SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1 - 10568
LG&E ENERGY CORP.
(Exact name of registrant as specified in its charter)
Kentucky 61 - 1174555
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 West Main Street 40232
P.O. Box 32030 (Zip Code)
Louisville, KY
(Address of principal executive offices)
(502) 627-2000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 32,988,441 shares, without
par value, as of April 30, 1994.
Part I. Financial Information - Item 1. Financial Statements
LG&E Energy Corp. and Subsidiaries
Statements of Income
(Unaudited - Thousands of $ Except Per Share Data)
Three Months Ended
March 31,
1994 1993
REVENUES:
Electric . . . . . . . . . . . . . . . . . . . . . . $123,418 $125,025
Gas. . . . . . . . . . . . . . . . . . . . . . . . . 96,362 84,781
Non-utility. . . . . . . . . . . . . . . . . . . . . 24,682 28,590
Total revenues. . . . . . . . . . . . . . . . . . . 244,462 238,396
COST OF REVENUES:
Fuel and power purchased . . . . . . . . . . . . . . 36,620 37,873
Gas supply expenses. . . . . . . . . . . . . . . . . 67,399 57,362
Development and construction costs . . . . . . . . . 20,758 25,169
Total cost of revenues. . . . . . . . . . . . . . . 124,777 120,404
Gross profit. . . . . . . . . . . . . . . . . . . . . 119,685 117,992
OPERATING EXPENSES:
Operation and maintenance. . . . . . . . . . . . . . 59,052 54,001
Depreciation and amortization. . . . . . . . . . . . 20,965 20,538
Non-recurring charges (Note 3) . . . . . . . . . . . 48,743 -
Total operating expenses. . . . . . . . . . . . . . 128,760 74,539
Equity in earnings of joint ventures. . . . . . . . . 2,544 1,333
OPERATING INCOME (LOSS) . . . . . . . . . . . . . . . (6,531) 44,786
Other income and (deductions) (Note 4). . . . . . . . (15,841) (437)
Interest charges. . . . . . . . . . . . . . . . . . . 10,597 12,354
Income (loss) from continuing operations
before income taxes. . . . . . . . . . . . . . . . . (32,969) 31,995
Income taxes. . . . . . . . . . . . . . . . . . . . . (14,383) 11,835
Income (loss) from continuing operations
before preferred dividends . . . . . . . . . . . . . (18,586) 20,160
Preferred dividends . . . . . . . . . . . . . . . . . 1,378 1,587
INCOME (LOSS) FROM CONTINUING OPERATIONS. . . . . . . $(19,964) $ 18,573
LG&E Energy Corp. and Subsidiaries
Statements of Income (cont.)
(Unaudited - Thousands of $ Except Per Share Data)
Three Months Ended
March 31,
1994 1993
INCOME (LOSS) FROM CONTINUING OPERATIONS. . . . . . . $(19,964) $ 18,573
Income from discontinued operations,
net of income taxes of $984 (Note 5) . . . . . . . . - 1,524
Gain on sale of discontinued operations,
net of income taxes of $35,048 (Note 5). . . . . . . 51,805 -
Income before cumulative effect of
change in accounting principle . . . . . . . . . . . 31,841 20,097
Cumulative effect of change
in accounting principle, net of
income taxes of $2,280 (Note 6). . . . . . . . . . . (3,369) -
NET INCOME. . . . . . . . . . . . . . . . . . . . . . $ 28,472 $ 20,097
Average common shares outstanding . . . . . . . . . . 32,967 32,443
EARNINGS PER SHARE:
Continuing operations. . . . . . . . . . . . . . . .$ (.61) $ .57
Income from discontinued operations. . . . . . . . . - .05
Gain on sale of discontinued operations. . . . . . . 1.57 -
Cumulative effect of accounting change . . . . . . . (.10) -
Total earnings per share. . . . . . . . . . . . . .$ .86 $ .62
LG&E Energy Corp. and Subsidiaries
Balance Sheets
(Unaudited)
(Thousands of $)
ASSETS
March 31, Dec. 31,
1994 1993
UTILITY PLANT:
At original cost . . . . . . . . . . . . . . . . . .$2,477,152 $2,464,101
Less: reserve for depreciation. . . . . . . . . . . 841,988 823,141
Net utility plant . . . . . . . . . . . . . . . . . 1,635,164 1,640,960
OTHER PROPERTY AND INVESTMENTS - less reserve:
Investments in affiliates. . . . . . . . . . . . . . 66,806 63,241
Other. . . . . . . . . . . . . . . . . . . . . . . . 38,662 24,949
Investment in discontinued operations (Note 5) . . . - 84,284
Total other property and investments. . . . . . . . 105,468 172,474
CURRENT ASSETS:
Cash and temporary cash investments. . . . . . . . . 121,920 67,377
Marketable securities. . . . . . . . . . . . . . . . 95,706 -
Accounts receivable - less reserve . . . . . . . . . 117,261 124,504
Materials and supplies - at average cost:
Fuel (predominantly coal) . . . . . . . . . . . . . 13,514 12,075
Gas stored underground. . . . . . . . . . . . . . . 10,804 33,370
Other . . . . . . . . . . . . . . . . . . . . . . . 39,554 40,357
Prepayments and other. . . . . . . . . . . . . . . . 5,022 1,600
Total current assets. . . . . . . . . . . . . . . 403,781 279,283
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense . . . . . . . . . . . . . . 24,404 24,698
Accumulated deferred income taxes. . . . . . . . . . 76,955 58,675
Regulatory asset - income taxes. . . . . . . . . . . 39,388 39,651
Other. . . . . . . . . . . . . . . . . . . . . . . . 37,462 69,053
Total deferred debits and other assets. . . . . . . 178,209 192,077
Total assets. . . . . . . . . . . . . . . . . . .$2,322,622 $2,284,794
LG&E Energy Corp. and Subsidiaries
Balance Sheets (cont.)
(Unaudited)
(Thousands of $)
CAPITAL AND LIABILITIES
March 31, Dec. 31,
1994 1993
CAPITALIZATION:
Common stock, without par value -
Authorized 75,000,000 shares;
outstanding 32,988,441 shares
and 32,956,148 shares (Note 2). . . . . . . . . . .$ 460,089 $ 458,940
Common stock expense . . . . . . . . . . . . . . . . (899) (899)
Retained earnings. . . . . . . . . . . . . . . . . . 282,924 271,606
Total common equity . . . . . . . . . . . . . . . . 742,114 729,647
Cumulative preferred stock . . . . . . . . . . . . . 116,716 116,716
Long-term debt . . . . . . . . . . . . . . . . . . . 662,875 662,879
Total capitalization. . . . . . . . . . . . . . . . 1,521,705 1,509,242
CURRENT LIABILITIES:
Notes payable. . . . . . . . . . . . . . . . . . . . - 20,000
Accounts payable . . . . . . . . . . . . . . . . . . 103,566 111,192
Common dividends declared. . . . . . . . . . . . . . 17,154 17,137
Accrued taxes. . . . . . . . . . . . . . . . . . . . 51,824 11,267
Accrued interest . . . . . . . . . . . . . . . . . . 11,489 12,864
Other. . . . . . . . . . . . . . . . . . . . . . . . 36,227 38,394
Total current liabilities . . . . . . . . . . . . . 220,260 210,854
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes . . . . . . . . . . . . . . . . . . . . . . . 338,133 345,630
Investment tax credit, in
process of amortization . . . . . . . . . . . . . . 90,383 91,572
Customers' advances for construction . . . . . . . . 7,422 7,384
Regulatory liability - income taxes. . . . . . . . . 46,943 46,528
Other. . . . . . . . . . . . . . . . . . . . . . . . 97,776 73,584
Total deferred credits and other liabilities. . . . 580,657 564,698
Total capital and liabilities . . . . . . . . . .$2,322,622 $2,284,794
LG&E Energy Corp. and Subsidiaries
Statements of Cash Flows
(Unaudited - Thousands of $)
Three Months Ended
March 31,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . .$ 28,472 $ 20,097
Items not requiring cash currently:
Cumulative effect of change
in accounting principle . . . . . . . . . . . . . 3,369 -
Non-recurring charges . . . . . . . . . . . . . . . 48,743 -
Depreciation and amortization . . . . . . . . . . . 20,965 20,538
Deferred income taxes - net . . . . . . . . . . . . (20,531) (12,318)
Investment tax credit - net . . . . . . . . . . . . (1,189) (9,462)
Undistributed earnings of joint ventures. . . . . . (1,552) (934)
Income from discontinued operations . . . . . . . . - (1,524)
Gain on sale of discontinued operations . . . . . . (90,878) -
Other . . . . . . . . . . . . . . . . . . . . . . . 7,493 4,029
(Increases) decreases in net current assets:
Accounts receivable . . . . . . . . . . . . . . . . 7,243 (8,843)
Materials and supplies. . . . . . . . . . . . . . . 21,930 30,074
Accounts payable. . . . . . . . . . . . . . . . . . (7,626) (20,313)
Accrued taxes . . . . . . . . . . . . . . . . . . . 40,557 29,644
Accrued interest. . . . . . . . . . . . . . . . . . (1,375) 362
Prepayments and other . . . . . . . . . . . . . . . (5,589) (6,790)
Other. . . . . . . . . . . . . . . . . . . . . . . . (3,502) 7,250
Net cash provided by operating activities . . . . . 46,530 51,810
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of capital asset. . . . . . . . . . . . . . . . - 91,076
Investment in marketable securities. . . . . . . . . (95,706) -
Long-term investment in securities . . . . . . . . . (13,847) (165)
Construction expenditures. . . . . . . . . . . . . . (14,433) (22,280)
Investment in affiliates . . . . . . . . . . . . . . (2,013) -
Proceeds from sale of discontinued operations. . . . 170,000 -
Net cash provided by investing activities . . . . . 44,001 68,631
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock . . . . . . . . . . . . . . 1,149 6,318
Retirement of pollution control bonds. . . . . . . . - (27,411)
Decrease in notes payable. . . . . . . . . . . . . . (20,000) (8,000)
Payment of common dividends. . . . . . . . . . . . . (17,137) (16,253)
Net cash used for financing activities. . . . . . .$ (35,988) $ (45,346)
LG&E Energy Corp. and Subsidiaries
Statements of Cash Flows (cont.)
(Unaudited - Thousands of $)
Three Months Ended
March 31,
1994 1993
NET INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS . . . . . . . . . . . . .$ 54,543 $ 75,095
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . 67,377 21,997
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD. . . . . . . . . . . . . . . . . . . .$ 121,920 $ 97,092
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes. . . . . . . . . . . . . . . . . . .$ 6,240 $ 4,618
Interest on borrowed money. . . . . . . . . . . . 11,781 11,906
For the purposes of this statement, all temporary cash investments purchased
with a maturity of three months or less are considered cash equivalents.
LG&E Energy Corp. and Subsidiaries
Statements of Retained Earnings
(Unaudited)
(Thousands of $)
Three Months Ended
March 31,
1994 1993
Balance at beginning of period. . . . . . . . . . . . $271,606 $251,121
Net income. . . . . . . . . . . . . . . . . . . . . . 28,472 20,097
Subtotal . . . . . . . . . . . . . . . . . . . . . . 300,078 271,218
Cash dividends declared on
common stock ($.52 and $.5025 per share) . . . . . . 17,154 16,335
Balance at end of period. . . . . . . . . . . . . . . $282,924 $254,883
LG&E Energy Corp. and Subsidiaries
Notes to Financial Statements
(Unaudited)
1. The unaudited consolidated financial statements include the accounts of
LG&E Energy Corp. and its wholly-owned subsidiaries - Louisville Gas and
Electric Company (LG&E) and LG&E Energy Systems Inc. (Energy Systems),
collectively referred to as the "Company."
In the opinion of management, all adjustments have been made to present
fairly the consolidated financial position, results of operations and cash
flows for the periods indicated. 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 SEC rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. Certain amounts in the statements of income and cash flows for
the three months ended March 31, 1993, have been restated to be consistent
with the presentation for the three months ended March 31, 1994.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K for the year 1993.
2. Changes in common stock outstanding during the three months ended March 31,
1994, were:
Shares $000's
Outstanding January 1 32,956,148 $458,940
Issued under the Employee
Common Stock Purchase Plan 21,640 718
Issued under the Omnibus Long-Term
Incentive Plan 10,653 431
Outstanding March 31 32,988,441 $460,089
3. Effective January 1, 1994, the Company realigned its business to reflect
its outlook for rapidly emerging competition in all segments of the energy
service industry. Under the realignment, a national business unit, LG&E
Energy Services, was formed to develop and manage all of its utility and
non-utility electric power generation and concentrate on the marketing and
brokering of wholesale electric power on a regional and national basis.
LG&E, an electric and gas utility that is the Company's principle
subsidiary, will increase its focus on customer service and develop more
customer options as the local utility industry becomes more competitive in
the future.
In addition to the realignment, LG&E has been re-evaluating its regulatory
strategy which previously had been to seek full recovery of certain costs
deferred in accordance with prior precedent established by the Public
Service Commission of Kentucky. LG&E completed its study in the first
quarter of 1994 and decided to write off several non-recurring items
amounting to approximately $38.6 million before tax. While LG&E continues
to believe that it could have reasonably expected to recover these costs in
future rate proceedings before the Public Service Commission of Kentucky,
LG&E decided to deduct these expenses currently and not seek recovery for
such expenses in future rates due to increasing competitive pressures and
the existing and anticipated future economic conditions. The items written
off include costs incurred in connection with early retirements and work
force reductions that occurred in 1992 and 1993 which consist primarily of
separation payments, enhanced early retirement benefits, and health care
benefits; costs associated with property damage claims pertaining to
particulate emission from its Mill Creek electric generating plant which
primarily consist of spotting on automobile finish and aluminum siding; and
certain costs previously deferred resulting from adoption in January 1993 of
SFAS No. 106 (Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Post-Retirement Benefits Other Than Pensions).
LG&E Power Inc. (LPI) set up a reserve for $10.1 million before tax for the
cost related to terminating a contract to lease office space. This cost and
the costs mentioned above that were incurred by LG&E have been classified as
non-recurring charges in the accompanying statements of income.
4. In the first quarter of 1994, the board of directors of the Company
approved the formation of a tax-exempt charitable foundation which will
make charitable contributions to qualified persons and entities. The board
authorized an initial contribution to the foundation of up to $15 million.
Accordingly, the Company recorded a pretax charge against income and
accrued $15 million to fund the contribution. Funding is anticipated to
occur following the receipt of exempt status for the foundation under the
Internal Revenue Code. Contributions made from this foundation will not be
charged against income and, therefore, will not affect the Company's net
income in the future.
5. The Company sold its 36.5% equity interest in Natural Gas Clearinghouse
(NGC) to NOVA Corporation in January 1994 for $170 million. The sale
resulted in a pretax gain of $87 million, and the tax on the gain totaled
$35 million. All of these amounts were in line with previously-disclosed
estimates.
The Company's gain on the sale, investment balance, and equity in the
earnings of NGC have been classified as discontinued operations in the
accompanying financial statements.
6. The Company adopted SFAS No. 112 (Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Post-Employment Benefits) in
the first quarter of 1994. SFAS No. 112 requires the accrual of the
expected cost of benefits to former or inactive employees after employment
but before retirement. The cumulative effect of the accounting change was
recorded in the first quarter of 1994 and decreased pretax income by $5.6
million.
7. In connection with the financing of various power projects, Energy Systems
and LPI provide equity funding commitments and guarantee the construction
and performance of the projects. Ascertainable equity funding commitments
were $57 million and $36 million at March 31, 1994, and December 31, 1993,
respectively. Contingent construction and project performance guarantees
totaled $213 million at March 31, 1994, and $198 million at December 31,
1993.
Westmoreland Energy Inc. (WEI) is a partner along with LPI in six
cogeneration projects in operation or under construction. Under an
agreement signed on April 15, 1993, LPI and Energy Systems have guaranteed
(in exchange for fees and other consideration) the equity funding commitment
of WEI in connection with the following three projects: Roanoke Valley I,
Roanoke Valley II, and Rensselaer. The additional commitments resulting
from this agreement total $35.5 million.
During December 1993, the Company signed an agreement with Nations Financial
Capital Corporation (Nations Financial) under which Nations Financial
agreed, in exchange for fees, to assume $26.9 million of the Company's
contingent equity funding commitment for Roanoke Valley I and II resulting
from its April 15, 1993, agreement with WEI.
8. Reference is made to Part II herein - Item 1, Legal Proceedings.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
The Company's principal subsidiary is LG&E, an electric and gas utility.
Accordingly, LG&E's results of operations and liquidity and capital resources
are the primary factors affecting the Company's consolidated results of
operations and capital resources and liquidity.
Results of Operations
LG&E's results of operations are significantly affected by seasonal
fluctuations in temperature and other weather-related factors. Additionally,
results of the Company's non-utility operations are dependent, among other
things, upon the timing and magnitude of development and construction
activities associated with LPI's various electric generation projects. Because
of these and other factors, the results of one interim period are not
necessarily indicative of results or trends to be expected for the full year.
Three Months Ended March 31, 1994, Compared with
Three Months Ended March 31, 1993
The increase in net income was due primarily to recognizing a gain on the sale
of the Company's interest in NGC and to higher earnings from LPI (before non-
recurring charges). Partially offsetting these increases were decreases
resulting from recording non-recurring charges (see note 3), the expense
associated with the formation of a tax-exempt charitable foundation (see note
4), and the cumulative effect of a change in accounting principle, as well as
decreases resulting from lower earnings from LG&E (before non-recurring
charges) resulting from increased storm damage expenses caused by the area's
worst winter storm in 16 years, and lower income from discontinued operations.
A comparison of utility operating revenues for the quarter ended March 31,
1994, with the quarter ended March 31, 1993, reflects increases and decreases
which have been segregated by the following principal causes:
Increase or (Decrease)
(Thousands of $)
Electric Gas
Cause Revenues Revenues
Sales to ultimate consumers:
Fuel and gas supply adjustments $ (987) $ 811
Variation in sales volume, etc. 3,896 12,077
Total 2,909 12,888
Sales to other utilities (4,650) -
Gas transportation - net - (1,395)
Other 134 88
Total $(1,607) $11,581
The decrease in non-utility revenues resulted from lower levels of activity on
LPI's Roanoke Valley I and Rensselaer construction projects. The lower
activity was due to the projects' nearing completion in 1994.
Fuel for electric generation and gas supply expenses comprise a large segment
of LG&E's total operating expenses. LG&E's electric and gas rates contain a
fuel adjustment clause and a gas supply clause, respectively, whereby increases
or decreases in the cost of fuel and gas supply may be reflected in LG&E's
rates, subject to the approval of the Public Service Commission of Kentucky.
Fuel and power purchased decreased 3% for the quarter. Fuel expenses decreased
slightly for the quarter primarily because of a decrease in the cost of coal
burned. Power purchased decreased due mainly to less power wheeled for other
utilities.
Gas supply expenses increased 17% due mainly to an increase in the volume of
gas delivered to the distribution system and the higher cost of gas purchased.
Development and construction costs decreased due mainly to the lower level of
activity on LPI's Roanoke Valley I and Rensselaer construction projects.
Operation and maintenance expenses increased primarily as a result of increases
at LG&E related to increased electric and gas distribution expenses, increased
costs to operate and maintain the electric power plants, and an increase in
storm damage expenses caused by the severe winter weather.
Depreciation and amortization increased because of increased depreciable plant
in service.
Non-recurring charges include LG&E's write off of costs in connection with
early retirements and work force reductions that occurred in 1992 and 1993,
costs in connection with property damage claims pertaining to particulate
emissions from the Mill Creek electric generating plant, and certain costs
previously deferred resulting from adoption of SFAS No. 106 (Statement of
Financial Accounting Standards No. 106, Employers' Accounting for Post-
Retirement Benefits Other Than Pensions) expense previously recorded as a
deferred item. Non-recurring charges also includes a reserve to record costs
related to terminating a contract entered into by LPI to lease office space.
See Note 3 of Notes to Financial Statements.
The increase in equity in earnings of joint ventures was due mainly to
increased dispatch levels at LPI's Virginia projects.
Other income and deductions include the provision associated with the formation
of a tax-exempt charitable foundation. See Note 4 of Notes to Financial
Statements.
Interest charges decreased because of a lower composite interest rate on
outstanding debt and a reduction in notes payable.
Variations in income tax expense are largely attributable to changes in pretax
income.
Income from discontinued operations and gain on sale of discontinued operations
reflect the sale of the Company's investment in NGC in January 1994. See Note
5 of Notes to Financial Statements.
Cumulative effect of change in accounting principle reflects the adoption of
SFAS No. 112 (Statement of Financial Standards No. 112, Employers' Accounting
for Post-Employment Benefits). See Note 6 of Notes to Financial Statements.
Liquidity and Capital Resources
The Company's need for capital funds is primarily related to the construction
of plant and equipment necessary to meet LG&E's electric and gas customers'
needs and protection of the environment. Needs for capital funds also arise
from partnership equity contributions in connection with independent power
production projects in the non-utility business. Utility construction
expenditures for the first three months of 1994 of $14 million were financed
with internally-generated funds.
At March 31, 1994, loan agreements and lines of credit were in place totaling
$320 million ($25 million for LG&E Energy Corp., $145 million for LG&E, and
$150 million for Energy Systems) for which the companies pay commitment or
facility fees. These lines of credit were unused as of March 31, 1994. These
credit lines are scheduled to expire at various times between 1994 and 1996,
and management intends to renegotiate them when they expire.
The Company's capitalization ratios at March 31, 1994, and December 31, 1993,
were:
March 31, Dec. 31,
1994 1993
Long-term debt 43.5% 43.4%
Notes payable - 1.3
Preferred stock 7.7 7.6
Common equity 48.8 47.7
Total 100.0% 100.0%
For a description of significant contingencies that may affect the Company,
reference is made to Part II herein - Item 1, Legal Proceedings.
Part II. Other Information
Item 1. Legal Proceedings.
For a description of the significant legal proceedings involving the Company,
reference is made to the information under the items and captions of the
Company's Annual Report on Form 10-K for the year ended December 31, 1993:
Item 1, Business; Item 3, Legal Proceedings; Item 7, Management's Discussion
and Analysis of Results of Operations and Financial Condition; and Notes 10 and
11 of the Notes to Financial Statements under Item 8, Financial Statements and
Supplementary Data. Except as noted below, there have been no material changes
in these proceedings as reported in the Company's Form 10-K.
Environmental. As discussed in Note 10 of the Notes to Financial Statements
under Item 8 of the Company's Form 10-K, LG&E owns or formerly owned three
primary sites where manufactured gas plant operations were located. Such
manufactured gas plant operations, conducted in the 1838 to 1960 time period,
typically produced coal tar byproducts and other constituents that may
necessitate cleanup measures. LG&E commenced site investigations at the two
LG&E-owned sites to determine if significant levels of contaminants are
present. In the first quarter of 1994, LG&E entered into an agreement with the
current owner of the third site and a third party in which the three parties
have committed to jointly perform a site investigation. LG&E anticipates
spending a total of approximately $1.3 million on site investigations expected
to be completed by 1995. Preliminary testing at all three sites has identified
contaminants typical of manufactured gas plant operations. Until an
investigation and associated regulatory review is completed for each site, LG&E
will be unable to predict what, if any, cleanup activities may be necessary.
Trimble County Generating Plant. As discussed in Note 11 of the Notes to
Financial Statements under Item 8 of the Company's Form 10-K, on January 7,
1994, LG&E filed testimony with the Kentucky Public Service Commission
(Commission) in which it recommended that the Commission allow it to recover
the approximately $11.1 million it refunded to customers under the 1989
settlement agreement. Testimony was filed by the Kentucky Attorney General,
the Jefferson County Attorney, the Metro Human Needs Alliance, and the Kentucky
Industrial Utility Customers. The testimony recommended that the Commission
order LG&E to refund approximately $183 million, based upon their argument that
LG&E should refund 25% of the revenue requirements associated with Trimble
County's construction work in progress it collected over the course of the
Trimble County construction project. LG&E continues to maintain the position
that no additional refunds are necessary to fully effectuate the Commission's
disallowance of 25% of Trimble County's costs, and that the refund amounts
supported by the other parties to the proceeding would require the Commission
to engage in retroactive ratemaking, which is prohibited under Kentucky law.
No date has been set for a hearing. LG&E is unable to predict the outcome of
the Commission proceedings, the amount of additional refunds or recoveries, if
any, that may be ordered or whether the Commission will revise its earlier
position.
Item 6(b). Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LG&E ENERGY CORP.
Registrant
Date: May 13, 1994 /s/ Charles A. Markel
Charles A. Markel
Corporate Vice President, Finance
and Treasurer
(On behalf of the registrant in his
capacity as Principal Accounting Officer)
