SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
<TABLE>
<CAPTION>
Commission Registrant, State of Incorporation; IRS Employer
File Number Address and Telephone Number Identification No.
<S> <C> <C>
1-11603 SIGCORP, Inc. 35-1940620
(An Indiana corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
1-3553 Southern Indiana Gas and Electric Company 35-0672570
(An Indiana Corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Registrant Title of each class on which registered
<S> <C> <C>
SIGCORP, Inc. Common Stock, Without New York Stock Exchange
Par Value
Rights to Purchase New York Stock Exchange
Common Stock
Southern Indiana Gas None
and Electric Company
</TABLE>
Securities registered pursuant to Section 12(g)
of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Registrant Title of each class on which registered
<S> <C> <C>
SIGCORP, Inc. None
Southern Indiana Gas Cumulative Preferred New York Stock Exchange
Stock,
and Electric Company $100 Par Value
</TABLE>
<PAGE> 2
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
registrants' 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 all Registrants (1) have
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
registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past
90 days: Yes X No __
At February 29, 2000, the aggregate market values of
SIGCORP, Inc. Common Stock, Without Par Value, and Southern
Indiana Gas and Electric Company Cumulative Preferred Stock,
$100 Par Value, 185,895 shares, held by non-affiliates were
$511,011,033 and $15,325,490, respectively.
As of February 29, 2000, the number of shares outstanding of
each of the Registrants' classes of common stock were:
<TABLE>
<CAPTION>
<S> <C>
SIGCORP, Inc.: Common stock, no par value, 23,630,568 shares
Southern Indiana Gas and Common stock, no par value, 15,754,826 shares
Electric Company: outstanding and held by SIGCORP, Inc.
</TABLE>
Documents Incorporated by Reference
None
This combined Form 10-K is separately filed by SIGCORP, Inc.
and Southern Indiana Gas and Electric Company.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Item Page
Number Number
<S> <C> <C> <C>
Part I
1 Business 4
2 Properties 14
3 Legal Proceedings 14
4 Submission of Matters to Vote of Security Holders 15
Part II
5 Market for Registrant's Common Equity
and Related Security Holder Matters 16
6 Selected Financial Data 17
7 Management's Discussion and Analysis
of Results of Operations and Financial Condition 18
8 Financial Statements and Supplementary Data 31
9 Disagreements on Accounting and Financial
Disclosure 65
Part III
10 Directors and Executive Officers of
the Registrants 66
11 Executive Compensation and Transactions 67
12 Security Ownership of Certain Beneficial
Owners and Management 73
13 Certain Relationships and Related
Transactions 74
Part IV
14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 75
15 Subsidiaries of the Registrant 81
16 Signatures 82
<PAGE> 4
PART I
Item 1. BUSINESS
SIGCORP and SIGECO
This discussion includes forward looking statements
based on information currently available to management.
Such statements are subject to certain risks and
uncertainties. These statements typically contain, but are
not limited to, the terms "anticipate", "expect",
"potential", "estimate" and similar words, and actual
results may differ materially due to the speed and nature of
increased competition and deregulation in the electric and
gas utility industry, economic or weather conditions
affecting future sales and margins, changes in markets for
energy services, changing energy market prices, legislative
and regulatory changes including revised environmental
requirements, impacts of Year 2000 issues, availability and
cost of capital, the pending merger with Indiana Energy,
Inc. and other similar factors.
ORGANIZATION
SIGCORP, Inc. (SIGCORP) is a holding company
incorporated October 19, 1994 under the laws of the State of
Indiana. SIGCORP has eleven wholly-owned subsidiaries:
Southern Indiana Gas and Electric Company (SIGECO), a gas
and electric utility, and ten 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, became the parent of SIGECO, which accounts for
over 80% 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. 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 remained securities of SIGECO and were
unaffected. (See "Nonregulated Subsidiaries - General" and
Note 1 of the Notes to Consolidated Financial Statements,
page 48, for further discussion.)
The reorganization was 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 buffers 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 remains the core business and primary focus
of SIGCORP.
On June 14, 1999, SIGCORP announced an agreement to
merge with Indiana Energy, Inc. (IEI) in an all-stock
pooling transaction through which a new holding company,
Vectren Corporation, would be formed. (See "Pending Merger"
in Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATION AND FINANCIAL CONDITION, Page 18, and Note 1 of
the Notes to Consolidated Financial Statements, page 48, for
further discussion.)
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.
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, 1999, SIGECO
served 126,605 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).
<PAGE> 5
At December 31, 1999, SIGECO supplied gas service to
109,388 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 1999, thirty-two suppliers were used.
The principal industries served by SIGECO include
polycarbonate resin (Lexan) and plastic products, aluminum
smelting and recycling, aluminum sheet products, automotive
assembly, steel finishing, 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 a 138,000 volt electric
transmission line which is located in Kentucky and which
interconnects with Louisville Gas and Electric Company's
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, 1999, were as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Electric 81.3% 74.2% 76.1% 81.7% 81.8%
Gas 18.7 25.8 23.9 18.3 18.2
Operating Income Before Income
Taxes:
Electric 96.4% 89.0% 87.1% 90.8% 91.7%
Gas 3.6 11.0 12.9 9.2 8.3
</TABLE>
Reference is made to Note 9 of the Notes to
Consolidated Financial Statements, page 48, for Segments of
Business data.
SIGECO - ELECTRIC BUSINESS
SIGECO supplies electric service to 126,605 customers,
including 110,064 residential, 16,344 commercial, 173
industrial, 19 public street and highway lighting, and five
municipal customers.
SIGECO's installed generating capacity as of December
31, 1999 was rated at 1,256,000 kilowatts (Kw). Coal-fired
generating units provide 1,041,000 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 July 6,
1999, when SIGECO's system summer peak load reached
1,140,800 Kw. SIGECO's total load, including its firm power
commitments to the City of Jasper, Indiana, for each of the
years 1995 through 1999 at the time of the system summer
peak, and the related reserve margin, are presented below.
<TABLE>
<CAPTION>
Date of Summer 8-17-95 8-21-96 7-14-97 7-21-98 7-6-99
Peak Load
<S> <C> <C> <C> <C> <C>
Company System
Peak Load (Kw)
1,021,000 999,800 1,022,700 1,082,500 1,140,800
Firm Power
Commitments at
Peak 60,800 53,500 63,700 46,800 58,700
Total at Peak 1,081,800 1,053,300 1,086,400 1,129,300 1,199,500
Total Generating
Capability (Kw) 1,236,000 1,236,000 1,236,000 1,256,000 1,256,000
Reserve Margin at
Peak 14% 17% 14% 11% 5%
</TABLE>
<PAGE> 6
The winter peak load of the 1998-1999 season of 834,200
Kw occurred on January 5, 1999 and was 9.3% higher than the
previous winter peak load of 763,200 Kw which occurred on
March 11, 1998.
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 222 Mw during the 1999-
2000 winter season, and was terminated March 15, 2000.
Electric generation for 1999 was fueled by coal (98.8%)
and natural gas (1.2%). Oil was used only for testing of
gas/oil-fired peaking units.
Historically, coal for SIGECO's coal-fired generating
stations has been purchased from operators of nearby Indiana
strip mines pursuant to long-term contracts. Over the past
several years, SIGECO has been actively involved in
intensive contract negotiations and legal actions to reduce
coal costs and thereby lower electric rates. The initial
long-term coal contracts to be renegotiated and eventually
bought out were those supplying SIGECO's Culley Generating
Station and Warrick Unit 4. Net savings from these actions,
estimated to total approximately $59 million, were passed
back to SIGECO's electric customers through the fuel
adjustment clause. The coal used in these plants is
blended, when necessary, 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
1,615,000 tons of coal were used during 1999 in the
generation of electricity at the Culley Station and Warrick
Unit 4 with the majority of the coal used at the Culley
Station supplied by SIGCORP's subsidiary, SIGCORP Fuels, Inc
(see "Nonregulated Subsidiaries - General", page 8). Culley
Units 2 and 3 were equipped with flue gas desulfurization
equipment as part of the Clean Air Act Compliance Plan.
(See "Environmental Matters", page 11, 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. SIGECO estimates the total
savings in coal costs resulting from the buyout, net of
total buyout costs, approximated $58 million through
December 31, 1998, the term of the original contract. The
net savings from this coal contract renegotiation have been
passed back to SIGECO's retail and firm wholesale electric
customers through the fuel adjustment clause. The amount of
coal burned at A. B. Brown Generating Station during 1999
was approximately 1,372,000 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 all coal consumed in generating
electrical energy for the years 1995 through 1999 was as
follows:
<TABLE>
<CAPTION>
Average Cost
Average Cost Average Cost Per Kwh
Year Per Ton Per MMBTU (In Mills)
<S> <C> <C> <C>
1995 30.02 1.33 14.10
1996 26.01 1.16 12.40
1997 20.75 0.91 9.80
1998 21.34 0.94 9.97
1999 21.88 0.96 10.13
</TABLE>
<PAGE> 7
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 1997-1999, 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. On August 18, 1999,
the IURC issued a generic order establishing new guidelines
for the recovery of the net energy cost of purchased power
through fuel adjustment clauses. The order requires each
utility to establish a benchmark which is the utility's
highest on-system fuel cost per kilowatt-hour during the
most recent annual period. If the utility's weekly average
purchased power costs were less than the benchmark cost of
fuel, those costs would be recoverable through the fuel
clause as "fuel costs included in purchased power". If the
utility's weekly average purchased power costs exceeded the
"benchmark", the utility would be required to provide
evidence supporting the reasonableness of the costs
incurred. SIGECO does not anticipate any limitation of
recoverability of its purchased power costs under this
generic order. The Office of the Utility Consumer Counselor
has appealed the generic order to the Indiana Court of
Appeals.
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 1999, SIGECO paid $1,014,000 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 1999, SIGECO's
participation in the OVEC arrangements was 1.5%.
SIGECO participates with seven other utilities and 31
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.
Additionally, SIGECO is one of 14 owners of the Midwest
Independent System Operator (MISO) which is an organization
recently established to ensure the dependable and efficient
transmission of electric energy between its owner utilities
located in the midwestern United States. The MISO
anticipates an in-service date of June 2001 for its control
center and systems.
SIGECO - GAS BUSINESS
SIGECO supplies natural gas service to 109,388
customers, including 99,596 residential, 9,576 commercial
and 216 industrial customers, through 2,921 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
<PAGE> 8
can be withdrawn from the three storage fields during peak
demand periods on the system.
In 1999, a total of 32 suppliers sold gas to SIGECO.
In total, SIGECO purchased 12,574,927 Dth in 1999. During
1999, sixty-one of SIGECO's major gas customers utilized
SIGECO's gas transportation program to procure a portion of
their gas supply needs from suppliers other than SIGECO. A
total of 19,580,081 Dth, 61% of total gas throughput, was
transported for these major customers in 1999 compared to
17,349,036 Dth transported in 1998. SIGECO receives fees
for the use of its facilities in transporting such gas.
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 1998-1999 winter season peak day send out
was 215,284 Dth on January 14, 1999.
The average cost per Dth of gas purchased by SIGECO
during the past five calendar years was as follows: 1995,
$2.48; 1996, $3.47; 1997, $3.25; 1998, $3.22; and 1999,
$3.10.
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
1997-1999, 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.
SIGCORP
NONREGULATED SUBSIDIARIES - GENERAL
In addition to its wholly-owned utility subsidiary,
SIGECO, SIGCORP has ten wholly-owned nonutility
subsidiaries, of which nine were active at December 1999.
Southern Indiana Properties, Inc., formed in 1986, invests
in leveraged leases of real estate and equipment, real
estate partnerships and joint ventures and private placement
subordinated debt instruments. Energy Systems Group, Inc.,
incorporated in April 1994, has a one-third ownership in
Energy Systems Group, LLC, an energy-related performance
contracting firm serving industrial and commercial
customers. Southern Indiana Minerals, Inc., incorporated in
May 1994, processes and markets coal combustion by-products.
SIGCORP Energy Services, Inc., incorporated in October 1996,
was established to market energy and related services and
currently provides natural gas, pipeline management, storage
service and other natural gas-related services to SIGECO and
other customers. SIGCORP Capital, Inc., also incorporated
in October 1996, is the primary financing vehicle for
SIGCORP's nonregulated subsidiaries. SIGCORP Fuels, Inc.,
incorporated in December 1996, was formed to own and operate
coal mining properties and to provide coal and related
services to SIGECO and other customers. SIGCORP Power
Marketing, Inc., also incorporated in December 1996, but not
yet active, was formed to procure electric power supplies
for SIGECO and other customers, and will market SIGECO's
excess electric generation capacity. SIGCORP Communications
Services, Inc., incorporated in August 1997, was formed to
undertake telecommunications-related strategic initiatives.
SIGECO Advanced Communications, Inc. (Advanced
Communications), incorporated in
<PAGE> 9
April 1998, holds SIGCORP's investment in Utilicom Holdings,
LLC, the newly formed holding company for Utilicom Networks,
Inc., and in SIGECOM Holdings, Inc., the newly formed
holding company of SIGECOM, LLC. Advanced Communications
and Utilicom Networks, Inc. are partners in SIGECOM, LLC, an
integrated communications provider serving the Evansville,
Indiana market with an 860-mile fiber-optic based network.
(See Note 12 of the Notes to Consolidated Financial
Statements, page 48, for discussion of the restructured
investment at Advanced Communications.) SIGCORP
Environmental Services, Inc., incorporated in November 1998,
holds SIGCORP's investment in Air Quality Services, a joint
venture created to provide air quality monitoring and
testing services to industry and utilities. (See "SIGECO
Advanced Communications, Inc." in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 18, and Note 1 of the Notes to
Consolidated Financial Statements, page 48, for further
discussion.)
SIGCORP and SIGECO
PERSONNEL
The holding company, SIGCORP, had one employee as of
December 31, 1999.
SIGECO's network of gas and electric operations
directly involves 775 employees with an additional 146
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 1999
(including all Warrick Plant employees) were $62.7 million.
In 1998, total payroll and benefits were $55.8 million.
On July 1, 1998, SIGECO signed a new two-year contract
with Local 702 of the International Brotherhood of
Electrical Workers. The contract provides for annual wage
increases of 3.5% and 3.0%. Improvements in healthcare
coverage costs and pension plan benefits are also included.
On October 4, 1999, SIGECO's Hoosier Division signed a new
two-year labor contract, ending September 23, 2001, with
Local 135 of the Teamsters, Chauffeurs, Warehousemen and
Helpers. The contract provides for annual wage increases of
3% and improvements in health care coverage costs and
pension and other benefits.
As of December 31, 1999, Southern Indiana Properties,
Inc. had 2 employees; Southern Indiana Minerals, Inc. had 7
employees; SIGCORP Energy Services, Inc. had 21 employees;
SIGCORP Communications, Inc. had 28 employees; SIGCORP
Fuels, Inc. had 3 employees; and Sigeco Advanced
Communications, Inc. had 1 employee. Energy Systems Group,
Inc., SIGCORP Capital, Inc., SIGCORP Environmental Services,
Inc. and SIGCORP Power Marketing, Inc. had no employees as
of December 31, 1999. There were no labor organizations
representing employees of the nonregulated entities.
CONSTRUCTION PROGRAM AND FINANCING
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.
Additionally, SIGCORP may periodically make capital
investments in its nonregulated operations. See "Liquidity
and Capital Resources" in Item 7, MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION, page 18, for discussion of construction
expenditures and financing during 1999.
For 2000, SIGECO's construction expenditures are
presently estimated to be $52.0 million. Expenditures in
the power production area are expected to total $18.8
million. The balance of the 2000 construction program
consists of $17.0 million for additions and improvements to
other electric system facilities, $8.9 million for additions
and improvements to the gas system and $7.3 million to
complete several strategic information systems and for
common utility 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,
<PAGE> 10
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 $357 million, including
allowance for funds used during construction, for the years
2000-2004 as follows: 2000 - $52 million; 2001 - $87
million; 2002 - $113 million; 2003 - $62 million; and 2004 -
$43 million. This construction program includes $97 million
for construction expenditures during 2000-2003 that SIGECO
estimates as the maximum amount if it is required to comply
with new United States Environmental Protection Agency
(USEPA) air quality standards discussed under "Environmental
Matters," and $32 million for the construction of a gas-
fired electric generation peaking unit in 2002. Because
SIGECO plans to lease the proposed cogeneration facility
discussed in "Rate and Regulatory Matters" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 18, its cost is not
included in the projected five-year construction
requirements. While SIGCORP expects the majority of
SIGECO's construction and other capital requirements to be
provided by internally generated funds, external financing
requirements of $50-70 million of medium term debt are
anticipated and will be used primarily to retire a similar
amount of short-term debt.
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 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
pertain 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 (IURC) 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.
See subsequent discussion under "Competition" regarding the
restructuring of the electric utility industry and possible
deregulation of certain segments or functions of electric
utility service.
In addition, SIGECO is subject to regulation by the
Federal Energy Regulatory Commission (FERC) with respect to
the sale and transmission of electric energy in interstate
commerce, its rates for sales for resale, interconnection
agreements with other utilities, the classification of its
accounts and the acquisition and sale of utility property in
certain circumstances as provided by the Federal Power Act.
See "SIGECO-Electric Business", page 5 and "SIGECO-Gas
Business", page 7 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
As part of its efforts to develop a national energy
strategy, Congress amended PUHCA and the Federal Power Act
by enacting the National Energy Policy Act of 1992 (NEPA),
which will affect the traditional structure of the electric
utility industry. As a result of changes brought about by
NEPA, SIGECO competes with other utilities and wholesale
generators for sales of electricity to existing wholesale
customers of SIGECO and other potential wholesale customers.
SIGECO currently competes with other utilities in connection
with intersystem bulk power sales. SIGECO does not
presently compete for retail electric or gas customers with
the other utilities within its assigned service areas.
However, various federal and state legislators, including
members of the Indiana General Assembly, have introduced
proposed legislation addressing retail wheeling and other
related issues. Under the proposed legislation, the
electric generation function (and the marketing function
under some proposals) would be subject to competition and
deregulated, while other
<PAGE> 11
functions such as transmitting and distributing power, would
continue to be regulated. See "Competition" in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 18, for discussion
of the major changes effected by NEPA; the status of related
Indiana legislation; and further discussion of the
deregulation of the electric industry and possible further
deregulation of the natural gas industry.
Some of SIGECO's gas customers have, or in the future
could acquire, access to energy sources other than those
available through SIGECO. (See "SIGECO-Gas Business", page
7, for discussion of gas transportation.) Although federal
policy allows bypass of a local distribution company,
Indiana law disallows bypass in most cases. SIGECO is
currently litigating two such attempts in the Indiana
regulatory arena and before the FERC. (See "Competition" in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION, page 18 for discussion
of the bypass attempts and related litigation.)
There continues to be 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 this competition
in the future or its potential effect on SIGECO's
operations.
ENVIRONMENTAL MATTERS
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 investments above those amounts stated under
"Construction Program and Financing", page 9.
All existing SIGECO electric generation facilities have
operating permits from the Indiana Department of
Environmental Management or other agencies having
jurisdiction. In order to secure approval for these
permits, SIGECO had 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
require reduction in emissions of sulfur dioxide (SO2) and
nitrogen oxide (NOX) from coal-burning electric generating
facilities, including those owned and operated by SIGECO.
Two of SIGECO's principal coal-fired facilities (A. B. Brown
Units 1 and 2, totaling 500 megawatts of capacity) were
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, Warrick Unit 4 and Culley Unit 2 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
all of the Phase I emission requirements and some of the
Phase II requirements by January 1995 with the
implementation 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)
<PAGE> 12
was also subject to the 1.2 lb/MMBTU restriction by January
2000. With the addition of the scrubber at the Culley
generating station, SIGECO is surpassing the minimum
compliance requirements of Phase I and is using
"overcompliance allowances" and fuel blending (with low
sulfur coal) strategies to help meet the stricter Phase II
requirements effective January 2000. SIGECO is purchasing
additional allowances to fully meet Phase II requirements.
No material capital expenditures are anticipated to meet
Phase II requirements, and thus, none are reflected in the
projected construction requirements for the years 2000-2004
discussed in "Construction Program and Financing" or in
"Liquidity and Capital Resources" in Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, page 18.
Current regulatory policy allows for the recovery
through rates of all authorized and approved pollution
control expenditures. Refer to "Environmental Matters" in
Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION, page 18, for
further discussion of SIGECO's Clean Air Act Compliance
Plan, and the associated costs. SIGECO filed Title V (of
the 1990 Amendments to the Federal Clean Air Act) permit
applications for all of its applicable generation facilities
during the fourth quarter of 1996. The applications have
been approved for completeness and are being processed by
the Indiana Department of Environmental Management. Warrick
Unit 4 (50% owned by SIGECO) is covered by Title V permit
applications filed by Alcoa Generating Corporation, majority
owner of the Warrick Generating Station.
In December 1996 and January 1997, the USEPA issued
proposed regulations regarding new national ambient air
quality standards for regional ozone and particulate matter
concentration levels. In July 1997, the USEPA issued its
final rule which revised the national ambient air quality
standard for ozone by setting a lower concentration limit
and changing the averaging period from one hour to eight
hours. There remains much uncertainty as to the extent that
SIGECO would be affected by this ruling. Refer to
"Environmental Matters" in Item 7, MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION, page 18, for discussion of this new ruling and
related issues and the estimated possible costs to comply
with reductions if ultimately required.
Refer to Item 3, LEGAL PROCEEDINGS, Page 14, and to
"Environmental Matters" in Item 7, MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION, page 18 for discussion of the USEPA's lawsuit
against SIGECO for alleged violations of the Clean Air Act.
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. Application for renewal of the landfill
operating permit was filed with the Indiana Department of
Environmental Management (IDEM) in August 1996, which has
not yet been acted upon. The existing permit will remain in
effect until action is taken by IDEM on the renewal
application. 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 for its sale
to a wallboard manufacturer. Such utilization has not been
necessary, to date.
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 USEPA 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
and Broadway Station (gas turbines). As majority owner of
Warrick Generating Station, Alcoa Generating Corporation has
been granted an NPDES permit for that facility, including
Warrick Unit 4. Such discharge permits are limited in time
and must be renewed at five-year intervals. During 1994,
SIGECO submitted renewal applications for these permits,
which are currently pending, as they are for most
industries. The existing permits will remain in effect
until action is taken by IDEM on the renewal applications.
SIGECO anticipates renewal of the permits by IDEM. At
present, there are no known enforcement proceedings
concerning water quality pending or threatened against
SIGECO.
<PAGE> 13
<TABLE>
<CAPTION>
Age at
Name 12/31/99 Positions Held During Past Dates
Five Years
<S> <C> <C> <C>
R. G. Reherman 64 Chairman of the Board of
Directors,
and Chief Executive May 1999 -
Officer of SIGCORP Present
Chairman of the Board of
Directors,
President and Chief Executive
Officer of SIGCORP Jan 1996 -
April 1999
Chairman of the Board of
Directors of SIGECO Sept 1997 -
Present
Chairman of the Board
of Directors,
President and Chief Executive
Officer of SIGECO *- Sept 1997
A. E. Goebel 52 President and Chief Operating
Officer of SIGCORP;
Chief Executive
Officer of SIGECO May 1999- Present
Executive Vice President Sept 1997 -
of SIGCORP April 1999
Secretary and Treasurer Jan 1996 -
of SIGCORP Sept 1997
President and Chief
Executive Officer Sept 1997-
of SIGECO April 1999
Senior Vice President, Chief
Financial Officer Oct 1996 -
and Secretary of SIGECO Sept 1997
Senior Vice President, Chief
Financial Officer,
Secretary and Treasurer of * - Oct 1996
SIGECO
J. G. Hurst 56 President and Chief Operating May 1999 -
Officer of SIGECO Present
Executive Vice President and
Chief Operating Sept 1997 -
Officer of SIGECO April 1999
Senior Vice President and
General Manager
of Operations of SIGECO * - Sept 1997
R. G. Lynch 48 Senior Vice President of
Human Resources Mar 1999 -
and Administration of SIGCORP Present
J. L. Davis 44 Vice President Support Jan 1999 -
Services of SIGECO Present
Vice President of Marketing
and Customer
Service of SIGECO * - Dec 1998
W. S. Doty 49 Vice President Energy Jan 1999 -
Delivery of SIGECO Present
Director of Gas Operations * - Dec 1998
of SIGECO
R. G. Jochum 52 Vice President Power Supply Jan 1999 -
of SIGECO Present
Vice President and Director
of Power
Production of SIGECO * - Dec 1998
G. M. McManus 52 Vice President and Director
of Governmental
Relations of SIGECO * - Present
<FN>
* Indicates positions held at least since 1995.
</FN>
<PAGE> 14
Item 2. PROPERTIES
SIGCORP and SIGECO
SIGCORP has no significant properties other than common
stock of affiliates.
SIGECO's installed generating capacity as of December
31, 1999 was rated at 1,256,000 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 406,000
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 they are generally used only for reserve, peaking or
emergency purposes due to the higher per unit cost of
generation.
SIGECO's transmission system consists of 820 circuit
miles of 138,000 and 69,000 volt lines. The transmission
system also includes 27 substations with an installed
capacity of 4,013,590 kilovolt amperes (Kva). The electric
distribution system includes 3,195 pole miles of lower
voltage overhead lines and 225 trench miles of conduit
containing 1,345 miles of underground distribution cable.
The distribution system also includes 93 distribution
substations with an installed capacity of 1,833,855 Kva and
49,501 distribution transformers with an installed capacity
of 2,223,537 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 359 miles of
transmission mains, and the gas distribution system includes
2,562 miles of distribution mains.
SIGECO's properties 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 the ownership and operation of coal
mining property and investments in real estate partnerships,
leveraged leases, and private placement subordinated debt
instruments.
Item 3. LEGAL PROCEEDINGS
SIGCORP and SIGECO
On November 3, 1999, the USEPA filed a lawsuit against
SIGECO. The USEPA alleges that, beginning in 1992, SIGECO
violated the Clean Air Act by: (i) making modifications to
its Culley Generating Station in Yankeetown, Indiana without
obtaining required permits; (ii) making major modifications
to the Culley Generating Station without installing the best
available emission control technology; and (iii) failing to
notify the USEPA of the modifications. In addition, the
lawsuit alleges that the modifications to the Culley
Generating Station required SIGECO to begin complying with
federal new source performance standards.
SIGECO believes it performed only proper maintenance at
the Culley Generating Station. Because proper maintenance
does not require permits, application of the best available
emission control technology, notice to the USEPA, or
compliance with new source performance standards, SIGECO
believes that the lawsuit is without merit, and intends to
defend the lawsuit vigorously.
<PAGE> 15
The lawsuit seeks fines against SIGECO in the amount of
$27,500 per day per violation. The lawsuit does not specify
the number of days or violations the USEPA believes
occurred. The lawsuit also seeks a court order requiring
SIGECO to install the best available emissions technology at
the Culley Generating Station. If the USEPA is successful
in obtaining an order, SIGECO estimates that it would incur
capital costs of approximately $40 million to $50 million
complying with the order.
The USEPA has also issued an administrative notice of
violation to SIGECO making the same allegations, but
alleging that violations began in 1977.
Under applicable rules, SIGECO could be subjected to
criminal penalties if the Culley Generating Station
continues to operate without complying with the new source
performance standards and the allegations are determined by
a court to be valid. SIGECO anticipates at this time that
the plant will continue to operate while the matter is being
decided.
No material legal proceedings were terminated during
the fourth quarter of 1999.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
SIGCORP and SIGECO
(a) A special meeting of shareholders was held at
2:00 P.M. (CDT) on December 17, 1999, with the
following action taken:
(b) The merger of SIGCORP, Inc. and Indiana Energy,
Inc. was approved by a majority of the
outstanding shares of SIGCORP, Inc.
(c) The following table shows the voting results:
</TABLE>
<TABLE>
<CAPTION>
Approval of Merger
Total Votes Cast: 22,606,603
For Against Abstain
<S> <C> <C>
21,590,477 708,424 307,702
</TABLE>
<PAGE> 16
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS
SIGCORP and SIGECO
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 March 1, 2000, SIGCORP had
8,407 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 SIGCORP's stock as
reported in the consolidated transaction reporting system
for each quarterly period during the two most recent fiscal
years were:
<TABLE>
<CAPTION>
QUARTERLY PERIOD
1 2
High Low High Low
<S> <C> <C> <C> <C>
1999 $35-7/8 $26-7/8 $31-7/16 $26-1/2
1998 $32-5/16 $27-5/16 $32-3/8 $28-1/16
3 4
High Low High Low
1999 $27-15/16 $25-1/2 $26-9/16 $22-9/16
1998 $33-7/16 $30-1/4 $36-9/16 $32-13/16
</TABLE>
Dividends declared and paid per share of SIGCORP common
stock during the past two years were:
<TABLE>
<CAPTION>
QUARTERLY PERIOD
1 2 3 4
<S> <C> <C> <C> <C>
1999 $0.3100 $0.3100 $0.3100 $0.3100
1998 $0.3025 $0.3025 $0.3025 $0.3025
</TABLE>
The quarterly dividend on common stock was increased to
31.75 cents per share in January 2000, payable
March 20, 2000.
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
to SIGCORP is, in effect, restricted by SIGECO's 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, 1999 under
this restriction.
The payment of cash dividends on common stock is, in
effect, restricted by SIGECO's 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, 1999 under this restriction was $2,154,682,
leaving $253,235,117 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)).
<PAGE> 17
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, 1999, such ratio amounted to
approximately 52%.
Item 6. SELECTED FINANCIAL DATA
SIGCORP and SIGECO
<TABLE>
<CAPTION>
SIGCORP, Inc.
Year Ended December
31
(in thousands 1999 1998 1997 1996 1995
except for per share
amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 604,491 $ 557,111 $ 433,237 $ 404,738 $ 360,771
Operating Income $ 88,812 $ 86,079 $ 85,582 $ 82,717 $ 72,401
Net Income Before
Cumulative Effect of
Accounting Change $ 52,057 $ 50,476 $ 46,140 $ 43,264 $ 38,525
Net Income $ 52,057 $ 50,476 $ 46,140 $ 43,264 $ 44,819
Average Common
Shares Outstanding 23,631 23,631 23,631 23,631 23,631
Earnings Per Share
of Common Stock
Before Cumulative
Effect of
Accounting Change $ 2.20 $ 2.14 $ 1.95 $ 1.83 $ 1.63
Cumulative Effect
of Accounting Change $ - $ - $ - $ - $ 0.27
Basic Earnings Per
Share $ 2.20 $ 2.14 $ 1.95 $ 1.83 $ 1.90
Diluted Earnings
Per Share $ 2.19 $ 2.12 $ 1.95 $ 1.83 $ 1.90
Dividends Per Share
of Common Stock $ 1.24 $ 1.21 $ 1.18 $ 1.15 $ 1.13
Total Assets $ 1,144,142 $ 1,029,518 $ 990,023 $ 952,720 $ 923,981
Redeemable Preferred
Stock $ 8,192 $ 8,308 $ 8,424 $ 8,424 $ 8,424
Long-Term
Obligations $ 276,164 $ 206,705 $ 276,844 $ 266,951 $ 265,085
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas And Electric Company
Year Ended December 31
(in thousands) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 375,781 $ 364,666 $ 358,106 $ 372,730 $ 338,698
Operating Income $ 63,426 $ 62,002 $ 62,912 $ 61,041 $ 53,873
Net Income Before
Cumulative Effect of
Accounting Change $ 46,768 $ 43,542 $ 45,363 $ 42,841 $ 39,624
Net Income Applicable
to Common Stock $ 45,690 $ 42,447 $ 44,266 $ 41,744 $ 44,819
Total Assets $ 894,759 $ 881,912 $ 864,463 $ 852,325 $ 923,981
Redeemable Preferred
Stock $ 8,192 $ 8,308 $ 8,424 $ 8,424 $ 8,424
Long-Term Obligations $ 240,915 $ 170,915 $ 239,420 $ 252,114 $ 265,085
</TABLE>
<PAGE> 18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
SIGCORP and SIGECO
The consolidated financial statements of SIGCORP, Inc.
(SIGCORP), an investor-owned holding company, include
SIGCORP's principal subsidiary, Southern Indiana Gas and
Electric Company (SIGECO), a regulated gas and electric
utility, and ten nonregulated subsidiaries. The following
discussion and analysis includes those factors which have
affected, or may materially affect the results of operations
and financial condition of SIGCORP and its subsidiaries.
RESULTS OF OPERATIONS
Favorable results of sustained economic growth within its
service territory and the continued ability to aggressively
compete in the wholesale power market, combined with greater
capitalized interest charges, produced record earnings of
$2.20 per basic share for SIGCORP in 1999. The previous
yearly earnings record of $2.14 per share, set in 1998,
included a $2.9 million after-tax ($.12 per share) gain on
the liquidation of an equity position in a leveraged lease.
Earnings per share for 1997 were $1.95. Utility operations
contributed $1.93 of the 1999 per share earnings and
nonregulated operations contributed $.27 per share; for
1998, utility net income provided $1.80 and strong non-
utility results, reflecting the $0.12 gain, contributed the
remaining $.34 of total basic earnings per share. The
factors effecting the $.06 increase in 1999 earnings follow:
<TABLE>
<CAPTION>
<S> <C>
Period ended December 31, 1998 $ 2.14
Weather (.01)
Utility sales growth other than weather .19
Electric sales to other utilities and power .02
marketers
Utility O&M expense (.06)
Utility depreciation expense (.06)
Nonregulated gas energy services and nonutility (.07)
operations
Other .05
Period ended December 31, 1999 $ 2.20
</TABLE>
REVENUES Electric utility revenues rose $9.7 million (3.3%)
during 1999, reflecting a 5.5% increase in sales to retail
and municipal customers following a 7.3% rise in sales to
such customers in 1998. Although sales to other utilities
and power marketers declined 16.6% in 1999, several new
sales contracts produced higher average unit sales prices to
these customers and related revenues were down only 2.5%. A
$25.3 million ( 9.3%) increase in electric revenues in 1998
reflected the greater sales to retail and municipal
customers, higher unit prices for power sales to other
utilities and power marketers during a very warm summer and
additional sales to Alcoa Generating Corporation. Continued
economic growth in SIGECO's service area during 1999 more
than offset the impact of milder summer temperatures (21%
milder than 1998 in terms of cooling degree-days) on weather-
sensitive sales, raising residential and commercial electric
sales 3% and 5%, respectfully. Industrial sales reflected
the strength of the area's growing industrial base,
increasing 7% compared to 1998. The decrease in sales to
other utilities and power marketers during the current year
also reflected the milder temperatures which eased demand in
the wholesale market, compared to the prior year when
temperatures were 18% warmer than normal and market supply
was constrained. Total electric sales rose 1.2% compared to
1998, when electric sales were 24% greater than the 1997
period.
<PAGE> 19
Greater sales to retail gas customers was the primary reason
for a 2.1% ($1.4 million) increase in 1999 gas revenues and
more than offset the impact on revenues of the recovery of
lower per unit gas costs reflected in customer rates. The
higher revenues followed a 22% ($18.8 million) decrease in
1998 gas utility revenues resulting from fewer sales and the
recovery of lower per unit gas costs. Total gas sales were
up 6% in 1999, after a 22% decline in 1998, reflecting the
impact of 7% cooler temperatures (in terms of heating degree-
days) on weather-sensitive sales and the economic health of
SIGECO's service area. Residential sales rose 6% during
1999, after substantially milder winter temperatures in 1998
caused a 19% decrease in such sales. Sales to commercial
customers also rose 6% reflecting the cooler temperatures
and the growth of the commercial sector. Total natural gas
sold and transported to gas customers increased 10% during
1999 after a 1% decline in 1998.
The continued growth of SIGCORP Energy Services (Energy),
which markets natural gas and related services, during its
third full year of operation raised SIGCORP's 1999 revenues
$41.9 million, following a $108.0 million increase in
Energy's revenues in 1998 which reflected both substantial
growth in sales and higher market prices for natural gas
sold to Energy's customers during 1998. A $5.7 million
decline in other revenues for 1999, which includes the
operating revenues of SIGCORP's other nonregulated
subsidiaries, was primarily the result of $4.1 million lower
revenues at SIGCORP's Communications Services
(Communications) subsidiary due to the completion of several
large projects by the end of 1998. During 1998, the first
full-year operation of Communications and revenues from
these large projects were reflected in the $9.4 million
increase in other revenues compared to 1997.
OPERATING EXPENSES Fuel for electric generation, the most
significant electric operating cost, increased 1.7% ($1.1
million) in 1999, tracking a 1.9% increase in electric
generation; per unit fuel costs were comparable to the year-
earlier period. A 5.5% rise in 1998 electric generation
caused a 4.1% rise in total fuel costs. Changes in the unit
costs of fuel and purchased electric energy are passed on to
electric customers through commission-approved fuel and
purchased power cost recovery mechanisms.
Although SIGECO's sales of electric energy to nonfirm
wholesale customers are provided primarily from excess
capacity, SIGECO's purchases of electricity from other
utilities for resale to nonfirm wholesale customers
typically represent the majority of SIGECO's total purchased
electric energy costs. During 1999, total purchases of
electric energy declined 13% due to the 17% decline in sales
to other utilities and power marketers, however higher
average market prices for energy purchased resulted in total
costs remaining comparable to prior year costs. Purchased
electric energy costs incurred in 1998 increased $6.8
million over 1997 costs due to a 39% rise in purchases from
other utilities for resale to nonfirm electric wholesale
customers and higher market prices.
The cost of gas sold, the major component of gas operating
expenses, was comparable to 1998 costs, despite the
increased sales of gas, reflecting a 5% lower average per
unit cost of gas sold. A 27% ($14.4 million) decrease in
the 1998 cost of gas sold was attributed to the 22% decrease
in sales of gas and a 7% decline in unit costs. Changes in
the unit costs of natural gas are passed on to gas customers
through a commission-approved gas cost recovery mechanism.
During 1999, the cost of energy services and other revenues,
which was chiefly the cost of natural gas purchased for
resale by Energy and project contract costs at
Communications, rose $36.1 million compared to 1998 due to
the continued growth of Energy. Contract costs at
Communications were $5.0 million lower than a year ago. The
total cost of energy services and other revenues were up
$114.1 million in 1998 compared to 1997 due to the
significant growth at Energy and higher market prices paid
for natural gas sold to their customers and project costs
related to the full-year operations of Communications.
<PAGE> 20
SIGCORP's other operation expenses in 1999 were up 11.5%
($7.4 million) over 1998 due to a $5.1 million rise in
SIGECO's other operation expenses and higher expenses at
Energy, Communications and SIGCORP, Inc. (the holding
company). The 9% increase in expenses at SIGECO reflects
increased compensation and benefits and other general
operation expenses, all of which were partially offset by a
$2.2 million reduction in provisions for uncollectible
revenues which reflected a $2.0 million provision in 1998
for uncollectible revenue from sales of wholesale power to a
power marketer. Other operation expenses for 1998 rose 6.1%
($3.7 million) compared to 1997 due to higher operation
expenses at several of SIGCORP's nonregulated subsidiaries,
primarily Energy, SIGCORP Fuels and Communications, related
to their increased activity. SIGECO's 1998 operation
expenses, which included the $2 million reserve for
uncollectible revenue, were comparable to 1997.
Maintenance expenses, essentially all incurred at SIGECO,
declined 8% ($2.9 million) compared to 1998, when higher
power generation maintenance expenditures related to a
scheduled major overhaul of a turbine generator at one
generating unit and unscheduled repairs at two other
generating units were incurred. During 1999, maintenance
costs at SIGECO's generating facilities were down 13% ($3.6
million). SIGCORP's 1998 maintenance costs of $37.5 million
represented a 28% ($8.3 million) increase over such costs
for 1997, due to an $8.0 million increase in maintenance
expenditures at SIGECO's generating facilities.
Depreciation and amortization expense increased 6.1% ($2.6
million) in 1999, following a similar increase in 1998, due
primarily to SIGECO's continued investment in gas and
electric utility facilities required to serve new customers
and upgrade existing energy production and delivery systems
and due to a greater investment in shorter-lived utility
plant.
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 to which
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, SIGECO's electric
and gas rates remain unchanged until a rate application is
filed and a general rate order is issued by the Indiana
Utility Regulatory Commission (IURC).
Property and other taxes expense in 1999 and 1998 were
comparable to 1997 costs.
INTEREST AND OTHER CHARGES SIGCORP's total interest and
other charges declined slightly from 1998 reflecting greater
capitalized interest charges during 1999 which included a
$1.1 million adjustment of prior period provisions. Total
interest expense during the current period rose 3%, the
result of additional short-term debt incurred primarily to
fund Southern Indiana Properties' (SIPI) increased
investment activity. Interest on long-term debt declined
$1.3 million reflecting a full-year impact of lower average
interest rates due to SIGECO's 1998 refunding of $80.3
million of tax-exempt bond issues with an equal amount of
tax-exempt bonds. Interest income declined from 1998 when
SIPI earned additional contingent interest income totaling
approximately $1.0 million from two investments.
SIGCORP's 1999 Other, net rose by $0.6 million. Gains on
sales of some of its investment assets and earnings from
additional leveraged lease investments at SIPI combined with
improved results from Energy Systems Group due to several
new large performance contracts more than offset the impact
of the 1998 gain on the liquidation of SIPI's equity
position in a leveraged lease and the final $1.4 million
sale of a portion of emission allowance credits to another
utility under a five-year agreement.
A $3.5 million increase in SIGCORP's Other , net, due
primarily to the gain on the liquidation of SIPI's leveraged
lease investment, was the primary reason for a $4 million
reduction in SIGCORP's total interest and other charges in
1998.
<PAGE> 21
INCOME TAX EXPENSE Higher pretax income in 1999 and the
favorable impact on the 1998 effective tax rate of the
liquidation of the leveraged lease discussed above caused
the increase in federal and state income tax expense for the
1999 period. Despite SIGCORP's higher pretax income in
1998, federal and state income taxes in 1998 were comparable
to 1997 due to the favorable impact of the lower 1998
effective tax rate.
EARNINGS The $0.06 per share (3%) increase in basic
earnings per share for the current twelve-month period was
the result of greater retail and municipal electric sales,
higher unit margins on sales to other utilities and power
marketers, increased gas sales, lower utility maintenance
expenses and additional capitalized interest charges, the
favorable impacts of which were partially offset by higher
utility operation and depreciation expenses and
comparatively lower non-utility earnings due to the $0.12
per share after-tax gain realized by SIPI on the liquidation
of the leveraged lease investment in 1998. Much stronger
non-utility results in 1998, up $0.26 per share over 1997,
resulted in the $0.19 per share (10%) higher earnings in
1998.
PENDING MERGER On June 14, 1999, SIGCORP announced an
agreement to merge with Indiana Energy, Inc. (IEI) in an all-
stock pooling transaction through which a new holding
company, Vectren Corporation (Vectren), would be formed. In
a tax-free exchange, SIGCORP shareholders would receive one
and one-third shares of Vectren stock for each share of
SIGCORP stock, while IEI shares would be exchanged on a one-
for-one basis. The merger would create a company with more
than 650,000 customers providing gas and/or electric service
in adjoining service areas covering nearly two-thirds of
Indiana and assets of approximately $1.8 billion. On March
9, 2000, SIGCORP and IEI received approval from the U.S.
Securities and Exchange Commission to merge, representing
the last remaining federal or state approval needed to
complete the merger; shareholder approval was received on
December 17, 1999. SIGCORP and IEI will complete the merger
on March 31, 2000. The companies expect to generate
efficiencies and other savings of $200 million over a ten-
year period, net of non-recurring merger costs in the range
of $50 million to $55 million. SIGCORP transaction and
related costs incurred by December 31, 1999 were $5,506,000
and have been deferred pending completion of the merger. On
December 15, 1999, IEI announced that its board of directors
had approved a definitive agreement which will allow IEI to
acquire DPL Inc.'s (DPL) natural gas distribution business
for $425 million in a cash transaction. The acquisition,
which is expected to close by the third quarter of 2000,
will be a Vectren transaction. The service area of DPL's
natural gas business is contiguous to Vectren's distribution
system in East Central Indiana, and includes 16 counties in
West Central Ohio. With the acquisition, Vectren
Corporation will have total assets approximating $2.2
billion and revenues approximating $1.2 billion; utility
customer count will total nearly one million.
RATE AND REGULATORY MATTERS SIGECO complies with the
provisions of Statement of Financial Accounting Standard
(SFAS) 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.
Criteria that could give rise to the discontinuance of SFAS
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 SFAS
71 is appropriate. In the event SIGECO determines that it
no longer meets the criteria for following SFAS 71, the
accounting impact could be an extraordinary noncash charge
to operations of an amount that could be material. SFAS
121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", imposes a stricter
criterion for these regulatory assets by requiring that such
assets be probable of future recovery at each balance sheet
date. Under SIGECO's present regulatory
<PAGE> 22
environment and given its current competitive position in
the industry, SIGECO believes its use of regulatory
accounting is appropriate.
On October 1, 1998, SIGECO announced plans and filed for
regulatory approval with the Indiana Department of
Environmental Management (IDEM) and the IURC to build a $120
million cogeneration facility, pending contract
finalization, regulatory approval and placement of permanent
financing. The facility, an atmospheric fluidized-bed coal-
fired plant, will have production capacity for approximately
600,000 pounds/hour of steam and generation of approximately
70 megawatts of electricity. SIGECO plans to lease the
facility through an operating lease. Regulatory reviews by
the IDEM and IURC are in progress, as are preliminary
financing discussions. The final outcome of these matters
are uncertain at this time, however, SIGECO believes these
issues will be favorably resolved. Pending final
resolution, construction of the facility is expected to
begin in late-2000, with commercial operation to begin
during the first quarter of 2003.
COMPETITION SIGCORP's predominant subsidiary, SIGECO, is
presently a fully integrated provider of retail gas and
electric utility service within a franchised, retail
monopoly service area. The production of electricity is the
most significant functional component of the integrated
SIGECO operations, representing approximately 60% of
regulated assets and, as a result of wholesale sales of
electricity, a greater portion of the net income of the
utility.
A fundamental change with respect to the monopoly structure
of the electric utility industry is occurring in the United
States, brought about by the National Energy Policy Act of
1992 (NEPA). The primary purpose of the electric provisions
of NEPA is to increase competition in electric generation,
and under authority granted by NEPA, the Federal Energy
Regulatory Commission (FERC) has aggressively undertaken the
introduction of competition into the wholesale electric
business.
The results of the changes in the wholesale electric
business on SIGECO have been generally favorable. Because
SIGECO has below average fuel for electric generation costs,
it has been an aggressive seller of electricity to power
marketers and other providers seeking electricity to fulfill
wholesale sales contracts. The results of the increased
wholesale sales are discussed further in "Results of
Operations." Conversely, SIGECO has reduced prices to firm
wholesale customers, or offered to do so, to retain their
business. These discounts in pricing terms, when fully
effective, result in gross margins which are several million
dollars below margins attainable from such customers prior
to NEPA. SIGECO cannot predict the long-term consequences
of these changes on its results of operations or financial
condition.
FERC does not have jurisdiction over the retail sales of
electricity. States retain jurisdiction over the permitting
of retail competition, the terms of such competition and the
recovery of any costs or other transition charges resulting
from retail competition.
To date, numerous state legislatures or regulatory agencies
have adopted laws or regulations to introduce retail
electricity competition. However, most states are
continuing to evaluate the issue. In Indiana, the state
legislature must adopt appropriate legislation to amend the
Public Utility Act to provide for retail competition. In
each of the past four years, such legislation was introduced
in the Indiana Senate, but failed to pass. In January 2000,
an association of Indiana's large manufacturers introduced
an electric deregulation bill in the Indiana Senate but the
bill was not voted out of the Senate Commerce Committee, and
the legislative session terminated before further review
could be taken.
Since 1998, Indiana's five largest investor-owned utilities
have attempted to develop the framework for a comprehensive
retail competition bill. However, no comprehensive proposal
has been finalized. Also, recent studies have concluded
that many of Indiana's electric and gas customers, whose
energy costs rank among the lowest in the
<PAGE> 23
nation, may actually experience rate increases with retail
competition. These and other developments have delayed
statewide deregulation in Indiana.
It is anticipated by SIGECO that pressure on the Indiana
legislature could intensify as other surrounding states
implement retail competition for electricity. SIGECO will
continue to participate in the debate to represent the
interests of all its stakeholders. One of SIGECO's primary
concerns in the debate is that appropriate reciprocity
provisions with other utilities and power marketers are
enacted which would prevent out-of-state providers from
having an unfair advantage over Indiana utilities. In
addition, SIGECO has taken the position in the debate (and
will continue to attempt to influence the outcome of the
debate) that low-cost producers such as SIGECO should not,
as has occurred in other states, be penalized for prudently
managing its business and being a low-cost provider. More
specifically, the implementation of "access charges" and
"transition charges" in other states have served to make it
very difficult for low-cost producers to economically
compete for business from the customers of high-cost
producers due to the need for those customers to pay their
current provider very high fixed charges for the privilege
of "accessing" the marketplace. At the same time,
historically low-cost producers, such as SIGECO, have lower
access charges because their "stranded costs" are low,
making it economically less difficult for high-cost
producers to sell to a low-cost producer's customer base at
marginal production costs.
SIGECO is unable to predict the timing or final provisions
of Indiana legislative actions on competition, if any.
Although SIGECO is uncertain of the timing and/or final
outcome of these developments, it is committed to pursuing,
and has been implementing, its corporate strategy of
positioning itself as a low-cost energy producer and the
provider of high-quality service to its retail and wholesale
customers.
SIGECO also provides retail integrated natural gas service
in Indiana. However, SIGECO does not earn a profit on the
direct sale of the natural gas commodity. SIGECO simply
charges its retail gas customers the cost SIGECO incurs to
purchase the gas and have it delivered to SIGECO's metering
points on the interstate pipeline network. SIGECO does earn
a return on the investment in its assets used to deliver the
gas to customers. As a result, as long as SIGECO delivers
gas to end users, SIGECO does not anticipate any material
impact on the financial results of its operations should the
right of retail customers to choose gas commodity providers
extend beyond the current level.
Although federal policy allows bypass of a local
distribution company, Indiana law disallows bypass in most
cases. SIGECO is litigating two attempts to bypass its gas
distribution system in the Indiana regulatory arena. In May
1998, a natural gas transmission pipeline company requested
and received authorization from FERC to construct and
operate a 3-mile lateral pipeline from its main line system
directly to a newly-constructed industrial facility located
in SIGECO's service territory, thus bypassing SIGECO, the
local distribution company. SIGECO petitioned the IURC to
rule on the pipeline company's proposal. The IURC issued an
order effectively awaiting final FERC action on the issue.
The IURC has not yet ruled on the pipeline company's
proposal. The pipeline lateral was constructed despite
SIGECO's opposition. Recently, the pipeline company
requested authorization for a tap from its main line to
directly serve a second SIGECO customer, at an exisiting
facility. SIGECO is opposing this effort at the IURC. If
through litigation, SIGECO is unable to prevent the pipeline
from directly serving the facilities of the two customers,
the gas service revenue forgone for these two customers will
not have a material detrimental impact on SIGCORP's revenues
or financial condition, however, continued bypass activity
may eventually impact retail rates.
SIGCORP's nonutility subsidiaries are all subject to the
competitive forces existing in their respective industries,
including the gas marketing industry, the energy services
industry, telecommunications, industrial mineral products
and coal production. As such, the financial results of the
nonregulated entities depend upon their ability to
successfully compete in their respective markets.
<PAGE> 24
SIGCORP
SIGECO ADVANCED COMMUNICATIONS, INC. On May 7, 1998,
SIGCORP formed SIGECO Advanced Communications, Inc.
(Advanced Communications), a wholly-owned nonregulated
subsidiary, to hold SIGCORP's investment in SIGECOM, LLC and
Utilicom Networks, Inc. (Utilicom). SIGECOM, LLC, also
formed on May 7, 1998, was a joint venture between Advanced
Communications and Utilicom to provide and market enhanced
communication services over a high capacity fiber optic
network in the greater Evansville area and potentially other
areas encompassing SIGECO's service territory. Advanced
Communications had a preferred interest in SIGECOM LLC which
held a 100% liquidation preference and was convertible to a
49% common interest, and Utilicom had a 100% common
interest. Advanced Communications also acquired an 11.5%
interest in Utilicom. Advanced Communications and Utilicom
were to make equity contributions to SIGECOM during the 24-
month period subsequent to the formation date as required by
the construction and operating needs of SIGECOM. In
addition to these equity contributions, SIGCORP contributed
its wholly-owned subsidiary, ComSource, Inc. to SIGECOM on
July 1, 1998. As of December 31, 1999, Advanced
Communications had made $15.1 million, including the value
of ComSource, Inc., of its required equity contributions to
SIGECOM and will contribute an estimated remaining $1.5
million in 2000. The equity contributions by Advanced
Communications and Utilicom over the 24-month period are
expected to total approximately $40 million.
On January 28, 2000, affiliates of Blackstone Capital
Partners III, a private equity fund of The Blackstone Group
invested in class B equity units of Utilicom Holdings LLC
(Holdings), the newly formed holding company for Utilicom.
The investment was the first part of a commitment by
Blackstone to invest up to $100 million to fund future
growth opportunities in fiber optic networks. At the same
time, Advanced Communications exchanged 35% of its 49%
preferred equity interest in SIGECO LLC for $16.5 million of
convertible debt of Holdings. The debt is convertible into
class A equity units at a future date or in the event of a
public offering of stock. Advanced Communications'
remaining 14% of preferred equity interest in SIGECOM LLC
was converted to a 14% indirect common equity interest in
SIGECOM LLC.
The investment restructuring resulted in an immediate after-
tax gain to SIGCORP of $4.9 million in the first quarter of
2000.
SIGCORP and SIGECO
ENVIRONMENTAL MATTERS To meet the Phase I requirements of
the Clean Air Act Amendments of 1990 (CAAA), effective 1995,
and some of the Phase II requirements (effective 2000),
SIGECO installed a single sulfur dioxide scrubber at the
Culley Generating Station to serve Culley Units 2 and 3 and
installed low nitrogen oxide (NOx) burners on the two units.
With the addition of the scrubber, SIGECO is emitting lower
sulfur dioxide quantities than the minimum compliance
requirements of Phase I of the CAAA and has available unused
allowances, called "overcompliance allowances", for
retention by SIGECO to meet stricter post-2000 emission
limitations. SIGECO is purchasing additional allowances to
fully meet Phase II requirements.
In July 1997, the United States Environmental Protection
Agency (USEPA) issued its final rule which revised the
national ambient air quality standard for ozone by setting a
lower concentration limit and changing measurement methods.
It is anticipated that the number of ozone nonattainment
counties in the United States will increase significantly.
The USEPA has encouraged states to target utility coal-fired
boilers for the majority of the reductions required,
especially NOx emissions, because they believe this approach
is the most cost effective. Northeastern states have
claimed that ozone transport from midwestern states
(including Indiana) is a significant reason for their ozone
concentration problems. Although this premise is challenged
by others based on various air quality modeling studies,
including studies commissioned by the USEPA, the USEPA
intends to incorporate a regional control strategy to reduce
ozone transport. In October 1997, the USEPA provided each
state a proposed budget of
<PAGE> 25
allowed NOx emissions, a key ingredient of ozone, which
requires a significant reduction of such emissions. Under
that budget, utilities may be required to reduce NOx
emissions to a rate of 0.15 lb/mmBtu from levels already
imposed by Phase I and Phase II of the CAAA. Midwestern
states (the alliance) have been working together to
determine the most appropriate compliance strategy as an
alternative to the USEPA proposal. The alliance submitted
its proposal, which calls for a smaller, phased in reduction
of NOx levels, to the USEPA and the IDEM in June 1998.
In July 1998, Indiana submitted its proposed plan to the
USEPA in response to the USEPA's proposed new NOx rule and
the emissions budget proposed for Indiana. The Indiana
plan, which calls for a reduction of NOx emissions to a rate
of 0.25 lb/mmBtu by 2003, is less stringent than the USEPA
proposal but more stringent than the alliance proposal.
The USEPA issued its final ruling on September 24, 1998,
which was essentially unchanged from its July 1997 proposed
rule, after considering all filed comments. The USEPA's
final ruling is being litigated in the federal courts by
approximately ten midwestern states, including Indiana. The
proposed NOx emissions budget for Indiana stipulated in the
USEPA's final ruling requires a significant reduction in
total NOx emissions from Indiana. Depending on the level of
emission reductions required, and the control technology
utilized to achieve the reductions, the estimated
construction costs of the control equipment could reach
approximately $100 million, and related additional operation
and maintenance expenses could be an estimated $8 million to
$10 million, annually. Under the USEPA implementation
schedule, the emissions reductions and required control
equipment must be implemented and in place by May 15, 2003.
During the second quarter of 1999, the USEPA lost two
federal court challenges to key air-pollution control
requirements. In the first ruling by the U.S. Court of
Appeals for the District of Columbia on May 14, 1999, the
court struck down the USEPA's attempt to tighten the one-
hour ozone standard to an eight-hour standard and the
attempt to tighten the standard for particulate emissions,
finding the actions unconstitutional. In the second ruling
by the same Court on May 25, 1999, the Court placed an
indefinite stay on the USEPA's attempts to reduce the
allowed Nox emissions rate from levels required by the CAAA.
The USEPA appealed both court rulings. On October 29, 1999,
the Court refused to reconsider its May 14, 1999 ruling. On
March 3, 2000, the Court reversed its ruling of May 25,
1999, and removed its stay on the USEPA's attempts to reduce
the allowed Nox emissions rate. This decision by the Court
will be appealed by the affected parties, including SIGECO.
(Refer to "Capital Requirements" for discussion of SIGECO's
five-year construction requirements and inclusion of the
estimated construction costs for the control equipment.)
Approximately 12 months ago, the USEPA initiated an
investigation under Section 114 of the Clean Air Act (the
Act) of SIGECO's coal-fired electric generating units in
commercial operation by 1977 to determine compliance with
environmental permitting requirements related to repairs,
maintenance, modifications and operations changes. The
focus of the investigation was to determine whether new
source performance standards should be applied to the
modifications and whether the best control technology was,
or should have been used. Numerous other electric utilities
were, and are currently, being investigated by the USEPA
under an industry-wide review for similar compliance.
On November 3, 1999, the USEPA filed a lawsuit against
SIGECO alleging that, beginning in 1992, SIGECO violated the
Act by: (i) making modifications to its Culley Generating
Station in Yankeetown, Indiana without obtaining the
required permits; (ii) making major modifications to the
Culley Generating Station without installing the best
available emission control technology; and (iii) failing to
notify the USEPA of the modifications. In addition, the
lawsuit alleges that the modifications to the Culley
Generating Station required SIGECO to begin complying with
federal performance standards.
<PAGE> 26
SIGECO believes it performed only proper maintenance at the
Culley Generating Station. Because proper maintenance does
not require permits, application of the best available
emission control technology, notice to the USEPA, or
compliance with the new source performance standards, SIGECO
believes that the lawsuit is without merit, and intends to
defend the lawsuit vigorously. The USEPA also filed suit
against six other investor-owned utilities for similar
actions.
The lawsuit seeks fines against SIGECO in the amount of
$27,500 per day per violation. The lawsuit does not specify
the number of days or violations the USEPA believes
occurred. The lawsuit also seeks a court order requiring
SIGECO to install the best available emissions technology at
the Culley Generating Station. If the USEPA is successful
in obtaining an order. SIGECO estimates that it would incur
capital costs of approximately $40 million to $50 million
complying with the order. In the event that SIGECO is
required to install system-wide Nox emission control
equipment, the majority of the $40 million to $50 million
for best available emissions technology at Culley Generating
Station would be included in the $100 million expenditure.
The USEPA has also issued an administrative notice of
violation to SIGECO making the same allegations, but
alleging that violations began in 1977.
Under applicable rules, SIGECO could be subjected to
criminal penalties if the Culley Generating Station
continues to operate without complying with the source
performance standards and the allegations are determined by
a court to be valid. SIGECO anticipates at this time that
the plant will continue to operate while the matter is being
decided.
Also in July 1997, the USEPA announced a new 2.5-micron
particulate matter (PM) standard while retaining the
existing 10-micron PM standard. The regulatory impacts of
this action cannot be determined until appropriate
monitoring data is collected and subsequent national ambient
air quality area designations are determined. The extent of
the impact on SIGECO, if any, is unknown.
DEMAND SIDE MANAGEMENT (DSM) In the November 1997 update of
its Integrated Resource Plan (IRP), SIGECO determined that
certain of its DSM programs were not cost effective and
those programs have been discontinued. The remaining DSM
programs are residential and commercial direct load control
programs, which have been very effective. In the latest
update of the IRP, filed in November 1999, the IRP
evaluation determined that through 1998 approximately 71
megawatts of required capacity are estimated to have been
postponed or eliminated by these programs. Projected DSM
program expenditures for the 2000-2015 period are expected
to total less than $10 million. SIGECO will continue to
monitor the benefits of its DSM programs and additional
changes are possible.
YEAR 2000 READINESS SIGCORP, primarily SIGECO, uses various
software, systems and technology that could have been
affected by the date change in 2000. All identification,
testing and replacement or remediation of such software,
systems and technology at SIGECO was completed by December
31, 1999. No significant noncompliance issues have been
encountered in 2000 and SIGECO anticipates that no such
issues will be encountered. SIGECO estimates the expense of
Year 2000-readiness modifications to existing systems or
replacements treated as expense incurred through December
31, 1999 totaled approximately $1.7 million.
SIGCORP's contingency planning was completed during 1999 and
SIGECO's detailed contingency plan was filed with the
Indiana Utility Regulatory Commission on June 30, 1999. The
planning encompasses external dependencies such as critical
suppliers, interconnected electricity and natural gas
transmission systems and major customers, as well as
SIGECO's electric generation facilities and other gas and
electric operations areas.
<PAGE> 27
SIGCORP is not aware of any significant noncompliance issues
in 2000 with the critical systems of its suppliers or major
customers, however it believes that noncompliance of such
systems would not have a material adverse effect on its
financial position or results of operations.
A review of SIGECO's Year 2000-readiness initiatives follow:
A Year 2000 team was established in early 1997 to identify
and address Year 2000-readiness issues. In 1998, this
process became more formalized with the establishment of
SIGCORP's Year 2000 Task Force. A high-level assessment of
the mission-critical systems and items of all SIGCORP
subsidiaries was completed in early 1997. SIGECO has
completed a detailed inventory of all systems and devices,
including imbedded technology in the operational areas,
determined to be date-sensitive. All systems and devices in
the inventory have been rated on criticality and likelihood
of failure and prioritized for testing. Due to functional
obsolescence, under its general business plan SIGECO has
recently replaced or is currently replacing, all of its
known major noncompliant mission-critical information and
control systems with systems incorporating Year 2000-ready
technology. As of June 30, 1999, SIGECO had tested all of
its mission-critical systems and devices and remediated
those systems and devices found not ready for 2000, thus
meeting the North American Electric Reliability Council
(NERC)-imposed deadline to ensure Year 2000 readiness of
SIGECO's operations.
SIGECO's noncompliant critical information systems, the
customer billing and financials/supply chain systems,
developed in the late 1960's, are being replaced to address
functional obsolescence. Of the two noncompliant critical
information systems being replaced, the customer billing
system carried the most risk since it has experienced
project delays. Due to the risk of not completing this
project by 2000, SIGECO modified its existing customer
billing system to be Year 2000-ready, testing of which was
completed by late 1999. The first and largest phase of the
financials/supply chain systems project was successfully
implemented September 1, 1998 and the smaller, final phase
of the financials/supply chain systems project, the
payroll/HR information system, was successfully implemented
in July 1999.
At SIGECO's base-load generating stations, all noncompliant
critical control and data systems were replaced due to
functional obsolescence by June 30, 1999.
Based on the findings of SIGECO's detailed inventory and
related testing, there were a low number of smaller non-
critical systems and items identified as also requiring Year
2000-readiness upgrades or replacement, and those upgrades
or replacements were completed by late 1999.
MARKET RISK SIGCORP is exposed to market risk due to
changes in interest rates and changes in the market price
for electricity and natural gas resulting from changes in
supply and demand. Exposure for interest rate changes
relates to its long-term debt and preferred equity and
partnership obligations. Exposure to electricity market
price risk relates to forward contracts to effectively
manage the supply of, and demand for, the electric
generation capability of SIGECO's generating plants related
to its wholesale power marketing activities. Exposure to
natural gas price risk relates to forward contracts taken by
Energy to manage its exposure to commodity price risks in
providing natural gas supplies to its customers. SIGECO is
not currently exposed to market risk for purchases of
electric power and natural gas for its retail customers due
to current Indiana regulations which allow for full cost
recovery of such purchases through SIGECO's fuel and natural
gas cost adjustment mechanisms. A 1999 generic order issued
by the IURC established new guidelines for the recovery of
purchased electric energy costs through fuel adjustment
clauses, however, SIGECO does not anticipate any limitation
of recoverability of its purchased electric power costs
under this generic order. This order has been appealed by
the Office of the Utility Consumer Counselor, and if the
appeal is upheld, non-recovery of some future purchased
electric energy costs could be possible. SIGECO and Energy
do not presently utilize financial instruments for trading
or speculative purposes.
<PAGE> 28
The table below provides the fair value and average
interest, or fixed dividend rate, of outstanding debt,
preferred stock equity instruments and partnership
obligations at December 31, 1999. The Series A and C
Adjustable Rate Pollution Control Bonds are listed as
variable rate long-term debt due to annual adjustment of
their interest rates to current market rates on March 1.
<TABLE>
<CAPTION>
Fair
Value
Expected Maturity Date as of
SIGCORP and 2000 2001 2002 2003 2004 There- Total 12/31/99
Subsidiaries after
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt
Fixed Rate - - - $1.0 - $272.3 $273.3 $308.1
Average
Interest Rate - - - 6.3% - 6.8%
Variable Rate - - - - - $ 53.7 $ 53.7 $ 46.4
Average
Interest Rate - - - - - 3.0%
Preferred Stock
Not Subject
to Mandatory
Redemption - - - - - $ 7.5 $ 7.5 $ 7.5
Average
Dividend Rate - - - - - 6.5%
Partnership
Obligations $0.6 $0.2 - - - - $ 0.8 $ 0.9
Average
Interest Rate 8.3% 8.3% - - - -
</TABLE>
SIGECO utilizes contracts for the forward sale of
electricity to effectively manage the utilization of its
available generating capability. Such contracts include
forward physical contracts for wholesale sales of its
generating capability, during periods when SIGECO's
available generating capability is expected to exceed the
demands of its retail, or native load, customers. To
minimize the risk related to these forward contracts, SIGECO
may utilize call option contracts to hedge against the
unexpected loss of its generating capability during periods
of heavy demand. SIGECO also utilizes forward physical
contracts for the wholesale purchase of generating
capability to resell to other utilities and power marketers
through nonfirm "buy-resell" transactions where the sale and
purchase prices of power are concurrently set. As of
December 31, 1999, management believes exposure from these
positions was not material.
Energy utilizes forward physical contracts for both the
purchase and sale of natural gas to its customers, primarily
through "back-to-back" transactions where the sale and
purchase prices of natural gas are concurrently set. As of
December 31, 1999, approximately 4% of Energy's forward
sales contracts were not covered by forward purchase
contracts; management believes exposure from these positions
was not material. Energy sells fixed-price and capped-price
products, and reduces its market price risk through the use
of fixed-price supplier contracts and storage assets. As of
December 31,1999, the estimated fair market value of
Energy's forward sales contracts was approximately $10.5
million; and the estimated fair market value of its forward
purchase contracts was approximately $10.1 million.
SIGECO and Energy are also exposed to counterparty credit
risk when a customer or supplier defaults upon a contract to
pay or deliver product. To mitigate this risk, they have
established procedures to determine and monitor the
creditworthiness of counterparties.
<PAGE> 29
LIQUIDITY AND CAPITAL RESOURCES
SIGCORP and SIGECO
In 1999, 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 1999 construction expenditures; these expenditures
were also fully funded with internally generated cash in
1998. Cash provided from operations increased $25.5 million
during 1999 compared to 1998, while cash required for
investing and financing activities increased $16.6 million.
SIGCORP's ratio of earnings to fixed charges (SEC method)
remained 4.0:1 for 1999, and its embedded cost of long-term
debt and preferred stock is 6.2% and 5.6%, respectively.
SIGCORP's financial strength is reflected in high quality
credit ratings. SIGECO's senior secured debt continues to
be rated AA, or equivalent, by major credit rating agencies.
CAPITAL REQUIREMENTS 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 and environmental compliance requirements.
Additionally, SIGCORP may periodically make capital
investments in its nonregulated operations. Construction
expenditures totaled $60.9 million during 1999, which
primarily included normal improvements and replacements of
facilities comprising SIGECO's electric and gas utility
systems, and also included $10.4 million expended on the
design and implementation of several comprehensive
information systems necessary to meet expanding customer
service needs and to better manage SIGECO's resources. The
1999 construction expenditures compare to $56.5 million and
$68.4 million expended in 1998 and 1997, respectively.
SIGECO's construction requirements for the years 2000-2004
are projected to total approximately $360 million, including
construction expenditures that may be required to comply
with new USEPA air quality standards discussed under
"Environmental Matters" which could total approximately $100
million, and an estimated $32 million for the construction
of a gas-fired electric generation peaking unit planned for
2002. Because SIGECO plans to lease the proposed
cogeneration facility discussed in "Rate and Regulatory
Matters", its cost is not included in the projected five-
year construction requirements.
FINANCING ACTIVITIES During April 1999, SIGECO temporarily
refunded its $45 million 6% series first mortgage bonds due
in 1999 with short-term debt. In July, $80 million in short-
term borrowings, including the above amount, were refunded
with the issue of $80 million of 6.72% Senior Notes due
August 1, 2029. In November 1999, SIGECO refunded $10
million of its $25 million 8-7/8% series first mortgage
bonds due 2016 with short-term notes payable. During 1998,
SIGECO refunded four tax-exempt bond issues totaling $80.3
million with an equal amount of tax-exempt bonds which will
reduce total interest expense on a present value basis by
$8.5 million over the remaining lives of the bond issues.
SIGECO also refunded $14 million of its first mortgage bonds
with short-term notes payable. SIGCORP's short-term notes
payable increased $39.1 million during 1999 following a
$28.6 million rise in such short-term borrowings the prior
year, primarily to fund structured financial investments by
SIPI. At year end, SIGCORP had $108.6 million in short-term
borrowings, leaving unused lines of credit and trust demand
note arrangements totaling $57.4 million.
Over the five-year period, SIGCORP expects the majority of
the construction requirements and any capital contributions
to its nonregulated subsidiaries to be provided by
internally generated funds, however, SIGCORP anticipates
issuing $50 million to $70 million of medium-term debt that
will be used primarily to retire a similar amount of short-
term debt.
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
<PAGE> 30
future construction and other capital requirements.
FORWARD LOOKING STATEMENTS This discussion includes forward
looking statements based on information currently available
to management. Such statements are subject to certain risks
and uncertainties. These statements typically contain, but
are not limited to, the terms "anticipate", "expect",
"potential", "estimate" and similar words, and actual
results may differ materially due to the speed and nature of
increased competition and deregulation in the electric and
gas utility industry, economic or weather conditions
affecting future sales and margins, changes in markets for
energy services, changing energy market prices, legislative
and regulatory changes including revised environmental
requirements, impacts of Year 2000 issues, availability and
cost of capital, the pending merger with Indiana Energy,
Inc. and other similar factors.
<PAGE> 31
<TABLE>
<CAPTION>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Number
<S> <C> <C> <C>
1. Financial Statements
SIGCORP
Report of Independent Public Accountants 32
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997 34
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997 35
Consolidated Balance Sheets - December 31, 1999
and 1998 36
Consolidated Statements of Capitalization -
December 31, 1999 and 1998 38
Consolidated Statements of Common Shareholders' Equity
for the years ended December 31, 1999, 1998 and 1997 39
SIGECO
Report of Independent Public Accountants 40
Statements of Income for the years
ended December 31, 1999, 1998 and 1997 42
Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997 43
Balance Sheets - December 31, 1999 and 1998 44
Statements of Capitalization -
December 31, 1999 and 1998 46
Statements of Common Shareholder's Equity for the
years ended December 31, 1999, 1998 and 1997 47
SIGCORP and SIGECO
Notes to Consolidated Financial Statements 48
2. Supplementary Information
SIGCORP and SIGECO
Selected Quarterly Financial Data 65
3. Supplemental Schedules
SIGCORP and SIGECO
Schedule II - Valuation and Qualifying Accounts and
Reserves for the years ended December 31, 1999, 1998 79
and 1997
<FN>
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.
</FN>
</TABLE>
<PAGE> 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO 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,
1999 and 1998, and the related consolidated statements of
income, common shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1999.
These financial statements and the supplemental schedule
referred to below are the responsibility of SIGCORP, Inc.'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,
1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted
accounting principles.
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 28, 2000
<PAGE> 33
SIGCORP, Inc. and
Subsidiaries
<PAGE> 34
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31 (in thousands except for per share amounts)
1999 1998 1997
<S> <C> <C> <C>
OPERATING REVENUES:
Electric utility $ 307,569 $ 297,865 $ 272,545
Gas utility 68,212 66,801 85,561
Energy services and other 228,710 192,445 75,131
Total operating revenues 604,491 557,111 433,237
OPERATING EXPENSES:
Fuel for electric generation 66,305 65,222 62,630
Purchased electric energy 20,791 20,762 13,985
Cost of gas sold 39,612 39,627 54,060
Cost of energy services and
other 223,887 187,742 73,668
Other operation expenses 71,823 64,430 60,726
Maintenance 34,661 37,553 29,224
Depreciation and amortization 45,340 42,733 40,373
Property and other taxes 13,260 12,963 12,989
Total operating expenses 515,679 471,032 347,655
OPERATING INCOME 88,812 86,079 85,582
INTEREST AND OTHER CHARGES:
Interest expense on long-term
debt 18,722 19,977 19,797
Interest expense on short-term
debt 5,245 3,313 1,519
Amortization of premium,
discount and expense on debt 487 690 671
Allowance for funds used during
construction (2,803) (1,392) (1,378)
Preferred dividend requirements
of subsidiary 1,078 1,095 1,097
Interest income (4,495) (5,488) (3,003)
Other, net (7,197) (6,602) (3,122)
Total interest and other
charges 11,037 11,593 15,581
INCOME BEFORE INCOME TAXES 77,775 74,486 70,001
Federal and state income taxes 25,718 24,010 23,861
NET INCOME $ 52,057 $ 50,476 $ 46,140
AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631 23,631
BASIC EARNINGS PER SHARE OF
COMMON STOCK $ 2.20 $ 2.14 $ 1.95
DILUTED EARNINGS PER SHARE OF
COMMON STOCK $ 2.19 $ 2.12 $ 1.95
</FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 52,057 $ 50,476 $ 46,140
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation and amortization 45,340 42,733 40,373
Preferred dividend requirements of
subsidiary 1,078 1,095 1,097
Deferred income taxes and
investment
tax credits, net 8,637 (3,684) (3,899)
Allowance for other funds used
during construction 296 - (581)
Change in assets and liabilities:
Receivables, net (including
accrued unbilled revenues) (15,385) (11,608) (19,497)
Inventories 2,115 (12,421) (4,306)
Accounts payable 7,407 5,650 14,141
Accrued taxes 5,137 (1,005) (1,855)
Refunds to customers and from
gas suppliers 3,219 1,001 (1,566)
Other assets and liabilities (2,861) 9,322 8,103
Net cash provided by operating
activities 107,040 81,559 78,150
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of
allowance for
other funds used during construction) (60,676) (55,313) (65,501)
Demand side management program
expenditures (252) (1,182) (2,340)
Investments in leveraged leases (49,734) 6,961 -
Purchases of investments (389) (1,940) (423)
Sales of investments 183 80 264
Investments in partnerships and
other corporations (3,340) (11,419) 3,166
Change in nonutility property (5,504) (279) (5,572)
Change in notes receivable (11,899) 1,033 (5,592)
Other (1,368) (2,176) (1,181)
Net cash used in investing
activities (132,979) (64,235) (77,179)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds retired (55,000) (14,000) (295)
First mortgage bonds issued 80,000 - -
Dividends paid (32,380) (30,188) (30,482)
Reduction in preferred stock (116) (116) -
Change in environmental improvement
funds held by trustee 3,304 (198) (272)
Payments on partnership obligations (1,513) (2,205) (2,276)
Change in notes payable 39,058 28,140 27,027
Other 718 465 2,963
Net cash (used) provided by in
financing activities 34,071 (18,102) (4,335)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,132 (778) (3,364)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 5,049 5,827 9,191
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 13,181 $ 5,049 $ 5,827
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
At December 31 (in thousands) 1999 1998
<S> <C> <C>
ASSETS
UTILITY PLANT, at original cost:
Electric $ 1,160,216 $ 1,141,870
Gas 156,918 150,136
1,317,134 1,292,006
Less accumulated provision for depreciation 623,611 593,901
693,523 698,105
Construction work in progress 45,393 24,306
Net utility plant 738,916 722,411
OTHER INVESTMENTS AND PROPERTY:
Investments in leveraged leases 85,737 36,003
Investments in partnerships and other
corporations 35,729 32,389
Environmental improvement funds held
by trustee 996 4,300
Notes receivable 32,271 20,372
Nonutility property and other, net 20,405 14,901
Total other investments and property 175,138 107,965
CURRENT ASSETS:
Cash and cash equivalents 13,181 5,049
Temporary investments, at market 903 793
Receivables, less allowance of $2,210
and $2,204, respectively 83,073 65,829
Accrued unbilled revenues 18,736 20,595
Inventories 43,060 45,351
Current regulatory assets 7,921 9,527
Other current assets 9,068 3,777
Total current assets 175,942 150,921
OTHER ASSETS:
Unamortized premium on reacquired debt 3,937 4,226
Postretirement benefits other than pensions - 985
Demand side management programs 25,298 25,046
Allowance inventory 2,269 2,093
Deferred charges 22,642 15,871
Total other assets 54,146 48,221
TOTAL $ 1,144,142 $ 1,029,518
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
At December 31 (in thousands) 1999 1998
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 315,028 292,717
Accumulated Other Comprehensive Income (Loss) (78) (12)
Total common shareholders' equity 393,208 370,963
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 692 808
Long-Term Debt, net of current maturities 273,282 204,771
Long-Term Partnership Obligations, net of
current maturities 249 781
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 686,021 595,913
CURRENT LIABILITIES:
Current Portion of Adjustable Rate Bonds
Subject to Tender 53,700 53,700
Current Maturities of Long-Term Debt,
Interim Financing
and Long-Term Partnership Obligations:
Maturing long-term debt - 45,000
Notes payable 108,566 69,508
Partnership obligations 596 1,577
Total current maturities of long-term
debt, interim financing
and long-term partnership obligations 109,162 116,085
Other Current Liabilities:
Accounts payable 60,798 53,391
Dividends payable 117 120
Accrued taxes 10,000 4,863
Accrued interest 6,823 5,140
Refunds to customers 5,375 2,156
Other accrued liabilities 25,758 21,320
Total other current liabilities 108,871 86,990
Total current liabilities 271,733 256,775
OTHER LIABILITIES:
Accumulated deferred income taxes 154,459 144,032
Accumulated deferred investment tax
credits, being
amortized over lives of property 17,372 18,802
Postretirement benefits other than pensions 12,041 11,337
Other 2,516 2,659
Total other liabilities 186,388 176,830
TOTAL $ 1,144,142 $ 1,029,518
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31 (in thousands except for per share
amounts) 1999 1998
<S> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 23,630,568 $ 78,258 $ 78,258
Retained Earnings, $2,155 restricted as
to payment of cash dividends on common stock 315,028 292,717
Accumulated Other Comprehensive Income (78) (12)
Total common shareholders' equity 393,208 370,963
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
Total nonredeemable preferred stock of
subsidiary 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 6,917 and
8,077 shares, respectively, redeemable at $100
per share 692 808
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 239,915 169,915
Notes payable 36,000 36,009
Unamortized debt premium and discount, net (2,633) (1,153)
Total long-term debt 273,282 204,771
LONG-TERM PARTNERSHIP OBLIGATIONS, NET OF
CURRENT MATURITIES 249 781
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2025, Series A, presently 3.00% 31,500 31,500
2030, Series C, presently 3.05% 22,200 22,200
53,700 53,700
TOTAL CAPITALIZATION, including bonds subject to
tender $ 739,721 $ 649,613
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
Accumulated
Other
Common Retained Compre-
hensive
(in thousands ) Total Stock Earnings Income
(Loss)
<S> <C> <C> <C> <C>
Balances, December 31, 1996 $ 330,924 $ 78,258 $ 252,626 $ 40
Net Income 46,140 - 46,140 -
Unrealized Gain on
Securities (net of tax) 37 - - 37
Comprehensive Income 46,177 - 46,140 37
Common Stock Dividends
($1.15 per share) (27,938) - (27,938 - )
Balances, December 31, 1997 349,163 78,258 270,828 77
Net Income 50,476 - 50,476 -
Unrealized (Loss) on
Securities (net of tax) (89) - - (89)
Comprehensive Income 50,387 - 50,476 (89)
Common Stock Dividends
($1.21 per share) (28,587) - (28,587) -
Other (429) - (429) -
Balances, December 31, 1998 370,534 78,258 292,288 (12)
Net Income 52,057 - 52,057 -
Unrealized (Loss) on
Securities (net of tax) (66) - - (66)
Comprehensive Income 51,991 - 52,057 (66)
Common Stock Dividends
($1.24 per share) (29,224) - (29,224) -
Other (93) - (93) -
Balances, December 31, 1999 $ 393,208 $ 78,258 $ 315,028 ($78)
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SOUTHERN INDIANA GAS AND ELECTRIC COMPANY:
We have audited the balance sheets and statements of
capitalization of SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(an Indiana corporation) as of December 31, 1999 and 1998,
and the related statements of income, retained earnings and
cash flows for each of the three years in the period ended
December 31, 1999. These financial statements and the
supplemental schedule referred to below are the
responsibility of Southern Indiana Gas and Electric
Company'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 financial statements referred to
above present fairly, in all material respects, the
financial position of Southern Indiana Gas and Electric
Company as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.
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 28, 2000
<PAGE> 41
Southern Indiana Gas
And Electric Company
<PAGE> 42
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC
COMPANY
STATEMENTS OF INCOME
Year Ended December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
OPERATING REVENUES:
Electric $ 307,569 $297,865 $ 272,545
Gas 68,212 66,801 85,561
Total operating revenues 375,781 364,666 358,106
OPERATING EXPENSES:
Fuel for electric generation 72,155 68,849 62,630
Purchased electric energy 20,791 20,762 13,985
Cost of gas sold 39,612 39,627 54,060
Other operation expenses 61,108 56,001 55,611
Maintenance 34,550 37,398 29,086
Depreciation and amortization 44,867 42,401 40,191
Federal and state income taxes 26,427 25,035 27,259
Property and other taxes 12,845 12,591 12,828
Total operating expenses 312,354 302,664 295,650
OPERATING INCOME 63,426 62,002 62,456
OTHER INCOME:
Allowance for other funds used
during construction 296 (73) 581
Interest 363 340 541
Other, net (58) 488 1,448
Total other income 601 755 2,570
INCOME BEFORE INTEREST AND OTHER
CHARGES 64,027 62,757 65,026
INTEREST AND OTHER CHARGES:
Interest on long-term debt 16,121 17,376 18,020
Interest on short-term debt 3,158 2,614 1,769
Amortization of premium, discount,
and expense on debt 487 690 671
Allowance for borrowed funds used
during construction (2,507) (1,465) (797)
Total interest and other charges 17,259 19,215 19,663
NET INCOME 46,768 43,542 45,363
Preferred stock dividend 1,078 1,095 1,097
NET INCOME APPLICABLE TO COMMON STOCK $ 45,690 $ 42,447 $ 44,266
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC
COMPANY
STATEMENTS OF CASH FLOWS
Year Ended December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 46,768 $ 43,542 $ 45,363
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation and amortization 44,867 42,401 40,191
Deferred income taxes and
investment
tax credits, net 3,401 2,207 (4,951)
Allowance for other funds used
during construction 296 - (581)
Change in assets and liabilities:
Receivables, net (including
accrued unbilled revenues) (5,184) 5,152 (3,261)
Inventories 5,200 (12,587) (3,407)
Accounts payable 433 1,061 (272)
Accrued taxes 3,636 (1,153) (2,788)
Refunds to customers and from
gas suppliers 3,219 1,001 (1,566)
Other assets and liabilities 7,986 7,492 7,950
Net cash provided by operating
activities 110,622 89,116 76,678
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net
of allowance for
other funds used during construction) (60,676) (55,314) (65,501)
Demand side management program
expenditures (252) (1,182) (2,340)
Change in nonutility property (50) (25) -
Other (990) (1,894) (456)
Net cash used in investing activities (61,968) (58,415) (68,297)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds retired (55,000) (14,000) (295)
First mortgage bonds issued 80,000 - -
Dividends paid (32,380) (30,187) (30,482)
Reduction in preferred stock (116) (116) -
Change in environmental improvement
funds held by trustee 3,304 (198) (272)
Change in notes payable (42,800) 13,150 20,176
Other (1,725) 48 479
Net cash used in financing activities (48,717) (31,303) (10,394)
NET DECREASE IN CASH AND CASH (63) (602) (2,013)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING 512 1,114 3,127
OF PERIOD
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 449 $ 512 $ 1,114
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
BALANCE SHEETS
At December 31 (in thousands) 1999 1998
<S> <C> <C>
UTILITY PLANT, at original cost:
Electric $ 1,160,216 $ 1,141,870
Gas 156,918 150,136
1,317,134 1,292,006
Less accumulated provision for
depreciation 623,611 593,901
693,523 698,105
Construction work in progress 45,393 24,306
Net utility plant 738,916 722,411
OTHER INVESTMENTS AND PROPERTY:
Environmental improvement funds held by
trustee 996 4,300
Notes receivable 1,159 -
Nonutility property and other 1,627 1,577
Total other investments and property 3,782 5,877
CURRENT ASSETS:
Cash and cash equivalents 449 512
Receivables, less allowance of $2,138
and $2,156, respectively 34,738 28,854
Accrued unbilled revenues 18,736 20,595
Inventories 39,190 44,566
Current regulatory assets 7,921 9,527
Other current assets 2,970 2,776
Total current assets 104,004 106,830
OTHER ASSETS:
Unamortized premium on reacquired debt 3,937 4,226
Postretirement benefits other than
pensions - 985
Demand side management programs 25,298 25,046
Allowance inventory 2,269 2,093
Deferred charges 16,553 14,444
Total other assets 48,057 46,794
TOTAL $ 894,759 $ 881,912
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
At December 31 (in thousands) 1999 1998
<S> <C> <C>
SHAREHOLDER'S EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 256,312 241,924
Total common shareholder's equity 334,570 320,182
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 692 808
Long-Term Debt, net of current maturities 238,282 169,762
Total capitalization, excluding bonds
subject to tender (see Statements
of Capitalization) 592,134 509,342
CURRENT LIABILITIES:
Current Portion of Adjustable Rate Bonds
Subject to Tender 53,700 53,700
Current Maturities of Long-Term Debt and
Interim Financing:
Maturing long-term debt - 45,000
Notes payable 22,880 50,759
Notes payable to Associated Company - 14,930
Total current maturities of long-term debt
and interim financing 22,880 110,689
Other Current Liabilities:
Accounts payable 28,560 28,127
Dividends payable 117 120
Accrued taxes 8,408 4,772
Accrued interest 6,012 4,676
Refunds to customers 5,375 2,156
Other accrued liabilities 22,706 18,544
Total other current liabilities 71,178 58,395
Total current liabilities 147,758 222,784
OTHER LIABILITIES:
Accumulated deferred income taxes 122,977 118,147
Accumulated deferred investment tax
credits, being
amortized over lives of property 17,372 18,801
Postretirement benefits other than pensions 12,041 11,337
Other 2,477 1,501
Other liabilities 154,867 149,786
TOTAL $ 894,759 $ 881,912
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
At December 31 (dollars in thousands) 1999 1998
<S> <C> <C>
COMMON SHAREHOLDER'S EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 15,754,826 $ 78,258 $ 78,258
Retained Earnings, $2,155 restricted as
to payment of cash dividends on common stock 256,312 241,924
Total common shareholder's equity 334,570 320,182
PREFERRED STOCK
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
Total nonredeemable preferred stock 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
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series,
outstanding 6,917 and 8,077 shares,
respectively, redeemable at $100 per share 692 808
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 239,915 169,915
Notes payable 1,000 1,000
Unamortized debt premium and discount, net (2,633) (1,153)
Total long-term debt 238,282 169,762
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2025, Series A, presently 3.00% 31,500 31,500
2030, Series C, presently 3.05% 22,200 22,200
53,700 53,700
TOTAL CAPITALIZATION, including bonds
subject to tender $ 645,834 $ 563,042
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF RETAINED EARNINGS
At December 31 (dollars in thousands) 1999 1998
<S> <C> <C>
Balance Beginning of Period $ 241,924 $ 228,570
Net Income 46,768 43,542
288,692 272,112
Preferred Stock Dividends 1,078 1,095
Common Stock Dividends 31,302 29,093
32,380 30,188
Balance End of Period (See Consolidated
Statements of Capitalization for
restriction) $ 256,312 $ 241,924
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SIGCORP AND SIGECO
PRINCIPLES OF CONSOLIDATION SIGCORP, Inc. (SIGCORP), an
Indiana holding company, has 11 wholly-owned subsidiaries:
Southern Indiana Gas and Electric Company (SIGECO), a gas
and electric utility which accounts for over 80% of
SIGCORP's net income for the twelve months ended December
31, 1999, and ten nonregulated subsidiaries.
On June 14, 1999, SIGCORP announced an agreement to merge
with Indiana Energy, Inc. (IEI) in an all-stock pooling
transaction through which a new holding company, Vectren
Corporation, would be formed. In a tax-free exchange,
SIGCORP shareholders would receive one and one-third shares
of Vectren stock for each share of SIGCORP stock, while IEI
shares would be exchanged on a one-for-one basis. SIGCORP
and IEI are proceeding to obtain the necessary regulatory
approvals and completion of the merger is expected by the
end of the first quarter of 2000. Transaction and related
costs incurred by SIGCORP through December 31, 1999 were
$5,506,000 and have been deferred.
SIGECO, which has no subsidiaries, is a regulated gas and
electric utility is engaged principally in the production,
purchase, transmission, distribution and sale of electricity
and the delivery of natural gas. SIGECO serves 126,605
electric customers in the city of Evansville and 74 other
communities and serves 109,388 gas customers in the city of
Evansville and 64 other communities.
Energy Systems Group, Inc. (ESGI) has a one-third ownership
in Energy Systems Group, LLC, an energy-related performance
contracting firm serving industrial and commercial
customers. Southern Indiana Minerals, Inc. (SIMI) processes
and markets coal combustion by-products. Southern Indiana
Properties, Inc. (SIPI) invests in leveraged leases of real
estate and equipment, real estate partnerships and joint
ventures, and private placement subordinated debt
instruments. Cash balances are invested in marketable
securities. SIGCORP Energy Services, Inc. (Energy) was
established to market energy and related services and is
currently providing natural gas, pipeline management,
storage service and other natural gas-related services to
SIGECO, other utilities and endusers. SIGCORP Capital, Inc.
(Capital) is the primary financing vehicle for SIGCORP's
nonregulated subsidiaries. SIGCORP Fuels, Inc. (Fuels) was
formed to provide coal and related services to SIGECO and
other customers. SIGCORP Power Marketing, Inc. (Power), not
yet active, was formed to procure electric power supplies
for SIGECO and other customers, and will market SIGECO's
excess electric generation capacity. SIGCORP Communications
Services (Communications) was formed to undertake
telecommunications-related strategic initiatives. SIGCORP
Environmental Services, Inc. (Environmental Services) holds
SIGCORP's investment in Air Quality Services, a joint
venture created to provide air quality monitoring and
testing services to industry and utilities. SIGECO Advanced
Communications, Inc. (Advanced Communications) holds
SIGCORP's investment in SIGECOM, LLC and Utilicom Networks,
Inc. (Utilicom). SIGECOM, LLC, is a joint venture between
Advanced Communications and Utilicom to provide and market
enhanced communications services over a high capacity fiber
optic network in a multi-state area encompassing SIGECO's
service territory. Effective June 30, 1998, ComSource,
Inc., a former subsidiary of SIGCORP, was merged into
Advanced Communications. All significant intercompany
transactions are eliminated.
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.
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 SIGCORP and SIGECO are based on generally
accepted accounting principles, which give recognition to
the ratemaking and accounting practices of these agencies.
<PAGE> 49
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.
Generally accepted accounting principles for rate regulated
companies also require that regulatory assets which are no
longer probable of recovery through future revenues, at the
balance sheet date, be charged to earnings. The following
regulatory assets are reflected in the financial statements:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Regulatory Assets:
Demand side management program costs $ 25,900 $ 25,648
Postretirement benefits other than
pensions <F1> 1,234 3,263
Unamortized premium on reacquired debt 4,416 4,705
Regulatory study costs 21 107
Fuel and gas costs <F1> 5,585 5,931
37,156 39,654
Less current amounts 7,921 9,527
Total long-term regulatory assets $ 29,235 $ 30,127
<FN>
<F1> Refer to the individual paragraphs in this Note for discussion of
specific regulatory assets. See Income Taxes for regulatory assets and
liabilities related to income taxes.
</FN>
</TABLE>
As of December 31, 1999, the recovery of $15,762,000 of
SIGECO's total regulatory assets is reflected in rates
charged to customers. The remaining $21,373,000 of
regulatory assets, which are not yet included in rates,
represent SIGECO's demand side management (DSM) costs
incurred after 1993. When SIGECO files its next electric
rate case, these costs will be included in rate base and
earn a return; amortization of these costs over a period
anticipated to be 15 years will be recovered through rates
as a cost of operations. Of the $15,762,000 of regulatory
assets currently reflected in rates, a total of $8,943,000
is earning a return: $4,527,000 of pre-1994 DSM costs and
$4,416,000 of unamortized premium on reacquired debt. The
remaining recovery periods for the DSM costs and premium on
reacquired debt are 10.5 years and 19 years, respectively.
The remaining $6,819,000 of regulatory assets included in
rates but not earning a return are being recovered over
varying periods: $1,234,000 of deferred postretirement
benefit costs, over 1 year; $3,869,000 of fuel costs, over 3
months; and $1,716,000 of gas costs, over 12 months.
If all or a separable portion of SIGECO's operations becomes
no longer subject to the provisions of SFAS No. 71, a write
off of related regulatory assets would be required, unless
some form of transition cost recovery continues through
rates established and collected for SIGECO's remaining
regulated operations that would meet the requirements under
generally accepted accounting principles for continued
accounting as regulatory assets during such recovery period.
In addition, SIGECO would be required to determine any
impairment to the carrying costs of deregulated plant and
inventory assets.
CONCENTRATION OF CREDIT RISK SIGECO's customer receivables
from gas and electric sales and gas transportation services
are primarily derived from a 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. SIGECO also sells
electricity to wholesale marketers which increases its
exposure to potential credit losses. Energy's customer
receivables from gas sales and transportation services are
primarily derived from a diversified base of commercial and
industrial customers located in the midwestern region of the
United States. Energy investigates the creditworthiness of
its potential customers. See Note 2 for a discussion of
receivables related to SIPI's leveraged lease investments.
UTILITY PLANT Utility plant is stated at the historical
original cost of construction. The cost of repairs and
minor renewals is charged to maintenance expense as
incurred. Property unit replacements are capitalized and
the depreciation reserve is charged with the cost, less net
salvage, of units retired.
<PAGE> 50
DEPRECIATION Depreciation of utility property 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>
1999 1998 1997
<S> <C> <C> <C>
Electric 3.5% 3.4% 3.4%
Gas 3.3% 3.3% 3.2%
</TABLE>
INCOME TAXES SIGCORP and SIGECO utilizes the liability
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 are
as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and cost recovery timing
differences $ 120,306 $ 117,866
Deferred fuel costs, net 2,427 3,446
Leveraged leases 30,700 25,330
Regulatory assets recoverable through
future rates 26,128 26,048
Deferred Tax Assets:
Unbilled revenue (417) (1,394)
Regulatory liabilities to be settled
through future rates (20,388) (22,993)
Other, net (4,297) (4,271)
Net deferred income tax liability $ 154,459 $ 144,032
</TABLE>
The $10,427,000 increase in net deferred income tax
liability is due to: accelerated tax depreciation in excess
of book $1,064,000; unseasonably warm weather at year end
reducing unbilled revenue $977,000; investment in two
leveraged leases during year $5,370,000; reduction of
liability to customers due to fuel clauses $1,019,000;
amortization of investment tax credit $1,430,000; reduction
of deferred tax asset regulatory liability due to investment
tax credit amortization and accelerated tax depreciation in
excess of book $2,605,000.
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and cost recovery
timing differences $ 120,307 $ 117,765
Deferred fuel costs, net 2,427 3,446
Regulatory assets recoverable through
future rates 26,128 26,048
Deferred Tax Assets:
Unbilled revenue (417) (1,394)
Regulatory liabilities to be settled
through future rates (20,388) (22,993)
Other, net (5,080) (4,725)
Net deferred income tax liability $ 122,977 $ 118,147
</TABLE>
The $4,830,000 increase in net deferred income tax liability
is due to: accelerated tax depreciation in excess of book
$837,000; unseasonably warm weather at year end reducing
unbilled revenue $977,000; reduction of liability to
customers due to fuel clauses $1,019,000; amortization of
investment tax credit $1,430,000; reduction of deferred tax
asset regulatory liability due to investment tax credit
amortization and accelerated tax depreciation in excess of
book $2,605,000.
<PAGE> 51
The components of current and deferred income tax expense
are as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
Year Ended December 31 ( in thousands) 1999 1998 1997
<S> <C> <C> <C>
Current
Federal $ 14,573 $ 18,984 $ 24,387
State 2,431 2,859 3,961
Deferred, net
Federal 8,722 3,558 (2,858)
State 1,422 56 (172)
Investment tax credit, net (1,430) (1,447) (1,457)
Total income tax expense $ 25,718 $ 24,010 $ 23,861
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric
CompanyYear Ended December 31 ( in 1999 1998 1997
thousands)
<S> <C> <C> <C>
Current
Federal $ 19,836 $ 19,521 $ 28,403
State 3,195 2,849 4,265
Deferred, net
Federal 4,080 3,270 (3,673)
State 746 842 (278)
Investment tax credit, net (1,430) (1,447) (1,458)
Total income tax expense $ 26,427 $ 25,035 $ 27,259
</TABLE>
A reconciliation of the statutory tax rates to effective
income tax rate is as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
Year Ended December 31 1999 1997 1996
<S> <C> <C> <C>
Statutory federal and state rate 37.9% 37.9% 37.9%
Equity portion of allowance for funds
used during construction (.1) - (0.3)
Book depreciation over related tax
depreciation - nondeferred 1.6 1.7 1.8
Amortization of deferred investment
tax credit (1.8) (1.9) (2.1)
Low-income housing credit (3.5) (3.8) (4.0)
Preferred dividend requirements
of subsidiary .5 0.6 0.6
Excess deferred tax (1.5) (2.8) (1.2)
Other, net - 0.5 1.4
Effective tax rate 33.1% 32.2% 34.1%
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
Year Ended December 31 1999 1998 1997
<S> <C> <C> <C>
Statutory federal and state rate 37.9% 37.9% 37.9%
Equity portion of allowance for funds
used during construction - - (0.3)
Book depreciation over related tax
depreciation - nondeferred 1.7 1.7 1.8
Amortization of deferred investment
tax credit (1.9) (2.1) (2.1)
Other, net (1.1) (.4) 0.2
Effective tax rate 36.6% 37.1% 37.5%
</TABLE>
PENSION BENEFITS SIGECO has trusteed, noncontributory
defined benefit plans which cover eligible full-time regular
employees. The 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, 1999 consist of investments in interest-bearing
obligations and common stocks.
<PAGE> 52
Change in benefit obligation:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Benefit obligation at beginning of year $ 79,743 $ 72,914
Service cost - benefits earned during the year 3,020 2,639
Interest cost on projected benefit obligation 5,637 5,020
Plan amendments 33 2,220
Benefits paid (3,286) (3,176)
Actuarial (gain) loss (3,445) 126
Benefit obligation at end of year $ 81,702 $ 79,743
</TABLE>
Change in plan assets:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Plan assets at fair value at beginning of year $ 83,337 $ 76,587
Actual return on plan assets 6,000 9,926
Benefits paid (3,286) (3,176)
Fair value of plan assets at end of year $ 86,051 $ 83,337
</TABLE>
Reconciliation of funded status:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Excess of plan assets over projected benefit $ 4,349 $ 3,594
obligation
Remaining unrecognized transitional asset (1,398) (1,815)
Unrecognized service cost 3,180 3,455
Unrecognized net gain (14,490) (11,864)
Accrued pension benefit liability $ (8,359) $ (6,630)
</TABLE>
Components of net periodic pension benefit cost:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Service cost $ 3,020 $ 2,639
Interest cost 5,637 5,020
Expected return on plan assets (6,517) (5,985)
Amortization of prior service cost 307 178
Amortization of transitional asset (418) (418)
Recognized actuarial gain (300) (47)
Net periodic benefit cost $ 1,729 $ 1,387
</TABLE>
The projected benefit obligation at December 31, 1999 and
1998 was determined using an assumed discount rate of 7.5%
and 7.0%, respectively. For both periods, the long-term
rate of compensation increases was assumed to be 5.0%, and
the long-term rate of return on plan assets was assumed to
be 8.0%. The transitional asset is being amortized over
approximately 15, 18 and 14 years for the Salaried, Hourly
and Hoosier plans, respectively.
On January 1, 1999 SIGECO amended its pension plans by
increasing the "monthly earnings multiplier" applied to all
credited years of service in the plans' benefit formulas.
These amendments increased unrecognized prior service costs.
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. The accrued pension liability for these plans at
December 31, 1999 and 1998 was $4,648,000 and $3,820,000,
respectively. Service cost related to these benefits for
the year ended December 31, 1999 was approximately
$1,000,000.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS SIGECO provides
certain postretirement health care and life insurance
benefits for retired employees and their dependents through
a combination of self-insured and fully-insured plans. In
1998, SIGECO amended these benefits for salaried employees
aged 49 years and younger to require retiree contributions
towards the related health care insurance costs. SFAS No.
106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," requires the expected cost of these
benefits be recognized during the
<PAGE> 52
employees' years of service. As authorized by the IURC,
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. Subsequently, the IURC authorized SIGECO to include
in rates SFAS No. 106 costs and to recover the amounts
previously deferred over a 60-month period.
Change in benefit obligation:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Benefit obligation at beginning of year $ 25,529 $ 30,924
Service cost - benefits earned during the period 620 578
Interest cost on accumulated benefit obligation 1,707 1,664
Actuarial gain (2,287) (4,201)
Benefits paid net of participant contributions (661) (1,024)
Plan amendments - (2,412)
Benefit obligation at end of year $ 24,908 $ 25,529
</TABLE>
The net periodic cost determined under the standard includes
the amortization of the discounted present value of the
obligation at the adoption date over a 20-year period.
Change in plan assets:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Plan assets at fair value at beginning of year $ 9,511 $ 7,336
Actual return on plan assets 1,434 1,031
Employer contribution 1,425 2,168
Benefits paid net of participant contributions (661) (1,024)
Fair value of plan assets at end of year $ 11,709 $ 9,511
</TABLE>
Reconciliation of funded status:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Excess of projected benefit obligation over plan $ (13,199) $ (16,018)
assets
Unrecognized actuarial gain (15,885) (13,671)
Unrecognized transition obligation 17,043 18,353
Accrued postretirement benefit liability $ (12,041) $ (11,336)
</TABLE>
Components of net periodic other postretirement benefit
cost:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Service cost $ 620 $ 578
Interest cost 1,707 1,664
Expected return on plan assets (751) (577)
Amortization of transitional obligation 1,311 1,311
Recognized actuarial gain (757) (743)
Net periodic benefit cost $ 2,130 $ 2,233
</TABLE>
The assumptions used to develop the accumulated
postretirement benefit obligation at December 31, 1999 and
1998 included discount rates of 7.5% and 7.0%, respectively.
As of December 31, 1999 the health care cost trend rate is
8.0% declining to 4.5% in 2006. The accrued health care cost
trend rate for 2000 is 7.0%. 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 1.0% increase in the
assumed health care cost trend rate each year would increase
the aggregate service and interest costs for 1999 by
$382,000 and the accumulated postretirement benefit
obligation by $3,606,000. A 1.0% decrease in the assumed
health care cost trend rate each year would decrease the
aggregate service and interest costs for 1999 by $307,000
and the accumulated postretirement benefit obligation by
$2,952,000.
<PAGE> 54
On July 1, 1998, SIGECO amended its postretirement benefit
plans to change benefits for existing employees under fifty
years of age and new employees to a graduated benefit rate.
SIGECO has adopted Voluntary Employee Beneficiary
Association (VEBA) Trust Agreements for the funding of
postretirement health 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.
CASH FLOW INFORMATION For balance sheet and cash flow
purposes, SIGCORP and SIGECO consider all highly liquid debt
instruments purchased with an original maturity of three
months or less to be cash equivalents.
During 1999, 1998 and 1997, SIGCORP paid interest (net of
amounts capitalized) of $19,777,000, $21,900,000 and
$19,888,000, respectively, and income taxes of $19,990,000,
$27,594,000 and $29,552,000, respectively. SIGCORP is
involved in several partnerships which are partially
financed by partnership obligations amounting to $845,000
and $2,358,000 at December 31, 1999 and 1998, respectively.
During 1999, 1998 and 1997, SIGECO paid interest (net of
amounts capitalized) of $15,437,000, $18,484,000 and
$18,929,000, respectively, and income taxes of $25,476,000,
$23,789,000 and $35,239,000, respectively.
INVENTORIES SIGECO accounts for inventories under the
average cost method except for gas in underground storage
which is accounted for under the last-in, first-out (LIFO)
method. Energy accounts for gas in underground storage
under the lower of cost or market method.
<TABLE>
<CAPTION>
SIGCORP, Inc.At December 31 (in thousands) 1999 1998
<S> <C> <C>
Fuel (coal and oil) for electric generation $ 12,824 $ 15,701
Materials and supplies 14,131 15,179
Emission allowances 4,437 5,133
Gas in underground storage - at LIFO cost 11,441 10,762
Other 2,496 669
Total inventories $ 45,329 $ 47,444
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Fuel (coal and oil) for electric generation $ 12,229 $ 15,701
Materials and supplies 13,352 15,063
Emission allowances 4,437 5,133
Gas in underground storage - at LIFO cost 11,441 10,762
Total inventories $ 41,459 $ 46,659
</TABLE>
Based on the December 1999 price of gas purchased, the cost
of replacing SIGECO's current portion of gas in underground
storage at December 31, 1999 exceeded the amount stated on a
LIFO basis by approximately $12,000,000.
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. Metered electric
rates typically 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. SIGECO also collects through a
quarterly rate adjustment mechanism, the margin on electric
sales lost due to the implementation of demand side
management programs.
<PAGE> 55
SIGECO records any adjustment clause under-or overrecovery
each month in revenues. A corresponding asset or liability
is recorded until such time as the under-or overrecovery is
billed or refunded to its customers. 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.
COMPREHENSIVE INCOME Comprehensive income is a measure of
all changes in equity of an enterprise which result from
transactions or other economic events during the period
other than transactions with shareholders. This information
is reported in the Consolidated Statements of Common
Shareholders' Equity. SIGCORP's components of accumulated
other comprehensive income (loss) includes unrealized gains
(losses) on available for sale securities. SIGECO has no
elements of other comprehensive income.
NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which is effective for fiscal years
beginning after June 15, 2000, but may be adopted earlier.
The June 15, 1999 date was amended by SFAS No. 137 to June
15, 2000. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument,
including certain derivative instruments embedded in other
contracts, be recorded on Consolidated Balance Sheets as
either an asset or liability measured at fair value. The
accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and resulting
designation.
SFAS No. 133 requires that changes in the derivative's fair
value be recognized in the current period's earnings, unless
specific hedge accounting criteria are met. If an entity
qualifies for hedge accounting, gains and losses on
derivatives, generally, will offset the related effects of
the hedged items in the current period income statement.
SFAS No. 133 requires that formal documentation be
maintained and that the effectiveness of the hedge be
assessed quarterly.
SIGCORP and SIGECO have not yet quantified the effects of
adopting SFAS No. 133 on their financial statements and have
not determined the timing or method of their adoption of
this statement. However, adoption of SFAS No. 133 could
increase the volatility in earnings and other comprehensive
income.
NOTE 2 LEVERAGED LEASES
SIGCORP
SIPI is a lessor in several leveraged lease agreements under
which an office building, a part of a reservoir, a gas
turbine electric generating peaking unit, two heat and power
generating facilities and passenger railroad cars are leased
to third parties. In early 1998, SIPI sold its leveraged
lease in a paper mill. In 1999 SIPI entered into two new
leveraged leases in the Netherlands and Belgium. The
economic lives and lease terms vary with the leases. The
total equipment and facilities cost was approximately
$409,700,000 and $86,700,000 at December 31, 1999 and 1998,
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
$373,500,000 and $66,700,000 at December 31, 1999 and 1998,
respectively. SIGCORP's net investment in leveraged leases
at those dates was $55,037,000 and $10,673,000,
respectively, as shown:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Minimum lease payments receivable $ 161,551 $ 51,443
Estimated residual value 29,073 29,073
Less unearned income 104,887 44,513
Investment in lease financing receivables and loan 85,737 36,003
Less deferred taxes arising from leveraged leases 30,700 25,330
Net investment in leveraged leases $ 55,037 $ 10,673
</TABLE>
<PAGE> 56
NOTE 3 SHORT-TERM FINANCING
SIGCORP and SIGECO
SIGECO has trust demand note arrangements totaling
$17,000,000 with several banks, of which none was utilized
at December 31, 1999. Funds are also borrowed periodically
from banks on a short-term basis, made available through
lines of credit. SIGCORP has available lines of credit
totaling $149,000,000 at December 31, 1999 of which
$108,566,000 was utilized at that date.
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
Notes Payable
Balance at year end $ 108,566 $ 69,508 $ 41,368
Weighted average interest rate on
year end balance 6.26% 5.86% 6.21%
Average daily amount outstanding
during the year $ 96,920 $ 38,408 $ 14,510
Weighted average interest rate on
average daily amount
outstanding during the year 5.94% 6.22% 6.08%
</TABLE<
SIGECO has trust demand note arrangements totaling
$17,000,000 with several banks of which none was utilized
at December 31, 1999. Funds are also borrowed periodically
from banks on a short-term basis, made available through
lines of credit. SIGECO has available lines of credit
totaling $49,000,000 at December 31, 1999 of which
$22,880,000 was utilized at that date
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
Notes Payable
Balance at year end $ 22,880 $65,689 $ 52,529
Weighted average interest rate on
year end balance 6.42% 5.77% 6.31%
Average daily amount outstanding
during the year $ 54,576 $43,149 $ 19,777
Weighted average interest rate on
average daily amount
outstanding during the year 5.74% 6.28% 6.13%
</TABLE>
NOTE 4 LONG-TERM DEBT
SIGCORP and SIGECO
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 2000
sinking fund requirement by this means and, accordingly, the
sinking fund requirement for 2000 is excluded from current
liabilities on the balance sheet. At December 31, 1999,
$200,011,000 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. Of the
amount of first mortgage bonds, notes payable and
partnership obligations outstanding at December 31, 1999,
the following amounts which mature in the five years
subsequent to 1999 are as follows:
<TABLE>
<CAPTION>
SIGCORP SIGECO
<S> <C> <C>
2000 $ 596,000 $ -
2001 249,000 -
2003 1,000,000 1,000,000
</TABLE>
In addition, $53,700,000 of adjustable rate pollution
control series first mortgage bonds could, at the election
of the bondholder, be tendered to SIGECO in March 2000. 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 2000
are shown as current liabilities.
<PAGE> 57
First mortgage bonds, notes payable and partnership
obligations outstanding and classified as long-term are as
follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 (in thousands) 1999 1998
<S> <C> <C>
First Mortgage Bonds due:
2020, 4.40% Pollution Control Series B $ 4,640 $ 4,640
2030, 4.40% Pollution Control Series B 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8.875% 13,000 23,000
2023, 7.60% 45,000 45,000
2025, 7.625% 20,000 20,000
Adjustable Rate Pollution Control:
2015, Series A, presently 4.55% 9,975 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 22,800
2029, 6.72% 80,000 -
Total first mortgage bonds $ 239,915 $ 169,915
Notes Payable:
Insurance Company, due 2012, 7.43% $ 35,000 $ 35,000
Tax Exempt, due 2003, 6.25% 1,000 1,000
Bank, due 2000, 2.90% - 9
Total notes payable $ 36,000 $ 36,009
Partnership Obligations, due 2001 through 2005,
without interest $ 249 $ 781
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998
<S> <C> <C>
First Mortgage Bonds due:
2020, 4.40% Pollution Control Series B $ 4,640 $ 4,640
2030, 4.40% Pollution Control Series B 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8.875% 13,000 23,000
2023, 7.60% 45,000 45,000
2025, 7.625% 20,000 20,000
Adjustable Rate Pollution Control:
2015, Series A, presently 4.55% 9,975 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 22,800
2029, 6.72% 80,000 -
Total first mortgage bonds $ 239,915 $ 169,915
Notes Payable:
Tax Exempt, due 2003, 6.25% 1,000 1,000
Total notes payable $ 1,000 $ 1,000
</TABLE>
NOTE 5 CAPITAL STOCK
SIGCORP and SIGECO
COMMON STOCK Each outstanding share of SIGCORP's common
stock contains a right which entitles registered holders to
purchase from SIGCORP 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
<PAGE> 58
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. These rights are not exercisable in the merger with
IEI.
SIGECO has a common stock option plan for its key management
employees. The option price for all stock options is at
least 100% of the fair market value of SIGCORP common stock
at the grant date. Options generally vest and become
exercisable between one and three years in equal annual
installments beginning one year after the grant date, and
generally expire in 10 years. The expiration dates for
options outstanding as of December 31, 1999, ranged from
July 13, 2005 to July 14, 2008. Stock option activity for
the past three years was as follows:
<TABLE>
<CAPTION>
At December 31 1999 1998 1997
<S> <C> <C> <C>
Outstanding at beginning of year 503,668 458,169 327,901
Granted 204,639 74,999 139,348
Exercised (9,878) (29,500) (9,080)
Outstanding at end of year 698,429 503,668 458,169
Exercisable at end of year 493,790 381,765 318,821
Reserved for future grants at end
of year - 204,639 279,638
Average Option Price - Exercised $23.36 $21.16 $18.42
- Outstanding at
end of year $24.43 $23.28 $21.58
</TABLE>
SIGCORP and SIGECO account for stock compensation in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Under
Accounting Principles Board Opinion No. 25, no compensation
cost has been recognized for stock options. Had
compensation cost for stock options been determined
consistent with SFAS No. 123 "Accounting for Stock-based
Compensation," net income would have been reduced to the
following pro forma amounts:
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 1999 1998 1997
<S> <C> <C> <C>
Net Income:
As reported $52,057 $50,476 $46,140
Pro forma 51,386 49,961 45,848
Basic Earnings Per Share:
As reported $2.20 $2.14 $1.95
Pro forma 2.17 2.11 1.94
Diluted Earnings Per Share:
As reported $2.19 $2.12 $1.95
Pro forma 2.17 2.10 1.94
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 1999 1998 1997
<S> <C> <C> <C>
Net Income:
As reported $45,690 $42,447 $44,266
Pro forma 45,019 41,932 43,974
</TABLE>
The fair value of each option granted used to determine pro
forma net income is estimated as of the date of grant using
the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in the twelve
month periods ended December 31, 1999, 1998 and 1997: risk-
free interest rate of 6.46%, 4.44% and 5.75%, respectively;
expected option term of five years; expected volatilities of
34.00%, 33.16% and 36.62%, respectively; and dividend rates
of 4.46%, 3.77% and 4.46%, respectively.
<PAGE> 59
EARNINGS PER SHARE The following table illustrates the
basic and diluted earnings per share calculations.
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31
(in thousands except for per share amounts)
1999 1998 1997
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
Amount Amount Amount t
<S <C> <C> <C> <C> <C> <C> <C> <C> <C>
>
Basic EPS
$52,057 23,631 $2.20 $50,476 23,631 $2.14 $46,140 23,631 $1.95
Effect of dilutive securities
93 134 56
Diluted EPS
$52,057 23,724 $2.19 $50,476 23,765 $2.12 $46,140 23,687 $1.95
</TABLE>
Basic earnings per common share were computed by dividing
net income by the weighted average number of shares of
common stock outstanding during the year. Diluted earnings
per common share were determined using the treasury stock
method for dilutive stock options.
Options to purchase 74,999 shares of common stock at $32.06
per share were granted in July 1998, but were not included
in the computation of diluted earnings per share because the
exercise price was greater than the average market price of
the common shares.
CUMULATIVE PREFERRED STOCK OF SIGECO 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. This nonredeemable preferred stock is
callable at the option of SIGECO as follows: the 4.8% Series
at $110 per share, plus accrued dividends; and the 4.75%
Series at $101 per share, plus accrued dividends.
CUMULATIVE REDEEMABLE PREFERRED STOCK OF SIGECO The Series
has a dividend 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.
CUMULATIVE SPECIAL PREFERRED STOCK OF SIGECO The Cumulative
Special Preferred Stock contains a provision which allows
the stock to be tendered on any of its dividend payment
dates. On January 29, 1999, SIGECO repurchased 1,160 shares
of the Cumulative Special Preferred Stock at a cost of
$117,600 as a result of a tender within the provision of the
issuance.
NOTE 6 OWNERSHIP OF WARRICK UNIT 4
SIGCORP and SIGECO
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. SIGECO's share of
the cost of this unit at December 31, 1999 is $37,503,000
with accumulated depreciation totaling $27,306,000. 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.
NOTE 7 COMMITMENTS AND CONTINGENCIES
SIGCORP and SIGECO
SIGECO presently estimates that approximately $51,991,000
will be expended for construction purposes in 2000,
including those amounts applicable to SIGECO's demand side
management (DSM) programs. Commitments for the 2000
construction program are approximately $7,149,000 at
December 31, 1999. Additionally, SIGECO has a three-year
contract with a utility-affiliated power marketer to
purchase 50 MW of electric power beginning January 2000
through December 2002.
<PAGE> 60
NOTE 8 LEASE OBLIGATIONS
SIGCORP
SIMI has entered into an agreement to lease back a
previously sold manufacturing facility and related equipment
at $532,000 per year through 2010 under a noncancelable
operating lease. In December 1997, Fuels entered operating
lease agreements for mining equipment. The aggregate
future minimum rental payments required under the above
leases are as follows:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands)
<S> <C>
2000 $ 2,319
2001 2,319
2002 2,319
2003 2,145
2004 1,924
Thereafter 6,915
Total lease payments $ 17,941
</TABLE>
Total rental expense under all operating leases was
$679,863, $1,206,977 and $578,454 for the years ended
December 31, 1999, 1998 and 1997, respectively.
NOTE 9 SEGMENTS OF BUSINESS
SIGCORP AND SIGECO
SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information" establishes standards for reporting
information about operating segments in financial statements
and disclosures about products and services and geographic
areas. Operating segments are defined as components of an
enterprise for which separate financial information is
available and is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in
assessing performance.
SIGCORP has four reportable segments. They are SIGECO's
electric and gas utility operations, Energy Services' gas
marketing services and SIPI's investment operations. All
other subsidiary operations and corporate activities are
included in other. SIGCORP's reportable segments are
operations that are managed separately and meet the
quantitative thresholds required by SFAS No. 131. A
description of the segments' products and services is
included in Note 1 "Principles of Consolidation." The
accounting policies of the segments are those described in
Note 1. Revenues for each of SIGCORP's segments are
attributable principally to customers in the United States
except a portion of revenues for SIPI which are attributable
to customers in the Netherlands and Belgium as well.
<PAGE> 61
Certain financial information relating to significant
segments of business is presented below:
<TABLE>
<CAPTION>
SIGCORP, Inc.
Year Ended December 31 (in 1999 1998 1997
thousands)
<S> <C> <C> <C>
Operating revenues:
Electric $ 307,569 $ 297,865 $ 272,545
Gas 68,212 66,801 85,561
Gas marketing 221,534 179,613 71,669
Investment operations 1,039 963 955
All other 26,680 28,664 2,507
Total 625,034 573,906 433,237
Interest revenue:
Electric <F1> 330 309 492
Gas <F1> 33 31 49
Gas marketing 85 71 27
Investment operations 2,863 3,702 2,305
All other 7,321 4,880 2,912
Total 10,632 8,993 5,785
Interest expense:
Electric <F1> 17,544 18,191 18,009
Gas <F1> 1,735 1,799 1,781
Gas marketing 168 155 15
Investment operations 4,051 2,749 2,242
All other 6,604 3,901 2,051
Total 30,102 26,795 24,098
Income taxes:
Electric 24,331 22,881 23,714
Gas 2,096 2,153 3,545
Gas marketing 244 339 244
Investment operations (1,052) (1,517) (2,564)
All other 99 154 (1,078)
Total 25,718 24,010 23,861
Net income:
Electric 41,820 38,342 37,861
Gas 3,870 4,106 6,404
Gas marketing 239 543 405
Investment operations 5,318 6,899 3,528
All other 810 586 (2,058)
Total 52,057 50,476 46,140
Depreciation and amortization
expense:
Electric 40,829 38,077 36,217
Gas 4,038 4,324 3,974
Gas marketing 75 36 4
Investment operations 139 189 91
All other 260 107 87
Total 45,341 42,733 40,373
Capital expenditures:
Electric 51,080 47,114 55,735
Gas 9,893 9,381 12,687
Gas marketing - - -
Investment operations - - -
All other 902 2,277 592
Total 61,875 58,772 69,014
Identifiable assets:
Electric <F2> 751,159 740,746 726,507
Gas <F2> 143,078 141,174 137,956
Gas marketing 39,545 25,905 22,372
Investment operations 154,739 87,000 94,365
All other 577,756 460,706 398,928
Total assets $ 1,666,277 $ 1,455,531 $ 1,380,128
<FN>
<F1> SIGECO allocates interest revenue and expense based on the net plant
ratio which is 91% electric and 9% gas.
<F2> Utility plant less accumulated provision for depreciation,
inventories, receivables (less allowance), regulatory assets and other
identifiable assets.
</FN>
</TABLE>
<PAGE> 62
The following is a reconciliation to the consolidated
financial statements of SIGCORP:
<TABLE>
<CAPTION>
Year Ended December 31
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Operating revenues:
Total revenues for segments $ 625,034 $ 573,906 $ 433,237
Elimination of intersegment
revenues (20,543) (16,795) -
Total consolidated revenues 604,491 557,111 433,237
Interest revenue:
Total interest revenue for
segments 10,632 8,993 5,785
Elimination of intersegment
interest (6,137) (3,505) (2,782)
Total consolidated interest
revenue 4,495 5,488 3,003
Interest expense:
Total interest expense for
segments 30,102 26,795 24,098
Elimination of intersegment
interest (6,135) (3,505) (2,782)
Total consolidated interest
expense 23,967 23,290 21,316
Identifiable assets:
Total assets for segments 1,666,277 1,455,531 1,380,128
Elimination of intersegment
assets (522,135) (426,013) (390,105)
Total consolidated assets $ 1,144,142 $ 1,029,518 $ 990,023
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
Year Ended December 31
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Operating revenues:
Electric $ 307,569 $ 297,865 $ 272,545
Gas 68,212 66,801 85,561
Total 375,781 364,666 358,106
Interest revenue:
Electric <F1> 330 309 492
Gas <F1> 33 31 49
Total 363 340 541
Interest expense:
Electric <F1> 17,544 18,191 18,009
Gas <F1> 1,735 1,799 1,780
Total 19,279 19,990 19,789
Identifiable assets:
Electric <F2> 751,598 740,746 18,009
Gas <F2> 143,161 141,174 1,780
Total assets $ 894,759 $ 881,920 $ 19,789
<FN>
<F1> SIGECO allocates interest revenue and expense based on the net plant
ratio which is 91% electric and 9% gas.
<F2> Utility plant less accumulated provision for depreciation,
inventories, receivables (less allowance), regulatory assets and other
identifiable assets.
</FN>
</TABLE>
<PAGE> 63
NOTE 10 DISCLOSURES ABOUT FAIR VALUE
SIGCORP and SIGECO
Except for the following financial instruments, fair value
of SIGCORP's and SIGECO's financial instruments is
equivalent to carrying value due to their short-term nature.
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 1999 1998
(in thousands)
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair
Value
<S> <C> <C> <C> <C>
Long-Term Debt (including
current portion) $ 326,982 $ 354,426 $ 303,471 $376,424
Partnership Obligations
(including current
portion) 845 905 2,358 3,446
Redeemable Preferred
Stock of Subsidiary 7,500 7,538 7,500 9,044
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 1999 1998
(in thousands)
Carrying Estimated Carrying Estimated
Amount Fair Amount Fair
Value Value
<S> <C> <C> <C> <C>
Long-Term Debt (including
current portion) $ 291,982 $ 316,535 $ 268,462 $333,456
Redeemable Preferred Stock 7,500 7,538 7,500 9,044
</TABLE>
At December 31, 1999 and 1998, respectively, the fair value
of SIGCORP's debt relating to utility operations exceeded
carrying amounts by $24,500,000 and $65,000,000.
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.
LONG-TERM DEBT At December 31, 1999 and 1998, respectively,
the fair value of SIGCORP's long-term debt, which was
substantially related to SIGECO's operations, were based on
the current quoted market interest rate of long-term debt of
comparably rated utilities (6.46%) and (5.09%). Fair value
of SIGCORP's tax-exempt issues were valued at the tax-
effected rate of such debt (3.26%) and (4.01%),
respectively.
REDEEMABLE PREFERRED STOCK OF SIGECO At December 31, 1999
and 1998, respectively, the fair value of SIGECO's
redeemable preferred stock were based on the current quoted
market rate of long-term debt with similar characteristics,
of comparably rated utilities (6.46%) and (5.09%).
PARTNERSHIP OBLIGATIONS At December 31, 1999 and 1998,
respectively, the fair value of SIGCORP's partnership
obligations were estimated based on the current quoted
market rate of comparable debt (7.62%) and (5.09%).
NOTE 11 ENVIRONMENTAL
On November 3, 1999, the USEPA filed a lawsuit against
SIGECO. The USEPA alleges that, beginning in 1992, SIGECO
violated the Clean Air Act by: (i) making modifications to
its Culley Generating Station in Yankeetown, Indiana without
obtaining required permits; (ii) making major modifications
to the Culley Generating Station without installing the best
available emission control technology; and (iii) failing to
notify the USEPA of the modifications. In addition, the
lawsuit alleges that the modifications to the Culley
Generating Station required SIGECO to begin complying with
federal new source performance standards.
SIGECO believes it performed only proper maintenance at the
Culley Generating Station. Because proper maintenance does
not require permits, application of the best available
emission control technology, notice to the USEPA, or
compliance with new source performance standards, SIGECO
believes that the lawsuit is without merit, and intends to
defend the lawsuit vigorously.
The lawsuit seeks fines against SIGECO in the amount of
$27,500 per day per violation. The lawsuit does not specify
the number of days or violations the USEPA believes
occurred. The lawsuit also seeks a court order requiring
SIGECO to install the best available emissions technology at
the Culley Generating Station. If the USEPA is successful
in obtaining an order, SIGECO estimates that it would incur
capital costs of approximately $40 million to $50 million
complying with the order.
The USEPA has also issued an administrative notice of
violation to SIGECO making the same allegations, but
alleging that violations began in 1977.
Under applicable rules, SIGECO could be subjected to
criminal penalties if the Culley Generating Station
continues to operate without complying with the new source
performance standards and the allegations are determined by
a court to be valid. SIGECO anticipates at this time that
the plant will continue to operate while the matter is being
decided. SIGECO does not believe that it is liable for the
alleged fine in this matter, but cannot determine the
outcome of the matter with certainty. Currently, no
liability has been recorded for this matter.
NOTE 12 SUBSEQUENT EVENT
On January 28, 2000, affiliates of Blackstone Capital
Partners III, a private equity fund of The Blackstone Group
invested in class B equity units of Utilicom Holdings LLC
(Holdings) a newly formed holding company. The investment
was the first part of a commitment by Blackstone to invest
up to $100 million to fund future growth opportunities in
fiber optic networks. At the same time, Advanced
Communications exchanged 35 percent of its current 49
percent equity interest in SIGECOM LLC for $16.5 million of
convertible debt of Holdings. The debt is convertible into
class A equity units at a future date or in the event of a
public offering of stock. Simultaneous with this
transaction, Utilicom was downstreamed to Holdings and the
existing equity interests in Utilicom were converted to
class A equity units in Holdings. The investment
restructuring resulted in an immediate after tax gain to
SIGCORP of $4,900,000 in the first quarter of 2000.
<PAGE> 65
<TABLE>
<CAPTION>
Selected Quarterly
Financial Data
(Unaudited)
SIGCORP, Inc.
June
March 30,
31,
(in thousands except
for
per share amounts) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Revenues $ 150,161 $ 141,071 $ 131,920 $ 133,305
Operating Income $ 23,793 $ 23,880 $ 16,157 $ 16,623
Net Income $ 12,620 $ 16,426 $ 8,170 $ 9,007
Basic Earnings Per $ 0.53 $ 0.70 $ 0.35 $ 0.38
Share
Diluted Earnings Per
Share $ 0.53 $ 0.69 $ 0.34 $ 0.38
Average Common Shares
Outstanding 23,631 23,631 23,631 23,631
September 30, December 31,
1999 1998 1999 1998
Operating Revenues $ 157,963 $ 134,035 $ 164,447 $ 148,700
Operating Income $ 32,341 $ 31,557 $ 16,521 $ 14,019
Net Income $ 20,248 $ 17,876 $ 11,019 $ 7,167
Basic Earnings Per $ 0.86 $ 0.76 $ 0.47 $ 0.30
Share
Diluted Earnings Per
Share $ 0.85 $ 0.75 $ 0.47 $ 0.30
Average Common Shares
Outstanding 23,631 23,631 23,631 23,631
</TABLE>
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
Quarter Ended
March June 30,
31,
(in thousands) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Revenues $ 100,685 $ 95,145 $ 84,318 $ 87,821
Operating Income $ 17,147 $ 16,419 $ 12,338 $ 12,518
Net Income $ 12,237 $ 12,763 $ 7,617 $ 7,585
September 30, December 31,
1999 1998 1999 1998
Operating Revenues $ 101,930 $ 93,359 $ 88,848 $ 88,341
Operating Income $ 21,219 $ 21,376 $ 12,722 $ 11,689
Net Income $ 17,601 $ 16,429 $ 8,235 $ 5,670
</TABLE>
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.
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
<PAGE> 66
<TABLE>
<CAPTION>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANTS
<S> <C>
(a) Identification of Directors
John M. Dunn, 61, President and Chief Executive
Officer of Dunn Hospitality Group, Evansville,
Indiana, hotel development and management company. He
is also a director of Old National Bank of Evansville.
He has been a director of SIGECO and SIGCORP since
1996.
John D. Engelbrecht, 48, President and Chief Executive
Officer of South Central Communications, Evansville,
Indiana, owner and operator of radio and television
stations in Indiana, Kentucky and Tennessee and MUZAK
franchises in 14 U.S. cities. He is also a director
of Fifth Third Bank, Indiana; Evansville, Indiana. He
has been a director of SIGECO and SIGCORP since 1996.
Andrew E. Goebel, 52, President of SIGCORP since April
1999; Executive Vice President of SIGCORP 1997-1999;
Secretary and Treasurer of SIGCORP 1996-1997; Chief
Executive Officer of SIGECO since April 1999;
President and Chief Executive Officer of SIGECO 1997-
1999; Senior Vice President, Chief Financial Officer
and Secretary of SIGECO 1996-1997; Senior Vice
President, Chief Financial Officer, Secretary &
Treasurer of SIGECO 1989-1996; and Vice President,
Secretary and Treasurer of SIGECO 1984-1989. He is
also a director of Old National Bank of Evansville.
He has been a director of SIGCORP and SIGECO since
September 1997.
Robert L. Koch II, 61, President and Chief Executive
Officer of Koch Enterprises, Inc., Evansville,
Indiana, holding company comprised of manufacturers of
aluminum die castings, industrial painting systems and
wholesale distributors of heating and air conditioning
equipment. He is a director of Fifth Third Bancorp,
Cincinnati, Ohio and Bindley Western Industries, Inc.
of Indianapolis, Indiana. He has been a director of
SIGECO since 1986 and a director of SIGCORP since
1996.
Donald A. Rausch, 69, Chairman of the Board, President
and Chief Executive Officer 1990-1995, of UF Bancorp,
Inc., Evansville, Indiana; Chairman of the Board and
President, 1985-1995, of Union Federal Savings Bank,
Evansville, Indiana. He has been a director of SIGECO
since 1982 and a director of SIGCORP since 1996.
Officer of SIGECO 1988-1990; Executive Vice President
and General Manager of SIGECO 1985-1988. He is also a
director of Ohio Valley Electric Corp., Indiana-
Kentucky Electric Corp., National City Bancshares and
the National City Bank of Evansville. He has been a
director of SIGECO since 1985 and a director of
SIGCORP since 1996.
Richard W. Shymanski, 63, Chairman of the Board 1995-
1999, and President 1983-1995, of Harding Shymanski &
Company, Professional Corporation, Certif ied Public
Accountants, Evansville, Indiana. He has been a
director of SIGECO since 1989 and a director of
SIGCORP since 1996. Retired December 31, 1999 from
Harding Shymanski & Company
*Donald E. Smith, 73, President and Chief Executive
Officer of First Financial Corporation, Terre Haute,
Indiana; Chairman and director of Terre Haute First
National Bank, Terre Haute, Indiana; President and
director of Terre Haute Oil Corp., Chairman and
director of Princeton Mining Co., Inc., Chairman and
director of Deep Vein Coal Company and Chairman and
director of R.J. Oil Co., all of Terre Haute, Indiana;
and a director of Blackhawk Coal Corporation. He has
been a director of SIGECO since 1964 and a director of
SIGCORP since 1996. *Retired as a director of SIGECO
and SIGCORP effective December 31, 1999.
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C>
James S. Vinson, 58, President and Professor of
Physics at the University of Evansville in Evansville,
Indiana since 1987. Vice President of Academic
Affairs and Professor of Physics at Trinity University
of San Antonio, Texas 1983-1987. He has been a
director of SIGECO since 1989 and a director of
SIGCORP since 1996.
(b) Identification of Executive Officers
The information required by this item is included in
Part I, Item 1. - BUSINESS on page 13, to which
reference is hereby made.
</TABLE>
Item 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
General. The following three tables set forth
compensation paid by SIGCORP and SIGECO to the
five highest paid executive officers of SIGCORP
or SIGECO during the past three years whose total
cash compensation for the calendar year 1999
exceeded $100,000. The tables include a Summary
Compensation Table (Table 1); a table showing
Option Grants in Last Fiscal Year (Table 2), and
a table showing Aggregate Option Exercises in
Last Fiscal Year and Fiscal Year End Option
Values (Table 3).
<TABLE>
<CAPTION>
TABLE 1
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f)
Long Term
Compensation
Awards:
Shares
Underlying
Name and Principal Annual Compensation Options All Other
Position at SIGCORP Year Salary Bonus (#) Compensation
or SIGECO <F1>
<S> <C> <C> <C> <C> <C>
Ronald G. Reherman 1999 $ 409,801 $ 159,100 54,529 None
Chairman and Chief
Executive Officer 1998 363,467 150,500 None None
of SIGCORP and
Chairman of the 1997 346,875 67,000 52,955 None
Board of SIGECO
Andrew E. Goebel 1999 275,014 80,156 37,489 None
President of SIGCORP
and 1998 220,436 65,625 7,007 None
Chief Executive
Officer of SIGECO 1997 190,208 35,000 20,993 None
J. Gordon Hurst 1999 217,048 62,500 25,049 None
President and Chief
Operating Officer 1998 196,637 59,375 1,974 None
of SIGECO 1997 177,083 32,800 19,858 None
Ronald G. Jochum 1999 140,563 19,500 4,601 None
Vice President 1998 128,127 18,750 4,055 None
Power Supply of 1997 123,958 18,000 4,728 None
SIGECO
Jeffrey L. Davis 1999 123,650 16,500 4,090 None
Vice President 1998 107,213 15,000 3,431 None
Support Services of
SIGECO 1997 98,125 13,650 3,783 None
<FN>
<F1> These amounts are cash awards under the Corporate Performance Plan
based on performance for the prior plan year.
</FN>
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
TABLE 2
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
% of Potential
Number of Total Realizable
Shares
Under-
lying Options Exercise Value at Assumed
Granted Annual Rates of
Options to or Base Expira- Stock
Granted Employees Price tion Price
<F1> in <F2> Appreciation
Fiscal (Per for Option Term
Name (#) Year Share)($) Date ($)
5%<F3> 10%<F3>
<S> <C> <C> <C> <C> <C> <C>
R.G. Reherman 54,529 26.65 27.0000 7/19/2009 925,911 2,346,440
A.E. Goebel 37,489 18.32 27.0000 7/19/2009 636,569 1,613,191
J.G. Hurst 25,049 12.24 27.0000 7/19/2009 425,336 1,077,885
R.G. Jochum 4,601 2.25 27.0000 7/19/2009 78,126 197,986
J.L. Davis 4,090 2.00 27.0000 7/19/2009 69,449 175,997
</FN>
<F1> The options were granted July 19, 1999. For Messrs. Reherman, Goebel
and Hurst, options vest one-half of the total each year after the date
of grant with total vesting occurring at the two-year anniversary. For
Messrs. Jochum and Davis, options vest one year after the date of grant.
<F2> Equal to market price on grant date.
<F3> These values are not a prediction of what SIGCORP believes the market
value of its common stock will be in the next 10 years.
They are merely assumed values required to be calculated in accordance with
SEC Rules.
</FN>
</TABLE>
<TABLE>
<CAPTION>
TABLE 3
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of
Securities
Shares Underlying Underlying Value of
Acquired Unexercised Unexercised Unexercised
on Value Options at In-the-Money
Exercise Realized Year-End<F2> Options at
<F1> Year-End<F3>
Year Name (#) ($) (#) ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
<S> <C> <C> <C> <C> <C>
1999 R.G. Reherman - - 136,691/54,529 $ 362,853/0
1999 A.E. Goebel 4,000 37,833 63,097/37,489 152,085/0
1999 J.G. Hurst - - 57,509/25,049 154,599/0
1999 R.G. Jochum - - 23,802/4,601 31,447/0
1999 J.L. Davis - - 16,519/4,090 15,278/0
<FN>
<F1> Market value of underlying securities at time of exercise minus the
exercise price.
<F2> Options granted in 1996 are restated to reflect 3 for 2 common
stock split on March 27, 1997.
<F3> Market value of underlying securities at fiscal year-end (December
31, 1999) of $22.75 per share minus the exercise price.
</FN>
</TABLE>
<PAGE> 69
Change of Control Agreements. In order to insure
SIGCORP and SIGECO continuity of management and operations
in the event of a change of control of SIGCORP or SIGECO,
agreements have been entered into between SIGCORP, SIGECO
and Messrs. Reherman, Goebel, Hurst, Jochum and Davis. The
agreements provide that in the event of a change of control
of SIGCORP or SIGECO, the salary of the named officers will
continue for the lesser of a period of three years, or until
retirement age, at their existing compensation levels
(unless a lesser amount is the maximum amount deductible by
SIGCORP for United States Federal income tax purposes, in
which case the continued salary would be at such lesser
amount).
Retirement Plans. All officers participate in SIGECO's
trusteed, noncontributory tax qualified Pension Plan for
Salaried Employees (the "Pension Plan'). Retirement income,
as defined in the Pension Plan, is based on an employee's
average monthly earnings during the highest paid five
consecutive years in the Pension Plan of the employee's
final 10 years of continuous service prior to retirement or
other termination of employment and is calculated in two
increments: 1.52 percent of such average monthly earnings
for each year of accredited service or part thereof up to a
maximum of 30 years; plus .69 percent of such average
monthly earnings for each year of accredited service or part
thereof in excess of 30 years to a maximum of 10 years.
Amounts payable under the Pension Plan are not subject to
social security or other offset.
The years of service in the Pension Plan credited to
officers named in the compensation table above are R.G.
Reherman-36 years, 6 months; A.E. Goebel-27 years, 1 month;
J.G. Hurst-30 years; R.G. Jochum-5 years, 3 months; and J.L.
Davis-19 years, 3 months.
The following table illustrates the estimated
retirement income payable under the Pension Plan, based on
the specific remuneration levels and years of service
classification shown.
<TABLE>
<CAPTION>
Pension Plan Table
Years of Service
Covered
Remuneration 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$100,000 $22,800 $30,400 $38,000 $45,600 $49,050
125,000 28,500 38,000 47,500 57,000 61,300
170,000<F1> 38,760 51,680 64,600 77,520 83,380
and above
<FN>
<F1> As of January 1, 2000, the OMNIBUS Budget
Reconciliation Act of 1993 (OBRA '93) limited annual
compensation to $170,000 for purposes of pension
calculations under tax qualified pension plans.
</FN>
</TABLE>
SIGECO has a non-qualified Supplemental Retirement Plan
(the "Supplemental Plan") covering certain senior officers
of SIGECO who qualify under the applicable length of service
and other eligibility provisions. It is presently
anticipated that Messrs. Goebel, Hurst, Jochum and Davis
will qualify for benefits under the Supplemental Plan. The
Supplemental Plan provides for supplemental retirement
income to be paid such that, when combined with benefits
receivable under SIGECO's Pension Plan, total retirement
benefits paid will be equal to 50 percent of the average of
the senior officer's final three years base salary excluding
bonuses. In the case of death, survivor benefits are
payable to surviving spouse, if any, at an actuarially
adjusted level. SIGECO has entered into an agreement with
Mr. Reherman that is similar to the Supplemental Plan except
that the retirement income paid is equal to 70 percent of
his highest annualized salary as Chief Executive Officer or
Chairman of SIGECO. SIGECO has purchased life insurance on
the participants sufficient in amount to fund actuarially
all of SIGECO's future liabilities under the Supplemental
Plan and the Agreement.
Death Benefits Plan. SIGECO has a Supplemental Post-
Retirement Death Benefits Plan for officers and other senior
executives to provide retired participants with the
equivalent of 25-35 percent of the pre-retirement group life
insurance benefit under SIGECO's group insurance plan for
salaried employees. SIGECO has purchased insurance on the
lives of the participants, which is projected to allow
SIGECO to recover the entire cost of this plan.
Stock Option Plan. The 1994 Stock Option Plan was
adopted by the Board of Directors at its meeting held
December 21, 1993, and by SIGECO's shareholders at their
meeting held March 22, 1994. Pursuant to the exchange
whereby SIGECO common stockholders became stockholders of
SIGCORP, SIGECO's common stockholders, by
<PAGE> 70
agreeing to the exchange, also agreed to the amendment of
the 1994 Stock Option Plan to provide for the issuance of
SIGCORP shares. The 1994 Stock Option Plan authorizes the
granting of options to officers and key employees of SIGCORP
and SIGECO to purchase up to 750,000 shares of SIGCORP
Common Stock (adjusted for 3 for 2 stock split on March 27,
1997). Options granted under the 1994 Stock Option Plan may
constitute incentive stock options (within the meaning of
Section 422 of the Internal Revenue Code of 1986, as
amended), or nonqualified stock options (collectively,
"options"). To date, a total of 750,000 options have been
granted.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Program is administered and
monitored by the Compensation Committees. The Compensation
Committees are composed entirely of independent, nonemployee
directors. The main objectives of the program are to:
* attract and retain an outstanding management team,
* motivate and reward outstanding performance
results, and
* focus attention on plans, goals and initiatives
which enhance value to shareholders and customers.
In order to achieve these objectives, the executive
Compensation Program consists of three elements: a base
salary plan, an annual corporate performance incentive plan
and a long-term stock option plan. The key elements of the
compensation package for executive officers are addressed in
greater detail below.
Base Salary Plan. The Compensation Committees determine
the annual base salaries for senior officers and the salary
ranges for all officer positions. The determination of
officer salaries and salary ranges is based upon competitive
norms (averages) for similar positions in reasonably
comparable electric and combination utility companies. An
independent consultant is retained to provide such
information to the Compensation Committees.
Adjustments to actual base salaries take into
consideration two key variables: 1) the performance of the
officer, and 2) the level of actual salary compared with the
midpoint of the applicable salary range, where midpoint is
defined as the competitive salary norm for the position. In
general, individuals whose performance is deemed fully
competent over several years would be expected to achieve a
base salary at the midpoint level. Continued superior
performance could result in a base salary up to the maximum
level of the salary grade.
Corporate Performance Incentive Plan. Approximately 24
officers and senior management personnel participate in the
Performance Plan (the "Performance Plan"). During 1997, the
Performance Plan was revised to reflect changes in the
industry and to refocus on goals which are key to the
success of the Companies. Corporate goals were established
for financial and operating results which served as the
basis for award payments granted in 1999. They include the
following:
<TABLE>
<CAPTION>
<S> <C>
1. earnings per share
2. overall customer satisfaction index
3. total electric operating and maintenance expense (excluding
fuel and purchased power) per Kwh sold
4. overall equivalent availability of coal fired generating
units
5. reportable safety incident rate
</TABLE>
In addition, changes were made to provide award
opportunities which are more competitive with industry
practice. For the revised Plan, the following award
opportunities apply: 25-55% of base salary for the
Chairman; 20-50% of base salary for the Chief Executive
Officer; 15-45% for the Chief Operating Officer; and 5-35%
of base salary for all other participants. However, total
payout under the Plan is limited to a maximum of 2% of net
income.
An independent consultant is retained to assist in the
process of goal formulation and to provide an independent
assessment of goal achievement to the Compensation
Committees at the end of each Performance Plan year. The
annual awards paid under the Performance Plan for years
1997, 1998 and 1999 are shown in column (d) of the Summary
Compensation Table (Table 1) for the individuals named
therein.
<PAGE> 71
Long-Term Stock Option Plan. As indicated above, the
1994 Stock Option Plan was approved by the stockholders
during 1994. Approximately 29 officers and senior
management personnel are eligible to participate in the
plan. On July 19, 1999, the Compensation Committees granted
stock options to the plan participants. None of the options
granted in 1999 are exercisable prior to July 19, 2000.
The stock option awards for executive officers along
with additional details are included in Tables 2 and 3.
Discussion of CEO Pay. Consistent with overall
executive compensation program philosophy, the Compensation
Committees structured the CEOs' total compensation during
1999 based on the overall performance of SIGCORP and SIGECO,
competitive pay levels for CEOs at comparable companies and
a multi-year plan for the CEO to achieve a base salary level
at or about the established midpoint for the position.
During 1999, the Compensation Committees took the
following actions regarding the CEO of SIGCORP:
1. Increased base salary to $400,000 per year. This
represents an increase of 8.1%, which brought the
CEO's base salary to its 1999 competitive norm.
2. Provided a cash incentive of $159,100 based on
results achieved under the Corporate Performance
Incentive Plan for the plan year 1998.
During 1999, the Compensation Committees also took the
following actions regarding the CEO of SIGECO:
1. Increased base salary to $275,000 per year. This
represents an increase of 22.2%, which brought
the CEO's base salary closer to its 1999
competitive norm.
2. Provided a cash incentive of $80,156 based on
results achieved under the Corporate Performance
Incentive Plan for the plan year 1998.
During the Performance Plan Year 1998, performance as
measured against the five corporate goals resulted in the
following:
<TABLE>
<CAPTION>
Goal Actual Achieved
<S> <C> <C> <C>
Earnings Per Share (SIGCORP):
Threshold $2.00
Target $2.10 2.14 Target
Maximum $2.20
Customer Satisfaction Index: 91% 97% Yes
Total Electric O&M (excluding
fuel and purchased
power) per Kwh sold 1.153 cents 1.162 cents No
Overall Equivalent
Availability 85% 82% No
Safety Record (OSHA reportable
incidents per 100 FTEs) 4.41 2.82 Yes
</TABLE>
Under the Performance Plan formula, these performance
ratings earned an incentive award of 43% of base salary for
the CEO of SIGCORP and 35.6% of base salary for the CEO of
SIGECO.
Compensation Committee
Donald A. Rausch, Chairman R.W. Shymanski
Robert L. Koch II Donald E. Smith
<PAGE> 72
Performance Comparisons
Set forth below is a table comparing the yearly change
in the cumulative total shareholder return on SIGCORP Common
Stock, assuming reinvestment of all dividends, against the
cumulative total return of the S&P Composite 500 Stock Index
and the EEI Index of Investor-Owned Electric Utilities, over
the past five years.
<TABLE>
<CAPTION>
Comparison of Cumulative Total Return<F1>
12/94 12/95 12/96 12/97 12/98 12/99
<S> <C> <C> <C> <C> <C> <C>
SIGCORP, INC. $100 $138 $145 $193 $244 $179
S & P 500 Index 100 137 169 225 290 351
EEI Index of Investor-
Owned Electric Utilities 100 131 132 168 192 156
<FN>
<F1> $100 invested on 12/31/94 in stock or index including
reinvestment of dividends. Fiscal year ending December 31.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider
Participation. Under applicable Securities and Exchange
Commission Rules, there were no interlocks or insider
participation on the Compensation Committee during 1999.
<PAGE> 73
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of December 31, 1999, each of the following
stockholders was known to the management to be the
beneficial owner of more than five percent of the
outstanding shares of any class of voting securities as set
forth below.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
<S> <C> <C> <C>
IDS Certificate
$100 Par Preferred Company 75,000 Shares 40.3%
Stock of SIGECO %IDS Financial Registered Owner
Services, Inc.
3000 IDS Tower 10
Minneapolis, MN 55440
Common Stock of
SIGECO SIGCORP, Inc. 15,754,826 Shares 100%
20 N.W. Fourth Street Registered Owner
P.O. Box 3606
Evansville, IN 47735-3606
</TABLE>
Security Ownership of Directors and Executive Officers
The following table shows the beneficial ownership, as
of December 31, 1999, of SIGCORP Common Stock, by each
director, the Chief Executive Officer, and each of the other
executive officers named in the Compensation Table found
under "Executive Compensation". Also shown is the total
ownership for such persons and other executive officers as a
group. No member of the group is the beneficial owner of
any of SIGECO's Preferred Stock.<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Ownership<F2>
Name of Beneficial Owner<F1> Percent
Direct Indirect Total of Class
<S> <C> <C> <C> <C>
John M. Dunn 3,169 - 3,169 .02
John D. Engelbrecht 3,260 - 3,260 .02
Robert L. Koch II 3,627 - 3,627 .02
Donald A. Rausch 12,762 - 12,762 .06
Ronald G. Reherman 12,290 559 12,849 .06
Richard W. Shymanski 2,475 8,464 10,939 .04
Donald E. Smith<F3> 17,128 555 17,683 .08
James S. Vinson 997 - 997 -
Andrew E. Goebel 11,098 - 11,098 .05
J. Gordon Hurst 1,944 - 1,944 .01
Ronald G. Jochum 400 - 400 -
Jeffrey L. Davis 168 - 168 -
All of the above and other
executive officers
as a group (14) 83,902 .36
<FN>
<F1> Beneficial ownership includes those shares over which an individual
has sole or shared voting, or investment powers, such as
shares in which the spouse, minor children or other relatives living in
the home of the named person have a beneficial interest,
and shares held in SIGCORP's Dividend Reinvestment Plan and other trust
accounts.
<F2> Includes shares held jointly or in other capacities, as to which in
some cases beneficial ownership is disclaimed. Does not
include shares which the named individual has the right to acquire under
the 1994 Stock Option Plan. See Table 3 for the
number of shares that can currently be acquired.
<F3> Donald E. Smith is a director and President of Princeton Mining
Company, which owns 360,186 shares of Common Stock;
director and President of R.J. Oil and Refining Co., Inc., which owns
129,331 shares of Common Stock; director of Blackhawk
Coal Corporation, which owns 188,599 shares of Common Stock; Chairman,
CEO, President and director of Terre Haute First
National Bank, which holds 28,931 shares of Common Stock as trustee; and
President and director of Terre Haute Oil
Corporation, which owns 3,199 shares of Common Stock. The aggregate
number of such shares represents 3.01 percent of
Common Stock outstanding.
</FN>
</TABLE>
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Richard W. Shymanski is Chairman of the Board of
Harding Shymanski & Company, Certified Public
Accountants, which firm in 1999 performed certain
consulting and accounting services for SIGCORP
subsidiaries, and is expected to perform such services
in 2000. During 1999, the cost of such services was
$401,703, which the Company believes to be a fair and
reasonable price for the services rendered.
Andrew E. Goebel is President and Chief Operating
Officer of SIGCORP and Chief Executive Officer of
Southern Indiana Gas and Electric Company. During
1999, Hasgoe Cleaning Systems, a cleaning company
owned by Mr. Goebel's brother, performed certain
cleaning services for SIGCORP subsidiaries and is
expected to perform such services in 2000. During
1999, the cost of such services was $28,670, which the
Company believes to be a fair and reasonable price for
the services rendered.
<PAGE> 75
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(a) 1 and 2) The financial statements, including supporting schedule,
are listed in the Index to Financial Statements, page 27, filed as part of
this report.
(a) 3) Exhibits:
SIGCORP and SIGECO
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.)
SIGCORP
EX-2(a) Agreement and Plan of Merger by and among Indiana
Energy, Inc., SIGCORP, Inc. and Vectren Corporation,
dated as of June 11, 1999. (Physically filed and
designated as Exhibit 2 to Form 8-K filed June 15, 1999,
File No. 01-11603.)
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-4(b) Stock Option Agreement, between SIGCORP, Inc. and
Indiana Energy, Inc., dated as of June 11, 1999.
(Physically filed and designated as Exhibit 4-1 to Form
8-K filed June 15, File No. 01-11603.)
SIGECO
EX-3(a) 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).
EX-3(b) 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 and
designated in Form 10-K for the fiscal year 1995, File
No. 1-3553, as EX-3(b).)
EX-4(a)* 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
* 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.
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
<S> <C> <C>
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).) July 1, 1999. (Physically filed and
designated in Form 10-Q, dated August 16, 1999, File 1-
3553, as Exhibit 4(a).)
EX-10.1 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-10.2 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-10.3 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-10.4 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-10.5 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-10.6 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-10.7 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-10.8 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-10.9 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-10.10 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-10.11 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.)
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
<S> <C>
EX-10.13** 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-10.14** 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.)
EX-10.15** 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-10.16** 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-10.17** 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-10.18** 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-10.19** 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-10.20** 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-10.21** Southern Indiana Gas and Electric Company 1994 Stock
Option Plan (Physically filed and designated in Southern
Indiana Gas and Electric Company's Proxy Statement dated
February 22, 1994, File No. 1-3553, as Exhibit A.)
EX-10.22** Summary description of Southern Indiana Gas and Electric
Company's Corporate Performance Incentive Plan as amended
for the plan year beginning January 1, 1997. (Physically
filed and designated in the SIGCORP, Inc. and Southern
Indiana Gas and Electric Company's Joint Proxy Statement
dated March 23, 1998, File No. 1-11603 and File No. 1-
3553, under "Compensation Committee Report On Executive
Compensation", page 9.)
EX-10.23** Agreement dated September 1, 1997 between Southern
Indiana Gas and Electric Company and Andrew E. Goebel
regarding continuation of employment, which supercedes
such agreement dated July 22, 1986. (Physically filed
and designated in Form 10-K for the fiscal year 1997,
File No. 1-3553, as Exhibit 10.23.)
EX-10.24** Agreement dated September 1, 1997 between Southern
Indiana Gas and Electric Company and J. Gordon Hurst
regarding continuation of employment, which supercedes
such agreement dated February 22, 1989. (Physically
filed and designated in Form 10-K for the fiscal year
1997, File No. 1-3553, as Exhibit 10.24.)
EX-10.25** Agreement dated January 10, 1997 between Ronald G. Jochum
and Southern Indiana Gas and Electric Company regarding
continuation of employment. (Physically filed and
designated in Form 10-K for the fiscal year 1997, File
No. 1-3553, as Exhibit 10.25.)
EX-10.26** Agreement dated January 10, 1997 between Southern Indiana
Gas and Electric Company and Ronald G. Reherman regarding
continuation of employment, which supercedes such
agreement dated May 6, 1991. (Physically filed and
designated in Form 10-K for the fiscal year 1997, File
No. 1-3553, as Exhibit 10.26.)
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
<S> <C>
EX-10.27** Agreement dated April 16, 1997 between Southern Indiana
Gas and Electric Company and Ronald G. Reherman
regarding supplemental pension and disability benefits,
which supercedes such agreement dated February 1, 1995.
(Physically filed and designated in Form 10-K for the
fiscal year 1997, File No. 1-3553, as Exhibit 10.27.)
EX-10.28** Agreement dated January 10, 1997 between Southern
Indiana Gas and Electric Company and Jeffrey L. Davis
regarding continuation of employment. (Physically filed
and designated in Form 10-K for the fiscal year 1997,
File No. 1-3553, as Exhibit 10.28.)
EX-10.29** Southern Indiana Gas and Electric Company's nonqualified
Supplemental Retirement Plan as amended, effective April
16, 1997. (Physically filed and designated in Form 10-K
for the fiscal year 1997, File No. 1-3553, as Exhibit
10.29.)
** Filed pursuant to paragraph (b)(10)(iii)(A) of Item
601 of Regulation S-K.
SIGECO
EX-12 Computation of Ratio of Earnings to Fixed Charges
SIGCORP
EX-21 Subsidiaries of the Registrant
SIGCORP and SIGECO
EX-24 Power of Attorney
SIGCORP and SIGECO
EX-27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On October 21, 1999, SIGCORP, Inc. announced its
revenues and earnings for the quarter ended
September 30, 1999. The press release dated
October 21, 1999 was filed with the SEC on November
2, 1999.
On December 15, 1999, Indiana Energy, Inc. (IEI)
and Dayton Power & Light, Inc. (DPL) announced that
their respective boards of directors have approved
a definitive agreement under which IEI will acquire
DPL's natural gas distribution business for $425
million in cash. On June 14, 1999, IEI and
SIGCORP, Inc. (SIGCORP) announced their agreement
to merge in a $1.9 billion merger of equals to form
a new holding company which will be named Vectren
Corporation. The board of directors of SIGCORP
authorized an amendment to the merger agreement to
permit IEI to enter into the transaction with DPL.
The press release dated December 15, 1999
announcing the acquisition was filed with the SEC
on December 16, 1999.
On February 2, 2000, SIGCORP, Inc. announced its
revenues and earnings for the quarter and year
ended December 31, 1999. The press release dated
February 2, 2000 was filed with the SEC on February
11, 2000.
Because SIGECO intended to reprice two series of
pollution control bonds and refund a third series
of pollution control bonds before the filing of the
combined Annual Report on Form 10-K, SIGCORP, Inc.
and Southern Indiana Gas and Electric Company filed
their audited financial statements for the fiscal
year ended December 31, 1999 with the SEC on
February 25, 2000.
<PAGE> 79
<TABLE>
<CAPTION>
SCHEDULE II
Southern Indiana Gas And Electric Company
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 End of
Reserves,
Description of Year Expenses Accounts Net Year
(in thousands)
<S> <C> <C> <C> <C> <C>
VALUATION AND QUALIFYING
ACCOUNTS:
Year 1999 -
Accumulated
provision for
uncollectible
accounts $ 2,156 $ 604 $ - $ 622 $ 2,138
Year 1998 -
Accumulated
provision for
uncollectible
accounts $ 328 $2,797 $ - $ 969 $ 2,156
Year 1997 -
Accumulated
provision for
uncollectible
accounts $ 215 $1,517 $ - $ 1,404 $ 328
OTHER RESERVES:
Year 1999 - Reserve
for injuries
and damages $ 782 $ 661 $ - $ 396 $ 1,047
Year 1998 - Reserve
for injuries
and damages $ 1,047 $ 68 $ 261<F1> $ 594 $ 782
Year 1997 - Reserve
for injuries
and damages $ 1,737 $(253) $ 356<F1> $ 793 $ 1,047
<FN>
<F1> Charged to construction accounts
</FN>
</TABLE>
<PAGE> 82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrants have
duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
Date: March 29, 2000 SIGCORP, Inc.
By R. G. Reherman, Chairman
and Chief Executive Officer
BY s/s R. G. Reherman
R. G. Reherman
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
By R. G. Reherman, Chairman
BY s/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 registrants and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
R. G. Reherman Chairman and Chief Executive
Officer of SIGCORP, Inc.
(Principal Executive Officer)
Chairman of Southern Indiana Gas
and Electric Company March 29, 2000
A. E. Goebel* President and Chief Operating
Officer of SIGCORP, Inc.
Chief Executive Officer
of Southern Indiana Gas and
Electric Company
(Principal Executive Officer) March 29, 2000
J. G. Hurst* President and Chief Operating
Officer of Southern Indiana Gas March 29, 2000
and Electric Company
T. L. Burke* Secretary and Treasurer of SIGCORP,
Inc. and Southern Indiana Gas and
Electric Company
(Principal Financial Officer) March 29, 2000
S. M. Kerney* Controller of SIGCORP, Inc. and
Southern Indiana Gas and Electric
Company
(Principal Accounting Officer) March 29, 2000
John M. Dunn* )
)
John D.
Engelbrecht* )
)
Robert L. Koch II* )
)
Donald A. Rausch* ) Directors of SIGCORP, Inc. and March 29, 2000
) Southern Indiana Gas and Electric
Richard W. Company
Shymanski* )
)
James S. Vinson* )
*By R. G. Reherman, Attorney-in-fact
</TABLE>
<PAGE> 83
<TABLE>
<caption
SIGCORP
10-K
EXHIBIT INDEX
Sequential
Page Number
<S> <C> <C>
Exhibits incorporated by reference are found on 75 - 78
EX-21 Subsidiaries of the Registrant 81
EX-24 Power-of-Attorney 84 - 85
EX-27 Financial Data Schedule N/A
</TABLE>
March 21, 2000
Mr. R. G. Reherman
Mr. T. L. Burke
Southern Indiana Gas and Electric Company
20 N.W. Fourth Street
Evansville, Indiana 47741
J. H. Byington, Jr., Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
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, 1999 ("Form 10-K") before
April 1, 2000 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 s/s R. G. Reherman
R. G. Reherman
Chairman and CEO, SIGCORP, Inc.
Chairman, Southern Indiana Gas
& Electric Company
s/s John M. Dunn s/s Ronald G. Reherman
John M. Dunn Ronald G. Reherman
s/s John D. Engelbrecht s/s Richard W. Shymanski
John D. Engelbrecht Richard W. Shymanski
s/s Andrew E. Goebel s/s James S. Vinson
Andrew E. Goebel James S. Vinson
s/s Robert L. Koch II s/sTimothy L. Burke
Robert L. Koch II Timothy L. Burke
s/s Donald A. Rausch s/s S. Mark Kerney
Donald A. Rausch S. Mark Kerney
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000945372
<NAME> SIGCORP, INC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 738,916
<OTHER-PROPERTY-AND-INVEST> 175,138
<TOTAL-CURRENT-ASSETS> 175,942
<TOTAL-DEFERRED-CHARGES> 54,146
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,144,142
<COMMON> 78,258
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 314,950
<TOTAL-COMMON-STOCKHOLDERS-EQ> 393,208
0
19,282
<LONG-TERM-DEBT-NET> 273,531
<SHORT-TERM-NOTES> 109,162
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 53,700
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 295,259
<TOT-CAPITALIZATION-AND-LIAB> 1,144,142
<GROSS-OPERATING-REVENUE> 604,491
<INCOME-TAX-EXPENSE> 25,718
<OTHER-OPERATING-EXPENSES> 515,679
<TOTAL-OPERATING-EXPENSES> 541,397
<OPERATING-INCOME-LOSS> 88,812
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 88,812
<TOTAL-INTEREST-EXPENSE> 11,037
<NET-INCOME> 52,057
0
<EARNINGS-AVAILABLE-FOR-COMM> 52,057
<COMMON-STOCK-DIVIDENDS> 31,302
<TOTAL-INTEREST-ON-BONDS> 18,722
<CASH-FLOW-OPERATIONS> 107,040
<EPS-BASIC> 2.20
<EPS-DILUTED> 2.19
</TABLE>
<TABLE>
<CAPTION>
EX-21
<S> <C>
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
SIGCORP Energy Services, Incorporated in Indiana
SIGCORP Capital, Incorporated in Indiana
SIGCORP Fuels, Incorporated in Indiana
SIGCORP Power Marketing, Incorporated in Indiana
SIGCORP Communications Services, Incorporated in Indiana
SIGECO Advanced Communications, Incorporated in Indiana
SIGCORP Environmental Services, Incorporated in Indiana
</TABLE>
