UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO THE QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
Commission File Number 1-11377
CINERGY CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1385023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
139 East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices)
Registrant's telephone number: (513) 381-2000
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
As of July 31, 1996, 157,679,129 shares of Common Stock, par value $.01 per
share, were outstanding.
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TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . . 3
PART I. FINANCIAL INFORMATION
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 5
<PAGE>
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this amended Form
10-Q are defined below:
TERM DEFINITION
1995 Form Combined 1995 Annual Report on Form 10-K filed separately by
10-K Cinergy, as amended, CG&E, PSI, and ULH&P
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
Cinergy or Cinergy Corp.
Company
Clean Coal A joint arrangement by PSI and Destec Energy, Inc. for a
Project 262-mw clean coal power generating facility located at
Wabash River Generating Station, which was placed in
service in November 1995
CWIP Construction work in progress
D&P Duff & Phelps Credit Rating Co.
DSM Demand-side management
February 1995 An IURC order issued in February 1995
Order
FERC Federal Energy Regulatory Commission
FERC Order 888 FERC order which opens wholesale power sales to competition
FERC Order 889 FERC order requiring utilities to establish an electronic
system for sharing information on available transmission
capacity
Fitch Fitch Investors Service, Inc.
GPU General Public Utilities Corporation
IBEW International Brotherhood of Electrical Workers
Investments Cinergy Investments, Inc. (a subsidiary of Cinergy)
IURC Indiana Utility Regulatory Commission
kwh Kilowatt-hour
May 1992 Order A PUCO order issued in May 1992
Mcf Thousand cubic feet
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION
M.E. Holdings M.E. Holdings, Inc. (a subsidiary of Investments) which
holds Cinergy's 50% investment in Avon Energy
Mega-NOPR FERC's Notice of Proposed Rulemaking Promoting Wholesale
Competition Through Open Access Non-discriminatory
Transmission Services by Public Utilities
Midlands Midlands Electricity plc
Money Pool Participants with surplus short-term funds, whether from
internal or external sources, provide short-term loans to
other system companies at rates that approximate the costs
of the funds in the money pool
Moody's Moody's Investors Service
mw Megawatt
NOPR FERC's Notice of Proposed Rulemaking
Order 636 FERC order regarding gas purchases and transportation
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
PUCO Public Utilities Commission of Ohio
S&P Standard & Poor's
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
WVPA Wabash Valley Power Association, Inc.
Zimmer William H. Zimmer Generating Station
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Recent Developments
Cinergy
Joint Venture In May 1996, Cinergy, GPU, and Midlands announced the terms of
a recommended cash offer for Midlands to be made by Avon Energy. Midlands,
one of 12 regional electric companies in the United Kingdom, is headquartered
in Birmingham, England. Midlands' principal business is the distribution of
electricity to approximately 2.2 million customers. For further information,
reference is made to Cinergy's Current Reports on Form 8-K dated May 7, 1996,
and June 6, 1996, as amended. Cinergy and GPU each own 50% of Avon Energy.
Avon Energy commenced the offer to acquire all of the shares of Midlands on
the terms and subject to conditions set out in an offering document. On June
6, 1996, Cinergy and GPU announced that Avon Energy declared the cash offer
wholly unconditional in all respects and thereby is committed to purchase all
outstanding shares of Midlands. As of August 13, 1996, Avon Energy owns 381.3
million of Midlands' shares, representing approximately 97.1% of the issued
share capital of Midlands. The remaining shares are expected to be acquired
during the third quarter of 1996. The total acquisition cost of Midlands is
expected to be approximately (Pound Sterling) 1.7 billion (or approximately
$2.6 billion - U.S.).
See Note 9 of the "Notes to Financial Statements" in "Part I. Financial
Information" for pro forma financial information relating to the acquisition
of Midlands.
Cinergy, CG&E, PSI, and ULH&P
Securities Ratings Following the announcement of the potential acquisition of
Midlands, major credit rating agencies, D&P, Fitch, and S&P, affirmed the
current ratings of Cinergy's operating subsidiaries, after their consideration
of the effects of the potential acquisition. The other major credit rating
agency, Moody's, placed the credit ratings of Cinergy's operating
subsidiaries, CG&E, PSI, and ULH&P, under review for possible downgrade.
Moody's indicated that its review will focus on the likelihood of the
transaction being completed and will assess the operating strategies of the
combined companies and the anticipated benefits of the transaction. It will
also focus on the financial impact the transaction will have on Cinergy and
its operating subsidiaries, including the credit implications. Cinergy cannot
predict the outcome of this review.
Cinergy, CG&E, PSI, and ULH&P
Competitive Pressures As discussed in the 1995 Form 10-K, the primary factor
influencing the future profitability of Cinergy is the changing competitive
environment for energy services, including the impact of emerging
technologies, and the related commoditization of electric power markets.
Changes in the industry include increased competition in wholesale power
markets and ongoing pressure for "customer choice" by large industrial
customers, and ultimately, by all retail customers. Cinergy supports
increased competition in the electric utility industry and has chosen to take
a leadership role in state and Federal debates on industry reform.
As the electric utility industry moves toward a competitive environment,
Cinergy is reassessing its corporate structure, including the issue of whether
to remain vertically integrated. As a first step toward "unbundling" the
business for a competitive environment, Cinergy announced its intention to
reorganize into strategic business units. This functional reorganization will
separate Cinergy's utility businesses into an energy services business unit,
an energy delivery business unit, and an energy commodities business unit.
The design of these new organizations is expected to be completed by the end
of the year. Cinergy continues to analyze what benefits, if any, may exist in
the future for its various stakeholders of separating the business units into
different corporations.
Cinergy and PSI
Contract Negotiations As previously reported, the Labor Agreement between PSI
and IBEW Local No. 1393 was scheduled to expire May 1, 1996. On May 24, 1996,
union members ratified a new labor agreement effective May 24, 1996, and
expiring April 30, 1999.
Regulatory Matters
Cinergy, CG&E, PSI, and ULH&P
FERC Orders 888 and 889 In April 1996, the FERC issued final orders relating
to its previously issued mega-NOPR (FERC Orders 888 and 889). The
unanimously-passed final rules, contain essentially the same provisions as the
mega-NOPR. Additionally, the FERC concurrently issued a related NOPR which
establishes a new system for utilities to use in reserving capacity on their
own and others' transmission lines. Cinergy is currently evaluating its
position with respect to the related NOPR and the potential effects upon the
Company if adopted.
The final rules provide for mandatory filing of open access/comparability
transmission tariffs, provide for functional unbundling of all services,
require utilities to use the filed tariffs for their own bulk power
transactions, establish an electronic bulletin board for transmission
availability and pricing information, and establish a contract-based approach
to recovering any potential stranded costs as a result of customer choice at
the wholesale level. The FERC expects the rules to "accelerate competition
and bring lower prices and more choices to energy customers". The final rules
became effective on July 9, 1996. CG&E, PSI, and ULH&P have made compliance
filings with the FERC and are now operating under open access/comparability
tariffs.
Cinergy and CG&E
Legislation On June 18, 1996, House Bill 476 (HB 476) was signed into law by
the Governor of Ohio. HB 476 addresses regulatory reform of the natural gas
industry at the state level and thus is an extension of Order 636 for local
distribution companies. The Ohio law, among other things, provides that
natural gas commodity sales services may be exempted from PUCO regulation and
that the PUCO allow alternative ratemaking methodologies in connection with
other regulated services. The PUCO has initiated a rulemaking proceeding to
promulgate administrative rules necessary to implement the law.
Cinergy and PSI
PSI's Retail Rate Proceeding See Note 7 of the "Notes to Financial
Statements" in "Part I. Financial Information."
Cinergy and CG&E
CG&E's Gas Rate Proceeding See Note 8 of the "Notes to Financial Statements"
in "Part I. Financial Information."
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P
New Accounting Standard See Note 4 of the "Notes to Financial Statements" in
"Part I. Financial Information."
CAPITAL REQUIREMENTS
Cinergy and CG&E
Proposed Proxy Solicitation See Note 5 of the "Notes to Financial Statements"
in "Part I. Financial Information."
Other Commitments
Cinergy and PSI
WVPA Litigation See Note 3 of the "Notes to Financial Statements" in "Part I.
Financial Information."
Cinergy, CG&E, PSI, and ULH&P
1996 Voluntary Workforce Reduction Program See Note 6 of the "Notes to
Financial Statements" in "Part I. Financial Information."
CAPITAL RESOURCES
Cinergy, CG&E, PSI, and ULH&P
Long-term Debt and Preferred Stock For information regarding recent
securities redemptions, see Note 2 of the "Notes to Financial Statements" in
"Part I. Financial Information."
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt The operating subsidiary companies of Cinergy have the
following short-term debt authorizations and lines of credit:
Committed Unused
Authorized Lines__ Lines
(in millions)
Cinergy & Subsidiaries $838 $281 $202
CG&E 400 80 80
PSI 400 200 121
ULH&P 35 - -
Additionally, in connection with the tender offer to purchase Midlands,
Cinergy has established a $600 million credit facility, which expires in May
2001, of which $121 million remained unused as of August 12, 1996. This new
credit facility was established, in part, to fund the acquisition of Midlands
through Avon Energy ($500 million has been designated for this purpose) with
the remaining portion available for general corporate purposes. The prior
$100 million credit facility, which would have expired in September 1997, has
been terminated.
In addition, M.E. Holdings, entered into a $40 million non-recourse credit
agreement which will also be used to fund the acquisition of Midlands.
Cinergy expects to borrow approximately $500 million under the two agreements
to fund its equity investment in Avon Energy.
Cinergy, CG&E, PSI, and ULH&P
Sales of Accounts Receivables As discussed in each registrant's 1995 Form 10-
K, in January 1996, CG&E, PSI, and ULH&P entered into an agreement to sell, on
a revolving basis, undivided percentage interests in certain of their accounts
receivables. Under the agreement, the companies have the authority to sell up
to an aggregate maximum of $350 million of which $257 million has been sold as
of July 31, 1996.
CINERGY CORP.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1996
Kwh Sales
Kwh sales increased 11.2% for the quarter ended June 30, 1996, from the
comparable period of last year partially reflecting increased activity in
Cinergy's power marketing operations which led to higher non-firm power sales
for resale. Higher sales to residential and commercial customers reflected
cooler than normal weather early in the second quarter and an increase in the
average number of customers. Sales to industrial customers increased due to
growth in the primary metals sector.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the second quarter of 1996
increased 17.3% as compared to the same period in 1995. Cooler than normal
weather during the second quarter of 1996 and increases in the average number
of customers led to higher gas sales to retail customers. Industrial sales
decreased as customers continued to purchase gas directly from suppliers,
using transportation services provided by CG&E. The increase in
transportation volumes, which more than offset the decline in industrial
sales, mainly reflects demand for gas transportation services in the primary
metals and chemicals sectors.
Operating Revenues
Electric Operating Revenues
Electric operating revenues for the quarter ended June 30, 1996, increased $42
million (6.8%) as compared to the same period last year primarily as a result
of the higher kwh sales previously discussed. This increase was partially
offset by the operation of fuel adjustment clauses reflecting a lower average
cost of fuel used in electric production.
An analysis of electric operating revenues is shown below:
Quarter
Ended June 30
(in millions)
Electric operating revenues - June 30, 1995 $609
Increase (Decrease) due to change in:
Price per kwh
Retail (8)
Sales for resale
Firm power obligations 4
Non-firm power transactions (1)
Total change in price per kwh (5)
Kwh sales
Retail 28
Sales for resale
Firm power obligations 4
Non-firm power transactions 15
Total change in kwh sales 47
Electric operating revenues - June 30, 1996 $651
Gas Operating Revenues
Gas operating revenues increased $9 million (16.1%) in the second quarter of
1996 when compared to the same period last year. This increase was primarily
a result of the previously discussed changes in gas sales volumes and the
operation of fuel adjustment clauses reflecting a higher average cost of gas
purchased for the period.
Operating Expenses
Gas Purchased
Gas purchased for the quarter ended June 30, 1996, increased $17 million
(76.9%) when compared to the same period last year reflecting a higher average
cost per Mcf of gas purchased and an increase in volumes purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $19 million for the quarter ended
June 30, 1996, when compared to the same period last year, primarily
reflecting increased purchases of non-firm power for resale to other
utilities as a result of increased activity in Cinergy's power marketing
operations.
Other Operation
Other operation expenses for the quarter ended June 30, 1996, increased $25
million (20.1%) as compared to the same period last year. This increase is
due to a number of factors, including higher administrative and general
expenses reflecting, in part, charges of $17.4 million for early retirement
and severance program costs.
Maintenance
The $5 million (10.3%) increase in maintenance expense for the second quarter
of 1996 as compared to the same period of 1995 is primarily due to increased
maintenance on CG&E's electric production facilities. The commercial
operation of the Clean Coal Project in November 1995 also contributed to the
increased maintenance expenses.
Phase-in Deferred Return and Amortization of Phase-in Deferrals
Phase-in deferred return and amortization of phase-in deferrals reflect a
PUCO-ordered phase-in plan for Zimmer included in the May 1992 Order. In the
first three years of the rate phase-in plan, rates charged to customers did
not fully recover depreciation expense and return on investment. This
deficiency was deferred and is being recovered over a seven-year period that
began in May 1995.
Interest and Other Charges
Interest on Long-term Debt and Other Interest
Interest charges decreased $4 million (6.8%) for the three months ended June
30, 1996, from the same period of 1995 primarily due to the redemption of
$161.5 million of long-term debt by CG&E and ULH&P during the period from
January 1996 through May 1996. Additionally, interest on short-term debt
decreased as PSI and ULH&P borrowed funds through an internally funded Money
Pool, reducing outside borrowings at higher interest rates.
Preferred Dividend Requirements of Subsidiaries
The decrease in the preferred dividend requirement of $2 million (22.9%) for
the quarter ended June 30, 1996, from the same period of 1995 was due to the
early redemption in July 1995 of all 400,000 shares and 500,000 shares of
CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred
stock, respectively.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996
Kwh Sales
Kwh sales increased 12.0% for the six months ended June 30, 1996, from the
comparable period of last year partially reflecting increased activity in
Cinergy's power marketing operations which led to higher non-firm power sales
for resale. Also contributing to the higher kwh sales levels were increased
sales to residential and commercial customers as a result of colder weather in
the first quarter of 1996 and cooler than normal weather early in the second
quarter of 1996. Additionally, the increase reflects a higher average number
of residential and commercial customers, while industrial sales increased
primarily due to growth in the primary metals sector.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the first six months of 1996
increased 14.0% as compared to the same period in 1995. Colder weather during
the first quarter of 1996, cooler than normal weather early in the second
quarter of 1996, and increases in the average number of customers led to
higher gas sales to residential and commercial customers. Industrial sales
decreased as customers continued to purchase gas directly from suppliers,
using transportation services provided by CG&E. The increase in
transportation volumes, which more than offset the decline in industrial
sales, mainly reflects demand for gas transportation services in the primary
metals and chemicals sectors.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the six
months ended June 30, 1996, increased $95 million (7.6%) reflecting the
increased kwh sales, as previously discussed. In addition, PSI's 4.3% retail
rate increase approved in the February 1995 Order and a 1.9% increase for
carrying costs on CWIP property which was approved by the IURC in March 1995
contributed to the increase. The aforementioned operation of fuel adjustment
clauses partially offset these increases.
An analysis of electric operating revenues is shown below:
Six Months
Ended June 30
(in millions)
Electric operating revenues - June 30, 1995 $1 241
Increase (Decrease) due to change in:
Price per kwh
Retail (14)
Sales for resale
Firm power obligations (1)
Non-firm power transactions 3
Total change in price per kwh (12)
Kwh sales
Retail 70
Sales for resale
Firm power obligations 8
Non-firm power transactions 29
Total change in kwh sales 107
Electric operating revenues - June 30, 1996 $1 336
Gas Operating Revenues
Gas operating revenues increased $33 million (14.3%) in the first six months
of 1996 when compared to the same period last year. This increase was
primarily a result of the previously discussed changes in gas sales volumes.
Also contributing to the increase was the operation of fuel adjustment clauses
reflecting a higher cost of gas purchased for the period.
Operating Expenses
Gas Purchased
Gas purchased for the six months ended June 30, 1996, increased $16 million
(13.8%) when compared to the same period last year. This increase was
attributable to an increase in volumes purchased and a higher average cost per
Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $41 million for the six months
ended June 30, 1996, when compared to the same period last year, primarily
reflecting increased purchases of non-firm power for resale to other
utilities as a result of increased activity in Cinergy's power marketing
operations.
Other Operation
Other operation expenses for the six months ended June 30, 1996, increased $54
million (22.5%), as compared to the same period last year. This increase is
due to a number of factors, including higher administrative and general
expenses reflecting, in part, charges of $17.4 million for early retirement
and severance programs. Other factors include the recognition by PSI of
postretirement benefit costs on an accrual basis, an increase in the ongoing
level of DSM expenses, and the amortization of deferred postretirement benefit
costs and deferred DSM costs, which are being recovered in revenues pursuant
to the February 1995 Order.
Phase-in Deferred Return and Amortization of Phase-in Deferrals
As previously discussed, phase-in deferred return and amortization of phase-in
deferrals reflect the PUCO-ordered phase-in plan for Zimmer included in the
May 1992 Order.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service deferred operating expenses - net reflects the deferral of
depreciation on certain major projects, primarily environmental in nature,
from the in-service date until the related projects are reflected in retail
rates, net of amortization of these deferrals as they are recovered.
Other - net
The $8 million change in other - net is due, in part, to expenses associated
with CG&E's and ULH&P's sales of accounts receivables. These expenses were
partially offset by Cinergy's equity in the earnings of Avon Energy.
Interest and Other Charges
Interest on Long-term Debt and Other Interest
Interest charges decreased $12 million (10.4%) for the six months ended June
30, 1996, from the same period of 1995 primarily due to the refinancing of
over $330 million of long-term debt during the period from March 1995 through
November 1995 and the redemption of $161.5 million during the period from
January 1996 through May 1996. Additionally, interest on short-term debt
decreased as PSI and ULH&P borrowed funds through an internally funded Money
Pool, reducing outside borrowings at higher interest rates.
Preferred Dividend Requirements of Subsidiaries
The decrease in the preferred dividend requirement of $4 million (22.3%) for
the six months ended June 30, 1996, from the same period of 1995 was due to
the early redemption in July 1995 of all 400,000 shares and 500,000 shares of
CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred
stock, respectively.
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
Kwh Sales
Kwh sales increased 11.8% for the twelve months ended June 30, 1996, from the
comparable period of last year partially reflecting increased activity in
Cinergy's power marketing operations which led to higher non-firm power sales
for resale. Also contributing to the higher kwh sales levels were increased
sales to residential and commercial customers as a result of warmer weather in
the third quarter of 1995, colder weather during the fourth quarter of 1995
and the first quarter of 1996, and cooler than normal weather during the
second quarter of 1996. Additionally, the increase reflects a higher average
number of residential and commercial customers, while industrial sales
increased primarily due to growth in the primary metals sector.
Mcf Sales and Transportation
Mcf gas sales and transportation volumes for the twelve months ended June 30,
1996, increased 17.4% as compared to the same period in 1995. Colder weather
during the winter heating season and increases in the average number of
customers led to higher gas sales to retail customers. Industrial sales
decreased as customers continued to purchase gas directly from suppliers,
using transportation services provided by CG&E. The increase in
transportation volumes, which more than offset the decline in industrial
sales, mainly reflects demand for gas transportation services in the primary
metals sector.
Operating Revenues
Electric Operating Revenues
Compared to the same period last year, electric operating revenues for the
twelve months ended June 30, 1996, increased $238 million (9.6%), reflecting
increased kwh sales and PSI's rate increases, as previously discussed. The
aforementioned operation of fuel adjustment clauses partially offset these
increases.
An analysis of electric operating revenues is shown below:
Twelve Months
Ended June 30
(in millions)
Electric operating revenues - June 30, 1995 $2 469
Increase (Decrease) due to change in:
Price per kwh
Retail (3)
Sales for resale
Firm power obligations (6)
Non-firm power transactions 11
Total change in price per kwh 2
Kwh sales
Retail 181
Sales for resale
Firm power obligations 15
Non-firm power transactions 40
Total change in kwh sales 236
Electric operating revenues - June 30, 1996 $2 707
Gas Operating Revenues
Gas operating revenues increased $60 million (15.6%) for the twelve months
ended June 30, 1996, when compared to the same period last year. This
increase was primarily a result of the previously discussed changes in gas
sales volumes.
Operating Expenses
Gas Purchased
Gas purchased for the twelve months ended June 30, 1996, increased $30 million
(15.6%) when compared to the same period last year. This increase was
attributed to an increase in volumes purchased which was partially offset by a
lower average cost per Mcf of gas purchased.
Purchased and Exchanged Power
Purchased and exchanged power increased $58 million for the twelve months
ended June 30, 1996, when compared to the same period of last year,
primarily reflecting increased purchases of non-firm power for resale to
other utilities as a result of increased activity in Cinergy's power
marketing operations.
Phase-in Deferred Return and Amortization of Phase-in Deferrals
As previously discussed, phase-in deferred return and amortization of phase-in
deferrals reflect the PUCO-ordered phase-in plan for Zimmer included in the
May 1992 Order.
Post-in-service Deferred Operating Expenses - Net
Post-in-service deferred operating expenses - net reflects, in large part, the
deferral of depreciation on certain major projects, primarily environmental in
nature, from the in-service date until the related projects are reflected in
retail rates, net of amortization of these deferrals as they are recovered.
Taxes Other than Income Taxes
Taxes other than income taxes increased $14 million (5.5%) over the same
period of 1995 primarily due to increased property taxes resulting from a
greater investment in taxable property and higher property tax rates.
Other Income and Expenses - Net
Post-in-service Carrying Costs
Post-in-service carrying costs decreased $7 million (82.1%) for the twelve
months ended June 30, 1996, from the comparable period of last year. This
decrease is a result of PSI's discontinuing the accrual of post-in-service
carrying costs on qualified environmental projects upon the inclusion in rates
of the costs of the projects pursuant to the February 1995 Order. Partially
offsetting the decrease is the accrual of the aforementioned costs on the
Clean Coal Project which began commercial operation in November 1995.
Other - net
Other - net increased $17 million (60.0%) for the twelve months ended June 30,
1996, from the comparable period of 1995, reflecting $4 million of interest on
an income tax refund related to prior years, a $10 million gain on the sale of
an Argentine utility, Cinergy's equity in the earnings of Avon Energy, and
charges of $14 million in 1994 for merger-related and other expenditures which
cannot be recovered from customers. These items were partially offset by a
number of factors, including charges associated with winding-down certain non-
utility activities during 1995 and expenses associated with CG&E's and ULH&P's
sales of accounts receivables.
Interest and Other Charges
Interest on Long-term Debt and Other Interest
Interest charges decreased $17 million (7.1%) for the twelve months ended June
30, 1996, from the same period of 1995 primarily due to the refinancing of
over $330 million of long-term debt by CG&E and ULH&P during the period from
March 1995 through November 1995 and the redemption of $161.5 million during
the period from January 1996 through May 1996. Additionally, interest on
short-term debt decreased as PSI and ULH&P borrowed funds through an
internally funded Money Pool, reducing outside borrowings at higher interest
rates.
Preferred Dividend Requirements of Subsidiaries
The decrease in the preferred dividend requirement of $8 million (22.1%) for
the twelve months ended June 30, 1996, from the same period of 1995 was due to
the early redemption in July 1995 of all 400,000 shares and 500,000 shares of
CG&E's 7.44% Series and 9.15% Series $100 par value cumulative preferred
stock, respectively.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed by an
officer and the chief accounting officer on its behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
Registrant
Date: August 15, 1996 Charles J. Winger __
Chief Accounting Officer
