SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________________to
___________________________
Commission File Number 1-11603
SIGCORP, Inc.
(Exact name of registrant as specified in its charter)
Indiana 35-1940620
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 N.W. Fourth Street, Evansville, Indiana 47741-0001
(Address of principal executive office) (Zip Code)
Registrant's telephone number,
including area code: (812) 465-5300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, Without Par Value New York Stock Exchange
Rights to Purchase Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( X )
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 ( )
State the aggregate market value of the voting stock held by
non-affiliates of the registrant: $535,664,084 at February
29, 1996.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date:
Outstanding as of
Class February 29, 1996
Common Stock, Without Par Value 15,754,826
Documents incorporated by reference (to the extent indicated
herein):
Part of Form 10-K into which
Document document is incorporated
Proxy Statement dated March 8, 1996 relating to the
1996 Annual Meeting of Stockholders Part III
<PAGE> 1
PART I
Item 1. BUSINESS
ORGANIZATION
SIGCORP, Inc. (SIGCORP) is a holding company
incorporated October 19, 1994 under the laws of the state of
Indiana. SIGCORP has five wholly-owned subsidiaries:
Southern Indiana Gas and Electric Company (SIGECO), a gas
and electric utility, and four nonregulated subsidiaries.
On December 20, 1994, SIGECO's Board of Directors
authorized the steps required for a corporate reorganization
in which a holding company would become the parent of
SIGECO. SIGECO's shareholders approved the reorganization
at SIGECO's March 28, 1995 annual meeting, and approval by
the Federal Energy Regulatory Commission and the Securities
and Exchange Commission was granted November 7, 1995 and
December 14, 1995, respectively.
Effective January 1, 1996, the new holding company,
SIGCORP, Inc. (SIGCORP), became the parent of SIGECO which
accounts for over 90% of SIGCORP's net income, and four of
SIGECO's former wholly-owned nonregulated subsidiaries:
Energy Systems Group, Inc., Southern Indiana Minerals, Inc.,
Southern Indiana Properties, Inc. and ComSource, Inc.
Because of the significance of SIGECO, the operating results
of the nonregulated subsidiaries are included in Other
Income in the consolidated financial statements of SIGCORP.
All of the shares of SIGECO's common stock were exchanged on
a one-for-one basis for shares of SIGCORP, while all of
SIGECO's debt securities and all of its outstanding shares
of preferred stock remain securities of SIGECO and are
unaffected. (See Note 1 (a) of the Notes To Consolidated
Financial Statements, page 29, for further discussion.)
The reorganization is in response to the changes
created in the electric industry by the Energy Policy Act of
1992 and the need to respond quickly to the more competitive
business environment. The new structure will buffer SIGECO
and its customers from the effects of pursuing nonregulated
opportunities while allowing SIGCORP to engage in closely
related, but historically nonregulated, businesses.
Providing gas and electric utility service to customers
through SIGECO will remain the core business and primary
focus of SIGCORP.
SIGECO - GENERAL
SIGECO is an operating public utility incorporated June
10, 1912, under the laws of the State of Indiana, engaged in
the generation, transmission, distribution and sale of
electric energy and the purchase of natural gas and its
transportation, distribution and sale in a service area
which covers ten counties in southwestern Indiana. SIGECO
has one wholly-owned utility subsidiary, Lincoln Natural Gas
Company, Inc.
Electric service is supplied directly to Evansville and
74 other cities, towns and communities, and adjacent rural
areas. Wholesale electric service is supplied to an
additional eight communities. At December 31, 1995, SIGECO
served 120,547 electric customers and was also obligated to
provide for firm power commitments to the City of Jasper,
Indiana and to maintain spinning reserve margin requirements
under an agreement with the East Central Area Reliability
Group (ECAR).
At December 31, 1995, SIGECO supplied gas service to
102,929 customers in Evansville and 64 other nearby
communities and their environs. Since 1986, SIGECO has
purchased its natural gas supply requirements from numerous
suppliers. During 1995, twenty-one suppliers were used.
Until November 1993, Texas Gas Transmission Corporation
(TGTC) was SIGECO's primary contract supplier. In November
1993, TGTC restructured its services so that its gas
supplies are sold separately from its interstate
transportation services. SIGECO assumed full responsibility
for the purchase of all its natural gas supplies. (See
subsequent reference under "Gas Business" to the
restructuring of interstate pipelines.) During 1995,
twenty-eight of SIGECO's major gas customers took advantage
of SIGECO's gas transportation program to procure a portion
of their gas supply needs from suppliers other than SIGECO.
The principal industries served by SIGECO include
polycarbonate resin (Lexan) and plastic products, aluminum
smelting and recycling, aluminum sheet products, appliance
manufacturing, pharmaceutical and nutritional products,
automotive glass, gasoline and oil products, and coal
mining.
The only property SIGECO owns outside of Indiana is
approximately eight miles of 138,000 volt electric
transmission line which is located in Kentucky and which
interconnects with Louisville Gas and Electric Company's
<PAGE> 2
transmission system at Cloverport, Kentucky. The original
cost of the property is less than $425,000. SIGECO does not
distribute any electric energy in Kentucky.
SIGECO - LINES OF BUSINESS
The percentages of operating revenues and operating
income before income taxes attributable to the electric and
gas operations of SIGECO for the five years ended December
31, 1995, were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Electric 81.8% 79.2% 78.4% 79.1% 81.3%
Gas 18.2 20.8 21.6 20.9 18.7
Operating Income Before Income Taxes:
Electric 97.4% 99.0% 99.5% 90.9% 96.4%
Gas 2.6 1.0 0.5 9.1 3.6
</TABLE>
Periods beginning in 1992 reflect the results of
Lincoln Natural Gas Company, Inc., acquired June 30, 1994.
Reference is made to Note 13 of the Notes to
Consolidated Financial Statements, page 40, for Segments of
Business Data.
SIGECO - ELECTRIC BUSINESS
SIGECO supplies electric service to 120,551 customers,
including 105,322 residential, 15,024 commercial, 178
industrial, 23 public street and highway lighting and four
municipal customers.
SIGECO's installed generating capacity as of December
31, 1995 was rated at 1,236,000 kilowatts (Kw). Coal-fired
generating units provide 1,021,000 Kw of capacity and gas or
oil-fired turbines used for peaking or emergency conditions
provide 215,000 Kw.
In addition, SIGECO has interconnections with
Louisville Gas and Electric Company, CINergy Services, Inc.,
Indianapolis Power & Light Company, Hoosier Energy Rural
Electric Cooperative, Inc., Big Rivers Electric
Corporation, Wabash Valley Power Association, and the City
of Jasper, providing an ability to simultaneously
interchange approximately 750,000 Kw.
Record-breaking peak conditions occurred on August 17,
1995, when SIGECO's system summer peak load reached
1,021,000 Kw . The 1995 peak was .8% greater than the 1993
system summer peak load of 1,012,700 Kw (the second highest
summer peak in SIGECO history) established July 28, 1993.
SIGECO's total load, including its firm power commitments to
the City of Jasper, Indiana, for each of the years 1991
through 1995 at the time of the system summer peak, and the
related reserve margin, are presented below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Date of Summer Peak Load
07-22-91 07-13-92 07-28-93 07-20-94 08-17-95
Company System Peak Load (Kw)
948,400 916,700 1,012,700 992,000 1,021,000
Firm Power Commitments at Peak
47,600 46,300 55,300 42,000 60,800
Total at Peak
996,000 963,000 1,068,000 1,034,000 1,081,800
Total Generating Capability (Kw)
1,238,000 1,238,000 1,238,000 1,238,000 1,236,000
Reserve Margin at Peak
24% 29% 16% 20% 14%
</TABLE>
<PAGE> 3
The all-time record system winter peak load of 772,000
Kw occurred during the 1993-1994 season on January 19, 1994,
and was slightly greater than the previous record winter
season system peak reached on December 22, 1989 of 771,900
Kw.
SIGECO, primarily as agent of Alcoa Generating
Corporation (AGC), operates the Warrick Generating Station,
a coal-fired steam electric plant which interconnects with
SIGECO's system and provides power for the Aluminum Company
of America's Warrick Operations, which includes aluminum
smelting and fabricating facilities. Of the four turbine
generators at the plant, Warrick Units 1, 2 and 3, with a
capacity of 144,000 Kw each, are owned by AGC. Warrick Unit
4, with a rated capacity of 270,000 Kw, is owned by SIGECO
and AGC as tenants in common, each having shared equally in
the cost of construction and sharing equally in the cost of
operation and in the output.
SIGECO (a summer peaking utility) has an agreement with
Hoosier Energy Rural Electric Cooperative, Inc. (Hoosier
Energy) for the sale of firm peaking power to Hoosier Energy
during the annual winter heating season (November 15-March
15). The contract made available 200 Mw during the 1995-
1996 winter season, and allows for a possible increase to
250 Mw by November 15, 1998. The contract will terminate
March 15, 2000.
Electric generation for 1995 was fueled by coal (99.5%)
and natural gas (0.5%). Oil was used only to light fires
and stabilize flames in the coal-fired boilers and for
testing of gas/oil fired peaking units.
Historically, coal for SIGECO's Culley Generating
Station and Warrick Unit 4 has been purchased from operators
of nearby Indiana strip mines pursuant to long-term
contracts. During 1991, SIGECO pursued negotiations for new
contracts with these mine operators and while doing so,
purchased coal from the respective operators under interim
agreements. In October 1992, SIGECO finalized a new supply
agreement effective through 1995 and retroactive to 1991,
with one of the operators under which coal is supplied to
both locations. Included in the agreement was a provision
whereby the contract could be reopened by SIGECO for
modification of certain coal specifications. In early 1993,
SIGECO reopened the contract for such modifications.
Effective July 1, 1993, SIGECO bought out the remainder of
its contractual obligations with the supplier, enabling
SIGECO to acquire lower-priced spot market coal. SIGECO
estimates the savings in coal costs during the 1991-1995
period, net of the total buy out costs, approximate $59
million. The net savings are being passed back to SIGECO's
electric customers through the fuel adjustment clause. The
coal supplier retained the right of first refusal to supply
Warrick Unit 4 and the Culley plant during the years 1996-
2000. The Indiana coal used in these plants is blended to
meet specifications set in conformance with the requirements
of the Indiana State Implementation Plan for sulfur dioxide
issued under Federal laws regulating air quality (Clean Air
Act). Approximately 1,495,000 tons of coal were used during
1995 in the generation of electricity at the Culley Station
and Warrick Unit 4. Culley Units 2 and 3 were recently
equipped with flue gas desulfurization equipment as part of
the Clean Air Act Compliance Plan. (See "Environmental
Matters", page 7, for further discussion.) SIGECO's
remaining long-term contract coal supplier supplied the A.
B. Brown Generating Station. On April 10, 1995, SIGECO
reached an agreement with this coal supplier, effective July
16, 1995, to buy out the remainder of SIGECO's contractual
obligations, enabling it to acquire lower-priced spot market
coal for all coal-fired generation. SIGECO estimates the
total savings in coal costs resulting from the buyout, net
of total buyout costs, will approximate $58 million through
December 31, 1998, the term of the original contract. The
net savings from this coal contract renegotiation are also
being passed back to SIGECO's electric customers through the
fuel adjustment clause. (See Item 3, LEGAL PROCEEDINGS,
page 11, for discussion of prior litigation with this
producer regarding the coal supply agreement and its
resolution.) The amount of coal burned at A. B. Brown
Generating Station during 1995 was approximately 1,139,000
tons. Both units at the generating station are equipped
with flue gas desulfurization equipment so that coal with a
higher sulfur content can be used. There are substantial
coal reserves in the southern Indiana area. The average
cost (including contract buyout costs) of coal consumed in
generating electrical energy for the years 1991 through 1995
was as follows:
<TABLE>
<CAPTION>
Average Cost
Average Cost Average Cost Per Kwh
Year Per Ton Per MMBTU (In Mills)
<S> <C> <C> <C>
1991 33.01 1.46 15.87
1992 32.04 1.42 15.30
1993 32.56 1.46 15.66
1994 31.86 1.42 14.91
1995 30.02 1.33 14.10
</TABLE>
<PAGE> 4
The Broadway Turbine Units 1 and 2, Northeast Gas
Turbines and A. B. Brown Gas Turbine, when used for peaking,
reserve or emergency purposes, use natural gas for fuel.
Number 2 fuel oil can also be used in the Broadway Turbine
Units and the Brown Gas Turbine.
All metered electric rates contain a provision for
adjustment in charges for electric energy to reflect changes
in the cost of fuel and the net energy cost of purchased
power through the operation of a fuel adjustment clause
unless certain criteria contained in the regulations are not
met. Effective April 26, 1995, the principal restriction to
recovery of fuel cost increases is that such recovery is not
allowed to the extent that total operating income for the
60-month period including the twelve month period provided
in the fuel cost adjustment filing exceeds the total
operating income authorized by the Indiana Utility
Regulatory Commission (IURC) during the same 60-month
period. Prior to April 26, 1995, the operating income test
period was the twelve month period provided in the fuel cost
adjustment filing. During 1993-1995, neither restriction
affected SIGECO. As prescribed by order of the IURC, the
adjustment factor is calculated based on the estimated cost
of fuel and the net energy cost of purchased power in a
designated future quarter. The order also provides that any
over- or underrecovery caused by variances between estimated
and actual cost in a given quarter will be included in the
second succeeding quarter's adjustment factor. This
continuous reconciliation of estimated incremental fuel
costs billed with actual incremental fuel costs incurred
closely matches revenues to expenses.
(See "Rate and Regulatory Matters" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 15, and Note 2 of
the Notes to Consolidated Financial Statements, page 34, for
discussion of SIGECO's general adjustments in electric
rates.)
SIGECO participates in research and development in
which the primary goal is cost savings through the use of
new technologies. This is accomplished, in part, through
the efforts of the Electric Power Research Institute (EPRI).
In 1995,
SIGECO paid $744,000 to EPRI to help fund research and
development programs such as advanced clean coal burning
technology.
SIGECO is participating with 14 other electric utility
companies through Ohio Valley Electric Corporation (OVEC) in
arrangements with the United States Department of Energy
(DOE), to supply the power requirements of the DOE plant
near Portsmouth, Ohio. The sponsoring companies are
entitled to receive from OVEC, and are obligated to pay for,
any available power in excess of the DOE contract demand.
The proceeds from the sale of power by OVEC are designed to
be sufficient to meet all of its costs and to provide for a
return on its common stock. During 1995, SIGECO's
participation in the OVEC arrangements was 1.5%.
SIGECO participates with 32 other utilities and other
affiliated groups located in eight states comprising the
east central area of the United States, in the East Central
Area Reliability group, the purpose of which is to
strengthen the area's electric power supply reliability.
SIGECO - GAS BUSINESS
SIGECO supplies natural gas service to 104,732
customers, including 95,519 residential, 8,987 commercial,
222 industrial and four public authority customers, through
2,745 miles of gas transmission and distribution lines.
SIGECO owns and operates three underground gas storage
fields with an estimated ready delivery from storage of 3.9
million Dth of gas. Natural gas purchased from SIGECO's
suppliers is injected into these storage fields during
periods of light demand which are typically periods of lower
prices. The injected gas is then available to supplement
the contracted volumes during periods of peak requirements.
It is estimated that approximately 119,000 Dth of gas per
day can be withdrawn from the three storage fields during
peak demand periods on the system.
The gas procurement practices of SIGECO and several of
its major customers have been altered significantly during
the past nine years as a result of changes in the natural
gas industry. In 1985 and prior years, SIGECO purchased
nearly its entire gas requirements from Texas Gas
Transmission Corporation (TGTC) compared to 1995 when a
total of 21 suppliers sold gas to SIGECO. In total, the
Company purchased 15,229,051 Dth in 1995. In November 1993,
TGTC restructured its services so that its gas supplies are
sold separately from its interstate transportation services,
and SIGECO assumed full responsibility for the purchase of
all its natural gas supplies. (See subsequent reference in
this section to the restructuring of interstate pipelines.)
<PAGE> 5
During 1995, twenty-eight of SIGECO's major gas
customers took advantage of SIGECO's gas transportation
program to procure a portion of their gas supply needs from
suppliers other than SIGECO. A total of 11,963,531 Dth was
transported for these major customers in 1995 compared to
11,584,538 Dth transported in 1994. SIGECO receives fees
for the use of its facilities in transporting such gas.
See "Rate and Regulatory Matters" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 15, for discussion
of SIGECO's general adjustment in gas rates and for
discussion of the FERC Order No. 636 which required
interstate pipelines to restructure their services so that
gas supplies are sold separately from interstate
transportation services.
The all-time record send out occurred during the 1993 -
1994 winter season on January 18, 1994, when 247,449 Dth of
gas were delivered to SIGECO's customers. Of this amount,
97,946 Dth was purchased, 106,558 Dth was taken out of
SIGECO's three underground storage fields, and 42,945 Dth
was transported to customers under transportation
agreements. The 1994-1995 winter season peak day send out
was 185,411 Dth on February 8, 1995.
The average cost per Dth of gas purchased by SIGECO
during the past five calendar years was as follows: 1991,
$2.71; 1992, $2.77; 1993, $2.85; 1994, $2.54; and 1995,
$2.48.
The state of Indiana has established procedures which
result in SIGECO passing on to its customers the changes in
the cost of gas sold unless certain criteria contained in
the regulations are not met. Effective April 26, 1995, the
principal restriction to recovery of gas cost increases is
that such recovery is not allowed to the extent that total
operating income for the 60-month period including the
twelve month period provided in the gas cost adjustment
filing exceeds the total operating income authorized by the
IURC during the same 60-month period. Prior to April 26,
1995, the operating income test period was the twelve month
period provided in the gas cost adjustment filing. During
1993-1995, neither restriction affected SIGECO.
Additionally, these procedures provide for scheduled
quarterly filings and IURC hearings to establish the amount
of price adjustments for a designated future quarter. The
procedures also provide for inclusion in a later quarter of
any variances between estimated and actual costs of gas sold
in a given quarter. This reconciliation process with regard
to changes in the cost of gas sold closely matches revenues
to expenses. SIGECO's rate structure does not include a
weather normalization-type clause whereby a utility would be
authorized to recover the gross margin on sales established
in its last general rate case, regardless of actual weather
patterns.
Natural gas research is supported by SIGECO through the
Gas Research Institute in cooperation with the American Gas
Association. Since passage of the Natural Gas Act of 1978,
a major effort has gone into promoting gas exploration by
both conventional and unconventional sources. Efforts
continue through various projects to extract gas from tight
gas sands, shale and coal. Research is also directed toward
the areas of conservation, safety and the environment.
On December 23, 1993, SIGECO entered into a definitive
agreement to acquire Lincoln Natural Gas Company, Inc.
(LNG), a small gas distribution company currently serving
approximately 1,400 customers contiguous to the eastern
boundary of SIGECO's gas service territory. On June 30,
1994, SIGECO completed its acquisition of LNG after
receiving the necessary regulatory and shareholder
approvals. The applicable financial data in this filing has
been restated to reflect this acquisition, except where
noted. (See Note 1(a) of the Notes to Consolidated
Financial Statements, page 29, for further discussion of
this acquisition.)
NONREGULATED SUBSIDIARIES - GENERAL
In addition to its wholly-owned utility subsidiary,
SIGECO, SIGCORP has four active wholly-owned nonutility
subsidiaries. Southern Indiana Properties, Inc., formed in
1986, invests principally in partnerships (primarily real
estate), leveraged leases and marketable securities. Energy
Systems Group, Inc., incorporated in April 1994, provides
equipment and related design services to industrial and
commercial customers. Southern Indiana Minerals, Inc.,
incorporated in May 1994, began start up operations in 1995
to process and market coal combustion by-products.
ComSource, Inc., incorporated in June 1995, markets
telecommunications services. (See Note 1(a) of the Notes to
Consolidated Financial Statements, page 29, for further
discussion.)
<PAGE> 6
PERSONNEL
SIGECO's network of gas and electric operations
directly involves 793 employees with an additional 176
employed at Alcoa's Warrick Power Plant. Alcoa reimburses
SIGECO for the entire cost of the payroll and associated
benefits at the Warrick Plant, with the exception of one-
half of the payroll costs and benefits allocated to Warrick
Unit 4, which is jointly owned by SIGECO and Alcoa. The
total payroll and benefits for SIGECO employees in 1995
(including all Warrick Plant employees) were $50.7 million,
including $3.4 million of accrued postretirement benefits
other than pensions (See Note 1(j) of the Notes to
Consolidated Financial Statements, page 32, for further
discussion of the new financial accounting standard
requiring recognition of these costs effective January 1,
1993 and related regulatory treatment.) In 1994, total
payroll and benefits were $49.1 million, including $4.3
million of accrued postretirement benefits other than
pensions.
On July 1, 1994, SIGECO signed a new four-year contract
with Local 702 of the International Brotherhood of
Electrical Workers. The contract provides for annual wage
increases of 3.5%, 3.5%, 3.75% and 4.0%. Improvements in
productivity, work practices and the pension plan are also
included, along with initiatives to increase
labor/management cooperation. Additionally, the Company's
Hoosier Division signed a five-year labor contract with
Local 135 of the Teamsters, Chauffeurs, Warehousemen and
Helpers. The contract provides for annual wage increases of
3.5%, 3.5%, 3.75%, 4.0% and 4.0%. Also included are
improvements in health care coverage costs and pension
benefits.
As of December 31, 1995, Southern Indiana Properties,
Inc. had 2 employees; Energy Systems Group, Inc. had 15
employees; Southern Indiana Minerals, Inc. had 6 employees;
and ComSource, Inc. had 7 employees. There were no labor
organizations.
CONSTRUCTION PROGRAM AND FINANCING
SIGCORP's demand for capital is primarily related to
SIGECO's construction program including expenditures for
SIGECO's Demand Side Management (DSM) programs.
A total of $54,140,000 was spent in 1995 on SIGECO's
construction program, of which $33,391,000 was for the
electric system, $9,262,000 for the gas system, $2,436,000
for common utility plant facilities, and $9,051,000 for DSM
programs. (See "Demand Side Management" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, page 18.) Major construction
project expenditures in 1995 included $7.1 million, of which
$5.1 million was insured, to replace and upgrade the turbine
of its Culley Unit 1 turbine generator, the result of
extensive damage from a fire occurring in 1994. The
construction of the Culley scrubber project was completed
and declared commercially in service on February 1, 1995,
requiring $2.4 million in 1995. (See "Clean Air Act" in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, page 18.)
Other than an $8.4 million increase in short-term debt
due primarily to the buyout of SIGECO's remaining long-term
coal contract, no financing activity occurred during 1995.
For 1996, SIGECO's construction expenditures are
presently estimated to be $44 million which includes $5.2
million for DSM programs. Expenditures in the power
production area are expected to total $8.4 million. The
balance of the 1996 construction program consists of $18.5
million for additions and improvements to other electric
system facilities, $7.5 million of additions and
improvements to the gas system and $4.4 million for
miscellaneous common utility plant buildings, fixtures and
equipment.
In keeping with SIGECO's objective to bring new
facilities on line as needed, the construction program and
amount of scheduled expenditures are reviewed periodically
to factor in load growth projections, system planning
requirements, environmental compliance and other
considerations. As a result of this program of periodic
review, construction expenditures may change in the future
from the program as presented herein.
Currently it is estimated that SIGECO's construction
expenditures will total about $260 million for the years
1996-2000 as follows: 1996 - $44 million; 1997 - $66
million; 1998 - $53 million; 1999 - $44 million; and 2000 -
$53 million. This construction program reflects
approximately $25 million for the design and implementation
of several comprehensive information systems and $17 million
for DSM programs; however, as discussed in "Demand Side
Management" of Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page 18,
the anticipated changes in the electric industry may require
<PAGE> 7
further changes to the level of future DSM expenditures.
While SIGCORP expects the majority of SIGECO's construction
requirements and an estimated $65 million of required debt
redemptions to be provided by internally generated funds,
external financing requirements of $65-110 million are
anticipated.
The aforementioned amounts relating to SIGECO's
construction program are in all cases inclusive of Allowance
for Funds Used During Construction.
REGULATION
Because of its ownership of SIGECO, SIGCORP is a
"Holding Company" as defined by the Public Utility Holding
Company Act of 1935 (PUHCA). Furthermore, SIGECO is also a
"Holding Company" as defined by PUHCA due to SIGECO's
ownership of LNG and 33% of Community Natural Gas Company.
Both SIGCORP and SIGECO are exempt from regulation under the
PUHCA except for the provisions of Section 9(A)(2), which
pertains to acquisitions of other utilities.
Operating as a public utility under the laws of
Indiana, SIGECO is subject to regulation by the Indiana
Utility Regulatory Commission as to its rates, services,
accounts, depreciation, issuance of securities, acquisitions
and sale of utility properties or securities, and in other
respects as provided by the laws of Indiana.
In addition, SIGECO is subject to regulation by the
Federal Energy Regulatory Commission with respect to the
classification of accounts, rates for its sales for resale,
interconnection agreements with other utilities, and
acquisitions and sale of certain utility properties as
provided by the laws of the United States.
See "SIGECO-Electric Business", page 2 and "SIGECO-Gas
Business", page 4 for further discussion regarding
regulatory matters.
SIGECO is subject to regulations issued pursuant to
federal and state laws, pertaining to air and water
pollution control. The economic impact of compliance with
these laws and regulations is substantial, as discussed in
detail under "Environmental Matters." SIGECO is also
subject to multiple regulations issued by both federal and
state commissions under the Federal Public Utility
Regulatory Policies Act of 1978.
COMPETITION
SIGECO does not presently compete for retail electric
or gas customers with the other utilities within its
assigned service areas. As a result of changes brought
about by the National Energy Policy Act of 1992, SIGECO may
be required to compete (or have the opportunity to compete)
with other utilities and wholesale generators for sales of
electricity to existing wholesale customers of SIGECO and
other potential wholesale customers. (See subsequent
reference to discussion of this recent legislation.) SIGECO
currently competes with other utilities in connection with
intersystem bulk power rates.
Some of SIGECO's customers have, or in the future could
acquire, access to energy sources other than those available
through SIGECO. (See "SIGECO-Gas Business", page 4, for
discussion of gas transportation.) Although federal statute
allows for bypass of a local distribution (gas utility)
company, Indiana law disallows bypass in most cases and
SIGECO would likely litigate such an attempt in the Indiana
courts. Additionally, SIGECO's geographical location in the
corner of the state, surrounded on two sides by rivers,
limits customers' ability to bypass SIGECO. There is also
increasing interest in research on the development of
sources of energy other than those in general use. Such
competition from other energy sources has not been a
material factor to SIGECO in the past. SIGECO is unable,
however, to predict the extent of competition in the future
or its potential effect on SIGECO's operations.
As part of its efforts to develop a National Energy
Strategy, Congress has amended the Public Utility Holding
Company Act and the Federal Power Act by enacting the
National Energy Policy Act of 1992 (the Act), which will
affect the traditional structure of the electric utility
industry. (Refer to "National Energy Policy Act of 1992" in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 17, for discussion
of the major changes in the electric industry effected by
the Act.)
ENVIRONMENTAL MATTERS
SIGECO has substantially completed its investigation of
the possible existence of facilities once owned and operated
by SIGECO, its predecessors, previous landowners, or former
affiliates of SIGECO utilized for the manufacture of gas.
<PAGE> 8
Refer to "Environmental Matters" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 18, for discussion of the results
of the investigation.
SIGECO is subject to federal, state and local
regulations with respect to environmental matters,
principally air, solid waste and water quality. Pursuant to
environmental regulations, SIGECO is required to obtain
operating permits for the electric generating plants which
it owns or operates and construction permits for any new
plants which it might propose to build. Regulations
concerning air quality establish standards with respect to
both ambient air quality and emissions from SIGECO's
facilities, including particulate matter, sulfur dioxide and
nitrogen oxides. Regulations concerning water quality
establish standards relating to intake and discharge of
water from SIGECO's facilities, including water used for
cooling purposes in electric generating facilities. Because
of the scope and complexity of these regulations, SIGECO is
unable to predict the ultimate effect of such regulations on
its future operations, nor is it possible to predict what
other regulations may be adopted in the future. SIGECO
intends to comply with all applicable valid governmental
regulations, but will contest any regulation it deems to be
unreasonable or impossible to comply with or which is
otherwise invalid.
The implementation of federal and state regulations
designed to protect the environment, including those
hereinafter referred to, involves or may involve review,
certification or issuance of permits by federal and state
agencies. Compliance with such regulations may limit or
prevent certain operations or substantially increase the
cost of operation of existing and future generating
installations, as well as seriously delay or increase the
cost of future construction. Such compliance may also
require substantial investments above those amounts stated
under "Construction Program and Financing", page 6.
All existing SIGECO electric generation facilities have
operating permits from the Indiana Air Board or other
agencies having jurisdiction. In order to secure approval
for these permits, SIGECO has installed electrostatic
precipitators on all coal-fired units and is operating flue
gas desulfurization (FGD) units to remove sulfur dioxide
from the flue gas at its A. B. Brown
Units 1 and 2 generating facilities. The FGD units at the
Brown Station remove most of the sulfur dioxide from the
flue gas emissions by way of a scrubbing process, thereby
allowing SIGECO to burn high sulfur southern Indiana coal at
the station.
In October 1990, the U.S. Congress adopted major
revisions to the Federal Clean Air Act. The revisions
impose significant restrictions on future emissions of
sulfur dioxide (SO2) and nitrogen oxide (NOX) from coal-
burning electric generating facilities, including those
owned and operated by SIGECO. The legislation severely
affects electric utilities, especially those in the Midwest.
Two of SIGECO's principal coal-fired facilities (A. B. Brown
Units 1 and 2, totaling 500 megawatts of capacity) are
presently equipped with sulfur dioxide removal equipment
(scrubbers) and were not severely affected by the new
legislation. However, 523 megawatts of SIGECO's coal-fired
generating capacity were significantly impacted by the lower
emission requirements. SIGECO was required to reduce total
emissions from Culley Unit 3 (250 megawatts), Warrick Unit 4
(135 megawatts) and Culley Unit 2 (92 megawatts) by
approximately 50% to 2.5 lb/MMBTU by January 1995 (Phase I)
and to 1.2 lb/MMBTU by January 2000 (Phase II). SIGECO met
the Phase I emission requirements by January 1995 with the
implemention of its Clean Air Act Compliance Plan which
includes equipping Culley Units 2 and 3 with a sulfur
dioxide scrubber, among other provisions. Unit 1 at Culley
Station (46 megawatts) is also subject to the 1.2 lb/MMBTU
restriction by January 2000. The legislation included
various incentives to promote the installation of scrubbers
on units affected by the 1995 deadline. Current regulatory
policy allows for the recovery through rates of all
authorized and approved pollution control expenditures.
Refer to "Clean Air Act" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 18, for discussion of SIGECO's
Clean Air Act Compliance Plan, which was filed with the IURC
on January 3, 1992 and approved October 14, 1992, and the
associated estimated costs.
On April 1, 1994 , the EPA (Region V) issued SIGECO a
Notice of Violation regarding the exceedance of quarterly
opacity limitations at SIGECO's Culley Generating Station
for six quarterly periods during 1992-1993. SIGECO met with
the EPA in May 1994 to present SIGECO's voluntary opacity
limitation compliance plan (Compliance Plan), which is
designed to eliminate future exceedances, and which had
already been implemented by SIGECO. The EPA has since
accepted the Compliance Plan. The EPA issued an Agreed
Order to SIGECO based on the accepted Compliance Plan and
subsequent operational performance of the units. No civil
penalty was levied.
Under the Federal Clean Air Act (the Act), states are
authorized to adopt implementation plans to fulfill the
requirements of the Act. The Indiana Department of
Environmental Management (IDEM), which administers the
Indiana State Implementation Plan, issued to SIGECO on
October 11, 1994 a Notice of Violation (NOV) regarding
exceedance of quarterly opacity limitations for the first
quarter of 1994 at SIGECO's Culley Generating Station.
SIGECO subsequently consented to an Agreed Order and a civil
<PAGE> 9
penalty of $30,000. As previously discussed, actions had
already been taken by SIGECO to correct compliance
deficiencies with the opacity limitations before the NOV was
issued.
In connection with the use of sulfur dioxide removal
equipment at the A. B. Brown Generating Station, SIGECO
operates a solid waste landfill for the disposal of
approximately 200,000 tons of residue per year from the
scrubbing process. Renewal of the landfill operating permit
was granted in March 1992 by the Indiana Department of
Environmental Management (IDEM). The permit expires in
January 1997. Additionally, IDEM granted SIGECO's request
for modification (expansion) of the landfill, issuing the
construction permit in March 1992. SIGECO also has a solid
waste landfill available for the disposal of the gypsum by-
product being produced by the new sulfur dioxide scrubber at
the Culley Generating Station. SIGECO was granted a five-
year operating permit for the landfill in June 1995, but
anticipates using this landfill only when the gypsum by-
product does not meet contract specifications. (Refer to
"Clean Air Act" in Item 7, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION,
page 18 of this report, for discussion of the sale of the
gypsum by-product to a wallboard manufacturer.)
Under the Federal Water Pollution Control Act of 1972
and Indiana law and regulations, SIGECO is required to
obtain permits to discharge effluents from its existing
generating stations into the navigable waterways of the
United States. The State of Indiana has received
authorization from the EPA to administer the Federal
discharge permits program in Indiana. Variances from
effluent limitations may be granted by permit on a plant-by-
plant basis where the utility can establish the limitations
are not necessary to assure the protection of aquatic life
and wildlife in and on the body of water into which the
discharge is to be made. SIGECO has been granted National
Pollution Discharge Elimination System (NPDES) permits
covering miscellaneous waste water and thermal discharges
for all its generating facilities to which the NPDES is
applicable, namely the Culley Station, A. B. Brown Station,
Broadway Station (gas turbines) and Warrick Unit 4. Such
discharge permits are limited in time and must be renewed at
five-year intervals. During 1994, SIGECO submitted renewal
applications, which are currently pending, for these
permits. The existing permits will remain in effect until
action is taken by IDEM on the renewal applications. At
present, there are no known enforcement proceedings
concerning water quality pending or threatened against
SIGECO.
<PAGE> 10
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF SIGCORP AND SIGECO
Age at
Name 12/31/95 Positions Held During Past Five Years Dates
<S> <C> <C> <C>
R. G. Reherman 60 Chairman of the Board of Directors,
President and Chief Executive
Officer of SIGCORP 01-01-96 - Present
Chairman of the Board of Directors,
President and Chief Executive
Officer of SIGECO 03-24-92 - Present
President, Chief Executive Officer
and Director of SIGECO * - 03-24-92
A. E. Goebel 48 Secretary and Treasurer of
SIGCORP 01-01-96 - Present
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
of SIGECO * - Present
J. G. Hurst 52 Senior Vice President and General Manager
of Operations of SIGECO 03-01-92 - Present
Vice President, Gas and Warrick Operations
of SIGECO * - 03-01-92
J. L. Davis 40 Vice President of Marketing and Customer
Service of SIGECO 07-17-95 - Present
Director of Marketing of
SIGECO * - 07-14-95
R. G. Jochum 48 Vice President and Director of Power
Production of SIGECO 07-07-94 - Present
Director of Power Production
of SIGECO 09-13-93 - 07-01-94
G. M. McManus 48 Vice President and Director of
Governmentaland Public
Relations of SIGECO 03-01-92 - Present
Director of Governmental
Affairs of SIGECO * - 03-01-92
J. W. Picking 64 Vice President and Director
of Gas Operations 03-01-92 - Present
of SIGECO
Director of Gas Operations
of SIGECO * - 03-01-92
<FN>
* Indicates positions held at least since 1991.
</FN>
</TABLE>
Item 2. PROPERTIES
SIGCORP has no significant properties other than common
stock of affiliates.
SIGECO's installed generating capacity as of December
31, 1995 was rated at 1,236,000 Kw. SIGECO's coal-fired
generating facilities are: the Brown Station with 500,000
Kw of capacity, located in Posey County about eight miles
east of Mt. Vernon, Indiana; the Culley Station with 386,000
Kw of capacity, and Warrick Unit 4 with 135,000 Kw of
capacity. Both the Culley and Warrick Stations are located
in Warrick County near Yankeetown, Indiana. SIGECO's gas-
fired turbine peaking units are: the 80,000 Kw Brown Gas
Turbine located at the Brown Station; two Broadway Gas
Turbines located in Evansville, Vanderburgh County, Indiana,
with a combined capacity of 115,000 Kw; and, two Northeast
Gas Turbines located northeast of Evansville in Vanderburgh
County, Indiana with a combined capacity of 20,000 Kw. The
Brown and Broadway turbines are also equipped to burn oil.
Total capacity of SIGECO's five gas turbines is 215,000 Kw
and are generally used only for reserve, peaking or
emergency purposes due to the higher per unit cost of
generation.
<PAGE> 11
SIGECO's transmission system consists of 797 circuit
miles of 138,000 and 69,000 volt lines. The transmission
system also includes 26 substations with an installed
capacity of 3,860,653 kilovolt amperes (Kva). The electric
distribution system includes 3,176 pole miles of lower
voltage overhead lines and 194 trench miles of conduit
containing 1,110 miles of
underground distribution cable. The distribution system
also includes 87 distribution substations with an installed
capacity of 1,602,297 Kva and 46,140 distribution
transformers with an installed capacity of 1,844,458 Kva.
SIGECO owns and operates three underground gas storage
fields with an estimated ready delivery from storage
capability of 3.9 million Dth of gas. The Oliver Field, in
service since 1954, is located in Posey County, Indiana,
about 13 miles west of Evansville. The Midway Field is
located in Spencer County, Indiana, about 20 miles east of
Evansville near Richland, Indiana, and was placed in service
in December 1966. The third field is the Monroe City Field,
located in Knox County, about 10 miles east of Vincennes,
Indiana. The field was placed in service in 1958.
SIGECO's gas transmission system includes 335 miles of
transmission mains, and the gas distribution system includes
2,410 miles of distribution mains.
SIGECO's properties, excluding those of its subsidiary,
LNG, are subject to the lien of the First Mortgage Indenture
dated as of April 1, 1932 between SIGECO and Bankers Trust
Company, New York, as Trustee, as supplemented by various
supplemental indentures, all of which are exhibits to this
report and collectively referred to as the "Mortgage".
Subsidiaries other than SIGECO have no significant
properties other than investments in real estate
partnerships, leveraged leases, and marketable securities.
Item 3. LEGAL PROCEEDINGS.
On January 27, 1993, a coal supplier filed a complaint
in the Federal District Court for the Southern District of
Indiana alleging that SIGECO breached a coal supply contract
between SIGECO and that supplier. SIGECO had notified the
supplier that it would not require any delivery of coal
under the contract for at least some part of 1993. The
supplier claimed that this action violated certain minimum
purchase requirements imposed by the contract, and asked the
court to require specific performance of the contract by
SIGECO and for unspecified monetary damages. The complaint
alleged that SIGECO was obligated to purchase coal at a
minimum rate of 50,000 tons per month under the contract and
in any event to purchase all of the coal consumed at
SIGECO's A. B. Brown generating plant below 1,000,000 tons
per year. The contested contract was originally through
December 31, 1998. SIGECO filed counterclaims and disputed
that its actions violated the terms of the contract. On
March 26, 1993, SIGECO and the coal supplier agreed to
resume coal shipments but with the invoiced price per ton
substantially lower than the contract price and subject to
final outcome of the litigation. On June 6, 1993, the coal
supplier won a summary judgement to require SIGECO to take a
minimum of 600,000 tons annually, more or less in equal
weekly shipments. SIGECO maintained that shipments from the
supplier did not conform to the agreed upon coal
specifications in the contract. This litigation came to
trial conclusion based upon summary judgment motions in June
1994. The U. S. District Court found in favor of SIGECO
regarding required coal quality specification and, in the
earlier summary judgment, found in favor of the coal
supplier regarding alleged minimum annual tonnage
requirements. Damages of $1,442,000 were awarded to the
coal supplier. Both parties initiated appeal procedures and
expected the case to be heard by the Court of Appeals in
mid-1995 with a decision from that court later in 1995.
Concurrently, the parties initiated mediation. The 7th
Circuit Court of Appeals scheduled the appeals hearing for
April 10, 1995; however, the parties reached a settlement
agreement on April 10, 1995 prior to the hearing. Under the
terms of the contract buyout agreement, which was effective
July 16, 1995, all claims by the parties were set aside. No
damages were paid by either party. (Refer to "SIGECO -
ELECTRIC BUSINESS" in Item 1, BUSINESS, page 2, for
discussion of the coal contract buyout and estimated net
savings in coal costs.)
There are no other pending legal proceedings, other
than ordinary routine litigation incidental to the business,
to which the registrant is a party.
No material legal proceedings were terminated during
the fourth quarter of 1995.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None
<PAGE> 12
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS
Effective January 1, 1996, all shares of common stock
of SIGECO were exchanged for an equal number of shares of
common stock of SIGCORP. As of February 23, 1996, SIGCORP
had 8,833 holders of record of common stock. The principal
market on which SIGCORP's common stock is traded is the New
York Stock Exchange, Inc. where the common stock is listed.
The high and low sales prices for SIGECO's stock as reported
in the consolidated transaction reporting system for each
quarterly period during the two most recent fiscal years
are:
<TABLE>
<CAPTION>
QUARTERLY PERIOD
1 2 3 4
High Low High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $29-1/4 $26-3/8 $34-1/8 $28-7/8 $33-3/4 $30 $36-3/8 $32-5/8
1994 $33-7/8 $28 $30-1/8 $26-1/2 $28-1/2 $26-1/4 $27-1/8 $24
</TABLE>
Dividends declared and paid per share of SIGECO common
stock during the past two years were:
<TABLE>
<CAPTION>
QUARTERLY PERIOD
1 2 3 4
<S> <C> <C> <C> <C>
1995 $0.4225 $0.4225 $0.4225 $0.4225
1994 $0.4125 $0.4125 $0.4125 $0.4125
</TABLE>
The quarterly dividend on common stock was increased to 43-
1/4 cents per share in January 1996, payable March 20, 1996.
DIVIDEND RESTRICTIONS
The following restrictions pertain to SIGECO but, to
the extent that the dividends of SIGCORP depend on SIGECO
earnings, may have an effect on SIGCORP.
The payment of cash dividends on SIGECO's common stock
is, in effect, restricted by the Mortgage to accumulated
surplus, available for distribution to the common stock,
earned subsequent to December 31, 1947, subject to reduction
if amounts deducted from earnings for current repairs and
maintenance and provisions for renewals, replacements and
depreciation of all the property of SIGECO are less than
amounts specified in the Mortgage. (See Section 1.02 of the
Supplemental Indenture dated as of July 1, 1948, as
supplemented.) No amount was restricted against cash
dividends on common stock as of December 31, 1995, under
this restriction.
The payment of cash dividends on common stock is, in
effect, restricted by the Amended Articles of Incorporation
to accumulated surplus, available for distribution to the
common stock, earned subsequent to December 31, 1935. The
Amended Articles of Incorporation require that, immediately
after such dividends, there shall remain to the credit of
earned surplus an amount at least equal to two times the
annual dividend requirements on all then outstanding
Preferred Stock, No Par Value. (See Art. VI, Terms of
Capital Stock, General Provisions (B)). The amount
restricted against cash dividends on common stock at
December 31, 1995 under this restriction was $2,194,121,
leaving $234,034,230 unrestricted for the payment of
dividends. In addition, the Amended Articles of
Incorporation provide that surplus otherwise available for
the payment of dividends on common stock shall be restricted
to the extent that such surplus is included in a calculation
required to permit SIGECO to issue, sell or dispose of
preferred stock or other stock senior to the common stock
(Art. VI, Terms of Capital Stock, General Provisions (E)).
An order of the Securities and Exchange Commission
dated October 12, 1944 under the Public Utility Holding
Company Act of 1935 in effect restricts the payment of cash
dividends on common stock to 75% of net income available for
distribution to the common stock, earned subsequent to
December 31, 1943, if the percentage of common stock equity
to total capitalization and surplus, as defined, is less
than 25%. At December 31, 1995, such ratio amounted to
approximately 47%.
<PAGE> 13
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
for the years ended December 31,
1995 1994 1993 1992 1991
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Operating Revenues $338,698 $330,035 $329,489 $306,905 $322,582
Operating Income $ 53,873 $ 52,367 $ 51,565 $ 50,895 $ 53,156
Net Income Before
Cumulative Effect of
Accounting Change $ 38,525 $ 39,920 $ 38,483 $ 35,491 $ 37,232
Net Income $ 44,819 $ 39,920 $ 38,483 $ 35,491 $ 37,232
Average Common Shares
Outstanding 15,755 15,755 15,755 15,755 15,705
Earnings Per Share of Common Stock
Before Cumulative Effect
of Accounting Change $2.44 $2.53 $2.44 $2.25 $2.37
Cumulative Effect of
Accounting Change $0.40 $ - $ - $ - $ -
Total Earnings Per
Share of Common Stock $2.84 $2.53 $2.44 $2.25 $2.37
Dividends Per Share of
Common Stock $1.69 $1.65 $1.61 $1.56 $1.50
Total Assets $923,981 $917,416 $860,841 $762,133 $747,445
Redeemable Preferred
Stock $ 8,424 $ 8,515 $ 8,515 $ 8,515 $ 1,100
Long-Term Obligations $265,085 $274,467 $274,884 $213,026 $236,844
</TABLE>
Periods prior to 1992 were not restated to reflect the results of
Lincoln Natural Gas company, Inc., acquired June 30, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Effective January 1, 1996, a new holding company, SIGCORP,
Inc. (SIGCORP) became the parent of Southern Indiana Gas and
Electric Company (SIGECO), a regulated gas and electric
utility which accounts for over 90% of SIGCORP's net income,
and four of SIGECO's former wholly-owned nonregulated
subsidiaries (see "Holding Company"). Because of the
significance of SIGECO, the operating results of the
nonregulated subsidiaries are included in Other Income in
the consolidated financial statements of SIGCORP.
Earnings per share were $2.84 in 1995, compared to 1994
earnings of $2.53 and 1993 earnings of $2.44. The 1995
earnings include a one-time favorable adjustment of $.40 per
share in recognition of the impact of SIGECO's change to the
unbilled revenue method of accounting (see "Change in
Accounting Method").
In addition to the accounting change, the 1995 earnings were
favorably impacted by a number of items, including:
* Higher sales margins resulting from approved
increases in gas and electric rates
* Increased sales to retail and wholesale electric
customers
* Sale to another utility of SIGECO's 1995 allotment
of SO2 "extension allowances"
* Decrease in income taxes resulting from income tax
reserve adjustments
The above listed items were more than offset by two major events:
* A delay in receipt of an adjustment in retail
electric rates until approximately six months
after SIGECO's new Culley SO2 removal facility
began operation
* A devastating summer storm which resulted in
$2 million in expenses being incurred for repairs
to system facilities
REVENUES.
Electric revenues increased approximately 5.6% ($14.6
million) over 1994 due to implementation of the second and
third steps of a three step increase in retail electric
rates (see "Rate and Regulatory Matters") and increased
sales to SIGECO's retail and wholesale electric customers.
In 1994, electric operating revenues rose 1% ($2.5 million)
due to adjustments to base electric rates and higher sales
to retail customers. Total sales to retail electric
customers and five firm contract wholesale customers were up
3.2% in 1995, following increases of 1.7% and 7.9% in 1994
and 1993, respectively. Due to warmer temperatures, an all
time peak load of 1,082 megawatts was reached on August 17.
The 1995 peak was 1.3% higher than the previous all-time
peak of 1,068 megawatts set on July 28, 1993. SIGECO's
<PAGE> 14
total generating capacity at the time of the 1995 peak was
1,236 megawatts, representing a 14% reserve margin,
excluding the availability of an additional 5% of capacity
through interruptiblity arrangements with certain large
customers.
Lower gas costs recovered through retail rates and fewer
sales to residential customers more than offset the impact
on gas operating revenues of the second step (about 4% of
gas revenues, or $2.75 million on an annual basis) of
SIGECO's two-step increase in its base gas rates, effective
August 1, 1994 (see "Rate and Regulatory Matters").
Overall, gas revenues declined 8.5% ($5.9 million). Gas
sales in total were relatively unchanged from 1994, however,
residential sales were down 4% despite slightly cooler
winter temperatures and a 2% growth in residential customer
base. Very cold weather in December 1993 caused recorded
residential sales in January 1994 under the cycle billing
method to be 21% higher than in January 1995 (see "Change
In Accounting Method"). Gas revenues were down 2.8% in 1994
on fewer sales to all customers and lower recovered gas
costs.
FUEL AND PURCHASED ELECTRIC ENERGY.
Although SIGECO's electric generation was 3.8% greater as a
result of the increased sales, fuel for electric
generation, the most significant electric operating cost,
declined 2.6% due to lower coal costs. In 1995, SIGECO took
advantage of generally lower spot market coal prices to
attain the lower coal costs. SIGECO continues to pursue
further reductions in coal prices as a key component of its
strategy to remain a low-cost provider of electricity (see
"Rate and Regulatory Matters"). The 1994 fuel costs were
2.8% higher than 1993 due to a 7.2% increase in generation.
SIGECO increased its purchases of electricity from other
utilities by 69% in 1995 compared to the previous year to
meet the greater energy requirements of its customers.
Conversely, purchased electric energy costs in 1994 were 41%
lower than in 1993 due primarily to lower energy
requirements.
COST OF GAS SOLD.
Cost of gas sold, the major component of gas operating
expenses, declined 4.8% ($2 million) in 1995 to $40.3
million, following a 17.5% ($9 million) decrease in 1994.
The lower gas costs in 1995 were due to 7.7% lower unit gas
costs, partially offset by increased deliveries to
customers. The lower cost of gas sold in 1994 was due to
fewer deliveries and a 7.9% decline in average unit costs of
gas delivered. The market for purchase of natural gas
supply continues to be volatile, reflecting the general
tightening of the balance between available supply and
demand after several years of excess supply and, more
recently, the effect of the further deregulation of the gas
pipeline industry (see "Rate and Regulatory Matters").
Changes in the cost of gas sold are passed on to customers
through Indiana Utility Regulatory Commission (IURC)-
approved gas cost adjustments.
OTHER OPERATION AND MAINTENANCE EXPENSES.
Other operation expenses rose $1.8 million (3.7%) during
1995 due primarily to the costs of additional
postretirement benefits other than pensions applicable to
retail electric operations, about $2.8 million on an annual
basis beginning June 1995, which were previously deferred
pending inclusion in electric rates (see "Rate and
Regulatory Matters"). In 1994, SIGECO began expensing
demand side management (DSM) expenditures and postretirement
benefits other than pensions allocable to firm wholesale
electric customers as incurred, which totaled $1.4 million
in 1995. The increased operation expenses also reflected
the operating costs of the new sulfur dioxide scrubber
placed in commercial service February 1, 1995 (see "Clean
Air Act"), which are expected to be approximately $4 million
on an annual basis. During 1994, other operation
expenditures in the electric area also increased due to
expensing the previously deferred DSM and postretirement
benefit costs allocable to firm wholesale customers
applicable to 1993 and 1994, and to higher other operation
expenses. Other operation expenses in the gas area were
down from 1994 when SIGECO initiated an accelerated program
of relocating gas customer meters outside of customer
premises to aid in future operating efficiencies, and
incurred greater employee-related benefit costs and
increases in various other operating expenses.
On June 8, exactly 13 years after a devastating storm in
1982, SIGECO's electric service area experienced a storm
requiring expenditures totaling $3.5 million to restore
service to its customers. Despite the extent of the damage,
SIGECO was able to restore power to all customers within six
days. Of the total restoration costs, approximately $2
million were related to system repairs; the remainder
represented capital replacements. These expenditures were
<PAGE> 15
the chief reason for a 5.9% ($1.8 million) increase in
maintenance expenses, following a 13.4% ($3.6 million) rise
in 1994 due to several significant maintenance projects at
SIGECO's production facilities.
DEPRECIATION AND AMORTIZATION.
Depreciation and amortization expense was 4.2% ($1.6
million) higher in 1995, following a 2% increase in 1994,
due primarily to the depreciation of SIGECO's $103 million
investment in its Clean Air Act Compliance Plan facilities
(see "Clean Air Act") beginning February 1, 1995, and to the
15-year amortization of DSM expenditures allocable to firm
retail electric customers, which have been deferred since
1991 pending inclusion in rates. Lower depreciation rates
on other electric utility plant resulting from a recent
depreciation rate study, made effective June 1995, partially
offset the impact of increased plant investment and
amortization of DSM expenditures. Depreciation of gas plant
increased slightly during 1995 due to SIGECO's continued
investment in facilities required by new business
development and improvements to the existing gas
distribution system. Depreciation expense on gas plant
decreased in 1994, reflecting the impact of a full year of
lower depreciation rates implemented during 1993 as a result
of SIGECO's gas rate case.
While inflation has a significant impact on the replacement
cost of SIGECO's facilities, only the historical cost of
electric and gas plant investment is recoverable in revenues
as depreciation under the ratemaking principles followed by
the IURC, under whose regulatory jurisdiction SIGECO is
subject. With the exception of adjustments for changes in
fuel and gas costs and margin on sales lost under SIGECO's
demand side management programs (see "Demand Side
Management"), SIGECO's electric and gas rates remain
unchanged until a rate application is filed and a general
rate order is issued by the IURC.
TAXES.
Although 1995 pretax income was comparable to 1994, an
adjustment to income tax reserves resulted in a $1.2 million
decrease in federal and state income tax expenses, following
a 5.4% increase in income tax expense in 1994 on higher
pretax income. Taxes other than income taxes were up $3.5
million in 1995, following a $3.3 million decrease in 1994
resulting from adjustments to prior years' provisions for
property taxes related to the favorable outcome of a
property tax appeal.
OTHER INCOME AND INTEREST CHARGES.
Other income was $1.1 million lower during 1995 due to a
$3.6 million decrease in allowance for equity funds used
during construction resulting from the completion of
SIGECO's new sulfur dioxide scrubber February 1, 1995. The
sale to another utility of SIGECO's 1995 allotment of
"bonus" sulfur dioxide emission allowances (also called
"extension allowances") granted by the EPA, and improved
results of certain SIGCORP nonregulated subsidiaries,
partially offset the impact of the decline in allowance for
equity funds used during construction (see "Clean Air Act").
Interest and other charges were 8.8% ($1.8 million) higher
than in 1994 due primarily to lower capitalized interest
resulting from completion of the scrubber. In 1994,
interest expense was relatively unchanged when increased
interest on short-term debt was offset by additional
interest capitalized due to the increased construction
program.
RATE AND REGULATORY MATTERS.
As described in Note 1 of the Notes to Consolidated
Financial Statements, SIGECO complies with the provisions of
Financial Accounting Standard (FAS) 71, "Accounting for the
Effects of Certain Types of Regulation" that allows certain
costs incurred by SIGECO that have been, or are expected to
be, approved by regulatory authorities for recovery through
rates, to be deferred as regulatory assets until recovered
by SIGECO. In the event SIGECO determines that it no longer
meets the criteria for following FAS 71, the accounting
impact would be an extraordinary noncash charge to
operations of an amount that could be material. Criteria
that could give rise to the discontinuance of FAS 71 include
(1) increasing competition that restricts SIGECO's ability
to establish prices to recover specific costs, and (2) a
significant change in the manner in which rates are set by
regulators from cost-based regulation to another form of
regulation. SIGECO periodically reviews these criteria to
ensure the continuing application of FAS 71 is appropriate.
FAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", issued in
March 1995 and effective January 1, 1996, imposes a stricter
criterion for these regulatory assets by requiring that such
assets be probable of future recovery at each balance sheet
date. SIGECO will adopt this new standard for 1996, but
<PAGE> 16
does not expect that adoption will have a material impact on
financial position or results of operations. Because SIGECO
was undecided whether it would seek recovery of 1993 and
1994 demand side management expenditures and postretirement
benefits other than pensions allocable to firm wholesale
customers, about $2.5 million of these costs which had been
deferred as regulatory assets were expensed during 1994.
SIGECO continued to expense these costs as incurred during
1995 (see "Electric Operations"), and believes all remaining
regulatory assets are recoverable under SIGECO's present
regulatory environment.
In November 1992, SIGECO petitioned the IURC requesting a
general increase in gas rates, the first such adjustment
since 1982. On July 21, 1993, the IURC approved an overall
increase of approximately 8%, or $5.5 million in revenues,
in SIGECO's base gas rates. The increase was implemented in
two equal steps of approximately 4% on August 1, 1993 and
August 1, 1994. On September 7, 1995, SIGECO petitioned the
IURC seeking a general increase in gas rates. The requested
adjustment in rates, over those granted in 1993, is
necessary to recover increases in operating and maintenance
costs and additional investment in gas distribution
facilities. The adjustment includes recovery of additional
costs incurred for postretirement benefits other than
pensions related to gas operations approximating $1.1
million annually beginning in 1993, which have been deferred
pending inclusion in rates. The petition also requested the
merger into SIGECO of its Lincoln Natural Gas Company
subsidiary (Lincoln) and the consolidation of gas rates for
customers of SIGECO's Evansville and Hoosier divisions and
of Lincoln into one set of rates. SIGECO filed its case-in-
chief on December 15, 1995 supporting an overall increase of
11%, or $7.2 million in revenues.
On September 15, 1993, the IURC granted SIGECO's request for
a 1% increase in electric revenues, approximately $1.8
million on an annual basis, which took effect October 1,
1993, representing the first step in the recovery of the
financing costs on its investment through March 31, 1993 in
the Clean Air Act Compliance project constructed at the
Culley Generating Station. The majority of the costs are
for the installation of a sulfur dioxide scrubber on Culley
Units 2 and 3 (see "Clean Air Act"). A second increase,
2.3%, approximately $5.1 million on an annual basis,
effective June 29, 1994, was granted for recovery of
financing costs related to the scrubber construction
expenditures from April 1, 1993 through January 31, 1994.
On December 22, 1993, SIGECO petitioned the IURC for the
third of the three planned general retail electric rate
increases related to its Clean Air Act Compliance project.
The final adjustment was necessary to cover financing costs
related to the balance of the project construction
expenditures, costs related to the operation of the
scrubber, and certain nonscrubber-related operating costs
such as additional costs incurred for postretirement
benefits other than pensions beginning in 1993 and the
recovery of demand side management program expenditures (see
"Demand Side Management"). On June 21, 1995, the IURC
approved an overall increase of approximately 2.1% , or $4.5
million in revenues, effective June 27, 1995.
Over the past several years, SIGECO has been actively
involved in intensive contract negotiations and legal
actions to reduce its coal costs and thereby lower its
electric rates. On April 10, 1995, SIGECO reached an
agreement with its remaining long-term contract coal
supplier, effective July 16, 1995, to buy out the remainder
of SIGECO's contractual obligations, enabling it to acquire
lower-priced spot market coal. SIGECO estimates the total
savings in coal costs resulting from the buyout, net of
total buyout costs, will approximate $58 million through
December 31, 1998, the term of the original contract. The
net savings are being passed back to SIGECO's electric
customers through the fuel adjustment clause.
In 1992, the Federal Energy Regulatory Commission (FERC)
issued Order No. 636 (the Order) which required interstate
pipelines to restructure their services. Under the Order,
the stated purpose of which is to improve the competitive
structure of the natural gas pipeline industry, existing
pipeline sales service was "unbundled" so that gas supplies
are sold separately from interstate transportation services.
FERC has authorized the pipelines to seek recovery of
certain "transition" costs associated with restructuring
from their customers.
SIGECO's total transition costs will approximate $4.2
million. Through 1995, SIGECO has been billed $3 million of
these transition costs by its former major pipeline
supplier, Texas Gas Transmission Corporation, $1.8 million
of which it deferred pending authorization by the IURC of
recovery of such costs. SIGECO has also recorded the
liability for $1.2 million of these costs which have not
yet been billed. On November 2, 1995, the IURC approved
SIGECO's request for recovery of transition costs through
the gas cost adjustment; however, the Utility Consumer
Counselor has appealed the IURC-approved method of
allocation of the transition costs to SIGECO's customers,
and implementation of recovery of these costs is pending the
outcome of the appeal.
<PAGE> 17
NATIONAL ENERGY POLICY ACT OF 1992.
Key provisions of the National Energy Policy Act of 1992
(the Act) are expected to cause some of the most significant
changes in the history of the electric industry. The
primary purpose of the electric provisions is to increase
competition in electric generation by enabling virtually
nonregulated entities, such as exempt wholesale generators,
to develop power plants, and by providing the FERC authority
to require a utility to provide transmission services,
including the expansion of the utility's transmission
facilities necessary to provide such services, to any entity
selling electricity at wholesale. Although the FERC may not
order retail wheeling (the transmission of electricity
directly to an ultimate consumer), it may order wheeling of
electricity generated by an exempt wholesale generator or
another utility to a wholesale customer of a regulated
utility.
Pursuant to the authority granted it by the Act, on March
29, 1995, FERC issued a Notice of Proposed Rulemaking (MEGA-
NOPR) on Open Access. The MEGA-NOPR is essentially the
electric industry's equivalent of FERC's Order 636
applicable to the natural gas industry. The MEGA-NOPR as
proposed would, among other things, provide for mandatory
filing of open access/comparability transmission tariffs,
provide for functional unbundling of all services, and
require utilities to use the tariffs for their own bulk
power transactions. A final order is expected during 1996.
On December 22, 1995, SIGECO filed a Point-To-Point
Transmission Service Tariff and a Network Integration
Transmission Service Tariff which closely conform to the pro
forma tariffs required by the MEGA-NOPR, under which SIGECO
will offer firm and nonfirm point-to-point transmission
service, network integration transmission service and
certain ancillary services to any entity eligible for
mandatory wholesale transmission service under the MEGA-
NOPR. SIGECO is currently evaluating its position with
respect to the provisions of the MEGA-NOPR and the potential
effects upon SIGECO if ultimately adopted.
Although SIGECO is uncertain of the final outcome of these
developments, it is committed to pursuing, and is moving
rapidly to implement, its corporate strategy of positioning
itself as a low-cost energy producer and the provider of
high quality service to its retail as well as wholesale
customers. SIGECO has consistently had some of the lowest
per-unit administrative, operation and maintenance costs in
the industry, and with the completion of its coal supply
reformation strategy will also rank among the lowest cost
power producers (see "Rate and Regulatory Matters" for
discussion of coal contract negotiations).
CHANGE IN ACCOUNTING METHOD.
Effective January 1, 1995, SIGECO adopted the unbilled
revenue method of accounting to accrue the amount of revenue
for sales delivered but unbilled at the end of each month to
more closely match revenues with expenses. Previously,
SIGECO recognized electric and gas revenues when customers
were billed on a cycle billing basis, and the utility
service rendered after monthly meter reading dates through
the end of a calendar month became part of operating
revenues in the following month. The cumulative effect of
this change in accounting method as of January 1, 1995, net
of income taxes, was $6.3 million (40 cents per common
share) and is reported as a separate component of net income
for 1995. The effect of the change for 1995 is comprised of
a $1.6 million increase in operating income in addition to
the cumulative effect of the change. (See Note 3 of Notes
to Consolidated Financial Statements for further discussion
of this accounting change and the impact of the change on
prior periods on a pro forma basis).
HOLDING COMPANY.
On December 20, 1994, SIGECO's Board of Directors authorized
the steps required for a corporate reorganization in which a
holding company would become the parent of SIGECO. SIGECO's
shareholders approved the reorganization at SIGECO's March
28, 1995 annual meeting, and approval by the Federal Energy
Regulatory Commission and the Securities and Exchange
Commission was granted November 7, 1995 and December 14,
1995, respectively.
Effective January 1, 1996, the new holding company, SIGCORP,
became the parent of SIGECO and four of SIGECO's former
wholly-owned nonregulated subsidiaries: Energy Systems
Group, Inc., Southern Indiana Minerals, Inc., Southern
Indiana Properties, Inc. and ComSource, Inc. All of the
shares of SIGECO's common stock were exchanged on a one-for-
one basis for shares of SIGCORP, while all of SIGECO's debt
securities and all of its outstanding shares of preferred
stock remain securities of SIGECO and are unaffected.
<PAGE> 18
The reorganization is in response to the changes created in
the electric industry by the Energy Policy Act of 1992 and
the need to respond quickly to the more competitive business
environment. The new structure will buffer SIGECO and its
customers from the effects of pursuing nonregulated
opportunities while allowing SIGCORP to engage in closely
related, but historically nonregulated, businesses.
Providing gas and electric utility service to customers
through SIGECO will remain the core business and primary
focus of SIGCORP.
ENVIRONMENTAL MATTERS.
Testing of five sites utilized for the manufacture of gas by
predecessors of SIGECO was substantially completed in 1995.
Under current regulations, no remedial action is necessary
or required unless the soil is disturbed. If remediation
efforts are required in the future, SIGECO estimates the
related costs would not exceed $250,000 on a current basis.
At the present time, SIGECO does not anticipate that
remediation efforts will be required at any of these sites
and therefore has not provided for such costs. SIGECO has
not been named a potentially responsible party by the
Environmental Protection Agency (EPA).
CLEAN AIR ACT.
To meet the Phase I requirements of the Clean Air Act
Amendments of 1990 and nearly all of the Phase II
requirements, SIGECO's Clean Air Act Compliance Plan (the
Compliance Plan), which was developed as a least-cost
approach to compliance, proposed the installation of a
single scrubber at the Culley Generating Station to serve
both Culley Unit 2 (92 MW) and Culley Unit 3 (250 MW) and
the installation of state of the art low NOx burners on
these two units. In October 1992, the IURC approved a
stipulation and settlement agreement between SIGECO and
intervenors essentially approving the Compliance Plan.
Construction of the facilities, originally projected to cost
approximately $115 million including the related allowance
for funds used during construction, began during 1992, and
was completed and declared commercially in service on
February 1, 1995 at a total cost of $103 million. Under the
settlement agreement, the maximum capital cost of the
Compliance Plan to be recovered from ratepayers is capped at
approximately $107 million, plus any related allowance for
funds used during construction. The estimated annual cost
to operate and maintain the facilities, including the cost
of chemicals to be used in the process, is approximately $4
million.
By installing a scrubber, SIGECO was entitled to apply to
the federal EPA for extra allowances, called "extension
allowances". SIGECO will receive about 88,500 extension
allowances, which it has sold to another party under a
confidential agreement. As part of the IURC-approved
stipulation and agreement, SIGECO agreed to credit
approximately $2.5 million per year for the period 1995
through 1999 to retail customers to reduce the rate impact
of the Compliance Plan.
With the addition of the scrubber, SIGECO is exceeding the
minimum compliance requirements of Phase I of the Clean Air
Act and has available unused allowances, called
"overcompliance allowances", for sale to others or for
retention by SIGECO to meet stricter post-2000 emission
limitations. Proceeds from sales of overcompliance
allowances will also be passed through to customers.
The scrubbing process utilized by the Culley scrubber
produces a salable by-product, gypsum, a substance commonly
used in wallboard and other products. In December 1993,
SIGECO finalized negotiations for the sale of an estimated
150,000 to 200,000 tons annually of gypsum to a major
manufacturer of wallboard. During 1995, SIGECO shipped
171,000 tons of gypsum to the manufacturer. The agreement
will enable SIGECO to reduce certain operating costs with
the proceeds from the sale of the gypsum, further mitigating
the rate impact of the Compliance Plan.
DEMAND SIDE MANAGEMENT.
In October 1991, the IURC issued an order approving
expenditures by SIGECO for development and implementation of
DSM programs. The primary purpose of the DSM programs is to
reduce the demand on SIGECO's generating capacity at the
time of system peak requirements, thereby postponing or
avoiding the addition of generating capacity. Thus, the
order of the IURC provided that the accounting and
ratemaking treatment of DSM program expenditures should
generally parallel the treatment of construction of new
generating facilities.
<PAGE> 19
Most of the DSM program expenditures allocated to retail
electric customers are being capitalized per the IURC order
and will be amortized over a 15-year period beginning at the
time SIGECO reflects such costs in its rates. SIGECO began
recovering DSM costs incurred through 1993 in base retail
electric rates approved June 21, 1995 (see "Rate and
Regulatory Matters"). In addition to the recovery of DSM
program costs through base rate adjustments, SIGECO is
collecting, through a quarterly rate adjustment mechanism,
most of the margin on sales lost due to the implementation
of DSM programs.
According to projections included in SIGECO's latest update
of its Integrated Resource Plan (IRP), filed by SIGECO in
November 1995 and subject to IURC approval, SIGECO expects
to incur costs of approximately $20 million on DSM programs
during the 1996-2000 period. The projections indicate that
by 2000, approximately 60 megawatts of capacity are expected
to have been postponed or eliminated due to these programs.
While the latest projections of DSM expenditures are an
estimated $80 million through the year 2014, they are
forecasted to result in incremental savings of approximately
$140 million to ratepayers by deferring the need for
approximately 74 megawatts of new generating capacity.
These projections reflect substantial reductions in
previously projected DSM programs, related costs and
associated results due to the anticipated changes in the
electric industry precipitated by the National Energy Policy
Act of 1992. Additional changes to these programs in the
future are possible.
Athough SIGECO does not currently anticipate the need for
future additional base-load generation, the 1995 IRP
forecasts the need to acquire 20 megawatts of short-term
peaking capacity beginning in 1997.
LIQUIDITY AND CAPITAL RESOURCES.
In 1995, financial performance continued to be solid.
Internally generated cash (net income less dividends plus
charges to net income not requiring cash) fully funded
SIGECO's construction and DSM program expenditures, and
earnings continued to be of high quality, with allowance for
funds used during construction representing only 2.6% of net
income before the cumulative effect of the accounting
change. The ratio of earnings to fixed charges (SEC method)
excluding the cumulative effect of the accounting change was
3.5:1, the embedded cost of long-term debt is approximately
6.7%, and SIGECO's long-term debt continues to be rated AA
by major credit rating agencies.
SIGCORP's demand for capital is primarily related to
SIGECO's construction of utility plant and equipment
necessary to meet customers' electric and gas energy needs,
as well as environmental compliance requirements, and to
expenditures for SIGECO's DSM programs. Construction
expenditures, including $9.1 million for DSM programs,
totaled $54.1 million during 1995, compared to the $84.8
million expended in 1994. As discussed in "Clean Air Act",
construction of the new scrubber was completed and declared
commercially in service February 1, 1995, requiring only
$2.4 million in 1995 compared to $36.4 million in 1994.
During 1995, SIGECO replaced and upgraded the turbine of its
Culley Unit 1 turbine generator at a cost of $7.1 million of
which $5.1 million was insured, the result of extensive
damage from a fire occurring in 1994. The remainder of the
1995 construction expenditures consisted of normal
replacements and improvements to gas and electric
facilities. SIGCORP and SIGECO have access to outside
capital markets and to internal sources of funds that
together should provide sufficient resources to meet capital
requirements and do not anticipate any changes that would
materially alter their current liquidity.
At this time, SIGECO expects that construction requirements
for the years 1996-2000 will total approximately $260
million, including approximately $25 million for the design
and implementation of several comprehensive information
systems which are necessary to better provide expanding
customer service needs and to better manage SIGECO's
resources; and approximately $17 million of capitalized
expenditures to develop and implement DSM programs. As
discussed previously in "Demand Side Management", the
anticipated changes in the electric industry may require
further changes to the level of future DSM expenditures.
While SIGECO expects the majority of construction program
and debt redemption requirements to be provided by
internally generated funds, external financing requirements
of $60-70 million are anticipated.
Other than an $8.4 million increase in short-term debt due
primarily to the buyout of SIGECO's remaining long-term coal
contract, no financing activity occurred during 1995, which
was comparable to 1994, when the only financing activity was
an $11 million increase in short-term debt. At year end,
SIGCORP had $30.5 million in short-term borrowings, leaving
unused lines of credit and trust demand note arrangements
totaling $8.5 million.
<PAGE> 20
During the five-year period of 1996-2000, SIGCORP
anticipates that a total of $83.4 million of debt securities
will be redeemed.
SIGCORP is confident that its long-term financial
objectives, which include maintaining a capital structure
near 45-50% long-term debt, 3-7% preferred stock and 43-48%
common equity, will continue to be met, while providing for
future construction and other capital requirements.
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page No.
<S> <C>
1. Financial Statements:
Report of Independent Public Accountants 22
Consolidated Statements of Income for the years
ended December 31, 1995, 1994 and 1993 23
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 24
Consolidated Balance Sheets - December 31, 1995
and 1994 25-26
Consolidated Statements of Capitalization -
December 31, 1995 and 1994 27
Consolidated Statements of Retained Earnings for the
years ended December 31, 1995, 1994 and 1993 28
Notes to Consolidated Financial Statements 29-41
2. Supplementary Information:
Selected Quarterly Financial Data 42
3. Supplemental Schedules:
Schedule II - Valuation and Qualifying Accounts
and Reserves for the years ended
December 31, 1995, 1994 and 1993 46
</TABLE>
All other schedules have been omitted as not applicable
or not required or because the information required to
be shown is included in the Consolidated Financial
Statements or the accompanying Notes to Consolidated
Financial Statements.
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF SIGCORP, Inc.:
We have audited the consolidated balance sheets and
consolidated statements of capitalization of SIGCORP, Inc.
(an Indiana corporation) AND SUBSIDIARIES as of December 31,
1995 and 1994, and the related consolidated statements of
income, retained earnings and cash flows for each of the
three years in the period ended December 31, 1995. These
financial statements and the supplemental schedule referred
to below are the responsibility of SIGCORP'S management.
Our responsibility is to express an opinion on these
financial statements and supplemental schedule based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of SIGCORP, Inc. as of December 31,
1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 3, effective January 1, 1995,
SIGECO changed its method of accounting for unbilled
revenues.
Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedule listed under Item 8 (3) is
presented for the purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic
financial statements. This supplemental schedule has been
subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 24, 1996
<PAGE> 23
<TABLE>
SIGCORP, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31,
1995 1994 1993
(in thousands except per share data)
<S> <C> <C> <C>
OPERATING REVENUES
Electric $275,495 $260,936 $258,405
Gas 63,203 69,099 71,084
Total operating revenues 338,698 330,035 329,489
OPERATING EXPENSES
Operation:
Fuel for electric generation 81,236 83,382 81,080
Purchased electric energy 9,332 5,489 9,348
Cost of gas sold 40,303 42,319 51,269
Other 50,712 48,911 40,718
Total operation 181,583 180,101 182,415
Maintenance 32,158 30,355 26,775
Depreciation and amortization 39,302 37,705 36,960
Federal and state income taxes 18,093 19,302 18,306
Property and other taxes 13,689 10,205 13,468
Total operating expenses 284,825 277,668 277,924
OPERATING INCOME 53,873 52,367 51,565
Other Income:
Allowance for other funds used
during construction 380 3,972 3,092
Interest 1,213 988 930
Other, net 4,914 2,685 2,533
Total other income 6,507 7,645 6,555
INCOME BEFORE INTEREST AND OTHER CHARGES 60,380 60,012 58,120
Interest and Other Charges:
Interest on long-term debt 18,789 18,604 18,437
Amortization of premium, discount,
and expense on debt 694 852 773
Other interest 1,894 1,589 747
Allowance for borrowed funds used
during construction (621) (2,058) (1,425)
Preferred dividend requirements
of subsidiary 1,099 1,105 1,105
Total interest and other charges 21,855 20,092 19,637
NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 38,525 39,920 38,483
CUMULATIVE EFFECT AT JANUARY 1, 1995 OF
ADOPTING THE UNBILLED
REVENUES METHOD OF ACCOUNTING -
NET OF INCOME TAXES 6,294 - -
NET INCOME $ 44,819 $ 39,920 $ 38,483
AVERAGE COMMON SHARES OUTSTANDING 15,755 15,755 15,755
EARNINGS PER SHARE OF COMMON STOCK
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $2.44 $2.53 $2.44
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 0.40 - -
TOTAL EARNINGS PER SHARE OF COMMON STOCK $2.84 $2.53 $2.44
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.</FN>
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31,
1995 1994 1993
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $44,819 $39,920 $ 38,483
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 39,302 37,705 36,960
Preferred dividend requirements
of subsidiary 1,099 1,105 1,105
Deferred income taxes and investment
tax credits, net 9,516 (1,613) 9,459
Allowance for other funds used
during construction (380) (3,972) (3,092)
Cumulative effect of accounting change (6,294) - -
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) (22,167) 2,959 (4,087)
Inventories 11,479 (8,251) 9,734
Coal contract settlement (5,243) 5,610 (13,295)
Accounts payable 2,813 1,244 (105)
Accrued taxes 1,972 (1,092) (1,837)
Refunds from gas suppliers 2,037 1,755 1,545
Refunds to customers (7,348) 10,285 (412)
Accrued coal liability (22,018) 13,269 8,749
Other assets and liabilities (1,707) 3,638 7,145
Net cash provided by operating activities 47,880 102,562 90,352
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (44,709) (76,660) (72,574)
Demand side management program
expenditures (9,051) (4,119) (4,530)
Investments in leveraged leases - - (2,769)
Purchases of investments (2,034) (5,989) (6,315)
Sales of investments 4,211 7,258 7,016
Investments in partnerships (901) (1,582) (3,359)
Change in nonutility property 1,178 (2,922) (862)
Other 4,941 2,018 307
Net cash used in investing activities (46,365) (81,996) (83,086)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds - - 155,000
Dividends paid (27,725) (27,060) (26,395)
Reduction in preferred stock and
long-term debt (5,391) (105) (104,500)
Change in environmental improvement
funds held by trustee 6,884 12,087 (22,613)
Payments on partnership obligations (3,256) (3,849) (2,859)
Change in notes payable 9,127 11,149 7,650
Other 620 540 (2,373)
Net cash (used) provided in financing
activities (19,741) (7,238) 3,910
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (18,226) 13,328 11,176
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 28,060 14,732 3,556
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,834 $28,060 $ 14,732
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.</FN>
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31,
1995 1994
(in thousands)
ASSETS
<S> <C> <C>
Utility Plant, at original cost:
Electric $1,030,890 $ 907,591
Gas 125,053 114,951
1,155,943 1,022,542
Less-accumulated provision for depreciation 490,326 456,922
665,617 565,620
Construction work in progress 13,750 112,316
Net utility plant 679,367 677,936
Other Investments and Property:
Investments in leveraged leases 35,609 34,746
Investments in partnerships 25,308 25,667
Environmental improvement funds
held by trustee 3,642 10,526
Nonutility property and other 11,605 12,783
76,164 83,722
Current Assets:
Cash and cash equivalents 9,834 6,042
Restricted cash - 22,018
Temporary investments, at market 1,148 3,364
Receivables, less allowance of
$138 and $231, respectively 35,392 25,582
Accrued unbilled revenues 18,651 -
Inventories 34,962 46,441
Coal contract settlement 12,928 7,685
Other current assets 4,795 2,355
117,710 113,487
Deferred Charges:
Unamortized premium on reacquired debt 6,142 6,621
Postretirement benefits other than pensions 9,574 8,011
Demand side management program 20,337 11,530
Other deferred charges 14,687 16,109
50,740 42,271
__________ __________
$ 923,981 $ 917,416
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
December 31,
1995 1994
(in thousands)
SHAREHOLDERS' EQUITY AND LIABILITIES
<S> <C> <C>
Common Stock $ 78,258 $102,798
Retained Earnings 236,617 218,424
314,875 321,222
Less-Treasury Stock, at cost - 24,540
Common shareholders' equity 314,875 296,682
Cumulative Nonredeemable Preferred Stock
of Subsidiary 11,090 11,090
Cumulative Redeemable Preferred Stock of Subsidiary 7,500 7,500
Cumulative Special Preferred Stock of Subsidiary 924 1,015
Long-Term Debt, net of current maturities 257,440 264,110
Long-Term Partnership Obligations,
net of current maturities 6,839 9,507
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 598,668 589,904
Current Liabilities:
Current Portion of Adjustable Rate
Bonds Subject to Tender 31,500 31,500
Current Maturities of Long-Term Debt,
Interim Financing and Long-Term
Partnership Obligations:
Maturing long-term debt 9,906 7,803
Notes payable 30,500 22,060
Partnership obligations 2,786 3,374
Total current maturities of long-term debt,
interim financing and long-term partnership
obligations 43,192 33,237
Other Current Liabilities:
Accounts payable 37,996 35,183
Dividends payable 123 125
Accrued taxes 8,821 6,849
Accrued interest 4,577 4,599
Refunds to customers 8,896 14,844
Accrued coal liability - 22,018
Other accrued liabilities 17,689 16,339
Total other current liabilities 78,102 99,957
Total current liabilities 152,794 164,694
Deferred Credits and Other:
Accumulated deferred income taxes 132,793 120,646
Accumulated deferred investment tax credits,
being amortized over lives of property 23,146 24,702
Regulatory income tax liability 2,977 4,052
Postretirement benefits other than pensions 9,056 8,384
Other 4,547 5,034
172,519 162,818
$923,981 $917,416
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.</FN>
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1995 1994
(in thousands)
<S> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 15,754,826 and
16,865,003 shares, respectively $ 78,258 $102,798
Retained Earnings, $2,194,121 restricted as
to payment of cash dividends on common stock 236,617 218,424
314,875 321,222
Less-Treasury Stock, at cost, 1,110,177 shares - 24,540
314,875 296,682
PREFERRED STOCK OF SUBSIDIARY
Cumulative, $100 par value, authorized 800,000
shares, issuable in series:
Nonredeemable
4.8% Series, outstanding 85,895 shares,
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares,
callable at $101 per share 2,500 2,500
11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 shares,
redeemable at $100 per share December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK OF SUBSIDIARY
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series, outstanding
9,237 and 10,150 shares, respectively,
redeemable at $100 per share 924 1,015
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 251,410 259,615
Notes payable 6,836 5,345
Unamortized debt premium and discount, net (806) (850)
257,440 264,110
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 6,839 9,507
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2015, Series B, presently 4.60% 31,500 31,500
Total capitalization, including bonds
subject to tender $630,168 $621,404
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.</FN>
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
for the years ended December 31,
1995 1994 1993
(in thousands)
<S> <C> <C> <C>
Balance Beginning of Period $218,424 $204,449 $191,256
Net income 44,819 39,920 38,483
263,243 244,369 229,739
Common Stock Dividends ($1.69 per share
in 1995, $1.65 per share in 1994 and
$1.61 per share in 1993) 26,626 25,955 25,290
Capital Stock Expenses - (10) -
26,626 25,945 25,290
Balance End of Period (See Consolidated
Statements of Capitalization for
restriction) $236,617 $218,424 $204,449
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.</FN>
</TABLE>
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
Effective January 1, 1996, a new holding company,
SIGCORP, Inc. (SIGCORP), became the parent of SIGECO and
four of SIGECO's former wholly-owned subsidiaries: Energy
Systems Group, Inc., Southern Indiana Minerals, Inc.,
Southern Indiana Properties, Inc. and ComSource, Inc.
Lincoln Natural Gas Company, Inc. will remain a wholly-owned
subsidiary of SIGECO. All of the shares of SIGECO's common
stock were exchanged on a one-for-one basis for shares of
SIGCORP, while all of SIGECO's debt securities and all of
its outstanding shares of preferred stock remain securities
of SIGECO and are unaffected.
SIGECO is a regulated gas and electric utility and
engaged principally in the production, purchase,
transmission, distribution and sale of electricity and the
delivery of natural gas. SIGECO serves 120,547 electric
customers in the city of Evansville and 74 other communities
and serves 104,732 gas customers in the city of Evansville
and 64 other communities.
Southern Indiana Properties, Inc. invests principally
in partnerships (primarily in real estate), leveraged leases
and marketable securities. Energy Systems Group, Inc.,
incorporated in April 1994, provides equipment and related
design services to industrial and commercial customers.
Southern Indiana Minerals, Inc., incorporated in May 1994,
began start up operations in 1995 to process and market coal
combustion by-products. ComSource, Inc., incorporated in
June 1995, markets telecommunications services. Because
SIGECO is the principal subsidiary of SIGCORP, the operating
results of these nonregulated subsidiaries are included in
"Other, net" in the Consolidated Statements of Income. All
significant intercompany transactions are eliminated.
On June 30, 1994, SIGECO completed the acquisition of
Lincoln Natural Gas Company, Inc. (LNG), a small gas
distribution company with approximately 1,400 customers
contiguous to the eastern boundary of SIGECO's gas service
territory. SIGECO issued 49,399 shares of its common stock
for all common stock of LNG. This transaction was accounted
for as a pooling of interests. Prior period financial
statements have been restated to reflect this merger and to
conform to current period presentation.
(b) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE>
(c) Regulation
The Indiana Utility Regulatory Commission (IURC) has
jurisdiction over all investor-owned gas and electric
utilities in Indiana. The Federal Energy Regulatory
Commission (FERC) has jurisdiction over those investor-owned
utilities that make wholesale energy sales. These agencies
regulate SIGECO's utility business operations, rates,
accounts, depreciation allowances, services, security issues
and the sale and acquisition of properties. The financial
statements of SIGECO are based on generally accepted
accounting principles, which give recognition to the
ratemaking and accounting practices of these agencies.
(d) Regulatory Assets
SIGECO is subject to the provisions of Statement of
Financial Accounting Standards (SFAS) No. 71 "Accounting for
the Effects of Certain Types of Regulation." Regulatory
assets represent probable future revenues to SIGECO
associated with certain incurred costs which will be
recovered from customers through the ratemaking process.
Because of the expected favorable regulatory treatment, the
<PAGE> 30
following regulatory assets are reflected in the
Consolidated Balance Sheets as of December 31:
<TABLE>
<CAPTION>
1995 1994
(in thousands)
<S> <C> <C>
Regulatory Assets:
Demand side management program costs $20,337 $11,530
Postretirement benefit costs (Note 1(j)) 9,574 8,011
Coal contract buydown costs (Note 2) 12,928 7,685
Unamortized premium on reacquired debt 6,142 6,621
FERC Order No. 636 transition costs (Note 2) 3,000 2,147
Coal contract litigation costs (Note 2) - 1,442
Regulatory study costs 905 1,020
Fuel and gas costs (Note 1(m)) 2,573 467
Total 55,459 38,923
Less current amounts 15,501 8,152
$39,958 $30,771
</TABLE>
Refer to the individual footnotes referenced above for
discussion of specific regulatory assets.
SIGECO will adopt SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of ", on January 1, 1996. SFAS No. 121 requires
that impairment losses for long-lived assets and
identifiable intangibles to be held and used, be based on
the fair value of the asset. Long-lived assets and certain
identifiable intangibles to be disposed of should be
reported at the lower of carrying amount or fair value less
cost to sell. It also requires that regulatory assets which
are no longer probable of recovery through future revenues
be charged to earnings. SIGECO does not expect that the
adoption of this statement will have a material effect on
its financial position or results of operations based on the
current regulatory structure in which SIGECO operates.
(e) Concentration of Credit Risk
SIGECO's customer receivables from gas and electric
sales and gas transportation services are primarily derived
from a broadly diversified base of residential, commercial
and industrial customers located in a southwestern region of
Indiana. SIGECO continually reviews customers'
creditworthiness and requests deposits or refunds deposits
based on that review. See Note 4 of Notes to Consolidated
Financial Statements for a discussion of receivables related
to its leveraged lease investments.
(f) Utility Plant
Utility plant is stated at the historical original cost
of construction. Such cost includes payroll-related costs
such as taxes, pensions and other fringe benefits, general
and administrative costs and an allowance for the cost of
funds used during construction (AFUDC), which represents the
estimated debt and equity cost of funds capitalized as a
cost of construction. While capitalized AFUDC does not
represent a current source of cash, it does represent a
basis for future cash revenues through depreciation and
return allowances. The weighted average AFUDC rate (before
income tax) used by SIGECO was 8.0% in 1995, 9.5% in 1994
and 10.5% in 1993.
(g) Depreciation
Depreciation of utility plant is provided using the
straight-line method over the estimated service lives of the
depreciable plant. Provisions for depreciation, expressed
as an annual percentage of the cost of average depreciable
plant in service, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Electric 3.8% 4.0% 4.0%
Gas 3.3% 3.3% 3.7%
</TABLE>
(h) Income Taxes
Effective January 1, 1993, SIGCORP adopted SFAS No.
109, "Accounting for Income Taxes." The standard did not
have a material impact on results of operations, cash flow
or financial position. SIGCORP utilizes the liability
<PAGE> 31
method of accounting for income taxes, providing deferred
taxes on temporary differences. Investment tax credits have
been deferred and are amortized through credits to income
over the lives of the related property.
The components of the net deferred income tax liability
at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
(in thousands)
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and cost recovery
timing differences $109,899 $104,783
Deferred fuel costs, net 204 1,624
Leveraged leases 29,747 28,577
Regulatory assets recoverable through
future rates 26,839 28,397
Deferred Tax Assets:
Unbilled revenue (2,575) (7,571)
Regulatory liabilities to be settled
through future rates (29,817) (32,454)
Other, net (1,504) (2,710)
Net deferred income tax liability $132,793 $120,646
</TABLE>
Of the $12,147,000 increase in the net deferred income
tax liability from December 31, 1994 to December 31, 1995,
$9,156,000 is due to current year deferred federal and state
income tax expense and the remaining $2,991,000 increase is
primarily a result of the change in the net regulatory
assets and liabilities.
The components of current and deferred income tax
expense for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(in thousands)
<S> <C> <C> <C>
Current
Federal $ 9,801 $19,739 $ 9,302
State 1,861 2,722 1,497
Deferred, net
Federal 6,719 (1,451) 7,957
State 1,268 138 1,418
Investment tax credit, net (1,556) (1,846) (1,868)
Income tax expense as shown on Consolidated
Statements of Income 18,093 19,302 18,306
Current income tax expense included in
Other Income (3,030) (4,685) (3,608)
Deferred income tax expense included in
Other Income 1,169 1,547 1,887
Total income tax expense related to net
income before cumulative effect of
accounting change 16,232 16,164 16,585
Current income tax expense related to
cumulative effect of accounting change 3,845 - -
Total income tax expense $20,077 $16,164 $16,585
</TABLE>
A reconciliation of the statutory tax rates to
SIGCORP's effective income tax rate for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory federal and state rate 37.9% 37.9% 37.9%
Equity portion of allowance for funds
used during construction (0.2) (2.7) (2.1)
Book depreciation over related tax
depreciation - nondeferred 2.0 2.1 1.9
Amortization of deferred investment tax credit (2.4) (3.3) (3.4)
Low-income housing credit (4.3) (4.9) (4.4)
Preferred dividend requirements of subsidiary 0.6 0.8 0.7
Other, net (2.7) (1.1) (0.5)
Effective tax rate 30.9% 28.8% 30.1%
</TABLE>
(i) Pension Benefits
SIGECO has trusteed, noncontributory defined benefit
plans which cover eligible full-time regular employees. The
<PAGE> 32
plans provide retirement benefits based on years of service
and the employee's highest 60 consecutive months'
compensation during the last 120 months of employment. The
funding policy of SIGECO is to contribute amounts to the
plans equal to at least the minimum funding requirements of
the Employee Retirement Income Security Act of 1974 (ERISA)
but not in excess of the maximum deductible for federal
income tax purposes. The plans' assets as of December 31,
1995 consist of investments in interest-bearing obligations
and common stocks of 48% and 52%, respectively.
The components of net pension cost related to these
plans for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 1,700 $ 1,963 $ 1,454
Interest cost on projected benefit
obligation 4,044 3,842 3,605
Actual return on plan assets (12,243) (469) (2,669)
Net amortization and deferral 8,000 (3,978) (1,712)
Net pension cost $ 1,501 $ 1,358 $ 678
</TABLE>
Part of the pension cost is charged to construction and
other accounts.
The funded status of the trusteed retirement plans at
December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994
(in thousands)
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(49,401) $(41,438)
Accumulated benefit obligation $(49,694) $(41,660)
Projected benefit obligation $(63,531) $(51,511)
Plan assets at fair value 60,928 49,899
Excess of projected benefit obligation over
plan assets (2,603) (1,612)
Remaining unrecognized transitional asset (3,069) (3,486)
Prior service cost 449 503
Unrecognized net loss 1,521 894
Accrued pension liability $ (3,702) $ (3,701)
</TABLE>
The projected benefit obligation at December 31, 1994
was determined using an assumed discount rate of 8%. Due to
the decrease in yields on high quality fixed income
investments, a discount rate of 7% was used to determine the
projected benefit obligation at December 31, 1995. For both
periods, the long-term rate of compensation increases was
assumed to be 5%, and the long-term rate of return on plan
assets was assumed to be 8%. The transitional asset is
being recognized over approximately 15, 18 and 14 years for
the Salaried, Hourly and Hoosier plans, respectively.
In addition to the trusteed pension plans discussed
above, SIGECO provides supplemental pension benefits to
certain current and former officers under nonqualified and
nonfunded plans. In 1994, SIGECO charged $1,978,000 to
pension expense representing benefits earned as of December
31, 1994, but not yet recognized. Estimated annual service
cost related to these benefits will be approximately
$240,000.
(j) Postretirement Benefits Other Than Pensions
SIGECO provides certain postretirement health care and
life insurance benefits for retired employees and their
dependents through fully insured plans. Effective January
1, 1993, SIGECO adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," which
requires the expected cost of these benefits be recognized
during the employees' years of service. As authorized by
the IURC in a December 30, 1992 generic ruling, SIGECO
deferred as a regulatory asset the additional SFAS No. 106
costs accrued over the costs of benefits actually paid after
date of adoption, but prior to inclusion in rates. In June
1995, the IURC authorized SIGECO to include in electric
rates SFAS No. 106 cost and to recover the amounts
previously deferred over a 60-month period beginning June
1995. SIGECO continues to defer the gas portion of SFAS No.
106 cost pending the outcome of its gas rate case.
<PAGE> 33
The components of the net periodic other postretirement
benefit cost for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during
the period $903 $1,133 $924
Interest cost on accumulated benefit
obligation 2,272 2,404 2,463
Actual return on assets (107) - -
Net amortization and deferral 1,259 1,472 1,472
Net periodic postretirement benefit cost 4,327 5,009 4,859
Amortization of prior years' deferred
postretirement benefit obligation 549 - -
4,876 5,009 4,859
Deferred postretirement benefit obligation 2,112 3,886 4,125
Charged to operations and construction $2,764 $1,123 $734
</TABLE>
The net periodic cost determined under the new standard
includes the amortization of the discounted present value of
the obligation at the adoption date, $29,400,000, over a 20-
year period.
Reconciliation of the accumulated postretirement
benefit obligation to the accrued liability for
postretirement benefits as of December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994
(in thousands)
<S> <C> <C>
Accumulated other postretirement benefit
obligation:
Retirees $(10,775) $(11,599)
Other fully eligible participants (5,893) (6,311)
Other active participants (13,944) (13,132)
Total accumulated benefit obligation (30,612) (31,042)
Plan assets at fair value 2,658 -
Excess of accumulated benefit obligation
over plan assets (27,954) (31,042)
Unrecognized transition obligation 25,019 26,491
Unrecognized net (gain) (6,121) (3,833)
Accrued postretirement benefit liability $ (9,056) $ (8,384)
</TABLE>
The assumptions used to develop the accumulated
postretirement benefit obligation at December 31, 1995
included a discount rate of 7.25% and a health care cost
trend rate of 9% in 1995 declining to 5% in 2004. The
estimated cost of these future benefits could be
significantly affected by future changes in health care
costs, work force demographics, interest rates or plan
changes. A 1% increase in the assumed health care cost
trend rate each year would increase the aggregate service
and interest costs for 1995 by $620,000 and the accumulated
postretirement benefit obligation by $5,300,000.
In 1995, SIGECO adopted Voluntary Employee Beneficiary
Association (VEBA) Trust Agreements for the funding of
postretirement health and life insurance benefits for
retirees and their eligible dependents and beneficiaries.
Annual funding is discretionary and is based on the
projected cost over time of benefits to be provided to
covered persons consistent with acceptable actuarial
methods. To the extent these postretirement benefits are
funded, the benefits will not be shown as a liability on
SIGECO's financial statements.
(k) Cash Flow Information
For the purposes of the Consolidated Balance Sheets and
the Consolidated Statements of Cash Flows, SIGCORP considers
all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash
equivalents.
SIGCORP, during 1995, 1994 and 1993, paid interest (net
of amounts capitalized) of $20,085,000, $18,053,000 and
$18,359,000, respectively, and income taxes of $10,334,000,
$15,447,000 and $10,248,000, respectively. SIGCORP is
involved in several partnerships which are partially
financed by partnership obligations amounting to $9,625,000
and $12,881,000 at December 31, 1995 and 1994, respectively.
<PAGE> 34
(l) Inventories
SIGECO accounts for its inventories under the average
cost method except for gas in underground storage which is
accounted for under two inventory methods: the average cost
method for SIGECO's Hoosier Division (formerly Hoosier Gas
Corporation) and the last-in, first-out (LIFO) method for
all other gas in storage. Inventories at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
(in thousands)
<S> <C> <C>
Fuel (coal and oil) for electric generation $11,163 $21,355
Materials and supplies 15,422 14,678
Gas in underground storage - at LIFO cost 5,822 6,544
- at average cost 2,555 3,864
Total inventories $34,962 $46,441
</TABLE>
Based on the December 1995 price of gas purchased, the
cost of replacing the current portion of gas in underground
storage exceeded the amount stated on a LIFO basis by
approximately $14,000,000 at December 31, 1995.
(m) Operating Revenues and Fuel Costs
SIGECO accrues an estimate of revenues unbilled for
electric and gas service furnished from the meter reading
dates to the end of each accounting period.
All metered gas rates contain a gas cost adjustment
clause which allows for adjustment in charges for changes in
the cost of purchased gas. As ordered by the IURC, the
calculation of the adjustment factor is based on the
estimated cost of gas in a future quarter. The order also
provides that any under- or overrecovery caused by variances
between estimated and actual cost in a given quarter, as
well as refunds from its pipeline suppliers, will be
included in adjustment factors of four future quarters
beginning with the second succeeding quarter's adjustment
factor.
All metered electric rates contain a fuel adjustment
clause which allows for adjustment in charges for electric
energy to reflect changes in the cost of fuel and the net
energy cost of purchased power. As ordered by the IURC, the
calculation of the adjustment factor is based on the
estimated cost of fuel and the net energy cost of purchased
power in a future quarter. The order also provides that any
under- or overrecovery caused by variances between estimated
and actual cost in a given quarter will be included in the
second succeeding quarter's adjustment factor.
SIGECO also collects through a quarterly rate
adjustment mechanism, the margin on electric sales lost due
to the implementation of demand side management programs.
Reference is made to "Demand Side Management" in
Management's Discussion and Analysis of Operations and
Financial Condition for further discussion.
SIGECO records monthly any adjustment clause under- or
overrecovery as an asset or liability, respectively, until
such time as it is billed or refunded to its customers. The
IURC reviews for approval the adjustment clause factors on a
quarterly basis.
The cost of gas sold is charged to operating expense as
delivered to customers and the cost of fuel for electric
generation is charged to operating expense when consumed.
(2) Rate and Regulatory Matters
GAS MATTERS. On July 21, 1993, the IURC approved an
overall increase of approximately 8%, or $5.5 million in
revenues, in SIGECO's base gas rates. The increase was
implemented in two equal steps. The first step of the rate
adjustment, approximately 4%, took place August 1, 1993; the
second step of the rate adjustment took place on August 1,
1994. On September 7, 1995, SIGECO petitioned the IURC
seeking a general increase in gas rates. The requested
adjustment in rates, over those granted in 1993, is
necessary to recover increases in operating and maintenance
costs and additional investment in gas distribution
facilities. The adjustment included recovery of additional
costs incurred for postretirement benefits other than
pensions related to gas operations approximating $1.1
million annually beginning in 1993 which have been deferred
pending inclusion in rates. The petition also requested the
merger into SIGECO of its Lincoln Natural Gas Company
subsidiary (LNG) and the consolidation of gas rates for
customers of SIGECO's Evansville and Hoosier divisions and
of LNG into one set of rates. SIGECO filed its case-in-
chief on December 15, 1995 supporting an overall increase of
11%, or $7.2 million in revenues.
In April 1992, the Federal Energy Regulatory Commission
(FERC) issued Order No. 636 (the Order) which required
interstate pipelines to restructure their services. In
August 1992, the FERC issued Order No. 636-A which
substantially reaffirmed the content of the original Order.
On November 2, 1992, SIGECO's major pipeline, Texas Gas
Transmission Corporation (TGTC), filed a recovery
implementation plan with the FERC as part of its revised
compliance filing regarding the Order. On October 1, 1993,
the FERC accepted, subject to certain conditions, the TGTC
recovery implementation plan.
<PAGE> 35
Under the new TGTC transportation tariffs, which became
effective November 1, 1993, SIGECO will incur additional
annual demand-related charges which will be partially offset
by lower volume-related transportation costs. TGTC
originally estimated that SIGECO's allocation of transition
costs would total approximately $5.2 million, to be incurred
over a three-year period ending the first quarter of 1997.
Through 1995, SIGECO has been billed $3 million of these
transition costs, $1.8 million of which it deferred pending
authorization by the IURC of recovery of such costs. During
1995, TGTC and its customers negotiated a settlement
agreement for the disposition of remaining transition costs
not yet recovered by TGTC, and all related issues. On
October 26, 1995, TGTC filed a Stipulation Agreement of
Settlement (the Agreement) with FERC reflecting the
settlement agreement. As a result of the Agreement,
SIGECO's total transition costs will approximate $4.2
million. SIGECO has also recognized an additional $1.2
million of these costs which have not yet been billed. On
November 2, 1995, the IURC approved SIGECO's request for
recovery of transition costs through the gas cost
adjustment; however, the Utility Consumer Counselor has
appealed the IURC-approved method of allocation of the
transition costs to SIGECO's customers, and implementation
of recovery of these costs is pending the outcome of the
appeal.
ELECTRIC MATTERS. On May 24, 1993, SIGECO petitioned
the IURC for an adjustment in its base electric rates
representing the first step in the recovery of the financing
costs on its investment through March 31, 1993 in the Clean
Air Act Compliance (CAAC) project presently being
constructed at the Culley Generating Station. The majority
of the costs are for the installation of a sulfur dioxide
scrubber on Culley Units 2 and 3. On September 15, 1993,
the IURC granted SIGECO's request for a 1% revenue increase,
approximately $1.8 million on an annual basis, which took
effect October 1, 1993. SIGECO petitioned the IURC on
March 1, 1994 for recovery of financing costs related to
scrubber construction expenditures incurred from April 1,
1993 through January 31, 1994, and was granted a 2.3%
increase, approximately $4.2 million on an annual basis, in
base electric retail rates effective June 29, 1994.
On December 22, 1993, SIGECO petitioned the IURC for
the third of three planned general electric rate increases
related to its CAAC project. The final adjustment was
necessary to cover financing costs related to the balance of
the project construction expenditures, costs related to the
operation of the scrubber, certain nonscrubber-related
operating costs such as additional costs incurred for
postretirement benefits other than pensions beginning in
1993, and the recovery of demand side management program
expenditures. On June 21, 1995, the IURC approved an overall
increase of approximately 2.05%, or $4.5 million in
revenues, effective June 26, 1995.
Over the past several years, SIGECO has been actively
involved in intensive contract negotiations and legal
actions to reduce its coal costs and thereby lower its
electric rates. During 1992, SIGECO was successful in
negotiating a new coal supply contract with one of its major
coal suppliers. The new agreement, effective through 1995,
was retroactive to 1991. Included in the agreement was a
provision whereby the contract could be reopened by SIGECO
for modification of certain coal specifications. In early
1993, SIGECO reopened the contract for such modifications.
In response, the coal supplier elected to terminate the
contract enabling SIGECO to buy out the remainder of its
contractual obligations and acquire lower-priced spot market
coal. The cost of the contract buyout in 1993, which was
based on estimated tons of coal to be purchased during the
agreement period, and related legal and consulting services,
totaled approximately $18 million. In 1994 and 1995, SIGECO
incurred remaining buyout costs of $.6 million. On
September 22, 1993, the IURC approved SIGECO's request to
amortize all buyout costs to coal inventory during the
period July 1, 1993 through December 31, 1995 and to recover
such costs through the fuel adjustment clause beginning
February 1994. SIGECO estimates the total savings in coal
costs during the 1991-1995 period resulting from the
renegotiation and subsequent buyout, net of the total buyout
costs, approximated $59 million. The net savings are being
passed back to SIGECO's electric customers through the fuel
adjustment clause.
On April 10, 1995, SIGECO reached an agreement with its
remaining long-term contract coal supplier, effective July
16, 1995, to buy out the remainder of SIGECO's contractual
obligations for $45.5 million, enabling it to acquire lower-
priced spot market coal. SIGECO had been in litigation with
this coal supplier for several years. Under the terms of
the original contract, SIGECO was allegedly obligated to
take a minimum of 600,000 tons of coal annually. In early
1993, SIGECO informed the supplier that it would not require
shipments under the contract until later in 1993. On March
26, 1993, SIGECO and the supplier agreed to resume coal
shipments under the terms of a letter agreement which were
effective until final resolution of the litigation. Under
the letter agreement, the invoiced price per ton was
substantially lower than the contract price. As approved by
the IURC, SIGECO charged the full contract price to coal
inventory for recovery through the fuel adjustment clause.
The difference between the contract price and the invoice
price, $28.9 million at July 15, 1995, was deposited in an
escrow account and subsequently applied to the buyout
premium. The remaining buyout costs, about $16.6 million,
are being amortized to coal inventory over a 14-month period
ending September 1996 and recovered through the fuel
adjustment clause. SIGECO estimates the total savings in
coal costs resulting from the buyout, net of total buyout
costs, will approximate $58 million through December 31,
1998, the term of the original contract. The net savings
are being passed back to SIGECO's electric customers through
the fuel adjustment clause. All issues in litigation were
dismissed as a condition of the settlement agreement, and
all other interim agreements with this coal supplier were
terminated as of July 16, 1995.
<PAGE> 36
(3) Revenues Accounting Change
SIGECO previously recognized electric and gas revenues
when customers were billed on a cycle billing basis. The
utility service rendered after monthly meter reading dates
through the end of a calendar month (unbilled revenues)
became a part of operating revenues in the following month.
To more closely match revenues with expenses, effective
January 1, 1995, SIGECO changed its method of accounting to
accrue the amount of revenue for sales unbilled at the end
of each month. The cumulative effect of the change on prior
years, net of income taxes, is included in net income for
1995. The effect of the change was to increase 1995 net
income $7.9 million ($.50 per share), of which an increase
of $1.6 million ($.10 per share), is reflected in operations
and an increase of $6.3 million ($.40 per share), the
cumulative effect of the change as of January 1, 1995, is
reported as a separate component of net income.
Summarized below is the pro forma effect of the accounting
change, as if the change had been effective during the
periods ending December 31:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
As Reported (in thousands except per share data)
Operating Revenues
Electric $275,495 $260,936 $258,405
Gas 63,203 69,099 71,084
Total $338,698 $330,035 $329,489
Operating Income $ 53,873 $ 52,367 $ 51,565
Net Income $ 44,819 $ 39,920 $ 38,483
Earnings Per Share of Common Stock $ 2.84 $ 2.53 $ 2.44
Pro Forma
Operating Revenues
Electric $275,495 $261,103 $258,743
Gas 63,203 67,900 72,080
Total $338,698 $329,003 $330,823
Operating Income $ 53,873 $ 51,717 $ 52,405
Net Income $ 38,525 $ 39,270 $ 39,323
Earnings Per Share of Common Stock $ 2.44 $ 2.49 $ 2.50
</TABLE>
<PAGE>
(4) Leveraged Leases
Southern Indiana Properties, Inc. is a lessor in four
leveraged lease agreements under which an office building, a
part of a reservoir, an interest in a paper mill and
passenger railroad cars are leased to third parties. The
economic lives and lease terms vary with the leases. The
total equipment and facilities cost was approximately
$101,200,000 at December 31, 1995 and 1994, respectively.
The cost of the equipment and facilities was partially
financed by nonrecourse debt provided by lenders, who have
been granted an assignment of rentals due under the leases
and a security interest in the leased property, which they
accepted as their sole remedy in the event of default by the
lessee. Such debt amounted to approximately $60,900,000 and
$77,900,000 at December 31, 1995 and 1994, respectively.
SIGCORP's net investment in leveraged leases at those dates
was $5,862,000 and $6,169,000, respectively, as shown:
<TABLE>
<CAPTION>
1995 1994
(in thousands)
<S> <C> <C>
Minimum lease payments receivable $62,655 $62,624
Estimated residual value 22,095 22,095
Less unearned income 49,141 49,973
Investment in lease financing receivables
and loans 35,609 34,746
Less deferred taxes arising from
leveraged leases 29,747 28,577
Net investment in leveraged leases $ 5,862 $ 6,169
</TABLE>
<age> 37
(5) Short-Term Financing
SIGECO has trust demand note arrangements totaling
$17,000,000 with several banks, of which $14,500,000 was
utilized at December 31, 1995. Funds are also borrowed
periodically from banks on a short-term basis, made
available through lines of credit. These available lines of
credit totaled $22,000,000 at December 31, 1995 of which
$16,000,000 was utilized at that date.
<TABLE>
<CAPTION>
1995 1994 1993
(in thousands)
<S> <C> <C> <C>
Notes Payable
Balance at year end $30,500 $22,060 $11,040
Weighted average interest rate
on year end balance 6.09% 6.83% 3.44%
Average daily amount outstanding during
the year $16,790 $13,827 $ 6,992
Weighted average interest rate on average
daily amount outstanding during the year 6.32% 5.46% 3.36%
</TABLE>
(6) Long-Term Debt
The annual sinking fund requirement of SIGECO's first
mortgage bonds is 1% of the greatest amount of bonds
outstanding under the Mortgage Indenture. This requirement
may be satisfied by certification to the Trustee of unfunded
property additions in the prescribed amount as provided in
the Mortgage Indenture. SIGECO intends to meet the 1996
sinking fund requirement by this means and, accordingly, the
sinking fund requirement for 1996 is excluded from current
liabilities on the balance sheet. At December 31, 1995,
$186,161,000 of SIGECO's utility plant remained unfunded
under SIGECO's Mortgage Indenture.
Several of SIGCORP's partnership investments have been
financed through obligations with such partnerships.
Additionally, SIGCORP's investments in leveraged leases have
been partially financed through notes payable to banks. Of
the amount of first mortgage bonds, notes payable, and
partnership obligations outstanding at December 31, 1995,
the following amounts mature in the five years subsequent to
1995: 1996 - $12,700,000; 1997 - $3,170,000; 1998 -
$17,140,000; 1999 - $48,170,000; and 2000 - $2,220,000.
In addition, $31,500,000 of adjustable rate pollution
control series first mortgage bonds could, at the election
of the bondholder, be tendered to SIGECO in May 1996. If
SIGECO's agent is unable to remarket any bonds tendered at
that time, SIGECO would be required to obtain additional
funds for payment to bondholders. For financial statement
presentation purposes those bonds subject to tender in 1996
are shown as current liabilities.
First mortgage bonds, notes payable and partnership
obligations outstanding and classified as long-term at
December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
(in thousands)
<S> <C> <C>
First Mortgage Bonds due:
1996, 6% $ - $ 8,000
1998, 6-3/8% 12,000 12,000
1999, 6% 45,000 45,000
2003, 5.60% Pollution Control Series A 4,935 5,140
2008, 6.05% Pollution Control Series A 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8-7/8% 25,000 25,000
2023, 7.60% 45,000 45,000
2025, 7-7/8% 20,000 20,000
Adjustable Rate Pollution Control:
2015, Series A, presently 4.60% 9,975 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 22,800
2028, Series A, presently 4.65% 22,200 22,200
$251,410 $259,615
Notes Payable:
Banks, due 1997 through 2000,
presently 8% to 9% $ 5,836 $ 4,345
Tax Exempt, due 2003, 6.25% 1,000 1,000
$ 6,836 $ 5,345
Partnership Obligations, due 1997 through
2001, without interest $ 6,839 $ 9,507
</TABLE>
<PAGE> 38
(7) Cumulative Preferred Stock of Subsidiary
The amount payable in the event of involuntary
liquidation of each series of the $100 par value preferred
stock is $100 per share, plus accrued dividends.
The nonredeemable preferred stock is callable at the
option of SIGECO as follows:
4.8% Series at $110 per share, plus accrued dividends;
and
4.75% Series at $101 per share, plus accrued dividends.
(8) Cumulative Redeemable Preferred Stock of Subsidiary
The Series has an interest rate of 6.50% and is
redeemable at $100 per share on December 1, 2002. In the
event of involuntary liquidation of this series of $100 par
value preferred stock, the amount payable is $100 per share,
plus accrued dividends.
(9) Cumulative Special Preferred Stock of Subsidiary
The Cumulative Special Preferred Stock contains a
provision which allows the stock to be tendered on any of
its dividend payment dates. On March 8, 1995, SIGECO
repurchased 913 shares of the Cumulative Special Preferred
Stock at a cost of $91,300 as a result of a tender within
the provision of the issuance.
(10) Commitments and Contingencies
SIGECO presently estimates that approximately
$44,000,000 will be expended for construction purposes in
1996, including those amounts applicable to SIGECO's demand
side management (DSM) programs. Commitments for the 1996
construction program are approximately $8,500,000 at
December 31, 1995. Reference is made to "Demand Side
Management" in Management's Discussion and Analysis of
Operations and Financial Condition for discussion of the
implementation of SIGECO's DSM programs.
Testing of five sites utilized for the manufacture of
gas by predecessors of SIGECO was substantially completed in
1995. Under current regulations, no remedial action is
necessary or required unless the soil is disturbed. If
remediation efforts are required in the future, SIGECO
estimates the related costs would not exceed $250,000 on a
current basis. At the present time, SIGECO does not
anticipate that remediation efforts will be required at any
of these sites and therefore has not provided for such
costs. SIGECO has not been named a potentially responsible
party by the Environmental Protection Agency.
(11) Common Stock
On December 19, 1995, the Board of Directors authorized
the retirement of 1,110,177 shares of common stock held in
Treasury.
On June 30, 1994, SIGECO completed its acquisition of
Lincoln Natural Gas Company, Inc. (LNG). SIGECO issued
49,399 shares of common stock for all common stock of LNG.
Average common shares outstanding, earnings per share of
common stock and dividends per share of common stock as
shown in the accompanying financial statements have been
restated to reflect the issued shares. No shares of common
stock were issued during 1995.
After obtaining shareholder approval at the 1994 annual
shareholders meeting, a common stock option plan was
established for key management employees of SIGECO. During
1994, 153,666 options were granted to participants, of which
76,996 options were exercisable one year after the grant
date. Outstanding stock options were not included in the
computation of earnings per share as they did not have a
dilutive effect in 1995 and were antidilutive in 1994. The
option price for all stock options is at least 100% of the
fair market value of SIGCORP common stock at the date of
grant. Options generally vest and become exercisable
between one and three years in equal annual installments
beginning one year after the date of grant, and generally
expire in 10 years. Stock option activity for the past two
years was as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Outstanding at beginning of year 153,666 -
Granted 36,228 153,666
Exercised (1,575) -
Terminated - -
Outstanding at end of year 188,319 153,666
Exercisable at end of year 75,421 -
Reserved for future grants at end of year 310,106 346,334
Average Option Price - Exercised $27.63 -
- Outstanding at end of year $28.20 $27.63
</TABLE>
<PAGE> 39
The expiration dates for options outstanding as of
December 31, 1995, ranged from July 13, 2004 to July 14,
2005.
Each outstanding share of SIGCORP's stock contains a
right which entitles registered holders to purchase from
SIGCORP one one-hundredth of a share of SIGCORP's Common
Stock, at an initial price of $65 per share (Purchase Price)
subject to adjustment. The rights will not be exercisable
until a party acquires beneficial ownership of 10% of common
shares or makes a tender offer for at least 10% of its
common shares. The rights expire December 31, 2005. If not
exercisable, the rights in whole may be redeemed by SIGCORP
at a price of $.01 per right at any time prior to their
expiration. If at any time after the rights become
exercisable and are not redeemed and SIGCORP is involved in
a merger or other business combination transaction, proper
provision shall be made to entitle a holder of a right to
buy common stock of the acquiring company having a value of
two times such Purchase Price.
(12) Ownership of Warrick Unit 4
SIGECO and Alcoa Generating Corporation (AGC), a
subsidiary of Aluminum Company of America, own the 270 MW
Unit 4 at the Warrick Power Plant as tenants in common.
Construction of the unit was completed in 1970. The cost of
constructing this unit was shared equally by AGC and SIGECO,
with each providing its own financing for its share of the
cost. SIGECO's share of the cost of this unit at December
31, 1995 is $30,955,000 with accumulated depreciation
totaling $20,572,000. AGC and SIGECO also share equally in
the cost of operation and output of the unit. SIGECO's
share of operating costs is included in operating expenses
in the Consolidated Statements of Income.
<PAGE> 40
(13) Segments of Business
SIGCORP's principal subisidary, SIGECO, is a public
utility operating company engaged in distributing
electricity and natural gas. The reportable items for
electric and gas departments for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(in thousands)
<S> <C> <C> <C>
Operating Information-
Operating revenues:
Electric $275,495 $260,936 $258,405
Gas 63,203 69,099 71,084
Total 338,698 330,035 329,489
Operating expenses, excluding provision for income taxes:
Electric 206,071 195,790 188,875
Gas 60,661 62,576 70,743
Total 266,732 258,366 259,618
Pretax operating income:
Electric 69,424 65,146 69,530
Gas 2,542 6,523 341
Total 71,966 71,669 69,871
Allowance for funds used during
construction 1,001 6,030 4,517
Other income, net 4,266 535 1,742
Interest and other charges (21,377) (21,045) (19,957)
Preferred dividend requirements of
subsidiary (1,099) (1,105) (1,105)
Provision for income taxes (16,232) (16,164) (16,585)
Net income before cumulative effect
of accounting change 38,525 39,920 38,483
Cumulative effect at January 1, 1995 of
adopting the unbilled revenues method
of accounting - net of income taxes 6,294 - -
Net income per accompanying Consolidated
Statements of Income $ 44,819 $ 39,920 $ 38,483
Other Information-
Depreciation and amortization expense:
Electric $ 35,802 $ 34,475 $ 33,481
Gas 3,500 3,230 3,479
Total $ 39,302 $ 37,705 $ 36,960
Capital expenditures:
Electric <F1> $ 44,465 $ 74,577 $ 74,246
Gas 9,675 10,174 5,950
Total $ 54,140 $ 84,751 $ 80,196
Investment Information-
Identifiable assets <F2>:
Electric $708,310 $718,154 $672,771
Gas 115,266 102,762 94,479
Total 823,576 820,916 767,250
Nonutility plant and other investments 68,970 70,432 67,944
Assets utilized for overall company
operations 31,435 26,068 25,647
Total assets $923,981 $917,416 $860,841
<FN>
<F1> Includes $9,051,000, $4,119,000 and $4,530,000 of demand side
management program expenditures for 1995, 1994 and 1993, respectively.
<F2> Utility plant less accumulated provision for depreciation,
inventories, receivables (less allowance), regulatory assets and other
identifiable assets.
</FN>
</TABLE>
<PAGE> 41
(14) Disclosures About Fair Value of Financial Instruments
SIGCORP adopted in 1994 SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which
requires accounting for certain investment in debt or equity
securities at either amortized cost or fair value. Except
as described below, fair value of SIGCORP's financial
instruments is equivalent to carrying value due to their
short-term nature.
The carrying amount and estimated fair values of
SIGCORP's financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
Carrying Estimated Carrying Estimated
Fair Fair
Amount Value Amount Value
(in thousands)
<S> <C> <C> <C> <C>
Long-Term Debt (including
current portion) $298,846 $336,162 $303,413 $289,480
Partnership Obligations
(including current portion) 9,625 11,965 12,881 11,597
Redeemable Preferred Stock
of Subsidiary 7,500 7,260 7,500 6,608
</TABLE>
At December 31, 1995, the fair value of SIGCORP's debt
relating to utility operations exceeded carrying amounts by
$37,000,000. Carrying amounts of long-term debt at December
31, 1994 exceeded fair market value by $14,000,000.
Anticipated regulatory treatment of the excess or deficiency
of fair value over carrying amounts of SIGECO's long-term
debt, if in fact settled at amounts approximating those
above, would dictate that these amounts be used to reduce or
increase SIGECO's rates over a prescribed amortization
period. Accordingly, any settlement would not result in a
material impact on SIGECO's financial position or results of
operations.
The following methods and assumptions were used to
estimate the fair value of each class of financial
instruments for which it is practicable to estimate that
value:
Long-Term Debt
The fair value of SIGECO's long-term debt was estimated
based on the current quoted market rate of utilities with a
comparable debt rating. Nonutility long-term debt was
valued based upon the most recent debt financing.
Partnership Obligations
The fair value of SIGCORP's partnership obligations was
estimated based on the current quoted market rate of
comparable debt.
Redeemable Preferred Stock of Subsidiary
Fair value of SIGECO's redeemable preferred stock was
estimated based on the current quoted market rate of
utilities with a comparable debt rating.
<PAGE> 42
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited) Quarters Ended
March 31, June 30, September 30, December 31,
1995 1994 1995 1994 1995 1994 1995 1994
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues
$84,423 $104,723 $79,861 $74,258 $89,427 $77,206 $84,987 $73,848
Operating Income
$12,669 $ 17,218 $12,591 $10,316 $19,711 $17,294 $ 8,902 $ 7,539
Net Income
$15,777<F1> $ 14,384 $ 8,158 $ 7,731 $15,813 $13,861 $ 5,071 $ 3,944
Earnings Per Share of Common Stock
$1.00<F2> $0 .91 $0.52 $0.49 $1.00 $ 0.88 $0.32 $0.25
Average Common Shares Outstanding
15,755 15,755 15,755 15,755 15,755 15,755 15,755 15,755
<FN>
<F1> Includes cumulative effect of accounting change of $6,294.
<F2> Includes cumulative effect of accounting change of $.40.
<F3> Information for any one quarterly period is not indicative of the
annual results which may be expected due to seasonal variations common in
the utility industry.
</FN>
The quarterly earnings per share may not add to the total earnings per
share for the year due to rounding.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
(a) Identification of Directors
The information required by this item is included in
SIGCORP, Inc.'s Joint Proxy Statement, dated March 8, 1996
definitive copies of which were filed with the Commission
pursuant to Regulation 14A.
(b) Identification of Executive Officers
The information required by this item is included in
Part I, Item 1. - BUSINESS on page 10, to which reference is
hereby made.
Item 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
The information required by this item is included in
SIGCORP, Inc.'s Joint Proxy Statement, definitive copies of
which were filed with the Commission pursuant to Regulation
14A.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item is included in
SIGCORP, Inc's Joint Proxy Statement, definitive copies of
which were filed with the Commission pursuant to Regulation
14A.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included in
SIGCORP, Inc's Joint Proxy Statement, definitive copies of
which were filed with the Commission pursuant to Regulation
14A.
<PAGE> 43
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1) The financial statements, including supporting
schedule, are listed in the Index to Financial Statements,
page 21,
(a) 2) filed as part of this report.
(a) 3) Exhibits:
EX-2(a) Agreement and Plan of Exchange, of common
stock between Southern Indiana Gas and Electric Company and
SIGCORP, Inc., dated February 23, 1995. (Physically filed
and designated as Exhibit 2(a) in Amendment No. 1 to Form S-
4 Registration Statement filed January 20, 1995, File No.
33-57381.)
EX-3(a) Restated Articles of Incorporation of SIGCORP,
Inc. (Physically filed and designated as Exhibit 3(a) in
Amendment No. 1 to Form S-4 Registration Statement, filed
February 23, 1995, File No. 33-57381.)
EX-3(b) By-Laws of SIGCORP, Inc. . (Physically filed
and designated as Exhibit 3(b) in Amendment No. 1 to Form S-
4 Registration Statement, filed February 23, 1995, File No.
33-57381.)
EX-4(a) Rights Agreement, between SIGCORP, Inc. and
Continental Stock Transfer & Trust Company, Rights Agent,
dated as of December 31, 1995. (Physically filed and
designated as Exhibit 4.1 in Form 8-B Registration Statement
filed December 15, 1995, File No. 1-11603.)
EX-10.2 Amended Articles of Incorporation as amended
March 26, 1985. (Physically filed and designated in Form
10-K, for the fiscal year 1985, File No. 1-3553, as Exhibit
3-A.) Articles of Amendment of the Amended Articles of
Incorporation, dated March 24, 1987. (Physically filed and
designated in Form 10-K for the fiscal year 1987, File No.
1-3553, as Exhibit 3-A.) Articles of Amendment of the
Amended Articles of Incorporation, dated November 27, 1992.
(Physically filed and designated in Form 10-K for the fiscal
year 1992, File No. 1-3553, as Exhibit 3-A).
(Exhibits EX-10.1 through EX-10.24 pertain to Southern
Indiana Gas and Electric Company.)
EX-10.1 By-Laws as amended through December 18, 1990.
(Physically filed in Form 10-K for the fiscal year 1990,
File No. 1-3553, as Exhibit 3-B.) By-Laws as amended
through September 22, 1993. (Physically filed and
designated in Form 10-K for the fiscal year 1993, File No.
1-3553, as EX-3 (b).) By-Laws as amended through January 1,
1995. (Physically filed herewith as EX-3(b).)
EX-10.3* Mortgage and Deed of Trust dated as of April
1, 1932 between Southern Indiana Gas and Electric Company
and Bankers Trust Company, as Trustee, and Supplemental
Indentures thereto dated August 31, 1936, October 1, 1937,
March 22, 1939, July 1, 1948, June 1, 1949, October 1, 1949,
January 1, 1951, April 1, 1954, March 1, 1957, October 1,
1965, September 1, 1966, August 1, 1968, May 1, 1970,
August 1, 1971, April 1, 1972, October 1, 1973, April 1,
1975, January 15, 1977, April 1, 1978, June 4, 1981, January
20, 1983, November 1, 1983, March 1, 1984, June 1, 1984,
November 1, 1984, July 1, 1985, November 1, 1985, June 1,
1986. (Physically filed and designated in Registration No.
2-2536 as Exhibits B-1 and B-2; in Post-effective Amendment
No. 1 to Registration No. 2-62032 as Exhibit (b)(4)(ii), in
Registration No. 2-88923 as Exhibit 4(b)(2), in Form 8-K,
File No. 1-3553, dated June 1, 1984 as Exhibit (4), File No.
1-3553, dated March 24, 1986 as Exhibit 4-A, in Form 8-K,
File No. 1-3553, dated June 3, 1986 as Exhibit (4).) July
1, 1985 and November 1, 1985 (Physically filed and
designated in Form 10-K, for the fiscal year 1985, File
No. 1-3553, as Exhibit 4-A.) November 15, 1986 and January
15, 1987. (Physically filed and designated in Form 10-K,
for the fiscal year 1986, File No. 1-3553, as Exhibit 4-A.)
December 15, 1987. (Physically filed and designated in Form
10-K, for the fiscal year 1987, File No. 1-3553, as Exhibit
4-A.) December 13, 1990. (Physically filed and designated
in Form 10-K, for the fiscal year 1990, File No. 1-3553, as
Exhibit 4-A.) April 1, 1993. (Physically filed and
designated in Form 8-K, dated April 13, 1993, File 1-3553,
as Exhibit 4.) June 1, 1993 (Physically filed and
designated in Form 8-K, dated June 14, 1993, File 1-3553, as
Exhibit 4.) May 1, 1993. (Physically filed and designated
in Form 10-K, for the fiscal year 1993, File No. 1-3553, as
Exhibit 4(a).)
*Pursuant to paragraph (b)(4)(iii)(a) of Item 601 of
Regulation S-K, SIGECO agrees to furnish to the Commission
on request any instrument with respect to long-term debt if
the total amount of securities authorized thereunder does
not exceed 10% of the total assets of SIGECO, and has
therefore not filed such documents as exhibits to this Form
10-K.
<PAGE> 44
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K (Continued)
EX-10.4 Agreement, dated, January 30, 1968, for Unit
No. 4 at the Warrick Power Plant of Alcoa Generating
Corporation ("Alcoa"), between Alcoa and Southern Indiana
Gas and Electric Company. (Physically filed and designated
in Registration No. 2-29653 as Exhibit 4(d)-A.)
EX-10.5 Letter of Agreement, dated June 1, 1971, and
Letter Agreement, dated June 26, 1969, between Alcoa and
Southern Indiana Gas and Electric Company. (Physically
filed and designated in Registration No. 2-41209 as Exhibit
4(e)-2.)
EX-10.6 Letter Agreement, dated April 9, 1973, and
Agreement dated April 30, 1973, between Alcoa and Southern
Indiana Gas and Electric Company. (Physically filed and
designated in Registration No. 2-53005 as Exhibit 4(e)-4.)
EX-10.7 Electric Power Agreement (the "Power
Agreement"), dated May 28, 1971, between Alcoa and Southern
Indiana Gas and Electric Company. (Physically filed and
designated in Registration No. 2-41209 as Exhibit 4(e)-1.)
EX-10.8 Second Supplement, dated as of July 10, 1975,
to the Power Agreement and Letter Agreement dated April 30,
1973 - First Supplement. (Physically filed and designated
in Form 12-K for the fiscal year 1975, File No. 1-3553, as
Exhibit 1(e).)
EX-10.9 Third Supplement, dated as of May 26, 1978, to
the Power Agreement. (Physically filed and designated in
Form 10-K for the fiscal year 1978 as Exhibit A-1.)
EX-10.10 Letter Agreement dated August 22, 1978 between
Southern Indiana Gas and Electric Company and Alcoa, which
amends Agreement for Sale in an Emergency of Electrical
Power and Energy Generation by Alcoa and Southern Indiana
Gas and Electric Company dated June 26, 1979. (Physically
filed and designated in Form 10-K for the fiscal year 1978,
File No. 1-3553, as Exhibit A-2.)
EX-10.11 Fifth Supplement, dated as of December 13,
1978, to the Power Agreement. (Physically filed and
designated in Form 10-K for the fiscal year 1979, File No.
1-3553, as Exhibit A-3.)
EX-10.12 Sixth Supplement, dated as of July 1, 1979, to
the Power Agreement. (Physically filed and designated in
Form 10-K for the fiscal year 1979, File No. 1-3553, as
Exhibit A-5.)
EX-10.13 Seventh Supplement, dated as of October 1,
1979, to the Power Agreement. (Physically filed and
designated in Form 10-K for the fiscal year 1979, File No.
1-3553, as Exhibit A-6.)
EX-10.14 Eighth Supplement, dated as of June 1, 1980 to
the Electric Power Agreement, dated May 28, 1971, between
Alcoa and Southern Indiana Gas and Electric Company.
(Physically filed and designated in Form 10-K for the fiscal
year 1980, File No. 1-3553, as Exhibit (20)-1.)
EX-10.15** Agreement dated May 6, 1991 between Southern
Indiana Gas and Electric Company and Ronald G. Reherman for
consulting services and supplemental pension and disability
benefits. (Physically filed and designated in Form 10-K for
the fiscal year 1992, File No. 1-3553, as Exhibit 10-A-12.)
EX-10.16** Agreement dated July 22, 1986 between
Southern Indiana Gas and Electric Company and A. E. Goebel
regarding continuation of employment. (Physically filed and
designated in Form 10-K for the fiscal year 1992, File No.
1-3553, as Exhibit 10-A-13.)
EX-10.17** Agreement dated July 25, 1986 between
Southern Indiana Gas and Electric Company and Ronald G.
Reherman regarding continuation of employment. (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553, as Exhibit 10-A-14.)
** Filed pursuant to paragraph (b)(10)(iii)(A) of Item
601 of Regulation S-K.
<PAGE> 45
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K (Continued)
EX-10.18** Agreement dated July 22, 1986 between
Southern Indiana Gas and Electric Company and James A. Van
Meter regarding continuation of employment. (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553, as Exhibit 10-A-15.)
EX-10.19** Agreement dated February 22, 1989 between
Southern Indiana Gas and Electric Company and J. Gordon
Hurst regarding continuation of employment. (Physically
filed and designated in Form 10-K for the fiscal year 1992,
File No. 1-3553 as Exhibit 10-A-16.)
EX-10.20** Summary description of Southern Indiana Gas
and Electric Company's nonqualified Supplemental Retirement
Plan (Physically filed and designated in Form 10-K for the
fiscal year 1992, File No. 1-3553, as Exhibit 10-A-17.)
EX-10.21** Supplemental Post Retirement Death Benefits
Plan, dated October 10, 1984. (Physically filed and
designated in Form 10-K for the fiscal year 1992, File No.
1-3553, as Exhibit 10-A-18.)
EX-10.22** Summary description of Southern Indiana Gas
and Electric Company's Corporate Performance Incentive Plan.
(Physically filed and designated in Form 10-K for the fiscal
year 1992, File No. 1-3553, as Exhibit 10-A-19.)
EX-10.23** Southern Indiana Gas and Electric Company's
Corporate Performance Incentive Plan as amended for the plan
year beginning January 1, 1994. (Physically filed and
designated in Form 10-K for the fiscal year 1993, File No.
1-3553, as Exhibit 10-A-20.)
EX-10.24** Southern Indiana Gas and Electric Company
1994 Stock Option Plan (Physically filed and designated in
Southern Indiana Gas and Electric Company'sProxy Statement
dated February 22, 1994, File No. 1-3553, as Exhibit A.)
EX-21 Subsidiaries of the Registrant
EX-24 Power of Attorney
** Filed pursuant to paragraph (b)(10)(iii)(A) of Item
601 of Regulation S-K.
(b) Reports on Form 8-K
No Form 8-K reports were filed by SIGCORP during the
fourth quarter of 1995.
<PAGE> 46
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE II
SIGCORP, Inc.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Column A Column B Column C Column D Column E
Additions
Balance Charged Charged Deductions Balance
Beginning to to Other from Re- End of
Description of Year Expenses Accounts serves, Net Year
(in thousands)
VALUATION AND QUALIFYING
ACCOUNTS:
<S> <C> <C> <C> <C> <C>
Year 1995 - Accumulated
provision for uncollectible
accounts $ 231 $ 581 $ - $ 675 $ 138
Year 1994 - Accumulated
provision for uncollectible
accounts $ 166 $ 819 $ - $ 754 $ 231
Year 1993 - Accumulated
provision for uncollectible
accounts $ 136 $ 616 $ - $ 586 $ 166
OTHER RESERVES:
Year 1995 - Reserve for
injuries and damages $1,692 $ 712 $ 155<F1> $1,018 $1,541
Year 1994 - Reserve for
injuries and damages $1,321 $ 705 $ 95<F1> $ 429 $1,692
Year 1993 - Reserve for
injuries and damages $ 334 $1,177 $ 97<F1> $ 287 $1,321
<FN>
<F1> Charged to construction accounts
</FN>
</TABLE>
<PAGE> 48
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 on its behalf by the
undersigned, thereunto duly authorized.
Date: March 28, 1996
SIGCORP, Inc.
By R. G. Reherman, Chairman, President
and Chief Executive Officer
BY /s/ R. G. Reherman
R. G. Reherman
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
R. G. Reherman Chairman, President, Chief Executive
Officer (Principal Executive Officer) March 28, 1996
A. E. Goebel* Secretary and Treasurer
(Principal Financial Officer) March 28, 1996
Robert L. Koch II* )
)
Jerry A. Lamb* )
)
Donald A. Rausch* ) Directors March 28, 1996
)
Richard W. Shymanski* )
)
Donald E. Smith* )
)
James S. Vinson* )
)
N. P. Wagner* )
*By
(R. G. Reherman, Attorney-in-fact)
</TABLE>
SIGCORP
10-K
<TABLE>
<CAPTION>
EXHIBIT INDEX
Sequential
Page Number
<S> <C>
Exhibits incorporated by reference are found on 44 - 46
EX-21 Subsidiaries of the Registrant 48
EX-24 Power-of-Attorney 52 - 53
</TABLE>
<PAGE> 47
Exhibit 21
SIGCORP, Inc.
SUBSIDIARIES OF THE REGISTRANT
Southern Indiana Gas and Electric Company
Southern Indiana Properties, Incorporated in Indiana
Energy Systems Group, Incorporated in Indiana
Southern Indiana Minerals, Incorporated in Indiana
ComSource, Incorporated in Indiana
<PAGE> 52-53
Exhibit 24
February 20, 1996
Mr. R. G. Reherman
Mr. A. E. Goebel
Southern Indiana Gas and Electric Company
29 N.W. Fourth Street
Evansville, Indiana 47741
J. H. Byington, Jr., Esq.
Winthrop, Stimson, Putnam & Roberts
40 Wall Street
New York, New York 10005
Dear Gentlemen:
SIGCORP, Inc. and Southern Indiana Gas and Electric
Company will each file an Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 ("Form 10-K") before
April 1, 1996 which will be accompanied by certain exhibits.
We hereby authorize you, or any one of you, to complete
said Forms 10-K and to remedy any deficiencies with respect
to said Forms 10-K by appropriate amendment or amendments;
and we hereby make, constitute and appoint each of you our
true and lawful attorney for each of us and in each of our
names, places and steads, both in our individual capacities
as directors and that of officers of SIGCORP, Inc. and
Southern Indiana Gas and Electric Company, to sign and cause
to be filed with the Securities and Exchange Commission said
Forms 10-K, any appropriate amendment or amendments thereto,
and any exhibits thereto.
The undersigned, SIGCORP, Inc. and Southern Indiana Gas
and Electric Company, also authorize you and any one of you
to sign said Forms 10-K and any amendment or amendments
thereto on its behalf as attorney-in-fact for its respective
officers, and to file the same as aforesaid together with
exhibits.
Very truly yours,
SIGCORP, Inc. and
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
By (R. G. Reherman)
R. G. Reherman, Chairman, President and
Chief Executive Officer
(Robert L. Koch II) (Donald E. Smith)
Robert L. Koch II Donald E. Smith
(Jerry A. Lamb) (James S. Vinson)
Jerry A. Lamb James S. Vinson
(Donald A. Rausch) (N. P. Wagner)
Donald A. Rausch N. P. Wagner
(Ronald G. Reherman) (A. E. Goebel)
Ronald G. Reherman A. E. Goebel
(R. W. Shymanski) (S. M. Kerney)
Richard W. Shymanski S. M. Kerney
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
Operating Revenues - Accounting Change
The Company changed its method of accounting to accrue the amount of revenue for
sales unbilled at the end of each month. The cumulative effect of the change on
prior years, net of income taxes $6,294, is included in net income for 1995.
</LEGEND>
<CIK> 0000945372
<NAME> SIGCORP INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 679,367
<OTHER-PROPERTY-AND-INVEST> 76,164
<TOTAL-CURRENT-ASSETS> 117,710
<TOTAL-DEFERRED-CHARGES> 50,740
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 923,981
<COMMON> 78,258
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 236,617
<TOTAL-COMMON-STOCKHOLDERS-EQ> 314,875
0
19,514
<LONG-TERM-DEBT-NET> 264,279
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 30,500
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 44,192
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 250,621
<TOT-CAPITALIZATION-AND-LIAB> 923,981
<GROSS-OPERATING-REVENUE> 338,698
<INCOME-TAX-EXPENSE> 18,093
<OTHER-OPERATING-EXPENSES> 266,732
<TOTAL-OPERATING-EXPENSES> 284,825
<OPERATING-INCOME-LOSS> 53,873
<OTHER-INCOME-NET> 6,507
<INCOME-BEFORE-INTEREST-EXPEN> 60,380
<TOTAL-INTEREST-EXPENSE> 21,855
<NET-INCOME> 44,819
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 26,626
<TOTAL-INTEREST-ON-BONDS> 18,789
<CASH-FLOW-OPERATIONS> 47,880
<EPS-PRIMARY> 2.84
<EPS-DILUTED> 2.84
</TABLE>
