SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: June 14, 1996
LG&E ENERGY CORP.
(Exact name of registrant as specified in its charter)
Kentucky 1-10568 61-1174555
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
220 West Main Street
P.O. Box 32030
Louisville, KY 40232
(Address of principal executive offices)
(502) 627-2000
(Registrant's telephone number)
Item 5. Other Events.
LG&E Energy Corp. executives, at a meeting of industry analysts in New York,
New York, on June 12, 1996, generally discussed the Company's growth plans and
for the first time its expectations regarding future results. At the meeting,
the Company referenced its Form 8-K, filed on June 10, 1996, which contains
factors which could cause actual results to differ materially from the
Company's expectations regarding future results and developments. The Company
followed up the presentation to analysts with the attached press release, which
includes forward-looking and historical material non-public information
disclosed to analysts at the meeting. The press release also contains the list
of cautionary factors which could cause actual results to differ materially
from the forward-looking information disclosed.
Item 7(c). Exhibits Filed.
Exhibit
Number Description
99.01 News Release dated June 12, 1996, announcing the Company's
growth plans and expectations regarding future results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LG&E ENERGY CORP.
Registrant
Date: June 14, 1996 /s/ Walter Z. Berger
Walter Z. Berger
Executive Vice President and
Chief Financial Officer
(On behalf of the registrant in his
capacity as Principal Financial Officer)
Exhibit 99.01
LG&E Energy Executives Cite Competitive Readiness
As Key to Business Success; Anticipate Aggressive Growth
In Energy Marketing and Retailing
NEW YORK - Commodity marketing and retail merchandising skills, strengths in
trading and risk management and the ability to package integrated energy
solutions, rather than relying on traditional assets or regulatory protections,
are the new ingredients for success in the rapidly emerging energy services
industry, LG&E Energy Corp. executives told a meeting of industry analysts
today.
LG&E Energy Chairman and Chief Executive Officer Roger W. Hale told a meeting
of the financial analysts that the company's early efforts to build these
strengths, combined with a commitment to anticipate market trends and customer
needs, have fueled a compounded annual earnings growth rate from operations of
6.5 percent over the last five years and a total shareholder return that has
outpaced industry averages. Hale credited the growth rate to the company's
non-traditional approach to market opportunities that are developing as the
electric and natural gas industries converge and evolve in response to market
forces and new customer needs. Over the last two years, the company has
vaulted to a position as the nation's largest utility-affiliated power and
natural gas marketer, and has earned among the highest ratings in the country
for its local utility operations.
"I think more utilities will be judged -- by their customers and shareholders -
- - on how aggressively they embrace competition and stake their strategies on
customer choice and market needs, " said Hale, who noted that the company is
consistently cited as a leader in its markets and among the most prepared among
other utilities for competition.
Hale told the analysts that several trends are combining to fundamentally
reshape the electric and natural gas industries -- the dominance of customer
choice, the convergence of natural gas and power marketing, the evolution of
energy as a commodity, the demise of the vertically integrated utility, the
growing role of independent marketers, and increased emphasis on marketing,
merchandising, risk management, commodity trading and product packaging. Hale
also predicted that recent state initiatives in Illinois, New Hampshire and New
York allowing direct retail sales to industrial customers will prove to be
"matchsticks on dry timber" in igniting demand by industrial customers in other
states for similar choices and more quickly driving the industry toward a
market clearing price for power.
LG&E Energy has anticipated and responded to these trends, said Hale, by
acquiring and growing independent power and natural gas marketing businesses,
constructing a power trading room, recruiting commodity trading, marketing and
retail merchandising skills from within and outside the energy industry, and
launching new retail products and services, such as appliance repair and design
of commercial energy systems.
Walter Berger, executive vice president and chief financial officer, traced the
company development over five years, including its acquisition of independent
power business, its purchase and later sale of a partnership interest in
Natural Gas Clearinghouse, and its more recent acquisition of Hadson Gas. The
company intends to continue this expansion -- both in the scope and scale of
the business and to reach new customers and markets.
Berger said the company's early ventures in energy services and other
activities are designed to achieve a growth rate of six to eight percent a year
over the next few years, significantly outpacing the rest of the industry and
offering a very attractive total return to shareholders. Berger also said the
earnings growth would allow the company to drive its dividend payout ratio down
to 65 to 70 percent in the next couple of years. Last year, LG&E Energy
achieved a payout ratio of 72 percent on normalized earnings while enjoying
increased dividends for the 41st year in a row. In 1995, the company surpassed
$100 million in normalized earnings on revenues of $1.4 billion. The company's
growth in earnings per share continued into the first quarter of this year, up
ten percent from the comparable quarter in 1995, and Berger said he anticipates
this year's second quarter results also will be strong compared with the second
quarter of 1995, without considering the effects of a buyout of power sales
agreements in Maine recorded in the second quarter of 1995. The company
believes revenues in 1996 could reach $3 billion.
Contributing to the earnings growth were dramatic sales increases by the
company's energy marketing units over the last few months. LG&E Power
Marketing expects to sell 12 million megawatt hours of power in 1996 --
compared with 1.8 million megawatt hours during all of 1995. LG&E Natural, the
natural gas marketing group based in Dallas, showed similar growth, tripling
its sales since being acquired by LG&E Energy a year ago.
The company's utility operations, LG&E, continue to deliver solid returns on
equity, said Berger, which should provide a base for even stronger corporate
earnings as the company's non-utility businesses reach their potential. LG&E
has the lowest combined rates in the Midwestern region and last year was
described as "fast becoming a `best-in-class' utility" in a comprehensive audit
by the Kentucky Public Service Commission.
In summarizing the financial results of the operating units, Berger said the
investment strategy supports both growth and profitability, and that the
company expects to grow across all four of its target segments -- power
generation, power marketing, natural gas marketing and retail distribution.
The company has maintained AA bond rating on its debt and S&P recently upgraded
its outlook on the company's business position to "above average."
In a question and answer session with analysts, Hale said the partnership
interests with Kenetech on several U.S. and international wind power projects
are expected to be financially isolated from any impact of the recently
announced bankruptcy of Kenetech and that LG&E Energy hopes to operate some of
the plants through an LG&E Power subsidiary.
The Private Securities Litigation Reform Act of 1995 provides a new "safe
harbor" for forward-looking statements to encourage such disclosures without
the threat of litigation providing those statements are identified as forward-
looking and are accompanied by meaningful, cautionary statements identifying
important factors that could cause the actual results to differ materially from
those projected in the statement. Forward-looking statements are contained
herein. Such statements are based on management's beliefs as well as
assumptions made by and information currently available to management. The
words "anticipate", "estimate", "expect", "objective" and similar expressions
are intended to identify forward-looking statements. In addition to any
assumptions and other factors referred to specifically in connection with such
forward-looking statements, factors that could cause the Company's actual
results to differ materially from those contemplated in the forward-looking
statements include, among others, the following:
- -- Increased competition in the utility, natural gas and electric power
marketing industries, including effects of: decreasing margins as result
of competitive pressures; industry restructuring initiatives; transmission
system operation and/or administration initiatives; recovery of investments
made under traditional regulation; nature of competitors entering the
industry;retailwheeling; a new pricing structure; and former customers
entering the generation market;
- -- Changing market conditions and a variety of other factors associated with
physical energy and financial trading activities including, but not limited
to, price, basis, credit, liquidity, volatility, capacity, transmission,
currency, interest rate and warranty risks;
- -- Risks associated with price risk management strategies intended to mitigate
exposure to adverse movement in the prices of electricity and natural gas
on both a global and regional basis;
- -- Legal, regulatory, economic and other factors which may result in
redetermination or cancellation of revenue payment streams under power
sales agreements resulting in reduced operating income and potential asset
impairment related to the Company's investments in independent power
production ventures;
- -- Economic conditions including inflation rates and monetary fluctuations;
- -- Trade, monetary, fiscal, taxation, and environmental policies of
governments, agencies and similar organizations in geographic areas where
the Company has a financial interest;
- -- Customer business conditions including demand for their products of
services and supply of labor and materials used in creating their products
and services;
- -- Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission, state public utility
commissions, state entities which regulate natural gas transmission,
gathering and processing and similar entities with regulatory oversight;
- -- Availability or cost of capital such as changes in: interest rates, market
perceptions of the utility and energy-related industries, the Company or
any of its subsidiaries or security ratings;
- -- Factors affecting utility and non-utility operations such as unusual
weather conditions; catastrophic weather-related damage; unscheduled
generation outages, unusual maintenance or repairs; unanticipated changes
to fossil fuel, or gas supply costs or availability due to higher demand,
shortages, transportation problems or other developments; environmental
incidents; or electric transmission or gas pipeline system constraints;
- -- Employee workforce factors including changes in key executives, collective
bargaining agreements with union employees, or work stoppages;
- -- Rate-setting policies or procedures of regulatory entities, including
environmental externalities;
- -- Social attitudes regarding the utility, natural gas and power industries;
- -- Identification of suitable investment opportunities to enhance shareholder
returns and achieve long-term financial objectives through business
acquisitions;
- -- Some future project investments made by the Company could take the form of
minority interests, which would limit the Company's ability to control the
development or operation of the project;
- -- Legal and regulatory delays and other unforeseeable obstacles associated
with mergers, acquisitions and investments in joint ventures;
- -- Costs and other effects of legal and administrative proceedings,
settlements, investigations, claims and matters, including but not limited
to those described in Note 16 of the Notes to Financial Statements of the
Company's Annual Report on Form 10-K under the caption Commitments and
Contingencies;
- -- Technological developments, changing markets and other factors that result
in competitive disadvantages and create the potential for impairment of
existing assets;
- -- Factors associated with non-regulated investments, including but not
limited to: continued viability of partners, foreign government actions,
foreign economic and currency risks, political instability in foreign
countries, partnership actions, competition, operating risks, dependence on
certain customers, third-party operators, suppliers and domestic and
foreign environmental and energy regulations;
- -- Other business or investment considerations that may be disclosed from time
to time in the Company's Securities and Exchange Commission filings or in
other publicly disseminated written documents.
The Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.
LG&E Energy Corp. is an industry-leading energy services holding company
headquartered in Louisville, Kentucky. The company has four operating
divisions with assets and operations in retail and wholesale power and natural
gas services and marketing. It has offices, operations and partnership
projects throughout the U.S., as well as Canada, Argentina and Spain.
