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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 (Date of earliest event reported): May 20, 1997
LG&E ENERGY CORP.
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(Exact name of registrant as specified in charter)
Kentucky 1-10568 61-1174555
- ---------------------------- -------------------- -------------------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
220 West Main Street
P.O. Box 32030
Louisville, KY 40232
--------------------
(Address of Principal Executive Officer)
Registrant's telephone number, including area code: (502) 627-2000
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Item 5. Other Events
Merger Agreement with KU Energy Corporation.
On May 20, 1997, LG&E Energy Corp., a Kentucky corporation ("LG&E Energy"),
and KU Energy Corporation, a Kentucky corporation ("KU"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") providing for a merger of
LG&E Energy and KU. Pursuant to the Merger Agreement, among other things, KU
will be merged with and into LG&E Energy, with LG&E Energy as the surviving
corporation (the "Merger"). The Merger, which was unanimously approved by the
Boards of Directors of LG&E Energy and KU, is expected to close shortly after
all of the conditions to consummation of the Merger, including the receipt of
all applicable regulatory approvals, are met or waived.
As a result of the Merger, LG&E Energy, which is the parent of Louisville
Gas and Electric Company ("LG&E"), will become the parent company of KU's
principal operating subsidiary, Kentucky Utilities Company ("Kentucky
Utilities"). The operating utility subsidiaries (LG&E and Kentucky Utilities)
will maintain their separate corporate identities and will continue to serve
customers in Kentucky and Virginia under their present names. LG&E Energy and KU
expect more than $760 million in gross non-fuel savings over a ten-year period
following the Merger. Costs to achieve these synergies are estimated to be $77
million. The preferred stock and debt securities of the operating utility
subsidiaries will not be affected by the Merger. Present nonutility operations
of KU will be unaffected. The nonutility subsidiaries of KU will become
subsidiaries of LG&E Energy.
Under the terms of the Merger Agreement, each outstanding share of the
common stock, without par value, of KU ("KU Common Stock") (other than shares
with respect to which dissenters' rights are perfected under applicable state
law), together with the associated KU stock purchase rights, will be converted
into the right to receive 1.67 shares of common stock, without par value, of
LG&E Energy ("LG&E Energy Common Stock"), together with the associated LG&E
Energy stock purchase rights. A holder of KU Common Stock who would otherwise
have been entitled to a fractional share of LG&E Energy Common Stock will be
entitled to receive a cash payment in lieu of such fractional share. The
outstanding shares of LG&E Energy Common Stock will remain unchanged and
outstanding. As of May 16, 1997, there were 66,484,875 shares of LG&E Energy
common stock outstanding, and 37,817,878 shares of KU common stock outstanding.
Based on such capitalization, upon consummation of the Merger 51.3% of the
outstanding LG&E Energy common stock will be owned by the shareholders of LG&E
Energy prior to the Merger and 48.7% will be owned by former KU shareholders.
The Merger is subject to customary closing conditions, including, without
limitation, the approval of the holders of a majority of the outstanding shares
of common stock of each of LG&E Energy and KU, the receipt of all necessary
governmental approvals and the making of all necessary governmental filings,
including approvals of various regulators in Kentucky and Virginia under state
utility laws, the approval of the Federal Energy Regulatory Commission under the
Federal Power Act, the approval of the Securities and Exchange Commission (the
"Commission") under the Public Utility Holding Company Act of 1935, and the
filing of requisite notifications with the Federal Trade Commission and the
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the expiration of all applicable waiting periods
thereunder. The Merger is also subject to the receipt of opinions of
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counsel that the Merger will qualify as a tax-free reorganization and assurances
from the parties' independent accountants that the Merger will qualify as a
pooling of interests for accounting purposes. In addition, the Merger is
conditioned upon the effectiveness of a registration statement to be filed with
the Commission with respect to the LG&E Energy Common Stock to be issued in the
Merger and the approval for listing of such shares on the New York Stock
Exchange. It is anticipated that LG&E Energy, as parent of LG&E and Kentucky
Utilities, will continue to be an exempt holding company under the Public
Utility Holding Company Act of 1935. Shareholder meetings to vote upon approval
of the Merger will be convened as soon as practicable and are expected to be
held later in 1997.
The Merger Agreement contains certain covenants of the parties pending the
closing. Generally, the parties must carry on their business only as specified
in the Merger Agreement (subject to ordinary course exceptions, certain
negotiated dollar baskets and certain previously budgeted amounts).
The Merger Agreement provides that after the effectiveness of the Merger
(the "Effective Time"), the principal executive offices of LG&E Energy will
remain in Louisville, Kentucky. LG&E will remain headquartered in Louisville.
Kentucky Utilities will remain headquartered in Lexington, Kentucky and maintain
a substantial presence elsewhere throughout its service territory in order to
conduct its state-wide operations. At the Effective Time, LG&E Energy's Board of
Directors will consist of a total of 15 directors, eight of whom will be
designated by LG&E Energy and seven of whom will be designated by KU. The Board
of Directors will have the following four committees: (i) an Audit Committee;
(ii) a Compensation Committee; (iii) a Nominating and Governance Committee and
(iv) a Long Range Planning Committee. The Audit Committee will have ten members,
with five designated by LG&E Energy (one of whom would be the chairman) and five
designated by KU. The Compensation Committee will have seven members, with four
designated by LG&E Energy (one of whom would be the chairman) and three
designated by KU. The Nominating and Governance Committee will have eight
members, with four designated by LG&E Energy and four designated by KU (one of
whom would be the chairman). The Long Range Planning Committee will have nine
members, with five designated by LG&E Energy and four designated by KU (one of
whom would be the chairman). Upon completion of the Merger, Mr. Roger W. Hale
will continue as Chairman and Chief Executive Officer of LG&E Energy and LG&E
and will become Chairman and Chief Executive Officer of Kentucky Utilities. Mr.
Michael R. Whitley, the Chairman and Chief Executive Officer of KU, will become
Vice Chairman, President and Chief Operating Officer of LG&E Energy and Vice
Chairman and Chief Operating Officer of each of LG&E and Kentucky Utilities.
The Merger Agreement may be terminated in certain circumstances, including
(1) by mutual consent of the parties; (2) by either LG&E Energy or KU, if the
Merger has not been consummated before May 20, 1999 (plus an extension to
November 20, 1999 if all conditions to closing the Merger, other than receipt of
certain consents and/or statutory approvals by LG&E Energy or KU, have been
satisfied at May 20, 1999); (3) by either LG&E Energy or KU, if the stockholders
of either LG&E Energy or KU do not approve the Merger or if certain legal
requirements prohibit the Merger; (4) by either LG&E Energy or KU, if the
other party's directors withdraw or adversely modify their recommendation of the
Merger, fail to reaffirm such recommendation upon the other party's request, or
approve an alternative transaction with a third party; (5) by either party if
the other party has breached the Merger Agreement or if the other party's
representations and warranties are inaccurate, and such breach or inaccuracy is
reasonably
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likely to result in a material adverse effect and is not cured within 20 days
after receipt of notice thereof; (6) by either party if a third party acquires
more than 50% of the other party's outstanding voting securities or if the other
party's directors on May 20, 1997 (together with new directors nominated by a
majority of such party's directors) cease to constitute a majority of such
party's directors then in office; or (7) by either party, under certain
circumstances, if there is a competing third-party offer and (i) the target
party's directors receive written advice from outside counsel that, as a result
of the competing proposal, the directors' fiduciary duties require
reconsideration of the target party's commitment to consummate the Merger, (ii)
such target party's directors determine in good faith that their fiduciary
duties require acceptance of the competing proposal and (iii) such target party
is unable, prior to termination, to negotiate adjustments to the Merger
Agreement enabling the Merger to proceed.
The Merger Agreement provides that if a breach or inaccuracy described in
clause (5) above occurs and if such breach or inaccuracy is not willful, the
non-breaching party is entitled to reimbursement of its out-of-pocket expenses
and fees (including, without limitation, fees and expenses payable to all legal,
accounting, financial, public relations and other professional advisors arising
out of, in connection with or related to the Merger or the transactions
contemplated by the Merger Agreement) not to exceed $10 million. In the event of
a willful breach, the non-breaching party will be entitled to reimbursement of
its actual out-of-pocket expenses (which will not be subject to the $10 million
limit) and any remedies it may have at law or in equity; provided, further, that
if, at the time of the breaching party's willful breach, there shall have been a
third party tender offer or business combination proposal which shall not have
been rejected by the breaching party and withdrawn by the bidder, and within two
and one-half years following termination, the breaching party or an affiliate
thereof becomes a subsidiary of the bidder or a subsidiary of an affiliate of
such bidder or accepts a written offer to consummate or consummates a business
combination with such bidder or an affiliate thereof, then such breaching party
(jointly and severally with its affiliates), upon the signing of a definitive
agreement relating to such a business combination, or, if no such agreement is
signed, then at the closing (and as a condition to the closing) of such
breaching party becoming such a subsidiary or of such business combination, is
required to pay to the non-breaching party an additional fee equal to $50
million.
If the Merger Agreement is terminated by either LG&E Energy or KU due to
(i) the scenarios described in clauses (4) or (7) above, (ii) the failure of
either party to comply with certain covenants requiring it to call a meeting of
stockholders and recommend the Merger for approval, or (iii) the failure of
either party's stockholders to approve the Merger (provided the other party's
stockholders shall not have also failed to approve the Merger), and if at the
time of such event there is a pending third party offer or proposal that is not
rejected by the target directors and not withdrawn by the bidder, and if the
third party proposal is ultimately signed or consummated within two and one-half
years and the target party or an affiliate thereof becomes a subsidiary of the
bidder or a subsidiary of an affiliate of such bidder, or accepts a written
offer to consummate or consummates a business combination with such bidder or an
affiliate thereof, then the target party (jointly and severally with its
affiliates), upon the signing of a definitive agreement relating to such a
business combination, or, if no such agreement is signed, then at the closing
(and as a condition to the closing) of such target party becoming such a
subsidiary or of such business combination, is required to pay to the other
party an additional fee equal to $50 million in cash plus out-of-pocket fees and
expenses incurred by the other party.
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Simultaneously with the execution and delivery of the Merger Agreement,
LG&E Energy and KU also entered into reciprocal stock option agreements (the
"Stock Option Agreements"). Pursuant to the Stock Option Agreements, LG&E Energy
and KU have each granted to the other an irrevocable option to purchase up to
19.9% of the granting company's outstanding common stock, at an exercise price
per share equal to (i) in the case of LG&E Energy Common Stock, the average of
the daily closing sales price per share of LG&E Energy Common Stock during the
ten-day period ending May 12, 1997 or (ii) in the case of KU Common Stock, the
price per share of LG&E Energy Common Stock determined pursuant to clause (i)
above multiplied by an exchange ratio of 1.67. The option becomes exercisable if
the Merger Agreement becomes terminable by either LG&E Energy or KU in
circumstances that could entitle such party to receive termination fees,
generally as a result of the other party becoming the subject of a third party
tender offer or business combination proposal.
If its option becomes exercisable, either LG&E Energy or KU may request the
other party to repurchase all or part of its option at a price per share equal
to the spread between the exercise price and the highest average trading price
or the offered price in any business combination proposal. The aggregate amount
of any termination fees and the transaction expenses payable, plus any amounts
payable as a result of the required repurchase of options, is limited to a
maximum amount of $70 million.
In connection with the Merger, LG&E Energy has amended the terms of the
Rights Agreement, dated as of December 5, 1990, as amended (the "LG&E Energy
Rights Agreement"), between LG&E Energy and LG&E, as rights agent, so that the
execution, delivery and performance of the Merger Agreement and the Stock Option
Agreements will not cause any "Rights" (as defined in the LG&E Energy Rights
Agreement) to become exercisable, cause KU or any of its affiliates to become an
"Acquiring Person" (as defined in the LG&E Energy Rights Agreement) or give rise
to a "Distribution Date" or "Triggering Event" (as each such term is defined in
the LG&E Energy Rights Agreement). Similarly, KU has amended the terms of the
Rights Agreement, dated as of January 27, 1992 (the "KU Rights Agreement"),
between KU and Illinois Stock Transfer Company, as rights agent, so that the
execution, delivery and performance of the Merger Agreement and the Stock Option
Agreements will not cause any "Rights" (as defined in the KU Rights Agreement)
to become exercisable, cause LG&E Energy or any of its affiliates to become an
"Acquiring Person" (as defined in the KU Rights Agreement) or give rise to a
"Distribution Date" or "Triggering Event" (as each such term is defined in the
KU Rights Agreement).
The joint press release of LG&E Energy and KU issued in connection with the
Merger is attached as an exhibit hereto and is incorporated herein by reference.
This Report and the exhibit filed herewith include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. All statements herein and therein which are not based on historical facts
are forward looking and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. When used in
LG&E Energy's or LG&E's documents, the words "anticipate," "estimate," "expect,"
"believe", "objective" and similar expressions are intended to identify forward
looking statements. Factors that could cause actual results to differ materially
from those contemplated by the forward looking statements include, but are not
limited to: regulatory delays in approving the Merger; adverse regulatory
treatment of Merger-related synergies including requirements for rate
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reductions or allocation to customers of Merger savings in excess of what
management has anticipated; the ability of LG&E Energy and KU to implement and
to obtain anticipated Merger synergies; the actual costs required to effect the
Merger and to realize Merger synergies; and other risks detailed from time to
time in the reports filed with the Commission by LG&E Energy and KU, including
Exhibit 99.02 to this report on Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibit.
The exhibits listed below and in the accompanying Exhibit Index are
filed as part of this Current Report on Form 8-K.
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Exhibit No. Title
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99.01 Joint Press Release, dated as of May 20, 1997, of LG&E
Energy and KU.
99.02 Cautionary Statement for the purposes of the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act
of 1995.
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SIGNATURE
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 hereunto duly authorized.
LG&E ENERGY CORP.
By: /s/ Victor A. Staffieri
---------------------------------
Name: Victor A. Staffieri
Title: Chief Financial Officer
Dated: May 21, 1997
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EXHIBIT INDEX
LG&E ENERGY CORP.
Current Report on Form 8-K
Dated May 21, 1997
Exhibit No. Title Sequential Page No.
- ----------- ----- -------------------
99.01 Joint Press Release, dated as __
of May 20, 1997, of LG&E
Energy and KU
99.02 Cautionary Statement for the
purposes of the "Safe Harbor"
provisions of the Private
Securities Litigation Reform
Act of 1995
<PAGE>
EXHIBIT 99.01
For Immediate Release May 21, 1997
Media Contacts: Investor Contacts:
LG&E Energy LG&E Energy
John McCall Charles Markel
(502) 627-3665 (502) 627-2203
Kim Austin Lee
(502) 627-3867
KU Energy KU Energy
David Freibert William English
(606) 367-1271 (606) 367-1120
Greg Shields or Karen Klein
(606) 367-1155
LG&E Energy And KU Energy Sign Definitive Merger Agreement;
To Be One Of The Nation's Largest, Low-Cost Energy Services Companies
Louisville, KY/Lexington, KY -- May 21, 1997 - KU Energy (NYSE:KU) and LG&E
Energy (NYSE:LGE) today announced a definitive agreement to merge. The combined
company will be one of the largest, low-cost energy services holding companies
in the nation. No company in the industry is better positioned to succeed in the
rapidly emerging competitive energy marketplace, according to LG&E Energy and KU
Energy officials. The transaction is valued in excess of $3 billion and the
combined companies will have assets in excess of $4.7 billion.
Under the terms of the agreement, approved unanimously by both boards
yesterday, the holding companies will be merged. The resulting holding company
will be called LG&E Energy and will be based in Louisville. The two utility
companies, Louisville Gas and Electric Company (LG&E), based in Louisville and
Kentucky Utilities Company (KU), based in Lexington, will be wholly-owned
subsidiaries of the holding company. The merged company will serve more than 1.1
million electric and natural gas customers throughout Kentucky, Virginia and
internationally. It will also have access to 11,000 megawatts of low-cost
generation--through ownership of or an interest in 7,400 megawatts and
contractual arrangements for another 4,200 megawatts of power generation.
The agreement provides for KU Energy shareholders to receive 1.67 shares of
LG&E Energy common stock in exchange for each share of KU Energy common stock.
It is expected that the transaction will be accounted for as a pooling of
interests and will qualify as a tax-free exchange. The transaction is expected
to be marginally dilutive to earnings in the first year following the merger and
accretive thereafter. The outstanding debt and preferred stock of KU and LG&E
will not be affected by the merger.
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LG&E Energy And KU Energy Sign Definitive Merger Agreement - Page Two
The companies expect more than $760 million in gross non-fuel savings over
a 10 year period. The savings are anticipated primarily through the integration
of the companies' systems and operations, through joint planning and purchasing,
and by reducing other costs of operations. Over the next five years, the
companies are committing not to seek any base rate increases -- except in
extraordinary circumstances. In fact, the companies estimate that the merger
will translate into reductions in customers' bills of nearly two percent on a
combined basis for each of the next five years.
Following the merger, it is anticipated that the holding company will
continue the dividend level of LG&E Energy. The boards of both companies have
historically and consistently increased dividends.
Roger W. Hale, Chairman and Chief Executive Officer (CEO) of LG&E Energy,
will be Chairman and CEO of the merged company. Michael R. Whitley, Chairman
and CEO of KU Energy, will be Vice-Chairman, President and Chief Operating
Officer (COO) of the merged company. Board representation will be nearly equal
for both companies with KU Energy having seven seats and LG&E Energy having
eight.
"This is a formidable strategic combination of two companies that
individually have unique strengths, which together will be a powerful force as
the industry moves toward customer choice and greater competition," said Hale.
"As one of the nation's largest, low-cost energy services companies with the
largest utility-affiliated energy marketing business, we will define the
successful energy company of the 21st century."
"This merger gives the merged company the critical mass in both generation
and distribution markets to propel our growth over the next few years," Whitley
added. "This transaction will, no doubt, further secure our rank in Kentucky
and Virginia as one of the lowest cost areas for energy supply. We are
convinced that our competitive energy prices will be even more competitive after
our transaction closes. Together, we will provide compelling economic
incentives for our customers and will spur economic development in the region."
The merger is subject to the approval by the shareholders of both companies
and federal and state regulatory agencies. The companies expect that the
transaction will be completed within 12 to 18 months.
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LG&E Energy And KU Energy Sign Definitive Merger Agreement - Page Three
LG&E Energy Corp., a Fortune 500 company, headquartered in Louisville, KY,
is a diversified energy services and marketing company with businesses in retail
utility services, energy marketing and trading, power generation and project
development. It owns and operates Louisville Gas and Electric Company, a
regulated electric and gas utility in 17 counties around Louisville, KY, and a
gas utility in Mendosa province in Argentina. The company has interests in and
operates power plants in seven states, Argentina and Spain. The company is the
largest utility affiliated energy marketer in the U.S.
KU Energy Corporation, headquartered in Lexington, KY, is a holding company
committed to building shareholder value, having increased its dividends to
shareholders for 16 consecutive years. KU Energy is the parent company of
Kentucky Utilities Company (KU). KU was among the first electric utility
companies in the country to advocate nationwide customer choice and competition
in the energy arena. KU is recognized as an international model for efficient,
low-cost energy production, solid financial management and superior customer
service. The company provides service to more than 461,000 customers in 77
Kentucky counties and five counties in southwestern Virginia.
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Transaction Overview
KU Energy Corporation (NYSE:KU) and LG&E Energy Corp. (NYSE:LGE) Market
Capitalization of the two companies: In excess of $3 billion
Background:
The combined company will be one of the largest, low-cost energy
services holding companies in the nation. No company in the industry is better
positioned to succeed in the rapidly emerging competitive energy marketplace.
The transaction is valued in excess of $3 billion and the combined companies
will have assets in excess of $4.7 billion.
LG&E Energy Corp., a Fortune 500 company, headquartered in Louisville,
KY, is a diversified energy services and marketing company with businesses in
retail utility services, energy marketing and trading, power generation and
project development. It owns and operates Louisville Gas and Electric Company
(LG&E), a regulated electric and gas utility in 17 counties around Louisville,
KY, and a gas utility in Mendosa province in Argentina. The company has
interests in and operates power plants in seven states, Argentina and Spain. The
company is the largest utility affiliated energy marketer in the U.S.
KU Energy Corporation, headquartered in Lexington, KY, is a holding
company committed to building shareholder value, having increased its dividends
to shareholders for 16 consecutive years. KU Energy is the parent company of
Kentucky Utilities Company (KU). KU was among the first electric utility
companies in the country to advocate nationwide customer choice and competition
in the energy arena. KU is recognized as an international model for efficient,
low-cost energy production, solid financial management and superior customer
service. The company provides service to more than 461,000 customers in 77
Kentucky counties and five counties in southwestern Virginia.
Based on 1996 results, the combined company would have had revenues in
excess of $4.3 billion and assets of $4.7 billion.
Terms:
. 1.67 shares of LG&E Energy for each share of KU Energy.
. Combined company to have market capitalization in excess of $3 billion and
assets in excess of $4.7 billion.
. Merger expected to be accounted for as a pooling of interests; expected to
be tax-free reorganization for Federal income tax purposes.
. It is anticipated that following the merger, the holding company will
continue LG&E Energy's dividend payment level. LG&E Energy's current
indicated annual dividend is
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$1.15 per common share; KU Energy's is $1.76. The boards of both companies
have historically and consistently increased dividends. Preferred stock and
debt of LG&E and KU to remain outstanding after the transaction.
. Headquarters of holding company to be in Louisville, KY.
. The two utility companies, LG&E, based in Louisville and KU, based in
Lexington, will be wholly-owned subsidiaries of the holding company.
. Roger W. Hale, Chairman and Chief Executive Officer (CEO) of LG&E Energy,
will be Chairman and CEO of the merged company. Michael R. Whitley,
Chairman and CEO of KU Energy, will be Vice-Chairman, President and Chief
Operating Officer (COO) of the merged company. Board representation will be
nearly equal for both companies with KU Energy having seven seats and LG&E
Energy having eight.
. The companies expect more than $760 million in gross non-fuel savings over
a 10 year period. The savings are anticipated primarily through the
integration of the companies' systems and operations, through joint
planning and purchasing, and by reducing other costs of operations. Over
the next five years, the companies are committing not to seek any base rate
increases -- except in extraordinary circumstances. In fact, the companies
estimate that the merger will translate into reductions in customers' bills
of nearly two percent on a combined basis for each of the next five years.
Strategic Benefits:
. Combined company becomes one of nation's largest, low-cost energy services
holding companies
. Nation's largest utility affiliated energy marketer
. Combination of two strong financial performers
. Complementary management teams
. Expanded domestic and international market presence
. Significant operating synergies
. Low cost generation and lowest rates in region
. Combination creates formidable competitor in new energy industry
<PAGE>
Approvals & Consents:
. Kentucky Public Service Commission
. Virginia State Corporation Commission
. Federal Energy Regulatory Commission
. Securities and Exchange Commission
. Federal Trade Commission
. Shareholders of both companies
. Anticipated transaction completion: within 12 to 18 months
<PAGE>
EXHIBIT 99.02
LG&E Energy Corp. Cautionary Statement for the Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of
1995
The Private Securities Litigation Reform Act of 1995 provides a "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 have been and will
be made in written documents and oral presentations of LG&E Energy Corp. (the
"Company"). Such statements are based on management's beliefs as well as
assumptions made by and information currently available to management. When used
in the Company's documents or oral presentations, the words "anticipate",
"estimate", "expect", "believe", "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 any forward-looking statements
include, among others, the following:
. Increased competition in the utility industry, including effects of:
decreasing margins as a 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;
retail wheeling; 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;
<PAGE>
. 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 or
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 security ratings;
. Factors affecting 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 13 of the Notes to Financial
Statements of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, under the caption Commitments and
Contingencies;
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. 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-regulatory 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.
In addition, numerous matters associated with the proposed combination of
the Company and KU Energy Corporation, including:
. Regulatory authorities' decisions regarding business combination
issues including the approval of the business combination as proposed,
the rate structure of utility operating companies after the merger,
transmission system operation and administration, or divestiture of
portions of the Company's business;
. Qualification of the transaction as a pooling of interest;
. Factors affecting the anticipated cost savings including national and
regional economic conditions, national and regional competitive
conditions, inflation rates, weather conditions, financial market
conditions, and synergies resulting from the business combination;
. Allocation of benefits of cost savings between shareholders and
customers, which will depend, among other things, upon the results of
regulatory proceedings in various jurisdictions;
. Different or additional federal and state regulatory requirements or
restrictions to which the Company and its subsidiaries may be subject
as a result of the business combination (including conditions which
may be imposed in connection with obtaining the regulatory approvals
necessary to consummate the business combination);
. Factors affecting dividend policy including results of operations and
financial condition of the Company and its subsidiaries and such other
business considerations as the Company's Board of Directors considers
relevant.
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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.
