billings and payments process
and reflected in the net working capital
position of each entity as described in Section
IV. However, in no case will payment be due
(or amounts received) prior to the time such
payments would be due if the subsidiary company
were a "stand alone" company.
VIII. Financial Reporting
A. General
Initially, it is expected that all affiliates
will utilize Energy's accounting systems and
resources for purposes of management reporting
and financial statement preparation.
Exceptions require the approval of Resources'
Comptroller.
B. Financial Reporting Policies
1. The financial statements of each affiliate
will be prepared in conformity with generally
accepted accounting principles (GAAP) applied
on a consistent basis.
2. The format of each affiliate's financial
statements will be dictated by the reporting
requirements of Resources. In accordance
with GAAP, Resources' policy is to
consolidate all majority-owned subsidiaries.
When less than majority ownership exists,
consolidation may still be required if
"control" exists. Each case will be
evaluated to determine the need for
consolidation.
3. Accounting practices mandated by regulatory
agencies are to be observed when the
subsidiary is within an agency's
jurisdiction. In addition, all affiliates
are to comply with the reporting requirements
placed on Resources or its utility
subsidiaries by regulatory agencies.
Information regarding intercompany
transactions must be presented in a form and
manner which will assist in the review of
those transactions.
All intercompany transactions must be
reported to the Business Management
Information Section of Energy. Transfer
pricing must be documented in order to
facilitate verification of methods used to
determine cost or fair market value. The
nature and terms of such transactions should
be described.
5. Independent audit needs of each affiliate
will be dictated by Resources' and each
subsidiary's board of directors. Resources
has the right to initiate an audit of any
affiliate as deemed necessary. Independent
audit requirements of the consolidated
financial statements of Resources will
encompass affiliate activities to the extent
required by auditing standards.
IX. Internal Controls
A. General
Internal accounting controls will be maintained
to provide reasonable assurance that:
1. Intercompany transactions are executed in
accordance with management's authorization
and are properly recorded.
2. Subsidiary assets are safeguarded.
3. Accounting records may be relied upon for
the preparation of financial statements and
other financial information.
B. Internal Control Requirements
1. Management's authorization of transactions
will be evidenced by written signatures in
accordance with the applicable Authorized
Approvals Manual. Management of each
subsidiary is responsible for establishing
the appropriate level of authorization
required for each category of business
transaction, subject to the approval of the
Chief Executive Officer of Resources or his
designee.
2. All accounting policies and procedures for
transactions between affiliates will be
documented. The subsidiaries will develop
the necessary procedures and controls to
ensure adherence to the corporate policies.
Measures must be taken to ensure that the
procedures are made available to and are
observed by all employees. These procedures
will be refined as necessary to ensure the
accurate and complete recording of all
transactions.
3. Appropriate records will be kept by each
subsidiary to substantiate its books of
account, financial statements and tax
returns. All intercompany transactions will
be documented by records of sufficient detail
to facilitate verification of relevant facts.
The subsidiaries' records will be retained for the
period of time required by Resources' and
regulatory authorities (Indiana Utility Regulatory
Commission, Federal Energy Regulatory Commission,
Internal Revenue Service, etc.) record retention
policies.
APPENDIX A
Exhibit 1
PSI Resources, Inc.
. PSI Recycling, Inc.
. PSI Energy, Inc.
. PSI Energy Argentina, Inc. *
. PSI Investments, Inc.
. Power Equipment Supply Co.
. Wholesale Power Services, Inc.
. PSI Argentina, Inc.
. Costanera Power Corp. *
NOTE: Additional subsidiaries of PSI Investments, Inc.
include PSI Power Resource Development, Inc., PSI Power
Resource Operations, Inc., PSI Sunnyside, Inc., PSI
Environmental Corp., and PSI International, Inc.
Transactions applicable to these companies are recorded in
PSI Investments, Inc. PSI Energy, Inc. also owns South
Construction Company. Transactions applicable to South
Construction Company are recorded in PSI Energy, Inc.
Transactions applicable to Energy Services Inc. of Buenos
Aires are recorded in PSI Argentina, Inc.
* The general ledgers of these corporations contain only
the transactions associated with the investment in
generating and distribution companies in Argentina.
8/26/93
<TABLE>
<CAPTION>
Exhibit 2
APPENDIX A
PSI ENERGY DEPARTMENTS/SECTIONS DIRECTLY SUPPORTING AFFILIATES
PSI PSI PSI Wholesale PSI
Resp. Resources Argentina Investments Power Recycling
Center Description Inc. Inc. Inc. PESCO Services Inc. Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
010 Chairman, President and Chief Executive Officer X X X - - X
020 Senior Vice President and Chief Financial Officer X X X X X X
022 Comptroller X X X X X X
023 Vice President, General Counsel and Secretary X X X X X X
025 Manager - Strategic Planning Analysis X X X X X X
026 Manager - Corporate Development X X X X X X
027 Manager - Strategic Planning Systems X X X X X X
028 Assistant Comptroller X X X X X X
032 Manager - Corporate Accounting X X X X X X
034 Manager - Tax X X X X X X
039 Treasurer X X X X X X
042 Director - Investor Relations X - - - - -
045 Executive Director - Budgets and Forecasts X X X X X X
051 Vice President - Government Affairs X X X - - -
071 General Activities - Customer Operations - X - - - -
081 System Maintenance - X - - - -
088 Executive Director - Strategic Planning and
Corporate Development X X X X X X
173 Power Technical Services - X - - - -
174 Plant Engineering - X - - - -
178 Energy Management Systems - X - - - -
GEN Business Management Information X X X X X X
Note: An (X) indicates that the listed PSI Energy
responsibility center may be a provider of services to the
applicable affiliate.
8/26/93
</TABLE>
<TABLE>
<CAPTION>
APPENDIX A
Exhibit 3
DEPARTMENTS 100% DEDICATED TO AFFILIATES
PSI PSI PSI Wholesale PSI
Resp. Resources Argentina Investments Power Recycling
Center Description Inc. Inc. Inc. PESCO Services Inc. Inc.
<C> <S> <S> <S> <S> <S> <S> <S>
054 Manager - Accounting & Finance - Affiliated
Businesses X X X X X X
090 President - PSI Investments X X X X X X
098 Director - Business Development X X X - - -
099 PESCO Operations - - - X - X
125 Vice President - Energy Market Development - X X - - -
142 Recycling Operations - - - - - X
144 Manager - North American Machinery - - - X - -
145 Vice President - Corporate Development - X X X - X
146 PSI International - X X X - -
BKR Power Brokering - General - - - - X -
BKN Power Brokering - North - - - - X -
BKS Power Brokering - South - - - - X -
BKW Power Brokering - West - - - - X -
IPX Power Exchange - - - - X -
Note: An (X) indicates an affiliate to which time is devoted.
8/26/93
</TABLE>
<TABLE>
APPENDIX A
Exhibit 4
PSI ENERGY, INC.
LABOR LOADING RATES
1993
<CAPTION>
PSI Energy's
Employees 100% employees that
dedicated to affiliates service affiliates
<S> <C> <C>
Overheads
Office supplies and expenses -(a) 13.9%
Office space (Corporate Offices) -(a) 11.3%
Labor availability factor - 6.6%
(b)
Support departments 5.4% 5.4%
Computer services, office services,
& other miscellaneous costs 6.0% 6.0%
Total Overheads 11.4% 43.2%
Fringe Benefit Loading 21.0% 21.0%
Payroll Tax Loading 7.4% 7.4%
(a) Direct charge to affiliates
(b) Employee paid absences (vacation, holidays, sick time)
less estimated unpaid overtime
1/1/93
</TABLE>
APPENDIX B
The following procedures should be utilized in charging
costs to members of the affiliated group other than Energy:
. Labor Data Capture System: Time spent providing
services to affiliates should be charged to the applicable affiliate
corporation either through a fixed distribution or on
an exception basis utilizing the weekly or daily labor
document. Refer to the Labor Data Capture System Manual and contact
your department financial coordinator or the
Payroll section of Energy for guidance.
. Accounts Payable System: Nonlabor costs chargeable to
an affiliate, in accordance with the Financial
Policies and Guidelines for Transactions Between Affiliates,
should be charged to the affiliate corporation utilizing a
Request for Pay (RFP) or a Working Fund Draft.
Refer to the Accounts Payable Section of Energy's Account
Manual and contact your department financial coordinator or
the Accounts Payable section of Energy for guidance.
. General Ledger System (Journal Entries): Costs may be
charged to affiliates utilizing journal entries. All affiliate
transactions entered through journal entries must be
approved by the Manager, Accounting & Finance -
Affiliated Businesses or the General Accounting section of Energy.
. Vehicle Usage System: Any usage of Energy's vehicles
for affiliate purposes should be charged to the
affiliate corporation through this system. Refer to the
Vehicle System Manual and contact your
department financial coordinator or the Payroll section of
Energy for guidance.
The following systems will not accept charges from
affiliates:
. Inventory System
. Chargeback System
Any charges to affiliates for inventory purchases or
chargebacks will be entered through the General Ledger
System and must be approved by the Manager, Accounting &
Finance - Affiliated Businesses or the General Accounting
section of Energy.
1/1/93
Exhibit E
AGREEMENT APPORTIONING THE CONSOLIDATED TAX LIABILITY
OF PSI RESOURCES, INC. AND SUBSIDIARIES
This Agreement effective as of the first day of the
consolidated return year beginning January 1, 1991, is made
by and among PSI Resources, Inc. ("Parent Company") and each
of the undersigned subsidiaries within the consolidated
group:
PSI Energy, Inc.
PSI Recycling, Inc.
PSI Investments, Inc.
Power Equipment Supply Co.
Power Resource Development, Inc.
Power Resource Operations, Inc.
South Construction Company, Inc.
PSI Environmental Corp.
PSI International, Inc.
WITNESSETH:
WHEREAS, the parties (hereinafter sometimes referred to as
"Members"' or in the singular "Member") hereto are part of
an affiliated group ("Affiliated Group") as defined by the
Internal Revenue Code of 1986 (IRC) Section 1504(a); and
WHEREAS, such Affiliated Group has previously filed a
consolidated Federal income tax return in accordance with
IRC Section 1502 and is required to file a consolidated
income tax return for years subsequent to such year of first
consolidated filing; and
WHEREAS, it is the intent and desire of the parties hereto
that a method be established of allocating the current
consolidated Federal income tax liability as determined
under IRC Section 1552 (a)(2) and Regulation Section 1.1552-
1(a)(2), in conjunction with the method defined in
Regulation Section 1.1502-33(d)(2)(ii). Under this
combination of methods, the current Federal income tax
liability shall be allocated among the Members based on the
ratio of each Member's separate return tax liability for the
year to the sum of separate return tax liabilities of all
Members for the year. Members with a loss or excess credit
shall receive a negative tax allocation. The effect of this
method is to compensate a Member for its tax attributes
utilized in reducing the tax liability of the Affiliated
Group.
NOW THEREFORE, in consideration of the mutual covenants and
obligations provided for herein, the parties, by signing
this Agreement, hereby agree as follows:
(1) Allocation of Consolidated Federal Income Tax Under
Regulation Section 1.1552-1(a)(2) (Basic Method 2)
The consolidated tax liability is allocated among the
Members of the group in the ratio that each Member's
separate return tax liability for the year bears to the
sum of the separate return tax liabilities of all the
Members. For this purpose, the separate return tax
liability of a Member is its tax liability computed as
if it had filed a separate income tax return. No
Member's separate return tax liability will be treated
as being less than zero. The separate return tax
liability is calculated after giving effect to all
adjustments made due to consolidated return
regulations.
For the purposes of determining the separate
return tax liability of each member, the amount of
net operating loss deduction of a Member is the
deduction which the Member would have had
available if it had actually filed a separate
return for the year. Thus, for the purposes of
this paragraph (1) only, separate return tax
liability would not include any portion of a
Member's loss sustained in a prior year which had
been absorbed by the Affiliated Group or by the
member in computing actual tax liabilities for
prior years. Similarly, general business credit,
foreign tax credit, and charitable contribution
limitations are allocated to Members on a separate
return basis. This also includes capital gains
and losses, and IRC Section 1231 gains and losses.
- - - In computing depreciation under IRC Section 167,
property shall not lose its character as new property
as a result of a transfer from one Member to another
Member during the year (Regulation Section 1.1502-
12(g)).
- - - A dividend distributed by one Member to another Member
during the year will be assumed to qualify for the 100
percent dividend received deduction of IRC Section 243,
or shall be eliminated from such calculation in
accordance with Regulation Section 1.1502-14(a)(1).
- - - The amount of each graduated rate bracket of a Member
shall be the amount of each graduated rate bracket
allowed on the consolidated return divided by the
number of Members (or the portion of the consolidated
graduated rate bracket apportioned to the Member
pursuant to a schedule attached to the consolidated
return for the taxable year). To the extent that the
benefit of the graduated rate brackets is phased out
due to the taxable income of the group, the increase in
tax as a result of the phase-out is allocated to the
Members that had been allocated the benefit of the
lower rates.
(2) Steps for Allocating Tax Liability Under Regulation
Section 1.1502-33(d)(2)(ii) (Complementary Method 2)
The consolidated Federal income tax, exclusive of the
alternative minimum tax (AMT) (see paragraph (6)), and
before the results of any special benefits (see
paragraph (3)), shall be allocated in the following
manner:
Step 1. Allocate consolidated Federal income tax
to each member in accordance with paragraph (1)
(Basic Method 2).
Step 2. To all profitable Members, allocate an
additional amount at 100 percent of the excess of
the Member's separate return tax liability over
the consolidated tax liability allocated to the
Member under Step 1.
Step 3. The total of the amounts allocated under
Step 2 (including amounts allocated because of
carrybacks) is credited to the Members which had
losses or credits in proportion to their separate
company tax losses or credits calculated as if
they had filed separate returns for such period.
(3) Apportionment of Special Benefits
Any special benefits, such as the effects of IRC
Section 1341, shall be apportioned directly to the
Members giving rise to such benefits.
(4) Consolidated Net Operating Loss
Should the Affiliated Group generate a consolidated net
operating loss for a tax year, the consolidated
reduction in tax resulting from the carryback or
carryforward of the net operating loss shall be
apportioned to loss Members by computing or recomputing
(as the case may be) the, in accordance with this
Agreement, consolidated tax of the year(s) to which the
consolidated net operating loss is carried. The
differences between the tax allocations of each Member
before and after application of the consolidated net
operating loss for the carryback year(s) determine the
tax payments and collections for the year of the
consolidated net operating loss.
(5) Capital Gains and Losses
In determining separate return tax liability, the
portion of the consolidated tax attributable to net
capital gains and losses shall be allocated directly to
the Members giving rise to such items. The effects of
netting capital gains and losses in the current year
shall follow the principles of paragraphs (1) and (2).
The effects of capital loss carrybacks shall follow the
principles of paragraph (4).
(6) Alternative Minimum Tax (AMT or AMT Credit)
In any year in which AMT is payable by the Affiliated
Group, the total tax liability of the group will be
separated into two parts: regular tax and AMT.
Regular tax will be allocated as previously provided in
this Agreement. If a consolidated AMT liability
exists, such liability will be allocated only to those
Members with an excess of separate company tentative
minimum tax (which could be negative) over separate
company regular tax (which could be negative). The
separate company and consolidated tentative minimum tax
and AMT shall be computed in accordance with IRC
Section 55. The Affiliated Group's AMT liability shall
be allocated under this paragraph to each applicable
Member according to the ratio that such Member's
separate company preferences and adjustments bears to
the sum of the preferences and adjustments of all such
Members. Preferences shall be computed in accordance
with IRC Section 56 and adjustments shall be computed
in accordance with IRC Sections 56 and 58. As such,
those Members with separate company regular tax in
excess of separate company tentative minimum tax shall
be excluded from the calculation and would not be
affected in any manner by the Affiliated Group's AMT
liability.
If the regular tax in the consolidated tax return is
reduced by reason of the AMT credit (as defined in IRC
Section 53), the benefit of such credit shall be
allocated back to those Members who (by having an AMT
liability allocated to them in a prior year) generated
the credit, with the earliest AMT liabilities being
used first. If less than the full AMT credit is
utilized, the amount utilized will be allocated
according to the proportion of the original AMT
allocated to the Members.
(7) Allocation of Environmental Tax Liability
If a consolidated current environmental tax liability
exists, such liability shall be allocated based on the
relationship of that Member's alternative minimum
taxable income or loss (as defined in IRC Section 59A)
after reflecting paragraph (1) to consolidated
alternative minimum taxable income. Members with
alternative minimum taxable income will be allocated an
environmental tax liability while Members with an
alternative minimum taxable loss will be allocated a
tax benefit.
(8) Payments and Collections for Allocations
A Subsidiary with a net positive allocation as
computed under paragraphs (1) and (2) of this
Agreement shall be charged by the entity within
the Affiliated Group which is designated as the
paying agent the total amount allocated. PSI
Energy, Inc. is currently designated as the paying
agent for the Affiliated Group. A Subsidiary with
a net negative tax allocation as computed under
paragraphs (1) and (2) of this Agreement shall
charge the paying agent the total amount
allocated. Under the principles of paragraph (4),
any Member due a tax benefit as a result of a
consolidated net operating loss, capital loss, or
credit carryback shall charge the paying agent the
amount of the excess (if any) of such Member's
cumulative net positive tax allocations determined
as of the end of the immediately preceding tax
year over such Member's cumulative net positive
tax allocations determined as of the end of the
current tax year.
PSI Energy, Inc. shall make any calculations on behalf
of the Affiliated Group necessary to comply with the
estimated tax provisions of IRC Section 6655. Based on
such calculations, the designated agent shall charge
the Members appropriate amounts on an annual basis, or,
when the amounts become material, at intervals
consistent with the dates indicated by Section 6655.
If any Member makes estimated payments to the
designated paying agent and such payments are
determined to be in excess of the Member's liability,
then the designated agent shall pay such excess to such
Member. PSI Energy, Inc. or such other designated
paying agent, shall be responsible for paying to the
Internal Revenue Service the Affiliated Group's net
current Federal income tax liability (see paragraph
(17)).
(9) Separate Return Limitation
No Member shall be allocated a Federal income tax which
is greater than the Federal income tax computed as if
such Member had filed a separate return.
(10) Allocation of State Tax Liability or Benefit
If Parent Company so elects, or is required,
Subsidiaries which together with Parent Company form an
Affiliated Group, may to the extent permitted by
Indiana law (or law of any other state that Members of
the Affiliated Group may become subject to), file a
combined state income tax return or such similar return
or returns pursuant to such requirements, formulas, or
prescriptions as may be permitted or required by the
applicable state to treat the business of the
Affiliated Group on a combined basis. Each Subsidiary
which is a member of the Affiliated Group will
calculate its state income tax liability as if it were
to file a separate state income tax return for such a
period without being a part of such Affiliated Group.
The allocation of benefits arising from consolidation
shall follow the principles set forth above for
consolidated Federal income tax.
All other provisions of this Agreement, including but
not limited to the treatment of estimated tax payments,
shall also apply to any combined state tax liability.
(11) Subject to Change in Law and Regulations
This Agreement is subject to revision as a result of
changes in Federal or state income tax law and
regulations and relevant facts and circumstances.
(12) Supersedes Other Agreements
This Agreement amends any prior agreements whether
formal or informal, written or unwritten, relating to
the allocation of income tax liability by replacing in
full such prior agreements.
(13) Duration
This Agreement shall be effective for allocation of the
current federal and state income tax liabilities of the
Affiliated Group for the 1991 tax year and all
subsequent years until this Agreement is further
amended in writing by each Member which is a party to
this Agreement.
(14) Adjustment of Tax Liability
In the event of any adjustment of the federal or state
tax liabilities of the Affiliated Group, by reason of
the filing of an amended return, claim for refund, or
arising out of an audit by the IRS, the Indiana
Department of Revenue or the revenue department of any
other state, the liabilities of the Parent Company and
any Subsidiary hereunder shall be redetermined after
full effect is given to any such adjustment. Interest
or penalties arising from the filing of an amended
return, claim for refund, or an examination by the IRS
or state revenue department will be allocated to each
member of the Affiliated Group based on the allocation
of taxes pursuant to provisions of this agreement. PSI
Energy, Inc. shall act as agent for the Affiliated
Group for the payment of all income taxes, the receipt
of all income tax refunds, and all dealings with the
IRS and state tax authorities. However, both the
Parent Company and each Subsidiary remain both jointly
and separately liable for the tax liability. Unless
otherwise agreed to in writing, this paragraph shall
apply to any corporation which was a Member of the
Affiliated Group during the consolidated return year
for which a redetermination is made, without regard to
whether such corporation is a Member at the time that
the redetermination is made.
(15) Other Limitations to be Made on a Consolidated Basis
With respect to certain limitations regarding the
calculation or utilization of a deduction or credit not
specifically mentioned herein, they shall be applied on
a consolidated basis.
(16) Change in Accounting Method
Notwithstanding Regulation Section 1.1502-17, Parent
Company may direct each and any Subsidiary to apply
with any applicable state or the Commissioner of
Internal Revenue Service, under IRC Section 446(e), for
a change in the method of accounting for the Subsidiary
on an overall basis or for any material item.
(17) Authorization of Elections
Notwithstanding Regulation Section 1.1502-17, Parent
Company may direct and must authorize any election the
Subsidiaries may make under the IRC or Treasury
Regulations which may affect the Affiliated Group's
taxable position. This authorization includes, but is
not limited to election under IRC Section 168 (straight-
line MACRS depreciation), and IRC Section 248
(organizational expenditures).
(18) Acquisition or Disposition of Property
Parent Company may direct and must authorize any
acquisition or disposition of property held or to be
held by the Subsidiaries which may have a material
impact on the Subsidiaries' or Affiliated Group's
taxable position.
(19) Successors, Assigns
The provisions and terms of this Agreement shall be
binding on and inure to the benefit of any successor,
by merger, acquisition of assets or otherwise, to any
of the Members hereto.
(20) New Members
If at any time any other company becomes a Member of
the Affiliated Group, the parties hereto agree that
such new Member may become a party to this Agreement by
executing a duplicate copy of this Agreement. Unless
otherwise specified, such new Member shall have all the
rights and obligations of such a Subsidiary under this
Agreement.
(21) Governing Law
This Agreement shall be governed by the law of the
State of Indiana.
The above procedures for allocating the current consolidated
annual net Federal and state income tax liability and
expense of PSI Resources, Inc. and subsidiaries have been
agreed to by each of the below listed members of the
consolidated group as evidenced by the signatures of an
officer of each company:
PSI Resources, Inc.
By: /s/ James E. Rogers Date: March 24, 1992
PSI Energy, Inc.
By: /s/ J. Wayne Leonard Date: March 24, 1992
PSI Recycling, Inc.
By: /s/ James E. Rogers Date: March 24, 1992
PSI Investments, Inc.
By: /s/ James E. Rogers Date: March 24, 1992
Power Equipment Supply Company
By: /s/ James E. Rogers Date: March 24, 1992
Power Resource Operations, Inc.
By: /s/ James E. Rogers Date: March 24, 1992
Power Resource Development, Inc.
By: /s/ James E. Rogers Date: March 24, 1992
PSI Environmental Corporation
By: /s/ James E. Rogers Date: March 24, 1992
PSI International, Inc.
By: /s/ James E. Rogers Date: March 24, 1992
South Construction Company, Inc.
By: /s/ J. Wayne Leonard Date: March 24, 1992
PSI Energy Argentina, Inc.
By: /s/ J. Wayne Leonard Date: April 19, 1994
Wholesale Power Services, Inc.
By: /s/ Charles J. Winger Date: April 18, 1994
PSI Argentina, Inc.
By: /s/ J. Wayne Leonard Date: April 19, 1994
